PNB Housing Finance Ltd has come full circle. Ajai Kumar Shukla took charge as managing director and chief executive officer on 18 December, bringing closure to the leadership vacuum created by the sudden resignation of Girish Kousgi on 31 July, an episode that had rattled investors.
The stock had slumped 18% on 1 August amid concerns over continuity. But management assurances on strategy and growth, followed by the appointment of a seasoned successor, helped restore confidence. Most of the losses have since been recouped. Shukla, who joins from Tata Capital Housing Finance, brings nearly three decades of experience across sales, credit and risk in the mortgage business.
ICICI Securities, which had earlier downgraded the stock to ‘Hold’, upgraded it to ‘Buy’ last week. With the stock currently at ₹962, just 2% below the levels seen before Kousgi’s resignation, the focus now shifts squarely to fundamentals.
Those fundamentals have strengthened. In the September quarter (Q2FY26), the lender’s return on equity (RoE) stood at 13%, the highest quarterly number since FY21. Return on assets (RoA) improved 19 basis points year-on-year to 2.73%. Asset quality has steadily improved, without sacrificing growth despite intensifying competition.
Gross and net stage-3 assets declined sharply, from 6.4% and 4.3% in Q1FY23 to 1% and 0.7% in Q2FY26, respectively. The lender has reported negative credit costs since FY25, aided by provision write-backs. Early-bucket delinquencies have trended lower, pointing to better incremental loan quality. Net interest margin has remained stable at around 3.7%, as lower investment yields were offset by reduced cost of borrowing following cuts in the repo rate.
Prime housing contributes 60% of the lender’s assets under management (AUM), which has helped underpin asset quality. Growth has been led by higher disbursements in affordable and emerging segments, which contributed half of the lender’s disbursements in Q2FY26.
PNB Housing is on track to achieve the ₹1 trillion AUM milestone by FY27. Management’s guidance pencils in 17-18% growth in AUM this fiscal, and a similar pace of growth can be expected in FY27 as well.
In November, India Ratings upgraded the company’s credit rating to AAA from AA+. But it cannot be ignored that PNB Housing’s mainstay premium home financing segment faces stiff competition from banks. The benefit from provision write-backs is expected to end in the next 2-3 quarters, according to ICICI Securities. It expects the lender’s RoA to moderate to 2.5% in FY26, and 2.2% in FY27.
That said, PNB Housing has shifted strategic focus towards affordable and emerging housing segments which operate in a less competitive space, offer higher yields, and can support margins. Against overall AUM growth of 17%, affordable home financing AUM grew by 121% year-on-year in Q2FY26. The higher overall yields should help cushion the effect of monetary easing over the near term.
But these segments are typically prone to higher non-performing assets (NPAs). Even as PNB Housing focuses on resilient customer profiles, including salaried personnel and those with 750+ CIBIL-scores, the share of high-yield self-employed segment has inched up from 39% to 43% year-on-year. The management has categorized a fifth of the lender’s affordable housing segment as high-risk.
As the portfolio seasons, stress is beginning to show. Gross NPA in affordable housing rose 18 bps quarter-on-quarter to 0.51% in Q2FY26, and early-bucket delinquencies increased sharply from 0.91% to 1.40%. Even so, this remains well below the industry average of 3.7%. Besides, at 1.17x FY27 book value, based on Bloomberg consensus estimates, valuations offer some comfort.
