35226 - PNB HFL

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Summary of Investment Information

Project Number

35226

Company Name

P N B Housing Finance Limited

Date SPI Disclosed

May 27, 2014

Country

India

Region

South Asia

Projected Board Date

Jun 30, 2014

Environmental Category

FI-3 - No Impact

Status

Completed

Last Updated Date

Jun 12, 2021

Department

Global Industry, Financial Markets

Industry

Financial Markets

Previous Events

Approved : Jun 26, 2014
Signed : Jul 1, 2014
Invested : Aug 7, 2014

Sector

Primary Mortgage Institutions

Project Description

The proposed project would involve a senior loan of up to US$50 million to PNB Housing Finance Ltd. (“PNB HFL”). PNB HFL is targeting expansion of its affordable housing finance portfolio and has obtained RBI approval for a US$100 External Commercial Borrowings (“ECB”). The project is intended to support PNB HFL in increasing its reach in the affordable housing finance segments with additional focus on the low income states of India, women borrowers and for offering mortgage financing for “green” residential units. This will be PNB HFL’s second debt raising in the foreign currency debt market.

The proposed investment is consistent with the World Bank Group’s India Country Promotion Strategy (CPS) as it aligns with the engagement areas of (i) Inclusion – by improving access to affordable housing finance and enhancing investment in the low income states (ii) Transformation – through job creation by supporting the labor intensive affordable housing segment and (iii) Integration – giving increased access to financial services in Tier II and Tier III cities.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	50.0
Equity	35.0

IFC's loan to the financial institution described in this SII is targeted for on-lending to the following sector(s):

Product Type	Use of Proceeds
Straight Senior Loan	Housing Finance

IFC's Definitions of Targeted Sectors can be found here.

Development Impact

1) Increased access to finance access for Low and Middle Income Segments: These segments are characterized by low ticket sizes and not an area of focus for majority of banks and housing finance companies. PNB HFL is one of the few large HFCs which provides housing finance to the self employed and women clients. The Company is also committed to further expand its business in the low income states of India.

2) Job Creation: Building affordable homes will increase construction activity which has positive linkage impacts on employment and growth.

3) Green Mortgages: The company also proposes to develop, in consultation with IFC, suitably designed mortgage products which could finance "green" residential buildings.

1) Demonstration Effect: IFC''s investment would demonstrate the viability of offering housing finance to LMI client. While housing finance is one of the lowest risk asset classes in India''s financial sector, mainstream commercial institutions have so far shown limited in this segment. PNB HFL proposes to increase its presence in Tier II and Tier III cities thereby reinforcing the validity of low income housing finance as a viable business.
2) Access to competitive and diverse funding source: PNB HFL is well capitalized. However, it is dependent on bank borrowings and NCDs for >70% of its funding needs. Funding fom IFC will diversify the funding profile of the company. IFC will also support the company in its efforts to explore overseas markets and investors, which is an important element in the company''s growth strategy.

E&S Category Rationale / Risks and Mitigation

The lending profile of PNBHFL is focused (65%) on individual retail loans for home purchase, improvement etc., followed by house/property mortgage loan to individual proprietors and business owners (26%). Around 9% of the lending portfolio has exposure to real estate construction and builder finance. However, IFC’s loan will be utilized only for individual retail home loans under the affordable housing scheme for housing finance companies. On-lending for mortgage loans (LAP) and builder/developer finance will not be part of IFC loan. Hence, the proposed project presents no adverse environmental or social risks or impacts the project is categorized as FI-3. There will be no E&S requirements for the project. The company was found in compliance with IFC PS-2

Contacts

For Inquiries About the Project, Contact

Mr. Sanjaya Gupta, Managing Director,
PNB Housing Finance Limited
Email : md@pnbhfl.com

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