PNB Housing Finance Ltd

MESSAGE FROM THE MANAGING DIRECTOR & CEO

Dear Stakeholders,

Sectoral tailwinds

As urbanisation accelerates and aspirations rise across Bharat, the demand for housing continues to deepen, particularly in underserved and semi-urban regions. This presents a significant opportunity for housing finance companies to widen their reach and tap into a vast, underpenetrated market.

Government support has played a catalytic role in energising this sector. Schemes such as Pradhan Mantri Awas Yojana (PMAY) 2.0 have been instrumental in driving the Affordable Housing agenda, enabling access to home ownership for millions. Further, the announcement of SWAMIH 2 fund in Budget 2025 is expected to accelerate the construction of delayed projects.

In response, housing finance companies have been agile and proactive—adapting product portfolios, embracing digital tools, expanding their presence across the country, forging meaningful partnerships with entities to enable access, and offering customised, flexible financial solutions tailored to diverse customer needs.

According to ICRA, the industry is poised to maintain strong momentum as it continues to play a vital role in India's economic and social development. With one of the lowest mortgage penetration rates globally, the growth rates of Indian housing finance companies CHFCs) are expected to remain stable as they cater to a wider spectrum of consumers in both urban and semi-urban areas, across diverse customer profiles such as cash and non-cash and informal segments, thus boosting economic development.

Remarkable performance

We began FY25 with a clear and ambitious goal - to grow our retail Loan asset by 17%. I am pleased to share that we surpassed this target, achieving robust 18.2% growth, with the retail Loan asset rising to Rs.74,802 crore. Our total Loan asset crossed the Rs.75,000 crore milestone, closing the year at Rs.75,765 crore as of 31^s: March 2025. This performance reflects the strength of our strategic intent, execution excellence and focus on sustainable expansion.

A key highlight has been the consistent growth in the Affordable and Emerging Markets segments quarter on quarter. These segments now contribute 26% to our retail Loan asset, up from 21% in the previous fiscal year. The Affordable segment, in particular, delivered exceptional performance. Having launched this business only 27 months ago, we are proud to report that it has already crossed Rs.5,000 crore in March 2025. This remarkable milestone, achieved in such a short time, reinforces our belief in the segment's potential and our commitment to expanding financial inclusion across India.

The NHL share in overall retail disbursements rose from 25.8% in FY24 to 30.2% in FY25. Reflecting this momentum and in alignment with our goal of margin-accretive profitable growth, we launched a dedicated Non-Home Loan (NHL) vertical at the start of FY26. This team currently operates in 10 key clusters across top cities and is focused on sourcing NHL business exclusively. In a pioneering move, we introduced a full-tenure fixed-rate NHL product, providing customers with long-term rate stability and predictability. We believe this innovation will act as a catalyst to further strengthen our NHL portfolio.

On the asset quality front, we maintained a sharp focus throughout the year, bringing gross NPAs down to 1.08% as on 31^s: March 2025. We emphasised on cash collection, legal initiatives and recovery. This also helped in enhancing the asset quality as recovery from written-off accounts surged more than two-fold, from Rs.100 crore to T336 crore.

After Tax (PAT) rose by 28.4% to Rs.1,936 crore, reflecting the strength of our underlying business model.

Net Interest Margin (NIM) was at 3.70% during FY25 compared to 3.74% in FY24. The Gross Margin, net of acquisition cost, was at 4.11% for FY25.

The Company continues to maintain a well-diversified and cost-efficient long-term funding base, contributing to a year-on-year decline in the cost of borrowing by 15 basis points, bringing it down to 7.86% in FY25. During the year, the Company availed T5.000 crore funding from the National Housing Bank (NHB) and raised USD 350 million through External Commercial Borrowings (ECB), further strengthening its financial flexibility and long-term liquidity position. With market liquidity improving and the potential for rate cuts on the horizon, we anticipate a reduction in borrowing costs in the forthcoming quarters. We also received consistent credit rating upgrades to ‘AA+' from ‘AA' with ‘Stable' outlook, from the country's leading credit rating agencies, CARE, CRISIL, ICRA and India Ratings.

Return on Assets (RoA) stood at 2.55%, and Return on Equity (RoE) at 12.19%. We continue to maintain a strong capital position, with a capital adequacy ratio of 29.38% and Tier 1 capital at 28.39% as of 31^s: March, 2025.

The Union Budget 2025 resolution underscores the government's resolve to drive inclusive economic progress through prudent fiscal management and forward-looking reforms.

The housing sector remains a cornerstone of national development, and we welcome the thoughtful measures aimed at making home ownership more accessible and affordable for millions. The upward revision of the income tax exemption limit to Rs.12 lakh is expected to significantly increase disposable incomes, thereby stimulating housing demand across segments.

This, coupled with robust infrastructure investments and a pro-growth policy environment, bodes well for the long-term expansion of the housing and real estate sectors. Further, the policy rate cuts initiated by the RBI are expected to propel credit demand in the current year. We remain confident that these initiatives will catalyse sectoral growth, aligned with India's broader vision of building a sustainable, empowered, and inclusive economy.

At PNB Flousing Finance, our strategic focus remains clear and future-oriented. Guided by our core objectives, we are advancing on all fronts—from growing our retail and affordable loan portfolios, especially in underserved markets, to maintaining best-in-class asset quality through strong underwriting and collection practices. We continue to build a diversified and cost-effective borrowing profile. Strong corporate governance underpins every step we take, reinforcing our commitment to transparency and scalability. These initiatives, combined with our focus on profitability, are driving sustainable growth and delivering long-term value to all stakeholders. We have also relaunched the corporate segment with a focused approach.

We are advancing our digital transformation journey with a clear vision to become a leading tech- driven housing finance company.

Our technology revamp, initiated in Q4 FY24, is nearing completion, with visible improvements across parameters. We have piloted a new Loan Origination System and strengthened cybersecurity with 24/7 monitoring and Al-based tools. These initiatives ensure scalability, resilience, and seamless customer experiences across our growing digital ecosystem.

During the year, we also launched 'Roshni' a vibrant mascot symbolising hope, positivity, and empowerment. The mascot's name meaning 'light' in Hindi, reflects the Company's promise to illuminate the path to affordable for aspiring home owners.

I take this opportunity to extend my heartfelt gratitude to our team of 6,500+ dedicated professionals (including PNB Housing Finance and PHFL) whose commitment and resilience have powered our journey of continued success.

At PNB Housing Finance, we are deeply invested in fostering a culture where every individual—irrespective of role or background—can flourish. Our people strategy is built on the pillars of inclusivity, continuous learning, and holistic development.

We strive to provide an empowering work environment that enables our employees to adapt, innovate, and lead. By nurturing talent at every level, we are not just building a future-ready organisation—we are creating a workplace where potential is unlocked, aspirations are fulfilled, and every contribution advances our collective mission of delivering value to customers and stakeholders alike. This is further validated by PNB Housing Finance's recognition as a Great Place to Work twice in a row, indicating a strong commitment to employee well-being and a positive work environment.

Pursuing growth and profitability with sustainability

We operate in a VUCA world—volatile, uncertain, complex, and ambiguous, where sustainability has become essential to business continuity and risk mitigation. We firmly believe that embracing sustainability and transparently disclosing progress on ESG parameters help enhance stakeholder trust, and position businesses to be future-ready and resilient.

At its core, sustainability is about creating long-term value, building a healthier, more equitable future for our people, our organisation and our planet. At PNB Housing Finance, we integrate a sustainability lens into every facet of our business, from supporting low and middle-income households through our 'Roshni' loans, to fostering climate literacy, building a carbon-conscious culture, and sharpening our focus on diversity, equity, and inclusion (DEI). Our efforts are further strengthened by strong governance, cybersecurity protocols and impactful community programmes under our CSR framework.

As we move forward with strength and conviction, guided by our Board and Committees, we remain committed to transparent ESG disclosures and purposeful action.

Our journey echoes our promise:

'Ghar ki Baat Pakki, Jab Support ho Pakka'. This reinforces our mission to fulfil home ownership aspirations of Indians, coming from diverse social and economic backgrounds.

Looking forward

As we look to the future, we have set an ambitious goal: to scale our retail Loan asset to Rs.1 trillion by FY27— a vision rooted in strategic clarity and disciplined execution. Over the past three years, we have made significant investments in digitalisation to enhance customer experience, strengthen risk management, streamline credit underwriting, and expand our business reach. These initiatives, coupled with efforts to boost employee productivity and optimise operational efficiency, have laid a strong foundation for sustainable, high-quality growth.

I extend my sincere gratitude to all our stakeholders - investors, customers, valued partners, and employees - for their continued trust and belief in our journey. Your support inspires us to reach greater heights. I would also like to thank our Board members for their strategic vision and guidance.

I must take this opportunity to thank our promoters, regulators, rating agencies, lenders, and bankers for their support in shaping our growth journey. Together, as we align with the growth aspirations of our country,

I am confident that we are entering a dynamic new chapter, full of promise, purpose and progress.

Warm regards,