Wholesale 2.0 Lending

As part of the corporate transformation, PEL judiciously downsized its legacy Wholesale Lending operations and channelised its efforts towards establishing a diversified and more granular Wholesale 2.0 portfolio, backed by cash flows and assets. It refers to loans sanctioned under new real estate (RE) and corporate mid-market loans (CMML).

Wholesale 2.0 - revamped model leveraging the sector tailwinds

New real estate loans: capitalising on the market gap and leveraging our strengths

Notes: (1) Based on sanctioned value(2) Average yield % includes fee income (3) Based on sanctioned value & represents average door-to-door tenor

Building blocks for Wholesale 2.0 Lending comprise – 1) overhauled organisational structure; 2) use of automation and analytics; and 3) formal and templated process for credit review at loan and portfolio level.

• Under the revised organisation structure, the Company had created a Credit Team in 2022 to focus on deal underwriting for better decision-making as per sand box/gating criteria. The Asset Monitoring team was transitioned into Asset Management to enhance the proactive management and oversight of assets. This team took over deal ownership, although the Origination Team continues to engage with clients to ensure continuity of engagement, which is crucial for generating repeat business. This approach allows for a more in-depth understanding of market nuances and regulatory dynamics. Technology adoption has streamlined the various internal processes in the deal life cycle and the analytics-driven decision-making is only a tool to assist the underwriting/decision-making process taking cues from past deal experience.

The business is performing well, in line or ahead of underwriting, as reflected in prepayments. Since inception, all deals sanctioned under the new book 2.0 have been regular with on-time interest servicing and accelerated repayments, reflecting the quality of underwriting/structuring in terms of deal analysis.

Building a robust book by lending to established developers offers more flexibility in the use of proceeds, which can be particularly beneficial for developers who need to adapt to changing market conditions or project requirements. The Company has also been capitalising on the market gap by expanding its reach to mid-tier developers in existing cities like Mumbai, Bengaluru, Hyderabad, NCR, Chennai, and Pune. This is aimed at bringing down the cost of borrowing by reducing reliance on informal lending avenues for developers. The large developer finance business has also expanded into newer geographies like Karnal, Meerut in NCR, Lucknow which has seen traction in the physical real estate market in the recent past.

The Small Developer Finance (SDF) business has been set up as a part of the growing wholesale credit franchise to focus on mid-market and affordable residential housing projects with less than ₹ 200 crore revenue in low penetrated markets in Tier 1 outskirts and Tier 2&3 cities. Committed to retaining its leadership position in real estate financing space, the Company with its strong underwriting capabilities has been able to penetrate newer cities like Ahmedabad, Nashik, Gandhinagar, Vadodara, Chandigarh, and Jaipur. This move will transform the landscape of developer financing in Tier 2&3 cities, complementing the Company’s vision to democratise credit for all sections of the society and to cater to a larger addressable market.

Through the CMML line of business, PEL offers credit solutions to non-real estate clients. The team acts on sector-agnostic credit proposals and leverages its deep expertise in the lending business to offer customised solutions for financing needs. Since its inception, the segment has supported businesses across personal care, shipping, power, fintech, and logistic sectors, addressing their specific funding requirements that are inadequately met by existing products in the market. The portfolio performance has been robust in terms of collection efficiency.

Corporate mid-market lending: building a granular book backed by cash flows

Notes: (1) Based on sanctioned value (2) Average Yield % includes fee income (3) Based on sanctioned value & represents average door-to-door tenor

Wholesale 2.0 Lending at this scale, is already a profitable business for the company with healthy yields, controlled opex and strong asset quality.