PNB, Carlyle-Backed Firm To Sell Stake In Housing Finance Unit

Punjab National Bank and the Carlyle Group-backed investment firm Quality Investment Holdings plan to sell their stake in PNB Housing Finance Ltd.

The companies plan to sell a minimum of 51 percent stake in the housing finance company, according to an exchange filing. PNB and Quality Investment Holdings hold 32.8 percent and 32.3 percent, respectively, in the mortgage and construction lender.

Last month, Punjab National Bank’s board had given its approval for divestment of stake in PNB Housing Finance, ICRA, Crisil and BSE Ltd. “at appropriate time depending on the market conditions and available options.” Selling the entire stake will fetch Punjab National Bank Rs 6,546 crore, based on PNB Housing’s market capitalisation on Tuesday.

Carlyle had bought 49 percent stake in PNB Housing Finance via Quality Investments in February 2015 for Rs 1,600 crore. Post equity dilution in the company’s initial public offer in 2016, and open market sale in May this year, it now owns 32.3 percent stake.

Timeline Of Events

• February 2015: Carlyle acquires stake in PNB Housing Finance from financial services firm Destimoney Enterprises Pvt. Ltd.
• October 2016: PNB Housing Finance raises Rs 3,000 crore via initial public offer; assets under management crosses Rs 25,000 crore.
• November 2017: PNB sells six percent stake to investors, including General Atlantic Singapore Fund.
• March 2018: PNB Housing Finance’s AUM crosses Rs 60,000 crore
• May 8, 2018: Carlyle sells 4.8 percent stake for around Rs 1,040 crore through block deals, valuing the housing finance company at Rs 21,667 crore.

PNB Puts Up Non-Core Assets For Sale

The disinvestment is in line with the reforms agenda unveiled on Jan. 24 for public sector banks which are facing mounting bad loans. State-owned banks, including PNB, contribute the bulk of bad loans that have crossed Rs 10 lakh crore.

India’s second-largest public sector bank also reported in February that firms related to jewellers Nirav Modi and Mehul Choksi obtained fraudulent guarantees from a Mumbai branch of the bank in connivance with some of its employees. They still owe the lender about Rs 13,000 crore.

The bank is expected to receive Rs 13,000 crore from the sale of non-core assets, divestment of stake in subsidiaries and the second-tranche of capital infusion from the government in the three months through September, BloombergQuint had reported earlier.

Possible Suitors

On June 11, the Economic Times had reported that Carlyle was looking to sell its entire 33 percent holding in PNB Housing Finance. Two weeks later, it had reported that HDFC and Kotak Mahindra Bank were competing for a controlling stake in PNB Housing Finance. This was denied by PNB Housing in a clarification to the stock exchanges.

HDFC has raised Rs 13,000 crore last year to expand its affordable housing and health insurance businesses. HDFC was previously said to have been in talks to buy a controlling stake (30 percent) in Can Fin Homes but Canara Bank shelved its sale plan on not getting a desirable valuation.

Financials

PNB Housing Finance, the fifth largest housing finance company in India by both, total assets and market capitalisation, went public in October 2016 in a Rs 3,000-crore IPO in which it sold shares to investors at Rs 775 a share. Since then, the stock has given over 50 percent in returns. The company had loan assets of Rs 57,014 crore at end of March and gross non-performing assets at 0.33 percent.

Its loan assets have grown at 53 percent compounded annual growth rate over FY15-FY18 period driven by its 84 branches. General Atlantic Singapore held 8.52 percent in the NBFC in March, according to the company’s shareholding pattern on BSE. T.Rowe Price is among the other large investors.