Private equity fund Carlyle is looking to sell its entire stake in PNB Housing Finance in a deal that is expected to give a return that’s many more times the money it invested three years ago.
PNB Housing Finance, which listed in Mumbai in November 2016 after a Rs 3,000 cr initial public offer, has seen its market value almost double since then. Carlyle had invested Rs 1,600 cr in February 2015 for a 49% stake in the then unlisted company.
Currently, it owns a 33% stake, having recently sold about 5% in the open market. The company may mandate Morgan Stanley to lead the deal that is expected to be concluded within the next 18 months. The listed mortgage lender has a market capitalisation of Rs 18,994 cr. Quality Investment Holdings, an arm of Carlyle, sold a 4.8% stake for around Rs 1,040 cr through block deals on May 8.
Parent Punjab National Bank (PNB) has been looking to raise funds by selling stakes in noncore assets to shore up capital. It holds 33% of PNB Housing Finance and has investments in PNB Gilts, UTI Asset Management and various other entities. PNB informed the stock exchange last week that a decision to disinvest in PNB Housing Finance, ICRA, CRISIL and BSE will be taken at the appropriate time depending on market conditions and available options. This will be “to implement PSB's reforms agenda dated 24.01.2018 for responsive and responsible PSBs.”
The bank’s net non-performing assets have consistently remained above regulatory threshold of 6% for inclusion in the prompt corrective action (PCA) framework, which imposes restrictions on business activity. “With reported CAR (capital adequacy ratio) and Common Equity Tier I (CET I) also below the PCA inclusion threshold of 10.25% and CET of 6.75%, the likelihood of the bank being included under PCA has increased further,” said rating company ICRA. It had downgraded the bank’s rating, saying its external capital requirements were significant even if it divested some investments in subsidiaries or associates.
PNB Housing Finance is the second-largest deposit taking housing finance company in India. In November 2017, PNB sold a 6% stake to investors including the General Atlantic Singapore Fund. Other investors include Birla Sunlife MF, Motilal Oswal MF, Wasatch, T.Rowe Price, Government of Singapore, Fidelity, Invesco, Reliance MF and Nomura Asset Management. The company had assets under management of Rs 62,252 cr at end of March. Its net nonperforming loans were at 0.25% of the total. Shares of the company declined 1.23% to Rs 1,134.60 on the BSE on Friday.