Housing Development Finance Corp (HDFC) and Kotak Mahindra Bank are vying with each other for a controlling stake in PNB Housing Finance as both are looking to gain wider coverage in a mortgage market that’s seen among the safest of havens in the lending world.
Promoters Punjab National Bank and Carlyle, which together own about 66% of the company, are looking to sell their stake to a large investor. The deal is expected to fetch them about Rs 6,000 cr each. The listed mortgage lender has a market capitalisation of Rs 17,939 cr. HDFC and Kotak Bank have already met with the management of PNB Housing Finance last week to discuss buying out private equity fund Carlyle’s entire stake of around 33% and another 33% on block from PNB.
Carlyle is understood to have appointed Morgan Stanley as adviser to the deal while Punjab National Bank has started the process of appointing an investment bank for the role. General Atlantic, the third-largest shareholder, has been sounded out by PNB and Carlyle over selling its stake.
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.
Kotak and HDFC said they do not want to comment on market speculation. HDFC was previously said to have been in talks to buy a controlling stake in Can Fin Homes but the deal didn’t go through as the promoters shelved their sale plan. HDFC has raised Rs 13,000 cr to expand into the affordable housing segment.
If the PNB Housing Finance deal goes through, the investor will have to make an open offer for an additional stake under takeover rules.
Earlier this month, fraud-hit PNB had informed the stock exchange 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 “to implement PSB's reforms agenda dated 24.01.2018 for responsive and responsible PSBs (public sector banks)”.
PNB Housing Finance has 84 branches across the north, south and west. Mortgages account for 70% of the business. The stock ended Friday at Rs 1,071.35 on the Bombay Stock Exchange, down 3%.
Having listed in November 2016 after a Rs 3,000 cr initial public offer, PNB Housing Finance has seen its market value almost double since then. Carlyle invested Rs 1,600 cr in February 2015 for a 49% stake in the then unlisted company. It now owns a 33% stake, having recently sold about 5% in the open market.
PNB Housing Finance has been expanding disbursements at a 52% compound annual growth rate over the last four years. The company had assets under management of Rs 62,252 cr at the end of March 31, 2018. Its net non-performing loans were at 0.25% of the total.