NEW DELHI: After months of hanging in the balance, PNB Housing Finance has finally managed to rope in deep-pocketed marquee investors whose support will help fuel the company's next phase of growth.
On Monday, the board approved raising Rs. 4,000 crore in capital from US-based private equity firm Carlyle Group and a handful of other investors including HDFC Bank chief Aditya Puri, through a preferential share issue. Post this infusion, Carlyle will become the largest shareholder of the company.
As part of the transaction, Pluto Investments, an affiliated entity of private equity fund Carlyle, has agreed to invest up to Rs. 3,185 crore. Post the allotment of equity and warrants, Pluto will hold 30.2 per cent in the mortgage lender. Carlyle, through a separate vehicle, Quality Investments Holdings currently owns 32.2 per cent in the company.
Besides the PE firm, Salisbury Investments Pvt. Ltd, the family investment vehicle of former HDFC bank managing director Aditya Puri will invest Rs. 25 crore. Puri, senior advisor to Carlyle, is expected to be nominated to the PNB board as a Carlyle nominee in due course. Existing shareholders of the company --- Alpha Investments Fund, a fund managed by Ares SSG, will invest Rs. 400 crore and General Atlantic Singapore will invest Rs. 390 crore. Meanwhile, Punjab National Bank (PNB), which owns a little over 32 per cent stake right now, will continue to be the promoter along with Carlyle and Puri.
Both Carlyle and PNB Housing had decided to sell their joint stake in the company two years ago. An official had then said that a fall in prices of PNB Housing, however, prompted a change in decision. The fresh round of fundraise comes after promoter PNB was barred by the banking regulator to infuse further funds in its financing arm since the government is pushing state-run banks to get out of non-core businesses. The RBI, in fact, prefers that the lender uses available capital for its own needs first.
According to Hardayal Prasad, managing director and CEO of PNB Housing Finance, the key objective of raising capital is to augment capital adequacy, accelerate growth with a focus on retail housing, including self-employed and affordable housing loans. PNB Housing Finance, which is the fourth largest home financier in terms of loan assets, had assets worth Rs. 62,255 crore as of March 31, 2021. It holds the second largest share in deposits among housing finance companies, with deposits of Rs 17,129 crore as on March 31, 2021.
But, the lender has witnessed the highest-ever decline in Assets under Management (AUM) at 11 per cent during the March quarter. The bank's stressed loans continued to remain elevated and the outbreak of the the pandemic in 2020-21 just made it worse. PNB Housing closed the year with a gross bad loan pile of ₹2,762 crore or 4.4 per cent of total book. Analysts believe that the bank has a tough rough ahead with the primary task being showing a steady improvement in its financial metrics for valuations to sustain. On Monday, shares of PNB Housing Finance surged 20 per cent on the fundraising news.