PNB to sell stake in housing finance arm by fiscal end

New Delhi/Mumbai: Punjab National Bank expects to complete the stake sale in its mortgage lending arm, PNB Housing Finance, by the end of the financial year. It is also planning to list its insurance venture, PNB Metlife, on the bourses.

PNB, which has been struggling to meet its capital adequacy ratio after the ₹ 14,356-crore fraud, involving diamantaire Nirav Modi and his uncle Mehul Choksi, in January, is trying to monetize its non-core assets to preserve capital.

The bank’s common equity capital had gone below 6% in the quarter ended 31 March, forcing it to look at ways to conserve capital.

In a stock exchange notification last month, PNB Housing Finance had said that its parent, along with US private equity investor Carlyle Group, is in the process of selling a 51% stake in the company.

At the end of the day’s trade on Tuesday, the 51% stake of the mortgage lender would be valued at ₹ 11,150.8 crore, given the stock’s closing price of ₹ 1,305.7 per share on the BSE.

In November 2016, the company had raised fresh equity of ₹ 3,000 crore through an initial public offering, which saw the parent reducing its stake from 51% to 39%.

Between 2009 and 2014, PNB had sold a 49% stake to Destimoney Enterprises Pvt. Ltd, which in turn, sold its entire stake to the Carlyle Group in 2015.

“The idea is to find a strategic investor for PNB Housing,” said Sunil Mehta, managing director and chief executive officer (CEO), Punjab National Bank, adding that merchant bankers have been appointed to run the stake sale process.

“The expression of interest is already in the market and depending on the market condition, this may happen soon. The timeline is difficult to define, but we are going to conclude the deal in this financial year,” Mehta said.

Last month, Mint reported that the proposed stake sale has drawn the interest of bulge bracket private equity funds, TPG Capital and Baring Private Equity Asia, amongst others.

Punjab National Bank owns 32.79% and Quality Investment Holdings (Carlyle group) own 32.36% of the paid-up equity share capital of PNB Housing.

With regards to the insurance venture PNB MetLife, the bank plans to sell a 4% stake for price discovery ahead of the listing on the exchanges, said Mehta.

Punjab National Bank, which owns a 30% stake in PNB Metlife, has appointed investment bankers to run the share sale process.

PNB Metlife filed the draft red herring prospectus for the proposed IPO on 26 July, becoming the sixth life insurance company to file for a share sale.

The proposed initial public offering will see existing investors sell 495.89 million shares, or a 24.64% stake, in the company, according to the draft prospectus.

PNB, Metlife International Holdings Llc, M. Pallonji and Co. Pvt. Ltd and Jammu and Kashmir Bank Ltd, among others will shed some of their holdings during the public float. Recently listed life insurance companies include ICICI Prudential Life Insurance Co. Ltd, SBI Life Insurance Co. Ltd, HDFC Standard Life Insurance Co. Ltd, General Insurance Corporation of India and New India Assurance Co. Ltd.