Shares of PNB Housing Finance rose 4.36% to  ₹865.7 apiece on the BSE on news of the stake sale to General Atlantic and Varde Partners. (Pradeep Gaur/Mint)
Shares of PNB Housing Finance rose 4.36% to 865.7 apiece on the BSE on news of the stake sale to General Atlantic and Varde Partners. (Pradeep Gaur/Mint)

General Atlantic, Varde Partners check into PNB Housing Finance

  • General Atlantic, Varde Partners to put in 925 crore each, at 850 per share, to acquire 13% stake in PNB Housing Finance
  • PNB will continue to hold a strategic stake of about 19.79% in PNB Housing Finance and will stay on as a promoter

MUMBAI: Mumbai: State-owned Punjab National Bank (PNB) on Friday said it is selling a 13% stake in mortgage lender PNB Housing Finance Ltd to private equity (PE) firms General Atlantic and Varde Partners for 1,851 crore, or $268 million.

Both investors will pump in 925 crore each, at 850 per share, to acquire 1.08 crore shares each from PNB, the lender said in a stock exchange filing. On Friday, shares of PNB Housing Finance closed at 865.7 apiece, up 4.36% on the BSE.

PNB will continue to hold a strategic stake of about 19.79% in PNB Housing Finance and will stay on as a promoter, it said.

PNB Housing Finance stake sale will provide much-needed liquidity to PNB’s balance sheet, which has been weighed down by non-performing assets (NPAs) and the effects of a major fraud in which jeweller Nirav Modi is the main accused.

The bank reported gross NPAs of 16.33% in the quarter ending 31 December 2018, easing slightly from the level of 17.16% in the previous quarter. Its gross NPAs stood at 12.11% in the quarter ending 31 December 2017.

The stake sale in PNB Housing Finance had started last year, with PNB and co-promoter The Carlyle Group, a major PE firm, looking to offload at least 51% stake in the business. Before the sale, PNB owned 32.79% while Carlyle owned a 32.36% stake. Mint reported on 26 July that several PE funds, including TPG and Baring PE Asia, had shown interest in acquiring a controlling stake.

However, the deal hit a roadblock following the liquidity crisis that hit the NBFC and HFC sectors in September and resulted in a severe stock price correction for such lenders. Eventually, Carlyle dropped the plan to sell its stake.

For the quarter ending 31 December, PNB Housing Finance reported a profit of 303 crore, up 32% from 229.5 crore a year ago.

The stake sale indicates rising private equity interest in HFCs. In February, the world’s largest alternatives asset manager, Blackstone Group, acquired an 80% stake in Aadhar Housing Finance for around 3,000 crore. On Thursday, The Indian Express reported that Ajay Piramal-led Piramal Group and Baring Private Equity are in advanced talks to acquire a controlling stake in Dewan Housing Finance Ltd (DHFL).

HFCs have become attractive for PE funds as valuation expectations for the sector have moderated considerably after the crisis at Infrastructure Leasing & Financial Services Ltd (IL&FS) prompted banks and mutual funds, two major sources of funding for NBFCs, to go into a risk-averse mode.

PNB also aims to divest its stake in its life insurance joint venture PNB Metlife. In an interaction with PTI in February, PNB managing director and chief executive Sunil Mehta said the bank is in the process of selling 4% out of the 30% it owns in PNB Metlife to discover the price ahead of a proposed initial public offering (IPO).

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