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Business News/ Industry / Banking/  PNB  may  sell  stake  in NCDEX, Pridhvi  ARC  to free  up  capital

MUMBAI : Punjab National Bank (PNB) is looking to sell its stake in Pridhvi Asset Reconstruction and Securitisation Co. Ltd and National Commodity & Derivatives Exchange Ltd, or NCDEX, to free up capital to expand lending.

While PNB owns 10% in Pridhvi ARC, its stake in NCDEX is at 7.29%. The lender wants to hire legal advisers and other intermediaries to prepare the required documents and to manage the divestment process, according to a notice published by the bank. It said that it could either sell the entire stake or a portion of it by 28 February.

For banks, these so-called non-core assets are unrelated investments to their main business of lending. With credit demand picking up, banks are selling such assets to boost their lending business.

“The bank wishes to invite proposals from interested law firms and legal advisers, with experience, and expertise in divestment process of public sector undertaking and reputed private sector companies at the national level to act as legal advisers and assist the bank in the process," the notice by PNB said.

It added that bidders willing to assist the bank in the divestment process should have advised other entities and successfully completed at least one domestic divestment of shares of 50 crore or more in the financial services sector between 1 April 2017 and 31 March 2021. PNB has been selling its non-core assets to raise capital for some time now, and this is the latest bid ahead of what is being seen as the phase where demand for credit would pick up. Growth of non-food credit, languishing for the major part of 2021 in the 6-7% range, showed signs of picking up in December, rising 9.28% from a year earlier.

NCDEX is an agricultural commodity exchange in India, with a market share of 78%, based on average daily turnover (by value) for the six months ended 30 September 2019.

As of 31 December, the National Stock Exchange of India Ltd (NSE) held the highest stake in NCDEX at 15%, followed by Life Insurance Corporation of India (LIC) and the National Bank for Agriculture and Rural Development (Nabard) at 11.1% each. Other shareholders include Indian Farmers Fertiliser Cooperative Ltd and Oman India Joint Investment Fund at 10% each; Canara Bank (6.03%); Investcorp Private Equity Fund I, Build India Capital Advisors LLP, and Shree Renuka Sugars Ltd at 5% each.

Pridhvi Asset Reconstruction and Securitisation Co. was incorporated on 27 March 2007 and received the registration certificate from the Reserve Bank of India in April 2008. The company claims it is the first ARC to be licensed by RBI in south India. PNB is a sponsor of the ARC. Mint reported in July last year that lenders have started looking for buyers for their stakes in asset ARCs to free up capital for the launch of the National Asset Reconstruction Co. Ltd, the bad bank.

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Shayan Ghosh
Shayan Ghosh is a national writer at Mint reporting on traditional banks and shadow banks. He has over a decade of experience in financial journalism. Based in Mint’s Mumbai bureau since 2018, he tracks interest rate movements and its impact on companies and the broader economy. His interests also include the distressed debt market, especially as India’s bankruptcy law attempts recoveries of billions worth of toxic assets.
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Updated: 24 Jan 2022, 05:52 AM IST
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