India: General Atlantic, Varde to buy 13% stake in PNB Housing for $268m

Photo: Reuters

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).

This article was first published on livemint.com

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.