PNB CMD's exit clouds Destimoney sell-off

Destimoney, which is wholly owned by PE firm New Silk Route (NSR), holds a 49% stake in PNBHFL

There is a correction that can be seen at the end of this article.

The sale of Destimoney Enterprises (formerly known as Dawnay Day AV Financial Services), the retail financial services and distribution company, is expected to be delayed. The recent exit of the Punjab National Bank (PNB) chairman is learnt to have affected the sell-out discussions between the promoters of Destimoney and private equity investors.

Destimoney, which is wholly owned by PE firm New Silk Route (NSR), holds a 49 per cent stake in Punjab National Bank Housing Finance Ltd (PNBHFL). The deal is expected to be in the range of Rs 1,000-1,200 crore.

K R Kamath had quit as the chairman and managing director (CMD) of PNB with effect from October 28, after completing his five-year tenure. Kamath, who has another 13 months left to reach 60 years, was expected to get an extension. At present, no one has taken the charge of CMD at PNB and the position remains vacant.

Although the sell-off decisions are taken by an independent committee, the final approval and formalities are to be completed by the chairman. As the top position remains vacant, signing the deal is likely to be delayed further, sources said.

According to sources, PE majors General Atlantic, Actis and ChrysCapital are in discussions with New Silk Route for acquiring Destimoney, which has a wide exposure to the loan books of PNBHFL whose loans outstanding stood at Rs 10,591 crore at end-March 2014, up from Rs 6,619 crore a year ago.

People in the know said although the buyer is yet to be finalised, General Atlantic could be the front-runner for the deal.

When contacted, an NSR spokesperson said the company would not like to offer any comment. J M Trivedi, head of Actis South Asia, too, refused to comment while mails sent to General Atlantic and ChrysCapital did not elicit any response till the time of going to press.

An executive with a PE firm, which is in the race for Destimoney, said: "We need a better clarity over the recent developments, especially when a public-sector firm is involved in the deal. We had our expectation that Kamath would get another extension, where the deal would have been concluded in the specified time. However, we believe the deal will get delayed further as no one is yet to take charge at the top position."

When contacted, PNBHFL chief finance officer Jayesh Jain's office informed he was away for a board meeting and would be available only on Friday.

According to the finance ministry, the new CMD for PNB will be in by the end of this month. The selection process is underway and interviews are expected next week.

Destimoney was launched by mutual fund industry veteran Alok Vajpeyi as a joint venture with Dawnay Day International, the financial services unit of UK-based Dawnay Day Group. After its buyout in 2008 for Rs 200 crore, NSR changed the name from Dawnay Day AV Financial Services to Destimoney.

PNBHFL saw its profits grow 54 per cent to Rs 87 crore in the six months ended September 2014, compared to Rs 57 crore during April-September 2013.

The outstanding loan portfolio of PNBHFL, which provides loans to purchase and construct residential premises, was Rs 13,733 crore as on 30 September 2014 against Rs 8,502 crore a year ago, showing a 62 per cent growth. Out of the total advances, individual loan portfolio grew 51 per cent at Rs 8,696 crore in 12 months ended September 2014 from Rs 5,747 crore at the end of September 2013.

The housing finance company has also stepped up raising money through deposits in the past 12 months. The outstanding deposits grew 97 per cent to Rs 2,958 crore from Rs 1,505 crore a year ago.

THE STORY SO FAR

• Dawnay Day AV launched in 2006
   
• New Silk Route buys Dawnay Day AV in 2008; renamed as Destimoney
   
• PNB sells 26% stake in PNB Housing to Destimoney in 2009
   
• Destimoney increases stake to 49% in 2012
   
• NSR plans to sell Destimoney in 2014
   
• GA, Actis, ChrysCap are in fray

Correction: An earlier version of this story identified that K R Kamath has 13 months left to turn 58 when in fact he has 13 months left to turn 60. The error is regretted.