PNB's housing arm may raise $50 mn

New Silk Route backed company focuses on affordable housing

PNB Housing Finance Ltd (PNB HFL), promoted by the Punjab National Bank (PNB) and backed by private equity fund New Silk Route, is planning to raise $50 million by way of loan from the International Finance Corporation (IFC). PNB HFL focuses on affordable housing finance.

PNB HFL is targeting expansion of its affordable housing finance portfolio and has obtained RBI approval for a $100 million External Commercial Borrowings (ECB). IFC’s proposed project involves a senior loan by IFC’s own account of up to $50 million.

This will be PNB HFL’s second debt raising in the foreign currency debt market.

The fund raising is expected to support PNB HFL to increase its reach in the affordable housing finance segments with additional focus on the low income states, women borrowers and for offering mortgage financing for “green” residential units.

PNB HFL is well capitalised. However, it is dependent on bank borrowings and NCDs for over 70 per cent of its funding needs.

Funding from the IFC will diversify the funding profile of the company and will support PNB HFL’s efforts to explore overseas markets and investors which is an important element in the company’s growth strategy, said IFC.

“IFC’s investment would demonstrate the viability of offering housing finance to LMI client. While housing finance is one of the lowest risk asset classes in India’s financial sector, mainstream commercial institutions have so far shown limited in this segment,” said IFC.

IFC’s proposed investment is consistent with the World Bank Group’s India Country Promotion Strategy (CPS) as it aligns with the engagement areas of Inclusion – by improving access to affordable housing finance and enhancing investment in the low income states, transformation – through job creation by supporting the labour intensive affordable housing segment and  Integration – giving increased access to financial services in Tier II and Tier III cities.

Established in 1988, PNB HFL is promoted by the Punjab National Bank, which presently holds a majority, the balance held by Destimony Enterprises Private Ltd, a wholly-owned subsidiary of private equity fund New Silk Route.