PNB close to deal on exiting AMC, Gilts

Punjab National Bank, the second largest public sector bank in the country, is close to sealing a deal on exiting two of its non-core businesses – mutual fund and primary dealership. The bank is divesting its 30 per cent stake in Principal PNB Asset Management Company and 74 per cent stake in PNB Gilts.

According to sources in the investment banking, PNB is in advanced discussions with US-based Principal Financial Services for selling its stake in the AMC. While there are some differences over valuation, a senior bank official said the negotiations are expected to close shortly – most likely by next month.

PNB is asking for Rs 180 crore for its 30 per cent stake in the venture, valuing the AMC at Rs 600 crore. However, Principal has valued it at around Rs 500 crore, which is less than 5 per cent of the assets under management (AUM).

The valuation is lower than some of the recent transactions in the AMC space, but sources said this is due to the decline in the company’s assets under management to around Rs 11,000 crore from over Rs 13,000 crore last year.

In July this year, JM Financial had sold 12 per cent stake to three hedge fund investors for Rs 111.7 crore. The three investors — Valiant Capital Partners, Blue Ridge Capital and Eton Park — had valued the company at Rs 931 crore, which was 7.32 per cent of the assets under management of Rs 11,000 crore.

Standard Chartered sold its Indian asset management business to Infrastructure Development Finance Company Ltd for over Rs 800 crore, valuing the firm at about 6 percent of its assets under management.

The sources said Vijaya Bank, which has 5 per cent stake in Principal PNB AMC, and PNB had tried to approach other financial investors to get a better valuation, but was not able to get a good response as Principal has the first right of refusal.

Meanwhile, four companies, including Edelweiss Capital and Goldman Sachs are in the race to buy out the bank from PNB Gilts, which was the first primary dealer to be listed on the stock exchanges.

Source close to the development said that the deal is expected at the book value, which is Rs 40 per share. The company has a paid-up capital of Rs 135 crore and reserves of Rs 392 crore. “The deal is expected at Rs 40-45 a share. This would value the company around Rs 550-650 crore, The company’s share closed at Rs 23.50 on Tuesday.