PNB may dilute stake to 30% in housing finance arm

PNB Housing Finance, in which the bank currently holds 51%, is set to gor for an IPO later this year

Punjab National Bank, the country’s second largest lender, is looking at lowering stake in its subsidiary PNB Housing Finance (PNBHF) to over 30 per cent as the latter goes for an initial public offer (IPO) of equity later this year.

PNB currently has 51 per cent in PNBHF. The finance ministry has been asking banks to offload non-core assets to meet capital requirements. PNBHF, the fifth largest in its segment, had 66 per cent growth in net profit during 2015-16 to Rs 326 crore, against Rs 196 crore in 2014-15. Total income grew 52 per cent to Rs 2,697 crore.

“The IPO will rock the market, as it has posted a really good result. So, we are looking at whether to opt for dilution or offload something more. These are all options in hand,” said a senior executive. According to market estimates, the company could raise at least Rs 2,500 crore through the IPO. The public sector bank has sent the proposal for lowering  stake to the Department of Financial Services, under the Ministry of Finance.

“We have to take permission from the ministry. We should cash in when the winds are good. We will certainly not like to go below 30 per cent but it will be  decided by the size of the issue,” the executive added.

While PNB holds 51 per cent in  PNBHF, the other 49 per cent is held by Carlyle Group, an American multinational financial services company. “We want the issue to happen in FY17. They need capital as they are expanding operations. For how long can they be borrowing? This is a very good time. The company is doing well. It is an opportunity for them to encash their success,” said a senior banker.  The housing finance company is anticipating higher growth from tier-2 and tier-3 cities and the affordable housing segment in metropolitan cities.