Carlyle’s Fund Infusion Encourages PNB Housing Share’s Growth

PNB Housing Finance gets fundraising of worth ₹4,000 crores from the Carlyle Group and Aditya Puri, former chief executive of HDFC Bank Ltd to boost growth. End Quote

(1888PressRelease) June 25, 2021 - As per the latest reports, PNB (Punjab National Bank) witnessed a surge of 20% in its shares on 31st May 2021 after its board received capital funding worth ₹4,000 crores from the Carlyle Group along with a handful of other modest investors through a preferential share issue. The aforesaid fundraising by marquee investors proved a significant contribution for the shares of PNB Housing Finance Ltd than an uncontrolled assembly in equity markets.

This fund infusion will help Carlyle to raise its stake in the organization to 30% from the current 26%. Walking about other investors signifies the name of Aditya Puri, former chief executive of HDFC Bank Ltd.

Puri is probably going to be assigned to the board, PNB Housing Finance said in a release. PNB will stay the advertiser, yet with a decreased shareholding.

Due to a disrupted real estate sector, the balance sheet of the PNB Housing Finance has been under tremendous pressure. The uneven exposure to underlined developers had a bad influence over its valuations and its balance sheet stability in the last few years, following the global pandemic. According to the adjoining report, the lenders have also witnessed a shrink in assets under management (AUM) and a boost in bad loans.

For sure, the bank’s valuation has destroyed a huge 66% during FY19-FY21 due to this. Following this decrement, the current share prices of the bank are lower than the issue price of its IPO in October 2016.

For the March quarter, AUM highlighted the highest-ever decrement of 10.7%. Quite a bit of this was by plan, as the bank tried to encourage disrupted wholesale loans and raise the share of retail.

The loan book of the bank has been declining for six quarters in a row now. The pandemic even spoiled the situation in FY 2021 and the company completed the year with a gross bad loan of ₹2,762 crores or 4.4% of the total book. Bad loans were underneath the 1% mark just three years ago.

Given these complexities, the bank’s shares have not been capable of touching pre-pandemic marks, although most companions have crossed these levels. It is a much clear fact now that the lender is required to get fundraising to not only just develop but also restructure its loan book.

This fundraising by Carlyle will be of a significant contribution to the bank. After deteriorating for many years, the real estate industry is now reviving. A few state governments have stretched out tax shops to the real estate industry to encourage sales.

Along with the lower interest rates, demand for homes is also anticipated to boost. Given that the bank has amplified its arrangements impressively and decreased the disrupted developer book, a significant part of the fund raised is likely to attract growth.

All things considered, investigators accept that close-term difficulties from the pandemic will not vanish.

As per Anand Dama, an analyst at Emkay Global Financial Services Ltd, “I think approaching new investors like Carlyle will help in the long run. But they are required to adjust the books as they have still uneven exposure to the developers. In the upcoming period, there will be challenges.” The loan book of the bank is currently 67% retail, as it keeps shrinking its developer book.

While the aforesaid fund infusion is capable enough to boost the shares by 20%, the bank is required to show a continuous improvement in its metrics for valuations to survive.

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