PNB Housing Fin - Fast Growing HFC

Julian · February 22, 2019, 5:50pm

Doesn’t the news above sound fishy and appear illogical? How can PNB retain management control with 10% stake? Was such a news leaked to prevent the share price from spiking? Or PNB’s negotiation tactic?
Read the latest news below:
Mehta said the bank has received bids from buyers to its stake sale in housing finance subsidiary PNB Housing Finance and is now negotiating

https://m.timesofindia.com/business/india-business/pnb-metlife-ipo-likely-next-fiscal-mehta/articleshow/68082063.cms

Bhambri3 · February 24, 2019, 7:57pm

Another boost for housing sector

Kumark · March 5, 2019, 1:01pm

How do you all see this for PNBHFL future? considering need to raise capital soon.

Thanks,
Kumar

arhagar · March 18, 2019, 6:54am

Does anyone know if the stake sale is expected to be completed this FY ?

Julian · March 19, 2019, 2:53am

What stake sale are you talking about? Having decided that the prime days of PNB housing are over, the parent goes for stake sale. During the sale process, their partner Carlyle backs out since the market has crashed. Fools tread where Angels fear to enter! With public money to throw away, PNB continues the stake process to give away a company which had grown bigger than the parent in market cap, and finding that PNB housing is still growing by 30% invents an excuse that their subsidiary is their competitor! If your subsidiary is doing the housing finance business better than you, why don’t you acquire more of it and outsource the housing finance job to them? Fortunately there are wiser heads, and market is looking up. This one is the market leader for housing finance, having grown more and faster in the liquidity crisis last quarter where even Gruh Finance and HDFC bit the dust. Tell me, who can beat Sanjaya Gupta in sales growth? This must be the Challenger to HDFC, the king. And I have vested Interest.

arhagar · March 19, 2019, 2:57am

Still does not answer my simple question

Julian · March 19, 2019, 3:02am

Your question is not simple. PNB is trying to answer your question paper for over a year. Carlyle has already failed the exam.

mrai74 · March 19, 2019, 8:49am

I don’t see it atleast in current FY as we have less than 2 weeks. Next FY is expected to be promising with general elections & the resultant new (could be same) Govt in office for next 5 yrs (assuming no hung verdict). If it helps the broader indices, we may see more activity from PNB management as the major reason of disruption of recent stake sale process was crash in major indices.

vicky_7900 · March 27, 2019, 8:01am

Mridul:

Good debate! Most of us are gaga about housing finance companys’ prospects. Lot is being said about the triggers (subsidies, low cost housing, Infra status, tremendous growth visibility).

The thing is that giving loans is one thing and recovery is another thing (should be viewed separately). These housing loans are extremely long term loans. We all are assuming that house being a collateral could be sold easily at ‘good’ rates to recover money if something goes wrong. A lot is being assumed about the payback power of the people getting ‘affordable’ houses. Well, there could be a case where houses are in oversupply…so selling becomes difficult (at good rates).in case of defaults. So if the value of collateral falls, the loan might not remain as secure as one may think. One counter point to this might be that if someone defaults after paying regular EMIs for a few years, amount to be paid back becomes smaller than what he originally borrowed. So, even if the value of collateral comes down, we are good. Fair enough!

Another point which samir arora made is the budget for this housing subsidy…it’s just 1000 cr. So is that enough? May be more wd be allocated in next few years?

Regarding the space getting crowded due to everyone getting into housing finance, it’s being said that the pie is huge to accommodate everybody…is it? How big it is?

Another thing is that if one grows the denominator quickly (loan book), npa visibly look constant. But on absolute basis they are increasing. Whenever growth tapers down, npa numbers could skyrocket.

I am little cautious as everyone is running after these companies as if there is no tomorrow**. 7-8 times p/b is very expensive** irrespective of growth prospects. So MOS isn’t there now.

Roe is good as p/bv is very high. So they keep raising funds at higher p/bv, and their book value goes higher and higher. Now, if we assume that the growth (or quality of growth) falls due to some reasons i have mentioned above, stock wjll correct. Correction would resulf in fundraising at lower prices resulting in lower growth in bv. So this will impact roe. It’s all related. It’s all looking so good as they are able to raise funds at astronomical valuation.

Food for thought.

7-8x book value to now around 1.85x fy19 book value.

Bhambri3 · March 29, 2019, 4:12am

Not sure how true it is

sursub · March 29, 2019, 5:36am

Everyone says look at p/b for financials. Why are we looking at p/b and not p/e, over a period of time? If two banks have different ROA, say one is 5 and the other is 1, wouldn’t the first one command a significantly high p/b? Shouldn’t we value any business as sum of all the free cash to the eternity (or till the company exists) discounted to today’s value?

Just trying to understand why should not we use p/e. Appreciate any insights.

vicky_7900 · March 29, 2019, 6:03am

Absolutely. Earlier (meaning a couple of years back) we could say that due to expansion expenses, the RoA would be low and correspondingly P/E would be high. But now, things have normalised and the debt to equity ratio is also normal. So you could look at p/e or p/b as per your wish. Looks like Valuations have come off.

mrai74 · March 29, 2019, 11:35am

vicky_7900 · March 30, 2019, 8:49am

“Post these transactions, PNB said it would continue to hold strategic stake of 19.78 percent of the paid up capital of PNBHF and shall continue as a promoter and strategic shareholder of PNBHF.”

This could have positive impact on company’s ratings imho.

mrai74 · April 2, 2019, 12:00pm

Clarification from PNB on recent news of illegal lending practices by PNB Housing Finance

5F5FF024_E9E1_459F_9F53_DD59209AAD51_132055.pdf (143.1 KB)

Julian · April 5, 2019, 2:51am

Marriage on mind, Lakshmi Vilas Bank and Indiabulls Housing boards meet

via The Economic Times App(Download Now):
http://ecoti.in/1bhLVY

Dhfl gone. Now India Bulls housing. The thesis that PNB housing finance will be the lone Challenger to HDFC, and will eventually lead the housing finance pack is playing out as predicted.

Kumark · April 7, 2019, 5:15pm

Hi All,

PNB partial stake sale and keeping rest, kind of not giving good sign, as they are not getting good buyer to buy at higher prices. Also stock prices not going any where is giving indication that volatility will remain, on top the equity dilution should come in sometime. Real estate also yet to pick up. I believe these things can actually slowdown the company. whats your view ?

Thanks,
Kumar

Kumark · April 8, 2019, 7:58am

ROE will improve but to maintain high growth you have to dilute the equity as the gearing ration is coming close to pre-IPO level, which will again hit the ROE. I am sure they can keep up with growth which is not big problem, but spread is declining and these IBHF & Gruh will have reduced borrowing cost and stronger liability side. New NHB proposal if implemented could be little negative on short term.
PNB is not just going to stop selling they will wait for the prices to come up and selling pressure kicks in and everything we are experiencing will come all over again.

Bhambri3 · April 13, 2019, 2:08pm

PNB housing to now offer loan for 30 years as well

JOSE_ABRAHAM · April 30, 2019, 3:28pm

PNB housing has been put on credit watch by CARE. Was this the reason the stock has been on a free fall? From peak price of Rs 1700 to 700 ! Not a good sign. Will more skeltons start to tumble out as the price keeps nosediving?