PNB Housing Fin - Fast Growing HFC

Carlyle to Sell 10% Stake in PNB Housing Finance

EXITING WITH BIG PROFIT The PE firm, which had invested ₹1,600 cr in 2015 for a 49% stake, will make more three times its initial investment
Shilpy.Sinha@timesgroup.com

Mumbai: Global private-equity major Carlyle is seeking to sell a 10% stake in PNB Housing Finance, making more than three times the money it had initially put in and likely boosting the performance of the Asia buyout fund through which it holds the investment in the Indian mortgage lender.

PNB Housing Finance, which listed in Mumbai in November 2016 after a ₹3,000-crore initial public offer, has seen its market value almost double since the public debut. The share price has risen from ₹775 apiece to ₹1,335 apiece. Carlyle had invested ₹1,600 crore in February 2015 for a 49% stake in the unlisted company.

“Private-equity fund Carlyle has put a 10% stake on the block in PNB Housing Finance and is looking to sell it in the next 12-18 months,” said a source close to the development.

The listed mortgage lender has a market capitalisation of ₹22,242 crore. Carlyle’s 37.55% stake is worth ₹8,351 crore in the listed subsidiary. A 10% stake sale would fetch Carlyle ₹2,224 crore at current market prices.

Carlyle did not comment on the proposed stake dilution. Sanjaya Gupta, managing director of PNB Housing Finance, also said that he would not like to comment as it is a subject involving shareholders.

PNB Housing Finance is the second largest deposit taking housing finance company and Carlyle is its largest shareholder, followed by Punjab National Bank (PNB) that owns 33%. In November 2017, PNB had sold 6% to a clutch of investors, including the General Atlantic Singapore Fund.

In February 2015, Destimoney Enterprises Limited’s 49% stake was sold to Quality Investments Holding, a company of the Carlyle Group, L.P, and incorporated in Mauritius.

Other investors include Birla Sunlife MF, Motilal Oswal MF, Wasatch, T.Rowe Price, Government of Singapore, Fidelity, Invesco, Reliance MF and Nomura Asset Management.

During the initial share sale, PNB had reduced its stake in PNB Housing Finance to 39% from 51%.

The company has assets under management of ₹57,668 crore at the end of December 2017. Its gross nonperforming loan was at 0.42%. The government has given a boost to affordable housing by creating a dedicated fund in collaboration with the National Housing Bank as it looks to fulfil its target of building such homes for all by 2022.

Also, to boost the inventory of affordable homes in the coming fiscal year, New Delhi has decided to build 5.1 million homes in rural areas. Assistance has been provided to construct 3.7 million homes under the Pradhan Mantri Awas Yojana.

Shares of the company declined 1.22% to ₹1,335.20 on the Bombay Stock Exchange Wednesday.

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I think this is one of the downsides of having a management not being run by owner operators. No long term plans for the shareholders and no skin in the game for management.

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I don’t believe there is anything to be worried. The Promoter PNB housing has reduced stake to 30% and Carlyle does not want to be caught napping with 37%. With 37% you could end up as the promoter. Hence Carlyle would naturally want to sell their holdings to bring it below that of the promoter. Carlyle would make more by holding. But they are compelled to sell for strategic reasons.

Could you elaborate further on this ? Why don’t they want to be classified as promoter.
Thanks in advance.

Dis-Invested

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@baba You were spot on in guessing that Carlyle would want to exit.

Carlyle is not exiting. After selling 10% it will hold 27.55% still. (and history is made by earnings yoy/qoq, and not by who held the shares)

You need to ask the questions to Carlyle. Intentions are deduced from actions.

I think this statement was made before Canfin share split…Canfin was trading near 2800 or so…he expected it to be in 4 digits before 2020

LOOK at the annual report of Carlyle. They sell something each year. Why would pnbhf be any different. I don’t think they are here for long haul. Was very much interested in this company. But now need to wait for next con call.

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They won’t be making any statements on shareholders in the concall.

If anybody here is attending the con call could you ask about the promoter. Carlyle group is one of the reason for this company’s attractiveness. IF I get a chance to attend the con call I will also try asking. Thanks

PNBHousingPressReleaseMarch18.pdf (473.4 KB)
PNBHousingInvestorPresentationMay18.pdf (1.6 MB)

Results are out!

NII growth 36% Q4 FY17-18 vs Q4 FY16-17 and 54% YoY
PAT growth 44% Q4 FY17-18 vs Q4 FY16-17 and 58% YoY

Disbursements increased 61% YoY
AUM growth 50% YoY

Request to experts on forum to please shed more light on the results and what to look forward to going ahead.

PAT growth QoQ is just 0.8% (1.7 Crores)

Sorry for the mistake. I have corrected it now in the original post.

As promised by CEO, company is growing 1.5-1.8 times the industry average and today again the CEO said it would grow 1.5-1.8 times in future. I have no reasons not to believe him as he has build credibility through his regular delivery of performance. . Another remarkable thing is this out performance has not come in at the cost of asset quality. There are not many companies “promising” 30% growth and also delivering consistently with quality.

Do you think PNB HFL will be able to maintain such high levels of asset quality on a book so big with only 53% of it being individual housing loan and only 41% of the borrowers of the housing loan are salaried individuals.
They have 57000 crore loan book. DCB bank, RBL bank etc have much lower loan assets but higher NPA

Can anyone explain what is a sell-down loan? To whom do they dispose 5000 crores worth loans…

The NPA on loans to salaried individuals is higher than non-salaried in case of PNBHF for last several quarters.

Could you share the source of this information? I don’t see the split up in the investor presentation at least. It is still hard for me to believe such low NPA when 47% of the loan book (=25000 + crores) comprises construction finance, LAP, lease rental etc. Even HDFC has a higher NPA % with construction finance etc. I could only get the below given information from last year’s annual report.

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