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Published on 2/19/2018 1:55:53 PM
PNB can't sell housing finance stake just yet
Scam-hit Punjab National Bank (PNB) will not be able to raise additional funds by selling its entire stake immediately in PNB Housing Finance, with capital-market rules prohibiting the state-run lender from doing so within three years of listing.

The housing finance company, which was listed on November 7, 2016, has a market capitalisation of Rs. 20,000 crore, and PNB’s 33% holding in the listed subsidiary would fetch the lender Rs. 6,700 crore at current market prices.

"Punjab National Bank cannot sell the entire stake in the listed mortgage company because of the lock-in until November 7, 2019," said a source aware of the development.

The bank reduced its stake in PNB Housing Finance when the latter was listed to 39% from 51%. SEBI rules require promoters to offer a minimum 20% capital as lock-in for a period of three years, said the source mentioned above.

In November 2017, the bank sold a further 6% to raise Rs. 1,320 crore from a clutch of investors, including General Atlantic Singapore Fund, and shore up its capital base. It had sold its entire 21.38% stake in Principal PNB AMC, the asset management business. As on December 31, 2017, the bank’s capital adequacy ratio was 11.58%, with common equity tier-I capital ratio of 8.05%.

While diluting the stake, PNB chief Sunil Mehta had said that the promoter stake holding would not fall below 30%, leaving the bank with headroom to sell up to 3%. Other investors in the company include Birla Sunlife MF, Motilal Oswal MF, Wasatch, T.Rowe Price, Government of Singapore, Fidelity, Invesco, Reliance MF, and Nomura Asset Management.

After the scam became public, Mehta told investors that the bank has investments in non-core assets that could be monetised to strengthen the lender's capital position. Apart from the 33% stake in its subsidiary PNB Housing Finance, the bank has investments in PNB Gilts and UTI Asset Management.

For the year ended March 2017, PNB Housing Finance reported a profit after tax of Rs. 523.7 crore and AUMs of Rs. 41,492 crore.