PNB Housing Finance, the subsidiary of Punjab National Bank (PNB) on Tuesday, launched its initial public offering (IPO) to raise Rs 3,000 crore.
The issue, that closes on Thursday, can be subscribed in the price band of Rs 750-775.
Detailing about the objects of the issue, the Red Herring Prospectus of the company said it will help augment company's tier-I capital base to meet the future capital requirements which are expected to arise out of growth of PNB Housing's business and assets, primary the housing and non-housing loans.
The money garnered through IPO would also help the firm comply with National Housing Board directions on minimum capital adequacy ratio, which consists of tier-I and tier-II capital.
Below are ten points you must know about the PNB Housing Finance IPO:
- PNB Housing Finance is the 5th largest HFC (housing finance company) in India by loan portfolio as of September 30, 2015, according to the IMaCS Report.
- Post IPO, the two promoters of the company, Punjab National Bank (PNB) and Carlyle Group, L P, would together shed around 23.5 per cent stake in PNB Housing.
- The entire 3.9 crore shares on offer (at upper end) are through fresh issue with NIL amounts towards any offer for sale.
- At the higher price band of Rs 775, the issue is valued at 2.5x its post-dilution adjusted book value of Rs 311 per share on FY16 basis.
- "Considering the healthy financials, top-quartile return ratios and overall growth in the housing finance sector backed by government's "Housing for All" and "Smart Cities" program, we believe the company offers an ideal investment opportunity. Hence, investors can subscribe to the issue," said brokerage Centrum Broking.
- "PNB Housing's GNPAs were 0.22 per cent in FY16. For a company with 30 per cent non-housing portfolio (LAP, LRD etc), the asset quality is too good to sustain, if peers such as HDFC and Dewan Housing Finance, are considered more representative of normalized levels," said IDBI Capital. The brokerage recommends 'subscribe' on the issue.
- While caution is warranted on asset quality, IDBI Capital expects it to be cushioned by PNB Housing's improving earnings profile. It should also be noted that PNB Housing's growth shall get more granular as it's ticket sizes drop due to higher originations from Tier 2 centres. This should result in a better spread of credit risk.
- Angel Broking believes strong management with fresh capital should help maintaining the growth of the company. MD Sanjay Gupta along with the newly hired professionals from private sector has been the key behind the growth.
- The company has delivered a phenomenal nearly 61 per cent CAGR in loan book over FY12-16, which has resulted in 43 per cent CAGR in PAT growth. The IPO proceeds will enable the company maintaining the growth momentum albeit with a lower rate.
- "PNB Housing is all geared up for its next leg of growth and has the potential to become a significant player in the Indian mortgage business. Looking at the quality of management, which can drive the growth, we recommend a 'subscribe' to the issue," said Angel Broking.