State-run Punjab National Bank (PNB) and Carlyle Group, which owns over 32 per cent in PNB Housing Finance, have announced that they have appointed merchant bankers, to sell at least 51 per cent stake in the housing finance arm. The deal is expected to be finalised in the next few months, a top bank official has said. “We have just appointed the merchant bankers and are in the process of doing due diligence now,” managing director and chief executive, Sunil Mehta said, on July 16, 2018.
While PNB owns 32.79 per cent stake, Carlyle Group through its investment arm Quality Investment Holdings, owns 32.36 per cent in the Delhi-based PNB Housing Finance. In May 2018, Quality Investment Holdings had sold 4.8 per cent stake in the company for Rs 1,024 crores, through an open market transaction.
When asked about the timing of the deal, Mehta said the bank will go to the market, to offload the stake in the housing finance subsidiary at the right time. Whether the stake sale will happen in the second/ third quarter, Mehta said, “Yes, if the market condition is right and if we are able to get the right valuation, it may happen (in the second or third quarter). It all depends on market conditions.”
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The bank is also looking to list its life insurance arm, PNB MetLife Insurance. PNB MetLife has, as its shareholders, MetLife International Holdings, PNB, Jammu & Kashmir Bank, M Pallonji & Company and other private investors. Metlife and PNB own the majority. Early this year, the bank had set a target of raising Rs 8,000-10,000 crores, by selling non-core assets. Mehta said the bank is revamping its internal processes, to mitigate risks and to improve asset quality and profitability.
Meanwhile, the bank today opened its second centralised loan processing centre in Mumbai. “These centres will segregate functions of sourcing and processing of loans. With this, there will be greater element of transparency and better asset quality,” Mehta said. He said the bank has set a recovery target of Rs 22,000 crores, in the current financial year. In the first quarter, its recovery was above Rs 8,000 crores, compared to Rs 5,600 crores it had recovered during the entire FY18. In the April-June quarter, the bank got over Rs 3,000 crores, only through the NCLT resolution process. “We have set a total target of Rs 22,000 crores of recovery in the current financial year and we are more than confident of achieving it. In the first quarter itself, it was over Rs 8,000 crores and the second quarter recovery may be around Rs 10,000 crores,” Mehta said. In Q2, the lender expects Rs 3,500 crores from the NCLT resolution process, he added.
The fourth-biggest lender by assets, had reported the industry’s worst losses for the March quarter at Rs 13,417 crores, following the over Rs 14,356-crore Nirav Modi scam, against a net profit of Rs 261.90 crores, a year ago. The losses would have been over Rs 20,000 crores, had the bank fully made provisions for the loss incurred on account of the Modi fraud. Of the total amount of Rs 14,356 crores lost through the fraud, the bank has made provisions only for 50 per cent or Rs 7,178 crores, in the fourth quarter of FY18.