The lender’s plan to raise Rs 1,800 crore tier 1 capital has hit a speed breaker with promoter Punjab National Bank (PNB) communicating last month that it would not infuse capital. Qualified institutional placement and preferential shares are two possible ways of capital raising at present, while it abandoned a rights issue of shares following the PNB decision.
Sources in the know said that the overseas investors are doing the due diligence separately.
Both Carlyle and General Atlantic declined to comment. PNB Housing Finance did not respond to queries.
Matters surrounding PNB Housing turned gloomier after India Ratings & Research revised the outlook on lender’s non-convertible debentures to negative from stable even as it affirmed the “AA” rating.
The outlook revision reflects an added uncertainty around the timing and quantum of PNB Housing Finance’s capital raising, which could be critical in view of the stress in the loan portfolio, especially wholesale advances, the rating company said.
“This, if sustained, may require stronger stress absorbing buffers. The additional capital is also important to provide support for loan growth, without significantly raising leverage,” it said.
After PNB backed out from infusing capital following disapproval from the Reserve Bank of India, PNB Housing had said that it would pursue the proposed capital raising plan through permitted modes.
The promoter’s decision to not infuse capital afresh would lead to dilution in its shareholding from 32.65% at present. The bank had earlier said that it wanted to hold a minimum 26% share.
The Carlyle Group, which holds 32.22% in PNB Housing through a group company called Quality Investment Holdings, cannot participate in QIP as the group has representation in the mortgage lender’s board. General Atlantic, which has a 9.87% interest, can participate, people familiar with the matter said.
The disruption in economic activities brought about by the COVID-19 pandemic has resulted in rising delinquencies for PNB Housing. The proforma non-performing assets, which include NPAs that have not yet been classified as bad loans, were at 4.47% at end of December 2020. Gross NPA ratio was otherwise at 2.64%.
The pressure is higher in the construction finance portfolio with gross NPA at 8.2%, India Ratings said in a note. The lender is among the top five players in the housing finance segment with assets under management of Rs 77,769 crore. Its loan asset shrank to Rs 64,584 crore from Rs 69,194 crore a year ago.