1 % of PNB Housing Finance IPO fully subscribed

On 25th Oct, India’s fifth-largest housing finance company has made a debut on Dalal Street, with its initial public offer (IPO) opened for subscription. PNB Housing Finance, from the Punjab National Bank (PNB share price- 0.27%) stable has aimed to raise Rs 3000 crore. The IPO which will close for subscription on October 27 is going to be the second largest issue of 2016 after ICICI Prudential Life Insurance’s Rs 6057-crore IPO. So far, around 22 IPOs have hit markets this year.

The IPO of PNB Housing Finance kicked off, logging bids for 2.63 lakh shares in the first half-an-hour of the bidding process. This was roughly 1 per cent of the 2.8 crore shares the housing lender has put on the block. On Monday, the company witnessed spectacular response from anchor investors, who bade for 30-times the number of shares from the anchor book.

At the upper end of the price band of Rs 750-775 apiece, the IPO is expected to fetch up to Rs 3,000 crore. The issue constitutes entirely fresh issue of equity shares. Thus, the funds raised will augment tire-I capital of the home financier, taking the CAR well above the regulatory requirement of 12 per cent and aid future business growth.

At the upper end of the price band at Rs 775, the issue is valued at 2.5 times its post-dilution adjusted book value of Rs 311 per share on a FY16 basis. The valuation of the company seems reasonably attractive as compared with the peers with largely similar RoAs including LICHF (trading at 3.3 times its FY16 ABV), GICHF (2.5 times), CanFin Homes (5.6 times).

Considering the healthy financials, top quartile return ratios and total growth in the housing finance sector driven by government’s ‘housing for all’ and ‘Smart Cities’ programme, it is believed that PNB Housing Finance offers an ideal investment opportunity. As a result, investors can subscribe to the issue.

After IPO, its parent company PNB will reduce its stake to around 38-39 percent of issued share capital. Thus, PNB Housing Finance won’t stay either a subsidiary of PNB or a government company. Nonetheless, after the issue, PNB will still be its single largest shareholder with 26 percent or 33 percent holding of the post-issue equity share capital.

Established in 1988, the company has 47 branches across northern, western and southern regions of India and 16 processing hubs and 7110 channel partners all over different location in India. It initially offers customers housing loans for purchase, extension construction or improvement of residential properties or for purchase of residential plots and non-housing loans in the form of loans against property (LAP) to property-owning customers through mortgages over their current property and any additional security.

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