Shares of PNB Housing Finance will be in focus during the trading session on Tuesday as the US-based private equity firm Carlyle is likely to sell up to a 6.4 per cent stake in the shadow lender through an open market transaction on Tuesday, suggested some media reports.
IIFL Finance is the banker for the issue and according to the term sheet issued by it Carlyle affiliate entity Quality Investment Holdings is looking to offload 1.66 crore equity shares at a floor price of Rs 775 apiece, amounting to raise a total of Rs 1,256 crore. The floor price is fixed at a 5 per cent discount to Monday’s close at Rs 794.90 apiece.
PNB Housing stock has largely underperformed so far this year, inching up merely 1.14 per cent in 2024 so far, while the BSE Sensex has gained over 12.5 per cent in the current year so far. Carlyle held a 32.68 per cent stake in the housing finance player, as per the shareholding pattern for June 2024 quarter.
PNB Housing has transformed its business model toward retail, and reduced its corporate loan book as a percentage of its AUM in the last one year or little more than that. It now aims to scale up affordable housing disbursements in its total retail disbursements over the medium term.
In the previous week, PNB Housing reported a 25 per cent jump in net profit for the quarter ended on June 30, 2024 at Rs 433 crore. Its gross non-performing assets (GNPA) declined by 241 basis points (bps) to 1.35 per cent, while net NPA declined to 0.92 per cent a year ago.
Disbursement grew 19 per cent on a yearly basis to Rs 4,398 crore with retail disbursement constituted 99 per cent. Affordable book stood at Rs 2,361 crore. The lender’s net interest income (NIIs) grew 4 per cent YoY to Rs 651 crore. Net interest margin (NIMs) remained flat at 3.65 per cent in the reported quarter.
JM Financial expects PNB Housing Finance to re-rate, given its continued delivery on RoA metrics, attractive valuations and relatively lower asset quality risks. "We maintain 'buy' with a revised target price of Rs 1,200 (1.7 times FY26E BV) in return for RoA of 2.6 per cent by FY26E," it said.
Motilal Oswal continues to believe in its thesis that a transformation in this franchise and the management’s ability to deliver RoA improvement predicated on healthy retail loan CAGR of 17 per cent; NIM improvement in 2HFY25; benign credit costs from asset quality improvement and recoveries from the written-off pool.
"The stock trades at 1.1 times FY26E P/BV, and we believe that risk-reward is favorable for a re-rating in the valuation multiple as investors gain higher confidence in the company’s sustained execution in retail (across prime, emerging and affordable). We maintain a 'buy' with a target price of Rs 1,015," it said.