The Hindu Business Line : PNB to sell 26% stake in housing finance arm to Dawnay Day

The Chairman and Managing Director, Punjab National Bank, Dr K.C. Chakrabarty, and the Executive Director, Mr M.V. Tanksale, at a press conference in the Capital on Wednesday.

Our Bureau

New Delhi, May 20 Punjab National Bank (PNB) has decided to divest a 26 per cent stake in its housing finance subsidiary – PNB Housing Finance – to Dawnay Day.

Dawnay Day is a financial services company controlled by New Silk Route (NSR), an India focused private equity fund co-founded by ex-McKinsey honcho Mr Rajat Gupta.

“Today, our board has approved the divestment of 26 per cent in PNB Housing Finance. Dawnay Day has been identified as the strategic partner in our housing subsidiary,” Dr K.C. Chakrabarty, Chairman and Managing Director, told a press conference here on Wednesday.

The PNB Executive Director, Mr Mohan V. Tanksale, said that the transaction with Dawnay Day will have a provision to issue fresh capital at a later date to take the divestment up to 49 per cent.

“PNB Housing will later issue new shares and thereby bring down its stake through that route also. It will be both divestment as well as fresh issue of shares to the strategic partner at a later date,” a PNB official said.

PNB Housing Finance is a wholly owned subsidiary of PNB. The strategic partner for PNB Housing was identified after a bidding process. Dr Chakrabarty said that he expects the stake sale to be completed by June this year and that the bank could get about Rs 70-80 crore from the deal.

The housing finance arm had reported a 32 per cent increase in net profit for the fiscal year 2008-09 at Rs 53.41 crore (Rs 40.59 crore) on a total income of Rs 277.21 crore (Rs 227.14 crore).

To pay 200%

Meanwhile, PNB has reported a 50.9 per cent increase in net profit for the year ended March 31, 2009 at Rs 3,090.9 crore (Rs 2,048.8 crore). Total income of the bank for financial year 2008-09 stood at Rs 22,245.9 crore, reflecting a year-on-year growth of 36.8 per cent.

For the fourth quarter ended March 31, 2009, PNB recorded a 59.2 per cent increase in net profit at Rs 865.6 crore (Rs 543.8 crore). The board of directors has declared a dividend of 200 per cent, the highest in the history of the bank, said a PNB official.

The total amount restructured by the bank during 2008-09 stood at Rs 4,074 crore. This amount was not being considered as gross non-performing assets in line with the RBI guidelines, PNB officials said. Gross NPA of the bank stood at Rs 2,767 crore as on end March 2009, lower than Rs 3,319 crore as on end March 2008.

Asked how much of this amount related to restructuring after September 30, 2008, Dr Chakrabarty told Business Line that more than 90 per cent of this related to post-September 2008 period.

In the wake of the global financial crisis, the Reserve Bank of India had relaxed asset categorisation norms, allowing banks to continue treating certain accounts as standard assets if the proposal for restructuring was submitted before end March 2009.

Another decision taken at today’s board meeting related to the bank’s foray into factoring business. The PNB board has given its nod for the bank to take a 30 per cent stake in a joint venture with Malta-based Fin Bank for undertaking factoring business. While Fin Bank will hold 40 per cent stake, the balance will come from investors here, according to Dr Chakrabarty.

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