PNB Housing Finance Limited got approval from capital markets regulator Sebi a few days ago for its Rs 2,500 crore initial public offering (IPO). The home loan company is all set to enter the primary market at a time when IPOs have hit a six-year-high this year, riding on bullish stock market conditions and high investor appetite for fresh issues.
The company had applied with the Securities and Exchange Board of India (Sebi) in July and got approval last week.
Some of the recent IPOs, most prominently ICICI Prudential Life Insurance, have disappointed with their below-issue price listings. On Friday, the private life insurer's shares were trading at Rs 326 apiece, a gain of 2.64 percent but still below the issue price of Rs 334.
Public sector lender Punjab National Bank (PNB) has 51 percent stake in the company, which will come down to around 35 percent after the public issue.
The company intends to use the proceeds of the IPO to augment its capital base and for general corporate purposes. The issue will also "enhance visibility and brand name among existing and potential customers," it said in the offer document filed with the regulator.
The housing finance company will be in competition with its peers as well as banks such as PNB and SBI that are assiduously wooing Central government employees after the salary hike handed out to them on implementation of the recommendations of the 7th Central Pay Commission.
The price band for the public issue will be fixed in consultation with the global coordinators and book running managers — Kotak Mahindra Capital Company Limited, DSP Merrill Lynch Limited, J.P. Morgan India Private Limited and Morgan Stanley India Company Private Limited.
For the financial year ended March 31 2016, PNB Housing Finance had reported net profit of Rs 326 crore, up 66 percent from Rs 196 crore in the preceding fiscal, while revenues rose 52 percent to Rs 2,697 crore. Assets under management stood at Rs 27,555 crore as of March 31 2016.
Gross non-performing assets (NPAs) and net NPAs stood at 0.22 percent and 0.14 percent respectively at the end of financial year 2015-16.
The company is consciously reducing its dependence on northern parts of India by spreading its footprints.
"In 2010 when this entire re-engineering process started, 77 per cent of the book was sourced from north. As of now, it stands at 45 per cent," Dynamic Levels said in a note.
The company also intends to tap the NRI market by opening offices in West Asia.
"PNB Housing Finance also plans to open an overseas branch, most probably in the Middle East, to tap the potential of the NRI segment. The total market size of the NRI segment comprises about 12-13 percent of the overall housing market," Dynamic Levels said.