PNB Housing Finance (PNBHF) IPO was subscribed by 9 per cent on the first day of offer till 3.30 PM. The issue received bids for 25,48,128 shares against 2,80,77,500 shares offered by the company, according to the data available with stock exchanges. The public issue of PNB Housing Finance consists of a fresh issue of equity shares aggregating up to Rs 3,000 crore. The object of the issue is to augment the company’s Tier-I capital base to meet future capital requirements which are expected to arise out of growth in business. PNBHF has fixed a price band of Rs 750-775 for the ongoing public offer and the issue will close on October 27.
PNB Housing Finance Limited is promoted by Punjab National Bank one of the largest nationalised banks in India in 1988. PNB Housing is professionally managed housing finance company with 51 per cent holding with PNB and 49 per cent holding with Carlyle. PNB Housing is one of the fastest growing and the fifth largest Housing finance Company. During FY12 – FY16 the loan portfolio of the bank grew at a CAGR of 62 per cent from Rs 3,948.0 crore to Rs 27,177.3 crore.
Brokerage houses such as Nirmal Bang and Choice Broking have given ‘Subscribe’ rating to the issue. According to Nirmal Bang, PNB Housing has a decent business model and has reported a strong growth in financial performance. Between FY12-16, its net interest income grew at CAGR of 54.7 per cent while return on equity was 17.6 per cent for FY16. Going forward, with strong balance sheet growth and the profitability, the brokerage house believes the return ratios will further improve. On the valuation front, at the given upper band price of issue of Rs 775, the stock is offered at price-to-earnings ratio (P/E) of 39.2 times of its diluted FY16 earnings per share (EPS) and 2.5 times FY16 P/BV which is reasonably priced as compared to its peers.
According to Choice Broking, At higher price band of Rs 775, PNBHF’s stock is available at P/ABV multiple of 2.5 times of its FY16 adjusted book value (post issue) which is at discount to Can Fin Home (5.1), Repco Home Finance (5.4), Gruh Home Finance (13) as well as other larger players in housing finance sector. Industry dynamics are attractive given strong government’s focus on supporting housing throughout India, stabilising real estate prices, declining interest rates and rising incomes of prospective customers . Thus the established players like PNBHF are likely to remain major beneficiaries of strong growth in sector going forward. “We recommend a “Subscribe ” rating for the public issue,” Choice Broking said.