PNB Housing Finance in talks to dilute 49% stake

PNB Housing Finance, the housing finance arm of state-owned Punjab National Bank, is learnt to be in talks with several investors for diluting 49% stake. Sources close to the development say GE Capital and Tata Capital are the front-runners and have submitted termsheets for the transaction.

PNB chief general manager Ranjan Dhawan declined to comment. Both Tata Capital and GE Capital spokespersons
also declined to comment on the transaction.

���We are evaluating the termsheets and the transaction will be closed in the current quarter,��� said a PNB executive on conditions of anonymity.

Tata Capital ��� the NBFC arm of the Tata Group ��� is keen on a greater presence in the mortgage space. The company had recently bid for IDBI Home Finance. GE Capital, the financing arm of global giant GE, finished 2007 with net income of $10.3 billion and total assets in excess of $646 billion.

Sources close to the development said PNB Housing Finance has a loan portfolio of close to Rs 4,000 crore and is being valued at Rs 300-350 crore. Industry sources say the company is gearing up for aggressive expansion of its loan portfolio and thus needs to enhance its tier-I capital base. Capital adequacy norms for non bank finance companies require a capital adequacy ratio of 12%.

PNB Housing Finance has posted a 22% growth in its total income on a yearly basis and its profits after tax have risen 32% for the financial year ���09, compared to the previous financial year. The company's net NPAs have dipped from 0.32% in FY08 to 0.30% in FY09.

The booming housing loans market in India, with a sharp rise in housing loan disbursements has attracted a lot of interest. The share of housing loans in total bank credit rose sharply from 3.2% in 1998-99 to 11.8% in 2006-07. Within personal loans, the share of housing loans too rose sharply from 27.7% by end-March 1998 to 52.8% at end-March 2007. Home loans have increased by over 30% in the last few years, but experts say the growth is expected to slow to 8-10% for the current financial year.