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PNB Housing Finance, a subsidiary of Punjab National Bank, has been given the green light by the Securities and Exchange Board of India (SEBI) to raise up to Rs 2,500 crore through a rights issue of shares. This announcement follows the filing of draft papers with SEBI in December 2022, and the subsequent issuance of "observations" on March 6, which is required for any company to launch an issue.
According to the draft papers, PNB Housing will issue fully paid-up equity shares to its existing shareholders for an amount not exceeding Rs 2,500 crore. The company intends to use the net proceeds from the issue to augment its capital base.
Following the rights issue, the shareholding of Punjab National Bank (PNB) as a promoter of the company would decrease from the current level of 32.53 per cent to below 30 per cent, but it would remain higher than 26 per cent to ensure that the bank retains promoter status.
In March 2022, PNB Housing's board approved the Rs 2,500-crore rights issuance, and in November of the same year, the board cleared the draft letter offer that was to be filed with SEBI.
PNB Housing had initially intended to raise equity capital worth Rs 4,000 crore through a deal with joint venture partner Carlyle Group, among other investors, in May 2021. However, in October 2021, the mortgage lender decided to terminate the Rs 4,000 crore stake sale, citing delays due to pending legal proceedings.
The housing finance firm's latest move to raise capital through a rights issue of shares is likely an attempt to shore up its finances and enhance its capacity to expand its operations in a rapidly evolving market. The real estate sector in India has been grappling with several challenges in recent years, including a liquidity crunch, regulatory hurdles, and a slowdown in demand.
In this context, PNB Housing's decision to strengthen its capital base through a rights issue of shares is a prudent move that will enable it to maintain its growth trajectory despite the challenges it faces. Moreover, the company's ability to obtain SEBI's approval for the rights issue is a positive development.
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