The board of directors of PNB Housing Finance has approved to raise equity capital aggregating up to Rs 1800 crore through the preferential or right issue at the meeting held on August 19th 2020.
The shareholders’ approval would be required, among other regulatory approval required to raise capital, the housing finance said in a regulatory filing.
It said that the board of directors “Has approved to raise equity capital aggregating up to Rs 1,800 crore through preferential issue/rights issue, subject to such approvals as may be required, including the approval of the shareholders at a general body meeting or through postal ballot and further subject to such other statutory/regulatory approvals, as applicable”.
The company will raise up to Rs 45000 crore through debt securities after seeking shareholders’ approval.
The Housing Finance company appointed Neeraj Vyas as an additional director in the category of non- executive non-independent director of the company with effect from September 1, 2020
Punjab National Bank (PNB), the promoting company will infuse Rs 600 crore in the housing finance arm through preferential issue, according to the reports.
What is preferential share issue
The preferential allotment is a process to raise capital in which shares are allotted to a specific group of people or companies which are interested in it on a preferential basis. The company which allots shares states that whenever it will pay dividends, preference shares holders will be paid first and they don’t have voting rights. Any company listed on the stock exchange can do this by following the rules and regulations stated by SEBI
What is a right issue
A rights issue is when a company offers its existing shareholders the chance to buy additional shares for a reduced price. Usually, the discounted price will stand for a specified time frame, after which it is returned to normal.
A company would offer a rights issue in order to raise capital. If current shareholders did choose to buy the additional shares, a company could use the funding to clear its debt obligations, acquire assets, or facilitate expansion without having to take out a loan from a bank.
Banks and NBFCs have raised capital or announced to raise it through preferential or right issue lately
Banks will be raising capital either from the equity markets or by issuing debt instruments. Housing Development Finance Corporation (HDFC) on May 06 announced that would raise Rs 2500 crore by the issue of Non-Convertible Debentures (NCDs) through the Private Placement mode at a coupon rate of 7.06%. Axis Bank’s board on April 28 approved plans to raise Rs 35000 crore through markets in Indian Currency / Foreign Currency by issue the debt Instruments. Public Sector lender Bank of Baroda (BoB) also said that it had received board approval to raise Rs 13.5 thousand crores within the FY21 year; with Rs 9000 crore of this being raised through equity including the Qualified Institutional Placements (QIP) route in stages. BoB further added that it would look to raise Rs 4500 crores by the way of additional tier I/tier-II capital instruments issued in India and abroad in suitable tranches.
Indian banks will require more capital to tide over the COVID-19-led pandemic. Rating agency Icra said in a note on 4 June that public sector banks (PSBs) will require between ₹45,000 crores and ₹82,500 crores of capital in FY21, asset quality gets affected as the COVID-19 pandemic is expected to increase.
Why it’s important for PNB Housing Finance to raise funds
Banks and NBFCs are majorly hit by the pandemic and because of the disruption caused by the coronavirus pandemic, the lender witnessed a dip in disbursement in the June quarter.
PNB Housing Finance expects to disburse around Rs 13,000 crore loan in current fiscal, and sees demand picking up around October-November with the onset of the festive season. Demand from mass housing statement has started picking up post relaxations in coronavirus-induced lockdowns and gradual reopening of economy,
PNB Housing Finance, promoted by Punjab National Bank, disbursed loans of about Rs 694 crore (Rs 674 crore retail loan and Rs 20 crore corporate loan) in the first quarter ended June of 2020-21 as against Rs 7,634 crore in the year-ago quarter.
Net profit declined 10% to Rs 257 crore in the June quarter
The company’s net interest income also plunged 22% to Rs 487.8 crore during the June quarter as against Rs 625.5 crore in the same period last year.
PNB Housing Finance reported a net profit of Rs 284.5 crore in the June quarter of 2019-20.
Total income during the quarter also fell to Rs 1,872.33 crore from Rs 2,232.58 crore.
EBITDA stands at Rs. 1,713.92 crores in June 2020 down 14.93% from Rs. 2,014.69 crore in June 2019.
PNB Housing Fin EPS has decreased to Rs. 15.44 in June 2020 from Rs. 21.94 in June 2019.
During the June quarter, the disbursement was significantly impacted by the pandemic resulting in the lowest quarterly disbursement in more than 24 quarters. However, after all the branches being active due ease in lockdown and unlock process, the company is finally witnessing an increase in disbursement on a month on month basis
The company has rolled out its business plan for FY 20-21 and will continue to focus on the lower risk-weighted retail assets, resulting in a higher percentage of the retail books in the total AUM.
Total borrowings stood at Rs 67,283 crore as on June 30, 2020, compared to Rs 72,261 crore a year ago, registering a decline of 7 percent during the period.
However, the deposit portfolio grew by 5 percent to Rs 16,203 crore during the quarter as against Rs 15,446 crore with expanding retail penetration.