The additional capital is also important to provide support for PNBHF's loan growth without significantly raising leverage.
On February 20, PNBHF said its promoter Punjab National Bank will no longer infuse capital in the company, and that it will be looking to raise Rs 1,800 crore billion through a qualified institutional placement, preferential issue, rights issue or a combination in one or more tranches.
The promoter had previously indicated that it will infuse Rs 500 crore to Rs 600 crore and was awaiting an approval from the Reserve Bank of India to complete the same.
"While the improvement in PNBHF's valuation augurs well, the promoter's decision to not infuse further capital raises the prospects of material dilution in its promoter's shareholding which could have wider ramification," said Ind-Ra.
PNBHF is among the top five players in housing finance segment with assets under management of Rs 77,700 crore at end-9M FY20. It has experience of managing the mortgage business for over three decades, which has seen multiple business cycles.
The company is geographically diversified with 94 branches in 64 cities across the country, though the four large states of Karnataka, Maharashtra, Tamil Nadu and Uttar Pradesh contribute 58 per cent of home loan portfolio.
Ind-Ra said the disruption in economic activities brought about by Covid-19 pandemic has resulted in rising delinquencies for PNBHF.
The proforma non-performing assets (NPAs) increased to 4.47 per cent at end-9M FY21. The pressure is higher in construction finance portfolio.
Besides, the sharp drop in bank lending rates have led to stiff competition for PNBHF in retail loan segment as outward balance transfer in its portfolio accelerated.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.