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Thursday, October 27, 2016

PNB Housing Finance Ltd. IPO at a glance


Issue Highlights

Issue Period
25/10/16-27/10/16
Price Band (Rs.)
750-775
Issue Size(shares)
3,87.09,677
Issue Size (Rs. crore)
3,000
Issue Type
100 % Book Built
Face Value (Rs.)
10
Listing
BSE, NSE
Industry
Housing Finance
Registrar
Link Intime India Pvt. Ltd.
Minimum Bid Quantity
19
Maximum Retail Subscription
Rs. 1,91,425 (13 lots)
BRLM
BOA Merrill Lynch, JP Morgan India, JM Financial consultants, Morgan Stanley, Kotak Mahindra capital Co. Ltd.
# derived figure

Issue Details


Offer for Sale:  Nil
Fresh Issue:  3,87,09,677 #
Equity Shares Outstanding Prior to the Issue:  12,69,23,000
 Equity Shares Outstanding After The Issue #:  16,56,32,680

Objects of the Issue

(1)    To augment the capital base to meet future requirement
(2)     General corporate purposes & issue related expenses


Company Profile

PNB housing finance, promoted by Punjab National bank, is the 5th largest housing finance company in India in the loan-portfolio term. The company offers housing loans like NRPL (Non Residential Premise Loans) LRD (Lease Rental Discounting) ,CTL (Corporate Term Loans) etc  for various housing need and non-housing loans  in the form of LAP (Loan Against the Property). Around 87 % of the total loans disbursed are retail housing loans and less prone to default.
The company runs its operations through 47 branches and 16 processing hubs.
The corpus is 94% in loans and 6 % investments. It has got  whopping loan portfolio growth figure of 62 % for past 4 years.
The loan portfolio constitutes 13 %  fixed interest loan and 87 % variable interest loan

Risks & Threats

o   A sudden hike in interest rate is difficult to pass on its customers, and not at all possible to pass on to those with fixed interest loans
o   High interest regime causes a downward pressure on NII
o   The prohibition of  penalties on loan pre-payment makes it easier to customers to switch the loan if cheaper interest rates are available elsewhere
o   Lower interest rates means a higher principal component (and a lower interest component) which reduces company’s total loan
o   Portfolio whereas higher interest rates curbs the overall housing loan demand in an economy
o   Self employed people constituted around 23 % of the loan portfolio and this group is considered as a higher credit risk one
o   Stiff competition from HFCs, NBSCs and commercial banks
o   Recent slowdown in corporate credit growth had forced banks to aggressively pursue the housing finance market and thus posing a strong competition to HFCs.
o   In case of a big real estate meltdown, the expected value of the collateral can’t be recovered

Strengths & Opportunities
o   Housing loan penetration is still in its nascent stage and a huge potential lies ahead
o   Rapid urbanization and tax benefits are prominent factors for higher HF loans
o   Government policies like housing for all and smart cities holds huge opportunities
o   India’s high population growth rate and changing demographics where working young working class opts early to settle with his own home
o   Housing Finance companies are slowly capturing  housing finance market  from commercial banks to the extent of 37 % of the total housing finance market.
o   Gross NPAs are just .2 % of the total loan portfolio 
                                                                               
Financial Profile

Parameter FY 16
Value
Post Issue PE Multiple
39.19
PEG Profit 4 Year
.9
Net Profit margin %
12.13
Return on Equity %
15.28
ROCE %
12.39
CAGR Profit %
43.41
CAGR Sales
55.55
Post Issue Price to Book Multiple
5.99
EV/ EBITDA
15.6

Comparison with the listed Peers #


NPM (%)
ROCE(%)
ROE(%)
PE
PEG
PB
PNB Housing Finance
12.13
12.39
15.28
39.19
.9
5.99
HDFC Ltd.
22.95
4.79
20.78
20.03
1.18
4.25
LIC Housing Fin Ltd.
13.39
1.62
18.15
17.86
1.1
3.22
Gruh Finance
19
2.51
29.16
46.39
2.38
14.65
Repco Home
17.04
2.45
15.71
31.54
1.25
4.92




 # moneycontrol data



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