MUMBAI (NewsRise) -- Indian mortgage lender PNB Housing Finance, backed by state-owned Punjab National Bank, aims to raise as much as 30 billion rupees ($450 million) from an initial public offering this month, seeking to tap the south Asian nation's booming IPO market.
A string of small banks such as Equitas Holdings and Ujjivan Financial Services made stellar debuts on stock exchanges over the past few months as investors lapped up new shares in a country where traditional banks are saddled with staggering bad debt. Last month, ICICI Prudential Life Insurance saw its $910 million IPO, India's largest in last six years, being subscribed nearly 11 times the number of shares offered.
India's IPO market is making a strong comeback after years of lackluster performance. Companies raised as much as $1 billion in the first half of this year, according to researcher Prime Database.
PNB Housing's IPO of up to 40 million shares, or a 24% stake, will be open for subscription for three days starting Oct. 25, Punjab National Bank said in a statement. The company also set a price band of 750 rupees to 775 rupees a share.
PNB Housing is the fifth-largest Indian housing finance company by the amount of loans disbursed. With a loan portfolio of nearly 272 billion rupees at the end of the fiscal year ended in March, it has the second-largest public deposit base among the housing finance companies, behind HDFC.
Punjab National owns about 51% stake in the company, while Destimoney Enterprises, owned by Carlyle Group, held the remaining shares. After the share sale, the bank's stake will be reduced to nearly 39%, while Destimoney's shareholding will fall to about 37%, Sanjaya Gupta, managing director of PNB Housing, told reporters at a press conference.
Bank of America Merrill Lynch and J.P. Morgan India are among the five global coordinators and lead managers of the IPO.
In the year ended in March, PNB Housing Finance posted a net income of 3.28 billion rupees, while its revenue from operations stood at 27 billion rupees, the company said in a regulatory filing.
"The runway for us to grow is humungous," CEO Gupta said. "Our competitors are in about 200-300 branches, so distribution is something we are going to heavily stress upon."
Analysts are bullish about the prospects of India's housing finance industry as a relatively younger population, large unmet housing demand, low mortgage penetration and improving affordability is likely to ensure healthy growth.
"Housing finance has emerged as the safe haven across the entire lending space in India, with minimal problems from bad loans...," Mumbai-based brokerage Motilal Oswal said in a note to clients.
Still, some analysts remain wary of the company amid concerns about governance and asset quality issues.
PNB Housing has had three auditors in four years and adverse regulatory observations on lapses in internal controls, accounting policies and pricing of related-party transactions, Ambit Capital said in a note.
Further, the company got the parent's approval for an IPO on condition that Punjab National Bank will continue to hold a 30% stake in the mortgage lender.
Continuing as Punjab National's unit could be "a constraining factor" as the bank may not be able to infuse growth capital into the housing finance company, Ambit Capital said.
"Punjab National Bank itself is struggling with low capital and stressed balance sheet."
Shares of Punjab National Bank gained 2.93% at 140.65 rupees in Mumbai trading on Tuesday, while the benchmark S&P BSE Sensex ended 1.89% higher.