“Blackstone is the only bidder to have expressed its intention to pay an all-cash deal to buy out PNB Housing Finance,” said a source close to the development. “The bidders are reposing a lot of trust on the senior management of the housing finance company and want them to continue after the stake sale process is completed.”
Blackstone started investing in office parks in 2011. It is now the largest owner of office buildings in India. The private equity fund is looking to buy controlling stake in Indian businesses. Sources said Blackstone, with heavy investments in commercial real estate, sees synergies in the housing finance space and wants to expand into retail segment by investing in this company.
Blackstone is likely to form a consortium after winning the bid, the source said. Non-binding bids were submitted by August 25. Over 20 large private-equity majors and large home financiers, including Warburg Pincus, KKR, Dewan Housing Finance, Indiabulls, the Kotak Group and Godrej, had bid to acquire a large stake in the company. The first round of shortlisting is expected to close by this weekend followed by binding bids. The entire process is expected to be over by December.
Senior Blackstone executives met the management of PNB Housing Finance in Singapore and expressed interest in buying the business. Morgan Stanley will be running the mandate for Carlyle and Credit Suisse for PNB. Blackstone and PNB Housing declined to comment on the story.
At first, the successful bidder will get to buy 51% in PNB Housing Finance. Then it will raise stake to 66% or beyond by doing an open offer. Promoters Punjab National Bank and Carlyle, which together own about 66% of the company, are looking to sell their entire stake to a large investor. The new bidder will have to bring in close to ₹15,000 crore for the stake on offer.
Since PNB Housing is a deposit-taking housing finance company, the bidder will need an Indian anchor to retain the licence of deposit accepting NBFC. Blackstone may tie up with other bidders like Kotak, Premji Invest and Godrej to retain the deposit licence. It is the fifth-largest housing finance company by asset size and the second-largest by deposit book size among leading housing finance companies, or HFCs, in India.
PNB Housing Finance has market capitalisation of ₹21,000 crore while the market cap is close to ₹22,000 crore for Punjab National Bank.
At the end of March 31, 2018, the company had deposit outstanding of ₹11,586 crore. Apart from deposits, the company raises funds through multiple sources, including nonconvertible debentures, which form 41% of the borrowing mix, followed by deposits at 21% and commercial papers at 19%. It also raises funds through ECBs, banks and NFB.