Carlyle commits $439m to India's PNB Housing Finance
The Carlyle Group has agreed to invest up to INR31.8 billion ($439 million) in India-listed PNB Housing Finance, which would give it a majority interest in the company and trigger an open offer for an additional stake.
The private equity firm, which already owns 32.2% of the mortgage lending business, has agreed to acquire a 30.1% position, according to a filing. The transaction would be part of an INR40 billion investment, including General Atlantic, Ares SSG, and Salisbury Investments, which are set to take 9.8%, 3.8%, and 0.2% stakes, respectively.
The deal will trigger an open offer for the purchase of an additional 26% stake by Carlyle and Salisbury.
Salisbury is the family investment vehicle of Aditya Puri, a senior advisor for Carlyle in Asia and the former CEO of HDFC Bank. Puri is expected to be Carlyle's nominee to the PNB Housing board.
Shares in PNB Housing jumped 44% following the announcement of the proposed deal and approval by the company’s board. The stock last closed at INR630.7, its highest mark since September 2019. This equates to a market capitalization of around INR106.1 billion.
Carlyle said the investment reflected its commitment to India as a core market. Carlyle invested PNB Housing as early as February 2015, when it acquired a 49% stake from New Silk Route Advisors, for about $237.1 million. A partial exit was achieved upon PNB’s INR30 billion IPO the following year, leaving Carlyle with 37.5%.
Carlyle is mobilizing if fourth and fifth pan-Asia ex-Japan funds to finance the deal. They closed at $3.9 billion and $6.5 billion in 2014 and 2018, respectively. Fund IV made the original investment in PNB Housing.
The investment will support an expansion of PNB Housing’s operational footprint, a digitalization initiative, and improvements to the operating model and customer engagement, according to a statement. The idea is to position the company for perceived growth in housing finance segments such as affordable loans and loans for self-employed individuals.
PNB Housing was established in 1998 as a subsidiary of Punjab National Bank, India’s second-largest public sector bank, which now describes itself as a key stakeholder, promoter, and partner to the company. Previous investors also include Kuwait Investment Authority and GIC Private.
PNB Housing claims to be the fourth-largest housing finance company in India with interests extending into construction finance and real estate development loans. Its segment exposure is 45% salaried individuals, 39% self-employed, and 16% corporate.
Revenue increased 10.5% during the 2020 financial year to about INR45 billion, while profit fell 46% to INR6.5 billion. The company cited COVID-19 as a significant headwind to performance. Total loan disbursements during the year fell from INR 360.8 billion to INR186.3 billion.
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