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PNB stake may dip below 26% in its subsidiary PNB Housing Finance Ltd.

PNB Housing Finance Limited (PNB Housing) is a registered housing finance company with National Housing Bank (NHB). PNB Housing Finance was incorporated under the Companies Act, 1956 and commenced its operations on 11 November 1988 as a wholly-owned subsidiary of Punjab National Bank (PNB). On 9 December 2009 PNB entered into a strategic partnership with Destimoney Enterprises Private Limited (DEPL) and sold its 26% stake to DEPL. DEPL which held 49% shares in the company until February 2015 sold its entire shareholding to Quality Investments Holdings, which is owned by Carlyle Group, a global investment firm. The remaining 51% was owned by the parent bank i.e., Punjab National Bank.

In November 2016, the Company came out with a public issue of equity shares. Its equity shares are listed on National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) with effect from 7 November 2016. Post the public issue, the promoters jointly hold 76% of shares in the company and the public shareholding stands at 24%. The Company does have a 100% owned subsidiary for offering various loans under a dedicated direct sales force.

Rs 4000-crore investment in PNBHF announced last week by a consortium of investors, led by US private equity giant The Carlyle Group and former HDFC Bank Ltd. chief executive Aditya Puri. This is in spite of fact that both the government and PNBHF publicly committed to ensuring that PNB maintains a 26% stake.

Punjab National Bank Housing Finance (PNBHF) Shareholders’ meeting to held later this month and questions are likely to be raised at the meeting over the possibility of Punjab National Bank losing its dominant shareholder status in the company. The capital infusion will make Carlyle the largest shareholder in PNB Housing. This means it will not only lose its dominant shareholder status but also its veto power on the board of the company. The Carlyle Group will see its stake rising to above 50 per cent. PNB’s shareholding in PNBHF stands at 32.64% as of now and that of the Quality Investment Holdings (a Carlyle entity) stands at 32.21%.

A dip in holding below 26 per cent will not only weaken PNBs stature on board but will also take away its Veto Power, which sources say would be of concern to the government. In 2019-20, when PNBHF was looking to raise capital, the government had maintained that PNB’s shareholding should not go below 26%. The promoter, PNB, also seems to have gone back on its commitment of holding at least a 26% stake in PNBHF. In a statement on 23 January 2020, PNBHF said, “PNB will maintain a minimum shareholding in PNB Housing at 26%. Further, PNB has confirmed that its stated objective is to continue to hold a minimum 26% shareholding in the Company and continue to be the promoter of the Company.”


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