Scam-hit PNB can sell 13% in PNB Housing Finance by Nov 2019

Scam-hit Punjab National Bank (PNB) will be able to sell only up to 13 per cent by November 2019 in its subsidiary, PNB Housing Finance, to raise money according to the regulations.

“PNB Housing Finance was promoted by PNB, whose present shareholding in our company is 32.96 per cent. Of 32.96 per cent, shareholding equivalent to 20 per cent is locked up till November 7, 2019 according to the Securities and Exchange Board of India(Sebi) regulations,” PNB Housing Finance Limited said in a regulatory filing on February 17.

According to the state-owned lender's chief Sunil Mehta, PNB, hit by a Rs 114 billion scam related to fraudulent letters of undertaking, is looking at raising money through monetisation of its assets “to come out of the situation”.

PNB Housing Finance has issued a communiqué to the stock exchanges to "put at rest some concerns that our stakeholders might have with respect to any impact” on its operations due to the fraud.

“PNB Housing Finance Limited shares a common brand with PNB, yet has an arm's length relationship with PNB and does not share any branch network,” the company said, adding it had maintained an “arm’s length” with PNB for raising its financial resources.

It said the subsidiary was a professionally managed entity with “very strong” internal control systems and processes with independent set of data centres, branch network and customers.

“The appointment and engagement of IT partners, system and cyber auditors are independent,” PNB Housing Finance said. PNB sold a 5.9 per cent stake in PNB Housing Finance during this financial year and monetised Rs 13.21 billion out of the stake sale.

Kotak Institutional Equities said in a report on Thursday that PNB can sell stake in its subsidiaries and joint ventures to raise money after being affected by the scam that could trigger prompt corrective action (PCA) by the Reserve Bank of India. 

A PCA may put restrictions on the lending capacity of the public sector bank.

"PNB can take part in a combination of stake sales in few valuable entities like PNB Housing Finance (33 per cent worth Rs 66 billion), insurance (10 per cent stake in Metlife), and mutual funds (17 per cent in UTI MF) to raise funds but since these are contractual arrangements, it can delay unlocking of this value," the report stated.