PNB Housing Skyrockets 6% After Major Stake Sale by General Atlantic Singapore - What’s Driving the Surge?

Shares of PNB Housing Finance surged 10.25% to reach an intraday peak of ₹893.6 per share on the BSE on Wednesday, August 21, following a series of block deals.

By 10:15 AM IST, a total of 14.23 million shares had been traded on the BSE, while the combined volume with the NSE reached 19.97 million shares.

According to sources from CNBC-TV18, General Atlantic Singapore Fund FII Pte Ltd is set to divest a 5.1% stake in PNB Housing Finance Ltd through a block deal on Wednesday, August 21.

The private equity firm plans to sell the shares at a floor price of ₹775 each, reflecting a 4.4% discount to the company’s closing price of approximately ₹810 on the NSE, where it was down by 1.4% during trading. The stake being sold represents 5.1% of PNB Housing Finance’s equity, with the total deal estimated to be around ₹1,032.7 crore. CNBC-TV18 reported that IIFL Securities is expected to act as the broker for the transaction.

This transaction is described as a clean-out trade, with IIFL Securities serving as the sole broker. Additionally, the sale will not have a lock-in period, meaning the shares can be freely traded immediately after the transaction.

Earlier, on June 30, Carlyle, another private equity major, also sold over a 13% stake in PNB Housing Finance via a block deal valued at ₹2,642 crore. In these block deals, 3.4 crore shares were traded at ₹778 per share, as per CNBC-TV18.

PNB Housing Finance, a significant player in the housing finance sector, reported a 25% increase in net profit for the first quarter, amounting to ₹433 crore. The company’s gross non-performing assets (GNPA) dropped by 241 basis points to 1.35%, while disbursements grew 19% year-on-year to ₹4,398 crore.

As of June 30, 2024, General Atlantic Singapore Fund held a 5.1% stake in PNB Housing Finance, according to exchange data. Last month, PNB Housing Finance reported a nearly 25% rise in first-quarter profit. The consolidated net profit increased to ₹433 crore for the quarter ended June 30, up from ₹347 crore in the same period the previous year. The company's total disbursements rose by 19% to ₹4,398 crore.

Net interest income, which is the difference between interest earned and paid, increased by 4% to ₹651 crore.

Demand for premium housing in India has remained strong, even though the affordable segment has faced challenges due to high interest rates. Home financiers experienced robust disbursements during the quarter, as homebuyers were optimistic about potential interest rate cuts later in the year.

According to a June report by analysts at IIFL Securities, PNB Housing Finance's strategy to enhance profitability involves a rapid expansion in affordable and emerging segments, which offer yields 100-300 basis points higher, along with a growing mix of non-home loans (HL) and smaller-ticket prime HL. These factors, combined with cost of finance (COF) benefits from a rating upgrade, are expected to allow PNB HF to expand spreads by 5-10 basis points and maintain current margins by Q4FY26, despite an anticipated 50 basis point rate cut.

The brokerage anticipates PNB Housing Finance to achieve a 19% compound annual growth rate (CAGR) in its loan book from FY24 to FY27 and forecasts a return on assets (ROA) of 2.2% and a return on equity (ROE) of 12.0% at 5.5x leverage by FY27, with potential ROE rising to 14.5% at normalized leverage (6.5x).

IIFL Securities has assigned a 'Buy' rating to PNB Housing Finance stock, with a target price of ₹1,050. Over the past year, PNB Housing shares have increased by 23%, compared to the Nifty 50's nearly 24% rise.