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This article is more than 3 month old.

Only sellers in PNB Housing Fin for 3rd day; ICICI Securities cuts earnings estimates

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Shares of PNB Housing Finance were locked in the 5 percent lower circuit limit for the second straight day as concerns remerged after the lender decided to call off the proposed Rs 4,000-crore deal with Carlyle Group. The proposed preferential issue was a notable trigger for re-rating of stock as it would have strengthened the lender's balance sheet and supported growth.

Only sellers in PNB Housing Fin for 3rd day; ICICI Securities cuts earnings estimates
Shares of PNB Housing Finance were locked in the 5 percent lower circuit limit for the third straight day as concerns remerged after the lender decided to call off the proposed Rs 4,000-crore deal with Carlyle Group.
“The Board has decided not to proceed with the preferential issue and the share subscription agreements executed with the proposed allottees have been terminated in accordance with their respective terms,” it said in a regulatory filing.
The housing finance major cited pending legal proceedings, expected delay in approvals, no clarity on shareholders’ nod for the preferential issue, and continuing interim order of SAT as the reasons for cancelling the deal.
“With the deal being called off, concerns related to asset quality and growth re-emerge,” ICICI Securities said in a note.
The proposed preferential issue was a notable trigger for re-rating of stock as it would have strengthened the lender's balance sheet and support growth, the brokerage said.
The stock has almost doubled since the announcement of capital infusion in May 2021 and with the deal being called off, the scrip is likely to de-rate again as earnings and growth momentum would derail, it added.
ICICI Securities has slashed its earnings estimate for the lender by about 10 percent for FY22 and around 20 percent for FY23. Given this adverse development, the domestic brokerage has cut its target price to Rs 485 from Rs 848 and downgraded the rating on shares to ‘sell’ from ‘buy’.
“Also, in an exchange filing, the company highlighted that there is lack of visibility or certainty as to the timeline for judicial determination of the legal issues and regulatory approvals were not expected to be forthcoming amidst litigation,” the brokerage pointed out.
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