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PNB Housing shares hit 20% upper circuit for 2nd straight day. Here's why

PNB Housing shares hit 20% upper circuit for 2nd straight day. Here's why

PNB Housing shares hit 20% upper circuit for 2nd straight day. Here's why
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By Pranati Deva  Jun 1, 2021 12:42:51 PM IST (Published)

The shares of PNB Housing Finance were locked in the 20 percent upper circuit at Rs 630.20 per share after the company announced Carlyle Group would pick a controlling stake in the firm.

The shares of PNB Housing Finance were locked in the 20 percent upper circuit at Rs 630.20 per share after the company announced Carlyle Group would pick a controlling stake in the firm.

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The stock hit the 20 percent upper circuit in the previous session as well after its board approved a capital raise of up to Rs 4,000 crore, led by entities affiliated to Carlyle Group Inc.
Pluto Investments, an affiliate of Carlyle Asia Partners, will invest up to Rs 3,185 crore through a preferential allotment of equity shares and convertible warrants at Rs 390 per share. It will hold 30.2 percent in the company.
Quality Investment Holdings (QIH), another unit of Carlyle Group, which currently holds a 32.21 percent stake in the firm, will reduce it to 20 percent post the capital raise.
Together, they will hold 50.2 percent in PNB HF.
Existing shareholders of the company, funds managed by Ares SSG and General Atlantic, are also participating in the capital raise, PNB Housing Finance said in a regulatory filing.
As part of this transaction, Salisbury Investments Pvt. Ltd., the family investment vehicle of Aditya Puri, Senior Advisor for Carlyle in Asia and the former CEO & Managing Director of HDFC Bank, will also invest in the capital raise.
Aditya Puri is expected to be nominated to the PNB Housing Finance board as a Carlyle nominee director in due course, it said.
"The board has approved a preferential allotment on a private placement basis, an aggregate of 8,20,51,281 equity shares and 2,05,12,820 warrants exchangeable into equity shares at a price of Rs 390 per share warrant to Pluto Investments, Salisbury Investments Pvt Ltd, General Atlantic Singapore Fund FII Pte Ltd and Alpha Investments V Pte. Ltd in specified proportions for cash consideration aggregating to approximately Rs 4,000 crore," the company stated in a filing.
Public sector lender Punjab National Bank (PNB) will continue to be a promoter and a key stakeholder in the company. It held a 32.65 percent stake in the company as of March 31, 2021. Its stake will fall to 20.3 percent in the new regime.
According to Morgan Stanley, the announced large equity infusion should significantly improve the confidence of fixed income and equity markets and bring the firm back on the growth path. It believes this capital infusion could materially accelerate the business turnaround. The brokerage is 'overweight' on the stock with a target at Rs 600 per share, indicating a 37 percent upside.
Also, the increased certainty of the business turnaround with this confidence capital coming in should drive a meaningful valuation re-rating from beaten-down levels, it said.
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