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Housing finance company PNB Housing Finance Limited has announced that its Board approved a capital raise of up to Rs 4,000 crore, led by entities affiliated to The Carlyle Group.

Pluto Investments, an affiliated entity of Carlyle Asia Partners IV,  and Carlyle Asia Partners V, (together, ‘Carlyle’) has agreed to invest up to Rs 3,185 crore through a preferential allotment of equity shares and warrants, at a price of Rs 390 per share, the company said in a regulatory filing.

Existing shareholders of the company, funds managed by Ares SSG and General Atlantic, are also participating in the capital raise. PNB will continue to be the Promoter and a key stakeholder in the company.

Pursuant to the Securities and Exchange Board of India’s Takeover Regulations, the proposed transaction will trigger a mandatory open offer by Pluto Investments for the purchase of up to 26% equity shares of PNB Housing Finance from public shareholders.

As part of this transaction, Salisbury Investments, 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.

Over his 26 year tenure leading HDFC Bank, Puri grew the bank into the largest private sector bank in India and has been recognised globally as one of the world’s leading businesspersons.

Established in 1988, PNB Housing Finance is the fourth largest housing finance company in India in terms of Loan Assets (Rs 62,255 crore as of March 31, 2021), and the second largest in deposits (Rs 17,129 crore as of March 31, 2021).

Favuorable demographics, rising urbanisation, lower interest rates, continued improvement in housing affordability and supportive government policies are promoting growth across the industry which is expected to continue into the near future.

The key objective of raising capital is to augment capital adequacy, reduce gearing and accelerate growth with a focus on retail housing including self-employed and affordable housing loans such as the Unnati segment.

Assuming full capital infusion (including warrants) and no other change to the March 31, 2021 financials, the capital adequacy ratio of the Company as of March 31, 2021 would increase from 18.7% to over 28% and gearing as of March 31, 2021 will decline from 6.7x to less than 5x.

PNB Housing Finance Managing Director and CEO Hardayal Prasad said, “This fund raise, and Carlyle’s continued support, puts us in a strong position to benefit from the growing opportunities in the housing finance sector including in the affordable housing loans and self-employed segments, where we have developed differentiated capabilities in terms of distribution, underwriting and customer service.”

“The current fund raise and planned strengthening of the Board and management team will enable us to accelerate our strategic priorities, including further expanding our footprint, driving the company’s digitalisation, improving our operating model and customer engagement,” Prasad said.

Punjab National Bank Managing Director and CEO Mallikarjuna Rao said, “This capital raise will significantly strengthen PNB Housing Finance’s capital base.”

Aditya Puri, Senior Advisor for Carlyle in Asia and the former CEO & Managing Director of HDFC Bank, said, “I believe PNB Housing Finance with its enhanced capital base is very well positioned to meet the growing demand in its areas of operation.”

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