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PNB Housing Finance, the fifth largest HFC in India by loan and claim to having second largest amount of public deposits in an HFC in India, has received capital markets regulator Sebi’s approval to raise Rs 3,000 crore through an initial public offering.  The company is promoted by  Punjab National Bank (“PNB”), one of the large nationalized banks in India.  The price band of Rs. 750-775 appears steep and a quick peer comparison based  is given below to assess its financial strengths vis a  vis other major players. PNB holds 51% in PNB Housing Finance and 49% is held by Carlyle Group which is one of the world’s largest and well known investment firm.

Detailed IPO Analysis Link: http://www.ipoandmore.com/2016/10/18/pnb-housing-finance-ipo-analysis/

Issue date: 25 to 27 Oct 2016 Price Band – Rs. 750 – 775

Table 1: Peer Group I- PNB Housing Finance vs Other HFCs (updated 19/10/2016)

*  PNB Housing figures are based on pre issue equity. Post IPO figures for PNB Housing are given at Table 3.

 Company PNB Hsg* HDFC LIC Hsg IBulls Hsg DHFL
Revenue 2699.543 55351.24 12809.94 8483.13 7617.87
Face Value 10 2 2 2 10
Opr Profit 2460.73 33140.49 12167.62 8390.73 6899.8
OPM 0.9115 0.5987 0.9499 0.9891 0.9057
Net Profit 327.566 10782.89 1686.5 2421.24 757.32
NPM 0.1213 0.1948 0.1317 0.2854 0.0994
Share Capital 126.923 315.97 101 84.26 291.8
Net worth 2144.5 50818.73 9145.98 10503.83 4892
EPS 25.81 68.25 33.4 57.47 25.95
Market /Issue Price 775 1342 615.65 880.65 334.65
RONW 15.27% 21.22% 18.44% 23.05% 15.48%
NAV 168.96 338.49 189.32 263.8 174.55
P/E 30.03 19.66 18.43 15.32 12.9
P/BV 4.59 3.96 3.25 3.34 1.92
Return on Equity 17.60% 21.26% 19.58% 27.00% 15.32%
Interest Coverage 1.32 1.6 1.27 1.63 1.2
CAGR sales 3 yrs 59.42% 13.97% 17.71% 23.80% 21.65%
CAGR Sales 1 yr 51.63% 11.43% 15,34% 27.09% 22.76%
CAGR NP 3 Yr 52.25% 15.35% 17.52% 23.15% 18.04%
CAGR NP  1 yr 68.79% 18.57% 16.63% 17.23% 16.98%
NPA 0.14% 0.00% 0.22% 0.35% 0.93%

Table 2 :Peer Group II- PNB Housing Finance vs Other HFCs

 Company PNB Hsg Gruh Fin Repco Canfin GIC Hsg
Revenue 2699.543 1150.64 927.73 1150.64 906.66
Face Value 10 2 10 10 10
Opr Profit 2460.73 1063.36 823.25 1063 817.26
OPM 0.9115 0.9241 0.8874 0.9238 0.9014
Net Profit 327.566 263.72 159.38 174.74 128.57
NPM 0.1213 0.2292 0.7274 0.1519 0.1418
Share Capital 126.923 72.74 62.54 26.62 53.88
Net worth 2144.5 835.3 954.83 878.04 731.8
EPS 25.81 7.25 25.48 65.64 23.86
Market /Issue Price 775 339.1 780 1824 347.2
RONW 15.27% 31.57% 16.69% 19.90% 17.57%
NAV 168.96 26.31 158.96 348.5 141.9
P/E 30.03 46.77 30.61 27.79 14.55
P/BV 4.59 12.89 4.91 5.23 2.45
ROE 17.60% 31.49% 16.99% 19.03% 17.89%
Interest Coverage 1.32 1.49 1.42 1.36 1.32
CAGR sales 3 yrs 59.42% 25.31% 29.51% 40.25% 16.53%
CAGR Sales 1 yr 51.63% 18.84% 26.03% 30.23% 17.95%
CAGR NP 3 Yr 52.25% 18.63% 23.33% 42.64% 13.55%
CAGR NP  1 yr 68.79% 19.43% 24.03% 75.81% 21.46%
NPA % 0.14% 0.09%

Table 3 : PNB Housing Finance – Post IPO Figures 

 Company PNB Hsg (Post IPO)
Revenue 2,699.54
Face Value 10
Opr Profit 2,460.73
OPM 91.15%
Net Profit 327.57
NPM 12.13%
Share Capital 167
Net worth 5345
EPS 19.61
Market /Issue Price 775
RONW 6.13%
NAV 320
P/E 39.52
P/BV 2.42

A look at CAGR figures for sales and Net profit reveal good very aggressive growth by PNB Housing Finance in last few years even as promoter PNB does not enjoy much confidence of markets but backing of Carlyle Group , one of the world’s largest and successful investment firms is a big plus.

At the upper end of price PNB Housing Finance is asking for P/BV ratio of 4.5 & PE ratio of 30.79 . both P/BV and PE ratio are  higher than other HFCs.  However the IPO will have to be evaluated on its HY 2016 performance which is likely to be better.

For Q1Fy17 PNB Housing Finance is reported to have made a net Profit of 96 Crore.

Standard disclaimer:  I am not a SEBI registered analyst. I may have vested interest in every stock I discuss. Please do your own due diligence as stock market investments have high degree of inherent risk.