PNB Housing Finance surges 100% in six sessions; here's what investors can do now

Shares of PNB Housing Finance rallied 101% in six trading sessions after the company last week said its board has approved a proposal to raise up to Rs 4,000 crore by issuing equity shares and convertible warrants to entities led by Carlyle Group firms. The scrip has advanced to Rs 880.65 on June 7 from Rs 437.70 on May 28.

PNB Housing Finance’s board has approved a capital raise of up to Rs 4,000 crore, led by entities affiliated to the Carlyle Group, the company said in a regulatory filing.

Global brokerage firm Morgan Stanley believes that the announced large equity infusion should significantly improve the confidence of fixed income and equity markets and bring PNB Housing Finance back on the growth path. “We believe this capital infusion could materially accelerate the business turnaround,” Morgan Stanley said in a report last week.

Major investors

PNB Housing Finance said Pluto Investments, an affiliated entity of Carlyle Asia Partners IV, LP and Carlyle Asia Partners V, LP (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 as part of this transaction, Salisbury Investments, the family investment vehicle of Aditya Puri, senior advisor for Carlyle in Asia and the former CEO and MD of HDFC Bank, will also invest.

Aditya Puri is expected to be nominated to the PNB Housing Finance Board as a Carlyle nominee director in due course, the company added.

Should you invest?

Commenting on the further movement of PNB Housing Finance, technical analyst Mazhar Mohammad of Chartview India said, “Technically speaking this counter appears to be stretched on the charts as it almost doubled in a span of weekdays. Change of management owing to stake sale may be driving the stock price to higher levels as it was down from the lifetime highs of Rs 1,717 registered in the year 2017 to a low of Rs 152 witnessed in the year 2020.”

He further added that if PNB Housing Finance continues its up move then it should face some resistance in the zone of Rs 980 to Rs 1,000. “Those lucky few who managed to enter at lower levels can consider booking profits whereas fresh buying should be done only on a meaning full corrective and consolidation phase,” he added.

Mehul Kothari of Anand Rathi Shares and Stock Brokers said fresh entry into PNB Housing Finance is not advisable after the rally. “The only way to tackle this if anyone is holding the stock is to keep a stop loss of lower circuit on daily basis and keep on holding. We believe that stock is heading for Rs 950-1,000.”