18 Oct , 2021 By : monika singh
NEW DELHI:Â
 NSE -4.99 % is staring at a significant derating after the NBFC board decided not to proceed with the proposed preferential issue of Rs 4,000 crore at Rs 390 per share to the Carlyle group, General Atlantic, SSG Group and other investors.
A few brokerages have already cut their ratings to 'sell' and reduced price targets significantly owing to uncertainty regarding lack of growth capital, weak balance sheet and elevated non-performing assets
The stock had witnessed a sharp rerating and had almost doubled since the announcement of capital infusion in May. But now with the deal being called off, the scrip is likely to derate to 0.75 times FY23 book from 1 time at present, as growth momentum derails, said ICICI Securities.
The brokerage said the preferential issue was a notable trigger for re-rating of stock as it would have strengthened PNB Housing's balance sheet and supported growth.
"We cut our earnings estimate by over 10 per cent for FY22 and over 20 per cent for FY23. Given this adverse development, we revise our target price to Rs 485 from Rs 848 earlier. We downgrade the stock to ‘sell’ from 'buy', ICICI Securities said. ICICI's fresh target is 42 per cent lower than its earlier target.
Another brokerage Nirmal Bang Institutional Equities said the NBFC has been struggling to raise capital for more than two years, which has affected new business generation and AUM growth, especially at a time when profits have deteriorated due to high provisioning.
"At the current juncture, the company seems to be back to where it was before the announcement of the capital raise, which means the uncertainties have resurfaced. The stock more than doubled after the deal announcement (up 120 per cent at peak). With the transaction being called off, we expect a sharp de-rating for the stock," it said.
PNB Housing, Nirmal Bang said would need to address concerns regarding lack of growth capital, weak balance sheet and elevated non-performing assets.
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