MUMBAI: Canara BankBSE 0.30 % plans to sell a portion of its 43% stake in arm Can Fin HomesBSE -0.48 % as part of the government’s diktat asking public sector banks look to sell their noncore businesses. The decision comes as another large investor in the company, Catamaran Ventures, a fund belonging to InfosysBSE 1.27 % founder NR Narayana Murthy, has been offloading its holding in the market.
“The bank has decided to reduce stake in Can Fin Homes to 30% by selling 13% stake. This will help us strengthen our equity base,” Rakesh Sharma, managing director of Canara Bank told ET. Can Fin Homes has been one of the best-performing stocks amid the run-up in housing finance stocks during the past three years.
The stock rose 12 times in three years to a record high of Rs 1,862 earlier this month. The stock has corrected 18% since the government announced the demonetisation scheme. It closed at Rs 1,522 on Tuesday.
Catamaran sold 8.76 lakh shares in the last couple of months for about Rs 135 crore. Catamaran Ventures held about 10 lakh shares in housing finance company. These shares were bought at an average price of Rs 373. Catamaran sold 1.53 lakh shares last week for a price of Rs 1,290 per share. A large chunk of about 7 lakh shares was sold in September quarter when the price was about Rs 1,600.
Analysts said the stock’s valuations are expensive given that prospects of finance companies have turned hazy after the government’s decision to scrap high-denomination notes. With demonetisation expected to result in a decline in property prices, the loan against property (LAP) book of NBFCs will be squeezed, resulting in higher bad loans.
The stock is trading at 3.7 times its FY 2018 estimated adjusted book value.
“We believe valuation multiple expansion will be contingent upon the sustainability of high loan book growth, further improvement in profitability and stable asset quality, especially loan against property,” said Bunty Chawla, analyst, Axis Securities.
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Source: Economic Times
