Public sector bank (PSB) major, Punjab National Bank(PNB) on Thursday decided to sell its entire stake in Asset Reconstruction Company (India) (ARCIL) at an agreed price. PNB currently holds a 10.01% stake in ARCIL. The bank plans to divest its stake in the ARC by December 2022-end.
On the completion of divestment, PNB will cease to be a sponsor/shareholder in ARCIL as the shareholding will be NIL after the stake sale. The transaction will be carried in cash.
The bank will divest about 3,25,06,486 equity shares or 10.01% shareholding in ARCIL.
In its rationale for divestments, PNB in the regulatory filing said, “The Policy on Investment by banks in ARC’s was reviewed by the Reserve Bank of India. Accordingly, it was decided that banks may sponsor only one ARC at any point of time and banks’ investment in other ARCs should be less than 10% of the paid-up equity capital of the ARC subject to extant prudential norms on investment. Thereafter, Bank was advised to comply with the above stipulation.”
Further, PNB said, “to comply with the above guidelines and based on the market scenario, Bank has decided to sell its entire stake of ARCIL at an agreed price.”
ARCIL was founded in 2002 and is among the leading ARCs in the country. In FY22, ARCIL reported a total income of ₹3.04 crore compared to ₹1.73 crore in the previous fiscal. In FY20, the income stood at ₹1.66 crore. That said, in the last three fiscals, ARCIL has made consistent growth in its total income.
PNB’s divestment in ARCIL is subject to RBI’s approval. The permission will be obtained post execution of the share purchase agreement (SPA) between PNB and the purchaser to whom the bank will offer its 10.01% stake in ARCIL.
On BSE, PNB shares ended flat at ₹34.80 apiece compared to the previous closing of ₹34.85 apiece. The shares did touch an intraday high and low of ₹35.80 apiece and ₹34.25 apiece respectively. The bank’s market cap currently is at ₹38,318.33 crore.
As of June 30, 2022, PNB has a gross NPA of ₹90,167.10 crore — improving from ₹92,448.04 crore in Q1FY22. In percentage terms, the gross NPA is at 11.27% versus 11.78% in Q1FY22.
During the first quarter of FY23, the bank posted a net profit of ₹308 crore down by 69.8% from a profit of ₹1,023 crore in the same quarter a year ago. The bank’s interest earned also tumbled to ₹18,757 crore in June 2022 quarter against ₹18,929 crore in Q1FY22.