Public sector lender Canara Bank sold 13.45% stake in its mortgage unit Can Fin Homes to Singapore-government backed Caladium Investment for Rs 753.77 crore, helping the bank shore up its capital after the government decided to hold the purse strings.Caladium Investment, an affiliate of Singapore’s sovereign wealth fund GIC, bought 35.8 lakh shares at Rs 2,105 apiece, a 6.4% premium to Friday’s closing price. Post the sale, Canara Bank would own 30% in the mortgage company.
Shares of Can Fin Homes, which has a market capitalisation of Rs 5,264 crore, has risen by a fifth in the past year as investors scrambled to own a piece of the mortgage market which is growing at nearly 15% and is given a big push by the government in terms of interest subvention for affordable housing.
The sale comes part of a larger state-run banks’ plan to shore up their capital after the government allocated just about Rs 10,000 crore capital for the next fiscal. Others like IDBI Bank, Punjab National Bank and even the State Bank of India are looking to sell some of their investments to ensure they meet the regulatory capital needs.
“There is an increasing divide between the large and smaller PSBs, with the former having some access to growth capital, better market valuation, and also some non-core assets to divest, while the latter would only receive bailout capital if required,“ said India Ratings in a report. Ind-Ra expects banks to require Rs 910 billion in tier-1capital (including Rs 500 billion of Additional Tier-1 (AT1) bonds) till March 2019 to grow at a bare minimum pace of 8-9% CAGR. Canara Bank had a capital adequacy of 12.2%.
Canara Bank holds 51% stake in Canara HSBC OBC Life Insurance and 51% in Canara Robeco Mutual Fund.