Punjab National Bank invested nearly Rs 50 crore to pick up a significant minority stake in Garden Reach Shipbuilders & Engineers Ltd — a state-owned shipbuilding firm — during its IPO last month even though the public lender is cash strapped and is selling non-core assets to make up for huge losses. While the bank is surviving on government equity infusion and has diverted all its focus on recovery of bad loans, the investment in a non-core asset comes as a departure from its recent strategy of exiting from non-core assets to raise funds and claw back to profitability. PNB suffered net loss of Rs 13,416 crore in January-March quarter in FY18 and Rs 940 crore in April-June quarter of the current fiscal. Meanwhile, the government has infused Rs 8,247 crore of equity in PNB in the current fiscal so far. Apart from PNB, State Bank of India, Life Insurance Corporation of India and General Insurance Corporation of India are the other government companies that bought shares of Garden Reach Shipbuilders & Engineers. Out of 25.50 per cent of the company's equity which was sold through the IPO, nearly 17.46 per cent was acquired by these state-owned companies. Among other investors, mutual funds acquired 6.1 per cent stake in the company and the retail investors picked up 1.91 per cent stake. While NRI's picked up 0.01 per cent stake in the company, the shareholding of the company does not show foreign portfolio investors holding any stake in the company. The investment in the shipbuilding company has not turned out to be a good one for the investors till now. Since its listing on October 10, shares of Garden Reach Shipbuilders & Engineers have fallen over 23 per cent to Rs 90.55 at close on Wednesday, from the issue price of Rs 118. The company's IPO was not a big success as it failed to receive full subscription in three days of the issue period from September 24 to September 26. As it received onl 67 per cent subscription in the three days, the company had to not only extend the closing date to October 1, but also revise the price band of the issue to Rs 114-118 per share from the initial band of Rs 115-118. The Rs 345-crore issue was eventually subscribed 1.02 times, receiving bids for 2,97,58,920 shares against the total issue size of 2,92,10,760. The Kolkata-based company comes under the administrative control of the Ministry of Defence and makes warships for the Indian Navy and the Coastguard. While the IPO sailed through mainly through support of government companies, Reliance Capital Trustee Ltd and HDFC Trustee Company also picked up 1.84 and 3.67 equity stake, respectively, in Garden Reach Shipbuilder & Engineers. Punjab National Bank and State Bank of India did not respond to queries from The Indian Express seeking comments for the story. It is not clear why PNB has picked up 3.67 per cent stake in Garden Reach Shipbuilders & Engineers, especially at a time when the bank is trying to sell its non-core asset to put its house in order post the Nirav Modi-led Letter of Undertaking scam at the bank. "We plan to sale about Rs 8,600 crore of non-core assets in the current financial year. We are on track," PNB Managing Director Sunil Mehta said on October 15, as per a PTI report. PNB has already appointed merchant bankers for sale of its entire asset in PNB Housing Finance Company. Earlier this year, PNB sold its entire stake in the mutual fund joint venture with Principal Financial Group to give the latter full ownership of Principal PNB Asset Management Co. and Principal Trustee Co. Pvt. Ltd. PNB owned 21.38 per cent stake in Principal PNB Asset Management Co and 30 per cent equity in Principal Trustee Co. The bank is also looking to sell its stake in overseas subsidiaries and joint ventures.
