PNB to Exit India SME Asset Reconstruction Company, Sells Stake for ₹34 Crore

Punjab National Bank (PNB), one of India’s leading public sector banks, has taken a significant step to streamline its investment portfolio by agreeing to sell its entire stake in the India SME Asset Reconstruction Company Limited (ISARC) for ₹34.04 crore. This move aligns with the bank’s strategy to focus on its core banking operations and exit non-core investments.

Why in News?

PNB’s decision to sell its stake in ISARC has gained attention due to the bank’s ongoing efforts to optimize its portfolio and improve operational focus. The transaction, expected to complete by the end of Q1 FY 2025-26, reflects a broader trend among public sector banks to rationalize their investment holdings and focus on core financial services amidst evolving market conditions.

Aim and Objectives

• To streamline PNB’s investment portfolio by exiting non-core businesses.
• To focus resources and management attention on core banking activities.
• To comply with regulatory changes and enhance financial performance.

Background and Details

• PNB signed a definitive agreement on May 13, 2025, to sell its entire stake in ISARC.
• The stake sold comprises 2.09 crore shares at ₹16.29 per share, totaling ₹34.04 crore.
• The buyer, Authum Investment and Infrastructure Limited, is set to become the new sponsor following RBI approval in March 2025.
• ISARC is an asset reconstruction company jointly promoted by SIDBI, Bank of Baroda, PNB, and SIDBI Venture Capital Limited, focusing on reviving distressed assets in the SME sector.

Static Facts About ISARC

• Capital base (FY24): ₹129.68 crore
• Total assets (FY24): ₹130.11 crore
• Income (FY24): ₹18.08 crore
• Profit Before Tax (FY24): ₹10.65 crore
• Profit After Tax (FY24): ₹9.37 crore

Significance

• The sale is not a related-party transaction nor a merger or slump sale.
• It reflects PNB’s strategic realignment to enhance operational efficiency.
• This move also aligns with RBI’s broader financial sector reforms encouraging banks to focus on core competencies.
• PNB’s stock responded positively, closing higher by 1.93% on the BSE following the announcement.