Securities and Exchange Board of India (Sebi) has requested that mortgage lender PNB Housing Finance temporarily cease its proposed share sale.
On May 31, investors led by Carlyle Group announced a 4,000 crore investment in PNB Housing Finance. Carlyle Group Inc., Pluto Investments S.a.r.l., a subsidiary of Carlyle Asia Partners IV, and Carlyle Asia Partners V have agreed to invest up to 3,185 crore via a preferential allocation of shares and warrants at a price of 390 per share. The capital raise will also include current shareholders, including funds managed by Ares SSG and General Atlantic.
On 18th June, PNB Housing Finance disclosed the contents of a letter received from Sebi . The market regulator said that the notice given on May 31 for Extraordinary General Meeting is “ultra-vires of Article of Association (AOA) and shall not be acted upon until the company undertakes the valuation of shares as prescribed under 19(2) of AOA, for purpose of preferential allotment, from an independent registered valuer as per the provisions of applicable laws. The said report shall be considered by the Company’s Board while deciding on the preferential issue of shares and warrants.”
“The company shall disclose the contents of this letter to the stock exchanges in terms of provisions of Regulation 30 of the Sebi (LODR) Regulations, 2015,” the letter said, according to the company’s statement.
According to people familiar with the matter, public sector lender Punjab National Bank Housing Finance is weighing legal options and may approach the Securities Appellate Tribunal in response to regulator Sebi’s directive to halt its Rs 4,000 crore transaction with a consortium led by private equity giant Carlyle.
The consortium is led by Aditya Puri, the former MD and CEO of HDFC Bank, as well as private equity firms General Atlantic and Ares SSG. Sebi’s unusual involvement comes only days before a critical Extraordinary General Meeting (EGM) on June 22 to approve the issue of shares to the Carlyle-led company. Sebi has requested that PNB Housing Finance conduct the valuation procedure in accordance with the firm’s articles of association.
PNB Housing Finance declined to comment when contacted by media reports via email and referred them to information already supplied by the company as part of stock exchange notifications. Carlyle could not be reached for comment immediately.
However, the public sector lender maintained its initial stance. The company stated, “The Company and its Board of Directors have considered the SEBI Letter and continue to believe that the Company has acted in accordance with all applicable laws, including the applicable pricing regulations prescribed by SEBI, and the Company’s Articles of Association, and that such Preferential Allotment is in the best interests of the Company, its shareholders, and all other interested parties.” The Company is currently evaluating additional actions in this direction.”
The proposed transaction will be structured as a preferential allotment of shares, with Rs 3,200 crore being financed through equity shares and Rs 800 crore through warrant issuance. According to the plan, the deal will shift PNB Housing Finance’s control from single promoter to joint control holder with Carlyle Group.
PNB Housing Finance has not raised any equity capital in the last three years, with the exception of stock options granted to employees. The Reserve Bank rejected PNB’s application for a capital infusion into its subsidiary PNB Housing earlier this year.
Bhoi Smrutirekha Dharanidhar