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PNB never objected to housing finance arm’s deal with Carlyle, only asked it to follow SEBI directions: MD & CEO

CS Mallikarjuna Rao says the bank will follow whatever directions are issued by the appellate tribunal. In an announcement on May 31, PNBHFL had said that Carlyle Group, its affiliates, existing investors, and Puri’s family investment vehicle will invest up to Rs 4,000 crore in the housing finance firm.

August 03, 2021 / 03:50 PM IST
Earlier, SEBI had directed PNBHFL to halt the proposed deal until the company undertakes a fresh valuation from an independent valuer. (Image: Shutterstock)

Earlier, SEBI had directed PNBHFL to halt the proposed deal until the company undertakes a fresh valuation from an independent valuer. (Image: Shutterstock)


State-owned Punjab National Bank (PNB) on Tuesday said it never objected to the Rs 4,000-crore PNB Housing Finance (PNBHFL)-Carlyle deal but only asked the subsidiary to follow the directions of the Securities and Exchange Board of India (SEBI), the bank’s MD&CEO, C S Mallikarjuna Rao, said in a media conference call.

The housing finance company is backed by India’s second-largest PSU bank, PNB.

“When SEBI issued the letter, we asked the board to restructure the deal in line with the same,” Rao said. The bank will follow whatever directions are issued by the appellate tribunal in this case, he said.

Earlier, SEBI had directed PNBHFL to halt the proposed deal until the company undertakes a fresh valuation from an independent valuer. Later, the Securities Appellate Tribunal (SAT) allowed the company to conduct the AGM but asked it to not announce the results of the AGM till a final order. SAT's order is pending in this case.

The market regulator said that the notice given on May 31 for Extraordinary General Meeting (EGM) is "ultra-vires of the 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 the 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.”

Close

PNBHFL moved the SAT after the SEBI stay on the transaction. On July 7, PNBHFL informed exchanges that PNB had asked it to reconsider the structure of the Rs 4,000-crore investment proposal from the Carlyle-Aditya Puri combine in the current form and seek an alternative plan. Aditya Puri is a senior advisor at the Carlyle Group and former managing director of HDFC Bank.

In an announcement on May 31, PNBHFL said that the Carlyle Group, along with its affiliates, existing investors, and Puri’s family investment vehicle will together invest up to Rs 4,000 crore in the housing finance company.

Pluto Investments, an affiliated entity of Carlyle Asia Partners IV and Carlyle Asia Partners V, has agreed to invest up to Rs 3,185 crore through a preferential allotment of equity shares and warrants, at a price of Rs 390 per share.

Existing shareholders of the company, funds managed by Ares SSG and General Atlantic, will also participate in the fund-raising. The statement added Puri will likely get nominated to the Carlyle board in due course.

Proxy advisory firm raises questions

Proxy advisory firm SES had first raised an issue on the deal. Among the questions raised by SES include:

  1. a) Why did PNB willingly surrender control, without extracting a fair compensation? b) Why did the board agree to a preferential offer at a discount to book value? and c) Was the rights issue a better proposition? Has PNB sacrificed Rs 2,000+ crore?

Incidentally, SEBI’s objection was also related to the independent valuation of the issue. The SAT ruling, in this case, will be crucial, according to experts. If SAT upholds the SEBI ruling, PNB and Carlyle may have to go back to the drawing board to work on the deal structure and valuation.
Dinesh Unnikrishnan is Deputy Editor at Moneycontrol. Dinesh heads the Banking and Finance Bureau at Moneycontrol. He also writes a weekly column, Banking Central, every Monday.

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