Has complied with all regulations in Rs 4,000-crore Carlyle deal, PNB Housing tells tribunal

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PNB Housing Finance on Monday concluded its argument against the Securities and Exchange Board of India’s (SEBI) directive on the Rs 4,000-crore fundraising deal with a clutch of investors led by the Carlyle Group before the Securities Appellate Tribunal (SAT).

PNB Housing said it had complied with all provisions under the Issue of Capital and Disclosure Requirement (ICDR) regulations in the deal.

It argued that the regulator was focusing more on the article of association, which is an agreement between two shareholders. SAT will hear SEBI’s argument on Tuesday.

What is the issue?

On May 31, PNB Housing’s board approved the raising of funds through a preferential allotment of shares worth Rs 3,200 crore and warrants worth Rs 800 crore to Carlyle, General Atlantic and Salisbury Investments, an entity owned by Aditya Puri.

The price of the preferential issue and warrants was fixed at Rs 390 apiece, which was only Rs 6 higher than the floor price under ICDR. For the warrants issue of Rs 800 crore, only 25 percent needs to be infused on allotment, with the remaining to be infused within 18 months.

Through this preferential issue, PNB Housing was ceding management control to Carlyle and persons acting in concert (PAC), proxy adviser Stakeholders Empowerment Services (SES) had alleged.

PNB Housing told SAT that SEBI has issued a second letter to the independent directors on June 25 as to why they failed in saving the interest of the minority shareholders.

It then directed PNB Housing to stop the allotment unless the valuation was done by an independent valuer.

In an earlier letter on June 18, SEBI had stated: “The current resolution bearing item no. 1 (Issue of Securities of the company and matters related therewith) of EGM notice dated May 31, 2021, is ultra vires of 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.”

At the SAT hearing, PNB Housing cited similar transactions by LIC Housing Finance and Barbeque Nation. A source close to the development told Moneycontrol: “Sebi may look into this matter and may ask the exchanges to conduct a preliminary inquiry into the deal before their emergency general meeting”.

Last week, PNB Housing Finance said its promoter Punjab National Bank has asked it to consider restructuring the proposal.