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PNB Housing terminates deal with Carlyle-led investor group

The cancellation of the capital infusion plan assumes significance as the deal, if executed, would have seen United States-based Carlyle Group taking control of the lender.

October 15, 2021 / 07:36 AM IST
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The board of PNB Housing Finance Ltd has terminated a Rs 4,000-crore fund raising deal with a Carlyle-led group of investors citing pending legal issues which may delay regulatory approvals.

Subsequently, Pluto Investments, a Carlyle entity, will be initiating the process to withdraw an open offer made by them, the finance company said in a notice to stock exchanges.

The Securities and Exchange Board of India (SEBI) had asked PNB Housing to halt a preferential allotment of shares and warrants to entities including Pluto investments, an affiliate of the Carlyle Group, General Atlantic, Salisbury Investments Private Ltd, and Alpha Investments to raise Rs 4,000 crore.

Subsequently, PNB Housing had challenged the SEBI order at the Securities Appellate Tribunal which passed a split verdict. After this, SEBI has filed an appeal against the SAT verdict at the Supreme Court.

"There continues to be no visibility or certainty as to the timeline for judicial determination of the legal issues...in addition, regulatory approvals required for the Preferential Issue are pending and it is unclear whether such approvals will be forthcoming while the legal proceedings are ongoing," PNB Housing said.

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The cancellation of the capital infusion plan assumes significance as the deal, if executed, would have seen US-based Carlyle Group taking control of the lender.

Earlier, the proposed deal had received another setback when the promoter and biggest shareholder, Punjab National Bank, had written to PNB Housing to reconsider the structure of the deal against the backdrop of objections raised by SEBI.

The scrapping of the deal also appears to be a setback for Aditya Puri, former MD & CEO of HDFC Bank, longest-serving Indian bank CEO. Puri had joined Carlyle as an advisor in November 2020.

Puri's family investment vehicle together with Carlyle Group and its affiliates had proposed to together invest up to Rs 4,000 crore in PNB Housing finance company through a preferential allotment of equity shares and warrants, at a price of Rs 390 per share. The statement then issued by PNB Housing added that Puri would likely get nominated on the Board of Carlyle in due course.

Proxy Advisory firm SES had raised questions on the deal as follows: 1) Why did PNB willingly surrender control without extracting fair compensation? 2) Why did board agree to a preferential offer at a discount to book value? and 3) Were rights issue a better proposition and has PNB sacrificed Rs 2,000 crore?

SEBI too had objections related to the independent valuation of the issue.

The mortgage lender required capital to repair its loan book and fuel growth. The infusion would have benefited to augment its capital adequacy and accelerate growth. The deal would have increased the capital adequacy ratio from 18.7 percent to 28 percent.

ICICI Securities then in note had said, “Equity infusion of Rs 40 billion will lead to sharp uptick in CAR to 28 percent and reduce gearing to <5x (from 6.7x). This will instill confidence in the debt market, thereby improving visibility on debt rating upgrade. PNB HFL will also accelerate its borrowing capabilities (at lower cost) for retail-focused growth."
Moneycontrol News
first published: Oct 14, 2021 08:37 pm

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