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."
The Securities and Exchange Board of India has directed Punjab National Bank Housing Finance (PNBHF) to halt its proposed Rs 4,000 crore deal with Carlyle group.
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 EGM was scheduled for June 22 to approve the issuance of shares to a consortium of investors led by the Carlyle group giving it a controlling stake in the company. PNBHF was directed to disclose the contents of this letter.
"The Company and its Board of Directors have considered the SEBI Letter, and continue to believe that the Company has acted in compliance with all relevant applicable laws, including the applicable pricing regulations prescribed by SEBI, and the Articles of Association of the Company, and that such Preferential Allotment is in the best interests of the Company, its shareholders and all relevant stakeholders," the PNBHF said in a statement.
"The Company is evaluating further steps in this regard."
Moneycontrol was the first to report that Sebi is examining the deal after a proxy advisory firm questioned a proposed investment in the mortgage lending arm of Punjab National Bank by investors led by the American private equity firm.
“The Ministry of Finance is also looking into this deal,” a person close to the development had told Moneycontrol on condition of anonymity.
This person cited criticism of the deal by the proxy advisory firm Stakeholders Empowerment Services (SES) that the investment was weighed against the interests of the shareholders of both PNB Housing Finance and Punjab National Bank because the deal had been struck at a valuation less than even the book value of the company.
Meanwhile, the company emphasised that pricing is not required to be based on a valuation report from a registered valuer and that the final price is higher than the floor price suggested by registered valuers.
The company also stressed that the price was arrived at after due consideration and weighing of various relevant factors, and hence the pricing for the said preferential issue has been determined in compliance with the applicable law.
Responding to a query from Moneycontrol, a PNB Housing Finance spokesperson has said: "The Company’s capital raise is in compliance with the Companies Act, 2013 and the SEBI ICDR Regulations. On May 31st 2021 all the exchanges were informed about the capital raise transaction of PNB Housing Finance as per the prescribed LODR regulations. We have received a query from NSE and BSE at 3 PM on 11th June, and we will be addressing it in due course."
According to the company, ICDR provides for the minimum price of equity shares. "The Company calculated the floor price as prescribed by SEBI and the issue price of Rs 390 per share is above the floor price of Rs 384.6 per share. The Company as a prudent measure has also taken a valuation report from an independent CA firm basis the relevant regulations and guidelines. Hence, the Company has followed all the regulatory compliances to determine the issue price,” it said in response to SES.