PNB Housing Finance likely to challenge Sebi’s valuation order


The Rs 4,000-crore Carlyle deal with PNB Housing Finance could be in a regulatory fix as the mortgage lender is likely to challenge a Securities & Exchange Board of India order that required an independent valuation of the business before the company sought shareholder approval for the transaction.

Carlyle and Salisbury Investments, which are set to be the new promoters of the company, are also expected to support the PNB Housing plans to challenge the regulatory order.

Making an appeal to the Securities Appellate Tribunal against the Sebi order is an option before PNB Housing Finance now, a person familiar with the matter told ET.

“Carlyle and the other investors could be supporting PNB Housing’s move to challenge the order. They have done a price discovery mechanism and thus arrived at the share price formula for the preferential offer as prescribed by the existing Sebi guidelines,” said a source familiar with investors’ plans.


In a rare regulatory move, Sebi said the resolution related to the deal violates the company’s Articles of Associations and the company must undertake an independent valuation of the business before the resolution is taken up for further discussions. A shareholders’ meeting was scheduled to be held on June 22 to approve the deal.

The Punjab National Bank-promoted mortgage lender has invited American private equity company Carlyle to own a majority share in the housing business by selling shares in a preferential allotment and warrant issuance.

The review petition is likely to be filed as early as this week.

PNB Housing did not respond to ET’s mailed queries on the matter. A Carlyle spokesperson also declined to comment.

The company and its board of directors continue to believe the pricing of the deal is in compliance with all relevant laws and rules, PNB Housing said in a regulatory filing on June 19.

“Preferential allotment is in the best interests of the company, its shareholders and all relevant stakeholders,” it said.

The deal has come under the lens of the regulators after certain sections of the investment industry, including a proxy advisory firm, raised doubts about the neutrality of the PNB board.

The board of PNB Housing had approved placement of 82 million preferential equity shares and 20.5 million share warrants with Carlyle Group unit Pluto Investments, Salisbury, General Atlantic Singapore Fund FII Pte Ltd and Alpha Investments V Pte Ltd. Investors will get shares at Rs 390 apiece.

PNB Housing’s share price doubled to Rs 880 per share in a span of a week after the deal came to light, before easing to Rs 740 on BSE Friday.

The proposed takeover requires an open offer on behalf of the acquirers including Carlyle, and Salisbury Investments, a family investment vehicle of former HDFC Bank chief executive Aditya Puri. The former HDFC Bank CEO advises Carlyle on investment opportunities in Asia.

Following the deal, PNB’s shareholding in PNB Housing Finance is set to fall below 21%, while PNB Housing said as late as January this year that the public-sector bank would continue holding over 26%, people protesting the deal said.


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