PNB Housing shares fall 5% as SEBI halts Carlyle deal

PNB Housing Finance share hits lower circuit on Monday after the Securities Exchange board of India (SEBI) restrained PNB Housing Finance to go ahead with shareholders’ approval on the proposed Rs 4, 000 crore deal with Caryle Group and directed the company to carry out the valuation process as per the relevant legal provisions.

As per SEBI, the resolution regarding the deal, which was to be put for shareholders' vote on June 22, was "ultra-vires" of the company's Articles of Association (AoA).

The transaction, which has come under the lens of Sebi and Reserve Bank of India (RBI) following concerns raised in certain quarters, including by a proxy advisory firm, would eventually see private equity major Carlyle group taking control of PNB Housing Finance, which is a subsidiary of Punjab National Bank.

The company's meeting is scheduled for Tuesday (June 22) to take up the matter for approval of the shareholders.

The company, promoted by PNB, said it had received the letter from Sebi on June 18, 2021, calling upon the company to comply with the legal provisions in the matter.

Proxy advisory firm Stakeholders Empowerment Services (SES), in its report, has raised a number of questions on the proposed deal, wondering if Punjab National Bank (PNB) has willingly surrendered control without extracting a fair compensation.

Details of the Proposed Deal:

Under the proposed deal, Rs 3,200 crore is to be raised through equity shares and Rs 800 crore by issuance of warrants.

A total of 8.21 lakh equity shares and 2.05 lakh warrants are to be issued at an issue price of Rs 390 per share/warrant to Pluto Investments S.a.r.l (Pluto) (Carlyle Group); Salisbury Investments (person acting in concert with Carlyle); General Atlantic Singapore Fund FII Pte Ltd and Alpha Investments V Pte Ltd.

Salisbury Investments is the family investment vehicle of former HDFC Bank CEO Aditya Puri, who is also a senior advisor for Carlyle in Asia.

Will Promoters Change?
As per the proposal, the deal will change the control of PNB Housing Finance -- from PNB being the sole promoter of the company to a joint control holder with Carlyle Group.

With this, PNB's stake in the company will come down to 20.28% from the existing 32.64%, while that of Carlyle will rise to 50.16% from 32.21%.

PNB Housing Finance and SAT:
PNB Housing Finance Limited said in the regulatory filing on Monday that it has filed an appeal before the Securities Appellate Tribunal (SAT) against the letter issued by the Securities and Exchange Board of India on June 18, 2021.
Stock Impact:

The stock is currently trading at Rs702.40, down by Rs36.95 or 5% from its previous closing of Rs739.35 on the BSE. The scrip opened at Rs702.40 and has touched a high and low of Rs702.40 and Rs702.40 respectively.

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_{Disclaimer: The above report is compiled from information available on the public platforms.
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