As Carlyle deal hits legal hurdle, PNB Housing plans Rs 35k-cr debt capital

Preferential allotment will be made post receipt of regulatory, shareholders and legal approval, says mortgage lender

PNB Housing Finance (PNB HFL) will raise Rs 35,000-crore debt as its deal with Carlyle Group has hit a legal hurdle, with the Securities Appellate Tribunal (SAT) pronouncing a split verdict on the matter.
 
The mortgage lender will seek shareholders’ approval for the fundraising at its annual general meeting scheduled on September 3, it said in a regulatory filing. An approval has been sought to issue redeemable, secured or unsecured non-convertible debentures aggregating to Rs 35,000 crore in one or more tranches.
 
This comes two days after SAT gave a split verdict to the lender’s appeal against the Securities and Exchange of Board of India’s (Sebi's) directive that restrained PNB HFL from going ahead with the preferential allotment of shares to a bunch of investors unless the valuation was done by an independent valuer.

 

The mortgage lender now has the option to move Supreme Court. The preferential issue of equity shares and warrants aggregating to Rs 4,000 crore to investors recommended by the board of PNB HFL “will be made after receipt of regulatory/ shareholders'/ legal approval”, the lender said in annual report.
 
In May, PNB HFL had announced a preferential allotment of shares worth Rs 3,200 crore and Rs 800 crore worth of warrants to Carlyle Group, Aditya Puri’s family investment vehicle Salisbury Investments, General Atlantic, and Alpha Investments at Rs 390 apiece.
 
It was deemed “unfair” to public shareholders of the company a week later by proxy advisory firm Stakeholders Empowerment Services. On June 18, Sebi directed the company to halt the allotment unless the valuation was done by an independent valuer.

 
The mortgage lender then moved SAT, challenging the regulator’s directive, and the appellate tribunal allowed the company to conduct its scheduled extraordinary general meeting, but with the caveat that the outcome of the vote would not be disclosed.
 
The company has been looking to raise funds for the past few years. The Reserve Bank of India earlier this year had barred PNB from infusing capital into its subsidiary. The mortgage lender had earlier planned a qualified institutional placement, which would have led to PNB participating through a rights issue. However, this proved difficult since PNB would have still held over 30 per cent in the housing  finance company, leading to a breach of regulatory norms.

 
The Covid-19 pandemic and the subsequent lockdowns have posed a new set of challenges for the entire housing finance industry, which was already struggling through liquidity constraints after the Infrastructure Leasing & Financial Services crisis of 2019, the lender said in its annual report.
 
However, the lender continued with a business plan that involved improving focus on collections and increasing collection efforts. The lender has also realigned its strategy in favour of retail business, while reducing exposure to the corporate segment.