PNB Housing Finance defends Carlyle Group deal after Sebi halts move

Regulator wants report by independent valuer

The Securities and Exchange Board of India (Sebi) has asked PNB Housing Finance (PNB HFC) to keep on hold the proposal to seek the shareholders’ nod for a preferential allotment of equity until an independent valuation of shares was done.

The housing finance firm was planning to issue shares and warrants on a preferential basis to private equity firm Carlyle Group and associates, which were reported to be investing Rs 4,000 crore to acquire a controlling stake of over 50 per cent in the Delhi-based mortgage lender.

It was supposed to hold an extraordinary general meeting of shareholders on June 22 to consider the preferential allotment (shares and warrants). The price of each share and convertible warrant is Rs 390.

On Friday its shares closed 1.4 per cent lower at Rs 739.35 per share on the BSE.

Sebi, in a communication to the housing finance firm, said the resolution about the issue of securities and related matters was “ultra-vires” of the Articles of Association (AoA). The resolution will not be acted upon until the company does the valuation of shares (for preferential allotment) by an independent, registered valuer.

PNB HFC in a late night filing with the BSE said the company had acted in compliance with the laws, including pricing regulations prescribed by Sebi and the AoA.

Such preferential allotment is in the best interests of the company, its shareholders, and all relevant stakeholders. The company is evaluating further steps in this regard. It, however, did not elaborate on its steps, including the shareholders’ meeting.

Also in its communication (June 15, 2021) to the exchange, PNB HFC had said there was no prescribed methodology required to be followed for valuing the shares of a listed entity, except the minimum pricing formula prescribed under the Sebi Regulations.

The formula is market-linked and the floor price is the higher of the two values determined on the basis of differing look-back periods with reference to the “relevant date” for the preferential issuance. Hence, there is no prescribed distinction between a pricing and a valuation certificate. The process followed was also in line with the market practice followed by listed companies.

Stakeholders Empowerment Services, a governance watchdog, in a report earlier in June had said PNB HFC’s decision to allot shares and warrants to Carlyle Group, Aditya Puri, and others at Rs 390 apiece was “unfair” to public and other shareholders.

PNB HFC had said the company had obtained a valuation report (May 29) for the preferential issuance from the company’s statutory auditing firm BR Maheswari & Co LLP. It was reviewed and confirmed by Amresh Sood, partner of the firm who is a registered valuer. Also, the management had received a valuation report (dated May 31 provided by the lead investor). That report was issued by Vikram Kailash Jain, a registered valuer. The issue price for the preferential issue (Rs 390 apiece) was higher than the minimum floor price calculated in accordance with the Sebi Regulations (Rs 384.60), as also borne out by the valuation reports.