Carlyle deal struck after due diligence, says PNB Housing Finance

Issue price arrived at after valuation by a CA, firm adds

PNB Housing Finance’s capital raising plan was approved after appropriate due diligence was conducted, and the financier did not appoint a registered valuer as the Companies Act does not require the share price to be determined by a valuation report if preferential allotment is done, the firm said.

The mortgage financier said its articles of association (AoA), read with rule 13 of Section 62 of the Companies Act states that price of shares, to be issued on a preferential basis, shall not be required to be determined by the valuation report of a registered valuer, the company told Business Standard. The AoA does not elaborate on the procedural aspects of valuation of preferential issue, for which the company has to abide by the Companies Act, 2013, it said.

However, “as a prudent measure”, the company has taken a valuation report from an independent chartered accountant (CA) firm, and complied with all regulations to determine the issue price of Rs 390 per share, which is above the floor price of Rs 384.6 per share, it said reacting to allegations made by a proxy advisory firm.

Proxy advisory firm Stakeholders Empowerment Services (SES), in a report, said PNB Housing’s proposal to preferentially allot Rs 3,200 crore worth of shares and Rs 800 crore worth of warrants to Carlyle, former HDFC Bank chief executive officer Aditya Puri’s family investment vehicle Salisbury Investments, General Atlantic, and Alpha Investments at Rs 390 a piece was “unfair” to public shareholders of the company and shareholders of its parent Punjab National Bank.

After the deal’s announcement, shares of the housing finance company have jumped, ending trade on Thursday at Rs 817 apiece. SES had said the AoA of the company required it to appoint a registered valuer if capital is not raised through a rights issue, arguing that the latter would have been a “fair and better option”.

In its response to this newspaper, the company said it analysed all options to raise capital, including a rights issue. However, as PNB, the promoter of the mortgage financier, could not get regulatory approval to infuse capital in the company, a decision was taken to explore raising capital from the market. 

PNB had earlier deliberated on a rights issue, but the proposition turned out to be difficult from a regulatory clearance point of view. The earlier plan was to go for a QIP, and to have the bank participate through rights issue. However, this proved difficult as PNB would have still held over 30 per cent in the housing finance company, breaching regulatory norms, Business Standard reported Wednesday.

“This deal for capital raising has been arrived at with appropriate due diligence keeping best interests of all stakeholders in mind. The culmination of this deal is a distinct reflection of PNB HF’s ability for retaining faith and confidence of all of its existing investors. We are confident this will take the company forward to its deserving success and growth and expected to unlock value for all the stakeholders,” the firm said.