No error of judgement in PNB Housing Finance deal: PNB MD

Without specifying details of the PNB letter to the housing finance company, Rao said the bank had merely asked the company to follow Sebi’s directions and had not directed any specific changes.

There was no error of judgment while finalising the Rs 4,000 crore fundraising plan for PNB Housing Finance (PNBHFL), Punjab National Bank (PNB) managing director SS Mallikarjuna Rao said on Tuesday.

While speaking at a conference on the bank’s June quarter earnings, Rao said PNB is awaiting a decision from the Securities Appellate Tribunal (SAT) on the PNB Housing Finance-Carlyle deal as it is a matter of interpretation of law. The deal, first announced on May 31, is stuck in limbo as SAT has reserved its judgement on the fundraising plan of the housing firm.

“The decision taken by PNB Housing’s board was within Sebi (Securities and Exchange Board of India) guidelines. Considering the issues raised by the regulator in its June 18 letter, the PNB board had written to PNB Housing Finance’s board to follow the regulator’s guidance,” Rao, who is also the non-executive chairman of PNB Housing Finance, said. Currently, PNB holds a 32.6% stake in PNB Housing Finance.

Without specifying details of the PNB letter to the housing finance company, Rao said the bank had merely asked the company to follow Sebi’s directions and had not directed any specific changes.

On June 18, Sebi restrained PNB Housing Finance from going ahead with the vote on the proposed share sale, saying the fundraising plan was ‘ultra vires’ to the Articles of Association of the housing finance company. The company was directed to carry out the valuation process of shares as per the relevant legal provisions.

PNB Housing, however, contended that it has followed Sebi norms in deciding the issue price at Rs 390 apiece. According to Rao, the voting on the proposal had already commenced, due to which PNBHFL approached the SAT for further guidance.

Defending the stance taken at the PNB Housing Finance board meeting on May 31, Rao said, “There was no error of judgement. If you have seen the share price of PNB Housing Finance in the last 2-2.5 years, it was hovering at below rate. ICDR guidelines clearly indicate the kind of formula to be used for pricing for listed entities.”

The share price of PNBHFL had doubled since the announcement of the fundraise on May 31 to reach at Rs 880 per share on June 7. Since then, the stock has corrected around 22% to close at Rs 680 per share at Bombay Stock Exchange on Tuesday.

On May 31, PNB Housing’s board had approved a preferential allotment of Rs 3,200 crore worth of shares and Rs 800 crore worth of warrants to Carlyle, Aditya Puri’s family investment vehicle, Salisbury Investments, General Atlantic and Alpha Investments at Rs 390 per share. Puri was expected to be nominated to the firm’s board as a Carlyle nominee director.