The ₹4,000-crore deal involving PNB Housing Finance Company’s preferential allotment of shares to private equity major Carlyle continues to be in limbo with the Securities and Appellate Tribunal (SAT) giving a split verdict on the objections raised by SEBI.
While Justice MT Joshi held that SEBI had correctly asked PNB HFC to obtain a valuation report, per the Articles of Association, to be placed before the general body of shareholders, Justice Tarun Agarwala ruled that SEBI ought not to have intervened since the PNB board had approved the issue of shares, per the Issue of Capital and Disclosure Regulations (ICDR).
CCI green signals Carlyle Group-led ₹4,000 cr investment in PNB Housing
SAT functions with a three-member Bench, but one of the members retired recently and the vacancy is yet to be filled. This has led to a rare split-decision situation, as otherwise, cases have been decided on the basis of a majority verdict.
Valuation of shares
According to legal experts, the Supreme Court will now have to decide on the dispute. In May, PNB HFC had announced the preferential allotment of shares worth ₹4,000 crore to a clutch of investors led by private equity firm Carlyle. The deal gives management control of the HFC to the new investors.
A proxy advisory report by Mumbai-based Stakeholders Empowerment Services (SES) had said that Carlyle was getting control of PNB HCF, which could cause a loss to minority shareholders.
SAT reserves order in ₹4,000-crore PNB HCF, Carlyle deal
Subsequently, SEBI blocked the deal until the housing finance company undertook a valuation of its shares. PNB HFC insisted that the acquisition of shares by the Carlyle group and other investors was at a fair price and beneficial to the company’s existing investors. They further argued that PNB HFC was in dire need of funds and its single largest shareholder, PNB, was barred by the RBI from infusing any further capital into the HFC.
According to JN Gupta, Managing Director, SES, the best way for PNB to divest the PNB Housing stake is to come out with a rights issue and renounce in favour of Carlyle at a market discovered price so that retail investors also benefit from the deal.