PNB Housing Finance, directors settle case with SEBI

The Securities and Exchange Board of India (SEBI) has passed a settlement order in the matter related to PNB Housing Finance and its directors wherein the company settled the case by paying ₹72.77 crore.

“The High Powered Advisory Committee… considered the settlement terms proposed by the applicants and recommended the case for settlement upon payment of ₹72,76,533… which includes ₹44,26,533… as legal costs, payable jointly and severally by the applicants,” stated the Sebi order issued on Tuesday.

The matter pertains to last year’s proposed deal between PNB Housing Finance and US private equity major Carlyle wherein the board of the housing finance firm approved a preferential allotment of shares and warrants to entities including Carlyle.

The deal had come under heavy criticism from corporate governance experts with even Sebi writing to the company that the deal was “ultra vires” the Articles of Association of the company and cannot be implemented until a valuation exercise is done.

As per the deal approved by the board of PNB Housing Finance in May 2021, an amount of Rs 4,000 crore was to be raised by issuing shares and warrants by way of a preferential allotment to Carlyle Group, Salisbury Investments, General Atlantic and Alpha Investments.

The deal was structured in a way that ₹3,200 crore was coming by way of issue of shares and the balance ₹800 crore through warrants.

More importantly, the allotment was proposed at a price of ₹390 per share/warrant, which was much lower than the then prevailing market price of around ₹525 per share.

Further, the deal would have reduced PNB’s stake in the housing firm to 20 per cent from around 33 per cent while making Carlyle the majority shareholder.

Incidentally, the case had gone to the Securities Appellate Tribunal and ultimately to the Supreme Court.

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