After purple flags, PNB Housing Finance calls off its Rs 4,000-crore Carlyle deal

THE controversial transfer by US-based Carlyle group, together with former MD of HDFC Bank and a senior advisor at Carlyle Aditya Puri, to amass a stake in PNB Housing Finance has come to an finish with the board of the house mortgage firm deciding to not proceed with the preferential subject.
As The Indian Express had reported in June, this transaction had been red-flagged by minority shareholders and the hyperlinks of many PNBHF board members to Carlyle had raised questions of battle of curiosity.
PNB Housing has terminated the share subscription agreements executed with Pluto Investments, an affiliated entity of Carlyle Asia Partners IV, and Carlyle Asia Partners V, which entailed an funding of Rs 3,185 crore.
“We have been informed that consequently Pluto Investments (together with persons acting in concert) will be initiating the process to withdraw the open offer made by them at Rs 403.22 per share,” PNB Housing stated in an trade submitting.
The subject, if it had gone by way of, would have made the US-based non-public fairness big a majority shareholder within the firm — taking its share from 32% to 50.1% — and introduced down the stake of Punjab National Bank in its housing finance subsidiary from 32.6% to twenty.3%.
On June 8, The Indian Express had reported how a number one proxy advisory agency, Stakeholders’ Empowerment Services, on the behest of minority shareholders, had red-flagged the proposed transaction.
On the pricing of the choice share at Rs 390, PNBHF, the agency’s report stated, ignored its Articles of Association, which requires the value to be “determined by the valuation of a registered valuer.”

On June 14, The Indian Express had reported that of the 12 PNBHF board members who cleared the allotment, not less than seven had handled the US PE big — together with two Carlyle workers who’re nominee administrators.
On Thursday, the PNB Housing board “noted that due to the protracted litigation and the continuing interim order of the SAT dated June 21, 2021, there is no clarity on the shareholders’ approval for undertaking the preferential issue”.
In addition, regulatory approvals required for the preferential subject, are pending and it’s unclear whether or not such approvals shall be forthcoming whereas the authorized proceedings are ongoing, the corporate stated.
“The company’s capital raising plans will be further delayed and such uncertainty will continue. The board’s primary objective is to raise capital to support the growth of the company, and the board believes that the current situation is not in the best interests of the company and its stakeholders,” PNB Housing stated.
The proposed preferential subject has been held up for greater than 4 months — after already having taken over two years — on account of pending authorized proceedings earlier than the Securities Appellate Tribunal.
On June 18, 2021 capital markets regulator Sebi issued a letter to PNB Housing and directed that the decision regarding “issue of securities of the company” within the EGM discover dated May 31, is “ultra-vires” of the corporate’s Articles of Association and it shouldn’t be acted upon till the corporate undertakes the valuation of shares — as prescribed in its AoA – by an unbiased registered valuer.
While the corporate filed an enchantment with SAT, the appellate authority handed an interim order on June 21.

In its order, although the Tribunal gave its nod to PNB Housing Finance to carry its extraordinary common assembly for shareholder approval of the Rs 4,000-crore share allotment to a clutch of traders led by Carlyle Group, it directed the corporate to not declare the outcomes of voting that was to be held on June 22, till additional orders from the tribunal.
On August 9, a cut up verdict was introduced, during which the Presiding Member of SAT issued an order in favour of the corporate and put aside the Sebi letter dated June 18, whereas the Judicial Member’s order upheld the Sebi letter.
Further, SAT ordered that the interim order dated June 21, 2021 was to proceed till additional orders of SAT.
Meanwhile, Sebi most well-liked an enchantment towards the order of the Presiding Member of SAT earlier than the Supreme Court, which is presently pending. “There continues to be no visibility or certainty as to the timeline for judicial determination of the legal issues, in particular as a third member of the SAT is yet to be appointed,” PNB Housing stated.