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PNB Housing scraps stake sale to Carlyle

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PNB Housing Finance

  • In an exchange filing, the housing finance company noted that Carlyle firm Pluto Investments has initiated the process to withdraw the open offer after the housing finance company decided not to go ahead with the preferential allotment
  • PNBHF announces plan to raise capital via preferential allotment on 31 May

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MUMBAI : Mumbai: PNB Housing Finance on Thursday said that its board has decided to terminate the 4,000 crore stake sale to a clutch of investors led by Carlyle Group, citing delays caused by pending legal proceedings.

In an exchange filing, the mortgage lender said that Carlyle Group affiliate Pluto Investments initiated the process to withdraw the open offer after the housing finance company decided against proceeding with the preferential allotment.

“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 (Securities Appellate Tribunal) is yet to be appointed. In addition, regulatory approvals required for the preferential issue are pending, and it is unclear whether such approvals will be forthcoming while the legal proceedings are ongoing," the company said.

The investment by Carlyle was crucial for PNB Housing to boost lending amid the rising demand for home loans and low interest rates. The mortgage lender’s financials were hit by the liquidity crunch that engulfed non-bank lenders following the collapse of Infrastructure Leasing & Financial Services Ltd (IL&FS) in September 2018 and then by the pandemic.

“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 interest of the company and its stakeholders," PNB Housing said.

With the cancellation of the deal, the mortgage lender will have to explore other funding sources to support growth. The company has received shareholders’ approval to raise 35,000 crore by selling non-convertible debentures.

“The company is back to square one in terms of fundraising. The overhang will continue. We need to see if they have managed to strike a deal with any other investor," said an analyst covering the stock, requesting anonymity.

On 31 May, investors led by Carlyle announced an investment of 4,000 crore in PNB Housing. Carlyle Group Inc., Pluto Investments, an affiliated entity of Carlyle Asia Partners IV, and Carlyle Asia Partners V agreed to invest up to 3,185 crore through a preferential allotment of shares and warrants at 403.22.

However, the transaction came under the scrutiny of the Securities and Exchange Board of India (Sebi) after proxy adviser Stakeholders Empowerment Services (SES) termed the deal “unfair and abusive" to the mortgage lender’s minority shareholders. The markets regulator halted the stake sale and asked the company to conduct an independent valuation before pricing any capital-raising deal.

On Thursday, shares of PNB Housing fell 1.32% to 641 on BSE.

PNB Housing Finance then challenged the regulator’s directive at SAT, which allowed the company to seek shareholders’ approval but ordered the results of the vote to be kept in a sealed cover until further orders. Finally, Sebi approached the Supreme Court after SAT delivered a split verdict.

The mortgage lender has been looking to raise funds for the past few years. However, the Reserve Bank of India barred parent Punjab National Bank from infusing capital into its housing finance subsidiary. The mortgage lender had earlier planned a qualified institutional placement, which would have led to Punjab National Bank participating through a rights issue. This would have meant Punjab National Bank holding more than 30% stake in the home financier, leading to a breach of regulatory norms.

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