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Home / Industry / Banking /  What the Carlyle deal collapse means for PNB Housing Finance

MUMBAI : The collapse of a 4,000-crore investment plan led by Carlyle Group has muddied the fundraising plans of PNB Housing Finance Ltd, with the private equity firm now seen as unlikely to increase its stake in the mortgage lender.

Carlyle Group, the second-biggest shareholder in PNB Housing Finance, on 31 May agreed to invest up to 3,185 crore in the company through a preferential allotment at 390 per share. The investment was to be routed through Pluto Investments S.a.r.l., an affiliate of Carlyle Asia Partners IV, L.P.

Carlyle, through a separate vehicle, Quality Investment Holdings, which owns 32.2% in PNB Housing Finance, would have increased its stake to 50% after the capital raise.

Funds managed by Ares SSG and General Atlantic had also decided to participate in the capital raise, totalling 4,000 crore.

On Thursday, PNB Housing Finance said its board has decided to terminate the 4,000 crore stake sale, citing delays caused by pending legal proceedings.

A PNB Housing Finance executive said Carlyle may not bring in funds at the current share price and will instead look at maintaining its stake in the mortgage financier. On Friday, PNB Housing Finance shares closed at 639 on BSE.

“It is likely that PNB Housing or Punjab National Bank may not approach Reserve Bank of India again. Carlyle wants to be out of all these legal proceedings. Their name was sullied in this process. Both funds are different, though managed by Carlyle. We need to see if people who were agreeable to invest... if they will come back, and at what rate. ICDR (issue of capital and disclosure requirements) rate has gone up. Whether somebody will bring in dollars at that rate is a question," the executive said on condition of anonymity.

On the contrary, an executive at a credit rating agency said PNB may approach RBI seeking approval to raise stake to above 20%, given its improved financials and that it has managed to raise over 5,000 crore via QIP last fiscal.

Spokespeople for PNB Housing Finance and Carlyle declined to comment on the issue.

“Carlyle is a private equity firm. It has been there for six-and-a-half years. It will be looking at an exit. If this had happened, they would have had a lock-in of one year. The company could look at a follow-on public offer, or they will sell a majority stake, and the new investor could look at management takeover," said a former executive of PNB Housing.

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