The proxy advisory firm has interpreted that the deal is not only discriminatory but also is in violation to the Articles of Association (AoA) and the pricing of the proposed preferential allotment (the deal) has not been done fairly.
The markets regulator will scrutinize the ₹4,000 crore share sale by PNB Housing Finance Ltd to a group of investors led by private equity firm Carlyle Group after a proxy adviser said the deal is unfair to the mortgage lender’s minority shareholders, two people aware of the matter said.
Stakeholders Empowerment Services (SES), led by former Securities and Exchange Board of India (Sebi) executive director J.N. Gupta, said the proposed deal is “unfair and abusive" to minority shareholders of PNB Housing. Instead, the company should have opted to raise the capital through a rights issue, treating all shareholders equitably, the proxy adviser said.
SES claimed the proposed deal also violates the Articles of Association (AoA) of the home financier, and the pricing of the proposed preferential sale of stock to the investor group led by Carlyle was not done fairly.
The proxy adviser also highlighted that PNB was giving away control of its unit to the Carlyle Group without seeking a “control premium".
On 31 May, a clutch of investors led by Carlyle Group announced an investment of ₹4,000 crore in PNB Housing Finance. Carlyle Group Inc. Pluto Investments S.a.r.l., 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 a price of ₹390 apiece.
Some existing shareholders of the company, including funds managed by Ares SSG and General Atlantic, are also participating in the capital raise.
Salisbury Investments Pvt. Ltd, the family investment vehicle of Aditya Puri—senior adviser for Carlyle in Asia and the former managing director of HDFC Bank Ltd—will also invest ₹25 crore. Puri is expected to be nominated to the PNB Housing Finance board as a Carlyle nominee director in due course.
Post the allotment of equity and warrants, Pluto Investments will hold 30.2% in PNB Housing Finance. Carlyle, through a separate investment vehicle, Quality Investment Holdings, owns 32.2% in PNB Housing Finance. Cumulatively, Carlyle will hold about 50% after the capital raise.
General Atlantic Singapore agreed to invest ₹390 crore as part of the deal and will hold 9.8% in the mortgage lender post equity and warrant allotment. It is an existing investor and owns 9.9%. Alpha Investment, a fund managed by SSG Group, will hold 3.8%.
SES said PNB Housing could have raised the same amount of capital via a rights issue, and Punjab National Bank could have renounced its rights entitlement to Carlyle at a market-discovered price.
SES said the boards of Punjab National Bank and PNB Housing failed their minority shareholders and the exchequer.
Due to non-participation, Punjab National Bank’s stake will get diluted from 32.6% to 20.3% if the proposed preferential allotment is consummated.
On Thursday, PNB Housing refuted concerns that its proposed capital raise is unfair to minority shareholders, stating that the pricing of the preferential issue has been done in compliance with Sebi’s preferential allotment norms and listing guidelines.
According to PNB Housing, the extant rules under Section 62 of the Companies Act does provide that pricing for preferential issue of a listed entity need not be required to be determined by the valuation report of a registered valuer, and, hence, the pricing has been done in a fair manner.
PNB Housing clarified on Thursday that even after the proposed deal with Carlyle, Punjab National Bank will continue to be a promoter.
Carlyle has declined to comment.
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