PNB Housing Finance calls off deal with Carlyle

Mumbai: PNB Housing Finance on Thursday said that the board has decided to terminate the ₹4,000 crore stake sale to Carlyle led investor group citing pending legal proceedings. 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.

“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… 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,” said the company.

The investment by Carlyle was crucial for PNB Housing, whose business was impacted by the liquidity crunch that hit non-bank lenders following the collapse of IL&FS in September 2018. The company’s financials were further hit by the covid-19 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 interests of the Company and its stakeholders,” said the company.

With cancellation of the deal, the mortgage lender will have to look at other sources of funding to support growth. The company has already received shareholders’ approval to raise ₹35,000 crore debt in the form of non-convertible debentures.

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, 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.

PNB Housing Finance then moved SAT, challenging the regulator’s directive, and the appellate tribunal allowed the company to seek shareholders’ approval for the deal at an extraordinary general meeting (EGM) but ordered the results of the vote to be kept in a sealed cover until further orders. SEBI then approached the Supreme Court after SAT delivered a split verdict.

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

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

Shares of PNB Housing Finance closed 1.6 pecent down at ₹639.05 per share

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