PNB Housing deal: SES sticks to its guns

K.R.SrivatsNew Delhi, Jun 11 New Delhi | Updated on June 11, 2021

Proxy advisory firm maintains stand that valuation report is not legally tenable

The controversy over the proposed ₹4,000 crore PNB Housing Finance-Carlyle Group deal refuses to die down with proxy advisory firm SES now demolishing the pricing justification provided by PNBHFL as regards the issue price of ₹390 per share decided for the preferential allotment.

Floor price is ‘Not fair value’

Shelter cannot be taken under SEBI ICDR pricing guidelines stating that ₹384.6 (floor price) is the fair value for every share of a company that is having ₹530 as book value, said Stakeholders Empowerment Services (SES) in an addendum – issued on Thursday – to it's earlier report of June 6.

“SEBI ICDR indicates past prices at which the stock was traded and need not necessarily indicate the value,” SES addendum said.

SES has maintained that the proposed preferential issue is ultra vires the Articles of Association (AoA) as the company has decided on the issue price without obtaining a legally tenable valuation report.

Not registered valuer

The report from BR Maheswari and Co LLP – provided by PNBHFL to SES – is not legally tenable as it appears that the CA firm is not a Registered Valuer and the report furnished by it does not meet ICAI valuation standards 2018, according to SES.

“SES firmly believes that PNBHFL cannot undertake any issue other than a rights issue, unless the issue price is supported by a valuation report from a registered valuer.

The so called valuation report talked about by PNBHFL is not legally tenable as it does not seem to have come from a registered valuer, but from an independent CA firm.

The company is trying to palm off floor price calculation report as a valuation report,” JN Gupta, Founder & Managing Director, SES told BusinessLine.

Gupta highlighted that Articles of Association are internal regulations of a company and these are binding on the company unless contrary to the law.

While the law does not mandate obtaining valuation report for determining value of share in case of a listed company, but it does not prohibit valuation report, he added.

In response to SES mail, PNBHFL had sent a report calling it a valuation report, which in opinion of this proxy advisory firm does not qualify or meet the requirement of a valuation report.

Rights issue: ‘Better option’

The proxy advisory firm has reiterated that PNBHFL should have come up with a Rights Issue and PNB should have opted to renounce it's right either for a price determined on stock exchange where such entitlements are traded.

Alternately, PNB could have shown benevolence towards retail shareholders increasing their entitlement out of its quota at option of shareholders.

Published on June 11, 2021

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