Stocks

PNB Housing Finance rejects SES charges

KR Srivats New Delhi | Updated on June 10, 2021

Sees no merit in Proxy Advisory firm SES concerns around “unfair” deal for minority shareholders

Refuting concerns that its recent ₹4,000 crore capital raise announcement was “unfair and abusive” on minority shareholders, PNB Housing Finance Ltd (PNBHFL) on Thursday asserted that the proposed transaction was very much in compliance with the laws of the land and the pricing for the preferential issue has been done in compliance with SEBI guidelines.

There has also been no violation to the Articles of Association (AoA) and the extant Rules under Section 62 of 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, according to a PNB Housing spokesperson.

Gets CA firm report

However, the company as a prudent measure has taken a valuation report from an independent CA firm, the official added.

“The company calculated the floor price as prescribed by SEBI and the issue price of ₹390 per share is above the floor price of ₹384.6 per share,” the spokesperson told BusinessLine.

“The company has duly complied with the pricing requirements under the SEBI ICDR regulations and the preferential issue is compliant with the companies act 2013 and SEBI ICDR regulations.”

This remark was significant as the recently announced preferential issue came under a cloud after proxy advisory firm Stakeholder Empowerment Services (SES) raised concerns in a report about the transaction being unfair to the minority shareholders of PNB Housing Finance and retail shareholders of PNB. It also highlighted that PNB was gifting away control of PNBHFL to the Carlyle Group without deriving “control premium”.

The SES report had also said that the transaction violated the AoA of PNB Housing Finance as it did not specifically provide for the company to issue shares on a preferential basis.

The proxy advisory firm had argued that Rights Issue would have been the best option.

PNB to continue as promoter

PNBHFL spokesperson asserted that PNB would continue as a promoter and as a key stakeholder in PNB Housing Finance even if it’s stake gets diluted to about 22 per cent after the deal from 32 per cent now.

“To ensure PNB continues to have the ability to provide its valuable support, it will have the right to continue appointing two directors on the board of PNB Housing Finance even if its ownership reduces below 26 per cent for which the company’s articles of association is proposed for an amend during the upcoming EGM”, the spokesperson said. PNBHFL spokesperson said the company was looking to raise capital for the last two years.

Rights issue

The first capital raise resolution was passed by the board on July 30, 2019, followed by further resolution on March 3, 2020, and on August 19, 2020. In view of PNB not getting regulatory approval to infuse capital in PNBHFL, the company decided to explore raising capital from the market.

Asked about SES contention that PNB may have sacrificed about ₹2,000 crore by not going in for rights issue or seeking control premium, the PNBHFL spokesperson said that calculation of rights entitlement is hypothetical as the same has been calculated based on the current share price which reflects the full positive impact of the proposed fund raise.

Published on June 10, 2021

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