PNB Housing locked in lower circuit after it shelves stake sale plan

The shares of PNB Housing Finance Limited (PNBHFL) were locked in the 5 per cent lower circuit on Monday after the company's Board called off its proposed ₹4,000 crore share sale plan to Carlyle Group and other marquee investors, including General Atlantic and Ares SSG, citing protracted delays and uncertainty over regulatory approvals required for the preferential issue.

On the BSE, the company's shares opened at ₹607.10, down ₹31.95 or 5.00 per cent as against the previous close of ₹639.05. The company's shares were locked in the 5 per cent lower circuit through the day.

On the NSE, it closed at ₹606.75, down ₹31.90 or 4.99 per cent.

In a meeting held on Thursday, the company's Board decided not to proceed with the preferential issue, it said in a regulatory filing.

The proposed deal

Under the proposed deal, Pluto Investments S.a.r.l, an affiliated entity of Carlyle Asia Partners IV , L.P and Carlyle Asia Partners V, L.P (together , “Carlyle”) had agreed to invest up to ₹3,185 crore through a preferential allotment of equity shares and warrants, at a price of ₹390 per share. Existing shareholders of PNBHFL, funds managed by Ares SSG and General Atlantic were also to participate in the capital raise. Salisbury Investments (Former HDFC Bank CEO Aditya Puri’s family investment vehicle) was also part of the capital raise deal. PNB had earlier decided that it will not be participating in the capital raise but would continue to be promoter of PNBHFL.

The share subscription agreements executed with the proposed allottees have been terminated in accordance with their respective terms.

"We have been informed that consequently Pluto Investments S.a.r.l (together with persons acting in concert) will be initiating the process to withdraw the open offer made by them (at ₹403.22 per share) pursuant to and in accordance with the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011)," the company said.

The Board in its meeting had discussed that the proposed preferential issue has been held up for over four months after already having taken over two years, due to the pending legal proceeding before the Securities Appellate Tribunal (SAT).

SEBI’s intervention

In June, SEBI had intervened and asked PNBHFL not to go ahead with the deal until it undertakes shares valuation by an independent agency.

Proxy advisory firm Stakeholders Empowerment Services (SES) had questioned the deal saying that Carlyle was getting control of PNB HCF at the cost of minority shareholders of parent Punjab National Bank. Subsequently, SEBI had blocked the deal until the housing finance company undertook a valuation of its shares.

SAT’s split verdict

PNBHFL filed an appeal before SAT, which came with a split verdict on August 9, whereby the Presiding Member of SAT issued an order in favour of the company and set aside the SEBI letter dated June 18, 2021, while the Judicial Member's order upheld the SEBI letter. Further, SAT ordered that the interim order dated June 21, 2021 was to continue until further orders of SAT," the company said.

Meanwhile, SEBI has preferred an appeal against the order of the Presiding Member of SAT before the Supreme Court of India, which is currently pending.

"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. The Board further noted that due to the protracted litigation and the continuing interim order of the SAT dated June 21, 2021, there is no clarity on the shareholders' approval for undertaking the Preferential Issue," the company said in its filings.

Pending regulatory approvals required for the preferential issue are another major obstacle.

"It is unclear whether such approvals will be forthcoming while the legal proceedings are ongoing. Therefore, the company's capital raising plans will be further delayed and such uncertainty will continue. 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," it said.

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