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Carlyle Deal: SAT Sets Aside Sebi Direction; Allows PNB Housing Fin To Hold EGM On Tuesday

PNB Housing Finance will allot securities worth Rs 4,000 crore to Carlyle group and other entities, a deal that will eventually result in the private equity major becoming a major shareholder of the company.

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Setting aside Sebi's direction, the Securities Appellate Tribunal (SAT) on Monday allowed PNB Housing Finance to go ahead with the shareholders' meeting on Tuesday to consider the proposed Rs 4,000 crore-investment by private equity firm Carlyle and others in the mortgage firm.

However, results of the shareholders' voting will not be disclosed till further directions from the tribunal.

The ruling comes hours after PNB Housing Finance informed stock exchanges that it has appealed against Sebi's direction on June 18 wherein it was asked to defer consideration of the proposed capital infusion proposal till a valuation of the company's shares is done by a registered independent valuer.

The Extraordinary General Meeting (EGM) is scheduled for Tuesday (June 22).

In a not-so-often seen move, Sebi not only restrained PNB Housing Finance from going ahead with voting on the proposal but also directed that the matter should be placed afresh before the company's board of directors and then a decision be taken on the basis of the independent valuation.

Under the proposed deal, PNB Housing Finance will allot securities worth Rs 4,000 crore to Carlyle group and other entities, a deal that will eventually result in the private equity major becoming a major shareholder of the company.

On Monday morning, PNB Housing Finance moved the tribunal against Sebi direction.

Taking up this matter on an urgent basis, a two-member bench of the tribunal said that as 'electronic voting has already commenced it would not be fair to stay the consideration of agenda no. 1 (issuance of preference shares) of the EGM notice dated May 31, 2021 which is going to be held on June 22, 2021.' The bench of Justice Tarun Agarwala and Justice M T Joshi said that no factual dispute exists and only an interpretation of the provisions of the ICDR Regulations and Companies Act read with Articles of Association is required to be considered.

Sebi has been asked to file a reply to the plea on the matter by June 26.

In its five-page order, the tribunal also said the EGM would be held on June 22 and that the members would consider agenda no. 1.

'However, the results would not be declared and would be kept in a sealed cover. In this regard, the company would issue specific directions to NSDL who is in-charge of the electronic voting not to reveal the results and keep the same in a sealed cover till further orders of this tribunal,' the order said.

On Monday, shares of PNB Housing Finance declined 5 per cent to close at Rs 702.40 apiece, its lower circuit limit, on BSE. At NSE, it fell 4.99 per cent to end the day at Rs 700.95.

The proposed transaction has come under the lens of Sebi and the Reserve Bank of India (RBI) following concerns raised in certain quarters, including by a proxy advisory firm.

The proposal is for allotting a total of 8,20,51,281 equity shares and 2,05,12,820 warrants exchangeable into equity shares for Rs 390 per share/ warrant to Pluto Investments S.a r.l, Salisbury Investments Pvt Ltd, General Atlantic Singapore Fund FII Pte Ltd and Alpha Investments V Pte. Ltd in specified proportions. These securities would be allotted for a cash consideration aggregating to around Rs 4,000 crore.

Pluto Investments, an affiliated entity of Carlyle Asia Partners IV L.P. and Carlyle Asia Partners V L.P. (together Carlyle) have agreed to invest up to Rs 3,185 crore in PNB Housing Finance.

Besides, existing shareholders of the company, the funds managed by Ares SSG and General Atlantic will be participating in the capital raise, along with Salisbury Investments, the family investment vehicle of Aditya Puri, Senior Advisor for Carlyle in Asia. He is also the former CEO and MD of HDFC Bank.

Once the deal is completed, the stake of Carlyle Group in the mortgage firm will rise to 50.16 per cent from 32.21 per cent, a development that would trigger an open offer.

Last week, Carlyle Group along with other entities floated a 'draft letter offer' with regard to an open offer for acquisition of over 7 crore equity shares representing 26 per cent stake in PNB Housing Finance.

An open offer is a mandatory offer that an acquirer and Persons Acting in Concert (PACs) have to make to the shareholders of a company in case the former acquires more than 25 per cent stake in the company, as per Sebi regulations. In case of creeping acquisition too, the clause of open offer kicks in when an entity or PACs makes an acquisition of more than 5 per cent stake in a company in a year.

Meanwhile, there are reports of conflict of interest of directors on the board of PNB Housing Finance as they have some direct or indirect connection with Carlyle.

Earlier this month, proxy advisory firm SES said the proposed deal was an 'unfair transaction' which is against public shareholders as well as the promoter bank PNB and also flagged concerns about the proposal to re-appoint two independent directors. 


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PNB Housing Carlyle Deal sebi capital infusion