Sebi asks PNB Housing to halt move to issue shares to Carlyle and others

The Securities and Exchange Board of India (Sebi) has asked PNB Housing Finance Ltd (PNB HFC) to keep on hold a proposal to seek shareholders nod for preferential allotment of its equity shares until it does independent valuation of shares.

The housing finance company plans to issue shares and warrants on a preferential basis to private equity firm Carlyle Group and associates who seek to invest Rs 4,000 crore to acquire a controlling stake of over 50 per cent in the Delhi-based mortgage lender. It is holding extraordinary general meeting of shareholders on June 22, 2021 to consider preferential allotment (shares and warrants). The price for proposed issue of equity shares and convertible warrants is Rs 390 a piece. On Friday its shares closed 1-4 per cent lower at Rs 739.35 per share on BSE.

In a communication to the housing finance firm, Sebi said the resolution on the issue of securities and related matters was ultra-vires of the firm’s Articles of Association. The resolution shall not be acted upon until the company undertakes the valuation of shares (for preferential allotment), from an independent registered valuer.

The Company’s board should consider report by independent valuer while deciding on the preferential issue of shares and warrants, market regulator said.

PNB HFC in late night filing with BSE said the Company has acted in compliance with all relevant applicable laws, including pricing regulations prescribed by Sebi, and the Articles of Association of the Company.

Such Preferential Allotment is in the best interests of the Company, its shareholders and all relevant stakeholders. The Company is evaluating further steps in this regard. It, however, did not elaborate on steps including the fate of shareholders meeting.

Also in its communication dated June 15 to the exchange, PNB HFC said there is no prescribed methodology required to be followed for the valuation of shares of a listed entity (apart from the minimum pricing formula prescribed under the Sebi ICDR Regulations.

The pricing formula is market-linked, and the floor price is the higher of two values determined based on differing look-back periods with reference to the ‘relevant date’ for the preferential issuance. Hence, there is no prescribed distinction between a pricing and a valuation certificate. The process followed was also in line with the market practice followed by listed companies.

Stakeholders Empowerment Services, a governance watchdog, had said in a report in June that PNB HFC’s decision to allot shares and warrants to the Carlyle group, and to the investment firm of former HDFC Bank CEO Aditya Puri’s family and others at Rs 390 a piece was “unfair” to public shareholders and shareholders.

PNB HFC had said the company had obtained a valuation report (dated May 29, 2021) for preferential issuance from the company’s statutory auditor, BR Maheswari & Co LLP. It was reviewed and confirmed by Amresh Sood, partner of the firm who is a registered valuer. Further, the management had also received a valuation report (dated May 31, 2021 provided by the lead investor). That report was issued by Vikram Kailash Jain, a registered valuer.

The issue price for the proposed preferential issue at Rs 390 per share was higher than the minimum floor price of Rs 384.60, calculated as per Sebi Regulations, as also borne out by the valuation reports. The price was arrived at after due consideration and weighing of various relevant factors, HFC added.

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