SEBI moves SC against SAT order on PNB Housings Carlyle deal

PNB Housing Finance said that Securities and Exchange Board of India (SEBI) has approached the Supreme Court against the Securities Appellate Tribunals (SATs) order in the matter related to the companys Rs 4,000 crore equity capital raise plan.

Sep 03, 2021 10:09 IST capital market

?The company is examining the appeal filed by SEBI,? the housing financier said in a statement.

On 31 May 2021, the housing financier informed about the scheduling an extra ordinary general meeting (EGM) to seek shareholders nod for the proposed Rs 4,000 crore-investment by private equity firm Carlyle and others in PNB Housing Finance (PNBHF).

PNBHF had said that the key objective of raising capital is to augment capital adequacy, reduce gearing and accelerate growth with a focus on retail housing including self-employed and affordable housing loans such as the Unnati segment.

The company would raise Rs 3200 crore through preferential equity shares and Rs 800 crore through warrants. The issue price of equity shares and warrants is fixed at Rs 390 each.

Assuming full capital infusion (including warrants) and no other change to the 31 March 2021 financials, the capital adequacy ratio of the company as of 31 March 2021 would increase from 18.7% to over 28% and gearing as of 31 March 2021 will decline from 6.7x to less than 5x.

However, it soon hit a roadblock after a proxy advisory firm reportedly red flagged the preference issue, contending it was not in the interest of the promoter and the minority shareholders of the company. Soon, SEBI restrained the company from going ahead with its proposed share sale to the Carlyle Group.

SEBI directed PNBHF to carry out the valuation process as per the relevant legal provisions. The market regulator said the resolution regarding the deal, which was to be put for shareholders vote on 22 June 2021, was ultra-vires of the companys articles of association (AoA).

In an exchange filing before market hours on 21 June 2021, PNBHF said that it had filed an appeal before SAT against the letter issued by SEBI.

On the same day, in a separate filing, the company said that SAT has allowed the company to go ahead with the shareholders meeting on 22 June 2021. ?However, results of the shareholders voting will not be disclosed till further directions from the tribunal,? it added.

Pronouncing its order on 9 August 2021, the two-member bench of the SAT gave a split verdict, saying there was difference of opinion between the members of the bench.

SAT directed that its interim order of 21 June 2021 will continue till further orders, restraining PNBHF from disclosing the voting results by the shareholders on the fund raise plan.

PNBHF is a deposit-accepting housing finance company, with second largest deposits outstanding within housing finance companies. The company provides housing loans to individuals for purchase, construction, repair, and upgrade of houses.

The company reported on a 5.40% decline in consolidated net profit to Rs 243.28 crore on a 9.53% fall in net sales to Rs 1691.81 crore in Q1 FY22 over Q1 FY21.

Shares of PNBHF shed 0.69% to currently trade at Rs 652 on the BSE.

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