Mumbai: Indian Markets regulator, Securities and Exchange Board of India (Sebi), has directed the mortgage lender PNB Housing Finance to temporarily halt its proposed share sale programme. The company said in a regulatory filing that it received a letter from Sebi on June 18 calling upon the company to comply with the legal provisions in the matter.
On May 31, investors led by Carlyle Group announced an investment of ₹4,000 crore in PNB Housing Finance. Carlyle Group Inc. Pluto Investments S.a.r.l., an affiliated entity of Carlyle Asia Partners IV, and Carlyle Asia Partners V agreed to invest up to ₹3,185 crore through a preferential allotment of shares and warrants at a price of ₹390 apiece. Some existing shareholders of the company, including funds managed by Ares SSG and General Atlantic, are also participating in the capital raise.
According to the statement, Sebi has pointed out that the issue of securities of the company “is ultra-vires of the articles of association (AOA) and shall not be acted upon until the company undertakes the valuation of shares as prescribed under 19(2) of AOA, for purpose of preferential allotment, from an independent registered valuer as per the provisions of applicable laws.” The report, Sebi added, shall be considered by the company’s board while deciding on the preferential issue of shares and warrants.
“The company shall disclose the contents of this letter to the stock exchanges in terms of provisions of Regulation 30 of the Sebi (LODR) Regulations, 2015,” the letter said, according to the company’s statement.
PNB Housing Finance said its board of directors has considered the Sebi letter and continue to believe that the company has acted in compliance with all relevant applicable laws and that 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 said.
Mint reported on 12 June that the markets regulator will scrutinize the ₹4,000 crore share sale after a proxy adviser said the deal is unfair to the mortgage lender’s minority shareholders.
Stakeholders Empowerment Services (SES) had earlier said the proposed deal is “unfair and abusive” to minority shareholders of PNB Housing. Instead, the company should have opted to raise the capital through a rights issue, treating all shareholders equitably, the proxy adviser said.
On 16 June, PNB Housing Finance clarified that the issue price for the preferential issue proposed to be undertaken by the company ( ₹390 per share) is higher than the minimum floor price calculated as per Regulation 164(1) of the SEBI ICDR Regulations ( ₹384.6) and hence the pricing for the said preferential issue has been determined in compliance with applicable law.
It added that the company is not required under applicable law to procure a valuation as Section 62(1)(c) the Companies Act, 2013 read with the second proviso to Rule 13(1) of the Companies (Share Capital and Debentures) Rules, 2014, states that the price of shares to be issued on a preferential basis by a listed company shall not be required to be determined by the valuation report of a registered valuer.
However, the lender said it had obtained a valuation report on 29 May from BR Maheswari & Co LLP, its statutory auditor, as reviewed and confirmed Amresh Sood, partner of the firm. It added that the management had also received a valuation report on 31 May, provided by the lead investor and issued by Vikram Kailash Jain, a registered valuer.