PNB Housing Finance shelves share sale plan citing legal delays

PNB Housing Finance

has shelved its proposed Rs 4000 crore preferential issue to private equity giant Carlyle Group and co investors including former HDFC Bank CEO Aditya Puri, General Atlantic and Ares SSG citing “protracted” legal delays in getting regulatory approvals which has made the timeline for the completion of the deal uncertain, the company said in a statement to the stock exchanges.

The company has as a result terminated subscription agreements executed with Carlyle and will look for other alternatives to raise capital.

Carlyle arm Pluto Investments S.a.r.l and other investors will withdraw the proposal to buy stake in the company.

Late in May, the board of PNB Housing had approved placement of 82 million preferential equity shares and 20.5 million share warrants with Carlyle Group unit Pluto Investments, Salisbury Investments, General Atlantic Singapore Fund FII Pte Ltd and Alpha Investments V Pte Ltd. Investors were to get the shares at Rs 390 apiece, a discount of about 11% to the closing price of the day before the deal was announced.

The sharp rise in the share price led to advisory firms opposing the deal because of the huge discount it was being done while ceding control to Carlyle without seeking a valuation from an independent valuer.

Following reports by advisory firms stock market regulator Securities and Exchange Board of India (SEBI) halted the transaction and asked PNB Housing to seek a report from an independent valuer.

Following a appeal by PNB Housing at the Securities Appellate Tribunal (SAT) a split verdict was announced, with the SAT member ordering in favour of the company while the judicial member upholding the SEBI stay.

The stay on the deal remained and SEBI appealed against the contention of the SAT member before the Supreme Court, 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… 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. In addition, regulatory approvals required for the preferential issue, are pending and 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,” PNB Housing said in the statement explaining the withdrawal of the issue.

PNB Housing has been looking to raise capital for the last two years. The latest development will delay it further.
The company’s first quarter net profit dropped 5% to Rs 243 crore from Rs 257 crore in the corresponding period last year. Gross NPAs increased to 6% of loans as of June 2021 from 3.6% a year earlier.

The company said its primary objective is to raise capital to support the growth and its board believes that the current situation is not in the best interests of the Company and its stakeholders.

PNB Housing shares fell 1.36% on Thursday to end at Rs 641 a piece on the BSE.