PNB Housing Finance case settled with SEBI

PNB Housing Finance and its directors were the subject of a settlement order issued by the Securities and Exchange Board of India (SEBI), under which the business agreed to resolve the dispute by paying a total of 72.77 crore. 
 
According to the Sebi order published on Tuesday, “The High Powered Advisory Committee… considered the settlement terms proposed by the applicants and recommended the case for settlement upon payment of 72,76,533… which includes 44,26,533… as legal costs, payable jointly and severally by the applicants.” 
 
The issue relates to a proposed merger between PNB Housing Finance and the largest US private equity firm, Carlyle, that was approved by the board of the housing finance company last year. Carlyle received a preferential allocation of shares and warrants. 
 
Corporate governance experts have sharply criticized the purchase, and even Sebi had written to the business to say that it “ultra vires” the company’s articles of association and cannot be implemented unless a valuation study is conducted.

PNB Housing Finance

As per the deal approved by the board of PNB Housing Finance in May 2021, an amount of Rs 4,000 crore was to be raised by issuing shares and warrants by way of a preferential allotment to Carlyle Group, Salisbury Investments, General Atlantic and Alpha Investments. 
 
The agreement was set up such that 3,200 crores would be raised through the issuance of shares and the remaining 800 crores would come from warrants. 
 
More significantly, the suggested allotment price of 390 per share or warrant was considerably less than the market price of roughly 525 per share at the time. 
 
Additionally, the deal would have made Carlyle the largest stakeholder while lowering PNB’s interest in the housing company from about 33 percent to 20 percent.