Why SEBI Put Hold On PNB Housing Rs 4,000-cr Carlyle Deal?

According to PNB Housing Finance, India's markets regulator has requested that the company suspend its Rs 4,000-crore share sale to a group of companies led by The Carlyle Group. For the time being, the Securities and Exchange Board of India (Sebi) has ordered mortgage lender PNB Housing Finance to halt its scheduled share sale campaign.

This would have made the New York-based private equity firm a majority shareholder in the company, reducing Punjab National Bank's holding in its housing financing arm to less than 26%.

Why the deal is on hold?

PNBHF announced on May 31 that an Extraordinary General Meeting (EGM) of shareholders will be conducted on June 22 to approve the issuance of its shares to investors led by Carlyle, which includes Aditya Puri, the former MD of HDFC Bank and a senior advisor to Carlyle. Over the next week, the price of PNBHF quadrupled as a result of that announcement.

The resolution reached on May 31 at an Extraordinary General Meeting (EGM) of shareholders was dubbed "ultra-vires" (outside the law) by SEBI and should not be implemented until the business conducts a share valuation.

In a response to the BSE, PNBHF stated, "The Company and its Board of Directors have studied the SEBI Letter and continue to believe that the Company has behaved in line with all relevant applicable laws."

PNBHF's decision to preferentially allot Rs 3,200 crore in shares and Rs 800 crore in warrants to Carlyle, former HDFC Bank chief executive officer Aditya Puri's family investment vehicle, General Atlantic, and Alpha Investments at Rs 390 each was "unfair" to public shareholders and shareholders, according to Stakeholders Empowerment Services, a governance watchdog.

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