PNB Housing Finance can go ahead with this week’s scheduled balloting for shareholders on its proposed Rs 4,000-crore deal with Carlyle Group, but polling results on the resolution allowing equity infusion into the mortgage lender can’t be published now, the Securities Appellate Tribunal (SAT) said on Monday.
In its interim order, SAT also asked the lender to ensure the National Securities Depository (NSDL) didn’t publish the balloting outcome until further orders. The matter will come up for final hearing on July 5.
PNB Housing shareholders are due to meet on Tuesday and vote on the agenda item dealing with the current round of equity infusion, led by US private equity company Carlyle.
“We direct that the EGM be held on June 22,” said the SAT bench comprising Justices Tarun Agarwala and MT Joshi. “However, results would not be declared and be kept in a sealed cover. The company would is sue specific directions to NSDL, which is in charge of the electronic voting, not to reveal results and keep the same in a sealed cover until further orders of this tribunal.”
The mortgage lender approached SAT on Monday after the Securities and Exchange Board of India (Sebi) directed halting this week’s shareholder balloting on the equity infusion proposal before an independent valuation of the business.
Mails to Sebi and PNB Housing Finance remained unanswered.
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.
Shares have nearly doubled since, although they closed 5% lower on Monday at Rs 702 apiece.
One of the key contentions in the case was commencement of electronic voting. The investors were allowed to e-vote on the agenda items from the morning of June 18, while Sebi’s order was passed in the evening that day. “When electronic voting is commenced, it would not be fair to stay the consideration,” SAT ruled.
Senior counsel Janak Dwarkadas appeared for PNB Housing Finance. Sebi opposed the petition on grounds that it could influence investors about the deal. “If the voting succeeds and majority shareholders give their nod to the deal, (it) could create a sense of prejudice among investors that there is nothing wrong in the deal,” said a person with direct knowledge of the matter. “Hence, Sebi wanted the voting to be halted until a valuation report by a Sebiregistered valuer is released.”
AYES AND NAYS
Backers of the deal believe that Sebi guidelines were followed while pricing the transaction. “The price at which the preferential issue was done was in accordance with Sebi guidelines. We believe we got some strong legal standing in terms of challenging the Sebi order,” said an official aware of PNB Housing’s stand. “The same Sebi formula was adopted in all the recently announced preferential issues.”
Critics of the deal have raised questions about the “neutrality of board members” at the home financier. The board includes a member from Carlyle Group, as it had about 32% holding through a group company called Quality Investment Holdings even before the deal.
“The deal was done meticulously to achieve various objectives,” said a person critical of the deal. “First, Carlyle’s holding is set to cross 50%. Second, PNB’s holding stays just above 20% and third, shareholding of Quality Investment Holding, a Mauritius-based Carlyle Group entity, would come down just below 20%. Otherwise, the Reserve Bank would not approve control in favour of Carlyle if a Mauritius-based entity owns more than 20%.
