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Anti-monopoly watchdog okays Carlyle deal to buy stake in PNB Housing Finance
Photo Credit: Reuters

Global private equity major Carlyle’s fundraising deal with PNB Housing Finance (PNBHF) has received deemed approval from the Competition Commission of India (CCI) even as it awaits a decision from the Securities Appellate Tribunal (SAT). 

“The proposed combination involves Pluto and Salisbury acquiring up to approximately 56.29% (assuming full tendering and acceptance in the mandatory open offer) and approximately 0.24% of the post-preferential allotment equity share capital of PNBHF,” said disclosures by CCI, the anti-monopoly watchdog. 

The CCI approval comes after the Securities and Exchange Board of India (SEBI) pulled up the mortgage lender saying the fundraising plan was “ultra vires” of the Articles of Association of PNBHF and SEBI’s pricing norms. 

Government-owned Punjab National Bank (PNB), which holds 32.59% stake in PNBHF, would reduce its ownership to around 20% after the fundraising, since the bank will not infuse any capital.

On Tuesday, speaking to mediapersons on the bank's quarterly results call, CS Mallikarjuna Rao, managing director and chief executive officer (MD and CEO) of PNB, said the lender never objected to the deal and only asked its subsidiary PNBHF to follow SEBI’s orders.

"The decision taken by PNBHF board was within SEBI's guidelines. Considering the issues raised by the regulator in its June 18 letter, the PNB board had written to PNBHF's board to follow the regulator's guidance,” he said. 

However, Rao, who is also the non-executive chairman of PNBHF, had in early July asked the housing finance firm to consider restructuring the deal to follow SEBI orders. 

The PNB chief added that as the voting had already commenced by the time SEBI objected and as per SAT order, the results of the voting are in a sealed envelope, where it will remain until further instructions. “We await SAT's final order in the matter and will proceed accordingly," Rao added.

As a large shareholder in the housing finance company, PNB also voted on the transaction at the extraordinary general meeting (EGM). 

According to Rao, there was “no error of judgement”.  

“If you have seen the share price of PNBHF in the last 2-2.5 years, you must have observed that it has been hovering at a lower rate. The ICDR guidelines (SEBI’s Issue of Capital and Disclosure Requirements) lay down the kind of formula to be used for pricing. As on date of taking a decision, it would never have been thought by any of us that it would increase so high in the subsequent days based on the decision taken by the company," he said.

He added that the legal opinion sought by PNB on the deal indicated there was no confusion between the Articles of Association of PNBHF and SEBI’s pricing guidelines. 

Carlyle-PNBHF deal

First proposed on 31 May 2021, PNBHF, India’s fourth largest housing finance company in terms of assets, said it would raise up to Rs 4,000 crore ($551.6 million) in a funding round led by global private equity firm The Carlyle Group. 

On June 18, SEBI raised its objections and asked to keep on hold the shareholder voting for a preferential allotment of equity until an independent valuation of shares was done. 

A day later, PNB Housing Finance challenged the action before the SAT.  

The deal has also prompted one of the proxy advisory firms Stakeholders Empowerment Services to ask investors to vote against the proposed preferential allotment raising concerns that the allotment did not capture the intrinsic valuation of the company. 

As part of the deal, the Delhi-based mortgage lender, owned by state-owned Punjab National Bank, said that Carlyle affiliate Pluto Investments will invest Rs 3,185 crore at a price of Rs 390 per share. 

Pluto, a newly established special purpose vehicle (SPV), is majority owned and controlled by investment funds of Carlyle Asia Partners V, all being advised by affiliates of global alternative asset manager Carlyle Group. 

Existing shareholders of PNBHF, Ares SSG and General Atlantic will participate in the fundraise plan.  

Salisbury Investments, the family investment vehicle of former HDFC Bank CEO and MD Aditya Puri, who is currently the senior advisor for Carlyle in Asia, will also take part in the fundraise. 

Salisbury is a non-banking finance company (NBFC) primarily engaged in the business of making investments in financial securities. 

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