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Carlyle to withdraw $551.6 mn offer to buy majority stake in PNB Housing Finance
Photo Credit: Reuters

Global private equity firm The Carlyle Group has decided to withdraw its offer to invest Rs 4,000 crore ($551.6 million) in PNB Housing Finance Ltd (PNBHF) citing pending legal issues which may delay regulatory approvals.

"We have been informed that consequently Pluto Investments S.a.r.l (together with persons acting in concert) will be initiating the process to withdraw the open offer made by them (at Rs 403.22 per share)," PNB Housing Finance said in a filing after its board meeting on Thursday.

In view of the above, the company shall evaluate other alternatives to raise capital, the mortgage lender added in the filing.

The move comes two months after anti-monopoly watchdog Competition Commission of India (CCI) gave deemed approval to the deal.

"There continues to be no visibility or certainty as to the timeline for judicial determination of the legal issues...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," the filing further said.

In May this year, PNBHF, the wholly-owned subsidiary of public sector lender Punjab National Bank (PNB), had said it would raise up to Rs 4,000 crore ($551.6 million) in a funding round led by Pluto Investments, an affiliate of the Carlyle Group.

Pluto Investments was to invest Rs 3,185 crore at a price of Rs 390 per share. Existing shareholders Ares SSG and General Atlantic were also expected to participate in the fundraise. Salisbury Investments, the family investment vehicle of Aditya Puri who is the senior advisor for Carlyle in Asia and HDFC Bank’s former chief executive and managing director, was also part of the fundraise.

The proposed combination involved 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.

However, markets regulator Securities and Exchange Board of India (SEBI) had pulled up the PNB arm saying the fundraising plan was “ultra vires” of the Articles of Association of PNBHF and SEBI’s pricing norms.

Subsequently, PNBHF had challenged the SEBI order at the Securities Appellate Tribunal (SAT) which passed a split verdict. Following this, SEBI has filed an appeal against the SAT verdict at Supreme Court, which is pending.

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

In a post-results interaction with mediapersons, PNB chief  CS Mallikarjuna Rao had said the lender never objected to the deal and only asked its subsidiary PNBHF to follow SEBI’s orders and that there was “no error of judgement”.

The deal would have paved the way for the US-based investor to take majority control in the lender.

Meanwhile, government-owned PNB, which holds 32.59% stake in PNBHF, would have reduced its ownership to around 20% had the fundraising succeeded, since the bank will not infuse any capital.

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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