Carlyle Group's Rs 4,000 Crore Fund Infusion Proposal in PNB Housing Finance Challenged by Government Watchdog

Strategic Insights -

The Carlyle Group's Rs 4,000 crore fund infusion proposal in Punjab National Bank (PNB) Housing Finance is being questioned by a government watchdog, Stakeholders Empowerment Services (SES). The watchdog has called the transaction "ultra vires" of the Articles of Association and said it is a "unfair transaction, against public shareholders and PNB". SES has raised several questions about PNB's preferential allotment to Carlyle, which gave the private equity firm control over PNB Housing Finance Company (PNBHFL). The watchdog has recommended PNB Housing public shareholders to cast 'against' votes against the resolution on preferential allotment.

Key Takeaways:

  • Stakeholders Empowerment Services (SES) has challenged the Carlyle Group's Rs 4,000 crore fund infusion proposal in PNB Housing Finance, calling it "ultra vires" of the Articles of Association and "unfair".
  • SES has questioned the legitimacy of the transaction and alleged corporate governance lapses, recommending PNB Housing public shareholders to cast 'against' votes against the resolution on preferential allotment.
  • The preference allotment to Carlyle gave the private equity firm control over PNB Housing Finance Company (PNBHFL).
  • The Carlyle Group's proposed investment of up to Rs 3,185 crore is at a price of Rs 390 per share.
  • Existing shareholders of PNB Housing Finance, including funds managed by Ares SSG and General Atlantic, are also participating in the capital raise.
  • PNB will continue to be the promoter and a key stakeholder in the Company.
  • The transaction is subject to customary regulatory approvals as well as shareholder approval.
  • A mandatory open offer by Pluto Investments S.a.r.l. will be triggered for the purchase of up to 26% equity shares of PNB Housing Finance from public shareholders.
  • Aditya Puri, former CEO and Managing Director of HDFC Bank, is expected to be nominated to the PNB Housing Finance Board as a Carlyle nominee Director.

Statistics:

  • Rs 4,000 crore fund infusion proposal by Carlyle Group in PNB Housing Finance.
  • Up to Rs 3,185 crore investment by Carlyle Group at a price of Rs 390 per share.
  • 18.7% capital adequacy ratio as of March 31, 2021.
  • Over 28% capital adequacy ratio expected after full capital infusion.
  • 6.7x gearing as of March 31, 2021.
  • Less than 5x gearing expected after full capital infusion.
  • 118% surge in PNB Housing shares since May 25.

Sources:

  • Business Standard
  • Indian Express
  • Moneycontrol
  • CNBC-TV18
  • Contify.com