PNB may unsteady its dominant shareholder’s status in housing finance

The Punjab National Bank may loose its dominant shareholder status in the Punjab National Bank Housing Finance. Later in this month, at the stakeholder’s meeting questions over the possibility of Punjab National Bank Housing Finance loosing its dominant status in shareholding is quietly expected. Adding to the earlier week’s report that Rs 4,000 crore investment in PNBHF was declared by a consortium of investors, led by US private equity giant The Carlyle Group and Aditya Puri, former chief executive of HDFC Bank Limited.

According to the above capital infusion it is likely to make Carlyle the largest shareholder in Punjab National Bank Housing Finance. Although, both the government and PNBHF publicly clarified to ensure PNB a 26 percent stake in the company.  The company’s shares too got doubled in the previous six days. As per the reports prepared by Stakeholders Empowerment services that protects the minority shareholders interest called the PNBHF resolution on preferential issue of equity shares and warrants to the consortium as “unfair transaction against public shareholders and PNB.” The  leading “proxy advisory firm,” Stakeholders Empowerment services, also noted the transaction as “ultra vires” of the Articles of Association.

The proposed share allotment by the company to Pluto Investments, a Carlyle affiliated and Puri’s Salisbury Investment with the other two foreign investors, might lead PNB to have only 20.3 percent stake in the housing finance major. As a result, PNB might not only loose its dominant shareholder status but also loose its veto power. On the other hand, the Carlyle Group will look forward to its stake rising above 50 percent.

The report by the “proxy advisory firm” on the pricing of the proposed share at Rs 390, stated that the company have let go its article of association which calls for price to be “determined by the valuation of a registered valuer.” Experts suggests, given that the book value of the major housing finance share is Rs 540, that would have pegged it at a more realistic level as it give indication of intrinsic value. The company went by SEBI rules on pricing that is based on either 12 week or two weeks highs.

At present PNB’s shareholdings in the housing finance is at 32.64 percent. Quality Investment Holdings, a Carlyle entity shareholding stands at 32.21 percent. Further, after the allotment of shares PNB’s holding is almost prepared to go down to 20.3 percent and Quality Investment Holdings to 20 percent. Along with Pluto’s holding of 30.1 percent, Carlyle entities will hold almost 50 percent share in the company.

In the previous year, 2019-2020, when the housing finance was looking forward to raise capital, the government had approached that PNB’s shareholding should not fall beyond 26 percent. The promoter PNB also looks to have gone back on its commitment to hold 26 percent stake in the company.

PNBHF earlier in January 23 stated, “PNB will maintain a minimum shareholding in PNB Housing at 26 percent. Further, PNB has confirmed that its stated objective is to continue to hold a minimum 26 percent shareholding in the company and continue to be the promoter of the company.”

On the dilution of PNB’s stake and pricing of the share the company stated, “As a responsible company PNB HFC has constantly striven for sound business practices along with excellent corporate governance. This deal for capital raising has been arrived at with appropriate due diligence keeping best interest of all the stakeholders in the mind. We are confident this will take the company forward to its deserving success and growth and expected to unlock value for all stakeholders including minority and retail investors.”

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