Carlyle-led investment in PNB Housing unfair to minority shareholders, says proxy firm

by Jeremy

Proxy advisory firm Stakeholders Empowerment Services (SES) said on Tuesday that the proposed preferential issue by PNB Housing Finance is against the interest of public shareholders, PNB shareholders, and the government.

The stock price of PNB Housing Finance rose 94% in a week to Rs 852.20 at Bombay Stock Exchange (BSE).

In a note to institutional investors, the proxy firm, headed by former Sebi ED JN Gupta, has argued that a rights issue would have been a fairer and better option for raising capital. SES has recommended PNB Housing’s public shareholders cast their votes against the resolution on the preferential allotment. “In absolute terms, existing retail shareholders are getting diluted by 5.83%; in relative terms, there is a dilution of almost 34%,” SES said.

“The shareholders owning close to 85% shares either decided to take the preferential offer or voluntarily gave their rights/sacrificed (i.e., PNB),” SES said, adding that people in control ignored the existence of minority shareholders. “On the face of it, SES finds this deal unfair to public shareholders of the company and shareholders of PNB. As a controlling shareholder of the company, PNB has blown away the value,” it said in a note.

The housing financier had earlier called an extraordinary general meeting (EGM) on June 22 to get shareholders’ approval on the proposed capital raising. Last week, PNB Housing’s board approved preferential allotment of Rs 3,200 crore worth of shares and Rs 800 crore worth of warrants to Carlyle, Aditya Puri’s family investment vehicle Salisbury Investments, General Atlantic, and Alpha Investments at Rs 390 per share.

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