Various courts and high courts order to keep any legal or administrative action halted during the second wave of the pandemic. The High Court orders for legal forbearance until August 31, 2021, led to restrictions on the PNB Housing Finance recovery front.
Owing to the circumstances., the company’s non-performing assets (NPAs) skyrocketed to six per cent of the gross advances (Rs. 3,625 crores) by June 30, 2021, from 2.7 per cent by the end of June 2020.
As the deadline for the leniency on the borrowers provided by the courts ends on August 31, the company expects to manage its bad loans efficiently.
Mr Hardayal Prasad, Managing Director and CEO of PNB Housing Finance, in an interview with PTI, said, “We expect to manage these better from this month onwards even as we have orders to pull back some NPAs. We have pulled back about Rs. Eighty-five crores of NPAs in July itself.
The company’s collection was the lowest during May, as the second wave of the COVID pandemic being prevalent. However, June and July marked a more profound collection efficiency.
The Carlyle Deal
PNB Housing Finance secured a deal with the Carlyle Group on May 31 to raise funds through a preferential allotment of shares worth Rs. Three thousand two hundred crores and warrants worth Rs. Eight hundred crores to Carlyle, General Atlantic and Salisbury Investments.
The price of shares and warrants was decided to be Rs. 390 per share or warrant. Considering the ICDR norms, the share price was Rs. 6 higher than the floor price. For the warranties, 25% of the deposits must be infused, and the remaining must be paid within 18 months.
In June, SEBI, a regulatory body for India’s securities and commodities market, asked PNB Housing Finance to go for a valuation of a share price for the Carlyle deal from an independent registered evaluator.
The controversy erupted in the already critical case when a proxy adviser, Stakeholders Empowerment Services (SES), proposed that the deal share price was not in favour of the minority shareholders of the company.
It also mentioned that it opposed the company’s Articles of Association (AoA). On account of this, SEBI forced PNB Housing Finance to hold back its Rs. 4,000 crore deal, and asked the company for carrying out a legally relevant valuation process.
SAT being indecisive
Securities Appellate Tribunal (SAT) has been indecisive on the SEBI-PNB Housing Finance case since both the judges have different opinions on the SEBI’s action on PNB Housing.
Justice MT Joshi held that the act of SEBI was legally correct, and the EGM vote cannot go ahead as soon as the valuation report is not obtained concerning the company’s AoA.
Justice Tarun Agarwala held that since the PNB board had approved the issuance of the shares, SEBI’s intervention was not correct, and shareholders should have been allowed to vote.
SAT has allowed PNB Housing Finance to carry forward the EGM because the voting outcome won’t be disclosed unless the matter was resolved.
However, SEBI has defended its intervention in the company’s EGM, which was held in July, saying that the company’s shareholders needed to access the correct valuation at which investors of the Carlyle Group would acquire shares and management control.
CCI gives its node to the deal
August 4, the Competition Commission of India (CCI) had permitted the proposed investments by the Carlyle Group and other investment firms in the PNB Housing Finance.
PNB Housing Finance is now looking forward to raising funds and improve its recovery front after the month ends.