The Securities and Exchange Board of India (Sebi) on Friday told the Securities Appellate Tribunal (SAT) that the board of directors of PNB Housing Finance (PNB HF) had erred in approving the pricing for the preferential allotment of shares because it did not conform to the company’s articles of association (AoA).
The market watchdog was also critical of the valuation report furnished by the company, and said that it had merely indulged in a mathematical calculation of the floor price, without spelling out the valuation methodologies used to arrive at the price, which typically is the case when such an exercise is conducted by independent registered valuers.
PNB HF had told the appellate tribunal it had carried out a valuation exercise that was certified by two accounting firms.
The approval of the board of directors has consequences in law and Sebi is entitled to step in at this stage. If you place a particular pricing before shareholders during the extraordinary general meeting (EGM) please do it by your own articles of association. There is no repugnancy between the ICDR (Issue of Capital and Disclosure Requirements) and AoA provisions and Section 19 (2) of the AoA is operative, which makes the board resolution deficient,” legal counsel representing Sebi argued before the tribunal in PNB Housing.
The extraordinary meeting for PNB HOUSING
The extraordinary general meeting on June 22 was called to decide on a special resolution on the preferential allotment of shares to the Carlyle Group and other investors.
It required the approval of 75 per cent of those present and voting to pass. The parties to the deal were Punjab National Bank, the largest shareholder, and private equity firms Carlyle, General Atlantic, and Ares SSG, which together own 85 per cent in PNB Housing Finance.