Aditya Puri, the man in a hurry, may have to wait a little longer.

His plans of helping The Carlyle Group take up the reins of PNB Housing Finance and getting on the board are on hold, temporarily though. He will await the outcome of a legal scrutiny of the proposed deal by the Securities Appellate Tribunal (SAT). Also on hold is his plans of investing in the home financier through a family investment vehicle.

For 70-year-old Puri, currently senior advisor for Carlyle in Asia, taking over the control of PNB Housing Finance has been one of the prime investment decisions he took ever since he joined the global investment firm on November 2, 2020. His mandate is to help identify investment opportunities for the global private equity (PE) firm across Asia. The veteran banker and former MD and CEO of HDFC Bank, who built India’s top private lender from scratch in his 26 years at the helm, was looking forward to a new journey.

A Carlyle Group statement said Puri would provide guidance on the evolving market landscape and new investment opportunities, and advise its investment professionals and portfolio management teams on building differentiated high-quality businesses.

Carlyle had already made several investments in the financial services space in India.

Apart from holding 32.2% stake in PNB Housing Finance, it has also bought into several marquee names such as HDFC, SBI Cards, SBI Life Insurance Co, and Edelweiss, among others. As of March 31, 2021, affiliates of Carlyle have invested more than $1.7 billion of equity in eight financial service companies in India and an overall $3.2 billion in the country. Puri was expected to sharpen Carlyle’s focus on the financial services space in Asia.

On May 31, the mortgage lender’s board approved a fund raising of up to ₹4,000 crore through a preferential allotment of equity shares and warrants. The proposed capital infusion would have taken Carlyle Group's stake in PNB Housing Finance to 50%. The preferential issue price of ₹390 per share implied a discount of 25% to that day’s closing price of ₹525.65 per share on the BSE. Shares in PNB Housing rose 20% to hit the upper trading limit of the day, up from the previous close of ₹437.70.

Puri said in a statement, “I believe PNB Housing Finance with its enhanced capital base is very well positioned to meet the growing demand in its areas of operation. I look forward to helping the company in this exciting journey.”

The proposal was to allot a total of 8.2 crore equity shares and 2.05 crore warrants exchangeable into equity shares for ₹390 per share / warrant to Pluto Investments S.a r.l, Salisbury Investments, General Atlantic Singapore Fund FII, and Alpha Investments V in specified proportions. These securities would be allotted for a cash consideration aggregating to around ₹4,000 crore.

Pluto Investments, an affiliated entity of Carlyle Asia Partners IV L.P. and Carlyle Asia Partners V L.P. (together Carlyle) had agreed to invest up to ₹3,185 crore. The two existing shareholders of the company—the funds managed by Ares SSG and General Atlantic—had also agreed to participate in the capital raise, along with Salisbury Investments, the family investment vehicle of Aditya Puri, which promised to invest ₹25 crore for 0.2% stake in PNB Housing Finance. The fresh investment would see PNB’s stake slide, but it will continue to be the promoter and a key stakeholder in the company.

Sunil Kaul, managing director of the Carlyle Asia advisory team, was a happy man. “We have developed a strong partnership with PNB Housing Finance since our investment six years ago, leveraging our industry expertise and networks to help the Company navigate sector headwinds, strengthen its business, and position it for future growth. This substantial additional investment reflects Carlyle’s strong commitment to India as a core market,” he said in a statement.

In the next six sessions, the stock price went on an unprecedented bull run. It touched the 52-week high of ₹924, nearly doubling the price, on June 8.

The smooth sailing of the stock hit a rock when on June 8, a proxy advisory firm Stakeholders Empowerment Services (SES) called the deal “unfair”.

It said the proposed preferential issue is against the interest of public shareholders, shareholders of PNB and the government. In a note to institutional investors, the firm, headed by former Sebi ED JN Gupta, argued that a rights issue would have been a fairer and better option for raising capital. It recommended PNB Housing Finance’s public shareholders to cast their vote against the resolution on the preferential allotment.

“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.

SES said the open offer is “a mere formality” given the present market price. Nobody would have tendered their shares. On June 8, the stock closed at ₹852.20 on BSE.

Some experts believed that the stock went on a trek because of Puri’s investment and his involvement. The company's statement that Puri was likely to be nominated to the firm’s board as a Carlyle nominee director gave wings to the view that he will build the mortgage lender as a rival to HDFC Ltd.

But the murmurs of the protest reverberated louder. The stock was on a steady decline.

The prospect of holding the company 's extraordinary general meeting (EGM) on June 22 to seek approval of shareholders looked uncertain. The transaction would have triggered an open offer to acquire 26% from the public as per Sebi norms. The open offer price was fixed at ₹403 per share.

On June 18, just 4 days before the proposed EGM, Sebi asked PNB Housing Finance to halt its ₹4,000-crore transaction, in a rare move. “The current resolution bearing item no. 1 (issue of securities of the company) of EGM notice dated May 31 is ultra-vires of AOA and shall not be acted upon until the company undertakes the valuation of shares from an independent registered valuer as per the provisions of applicable laws. The said report shall be considered by the company’s board while deciding on the preferential issue of shares and warrants,” said Sebi in its order.

Sebi’s order led to a fair amount of ambiguity on the EGM. Apart from the resolution pertaining to the preferential allotment, the company had also sought the shareholders’ nod on several other resolutions passed by its board. An electronic voting on all the resolutions had already commenced on June 18.

Without an option, the company knocked at the Securities Appellate Tribunal (SAT)’s door. Soon enough, SAT allowed PNB Housing Finance to go ahead with its scheduled EGM and carry out voting on the controversial resolution of preferential issue. The tribunal, however, has directed it not to disclose the voting result on the resolution until further directions. The matter will come up for hearing on July 5, when the tribunal will decide on the need for a valuation report from an independent valuer. SAT has also directed the Sebi to file a reply by June 26 and rejoinder, if any, by July 4.

Will the tribunal rule against Sebi, or will it ask the company to go for a fresh valuation? If in case it orders a new valuation exercise, will Carlyle and others be interested in the deal?

That is a big concern for the company and investors.

Follow us on Facebook, X, YouTube, Instagram and WhatsApp to never miss an update from Fortune India. To buy a copy, visit Amazon.