Private equity giant Carlyle group’s Rs 4,000-crore deal to acquire controlling stake in PNB Housing Finance has hit a wall with the capital markets regulator, Securities and Exchange Board of India (Sebi), asking the mortgage lender to put on hold its proposed share sale programme.

Sebi said the move to put the deal for shareholders’ voting on 22 June is “ultra-vires” of the company’s Articles of Association (AoA). Restraining Punjab Housing Finance from acting upon it, the market watchdog has directed the company to carry out the valuation process by an independent registered valuer, as per the relevant legal provisions prescribed in its AoA.

PNB Housing Finance had, on 31 May, called for an Extraordinary General Meeting (EGM) of shareholders on 22 June to approve the issuance of its shares to a clutch of investors led by the Carlyle group, including former HDFC Bank managing director Aditya Puri.

The shareholders’ approval would have led to the dilution of Punjab National Bank’s (PNB) stake in the housing finance subsidiary to under 26%. PNB would lose majority control but continue to function in the capacity of promoter, as a joint control holder with Carlyle group.

In its letter, Sebi said that the valuation report by the independent valuer should be considered by the company’s board while deciding on the preferential issue of shares and warrants.

PNB Housing Finance, however, continues to believe that it acted in compliance with all relevant applicable laws. “Such preferential allotment is in the best interests of the company, its shareholders and all relevant stakeholders," PNB Housing Finance said in its filing to the stock exchanges.

The company is evaluating further steps in this regard, which may mean challenging the Sebi letter in the court.

Earlier this month, proxy advisory firm, Stakeholders Empowerment Services (SES) raised concerns over the proposed deal and said it was not in favour of the minority shareholders as well as the promoter Punjab National Bank. It wondered if PNB Housing Finance had willingly surrendered control without fair compensation. The deal is “ultra vires” to the AoA, it added.

This prompted the stock exchanges on Monday to seek some clarifications from PNB Housing Finance on the proposed deal and also asked it to submit the pricing certificate from a registered valuer.

Earlier in February this year, the Reserve Bank had rejected PNB’s proposal for a capital infusion into its subsidiary PNB Housing.

Under the proposed deal, Rs 3,200 crore is to be raised through equity shares and Rs 800 crore by issuance of warrants.

After the proposed preference share allotment by PNB Housing Finance, the stake of PNB would fall to just 20.3% stake in the housing finance company while Carlyle Group’s stake would climb to above 50%.

Earlier on 14 June, The Indian Express reported that of the 12 PNB Housing Finance board members who cleared the allotment, at least seven had dealings with the US PE giant — including two Carlyle employees who are nominee directors.