Friday, Sep 30, 2022

Conflict of interest: PNB Housing board that cleared majority stake for Carlyle has links with Carlyle

Besides two Carlyle nominees, five of 10 directors have had dealings with the US private equity giant.

A banner for PNB Housing Finance Ltd’s IPO offering. (Express Archive)

Raising questions of corporate governance and conflict of interest, a majority of the board members of PNB Housing Finance Limited that decided to issue shares worth Rs 4,000 crore to investors led by US private equity giant The Carlyle Group, have links to Carlyle.

Former HDFC Bank MD Aditya Puri, who has joined Carlyle as senior advisor, will also be issued shares.

The board’s move to issue shares, as reported by The Indian Express, could reduce the stakeholding of Punjab and National Bank in its housing finance subsidiary to below 26 per cent — a reversal of its own stated public commitment.

Of the 12 members, two are Carlyle employees and are nominee directors by virtue of the firm having a 32 per cent stake in the company — Sunil Kaul and Kapil Modi. After the share allotment, this will go up to over 50 per cent.

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Five others on the board have a Carlyle link. Consider:

* Hardayal Prasad, MD & CEO of PNBHF since August 2020: In July 2020, Prasad took voluntary retirement as MD and CEO of SBI Cards and within a month joined PNB Housing as its MD & CEO. In March 2020, Prasad was behind SBI Cards’s Rs 9,500-crore public issue in which Carlyle offered 9.3 crore shares (out of 24.24 crore shares it held) raising over Rs 7,000 crore through its offer.

Carlyle had acquired a 26 per cent stake in SBI Card from GE Capital in December 2017 for around Rs 2,000 crore and made a huge profit in less than three years.


Prasad was appointed MD and CEO of SBI Cards in February 2018. Just four months after the IPO, he took VRS, quit SBI Cards and joined PNBHF. While his remuneration in SBI Cards was Rs 66 lakh for 2018-19, PNB Housing hired him at a fixed salary of Rs 1.91 crore and a performance linked variable pay of Rs 1.4 crore. The board decided to pay a minimum of Rs 1.12 crore of variable pay for the first year. Prasad was also granted 5.5 lakh ESOP at the then market price.

* Neeraj Madan Vyas, non-independent director since September 1, 2020: Vyas was an independent director on the Board of PNBHF from April 19, 2019 to April 27, 2020 — and MD & CEO of PNB Housing Finance Limited from April 28, 2020 to August 10, 2020.

Vyas superannuated as Deputy MD and COO of SBI in June 2018. Negotiations for GE’s stake sale in SBI Cards went on when he had overall control of SBI Cards. And when Carlyle completed GE’s stake purchase in December 2017, Vyas was Deputy MD, SBI Corp. Central Mumbai, and was on the board of SBI Cards.


* Chandrasekaran Ramakrishan, independent director since 2015: He retired as executive vice chairman of Cognizant India in March 2019. He first joined the board of PNBHF in October 2015 and was reappointed in October 2020. In 2016-17, when Carlyle bid for GE’s stake in SBI Cards, Cognizant was the technical partner of Carlyle in the bid and Chandrasekaran was vice chairman of Cognizant.

* Nilesh S Vikamsey, independent director since April 2016: A chartered accountant by profession and past president of ICAI, he is a senior partner in Khimji Kunverji & Co. He joined the PNBHF board in April 2016 and was reappointed in April 2021.

RoC records show Vikamsey was also a director in SBI Cards between August 2019 and November 2020. Of the 10 companies where he has been a director, there are at least six where Carlyle has been an investor including PNB Housing, SBI Cards and SBI Life. Vikamsey is on the boards of three IIFL Group companies where Carlyle was an investor.

* T M Bhasin, independent director since April 2020: He’s also an independent director on the board of SBI Cards and SBI Life where Carlyle is an investor. He is ex-CMD of Indian Overseas Bank and an ex- Vigilance Commissioner.

Detailed questions sent to Neeraj Mohan Vyas, R Chandrasekaran, Nilesh Vikamsey, TM Bhasin, Carlyle and PNB did not elicit any response.


Responding to questions mailed to Prasad, a PNBHF spokesperson told The Indian Express: “The Company followed due process for the hiring of the MD & CEO. The Company hired a reputed consultant for search of suitable candidate and the final candidate was approved by the Board.”

Asked about the conflict of interest in several directors having linkages with Carlyle and SBI, the company said, “All directors of the company are obliged to periodically disclose all their ongoing engagements within the company as strictly mandated against laid out compliance norms under the law. The Company received all necessary general disclosures from its directors, including independent directors and do not see any conflict.”


The presence of board members in companies with a common investor puts a question mark on their independence and, therefore, raises issues of corporate governance, a corporate governance expert said.

Incidentally, Vyas’s link to Carlyle was flagged at the PNBHF board meeting on August 6, 2020 called to discuss Vyas’s appointment.


Fellow director Gourav Vallabh called it a “perceived conflict of interest” that went “against the foundations of corporate governance”. But his objections were ignored and Vyas was appointed. Vallabh also raised similar objections to Prasad’s appointment as MD and CEO. When contacted, Vallabh declined to comment.

First published on: 14-06-2021 at 04:16:00 am
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