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Wednesday, July 28, 2021

Shares up post Carlyle deal, top PNB Housing execs sold off ESOPs

Between June 2 and June 22, at least 23 senior executives of the company sold their shares worth an aggregate of over Rs 13 crore.

Written by Sandeep Singh , Sunny Verma | New Delhi |
Updated: June 25, 2021 6:55:22 am
A banner for PNB Housing Finance Ltd’s IPO offering. (Express Archives)

The controversial Rs 4,000-crore share allotment by PNB Housing Finance to a clutch of investors led by The Carlyle Group has prompted questions from the market regulator. But as PNBHF’s share price doubled following the May 31 announcement, records analysed by The Indian Express show that senior executives of the company, in leadership roles, rushed to monetise a hefty chunk of their employee stock options (ESOPs).

In fact, between June 2 and June 22, at least 23 senior executives of the company sold their shares worth an aggregate of over Rs 13 crore.

The top five by number of ESOPs sold: Nitant Desai, Chief Technology Officer who sold 35,982 shares (99.2% of his ESOP holding); Manoj Kumar, head of North and East (17,462 shares, 76.6%); zonal collection manager Sushant Kumar (13,000 shares, 100%); Pankaj Jain, zonal head, south (12,700 shares, 47.8%); and Rajan Suri, business head (12,140 shares, 64.3%).

They sold their shares after June 9 when its average value was at a record high of over Rs 700 – almost twice that of their average acquisition price.

A scrutiny of the company’s disclosures shows that after the surge, while seven employees sold their entire ESOP holding as on date, most of them sold more than half of their shareholding.

In, at least, three cases. employees acquired the ESOPs (vested to them) on June 10 and sold a large part of it by June 17. The acquisition of the share was at a pre-determined price of Rs 338 per share.

These trades are within the regulatory framework of Sebi’s Insider Trading Regulations as they were conducted 48 hours after the board announcement on May 31.

Market experts attribute the sale to two factors: one, the sharp rise in the share price and, two, the controversy over the PNBHF board’s allotment which is now the subject of a Sebi notice.

Indeed, data shows that of the total share sale by employees worth Rs 13 crore, shares worth over Rs 12 crore were sold by these employees after June 7.

Significantly, it was on June 7, that proxy advisory firm Stakeholders’ Empowerment Services (SES), at the behest of minority shareholders, released its report alleging that the PNBHF board resolution on the preferential issue was “(an) unfair transaction, against public shareholders and PNB”.

On the pricing of the preference share at Rs 390, PNBHF, the report said, ignored its Articles of Association which called for the price to be “determined by the valuation of a registered valuer”.

While a share of PNB Housing Finance closed at Rs 437.7 on May 28, it jumped to Rs 525 on May 31 and closed at Rs 880 on June 7 — doubling in six trading sessions.

Responding to queries mailed by The Indian Express, the company said, “These transactions were in compliance with Insider Trading Policy of the Company. The Company has informed the stock exchange on May 25, 2021 about holding of board meeting to consider fund raising…As per SEBI (Prohibition of insider trading) Regulation of 2015 and the Insider Trading Policy of the Company, the trading window for dealing in securities of the Company was closed from May 26, 2021 up till June 2, 2021 for the designated employees of the Company. Post opening of trading window, some of the employees have exercised their right to transact shares of the Company permitted as per Insider Trading Policy of the Company. The Company has reported transactions of employees to stock exchanges. The capital raise proposal and its contents were in public domain, refer our communication dated May 31, 2021, to the stock exchanges.”

On June 18, 2021, Securities and Exchange Board of India issued a letter to PNBHF that the resolution relating to “issue of securities of the company” in the EGM notice dated May 31, is “ultra-vires” of the company’s Articles of Association and it should not be acted upon until the company undertakes the valuation of shares — as prescribed in its AoA – by an independent registered valuer.

The company moved the Securities Appellate Tribunal on Monday (June 21) and got the go-ahead for the its EGM that was held the next day. The Tribunal however, directed the company to not declare the results of the voting.

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