The RBI has refused to clear a stake sale by PNB Housing Finance to private equity investors General Atlantic Group and Varde Partners because of pricing issues. The deal envisaged the two private equity players to pick up a 13 per cent stake in the PNB Housing Finance for around Rs 1,581 crore.

Each of the private equity investor was due to buy 1.08 crore shares at Rs 850 per share, aggregating Rs 925.80 crore.

Post deal, PNB would have held a strategic stake of 19.78 per cent of the paid-up capital of the company.

The Competition Commission of India and the National Housing Board had cleared the deal earlier this month. However, the transacting parties could not get the RBI’s approval to be exempted from applying for pricing guidelines under the Foreign Exchange Management (Transfer of Issue of Security to a Person Resident Outside India), Regulations, 2017.

The stake sale had an operating deadline of May 15, 2019.

“As all the conditions precedent to the completion of the transaction are yet to be fulfilled, and accordingly the completion has not occurred as on date (May 15, 2019), the SPA (transaction) stands terminated with immediate effect,” Punjab National Bank said in a statement to the bourses.

As on March 31, 2019, PNB held 32.8 per cent in the housing finance company, while private equity firm Carlyle Group held 32.4 per cent. General Atlantic is an existing investor with a 9.9 per cent stake.

The stake sale was supposed to bring in liquidity for PNB, which has been weighed down by high non-performing assets and the fraud involving jeweller Nirav Modi. Although on a declining trend, the bank’s gross non performing assets as on December 31, 2018, was 16.33 per cent of the advances.

“PNB will continue to be the sole promoter of the company and stay strategically invested in the company. PNB strongly believes in the growth story of the company and will continue to support the business and its management in pursuing their growth plans. Further, PNB will continue to provide branding support till it is the promoter of the company,” said the public sector bank.

The asset under management of PNB Housing Finance as on March 31, 2019, was Rs 84,722 crore, up 36 per cent over previous year. The mortgage lender saw a 51 per cent rise in profit after tax (Rs 380 crore) during the quarter ended March 2019 over the previous year.

Both PNB and Carlyle had earlier made efforts to divest their stakes in the housing finance company.

However, the efforts hit a roadblock in the wake of the liquidity crisis that hit the NBFC and housing finance companies last year, resulting in a stock price correction for such lenders.

The PNB scrip was 1.16 per cent down to Rs 81.15 over the previous close on the Bombay Stock Exchange.