The Committee of Creditors which is supervising the resolution plan of scam-hit Dewan Housing Finance Corporation (DHFL) is against handing over the company at a huge haircut of over 70 per cent to the four bidders. It is considering various options, including inviting fresh bids, takeover of DHFL assets by lenders themselves or continue operating under the administrator appointed by the RBI.
The four bids offer a very low recovery value, ranging from as low as Rs 75 crore to the highest of Rs 15,800 crore. The recovery rate from these bids for lenders will be in the range of 3 per cent to 16 per cent. This means lenders will suffer a loss of Rs 68,000-70,000 crore which, in turn, will push up the non-performing assets (NPAs) of the banking system.
Sources say that bankers are not in favour of accepting the bids as they feel that the amount is too low. There is a feeling among the bankers that the retail assets of around Rs 30,000 crore of the company are a good portfolio and the administrator is running the company well. The low bids by the Adani group, Piramal group, US-based Oaktree and Hong Kong-based SC Lowy to buy DHFL assets “for a song” shocked the lenders as the company cash worth over Rs 10,000 crore.
A source said that the bankers will ask the interested bidders to revise the bid or will like the administrator to run the company for some more time, adding, “The bids are too low and the bankers are not willing to take such a big haircut of around 70 per cent, especially when they feel that the retail portfolio of DHFL is strong.”
DHFL had total assets of Rs 93,000 crore, comprising retail asset portfolio of Rs 33,000 crore, wholesale asset portfolio of Rs 48,000 crore, and cash and cash equivalent of Rs 12,000 crore.
The Adanis offered to pay Rs 750 crore within one year and the balance Rs 1,500 crore would be payable after eight years. Piramal Enterprises has bid for DHFL’s Rs 33,000 crore retail portfolio for only Rs 6,000 crore. Piramal Enterprises has also offered Rs 9,000 crore out of Rs 12,000 crore available with the company to the lenders. The Piramal bid would result in recovery of only around 6 per cent for the lenders. SC Lowy has submitted the bid that comes with so many conditions that it is unlikely to be considered.
There’s also a view among bankers that DHFL has an attractive zero risk retail portfolio and it should be acquired by the banks themselves instead of offering that to any bidder at such a low valuation. Bids received are far lower than the fair value (FV) and liquidation value (LV) arrived at by the independent valuers on behalf of the lenders.
In November 2019, the Reserve Bank of India (RBI) superseded the board of directors of DHFL — which has liabilities of close to Rs 84,000 crore — and initiated the bankruptcy proceedings “owing to governance concerns and defaults by DHFL in meeting various payment obligations”.
The RBI, which stepped in after the banks and DHFL failed to agree on a resolution plan to bring the firm back on the rails, appointed R Subramaniakumar, former MD and CEO of Indian Overseas Bank, as the administrator to run the affairs of the company.
Although DHFL promoter Kapil Wadhawan, who is in judicial custody, had recently written to the RBI administrator offering family assets “valued at Rs 43,000 crore” to facilitate the resolution process of DHFL, lenders have not considered this proposal.
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