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Friday, February 26, 2021

Piramal group likely to bag DHFL as lenders back Rs 37,250-crore bid

The Committee of Creditors (CoC) is expected to officially clear the proposal in the coming days and forward it to the National Company Law Tribunal.

Written by George Mathew | Mumbai |
Updated: January 16, 2021 7:23:13 am
Piramal group likely to bag DHFL as lenders back Rs 37,250-crore bidLast Friday, Piramal Capital & Housing Finance said its bid for DHFL offers the highest upfront cash recovery and has the highest score according to the evaluation matrix.

The Piramal group is all set to bag the troubled Dewan Housing Finance Corporation (DHFL), with lenders led by public sector banks backing its Rs 37,250-crore bid for the takeover of the mortgage firm.

According to banking sources, banks were not in favour of clearing the bid by the US’ Oaktree Capital, which has been in a fierce battle with the Piramals for the housing finance firm. The Piramal bid got 94 per cent voting from the lenders, while the required majority is 66 per cent. However, Oaktree’s bid got only 45 per cent backing. The Piramals are likely to merge DHFL with their financial services business once the bid is cleared by the bankruptcy court.

The Committee of Creditors (CoC) is expected to officially clear the proposal in the coming days and forward it to the National Company Law Tribunal.

Explained

Resolution vital

The DHFL resolution is important for the financial sector, which was hit by the collapse of IL&FS and the DHFL crisis. While DHFL owes around Rs 80,000 crore to banks and other creditors, full recovery may not happen as bondholders are not sure about getting their money back.

After Piramal revised its bid, Oaktree had increased the bid by another Rs 1,700 crore after the deadline. Oaktree, in a letter to the creditors, had claimed a Rs 2,700-crore undervaluation by the CoC. Oaktree had also proposed it would offer Rs 1,000 crore from the sale of DHFL’s life insurance business to the lenders.

Last Friday, Piramal Capital & Housing Finance said its bid for DHFL offers the highest upfront cash recovery and has the highest score according to the evaluation matrix. Piramal said it formally submitted a final bid within the deadline, while Oaktree sent an additional offer after the deadline, offering Rs 1,700 crore more.

Realising that its bid falls severely short, Oaktree sent an email on December 24 — two days after the deadline — offering an additional Rs 1,700 crore, Piramal said. “Reserving the right in a bidding framework is blatantly illegal and mischievous — if this were to be allowed; everyone will bid Re 1 for all assets, ‘reserve’ the right to increase, look at other bids and increase to slightly more than the highest bid,” Piramal said.

Oaktree’s bid had reportedly claimed that DHFL’s NCDs would be assigned an ‘AAA’ rating if their resolution plan is accepted. However, rating agencies are not allowed by law to provide any ‘credit opinion’ or have ‘indicative credit rating discussions’, Piramal said. Piramal had said the proposed takeover of DHFL’s insurance business by Oaktree may invite regulatory challenges as it is a foreign entity. Currently, 49 per cent of DHFL Pramerica Life Insurance is owned as foreign investment by Prudential International Insurance Holdings.

On November 29, 2019, the Reserve Bank of India (RBI) filed an application for initiation of insolvency against DHFL, making it the first non-banking financial company (NBFC) to undergo the process.

In the first bidding round, Piramal Enterprises offered Rs 15,000 crore for DHFL’s retail arm, while Oaktree offered Rs 27,800 crore for the entire firm. SC Lowy, meanwhile, offered Rs 2,300 crore for its non-slum redevelopment authority loan book. After the lenders expressed unhappiness over the low bids, all the companies revised their bids significantly.

Lenders and creditors are looking to recover Rs 83,000 crore of unpaid loans of DHFL.

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