The National Company Law Tribunal (NCLT) on June 7 approved the Piramal Capital and Housing’s resolution proposal for the Dewan Housing Finance Ltd (DHFL), with some conditions.
Piramal’s wholly-owned subsidiary, Piramal Capital and Housing Finance (PCHFL) has proposed to acquire DHFL for Rs 37,250 crore. The plan involves delisting DHFL, writing off equity and merging the businesses into PCHFL, according to people directly in the know. Sources in the know told CNBC-TV18 that Piramal Group may consider selling off DHFL’s wholesale book after the acquisition, as it is primarily interested only in DHFL’s retail assets.
Piramal Group’s total offer of Rs 37,250 crore includes an upfront cash payment of Rs 12,700 crore to the creditors, CNBC-TV18 reported earlier. Piramal Group has also offered Rs 3,000 crore of cash to lenders from the interest earned on the existing cash on DHFL’s books, another Rs 1,000 crore for the insurance stake, and Rs 1,000 additional cash for interest income after the NCLT approval. This takes the total cash for the creditors at Rs 17,700 crore. The remaining Rs 19,550 crore is in the form of instruments payable over 10 years.
Here is a Timeline:
DHFL’s woes began in June 2019, when it defaulted on several debt repayments. As a result, the company’s shares fell over 90 percent and the government launched a probe into the company.
By August 2019, the creditors of the company decided to draft a resolution plan to let the government take the reins of the insolvency process. DHFL instead proposed to pay all of its creditors in full through an Inter-Creditor Agreement.
In the next few months, DHFL was hit by raids and probes as government agencies were looking into allegations of money laundering and involvement with criminal enterprises in the background of the insolvency process.
The board of directors of DHFL was removed by RBI citing "governance concerns and defaults" regarding payment obligations. The central bank also appointed R. Subramaniakumar, ex-MD and CEO of Indian Overseas Bank, as the administrator of the company. The Reserve Bank had then handed off the insolvency proceedings to the National Company Law Tribunal (NCLT).
Kapil Wadhawavan and Dheeraj Wadhawavan were arrested by the Enforcement Directorate for money laundering. The brothers were accused of other crimes as well in supplementary chargesheets.
The NCLT briefly halted the resolution process as it had to ascertain the views of the then industry regulator and refinancier -- National Housing Bank (NHB) -- that had invoked regulatory provisions to seek a bigger share of the resolution proceeds
In January 2021, the bid from Piramal won approval from the committee of creditors (CoC). The resolution plan from PCH had received 94 percent of the votes from the CoC. Under the plan, creditors of DHFL would have been able to recover around 40 percent of their total admitted dues of Rs 87,082 crore. The bid was subsequently approved by approved by the Competition Commission of India and the RBI. Oaktree Capital, Adani group and assets buyer SC Lowy were also involved in the bidding war for DHFL
Subsequently, DHFL promoter Kapil Wadhawavan floated his own offer after filing a case in the NCLT for creditors to consider his proposal. Wadhawavan had proposed to settle the entire Rs 91,000 crore dues of DHFL with Rs 43,000 crore being paid in the first few years. The NCLT passed orders on May 19 for the CoC to consider the proposal and had asked that the committee convene within the next 10 days.
The CoC and the Insolvency Resolution Professional contested the NCLT order in the National Company Law Appellate Tribunal (NCLAT), which stayed the previous order on May 26 as under the Insolvency and Bankruptcy Code, 2020, the promoter or management of any bankrupt company is prohibited from trying to re-acquire it during the resolution process.
Wadhawavan then moved the Supreme Court against the order from the NCLAT. Wadhawavan argued that the NCLAT had made a mistake in staying the NCLT direction which closed his rights in the matter. The matter is still pending in the apex court even as Piramal’s bid was accepted on June 7. Kapil is still in prison while the cases against him continue.
(Edited by : Shoma)