The Mumbai bench of the National Company Law Tribunal is set to pronounce its final verdict in the Dewan Housing Finance Ltd (DHFL) insolvency case on Monday, June 7. Among the 16 related matters listed for final order in the DHFL case, the court will also be ruling on Piramal Group’s takeover plan for the company.
Piramal Group’s resolution plan for DHFL was cleared by the creditors committee in January this year, after an intense bidding war between suitors, including Oaktree Capital and Adani Group. Piramal Group’s resolution plan was subsequently cleared by the Reserve Bank of India (RBI) in February, and by the Competition Commission of India (CCI) in April. The plan now requires NCLT’s and the insurance regulator’s final go-ahead.
To be sure, even with the NCLT approval, Piramal Group's takeover of DHFL may face legal challenges as the former promoter of the bankrupt company—Kapil Wadhawan—has moved the apex court in the matter. Wadhawan has moved Supreme Court against the NCLAT's May 25 interim order which set aside NCLT's decision to get lenders to consider a Rs 91,000 crore settlement offer from Wadhawan to withdraw the company from bankruptcy courts. This may cause some delays in the closing of this case, experts believe.
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. 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 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.
DHFL had total assets amounting to Rs 79,800 crore as of March, 2020—as per its annual report. Of this, Rs 50,227 crore of assets forming 63 percent of the total portfolio were reported as non-performing assets (gross NPAs). Of this, its retail book stood at Rs 33,500 crore, with gross NPAs of Rs 7,147 crore forming 21.32 percent of the total portfolio. The wholesale book, including SRA loans, stood at Rs 42,860 crore, of which a whopping Rs 39,690 crore or 92.61 percent of the entire portfolio is categorised as gross NPAs.
DHFL is the first financial services firm to have been sent to NCLT under the Insolvency and Bankruptcy Code (IBC), and will set the precedent for other stressed financial sector entities. The company is facing claims of over Rs 87,000 crores, with almost Rs 38,000 crores in the form of bank loans alone. State Bank of India, Union Bank of India, Bank of Baroda, Indian Bank and several others have exposure to the troubled mortgage lender.