Adani Realty In Talks To Develop Stressed Projects Funded By DHFL: Exclusive

Adani Realty is looking to take over development of a few large real estate projects funded by DHFL, including slum rehabilitation projects, under a master-developer agreement, two of the people quoted earlier said. The outstanding loans from DHFL to these projects are close to Rs 20,000 crore, these people said.

The agreement will involve completing development, including managing the sales process, one of the three people quoted earlier said. This person added that the master-developer agreement will provide for comprehensive management of the projects including business planning, design and development.

BloombergQuint could not ascertain the precise projects that would be covered by a potential master-developer agreement between the two companies.

Adani Realty and DHFL declined to comment on the matter. Emails sent on Friday to State Bank of India and Union Bank of India, who are two of the lead lenders to DHFL, went unanswered.

To be sure, the agreement is yet to be signed.

The board of Adani Realty is yet to approve the master-developer agreement, said the second person quoted earlier, speaking on condition of anonymity. The person added that taking over these projects and reviving them is a good opportunity for the company to scale its real estate business at a time when most developers are over-indebted.

The realty firm would need to bring in funds to complete the projects which would need to be supported by working capital credit from banks, the two people quoted earlier said. This, however, is subject to the requisite board approvals by Adani Realty and individual banks.

One Part Of A Complex Resolution Plan

The plan to bring in a developer for stressed real estate projects is one part of a complex resolution plan being proposed by DHFL to its creditors.

As per the plan, the lenders to DHFL intend to split the housing financier’s debt into a sustainable and unsustainable part. Liabilities aggregating to Rs 48,826 crore have been identified as sustainable, State Bank of India said in a letter dated Sept. 19 to the Reserve Bank of India. This debt will continue to be serviced by cash flows from DHFL’s retail loan book.

The Rs 32,622-crore in liabilities identified as unsustainable will be converted into debt instruments with a zero coupon and a tenor of up to 26 years. Some part of the unsustainable liabilities will also be converted to equity, the plan suggested.

The proposal added that with regard to the wholesale assets comprising of loans to slum rehabilitation loans and other large project loans, development managers will be appointed for completing the respective projects. “We have been given to understand that DHFL has been in discussions with interested parties having experience in this regard,” the letter said. BloombergQuint has reviewed a copy of the letter.

DHFL has been under stress since last year, when the fall of Infrastructure Leasing and Financial Services Ltd. led to a liquidity crunch for non-bank lenders. DHFL, in particular, failed to raise any additional funding from the debt markets and relied on loan sales to repay liabilities. In June 2019, DHFL reported its first delay in repayment on dues on debt instruments. It has subsequently defaulted on other payments and is rated ‘D’ by rating agencies.