Four In The Fray For DHFL Assets As Deadline Nears: Exclusive
The list of bidders for the assets of insolvent home financier Dewan Housing Finance Corp. Ltd. has come down to two Indian business houses and two international funds, looking to purchase different parts of the business.
According to three people with direct knowledge of the matter, who spoke on condition of anonymity, Piramal Group and Oaktree Capital Management continue to be in discussions with the Committee of Creditors to purchase DHFL’s retail loan assets. The Adani Group and Hong Kong-based investor SC Lowy remain interested in picking up wholesale assets, these people said.
According to the first of the three people quoted above, Piramal Group has appointed KPMG to conduct due diligence into the housing finance company’s retail assets, while Arpwood Capital is advising it on the transaction. Oaktree Capital is an distressed asset fund headquartered in the U.S. and has been actively looking at investment opportunities in India, especially in the non-banking finance space, BloombergQuint had reported in March.
Adani Group has been eyeing DHFL’s retail and wholesale assets since last year, even before the company went under into insolvency, according to the second person quoted above.
Adani Realty had shown interest in picking up and developing stressed assets funded by DHFL, including slum rehabilitation projects, BloombergQuint had reported in October. The deal would have helped DHFL recover loans it had extended to these projects and repay its own lenders.
SC Lowy has been actively involved in the secondary market for stressed loans in India. Last year, it had purchased Rs 1,200 crore worth Essar Steel loans extended by Bank of Baroda, before the company was sold to ArcelorMittal, through the bankruptcy process.
According to the three people quoted above, the seriousness of these four bidders can be measured by the number of times they have accessed DHFL’s information through the data room created by the lenders to the company. The advisers and officials from these investors have also been regularly in conversation with lenders and their advisers on firming up their bid.
The deadline for submission of bids is set for Sep. 16.
KPMG, Arpwood Capital, Oaktree Capital, Adani Group, SC Lowy, State Bank of India and DHFL’s administrator did not respond to queries sent on Wednesday. Piramal Group declined to comment.
DHFL was admitted to insolvency resolution in November 2019, after the Reserve Bank of India superseded the company’s board and appointed an administrator to run the company’s affairs.
According to the most recent assessment, financial creditors to DHFL have submitted claims worth over Rs 1 lakh crore.
The bidding process for DHFL saw at least 24 bidders submit initial expressions of interest in February. Since then, the bidders have been conducting due diligence and preparing a bid for the housing financier. However, owing to the Covid-19 pandemic the process has seen long delays, leading to lenders giving the bidders more time.
On Wednesday, the Reserve Bank of India appointed administrator for DHFL informed stock exchanges that a transaction audit conducted by Grant Thornton had found fraudulent loans worth over Rs 14,000 crore on the company’s books. These loans were classified as retail assets, but were actually extended to entities owned by the promoters at favourable interest rates, BloombergQuint reported citing people in the know.
In the notification, the administrator said that the committee of creditors had filed an application with the Mumbai bench of the National Company Law Tribunal, seeking to classify these loans as fraud. This would allow them to fully write down the accounts and initiate recovery proceedings against the promoters. The petition names 87 respondents, which includes promoters Kapil and Dheeraj Wadhawan.
In the quarter ended June 30, DHFL reported that the net present value of its outstanding loan book stood at Rs 65,408 crore, as compared with Rs 90,144 crore a year ago. The net present value adjusts for provisions or fair value loss on the gross loans. Out of this, the net present value of wholesale accounts stood at Rs 30,107 crore, while the rest were classified as retail assets.