DHFL Lenders Extend Deadline For Resolution Plans As Bidders Drag Their Feet
Lenders to stressed housing finance company Dewan Housing Finance Corporation Ltd. have decided to extend the deadline for submission of resolution plans to the last week of May from May 7 before. The extension in the deadline is to accommodate the delays caused by the national lockdown imposed to curb the spread of Covid-19, two people with direct knowledge of the matter said on the condition of anonymity.
On March 29, the Insolvency and Bankruptcy Board of India had allowed for the lockdown period to be excluded from the resolution timelines for cases under insolvency. As per the Insolvency and Bankruptcy Code, the entire resolution process must be completed within 330 days.
Beyond extended times, lenders fear that other factors could impact the resolution process for DHFL. According to the people cited earlier, bidders such as Edelweiss Group, Piramal Group, Adani Group and Hero FinCorp have not shown much interest in the bidding process for DHFL after submitting initial expressions of interest.
The bidders have not been accessing the data room created by the lenders consortium regularly and have not communicated with lenders lately, the people cited earlier said.
According to the first person cited earlier, Indian non-bank lenders are currently facing considerable asset quality and liquidity stress because of disruptions caused by the spread of Covid-19. While banks have not extended the Reserve Bank of India’s three-month loan repayment moratorium to NBFCs, borrowers to these companies have been allowed to delay repayments. This has caused an asset-liability mismatch for these non-bank lenders.
RBI Governor Shaktikanta Das announced last week that the regulator would conduct a second round of targeted long term repo operations (TLTRO 2.0) to provide Rs 50,000 crore to NBFCs and microfinance institutions. The response to that auction has been muted.
These issues could have made potential domestic bidders review their acquisition plans, the first person said.
Edelweiss Group, Piramal Group, Adani Group and Hero FinCorp did not respond to queries mailed on Thursday. The RBI-appointed administrator currently managing DHFL didn’t respond to calls or messages.
DHFL was the first non-bank lender to be referred for insolvency proceedings in November 2019. The RBI had suspended the company’s board and appointed R Subramaniakumar as the administrator to run daily affairs.
Financial and operational creditors had submitted claims worth Rs 87,000 crore as part of the insolvency process. State Bank of India is the largest financial creditor in the consortium which also includes bond holders. Financial creditors also include mutual funds which have an exposure to bonds issued by the housing financier. More than 55,000 fixed deposit holders also have claims worth more than Rs 4,500 crore against DHFL.
On Jan. 28, the lenders had called for expressions of interest for DHFL. The bidders were allowed to either bid for all assets or a portion of the loan book, as per their investment appetite. A total of 24 bidders had submitted initial interest for DHFL.
As per the terms set by the financial creditors, the company will be split into three parts—retail, wholesale and slum rehabilitation projects. The decision to allow bidders to submit resolution plans even for parts of DHFL’s business was expected to help draw in a wider set of potential bidders.
DHFL has a loan book of over Rs 80,000 crore and has been facing liquidity stress since October 2018. The collapse of Infrastructure Leasing & Financial Services Group and the consequent liquidity crunch worsened conditions for the housing financier which was already weighed down by governance concerns.