Oaktree Offers $5 Billion for Indian Shadow Lender Dewan

Bankrupt Indian shadow lender Dewan Housing Finance Corp., which was seized by the central bank last year, has attracted sweetened bids from suitors amid mounting signs of recovery in the sector.

Oaktree Capital Group has offered 366.5 billion rupees ($5 billion), up from 310 billion rupees in its previous bid and 280 billion rupees in its initial bid for the mortgage lender, according to people familiar with the matter. Piramal Enterprises and Adani Group also improved their proposals, the people said, asking not to be identified as the matter is private.

The development underscores strong investor interest in India’s shadow banking industry. Policy support has helped the sector bounce back from the pandemic and a crisis sparked by the collapse of financier IL&FS Group in late 2018. Non-bank finance companies’ borrowing costs in the credit market have fallen recently, while liquidity and share market performance has improved.

Before its downfall, Dewan was one of India’s leading mortgage financiers and also lent to real estate developers, with a loan book of about $12 billion.

The interest in Dewan also comes after the real estate market in Mumbai, the country’s commercial capital, has enjoyed an abrupt turnaround recently. Home sales in the city jumped to an eight-year high in October, according to data from Knight Frank, after the pandemic pushed down prices.

That all spells opportunity for investors looking to expand into a shadow banking industry where high risks can result in juicy returns and regulatory curbs are not as strict as for banks.

Here are the bid details:

  • Oaktree’s 366.5 billion rupee bid includes 116.5 billion rupees in cash and 10 billion rupees toward insurance. The remaining portion would be paid against debt over 7 years
  • Piramal has offered 355.5 billion rupees: 127 billion rupees in cash and 3 billion rupees toward insurance, the rest against debt over 10 years
  • Adani has offered 331 billion rupees including 107.5 billion rupees cash and 2.5 billion rupees toward insurance and the rest against debt over seven years

Oaktree, Adani and Piramal declined to comment. There was no reply from Dewan’s administrator to an emailed request for comment.

©2020 Bloomberg L.P.

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