Piramal Group Hopes To Complete DHFL Takeover By August

DHFL (Source: BloombergQuint)

Piramal Group Hopes To Complete DHFL Takeover By August

The Piramal Group hopes to complete its acquisition of Dewan Housing Finance Corporation Ltd. by about August, a person with direct knowledge of the matter told BloombergQuint, while acknowledging that the process could see further delay due to legal challenges.

The Mumbai bench of the National Company Law Tribunal on Monday approved a resolution plan submitted by Piramal Group, adding some conditions. Piramal Group's resolution plan, which offered Rs 37,250 crore for DHFL, was approved by the committee of creditors in January with a majority.

The conditions in the Monday order include a decision on a settlement proposal by DHFL promoter Kapil Wadhawan, which the NCLT had ordered the committee of creditors to consider on May 19. The creditors challenged the NCLT order at the appellate tribunal, which stayed the directions. The National Company Law Appellate Tribunal is yet to pronounce an order on the treatment of the settlement proposal. Wadhawan has already filed a petition with the Supreme Court, opposing the NCLAT stay.

Pending the outcome of the legal challenges, a monitoring committee will start to lay down the road map to try and complete the acquisition within 90 days. The Piramal Group plans to merge assets of the beleaguered housing finance company with Piramal Capital & Housing Finance Ltd.

Once that happens, the equity of existing shareholders will be written down to zero and DHFL shares will be delisted, the person quoted above said.

Over the next few weeks Piramal Group will formulate the process of issuing non-convertible debentures to DHFL's creditors, as is required in the resolution plan. Lenders to Piramal Capital & Housing Finance would need to provide no-objection certificates for this process to be concluded, the person quoted above said.

The order by the NCLT shows that if a process is followed thoroughly, resolution can be achieved even in complex situations. It is a result of a lot of collective hard work from financial creditors and the people who worked on the process. There are certain conditionalities in the oral order. We are awaiting the written order, which will be reviewed by the financial creditors and the further course will be decided.
R Subramaniakumar, Administrator, DHFL

According to Dinesh Kumar Khara, chairman, State Bank of India, the NCLT order is a "very positive development".

We believe that the process should get over in the second quarter of this fiscal year and we should get our dues.
Dinesh Kumar Khara, chairman, SBI

Queries mailed to Piramal Group on Monday were not immediately responded to.

What Do Fixed Depositors Get?

DHFL's fixed depositors are part of the committee of creditors and will see their dues settled under the resolution plan. According to last available information, public depositors have claims worth Rs 5,375 crore against DHFL.

The committee of creditors have approved a scheme where fixed depositors with dues up to Rs 2 lakh will receive full payment on their principal amount. These depositors constitute 70% of the total number of public depositors, but only 8% of the outstanding dues to fixed depositors.

Depositors with dues between Rs 2-10 lakh will get 40-43% of their principal outstanding. Those with dues higher than Rs 10 lakh are likely to be repaid through a mix of cash and securities on a pro-rata basis.

Fixed depositors are treated as unsecured financial creditors under the resolution process for DHFL, as they do not have any security interest against the company.

According to the person quoted above, a group of fixed depositors with large dues have voted against the Piramal Group resolution plan. As dissenting financial creditors, they would only be eligible to be paid the liquidation value due to them.

The NCLT on Monday said it cannot replace the wisdom of the committee of creditors, but advised them to show some "gesture" toward fixed depositors.

“The court has asked us to reconsider the payment to fixed depositors. The creditors will review this as a group and see what is the best way to handle these payments,” Khara said.

DHFL was the first large non-bank lender to be referred for resolution under the Insolvency & Bankruptcy Code. The Reserve Bank of India had made the reference, after superseding the company's board in November 2019. The resolution process has seen delays due to the Covid-19 pandemic and due to litigation by various stakeholders involved.

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