DHFL resolution: Piramal says its bid is best

Piramal Enterprises chairman Ajay Piramal has written a letter to the administrator for Dewan Housing Finance Corporation (DHFL) pointing out the company’s bid for DHFL is Rs 2,500 crore higher than that made by Oaktree Capital’s. “Piramal Capital and Housing Finance’s bid is designed to ensure the highest upfront cash payment of Rs 13,000 crore. This is higher than the competing bid by Rs 1,000 crore. Additionally, the competing bid has asked for an escrow of Rs 1,500 crore from lenders’ funds, and if we adjust that from cash payment, our bid is higher by Rs 2,500 crore,” the letter reads.

The letter argues Oaktree’s offer is not implementable due to constraints in the takeover of DHFL’s insurance business. “…the competing foreign financial investor’s resolution plan is unimplementable till such time that a credible, regulatorily acceptable alternate buyer for the Insurance business emerges,” the letter read.

As per sources, the proposed takeover of DHFL’s insurance business by Oaktree may invite regulatory challenges as it is a foreign entity. Currently, 49% of DHFL Pramerica Life Insurance is owned as foreign investment by Prudential International Insurance Holdings.

Piramal also mentions that Oaktree’s plan for DHFL is conditional. “The competing bid has stated that if the plan is not approved and implemented by March 31, 2021, or if there is any deterioration in asset quality or deviation from assumptions in the bid, the bidder reserves the right to discuss repricing or to revoke,” the letter read.

Piramal’s resolution plan for DHFL has no conditions, except for approvals like competition commission of India (CCI). The company has not included any sunset clauses or any rights to revoke the plan..

Piramal has promised merger of its housing finance entity with DHFL, committing Rs 10,400 of equity capital upfront. An offer has been made to retail fixed deposit (FD) holders of DHFL, committing an additional 10% of the amount allocated to them by the CoC (committee of creditors).

Oaktree Capital had offered a total of Rs 36,646 crore, Piramal Enterprises had bid Rs 35,550 crore for the entire book while Adani Properties had submitted a total bid of Rs 33,110 crore. FE learned the CoC will meet on December 24 to discuss the resolution plans and vote on them. However, the voting may continue for 10-15 days as per sources.

The admitted claims of financial creditors from DHFL stands at Rs 87,120 crore as on September 10. State Bank of India is the lead creditor with claims of Rs 10,083 crore, followed by Bank of India which has claimed Rs 4,126 crore. Among others, Canara Bank has claimed Rs 2,682 crore while National Housing Bank (NHB) has claimed Rs 2,434 crore. DHFL has been undergoing insolvency proceedings at the NCLT in Mumbai since December 3.