In the fourth round of bidding for the bankrupt Dewan Housing Finance Corp Limited (DHFL), bids of Oaktree Capital Management and Piramal Group were declared equal by the Committee of Creditors (CoC) to the sale entity. As a result, both suitors have been asked to improve clarity on sale conditions while submitting a new, and final offer, to decide the new owner of DHFL.
Oaktree’s bid for Rs 32,700 crore along with a clause that allows a potential holdback of Rs 1,500 crore by the company for ‘unspecified time’ in order to tackle issues arising from DHFL’s life insurance arm. This is accompanied by an upfront payment worth Rs 11,700 crore. But, CoC has asked Oaktree to improve transparency by providing a specific time duration for the holdback. This is expected to be fulfilled by Oaktree in the final bid.
Piramal’s Rs 32,250 crore bid fell slightly short of its competitor. However, Piramal has offered to flush capital to Rs 5,000 crore in DHFL. Due to this injection, cash worth approximately Rs 9,500 crore in DHFL books remains preserved for the payback to lenders. The offer from Piramal becomes lucrative due to their conditions on the future entity to be formed post-merger.
The main catch of the deal lies in the future entity created after the new owner. While Oaktree has not submitted a definitive structure of this new company, Piramal claimed that if they become DHFL owners, Non-Convertible Debentures (NCDs) worth Rs 19,500 crore will be sold at a 6.75% coupon to the lenders.
According to a report by Livemint, a confidential source said, “Piramal has said that it currently has ‘AA+’ rating for the financial services firm that is proposed to be merged with DHFL. Once the merger happens and fresh capital infusion of at least ₹4,000 crore is done, the rating of the merged entity will be somewhere in ‘A’ category, and not lower. This will make the proposed NCDs adequately marketable.”