After four rounds of intensive bidding, the Committee of Creditors (CoC) declared Piramal Capital and Housing Finance Ltd, a unit of Piramal Enterprise, victorious for the takeover of Dewan Housing Finance Corp Ltd (DHFL). Piramal Group beat the US-based Oaktree Capital Management and Adani Group with 94% votes in order to secure the entire loan book of DHFL.
Out of Rs 37,250 crore, Piramal Group would pay Rs 12,700 crore in cash while Non-convertible debentures (NCDs) worth Rs 19,500 are supposed to be paid back before 2031. Apart from this, the group will pay interest income valued at Rs 4,000 crore on DHFL’s book.
According to Piramal’s proposal, the lenders stand a bright chance to receive their Rs 9,500 crore stuck in the Non-Banking Financial Company (NBFC). DHFL, the shadow bank, has debts valued at nearly Rs 1 trillion with premier lenders including Yes Bank, Canara Bank, Bank of India, and Union Bank.
It is believed that the acquisition of DHFL, and the subsequent new entity, will strengthen Piramal Group’s development of its own shadow banking goals concentrated at real estate. The new entity is likely to receive an ‘A’ rating for financial services (since Piramal Group has AA+ rating) that will play a significant role in making the NCDs marketable in the upcoming months.
After the acquisition news hit the stock exchange, the market responded positively with 1.2% rise in Piramal’s shares. However, various analysts advised people against investing in DHFL despite its rescue purchase.
Experts have appreciated the swift action and decision making of CoC as well as all the associated bidders during the process. Usually, insolvency cases are known to take years before arriving at a concrete decision.
As the acquisition comes to an end, RBI is expected to release a set of stringent rules in the near future to avoid a similar case.