The Piramal Group has received the greenlight from the Reserve Bank of India to acquire Dewan Housing Finance Corporation Ltd (DHFL) under the bankruptcy law.
DHFL was one of the first financial companies to enter bankruptcy. The development comes almost a month after the Committee of Creditors (CoC) voted in favour of the resolution plan submitted by Piramal Capital and Housing Finance, overlooking rival and American asset management company Oaktree Capital.
To be sure, the two waged a war over the troubled company across four bidding rounds. The Rs 34,250 crore Piramal plan that was finally approved included an upfront cash component of Rs 14,700 crore.
The State Bank of India-led CoC is now in the process of filing the plan to the National Company Law Tribunal (NCLT) by the next week, which admitted DHFL in November 2019 for a default of over Rs 87,000 crore.
If the Piramal plan is okayed by NCLT, it would mean a haircut of around 60% for lenders.
DHFL ran into trouble in the aftermath of the Infrastructure Leasing & Financial Services (IL&FS) crisis of September 2018.
In October 2019, a forensic audit conducted by KPMG on behalf of the lenders of DHFL found a diversion of over Rs 19,000 crore of bank loans to the NBFC’s related entities.
All this led to the DHFL being pushed into bankruptcy by the RBI which superseded the company’s board in late 2019.
In September 2020, the RBI-appointed administrator of DHFL filed a case of fraud worth Rs 12,705 crore ($1.7 billion) against the company’s promoters Kapil and Dheeraj Wadhawan, who are currently behind bars.
DHFL, once one of India's top NBFCs, owes its creditors -- which include mutual funds, banks, pension funds, insurance firms and retail investors -- around Rs 91,000 crore.
Apart from SBI, which has an exposure of around Rs 10,000 crore, other banks having an exposure to DHFL include Bank of Baroda, Bank of India, Canara Bank, Union Bank of India, Syndicate Bank and National Housing Bank.