After Piramal Capital and Housing Finance Ltd (PCHFL) merges with Dewan Housing Finance Corporation Ltd, the combined entity will aim to reduce the wholesale book of DHFL, said an executive of the Piramal group.
Four months after approval by the company law tribunal, the merger will be complete in the next two weeks.
The acquisition will increase PCHFL’s retail assets under management (AUM) by nearly five times with the total lending book becoming equal parts wholesale and retail in the near term, said Piramal group chairman Ajay Piramal.
“From the medium to the long-term horizon, we want to take the retail up to two-thirds (67%) of the total book…The merged entity PCHFL, which is 100% subsidiary of Piramal Enterprises Ltd, will be focused on the affordable housing segment,” he added.
Asked if any loans would be sold off, Piramal said, “We have not worked on a number but we will look at bringing down the wholesale book of DHFL only.”
The merged total portfolio will stand at Rs 60,000-65,000 crore with an average ticket size of Rs 17 lakh. Currently, PCHFL’s book stands at Rs 47,181 crore.
The new entity will offer loans beyond real estate for used cars and two-wheelers; education loans for vocational and online courses; small builder finance; unsecured business loans; personal loans and loans against securities.
Piramal also pointed out that the company is still evaluating what it wants to do with the DHFL Pramerica Life Insurance subsidiary, which is part of the merger.
“We still have enough capital, our debt-to-equity ratio is 3.5:1 at present. So, if anything fits our strategy, we will be open to doing any other acquisition,” Piramal added.
For the acquisition, PCHFL has made payments worth Rs 34,350 crore to buy DHFL under the Insolvency and Bankruptcy Code (IBC).
The total consideration paid includes an upfront cash component of around Rs 14,700 crore and issuance of non-convertible debentures worth Rs 19,550 crore.
Piramal Group was to receive Rs 13,500 crore ($1.8 billion) in loans from two foreign lenders Barclays Bank and Standard Chartered Bank to fund the buyout.
Creditors, led by State Bank of India (SBI), which approved the bankruptcy resolution plan with a 95% majority, will receive a total of Rs 38,060 crore, including Rs 3,810 crore from the available cash balance on DHFL’s balance sheet.
After five rounds of bidding since DHFL was dragged into bankruptcy in 2019, the transaction is the first resolution of any stressed financial services company under the IBC process.
DHFL, once one of India's top shadow lenders, owed its creditors -- which include mutual funds, banks, pension funds, insurance firms and retail investors -- close to Rs 1 trillion ($13.93 billion).