New Delhi, Jan 4 : Raising concerns over the bids by Piramal Enterprises and US-based Oaktree for Dewan Housing Finance Corporation Ltd (DHFL), erstwhile promoter of the bankrupct NBFC, Kapil Wadhawan said that the bids are conditional and not qualified.
Noting that Piramal group has proposed a reverse merger of its company — Piramal Capital & Housing Finance Limited (PCHFL) with DHFL, Wadhawan, in a statement on Sunday said: “PCHFL itself had, just as DHFL, suffered immense liquidity crises in 2018.
However, it managed to survive by borrowing funds from SBI, LIC, Canadian pension fund CDPQ, IFC, Union Bank of India, IndusInd Bank, Bank of Baroda etc,”
He further said that the asset quality of PCHFL has not been vetted to ascertain whether the merger of PCHFL with DHFL would be in the interest of entities.
Piramal’s resolution plan is founded on the reverse merger occurring successfully to ensure the Rs 10,000 crore of capital be infused into DHFL, which is essential for maintaining various regulatory ratios mandated by RBI apart from being required for the success of the resolution plan, he said.
“It is uncertain whether the merger would take place and in any event the merger may entail considerable delay which would further delay and complicate the resolution of DHFL.”
According to Wadhawan, there is no clarity as to how the resolution plan of Piramal will be implemented if the reverse merger fails. At the stage of merger, the approval of various creditors as also approval of regulatory authorities would be required all of which are uncertain and any of which can cause the resolution plan to fail, he added.
On the resolution proposal of Oaktree, the former promoter said that being a foreign firm Oaktree is not entitled to hold equity beyond 49 per cent in a life insurance company.
He noted that as DHFL indirectly holds 50 per cent of Pramerica Life Insurance Limited, which is a life insurance company, “consequently Oaktree is per se disqualified from bidding for DHFL”.
Although various solutions have been suggested by Oaktree to circumvent the disqualification including that it shall transfer the life insurance business into an alternative investment fund, they are subject to regulatory and other approvals and it is uncertain whether Oaktree will be qualified eventually to take over DHFL, he added.
As far as Adani is concerned, apart from having made a low bid of Rs 33,110 crore considering the massive debt of $30 billion it is carrying on its books, it would not be appropriate to give them charge of an NBFC and another debt of nearly $12 billion.
“Considering that the main three contenders have so many inherent uncertainties in the resolution plan made by them and there are high probabilities that even if their plans are accepted/approved that such plans may fail, it is unclear why the settlement proposal of the promoter is not being considered,” the statement said referring to the proposal by Wadhawan to repay 100 per cent of the principal debt.
It said that Kapil Wadhawan has offered 100 per cent principal repayment to all the lenders — Rs. 91,158 crore — as opposed to the next highest bid of Rs. 38,250 crore. He has offered to repay Rs. 65,000 crore within seven years as opposed to Rs. 38,000 crore reportedly payable in 10 years.
The statement also reiterated Wadhawan’s offer to convert a part of the debt into equity thus making the creditors, including FD holders and retail NCD holders, majority shareholders of DHFL. The move, according to him, would ensure that not only are they repaid full principal amount, with more interest than offered by the bidders, but they are also entitled to the equity upside once the company revives and continues business as usual.
“Considering the large body of retail NCD holders and Fixed Deposit holders who do not personally attend the meeting of COC, at the very least, the plan should have been put to vote for the consideration of all the retail/fixed deposit holders rather than a group of banks surreptitiously taking decisions in the matter, when such a large body of creditors are involved and such massive amounts of public money is at stake,” Wadhawan said.
“The COC, RBI and Administrator ought to explain why plans that are inherently uncertain of implementation and provide for a 70 per cent haircut to the lenders are being preferred over a settlement proposal that provides for 100 per cent repayment to all the lenders.
As far as the bid process itself is concerned several questions regarding its transparency have been raised by certain members of the COC as well as Oaktree itself.”
He was of the view that if urgent corrective steps are not taken, DHFL is likely to become a saga of lost opportunity and loss of ten’s and thousands of crores of public money.
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