The committee of creditors voted in favour of a resolution bid submitted by Piramal Capital and Housing Finance for Dewan Housing and Finance Ltd (DHFL).

The decision was taken at the 18th committee of creditors (CoC) meeting held on 15 January after a long period of bids and rebids by both Piramal and the other contender Oaktree Capital Management. However, a litigation by Oaktree could delay the takeover.

The Piramal bid got an overwhelming support from the lenders, with 94% of them voting in favour of the company. Both contenders had submitted bids in the range of Rs 37,000 crore but differed in the upfront fee payment. Financial creditors had admitted claims of Rs 87,000 crore (major lenders being SBI at Rs 73,00 crore, BoI at Rs 4,120 crore and Union Bank of India at Rs 2,350 crore).

“The e-voting on resolutions pursuant to the 18th meeting of the committee of creditors of the company concluded on 15 January 2021 at 8 pm IST and the resolution plan submitted by Piramal Capital and Housing Finance Limited was duly approved by CoC by majority voting under section 30(4) of the Insolvency and Bankruptcy Code read with Reg. 39(3) of CIRP Regulations, as the successful resolution plan,” DHFL said in a regulatory filing on Sunday.

ICICI Securities in a report said, “If the deal consummates, the strategic portfolio diversification intent (towards 50:50 wholesale-to-retail mix) will be achieved sooner; reduced dominance of wholesale portfolio can help ease the borrowing cost; multi-asset retail digital lending can get further fillip from the existing DHFL franchise; and unallocated net worth of Rs 5,000–6,000 crore can now command some optional value (utilised towards retail business ramp up). Better-than-anticipated revival in real estate sentiment, scale-up of retail providing advantage of diversification and reduced concentration litigation by other contenders on bidding outcome can defer the process; and higher mark-down on acquired portfolio.”

After the fifth and final round of bidding last month, both contenders made claims and counter-claims, saying their respective offers were the best. Adani Group, which made an entry in the third round, offered a total Rs 33,110 crore, with Rs 10,750 crore upfront cash payment and deferred payments worth Rs19,110 crore in the next seven years. In the revised bid, Adani Group bid for the entire book, offering a total of Rs 30,000 crore plus interest of Rs 3,000 crore on 17 November. This was more than Rs 28,300 crore offered by Oaktree. Piramal quoted Rs 23,500 crore only for the retail portfolio of DHFL, while SC Lowy bid Rs 2,350 crore for SRA.

All three rival bidders had cried foul over Adani's bid, saying the group had submitted the bid past the deadline and sought disqualification of Adani. Subsequently, both Piramal Enterprises and Oaktree capital bettered their bids.

Adani Group, Piramal Group, US-based asset management company Oaktree Capital Management and Hong Kong-based SC Lowy were the four entities that submitted bids for DHFL in October.

The Reserve Bank of India (RBI) was forced to refer DHFL, on 19 November 2019, to the National Company Law Tribunal (NCLT) for insolvency proceedings after it discovered financial irregularities.

DHFL was the first finance company to be referred to NCLT by the RBI using special powers under Section 227 of the IBC. Before that, the company's board was superseded and R Subramaniakumar was appointed as the administrator. He is also the resolution professional under the Insolvency and Bankruptcy Code (IBC).

After the administrator took charge of DHFL affairs and bankruptcy proceedings were invoked, several external agencies were engaged to turnaround the organisation and operate it as a going concern. Currently, the entity manages loan assets of Rs 60,800 crore (Sep '20), of which wholesale portfolio is fairly valued at Rs 28,000 crore. This is after creating provision of Rs 24,000 crore on gross carrying asset value of Rs 52,000 crore. The recoverability of these loans is yet to be ascertained but bidders would not have assigned more than 20% value to its net value. The retail book of Rs 32,000 crore is relatively more granular with better potential to sell-down/securitise according to the ICICI Securities report.

‘”Net worth of the company has been fully eroded due to provisioning and is negative Rs 7,600 crore currently. On its balance sheet, it carries cash/bank balance of Rs 9,060 crore and an investment of Rs 4,800 crore. In September and October, the company reported details of fraudulent transactions for outstanding sums of Rs 14,000 crore, Rs 12,700 crore and Rs 1,800 crore, on which provisioning will be made over the three-quarters of the fiscal commencing from Q2FY21,” the report added.