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Baring India, Bain Capital and Hero FinCorp are said to be in talks to acquire a 10 percent stake in Dewan Housing Finance Corporation (DHFL).
"DHFL promoters are looking to sell a 10 percent stake to strategic investors through various ways, including an open offer. PE firms including Bain Capital, Baring India and Hero FinCorp are likely to bid after they lost out on Aadhar Housing Finance," a source told The Economic Times.
According to the newspaper report, DHFL Chairman Kapil Wadhawan may step down from active management after the stake sale. "Kapil Wadhawan has taken additional charge as CEO and he will remain in the position until a strategic partner comes in. He will step down once the sale process is concluded," a person aware of the development told the newspaper.
The move follows a February 13 announcement by the company that CEO Harshil Mehta has decided to resign from his position with immediate effect.
Holding company Wadhawan Global Capital owns 37.3 percent stake in DHFL. BNP Paribas holds 4.65 percent stake, Life Insurance Corporation of India (LIC) 3.44 percent and Lazard Emerging Markets Small Cap Equity Trust 1.44 percent are the other major shareholders.
The stock has been battered after Cobrapost alleged on January 29 that the company had siphoned off Rs 31,000 crore out of the total bank loans of Rs 97,000 crore through layers of shell companies. The expose alleged that the scam has been pulled off mainly by sanctioning and disbursing astronomical amounts in secured and unsecured loans to dubious shell or pass-through companies related to DHFL's primary stakeholders Kapil Wadhawan, Aruna Wadhawan and Dheeraj Wadhawan.
It alleged that this was done through their proxies and associates, which have in turn passed the money on to the companies controlled by the Wadhawans. The stock fell 33 percent between January 29 and February 15.
After the allegations of wrongdoing emerged, Wadhawan on February 4, said DHFL was looking to rope in a "strong strategic partner who can not only add value but also alleviate any concerns the market might have on the business and also bring in fresh equity and capital." He added that the board had appointed an external auditor to carry out a thorough probe and submit a report in three weeks and also one more auditor in a panel cleared by banking industry lobby IBA to assuage lenders' concerns.
DHFL had been hit by liquidity woes emanating from defaults by Infrastructure Leasing & Financial Services (IL&FS) even before the Cobrapost expose.
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