DHFL case | Piramal, Oaktree bids conditional and not qualified: Kapil Wadhawan

DHFL erstwhile promoter Kapil Wadhawan.

Beleaguered mortgage lender Dewan Housing Finance Ltd (DHFL)'s former promoter Kapil Wadhawan on January 4 expressed his concerns over bids from Piramal Enterprises and American asset management company Oaktree in the DHFL.

Wadhawan in his statement even stated that the bid made by Piramal and Oaktree are conditional and not qualified which may delay or defeat the resolution of DHFL.

"Even more worrisome are the various newspaper reports that suggest that both Oaktree and Piramal, which are the main contenders for DHFL, have made bids that are conditional and not qualified which may delay or defeat the resolution of DHFL further," CNBC-TV18 quoted Wadhawan as saying.

DHFL may get a new owner by January-end; advantage Piramals due to ‘local’ factor

The ex-DHFL promoter has in his statement mentioned that the private lender was done with the objective of attaining a quick resolution, as the process of bidding was delayed. Adding more, Wadhawan said this resulted in 60-70 percent haircut to the lenders.

Stating that Piramal Capital and Housing Finance Limited (PCHFL) had itself suffered immense liquidity crises in 2018, Wadhawan said the Piramal's flagship Company managed to survive only after borrowing funds from SBI, LIC, Canadian pension fund CDPQ, IFC, Union Bank of India, IndusInd Bank, Bank of Baroda etc.

He was of the opinion that PCHFL's asset quality has not been vetted to ascertain if DHFL's merger with PCHFL would be in the interest of entities. Also, clarity on Piramal's resolution implementation has not been specified if the reverse merger fails.

"Piramal’s resolution plan is founded on the reverse merger occurring successfully to ensure the Rs 10,000 crores 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. 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," Wadhawan said.

"In fact, recent newspaper reports suggest that the lenders are also concerned about the merger and the fact that it operates virtually as a precondition to the Piramal’s resolution plan, even though it may not have been expressly stated to be so," read the statement.

Apart from Piramal, the former DHFL promoter also aimed at Oaktree. He said that Oaktree being a foreign fund is not entitled to hold equity beyond 49 percent in a Life Insurance Company.

"As DHFL indirectly holds 50% of Pramerica Life Insurance Limited, which is a Life Insurance company, consequently Oaktree is per se disqualified from bidding for DHFL," he said.

Wadhawan mentioned the regulatory hurdles which may hinder Oaktree's prospect of circumventing the disqualification by regulatory bodies to take over DHFL.

He also took on Adani's bid to take over DHFL and cited the debt issue. "In so 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," he said.

Considering the bid options, regulatory hurdles, and inherent uncertainties in the resolution plans, Wadhawan seemed concerned about why his settlement proposal is not being considered.

Earlier, he had proposed to offer 100 percent principal repayment to all the lenders (offered to repay Rs 91,158 crore) as opposed to the next highest bid of Rs 38,250 crore. Wadhawan has offered to repay Rs 65,000 crore within seven years as opposed to Rs 38,000 crore reportedly payable in 10 years. Also Wadhawan had offered much higher interest rate than any of the other bidders during the interregnum.

The former DHFL promoter was running the show from 2000 to 2018 until the IL&FS crises crippled the firm.

Meanwhile, the committee of creditors (CoC) of the debt-laden firm will vote and decide for the winning bidder by January 15, whose result may be announced by month-end. Both Piramal and Oaktree have bid in the range of Rs 37,000-38,000 crore, while their cash component range between Rs 17,000 crore each.

DHFL owes Rs 91,000 crore to its creditors, including State Bank of India (Rs 10,000 crore), Bank of India (Rs 4,125 crore), Canara Bank (Rs 2,681 crore), NHB (Rs 2,434 crore), Union Bank of India (Rs 2,378 crore), Syndicate Bank (Rs 2,229 crore), Bank of Baroda (Rs 2,075 crore), Indian Bank (Rs 1,552 crore), Central Bank (Rs 1,389 crore), IDBI Bank (Rs 999 crore), and HDFC Bank (Rs 361 crore).