The National Company Law Tribunal (NCLT), on June 7, approved Piramal Group’s overall resolution plan for beleaguered mortgage lender, Dewan Housing Finance (DHFL), with a few conditions. The NCLT rejected former DHFL promoter Kapil Wadhawan's plea to get access to a copy of the resolution plan.
Piramal Group in its statement said they are "pleased" by the judgement, noting that they received endorsement of 94 percent lenders and subsequent approvals from the Reserve Bank of India (RBI) and the Competition Commission of India (CCI), which "reiterates the strength and quality" of its bid.
"This is one of India’s largest Insolvency and Bankruptcy Code (IBC) proceedings, and the very first in the financial sector. In that regard, it is an important and positive trendsetter for the future. The approval from NCLT is a significant milestone in DHFL's resolution and an affirmation of the sanctity of the IBC process in India," Piramal Group said.
"We are committed to collaborating with all relevant authorities, regulators, creditors and investors involved in this resolution and look forward to a speedy culmination of the resolution process," it added.
However, the NCLT's order is subject to final judgement from the National Company Law Appellate Tribunal (NCLAT) and the Supreme Court's judgement on Kapil Wadhawan in the matter. On 25 May, the NCLAT stayed an order of the NCLT that directed the DHFL lenders to consider Wadhwan's settlement offer. This came after the RBI appointed administrator for DHFL appealed against the NCLT’s order at the appellate tribunal. NCLAT's final order is pending on this matter.
In its order today (7 June), the tribunal asked the company's Committee of Creditors (CoC) to consider giving more money to small fixed deposit (FD) holders under the approved resolution plan. "We are not remanding the plan back to CoC; we respect their commercial wisdom," the NCLT said passing the order.
The CoC may thus consider re-allocation of funds under approved resolution plan for FD holders. NCLT approving Piramal Group's resolution plan is a major step in the DHFL resolution saga. DHFL’s resolution has been ongoing since November 2019 when it became the first non-banking finance company (NBFC) to be taken to the NCLT by the lenders.
Wadhawan is accused in Yes Bank-DHFL loan bribery case.
DHFL debt woes
A shadow lender in the home loans space, DHFL owes its lenders around Rs 91,000 crore. State Bank of India is its biggest creditor, with an exposure of around Rs 10,000 crore. Other lenders include Bank of India, Canara Bank, NHB, Union Bank of India, Syndicate Bank, and Bank of Baroda. The RBI had on November 20, 2019, superseded DHFL’s board of directors on account of "governance concerns and defaults by DHFL in meeting various payment obligations".
The CoC had in January accepted Piramal Group’s resolution bid and this was approved by the RBI on February 18. Piramal Enterprises, a diversified Indian conglomerate, got more than 94 percent votes for its bid. A resolution plan needs a minimum of 66 percent votes to be passed by lenders, who can vote a preference for more than one bidder.
Oaktree, an American asset management company, secured around 45 percent votes, the person quoted above said. Adani Capital is believed to have got 18 percent votes. Oaktree's bid for DHFL was at Rs 38,400 crore against Piramal's Rs 37, 250 crore. Piramal's offer, however, had a higher upfront cash payment and is likely to have swung support in its favour.
Wadhawan had proposed to pay 100 percent principal amount to all DHFL’s creditors, including the holders of non-convertible debentures and fixed deposits. In a revised proposal of Rs 91,158 crore for the creditors, he promised to make an upfront payment of Rs 9,000 crore. His offer is Rs 50,000 crore higher than what the Piramals’ offered. However, lenders are not too keen on this based on legal advice from their counsel.
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