Kapil Wadhawan, promoter of troubled mortgage lender Dewan Housing Finance Corporation (DHFL), on November 11 repeated his offer to pay up the entire principal amount to all creditors without any haircut besides letting all creditors convert part of their debt to equity.
“Even today, I am willing to stand by the principle of 100 percent repayment of principal amounts to all the creditors without any hair cut as I do believe, from DHFL’s business, that such recovery is possible,” Wadhawan said in a letter to DHFL’s RBI-appointed administrator on Wednesday.
Moneycontrol has a copy of the letter.
“As an additional incentive, I am also willing for all the creditors including the NCD and the fixed deposit holders to convert part of their debt into equity so as to enjoy the equity upside they will get once the company is revived…,” Wadhawan said the letter written to DHFL administrator.
This is not the first time Wadhawan is making an offer to the administrator for resolution.
Responding to his earlier offer dated October 17, the administrator had said that Wadhawan’s offer to settle claims is based on untenable legal grounds and property values estimated in the letter are grossly inflated and exaggerated, with no other purpose than to deceive the stakeholders of DHFL.
"Despite innumerable opportunities to offer a constructive role in the insolvency resolution process since December 3, 2019, you chose October 17, 2020, as the date to address your letter to the administrator. This causes a justifiable apprehension that the sole motive of the letter is to mislead the Committee of Creditors (CoC) and the resolution applicants," the administrator said in his response letter on October 27.
In today’s letter, Wadhawan said he is disappointed by the approach taken by the administrator responding to his offer.
“Keeping in mind my current limited resources and access to documents, I am not responding exhaustively to your letter dated 27 October, 2020 and reserve my right to do so. In the meantime, I deny all allegations made in your letter," Wadhawan said.
Wadhawan is facing an investigation on various financial irregularities. DHFL faced a major financial crisis following alleged frauds committed by the promoters and subsequently faced a major liquidity crunch. The lenders to the company are currently on the look-out for a buyer to revive the firm.
Bidders up offers
Recently, the bidders of DHFL had revised their bids upwards.
Adani Group, Piramal Enterprises, US-based Oaktree and Hong Kong-based SC Lowy have submitted 10-70 percent higher price for either a stake in the company or buying out some of its assets. Oaktree Capital has raised its bid price for the entire portfolio to Rs 33,000 crore from Rs 27,800 crore earlier, the PTI reported on Wednesday citing sources with knowledge of the development.
Piramal has significantly revised its bid for the retail book to Rs 26,500 crore from Rs 15,000 crore offered earlier.
Adani Properties has also raised its bid for the wholesale and Slum Rehabilitation Authority (SRA) assets to Rs 3,000 crore from Rs 2,200 crore earlier. It has also offered Rs 50 crore for the slum redevelopment book, they said. SC Lowy has upped its bid for the non-SRA book to Rs 2,300 crore from Rs 1,550 crore earlier. The new bids have been submitted after the lenders asked the bidders to revise their offer.
Promoters hold about 39.21 percent stake in DHFL. Bankers want promoters' stake to fall below 10 percent after the stake sale as part of the resolution plan. A Committee of Creditors, overseeing the resolution plan, is expected to meet next week to finalise the bidder. The CoC was hoping to finalise the resolution plan by November 16 before it could send it to the RBI for review. Last month, the National Company Law Tribunal (NCLT) had allowed 90 days extension for the resolution process till January 5.
Wadhawan’s request
In his letter, Wadhawan requested the RBI-appointed administrator to allow him to participate in the next meeting of Committee of Creditors (CoC) so that he could “put forth some of these thoughts to the committee of creditors on the video conference to constructively aid in the resolution process of DHFL.”
“I’m presently handicapped as I have no access to the records of the company to ascertain the present position and I’m constrained to rely on the newspaper reports as well as my knowledge and experience of having run the business for more than 15 years,” Wadhawan said.
If given access to the records, he can make a proposal setting out the necessary upfront and deferred payment components, which will provide maximum value realization for all stakeholders, Wadhawan said.
DHFL is the first financial services company which has been sent to NCLT under the insolvency and bankruptcy code (IBC).
Claims to creditors
DHFL is facing claims of Rs 87,031 crore from financial creditors.
Its large lenders include State Bank of India (including SBI Singapore) with Rs 10,083 crore exposure, 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 and 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.
DHFL had total assets amounting to Rs 79,800 crore as of March 2020, as per its annual report. Of these, Rs 50,227 crore of assets forming 63 percent of the total portfolio were reported as non-performing assets (Gross NPAs). Of this, its retail book stood at Rs 33,500 crore, with gross NPAs of Rs 7,147 crore forming 21.32 percent of the total portfolio.
The wholesale book, including SRA loans, stood at Rs 42,860 crore, of which a whopping Rs 39,690 crore or 92.61 percent of the entire portfolio is categorised as gross NPAs.
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