Piramal Group launches blistering attack against Oaktree bid for DHFL

But Piramal may get the advantage by virtue of being an established ‘local firm’ if both bids are weighed at the finishing line beyond the equal bid amounts, Moneycontrol reported on December 31.

Piramal Vs Oaktree

Contesting the Oaktree claim that it has ascribed Rs 1,000 crore of value to the shareholding in Pramerica Life Insurance, which is not being considered, Piramal said, Piramal has also ascribed Rs 1,000 crore of value to the shareholding in Pramerica, and it is also not being considered for scoring purposes.

“The value offered by Oaktree would be paid out at the DIL level, with no clarity on how DHFL creditors would be able to upstream the payment to that level, and what costs would be associated with such upstreaming. Compare this to the Piramal offer, which is an unconditional, clean value at the DHFL level,” Piramal said.

Secondly, with respect to Oaktree’s claim that it has made an additional interest income offer of Rs 1,700 crore which should be considered, Piramal said, Oaktree’s revised bids came on December 24, while final bids were supposed to be submitted by December 22.

Piramal said it formally submitted a final bid within the deadline. “After opening of the bids on December 23, on recognising that their bid falls severely short, Oaktree sent an email on December 24 (two days after deadline), offering an additional Rs 1,700 crore,” Piramal said.

“Reserving the right” in a Bidding framework is blatantly illegal and mischievous – if this were to be allowed; everyone will bid Rs 1 for all assets; “reserve” the right to increase; look at other bids and increase to slightly more than the highest bid, Piramal said. Hence, the additional amount offered post bid date is thus patently illegal, Piramal said.

Thirdly, Okatree had claimed that the fair market value of its NCDs would be much higher, because they would be rated AAA. Piramal said there are two serious violations of SEBI norms in this claim.

One, Credit rating agencies are not allowed by law to provide any "credit opinion" or have "indicative credit rating discussions". Two, without a formal rating being published, an issuer is prohibited by law from marketing an instrument to potential subscribers.

“In other words, till there is a formal rating published, SEBI norms explicitly prohibit the bidder from marketing their NCDs to COC members as something that 'is likely to be assigned AAA rating’,” Piramal said.

On Okatree’s claim that it has a legally viable structure for insurance shareholding, Piramal said, there is no specific plan or implementable solution that has been offered by Oaktree on insurance part. "There is an intractable legal obstacle to the implementation. And the burden of overcoming this obstacle is being placed on the COC itself,” Piramal said.

Finally, on Oaktree’s claim that it has “offered unconditional, committed capital that benefits financial creditors", Piramal said Oaktree has offered a mere Rs 1 lakh as committed equity.

According to the Oaktree letter, their plan proposes to invest Rs 1,000 crore “by way of equity or debt”. This, to support an approx Rs 40,000 crore balance sheet.  For contrast, the Piramal plan commits Rs 38,000 crore of equity. In addition, we have Rs 16,000 crore of equity in our financial services, it said.

“The competing bidder’s offer falls short on basic capital adequacy norms laid down by the regulator, and allows them to benefit from the cashflows of DHFL with no skin in the game,” Piramal said.

The CoC is likely to complete the voting on Piramal-Oaktree bids for DHFL by January 15 and is likely to decide a winner by the end of January.