CoC rejects DHFL's proposal for raising payout to small investors

The committee of creditors (CoC) of the beleaguered home financier Dewan Housing Finance Corporation (DHFL) has rejected the proposal to increase the payout to small investors. The CoC — by an overwhelming majority of 89.19 per cent — rejected the proposal to increase the payout as suggested by the National Company Law Tribunal (NCLT).

While the bankruptcy tribunal approved the overall plan, it had asked for reallocating funds to fixed-deposit (FD) holders and small investors. That said, it did not send the plan back to the CoC; rather, it said the final decision was left to the lenders.

“With regard to the decision on distribution to public depositors, FD holders, and subscribers to non-convertible debentures (NCDs), we request the CoC to reconsider their grievances… their request is only to enhance the percentage of payment made in the plan and the same be increased to the level of secured financial creditors,” the NCLT order had said.

The CoC was voting on a resolution that was aiming to pay the entire admitted claim of Army insurance fund aggregating to Rs 39 core, Air Force group insurance society aggregating to Rs 72.93 crore, and Navy children school aggregating to Rs 2.54 crore. 

Also, the CoC was voting on whether all FD holders should be paid additional amounts, such that the entire amount payable to such investors is equal to approximately 40 per cent of their claims, similar to the recovery percentage of secured financial creditors. So, they are likely to get around Rs 1,241 crore, amounting to a recovery of 23 per cent. 

Meanwhile, almost 88 per cent of the CoC voted to authorise representatives of State Bank of India, Union Bank of India, and Catalyst Trusteeship to act on their behalf for further actions in the DHFL case. These include the implementation of Piramal Group's resolution plan for the housing financier.

The Mumbai Bench of the NCLT approved Piramal Group’s resolution plan for the beleaguered DHFL on June 7. The plan put forward by Piramal Group, which has offered to pay Rs 37,250 crore, has been approved by the CoC, the Reserve Bank of India, and the Competition Commission of India.

According to the resolution plan, of the total consideration of Rs 37,250 crore, Rs 14,700 crore is upfront payment, cash recovery, of which Rs 4,002 crore is brought in by Piramal Group, the balance Rs 10,968 crore is cash available with DHFL as on March 31, and Rs 19,550 crore is debt securities (NCDs) issued to CoC members at a coupon rate of 6.75 per cent.