DHFL debt resolution to spill over into FY22

The lenders expecting to resolve one of India's biggest default worth Rs 90,000 cr in March quarter will have to wait longer

The acquisition of Dewan Housing Finance Corporation (DHFL) by Piramal Group is set to spill over to the next financial year with the legal process taking time, say lenders. With this, the lenders, who were expecting to resolve one of India’s biggest default worth Rs 90,000 crore in March quarter, will have to wait longer.

Earlier this month, the company filed an additional affidavit in the National Company Law Tribunal (NCLT) informing the court about additional monetary loss due to loans given by the previous management led by Kapil Wadhawan.

The company said, as per the transaction auditor report shared with the RBI-appointed administrator, the monetary impact of these transactions amounts to Rs 1,264.29 crore towards outstanding principal, Rs 130 crore towards accrued interest and Rs 29.94 crore towards notional loss of interest on account of charging lower rate of interest. This was in addition to the Rs 15,000-crore hole detected by Grant Thornton, the forensic auditor earlier.

While the additional losses have not come as a surprise to the Piramal officials as there were indications of additional losses, insiders said they were expecting delay due to the magnitude of the debt resolution. “The resolution plan by Piramal was filed in February this year after getting the permission from the Reserve Bank of India. The process will take at least six months,” said a lender.

The resolution of DHFL’s debt is not only followed keenly by the Indian lenders but by several other stakeholders. Apart from Indian banks, DHFL also owes money to provident fund trusts, mutual funds, fixed deposit holders and employees.

As per the plan by the Piramal, DHFL’s creditors would get Rs 34,250 crore over the next five years. Of this, Piramal has offered upfront cash of Rs 14,700 crore, including cash on DHFL’s balance sheet, and rest as deferred component in the form of non-convertible debentures.

The acquisition is in line with the Piramal Group’s strategy to diversify its loan book, and a step towards the demerger of the group’s financial services and pharma businesses in future. A Piramal Group official said the company planned to merge its financial services business with DHFL and retain all employees and said it could even hire additional staff to grow the business.

DHFL was sent to the NCLT in November 2019 after the company defaulted on its debt worth Rs 90,000 crore and auditors found a Rs 15,000-crore hole in its books. The promoters of the company are currently in jail and facing money-laundering charges.

According to Piramal’s plan, the existing shareholders of DHFL will get zero value though the current market capitalisation still shows Rs 555 crore of valuation. The fixed deposit holders have not voted for both plans.