DHFL looks for a buyer, in talks with investors to sell majority stake

As part of its resolution plan to emerge from its loan defaults, the troubled Dewan Housing and Finance Corporation (DHFL) has proposed a conversion of lenders’ debt into equity for the acquisition of a 51 per cent stake in the company at a price of Rs 54 a share.
 
Some of the banks in the consortium, however, are not comfortable about taking a majority stake in the company. That is why talks are on with potential investors which include private equity fund AION Capital as to whether they would like to buy the entire stake and take over the running of the company.  
 
In its resolution plan, DHFL has indicated that it is open to a change in the management and the ownership. It has pointed out that, based on its discussions, prospective investors have shown an interest in individual segments of the asset portfolio. These include the retail portfolio, providing priority funding for developer loans, and carving out Slum Rehabilitation Authority (SRA) projects and thereby providing the necessary working capital for these projects.
 
AION Capital had initially shown an interest in carving out the retail portfolio of the company rather than buying a stake. But during its recent talks with the lenders, it has come around to the idea of buying a majority stake and this could include buying the entire stake of the lenders after conversion of the debt. Prospective investors have made it clear they want to be legally indemnified from any future claims against the company after they take over. AION Capital declined to comment on the issue and DHFL did not reply to queries.
 
In its resolution plan, the company has stated that, on June 2019, its secured debt stood at Rs 74,995 crore and its insecure debt stood at Rs 10,036 crore. Under the payment plan, public deposits (PDs) and non-convertible debentures held by retail investors of up to Rs 10 lakh will be paid in full, but any amount above that will be restructured as per the terms of unsecured creditors. Non-retail investors holding PDs will be treated in the same way as unsecured creditors.

 
A moratorium on payment of loans will range from five quarters to as many as 32 quarters, depending on the instruments.
 
DHFL’s resolution plan says the firm has given project loans to 178 accounts out of which 55 accounts constitute 85 per cent of the portfolio of Rs 11,854 crore. The  working capital requirement in 30 of these accounts is Rs 2,100 crore. The company also has 55 mortgage loan accounts with a total loan of Rs 6,225 crore. One account will require working capital to the tune of Rs 170 crore.
 
HDFL has also given loans to SRA projects worth Rs 11,967 crore. The additional funding required for these projects is to the tune of Rs 1,797 crore which, it is assumed, will be provided to the developer directly by a new lender or investor. For some large projects, priority funding to the tune of Rs 1,552 crore will presumably be given by a new lender or investor.