Banks in talks with Shapoorji Pallonji Group to resolve RHFL impasse

An SP group source said the dues from Reliance Home Finance are to a joint venture company and not Shapoorji Pallonji alone

Indian lenders have initiated talks with the Shapoorji Pallonji (SP) Group -- owned by the billionaire Mistry family -- on the latter’s objection to the debt restructuring plan of Reliance Home Finance Ltd (RHFL). Lenders are expecting a breakthrough before the month-end, which will see a debt resolution of Rs 11,000 crore owed by the Anil Ambani-led home finance company.

The Shapoorji Pallonji Group, which has also sought debt restructuring for its own debt worth Rs 30,000 crore, had moved courts, thus stalling the debt resolution process of RHFL. The home finance company owes Rs 200 crore to a SP Group company and it had defaulted on the loan last year.

When contacted, an SP Group source said the dues from Reliance Home Finance are to a joint venture company and not Shapoorji Pallonji and hence its exposure to RHFL is not part of its one-time restructuring (OTR) process. The issue is part of a court process and hence is sub judice, he said.

The official said the SP Group is in the process of finalising its own OTR scheme and is not at liberty to share any information at this point in time.

But SP Group's litigation has stalled RHFL debt resolution which has received four binding bids. While two of the bids from ACRE and Authum Investments are for all the assets of the company, the other two bids from Capri Global and Avenue-Arcil, were for only the retail assets.

The bids are considered to be extremely attractive to the lenders as the bid values have crossed the fair value as determined by two independent valuers appointed by the lenders.

However, the lenders' plan has hit a roadblock after a stay obtained by the Shapoorji Pallonji (SP) Group from the Delhi High Court against RHFL in November 2019.

As per the stay obtained by the SP Group, RHFL is prohibited from disposing, alienating, encumbering either directly or indirectly or otherwise part with the possession of any its assets, thus directly impacting the ongoing debt resolution.

According to a senior banker involved in the resolution process, it is imperative for the lenders of RHFL to settle the issue with SP Group for the successful closure of the ongoing resolution plan.

‘’We hope to finalise the successful bidder for RHFL’s assets in the next couple of weeks. Thus, it becomes more important now to resolve this impediment at the earliest,’’ the official said.

SP group is a secured lender with just Rs 200 crore of exposure out of total debt of Rs 11,200 crore i.e. less than 1.8 per cent of the total debt of RHF. 

In August this year, lenders led by Bank of Baroda had invited expressions of interest for the assets of Reliance Home Finance and Reliance Commercial Finance, both arms of Reliance Capital.

The resolution process is being managed by BoB Capital Markets (BoB Caps) and Ernst & Young (EY).