Prospective bidders wary of DHFL's retail loan book, to submit EoIs

According to its findings, the firm used over 100,000 bogus retail customer accounts to siphon off Rs 12,000 crore from the company

Several local and foreign financial institutions are among 24 companies — including Aion Capital, KKR Credit Advisors, Blackstone, Adani Capital, and Hero Fincorp — to submit their expressions of interest (EoIs) for Dewan Housing Finance Corporation (DHFL).

Prospective bidders, however, are wary of the fraud in its retail loan book that was unearthed by the Enforcement Directorate. According to its findings, the company used over 100,000 bogus retail customer accounts to siphon off Rs 12,000 crore from the company. 

“The bids will depend on what the other skeletons in DHFL’s books are. Unless the books are 100 per cent clean, no foreign institution will bid,” said a source close to the development.

Entities have submitted EoIs under two options. The first entails buying the firm in entirety, while the second involves division of its asset book into three sections — retail, SRA (slum redevelopment authority), and wholesale portfolio. 

Submission of EoIs will allow these financial institutions to inspect the books, after they sign a non-disclosure agreement. Other institutions that submitted their EoIs on Monday were Oaktree, Morgan Stanley, Goldman Sachs Group, Deutsche Bank, Warburg Pincus, SSG Capital, Edelweiss, and Lone Star. 

Assets were divided into three buckets —retail loans, loans to builders, and project financing. EoIs were invited from prospective bidders provided they meet the net worth and asset requirement criteria. 

While some have submitted EoIs for all assets, others have shown interest only in the retail loan book. Bidders for the retail loan book were asked to show a minimum net worth of Rs 3,500 crore and Rs 10,000 crore of assets under management (AUM). 

For builder loans (or SRA), net worth was set at Rs 500 crore with Rs 10,000 crore in AUM. For project loans, the requirement was Rs 1,000 crore of net worth and Rs 4,000 crore in AUM.

The housing financier owes close to Rs 15,000 crore to fixed deposit holders, and another Rs 38,000 crore to banks. DHFL’s total debt is estimated at a whopping Rs 88,000 crore, including the amount owed mutual funds and bond holders.

In October, a forensic audit initiated by Union Bank of India and conducted by KPMG had confirmed that the promoters of DHFL had diverted funds worth Rs 20,000 crore, and in several cases there was no proper record kept on the end use of funds lent by DHFL to over 40 entities.

On January 27 this year, the ED arrested DHFL promoter Kapil Wadhawan, in connection to a money laundering probe against late gangster Iqbal Mirchi. The case related to Mirchi’s Mumbai properties, called “proceeds of crime” by the ED. 

According to investigating agencies, few properties were sold to Sunblink, the company linked to Kapil and his brother Dheeraj. In November, the Reserve Bank of India took over the management of the company and started bankruptcy proceedings.