 "DHFL")
Backed by the value maximisation experience during Binani Cement's sale to Ultratech, the State Bank of India, which has the largest exposure to bankrupt Dewan Housing Finance Corporation (DHFL), has decided to back yet another round of bidding for the housing finance company so that the asset's value can be maximised.
According to a lender source, the SBI representative said in the CoC (committee of creditors) meeting that all the bids received till now needs to be opened and a final round of bidding also needs to be done -- subject to CoC's approval based on voting. SBI has the highest exposure to DHFL at Rs 10,000 crore.
In the Binani Cement insolvency process, a late but far superior financial bid by the Aditya Birla group’s Ultratech was not only accepted by the lenders. but even upheld by the Supreme Court. In the DHFL case, the process is still on and bids of applicants are still being negotiated and the liquidation value is still not known.
As per the minutes of CoC meeting, the SBI representative said in order to keep the process transparent, both sets of bids (i.e. bids received on November 17th, 2020 as well as the bids that will be called at a later date) must be opened simultaneously at a later date. The CoC is expected to seek fresh bids by all bidders by December 10th.
Four companies are vying for DHFL’s assets including the Adani group, and Oaktree which have bid for the entire company while Piramal is bidding only for the retail book and SC Lowy is bidding for the wholesale book.
After the Adani group was not allowed to make the third round bid for the entire company, it wrote to the RBI administrator that it is ready to put more money on the table for DHFL's assets after it noticed that other bidders are undervaluing the company. In its communication to the DHFL’s administrator on November 22nd, the Adani Group said the rival bidders are, in fact, forming a "cartel'' to prevent value maximisation. But when Adani group informed the administrator on November 12 about its new offer that it would throw in its hat for the entire company, the Administrator denied it the chance and said it would entertain bids only for those assets for which the candidates had originally put in their bids for, thus scuttling Adani Group’s plans and preventing value maximisation. Adani had earlier bid only for the wholesale book but had submitted an expression of interest (EOI) for all assets. The denial was despite the fact that the bidding document says a bidder can submit an offer at any time (till NCLT clears a plan) and the Administrator and lenders should always try to maximise the value of the asset.
In the letter, the group said it further improved its unconditional offer, which included upfront cash of Rs 11,000 crore and another Rs 19,000 crore to be paid to the lenders with interest. Further, it has said it could consider a further improvement when revised bids are called. Piramal had made a conditional bid only for the retail book for Rs 25,000 crore while SC Lowy had bid only for the wholesale book. Oaktree had also bid for the entire company with deferred payment option.
The group said some of the bidders had formed a “cartel” to restrict full and fair competition in the auction process. According to Clause 7.7 of the resolution document, the lenders and administrator are within their rights to forfeit the earnest money of such resolution applicants.
Spokespersons of Adani, Piramal and Oaktree declined to comment. An email sent to the RBI Administrator did not elicit any response.
In the CoC meeting, the SBI informed the CoC that it must be made clear to the bidders that no bids will be entertained after the final bids are submitted on December 10th. The legal advisor to the Administrator of DHFL suggested that suitable wordings may be incorporated in the communication to the bidders that by participating in the final round of bidding, the applicants will not be allowed to submit any revised bid thereafter.
The Administrator also reiterated its earlier point that if the applicants submit revised bid, whether such revised bid is to be considered or better of the both the bids (i.e. the bid submitted by applicants on 17th November or the revised bid) needs to be taken, should he analysed from the legal angle and only the legally valid option should be mentioned in the resolution. The voting on the resolution seeking fresh bids will end on Saturday.
Bidding War
* Lenders, fixed depositors want value maximisation
* Binani Cement example of value maximisation to be followed
* Forfeit deposits of rival bidders who are preventing fair, transparent auction: Adani
* Banks may seek fresh bids by Dec 10th -- subject to voting
