Dewan Housing Finance Corporation, the publicly listed companyestablished to enable access to economical housing finance to the lower andmiddle income groups in semi-urban and rural parts of India, has theunfortunate title of being the first financial services company to undergo insolvencyproceedings.
To salvage the company, two Indian companies Adani Group andPiramal Enterprises and two foreign companies, US-based Oaktree and HongKong-based SC Lowy, in total four companies have submitted their bids, the applicationdeadline for which has been closed recently.
In November, the Reserve Bank referred DHFL, the thirdlargest pure-play mortgage lender, to the National Company Law Tribunal (NCLT)for insolvency proceedings.
DHFL was the first finance company to be referred to NCLT bythe RBI using special powers under section 227.
Adani Group has bid for the wholesale and slumrehabilitation authority portfolio. Piramal Enterprises, on the other hand, hasbid for its retail business.
Further, Oaktree has submitted a resolution proposal for theentire company with a bid value of Rs 20,000 crore.
According to sources, Oaktree has submitted bid for theentire company and the bid value is ₹20,000 crore as against the admittedliability of ₹95,000 crore with ₹10,000 crore cash in hand.
Therefore, sources said, accepting Oaktree bid would resultin a write-off of ₹65,000 crore for the lenders led by State Bank of India(SBI).
Adani Group has bid for DHFL's ₹40,000-crore wholesale andSlum Rehabilitation Authority (SRA) portfolio, valuing it at ₹3,000 crore,sources said.
Piramal Enterprises has bid for DHFL's retail portfolio. Ithas quoted ₹12,000 crore for the business and is asking for 18 per cent yieldon this portfolio, they said.
According to bankers, the bid of SC Lowy, the fourth bidder,comes with so many conditions that it is unlikely to be considered.
Bankers are of the opinion that resolution of DHFL throughNCLT will result in a massive write-off for the lenders and they will be stuckwith over ₹60,000 crore non-performing assets (NPAs).
The situation looks grim for the lenders to DHFL as in anycase, writeoffs around Rs 60,000 seem inevitable.
DHFL was sent to bankruptcy after the government on November15, 2019 enabled the Reserve Bank to sent large financial services companies, excludingbanks, to NCLT for insolvency proceedings.
In addition, the company is mired in frauds. Last month,auditor Grant Thornton reported finding frauds worth Rs 17,394 crore during FY2007 to FY 2019.
Additional fraudulent transactions worth ₹12,705.53 crorewas reported by the forensic audit, followed by the third one earlier thismonth.
The third fraud worth ₹2,150.84 crore, by way ofundervaluing the company's insurance subsidiary, was detected by GrantThornton.