Piramal Enterprises led by billionaire Ajay Piramal on Wednesday announced that the acquisition of Dewan Housing Finance Corporation (DHFL) by paying the latter’s creditors Rs 38,000 crore. This includes Rs 34,250 crore to be paid by Piramal Capital and Housing Finance (PCHFL) in cash and non-convertible debentures, and Rs 3,800 crore from the cash balance of DHFL.
Throwing light on the acquisition, Ajay Piramal, chairman, Piramal Group, said, “We are very pleased to announce the consideration payment made towards the completion of this exciting acquisition. This accelerates our plans to become a leading digitally oriented, diversified financial services conglomerate that focuses on serving the financial needs of the unserved and underserved customers of our country.”
The creditors of DHFL (including FD holders) would recover an aggregate amount of Rs 38,000 crores from the resolution process of DHFL. This amount comprises of Rs 34,250 crore to be paid by PCHFL as a combination of cash and non-convertible debentures and an amount of Rs 3,800 crore, which is the entitlement of creditors (as per the resolution plan), from the cash balance available with DHFL, the Piramal Group said.
“There were 70,000 creditors of DHFL and most of them are recovering nearly 46 per cent of their pending dues through the successful completion of resolution process,” it further mentioned.
After this transaction, the retail loan book of the merged entity would be 5 times. This will also lead to a significant diversification of the overall loan book. This paves the way for achieving nearly 50:50 retail wholesale mix in the near-term. This will improve the Asset Liability Management (ALM) profile of our Financial Services business. The transaction will also significantly improve the utilization of equity in our Financial Services business, with net debt-to-equity of the Financial Services business getting efficient from 1.6x as of Jun-2021 to 3.5x in the near term, the press release said.
DHFL is the first financial services company to be resolved under a special window of the IBC. The Reserve Bank of India had put the company under the bankruptcy process in November 2019. DHFL had collapsed in 2018 when it defaulted on its dues with a severe liquidity crunch after Infrastructure Leasing & Financial Services (IL&FS) went bust in late 2018. Enforcement authorities launched against the DHFL promoters Kapil and Dheeraj Wadhawan revealed several charges of financial irregularities and alleged ties with the underworld. DHFL case was taken up in the National Company Law Tribunal (NCLT) in December 2019 and since then creditors have been attempting to recover their dues. This long bidding process was full of twists and turns- the main competitors who were fray were Piramal Group, the Adani Group and Oaktree Capital.
“The combined entity will have 301 branches, 2,338 employees and over 1 million lifetime customers. We will be a dominant player in the fast-growing affordable housing segment. Over the last two years we have successfully built our next-gen technology platform, advanced analytics engine and AI/ML capabilities. This acquisition allows us to implement these technologies across a much larger base of customers. The new merged entity is poised to be at the forefront of the digital-first retail lending market in India.” Anand Piramal, executive director, Piramal Group said.
In January this year, the Piramal group had won the bid for DHFL after a majority of the creditors voted for its bid over competitor Oaktree Capital. Its resolution plan for DHFL received approval from the National Company Law Tribunal (NCLT) in June. Last month, the top officials of Piramal Enterprises had said that the group was on track to complete the transaction within 90 days of NCLT approval. The Piramal group has arranged funds from Standard Chartered Bank and Barclays Bank to finance the acquisition.
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