DHFL lenders are planning fresh bids with revised terms

Even though the four bidders – Oaktree Capital, Adani Properties, Piramal Enterprises and SC Lowy — are yet to receive any official communication from the administrator appointed by the Reserve Bank of India (RBI), sources close to them said this ...

Mumbai: Lenders to Dewan Housing Finance Corp. Ltd (DHFL) have decided to call a fresh round of bids for the troubled mortgage company, scrapping offers submitted last week, said several people with knowledge of the matter. This follows a late, unexpected offer by the Adani Group for DHFL in its entirety that angered the bidders that had already submitted their resolution plans by the deadline.

The decision to hold another round was taken by the committee of creditors (CoC) led by State Bank of India (SBI) that met on Monday. They also opened up the field, revising bid terms to allow prospective suitors to submit resolution plans for all or part of the business. Even though the four bidders – Oaktree Capital, Adani Properties, Piramal Enterprises and SC Lowy — are yet to receive any official communication from the administrator appointed by the Reserve Bank of India (RBI), sources close to them said this had been conveyed informally by a section of lenders.

Global Bidders Unhappy

The deadline for bids is expected to be sometime in the first week of December. “Next two weeks, the process of submitting improved offers should be over,” said one of the persons cited above.

The move was precipitated by the three of the four bidders threatening to abandon the process and possibly take legal action if the lenders accepted the bid by the Adani Group for all of DHFL, said the people cited above. It had originally bid for just the wholesale and slum rehabilitation (SRA) books.


Piramal even said it had reason to believe that details of its resolution plan had been leaked.

“The timing of the submission of the unsolicited offer, which is a few days after the details of the revised resolution plans (including the financial proposals) of all resolution applicants have become widely available, is also extremely suspicious,” it said in a letter to the CoC. “We do have reasons to believe that the details of our resolution plan (including the financial proposal) may have been leaked and have been considered for the purpose of making such an unsolicited offer.”

Sources close to Adani rejected the allegations and insisted that, as per their original expression of interest, they retain the flexibility to seek various options.

The CoC has also decided to bring in another legal firm, J Sagar Associates, they said. This follows allegations of favouritism levelled against Cyril Amarchand Mangaldas (CAM) by the bidders. Karan Adani, son of group chairman Gautam Adani, is married to Paridhi, daughter of Cyril Shroff, the law firm’s managing partner. At Monday’s meeting, Charu Desai, the authorised representative (AR) of fixed depositors, had raised a query about possible conflict of interest against CAM, said a top executive with knowledge of the matter.

Adani, Oaktree, SC Lowy and the Piramal Group declined to comment. DHFL didn’t respond to queries.

The global bidders are said to be unhappy about the changing deadlines and lack of transparency in the bidding process and may still opt out of the race.

“CoC seems potentially influenced here,” said one of the bidders. “In the letter received on November 13, 2020, they had clearly notified all the bidders that this would be final and bidders can’t change category and it had everyone's consent. Now they are going back on the terms, which is not in the best interest of the IBC process.”

A fund manager also in the fray warned that such indecision will impact future auctions of Indian stressed assets.

“This move sets a wrong precedent for the IBC (Insolvency and Bankruptcy Code) process and foreign investors may not be keen to invest in the Indian resolution process in the future,” he said.

With a debt of Rs 88,000 crore, DHFL is going through the bankruptcy resolution process after having defaulted on loan and bond repayments to banks, fixed deposit holders and pension funds.

Adani’s last-minute bid to acquire the entire DHFL for Rs 31,250 crore had raised the hackles of the others, with one person calling the move “disruptive and vitiated”. The revised Adani offer was only Rs 250 crore higher than rival Oaktree’s bid.

Piramal said in its letter that, as per insolvency rules, no bidder can submit an unsolicited or revised resolution plan past the deadline. It added that the administrator can seek the re-issue of resolution plans only if the ones received are unsatisfactory.

While the lenders had initially seemed inclined to accept the Adani bid, which offers the highest recovery and more cash payout upfront, the prospect of a boycott by other bidders left them in a bind. The CoC was originally expected to vote for the final bid on November 17, but that got delayed due to a stay by Mumbai’s National Company Law Tribunal (NCLT) bench. This followed National Housing Bank (NHB), a former regulator of housing finance companies, filing a case against DHFL claiming a higher share of recoveries. The CoC has now proposed a special package — lenders will set aside Rs 2,500-3,000 crore in an escrow account provided the NHB lifts its demand to stop the distribution of money recovered.

Kapil Wadhawan, erstwhile promoter of DHFL and currently in jail, had also filed an application before the NCLT. He demanded that his resolution plan based on an inter-creditor agreement (ICA), and said to have been signed by the requisite number of lenders, be considered by the CoC. The former promoter claimed to be offering an estimated Rs 45,000 crore spread over 15 years. The RBI administrator had put this matter before the lenders.




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