DHFL appoints former SBI executive Vajinath Gavarshetty as new CEO

Shareholders vote on debt conversion plan at the AGM on Saturday

Dewan Housing Finance Corporation (DHFL) has appointed Vajinath M Gavarshetty as the new CEO on the recommendations of the core committee of lenders as well as the firm’s internal committee. Gavarshetty is the former chief general manager of State Bank of India.

“This will help the lenders monitor the working of the company,” said a public sector bank executive.

The housing financier also held its annual general meeting on Saturday, in which it put forth various proposals before its shareholders. The firm has sought approval for conversion of debt into equity, or new debt instruments, as part of the resolution plan.

According to the draft resolution plan (RP), 2.3 per cent exposure to various categories of lenders — including debt from banks, bond holders, external commercial borrowings (ECB), borrowings from National Housing Bank (NHB), perpetual debt, commercial paper borrowings, and subordinate debt — will be converted into equity at the price of Rs 54, following which the creditors will own 51 per cent stake.

“…part of the resolution process that is currently underway, no principal haircuts will affect our creditors. Part of the debt will be converted into equity and will be offered to all permissible classes of creditors”, said Kapil Wadhawan, Chairman and Managing Director of DHFL, in his AGM speech.

The remaining loans will be converted into new loans with 9-, 10- and 21-year tenures.

In an exchange filing, the firm said it had presented a draft resolution plan to institutional creditors, including banks, financial institutions, mutual funds, insurance firms, and other institutional bond holders.

The draft RP segregates the company’s debt, based on loan assets, into three categories — retail assets, developer loans, and slum rehabilitation. It has broken down every category to be converted into multiple parts, each of which will have a different tenure/interest.

It had outstanding debt to of Rs 83,873 crore as of July 6 and loan assets to the tune of Rs 89,476 crore — including retail book of Rs 35,233 crore and wholesale book of Rs 47,610 crore.

Cash flows from existing retail assets are proposed to be used for restructuring liabilities of public depositors, to the tune of Rs 6,188 crore. However, no interest will be given to the public depositors.

Under the draft RP, Rs 24,619 crore of the overall Rs 83,873 crore will be converted into a debt paper of 21 years, with an interest rate of 0.0001 per cent. Another Rs 10,707 crore will have a tenure of nine years, without any interest.

Of the remainder, loans amounting to Rs 40,594 crore are expected to have a tenure of 10 years, of which Rs 24,872 crore will have a coupon rate of 8.5 per cent. 

Another Rs 13,364 crore will have a coupon of 10 per cent, while Rs 2,358 crore will bear no interest. In the AGM, the housing financier also sought shareholders’ approval to either sell, lease, or dispose of assets to reduce the financial burden. 

Other proposals put forth were to increase the authorised share capital of the company from Rs 828 crore to Rs 1,090 crore. “At present, the company has an overdue liability of around Rs 8,000 crore, which the company will repay once the debt resolution process completes,” Wadhawan added.

“Through the toughest phase that our company has been witnessing, it is noteworthy that we have repaid almost 40 per cent of our balance sheet without any fresh borrowings. This has been possible only through asset monetisation initiatives,” he said. Moreover, the board also sought shareholders’ nod to provide enabling rights to lenders for appointment of a nominee director on the board.

The voting on all resolutions discussed in the AGM will be done and the results declared in the next couple of days.