Oaktree Capital, Piramal Enterprises, Adani revise offers for bankrupt DHFL

Offer includes deferred payment, cash with HFC

The race for the takeover of bankrupt Dewan Housing Finance Corporation Ltd (DHFL) is seeing more action with bidders hiking their offers after the lenders (to DHFL) asked them in late October to do so.

Piramal Enterprises has increased its offer to around Rs 25,000 crore for the retail books of DHFL while Adani Group has put on the table Rs 3,000 crore for the wholesale and SRA (slum redevelopment authority) account. 

With this, the Piramal-Adani combine is almost matching the offer of their rival, US-based asset management company Oaktree Capital, which has revised its bid marginally to Rs 31,000 crore for the entire company from Rs 27,800 crore earlier. Both the Piramal and Oaktree offers include Rs 12,000 crore of cash on DHFL’s books, to be given to the lenders as part of their offers.

Piramal and Oaktree have offered to repay banks in deferred instalments over the next seven years with interest to be given to the lenders in the interim period.

Piramal’s earlier offer was around Rs 15,000 crore. Adani Group’s offer was Rs 2,250 crore. The group has made a conservative bid, keeping in mind the slowdown in the real estate sector. Both Piramal and Oaktree have offered interest to the banks at 6.5 per cent, according to a source close the development. That comes to around Rs 3,000 crore over seven years and is part of the offer.

“The Piramal-Adani combined offer looks more reliable because both are local companies and have a good track record. They have almost matched the offer by Oaktree Capital, which is offering only Rs 1,000 crore as upfront money while the rest is from DHFL’s cash on the books,” said a banker. The size of DHFL’s retail book is Rs 33,000 crore and will complement that of Piramal Enterprises, the banker said. In its earlier bid, Oaktree had offered to pay cash available with DHFL and an interest-bearing loan.

“There are several conditions to the Oaktree offer, such as getting all government permission or the offer will be withdrawn,” said the source. DHFL has a life insurance joint venture and if Oaktree takes over DHFL, it would breach FDI (foreign direct investment) norms in insurance and may not get the Insurance Regulatory and Development Authority’s clearance. 

The fourth contender, SC Lowy, had bid for the wholesale books, but the lenders consider its offer too low and also comes with riders. The committee of lenders may meet next week to consider the revised bids. But a banking source said the lenders were not interested in piecemeal sale and preferred a large cash offer in the initial stage itself. When contacted, the Oaktree Capital and Piramal Enterprises spokespersons declined to comment. In its last meeting on October 26, the committee of creditors had asked all the four bidders to revise their bids. The RBI-appointed administrator was of the view that the bids should be called after one year, when the cash with DHFL will increase by another Rs 10,000 crore. 

Even with the revised bids, the total write-off for the lenders will be significant, considering that the admitted liabilities of DHFL are close to Rs 95,000 crore.

In February this year, the lenders had sought offers for the company. Almost 24 companies had shown an interest in DHFL. 

The bids for the company were muted also owing to a forensic audit report by Grant Thornton, which revealed a Rs 14,500-crore hole in DHFL’s books. The report, which has been submitted to the National Company Law Tribunal (NCLT), has said there is a Rs 9,320-crore hole in the wholesale books, a Rs 1,707-crore loss on the SRA count, and a diversion of Rs 3,000 crore in retail loans. Recovering these loans is doubtful, the report said. The Indian lenders, mutual funds, and provident funds have an exposure of Rs 88,000 crore to the company. Of this, State Bank of India’s share is Rs 10,000 crore. The erstwhile promoters of the company are in judicial custody for alleged fraud and supposedly misappropriating funds.