Tough call for DHFL lenders as Oaktree just manages to outbid Piramal

Adani does not make aggressive bid in fourth round; all offers have several conditions and banks will have to take a call by evaluating NPV of each

US-based asset management fund Oaktree Capital has emerged as the highest bidder for bankrupt housing finance firm DHFL by making an offer of Rs 36,646 crore for the entire company. The offer includes Rs 11,646 crore in upfront cash and deferred payments to the lenders. The offer also holds back Rs 1,500 crore, which will be given to banks only after DHFL’s insurance venture is sold and all tax liabilities from the sale are met.

The Piramal group, however, has offered an upfront payment of Rs 13,000 crore and the balance of its Rs 35,550-crore offer in deferred payments for the company. The group has also made a second offer — only for the retail portfolio at Rs 26,500 crore. 

The Adani group did not make an aggressive bid in the fourth round and was third in the race. All the offers have been made with several conditions, and the lenders will have to take a call by taking their net present value. The lenders are expected to meet in the third week of December to vote on the top two proposals.

Oaktree will keep the life insurance stake held by DHFL in a trust and once the proceeds of the sale come in after regulators' approval, the proceeds will go to the lenders, said a source close to the development. The Piramal group has made the offer with insurance stake sale proceeds worth Rs 200 crore going to the lenders. "There is not much difference between the Piramal and Oaktree offers as both are including Rs 3,000 crore of interest earned on the cash in the books of DHFL,” said a source. Besides, while Piramal's offer for the entire company is Rs 32,350, the Oaktree offer is worth Rs 32,646 crore. The banks have a tough call to make on the offers. DHFL has Rs 12,000 crore of cash on its books and all the offers for upfront cash are made based on that. The Adani group, however, has made an offer of only Rs 29,860 crore, lower than what it did in the third round. SC Lowy, which made a conditional offer of Rs 2,300 crore for the corporate loan portfolio, has not made any offer in the fourth round.

A lending source said they would have to carefully study all the offers as Oaktree, which is a foreign company, had offered deferred payments. “We have to see what guarantees are on the table from Oaktree – if they decide to exit India tomorrow. In the case of Piramal and Adani, the lenders have recourse to other measures as they are local companies,” the source said. The bonds issued by Piramal to the lenders will be much better rated than Oaktree's, another banker said.

The spokespersons for the Piramal and Adani groups did not comment, while Oaktree officials were not available for comment.