DHFL debt resolution plan approved, shares to be delisted: All you need to know

By hindustantimes.com | Edited by Amit Chaturvedi, Hindustan Times, New Delhi

PUBLISHED ON JUN 08, 2021 10:52 AM IST

Debt-ridden mortgage firm Dewan Housing Finance Corporation (DHFL) said on Tuesday that shares would be delisted from stock exchanges post acquisition by Piramal Capital and Housing Finance, Livemint reported. The Mumbai bench of the National Company Law Tribunal (NCLT) on Monday gave its conditional approval to Piramal Group’s bid for DHFL.

As part of resolution process under the Insolvency and Bankruptcy Code (IBC), lenders led by Union Bank of India in January this year favoured the bid by Piramal Capital and Housing Finance to take over the beleaguered housing finance firm.

“We are pleased with the judgment today by the NCLT for approving our resolution plan for DHFL. This follows the endorsement of 94 per cent of lenders, and the subsequent approvals from RBI and CCI, and reiterates the strength and quality of our bid,” Piramal said in a statament on Monday.

Here is everything you need to know about the resolution process:

• The Piramal group is acquiring DHFL for ₹37,250 crore, but with a few conditions. “Resolution applicant’s amount to remain the same. Only inter-se allocation to be reconsidered,” the Mumbai bench of NCLT ruled.
• The tribunal has also asked DHFL’s committee of creditors (CoC) to consider giving more money to small fixed deposit holders.
• Piramal Group’s 37,250 crore offer includes ₹12,700 crore in upfront cash, ₹3,000 crore in interest income on DHFL’s books and ₹19,550 crore worth of non-convertible debentures to be repaid over 10 years.
• Going forward, Piramal Capital will decide on whether to absorb DHFL’s wholesale book, divest it or hive into a separate division.
• The company said that approval from NCLT is a significant milestone in DHFL’s resolution and an affirmation of the sanctity of the IBC process in India.
• Piramal Capital had received approvals from the Competition Commission of India (CCI) in April and the Reserve Bank of India in February. Its resolution plan had received 94% votes from DHFL’s creditors.
• The NCLT decision is a blow to DHFL’s former promoter Kapil Wadhawan’s attempt to take over the stressed mortgage lender. Last year, Wadhawan had made his settlement offer to the Committee of Creditors (CoC). The offer was rejected by the creditors, citing lack of credibility and the valuations attached to the proposed asset sales. In the plan, Wadhawan had proposed to repay lenders by selling assets.
• In November 2019, RBI had referred DHFL – then the third-largest pure-play mortgage lender – for resolution under the IBC.
• It was the first finance company to be referred to NCLT by the RBI using special powers under Section 227 of the IBC.
• DHFL had gone bankrupt with more than ₹90,000 crore in debt to various lenders, including banks, mutual funds and individual investors who kept fixed deposits with the company.