Multiple people involved in the discussions said that Oaktree’s ₹36,646-crore offer has the quickest repayment timelines and a higher overall recovery but the equity infusion is only about ₹1,500 crore.
MUMBAI: It’s a toss-up between Oaktree Capital and Piramal Enterprises after they trumped Adani Properties in the fourth round of bids submitted on Monday for the troubled mortgage lender Dewan Housing Finance Limited (DHFLNSE -4.92 %).
Multiple people involved in the discussions said that Oaktree’s Rs 36,646 crore offer has the quickest repayment timelines and a higher overall recovery but the equity infusion is only about Rs 1,500 crore.
Piramal Group has offered to make the highest cash payment upfront of Rs 12,700 crore to DHFL creditors and a higher equity contribution of Rs 2,500 crore. Piramal has also reiterated his offer to merge his flagship finance firm Piramal Capital and Housing Finance with DHFL thereby swelling the combined entity’s networth to more than Rs 18,000 crore and cushioning its ability to issue debt. Piramal’s bid comprises deferred payment of Rs 19,550 crore but it is payable over a longer tenure of 10 years in the form of bonds. Piramal had earlier bid only for the retail book.
The NYSE listed asset management firm Oaktree, in comparison, has offered a higher deferred payment of Rs 21,000 crore worth of bonds over 7 years and an upfront pay out of Rs 11,646 crore.
Adani Properties, that had emerged as a highest bidder after a late, unsolicited bid after round 3, has only bid Rs 10,750 crore upfront and Rs 19,110 crore as deferred over a 7 year horizon. SC Lowy, the fourth contender also submitted a bid but only for the wholesale book. Their conservative revision has raised eyebrows considering their late entry had created furore amongst the other contenders.
Oaktree declined to comment. DHFL, Adani and Piramal didn’t reply to ET’s query.
People close to the situation said that Oaktree’s offer also includes Rs 1,000 crore of gains from the sale of the DHFL stake in the insurance business. Since Oaktree cannot own the stake due to foreign investment restrictions, it has proposed that lenders sell the stake and keep the gains but within a stipulated deadline of March 31, 2021. Oaktree has also proposed some options in case this deadline is not met.
Both Piramal and Adani have bid Rs 300 crore and Rs 250 crore approximately for the insurance stake.
Each bidder did a detailed presentation after the bids were opened.
Both Adani and Piramal bid for multiple options, along with their offer for the entire DHFL. While Adani also bid just for the wholesale and slum rehabilitation book; Piramal’s made a separate bid for just the retail book.
Lenders are however likely to prefer bids for the whole company in order to maximise value rather thna part sales.
The home financier has borrowed about Rs 88,000 crore from lenders, depositors, bondholders. With the current highest offer of Rs 36,646 crores, the lenders would still face a large haircut of Rs 50,385 crores or almost 58 per cent.
The lenders are likely to meet next few days again to vote for the highest bid. Predicting the winner is extremely difficult considering the different parameters involved such as net present value, cash component, bonds and gross interest revenue during the period of corporate insolvency resolution process (CIRP), sources said.
SBI Caps, the advisor to the lenders, is in the process of submitting a report on bids based on net present value, a key gauge to assess bids. Piramal seems to have offered upfront cash payments while Oaktree looks attractive in terms of net present value (NPV). Decisions will be taken valuing after hair-splitting analysis of every financial parameter, lenders said.
“The bids we have got are really close and are being analysed point by point. It’s a tight race between Piramal and Oaktree with Adani still in the picture,” said a person involved in the exercise.
“We will prefer bidders taking the whole company rather than part by part,” said another person on condition of anonymity.
All three bidders have structured the bids based on the debt that they propose to issue to lenders, the cash available in DHFL and the proposed equity infusion. People close to the situation said that upfront cash payment actually refers to the cash on DHFL books due to repayment of principal after bankruptcy plus the bidder’s equity.
This cash is divided into two buckets, repayment of interest by DHFL borrowers and repayment of principal. Both Piramal and Oaktree have agreed to transfer the Rs 3,000 crore of net interest repayment to the lenders. The principal repayment stays on DHFL books. Oaktree’s upfront cash of Rs 11,646 includes this cash of around Rs 10,100- Rs 10,200 crore and its own equity contribution of Rs 1,500 crore. Piramal’s equity contribution is higher at around Rs 2,500 crore and its new debt offering of around Rs 19,000 crore is lower than that of Oaktree.
Oaktree is also believed to have told lenders that it will take over 100% of DHFL at bargain basement value in case the cash on DHFL books crosses its upfront cash offer of Rs 11,646 crore by the time the insurance business is sold by the lenders but this could not be independently confirmed.
Last week, Oaktree had written to the RBI governor and the CoC questioning the sanctity of the December 14 deadline, chosen as the deadline for a fourth round, ET had reported on December 10. Oaktree also said “breaches in confidentiality” add to uncertainty and pointed to the necessity of a “fair, transparent and reliable process.
The DHFL bidding has been marred by controversies and corporate shadow boxing with allegations of favouritism, legal threats that caught global investor attention.
DHFL’s erstwhile promoter Kapil Wadhawan, currently in jail, has also sent a complete proposal for repayment to the creditors of DHFL to the RBI appointed administrator, PMO, ministry of corporate affairs, finance, committee of creditors and the banking regulator. The offer includes repayment of entire liabilities to the lenders (outstanding principal amount) due as at September 30, 3030 as per the financial results and a full repayment to all creditors within a period of 7-8 years, with upfront cash payment of Rs 9000 crores to repay in full the outstanding of small investors.