Lenders led by State Bank of India (SBI) are set to log recoveries of ?37,400 crore this week, as Piramal Capital and Housing Finance’s (PCHF) acquisition of Dewan Housing Finance (DHFL) should be completed this month itself, multiple people aware of the deal told ET.
Piramal has completed the acquisition of DHFL for Rs 34,250 crore which includes a cash component and non-convertible debentures.
The total consideration of Rs 34,250 crore includes an upfront cash payment of nearly Rs 14,700 crore and issuance of debt instruments of nearly Rs 19,550 crores (10-year NCDs at 6.75% p.a. on a half-yearly basis).
In what is the largest recovery of stressed assets, banks will get a mix of cash and NCDs in the DHFL insolvency resolution case.
This is the first successful resolution under the IBC route in the financial services sector and amongst the largest resolutions in value terms.
The recovery will help the banks to improve their bottomline.
Here’s what the contours of the deal are:
The creditors of DHFL (including FD holders) would recover an aggregate amount of Rs.38,000 crores from the resolution process of DHFL.
This amount comprises of
(i) Rs. 34,250 Crores to be paid by PCHFL as a combination of cash and Non-Convertible Debentures and
(ii) an amount of ~Rs. 3,800 Crores, which is the entitlement of creditors (as per the resolution plan), from the cash balance available with DHFL.
Around 94% of the creditors had voted in favor of Piramal’s resolution plan. According to the regulatory filing, most of the DHFL creditors will recover around 46% through the acquisition by Piramal Group.
The resultant entity will be called PCHFL.
“We are very pleased to announce the consideration payment made towards the completion of this exciting acquisition. This accelerates our plans to become a leading digitally oriented, diversified financial services conglomerate that focuses on serving the financial needs of the unserved and underserved customers of our country. An important characteristic of any advanced economy is a robust insolvency code. The landmark bankruptcy reforms have made it possible to solve complex resolutions like this in a more complete and timely way,” said Ajay Piramal, Chairman, Piramal Group.