The Mumbai bench of the National Company Law Tribunal (NCLT) on Monday cleared Piramal Group’s resolution plan for Dewan Housing Finance Ltd (DHFL), with certain conditions. The bench rejected Kapil Wadhawan's plea to get access to a copy of the resolution plan.
The NCLT, while delivering its verdict in the matter, noted that it would not question the commercial wisdom of the committee of creditors (CoC) which had approved Piramal Group’s resolution plan. However, the tribunal has asked the lenders to reconsider the inter-se reallocation of funds under the approved plan in favour of the small depositors, and Fixed Deposit holders.
“We are not remanding the plan back to the CoC,” the tribunal clarified. It would be up to the lenders now to decide whether they want to consider the reallocation or not, according to legal sources CNBC-TV18 spoke to. The NCLT’s detailed order copy is awaited.
“Resolution applicant's (Piramal Group) amount to stay same. Only inter-se allocation to be reconsidered. Following the ruling in Essar Steel Ltd., expect gestures from the Committee of Creditors. But cannot substitute their wisdom,” the Mumbai bench of the tribunal said.
The NCLT ruling will also be subject to final orders from the Supreme Court and the National Company Law Appellate Tribunal (NCLAT), which have DHFL’s former promoter Kapil Wadhawan plea pending still.
Kapil Wadhawan had challenged NCLAT’s May 25 order in the Supreme Court, which had set aside an earlier NCLT order asking lenders to consider a settlement offer of Rs 91,000 crores from Wadhawan to withdraw the company from insolvency proceedings. The Supreme Court is expected to hear the case on Tuesday, June 8.
Piramal Group welcomed the order and said it looks forward to a speedy culmination of the resolution process.
“We are pleased with the judgment today by the Honorable NCLT for approving our resolution plan for DHFL. This follows the endorsement of 94 percent of lenders, and the subsequent approvals from RBI and CCI, and reiterates the strength and quality of our bid. This is one of India’s largest IBC proceedings, and the very first in the financial sector. In that regard, it is an important and positive trendsetter for the future. The approval from NCLT is a significant milestone in DHFL's resolution and an affirmation of the sanctity of the IBC process in India. We are committed to collaborating with all relevant authorities, regulators, creditors and investors involved in this resolution and look forward to a speedy culmination of the resolution process,” a spokesperson for Piramal Group said.
Besides Piramal Group’s plan, the NCLT also ruled on Kapil Wadhawan’s plea seeking access to Piramal’s resolution plan, which was rejected. NCLT also ruled that National Housing Bank’s advance to DHFL is a trust money and should be returned to NHB Trust. NHB had asserted its right to receive proceeds from the resolution process on a preferential basis, which was turned down.
Piramal’s wholly-owned subsidiary, Piramal Capital and Housing Finance (PCHFL) has proposed to acquire DHFL for Rs 37,250 crore. The plan involves delisting DHFL, writing off equity and merging the businesses into PCHFL, according to people directly in the know. Sources in the know told CNBC-TV18 that Piramal Group may consider selling off DHFL’s wholesale book after the acquisition, as it is primarily interested only in DHFL’s retail assets.
Piramal Group’s total offer of Rs 37,250 crore includes an upfront cash payment of Rs 12,700 crore to the creditors, CNBC-TV18 reported earlier. Piramal Group has also offered Rs 3,000 crore of cash to lenders from the interest earned on the existing cash on DHFL’s books, another Rs 1,000 crore for the insurance stake, and Rs 1,000 additional cash for interest income after NCLT approval. This takes the total cash for the creditors at Rs 17,700 crore. The remaining Rs 19,550 crore is in the form of instruments payable over 10 years.
State Bank of India welcomed the NCLT ruling. Speaking to CNBC-TV18 after the verdict, SBI Chairman Dinesh Khara said that they expect to recover money from the DHFL account by the second quarter of the fiscal. The RBI-appointed Administrator for DHFL, R Subramaniakumar called the ruling a “historic verdict.” Subramaniakumar said the NCLT ruling will pave the way for building confidence in investors.
As for Piramal, the DHFL acquisition will be a potential turning point in its journey of granularising its book away from real estate loans. Retail forms about 11 percent, or Rs 5,000 crores of its Rs 45,000 crores loan book. After the DHFL acquisition, retail is expected to become 40 percent of the total portfolio, which will help the company move towards its target of having a largely retail-focused book.
CNBC-TV18 learned from the Piramal Group sources that DHFL will be delisted and its equity is written down to zero as per the resolution plan. Also, the Piramal Capital and Housing Finance Ltd (PCHFL) is going to be merged into DHFL as part of the resolution plan although the Board is yet to take a call on whether the DHFL brand will be retained or not, sources added.
Furthermore, Piramal won’t get DHFL’s deposit-taking licence after the acquisition. Sources also added that Piramal may consider selling off DHFL's wholesale book after acquisition.
Following the DHFL acquisition, PCHFL’s retail assets as a percentage of the total portfolio will go up from 11 percent to about 40 percent. The Piramal Group is hopeful of concluding the transaction within 90 days and may transfer money to an escrow subject to a final order from the Supreme Court.
—This article has been updated with more details
(Edited by : Ajay Vaishnav)
First Published: Jun 7, 2021 11:57 AM IST
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