Billionaire Ajay Piramal on Monday made a strong case for the resolution plan submitted by his group for the troubled Dewan Housing Finance Corp. Ltd (DHFL). In a letter to DHFL’s administrator R. Subramaniakumar, he said Piramal Capital and Housing Finance Ltd (PCHFL)’s resolution plan offers high certainty and can be implemented irrespective of the outcome of the sale of the insurance business.
Piramal also urged the administrator to consider the timely closure of the resolution process, to maintain its sanctity. DHFL has already witnessed three rounds of bidding over the past two months.
“I am now perplexed to note that a need for ‘further clarifications’ has been expressed. And in some instances, these ‘clarifications’ have started to take a commercial colour yet again. Requests for change in terms like escrow amounts, cut-off date for financial creditors’ entitlement, etc., are, in fact, commercial changes. In a situation where the competing bid lacks implementability, I find that we are in a cycle of repeated negotiations with ourselves,” Piramal said.
The letter comes after both bidders, Oaktree Capital and PCHFL, agreed to improve their bids for DHFL as the sale process entered the final negotiations. Piramal’s bid of ₹32,250 crore in the fourth round was slightly lower to Oaktree’s bid of ₹32,700 crore.
Following the meeting on 18 December, the committee of creditors (CoC) had asked these bidders to explain their position on the acquisition of DHFL’s indirect shareholding in Pramerica Life Insurance Ltd, through wholly-owned subsidiary DHFL Investments Ltd, and the holdback clause relating to the treatment of tax liabilities. Holdback entails withholding a part of the payment for acquisition until certain post-closing conditions were met.
Oaktree and PCHFL proposed to set aside ₹1,500 crore and ₹300 crore, respectively, out of the financial creditors’ entitlement amount in an escrow account to meet tax liability arising from the sale of investment in the insurance firm.
“The Piramal resolution plan for DHFL offers high certainty to CoC members that it would be implementable, irrespective of the outcome of the sale process currently underway for the insurance business. As it currently stands, the competing foreign financial investor’s resolution plan is unimplementable till such time that a credible, regulatorily acceptable alternative buyer for the insurance business emerges,” Piramal said.
Piramal also clarified that his group’s resolution plan does not include any sunset clause or any rights to revoke the plan.
On the other hand, Okatree’s bid has stated that if the plan is not approved and implemented by 31 March 2021, or if there is any deterioration in DHFL’s asset quality or deviation from assumptions in the bid, it will reserve the right to discuss repricing or to revoke its bid.
