DHFL Locked In 10% Upper Circuit After It Receives Interest From 4 Bidders

On Monday, shares of Dewan Housing Finance Corporation Ltd. (DHFL) were locked in an upper circuit of 9.92 percent at Rs 13.85 on NSE after media reports said that the troubled NBFC reported bids from entities, including Adani Group, Piramal Enterprise, US-based distressed asset fund Oaktree Capital and Hong Kong's private banking firm SC Lowy.

The bidding process for the financial services player ended on 17 October. According to a PTI report citing sources, the Oaktree and SC Lowy submitted bids for DHFL on the last date of bidding.

The report said Oaktree has submitted a bid for the entire company at Rs 20,000 crore, as against the admitted liability of Rs 95,000 crore with Rs 10,000 crore cash in hand. If accepted, the bid would result in a write-off of Rs 65,000 crore for the SBI-led lenders of DHFL.

Adani Group has bid for DHFL's Rs 40,000-crore wholesale and Slum Rehabilitation Authority (SRA) portfolio, valuing it at Rs 3,000 crore, sources to PTI.

Piramal Enterprises has bid for DHFL's retail portfolio, quoting Rs 12,000 crore for the business and is asking for 18 percent yield on this portfolio, the report said.

The PTI report further said that the bid of SC Lowy comes with so many conditions that according to bankers, it is unlikely to be considered.

In November, the Reserve Bank referred DHFL, the third-largest pure-play mortgage lender, to the National Company Law Tribunal (NCLT) for insolvency proceedings.

DHFL was the first finance company to be referred to NCLT by the RBI using special powers under section 227.

Prior to that, the company's board was superseded and R Subramaniakumar was appointed as the administrator. He is also the resolution professional under the Insolvency and Bankruptcy Code (IBC).

Bankers are of the opinion that resolution of DHFL through NCLT will result in a massive write-off for the lenders and they will be stuck with over Rs 60,000 crore non-performing assets (NPAs).

SBI is the lead banker with an exposure of over Rs 10,000 crore to DHFL, while LIC and EPFO will also have to write-off nearly Rs 10,000 crore.

As of July 2019, the company owed Rs 83,873 crore to banks, the National Housing Board, mutual funds and bondholders.

According to a filing last month, fraudulent transactions worth Rs 17,394 crore were reported at DHFL during FY07 to FY19, as per a report of transaction auditor Grant Thornton.

Fund diversion by the promoters of DHFL resulted in lenders classifying DHFL account as "fraud".

Another fraudulent transactions worth ₹12,705.53 crore was reported by the forensic audit, followed by the third one earlier this month.

The third fraud worth ₹2,150.84 crore, by way of undervaluing the company's insurance subsidiary, was detected by Grant Thornton.