Ajay Piramal wins the most contested bankruptcy bid for Dewan Housing Finance Ltd

Ajay Piramal wins the most contested bankruptcy bid for Dewan Housing Finance Ltd

Billionaire Ajay Piramal won the most contested bankruptcy bid for Dewan Housing Finance Ltd., trumping distressed fund Oaktree Capital and Adani Capital as creditors overwhelmingly voted for the drug-maker turned real estate and mortgage lender.

Piramal’s bid received about 94 percent of votes of the creditors, followed by Oaktree at 45 percent, sources told ET. Adani Capital obtained about 18 percent, people said people familiar with the voting pattern. Lenders/investors have the option to vote for multiple bids.

The official announcement is expected later in the night or Saturday, said those people who did not want to be identified. Rules stipulate that the winning bidder is backed by at least 60 percent of lenders by value.

“Lenders/investors seem to have ignored apparent value but delved deep into bids’ intrinsic value’’ said one of the persons aware of the developments.

“We need to see now if there is an extended legal battle based on this outcome,” the person said.

Piramals and Oaktree have been in a slugfest for weeks over how the creditors should treat the rival bids as they differed in qualitative and quantitative parameters. Both claimed that their bids were superior to the other as the key Net Present Value calculation based on how much upfront cash they provide and over how many years they repay the remaining debt.

The Reserve Bank of India put DHFL under administrator after charges of siphoning off of funds and corruption were filed against the promoter family including the chairman Kapil Wadhawan. The Enforcement Directorate and other central agencies are pursuing prosecution against the former management.

DHFL went bankrupt with more than Rs. 91,000 crores in debt to various lenders including banks, mutual funds and individual investors who kept fixed deposits with the company.

Oaktree envisages a recovery of Rs. 35,700 crores for creditors, Piramal’s is at Rs. 35,250 crores and Adani’s Rs. 32,860 crores. A key concern for lenders is Oaktree’s submission of a rating company opinion which suggests a triple A rating for its debt without disclosing which agency it was. Piramal’s rated double A.

As lenders put these proposals to vote both Piramal and Oaktree have been writing to lenders to consider their proposal citing various issues including the insurance venture which became a thorn on the side of Oaktree which by regulation couldn’t buy.

But Oaktree said its offer was superiod based on communication that its debt would be rated triple A without saying which agency had promised such a rating.

Creditors’ quantitative evaluation gave Piramal’s offer 94 points to Oaktree’s 85 and Adani got 79 points, people familiar with the matter had said. When it came to the equity portion, Piramal scored a full 10 while Oaktree got 2.6.

The bids were very close but Piramal was preferred because it is an Indian company with deep pockets and it wanted to merge this business with its existing business. No doubt Oaktree was higher on many parameters but including based on net present value but the uncertainty of insurance business was a negative for them. All in all both sides lobbied hard and Piramal really used all resources to get thus through,” said a person involved in the negotiations.

Lenders have however not ruled out litigation with regards to this deal as the loser might challenge it in court citing technicalities.

“There is a strong possibility that things will go to court but we had to take a call which we have done. Other things are not in our hands,” said another person involved.

Public sector banks, led by State Bank of India and Union Bank of India, which owned as much as 42% of the loans have understood to have preferred Piramal. Some lenders and debenture holders voted for both Piramal as well as Oaktree which is possible under the bankruptcy rules as creditors can make a preference for more than one bidder.

The support of PSU banks was crucial in Piramal offer being chosen.

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