Piramal holds upper hand in DHFL bidding war

Hyderabad: With the insolvency resolution process of the Dewan Housing Finance Limited (DHFL) near completion, the market is waiting to see how the Committee of Creditors (CoC) will vote to resolve the issue on Thursday.

Incidentally, the DHFL is the first financial services company to go through the Insolvency & Bankruptcy Code (IBC). There have been numerous arguments made by all the bidders. Some companies submitted their bids even though they have no eligibility. It seems there is a fresh bid with CoC which has had over two weeks time to weigh the options before voting this Thursday.

Sources said upon carefully studying the bids submitted by various entities, the two that have stood out have been Piramal Group and Oaktree Capital.

Piramal bid offered highest upfront cash and its bid is considered as the best bet. "Piramal plan includes the highest upfront cash that allows the creditors higher liquidity in this option. It's bid also scores very high on the mandated scorecard for evaluation," sources added. Though Oaktree's bid also stood out, it has multiple regulatory issues which might attract legal hurdles and challenges, prolonging the resolution process, it's said. Sources point out that Oaktree, a foreign player, can't own insurance business in India as it will violate the country's FDI norms.

While some have suggested an AIF solution, this has no precedent in India's insurance sector which is home to 24 life insurance companies. "IRDA is unlikely to approve the route that Oaktree is proposing. This is critical for Oaktree as the resolution will be incomplete if the insurance business remains unresolved," sources said.

The Piramal bid has an implementable straight offer of Rs 1,000 crore for the Insurance business, payable at DHFL level. This is unlike the Oaktree offer which is payable at the level of a subsidiary (DIL), with no clear path to extract that amount for the benefit of the DHFL lenders.

Besides, Piramal is infusing Rs 3,800 crore of equity into DHFL, with another Rs 16,000 crore available in the financial services business for future.

It is said that the CoC may go for a bid that is most lucrative, regulatory compliant and most of all offers the fastest turn-around time for the creditors. The implementation of the Piramal plan is expected to be much shorter, as insurance related complications don't exist. This reduces open ended commercial risk for lenders on interest income.