Piramal may sell DHFL developer loans after deal

Piramal Capital & Housing Finance, which is set to acquire Dewan Housing Finance Corp. Ltd (DHFL), will likely put on sale the latter’s property developer loan portfolio of about Rs 53,165 crore as it moves toward becoming a retail mortgage lender.The group is working on an internal strategy to carve out the developers’ loan portfolio from the book, said people with knowledge of the matter. A final decision will be taken soon after the acquisition is completed.“It will likely sell the builder loan business to any other entity specialising in real estate loans only at a later date after it formally acquires the home financier,” one of the persons cited above told ET. With the DHFL acquisition, the merged entity aims to emerge as a retail franchise.Piramal will sell the loans for the right price, bankers said. The group did not comment on the matter.The fair value of the builder loans could be about one-fifth of the total size, according to the quarterly financial statements on the DHFL website. But this will be subject to market conditions and the repayment capabilities of the borrowers. The current valuation depends on multiple factors.“The total wholesale loan portfolio including interest receivable aggregating Rs 53,16,470 lakh has been ‘fair valued’ as at December 31, 2020, at Rs 9,85,320 lakh,” according to the financial statements. The wholesale book includes large loans to developers and builders that are stressed due to delays in projects.“The best thing would be to sell this book because it would lighten our balance sheet, remove the burden of heavy recoveries and make it more capital efficient,” said a person familiar with Piramal's plan.Plan Cleared with 94% Votes by LendersBillionaire Ajay Piramal’s bid for DHFL was approved by lenders with 94% votes about two months ago, trumping offers by Oaktree Capital and Adani Capital. Last month, the Reserve Bank of India (RBI) gave its assent to the resolution plan, which now needs approval from the National Company Law Tribunal (NCLT). The final outcome is expected by May-June. NCLT’s Mumbai bench resumed hearing the resolution plan submitted by DHFL’s lenders earlier this month.DHFL was forced into bankruptcy resolution with more than Rs 90,000 crore in debt to various lenders. Oaktree had envisaged a recovery of Rs 35,700 crore for creditors, while it was Rs 35,250 crore under the Pimral offer and Rs 32,860 crore in the Adani bid.In the first round of bidding, Piramal intended to acquire just the retail assets. However, it had to revise its offer to include developer loans as well to remain competitive with then frontrunner Oaktree Capital, which was the only entity that had bid for the whole company.“Even if you see the bids for just the wholesale business initially by Adani and SC Lowy, they were between 6 to 10 cents to a dollar, which gives an indication of the value of these loans,” said an executive.Well before the RBI dislodged the existing management, putting the home financier under the insolvency resolution process under an administrator, Piramal had been in talks to buy its assets. That fizzled out as the Piramal group was not keen to take on the wholesale loans, without which DHFL was unwilling to sell. 81751009

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