Piramal Group acquires DHFL and pays 14,700 crore in cash
Piramal Enterprises Ltd (PEL) announced on Wednesday that it has officially acquired the bankrupt Dewan Housing Finance Corporation Ltd (DHFL) by making the cash payment of 14,700 yen crore to creditors in accordance with the resolution plan.
DHFL was acquired by Piramal for a total consideration of 34,250 crore, which includes an initial cash component of 14,700 crore paid on Wednesday and the issuance of debt instruments of 19,550 crore (10-year NCD at 6.75 % per year on a half-yearly basis).
On top of that, the creditor got 3,800 crore in cash that was with DHFL when the administrator took over the entity for debt resolution.
Speaking virtually at a press conference, Ajay Piramal, Chairman of the Piramal Group, said it was the first successful resolution under the IBC path in the financial services industry.
“In terms of value, the transaction is among the most important resolutions to date, setting a precedent for future resolutions in the industry,” he said.
“We are very pleased to announce the payment of the consideration paid towards the completion of this exciting acquisition. This accelerates our plans to become a diverse, digitally-oriented financial services conglomerate that is focused on meeting the financial needs of our country’s unserved and underserved customers, ”he added.
Mr Piramal said 94% of creditors voted in favor of their resolution plan. He said all necessary approvals had been obtained from the Reserve Bank of India (RBI), the Competition Commission of India (ICC) and the National Company Law Tribunal (NCLT).
He said that Piramal Capital and Housing Finance Ltd. (PCHFL) will merge with DHFL and the merged entity will be named PCHFL. The merger will be completed within two weeks. The merged entity will be 100% owned by Piramal Enterprises.
Mr Piramal said most of DHFL’s creditors have recovered nearly 46% on the successful completion of the resolution process and the merger creates one of India’s leading housing finance companies with a focus on affordable finance.
With access to more than one million lifetime customers, it will be present in 24 states with a network of 301 branches and 2,338 employees. The plan is to add 1,000 additional employees in the short term and increase the branch network to 1,000 in five years.
He said the acquisition would increase Piramal’s retail lending portfolio five-fold and that this was in line with a strategic roadmap to transform Piramal’s financial services business over the past two years.
The company has raised 18,000 crore in equity capital and strengthened its balance sheet to take advantage of such opportunities.
He said the merged entity will have significantly reduced the debt-to-equity ratio, creating room for significant growth in the future.
In January 2021, DHFL’s creditors voted in favor of Piramal’s resolution plan.
Creditors, including FD holders, would recover a total amount of Rs 38,000 crore through DHFL’s resolution process.
There were 70,000 DHFL creditors.