While the minimum net worth requirement of bidders was slashed to ₹3,500 crore from the ₹5,000 crore proposed by the Reserve Bank of India (RBI)-appointed administrator, the criteria for assets under management (AUM) and committed funds were lowered to ₹10,000 crore and ₹3,500 crore, respectively, from ₹12,000 crore and ₹5,000 crore, the person cited above said on condition of anonymity.
“Lenders said that a high minimum net worth criterion will leave out a lot of potential investors from the bidding process and, therefore, it should be reduced, along with other requirements," the person said, adding that even SBI Capital Markets Ltd, the adviser to banks on the DHFL case, sought lower eligibility requirements.
Banks’ fear that potential investors may stay away from the bidding process could have been influenced by their experience in the case of bankrupt Jet Airways (India) Ltd, which drew a tepid response from bidders despite multiple attempts to revive the airline.
“Greater participation will lead to better price discovery of the asset. If suppose, the minimum net worth requirement is too high and only a couple of bidders show interest, lenders may not have enough leverage in the process and may lose out on price maximization," said Nirmal Gangwal, founder of debt restructuring advisory firm Brescon and Allied Partners Llp, adding that setting the criteria for potential bidders is the prerogative of the committee of creditors (CoC).
DHFL’s lenders and other creditors are currently voting on the proposal to approve the eligibility criteria of bidders.
Creditors to DHFL last met on 16 January to discuss the eligibility criteria for prospective resolution applicants. Other things on the agenda were updates on the insolvency process since the first meeting on 30 December; a resolution strategy for the lender; and an update on operations.
In the 30 December meeting, CoC approved a plan under which the mortgage lender could resume disbursing home loans, beginning with ₹500 crore a month, to arrest the decline in its loan book.
DHFL’s assets under management are at ₹1.19 trillion, of which ₹63,690 crore is in retail loans and the remaining in wholesale.
Administrator R. Subramaniakumar has decided to segregate DHFL’s loan book into three groups: the first group comprises retail assets, investments and unsecured loans; the second consists of construction finance loans, mortgage loans, corporate loans, intercorporate deposits and pass-through certificates; and the third comprises loans to entities for Slum Rehabilitation Authority (SRA), Mumbai projects.
“It was discussed in the meeting that three projects are part of the SRA loans disbursed by DHFL. These are Juhu Galli, Irla and Chembur projects," the person cited earlier said. “SBI Caps informed that ₹2,500-3,000 crore in working capital loans would be required to complete these projects."
An email sent to the administrator remained unanswered till the time of going to press.
Meanwhile, the administrator also told participants of the 16 January meeting that the ₹4,100 crore claim by Prudential International Insurance Holdings Ltd was rejected for lack of documentary proof supporting the claim. The total amount verified by the administrator was ₹86,035 crore, of which ₹5,015 crore was towards 60,717 fixed deposit holders.
On 20 November, RBI superseded DHFL’s board and later referred the mortgage lender to the National Company Law Tribunal (NCLT), citing governance concerns and payment defaults by the firm as reasons for superseding the board.
DHFL is the first non-bank lender to be referred to NCLT under new rules notified by the government on 15 November.
According to the RBI order cited by DHFL in a regulatory filing in November, a statutory inspection of DHFL conducted by the National Housing Bank with reference to its position as on 31 March 2018 revealed deterioration in its financial position. In September, RBI also superseded the board of crisis-hit Punjab and Maharashtra Cooperative Bank Ltd and appointed Jai Bhagwan Bhoria as the bank’s administrator.