DHFL subsidiaries may see changes in management2 min read . Updated: 09 Jan 2020, 11:51 PM IST
- Revamp will give administrator more control over the insolvency process
- Under IBC, once appointed, the administrator shall manage the affairs of the firm
MUMBAI : The Reserve Bank of India-appointed administrator to Dewan Housing Finance Corp. Ltd (DHFL) is planning to effect management changes at the mortgage lender’s subsidiaries to control its insolvency process better, a banker aware of the development said, requesting anonymity.
According to the banker, among the items put to vote by the administrator for voting by DHFL’s lenders last week was one seeking to change nominee directors of subsidiaries and step-down subsidiaries. That item or resolution, the banker said, also mentioned that he was contemplating a management change in DHFL’s subsidiaries. Last November, the RBI took over DHFL’s board and named R. Subramaniakumar, a former managing director and chief executive of Indian Overseas Bank, as its administrator. DHFL became the first financial service provider to end up at the bankruptcy tribunal for debt resolution.
“The administrator said in the voting resolution that a change in management, even in the subsidiaries, will provide more control and help him preserve the value of the asset," the banker added.
Under the Insolvency and Bankruptcy Code (IBC), once appointed, the resolution professional or administrator shall manage the affairs of the company. Moreover, the powers of the board of directors are suspended, and the officers and managers of the company report to the administrator.
Section 28 of IBC says that the resolution professional (administrator in this case) shall order to change the management of the corporate debtor or its subsidiaries with approval of the committee of creditors (CoC). However, section 18 of the code also says that the administrator shall take control of the assets over which the company has ownership rights except assets of any subsidiary.
Emails sent to Subramaniakumar and DHFL remained unanswered till press time.
As per the mortgage lender’s FY19 annual report, its subsidiaries include DHFL Advisory and Investments Pvt. Ltd, DHFL Investments Ltd, DHFL Holdings Ltd and DHFL Changing Lives Foundation. However, the annual report added that although DHFL holds 100% of equity share capital of DHFL Investments Ltd, it does not exercise control over the company and, hence, is not considered a subsidiary company for the purpose of preparation of financial statements.
DHFL has already sold its stakes in associate companies Aadhar Housing Finance Ltd, Avanse Financial Services Ltd and joint ventures DHFL Pramerica Asset Managers Pvt. Ltd and DHFL Pramerica Trustees Pvt. Ltd in 2019.
Mint reported on 5 January that DHFL’s CoC has approved a plan under which the mortgage lender will resume advancing home loans beginning with ₹500 crore a month to arrest the decline in its loan book. Interestingly, since the insolvency resolution process was started, no payouts are being made, including dues to lenders who bought assets under securitization deals. Subramaniakumar had recently informed lenders that he had requested the RBI for some clarity on such payments and also told them to approach the regulator independently.
At present, DHFL’s assets under management (AUM) stands at ₹119,952 crore, of which ₹63,690 crore are in retail loans and the rest in wholesale. Lenders, bondholders, depositors, employees and other creditors have claimed dues of ₹96,396 crore from DHFL. This includes claims filed by 55,147 fixed deposit holders for ₹5,246 crore, of which ₹4,892 crore has, so far, been verified.