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The flurry of bids and counterbids for Dewan Housing Finance Corp. Ltd (DHFL) continued with Piramal Capital and Housing Finance Ltd sweetening its offer to top rival Oaktree Capital’s bid, two people directly aware of the development said.

Piramal raised its total offer for DHFL to 38,250 crore on 24 December, improving on Oaktree’s commitment of 36,400 crore, and emerging as the top bidder based on evaluation metrics set by the investment banker and the committee of creditors (CoC) to the bankrupt lender, the people said on condition of anonymity.

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The two groups are engaged in an intense bidding war to take control of DHFL, which has seen its asset quality improve as India lifted lockdown curbs.

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Sarvesh Kumar Sharma/Mint


Spokespeople for Piramal and Oaktree declined to comment. Until the fourth round, Oaktree’s bid was the highest among the two bidders with Piramal’s offer at 32,250 crore. “Late on Friday, as per the evaluation metrics based on a formula stipulated under the Insolvency and Bankruptcy Code, the CoC found Piramal Group’s total score to be 91 points on a scale of 100, while Oaktree scored 85 points," said one of the two people cited above.

According to the final evaluation parameters, Piramal and Oaktree scored the maximum 15 points on qualitative parameters. But, on the quantitative metric, Piramal scored 76 and Oaktree 70, the person said.

“This is because of two factors—one, Piramal’s upfront payment to creditors and the equity infusion offer into DHFL are much higher than Oaktree. Second is Piramal’s offer for an outright buyout of the insurance business, which will immediately go to creditors. This commitment has an element of certainty, which Oaktree’s commitment does not have," the person said.

“Oaktree’s offer for the insurance business is to credit 1,000 crore in an escrow account, conditional and contingent on the outcome of legal cases against DHFL. This has lowered Oaktree’s score as per the internal evaluation metrics assessed by SBI Caps and CoC members on Friday and Saturday," said the second person.

In a letter to the Reserve Bank of India and DHFL’s lenders late on Sunday, Oaktree said that by selecting Piramal, the lenders will be shifting their exposure to a new entity, whose assets have not been independently inspected.

Oaktree asked the lenders’ panel to consider the possibility that the merged entity of Piramal Capital and DHFL could face imminent stress.

Oaktree said though Piramal has suggested it will infuse 3,800 crore into DHFL in the first 12 months, it is not a binding commitment. “Oaktree has, on the other hand, committed to providing a fresh capital infusion of 1,000 crore as a cushion to DHFL lenders, by way of a firm commitment letter.

“In terms of total recovery being offered to financial creditors as well as net present value, Oaktree’s financial proposal is clearly superior to all other PRAs (bidders). It is clear, however, that the benefit of any proposed fresh capital infusion by the second-highest bidder (Piramal) will not be available to the lenders of DHFL, but rather to a co-mingled entity that is burdened by other liabilities," said Oaktree’s letter.

On 22 and 23 December, both Oaktree and Piramal Group made a number of additional commitments over and above their fourth-round bid amounts. “As per the final bid structure, Oaktree has offered to infuse at least 1,000 crore equity into DHFL within 10 months if it wins," said the first person. Piramal has already committed to infusing around 4,000 crore into DHFL within 10 months if it wins the bid.

Also, Piramal has sweetened its offer for the insurance business. The company has now offered to buy out the entire life insurance business of DHFL’s Pramerica Life Insurance Co. Ltd unit for 1,000 crore. Earlier, Piramal had offered to pay 300 crore for the 51% stake held by DHFL Investments Ltd (DIL) in the life insurer.

“Oaktree has made two proposals—one, it will invest 1,000 crore in DIL through a domestic AIF," said the first person. Secondly, Oaktree has also agreed to withdraw the holdback clause pertaining to a portion of the payment to lenders for the insurance business against any future tax liability.

In its previous offer, Oaktree had stated that a sum will be kept as a holdback by it for an unspecified period from its upfront payment offer worth 11,700 crore.

Piramal, on the other hand, has made an upfront payment offer of 12,700 crore and has not kept any holdback condition. These new offers made by Oaktree and Piramal are over and above the offers made by the two bidders to pay the creditors during the period lapsing between NCLT’s nod and actual implementation of the deal.

Commenting on Oaktree's Sunday evening letter, a Piramal spokesperson said , " Imaginary conspiracy theories do not alter obvious facts. The fact is all the bidders had the opportunity to submit bids post clarifications on 22 Dec. After seeing our bid, and recognizing that their bid falls short on various dimensions, Oaktree is now sending this series of letters, to alter the substantive submissions they themselves have formally made. The Oaktree bid is short on upfront cash, short on NPV, short on overall score, un-implementable due to insurance related complications, and leaves lenders with weak debt paper due to the sub debt structure offered by Oaktree to themselves. The Piramal plan merges DHFL with a AA rated entity, offers over Rs. 10,000 crore of equity immediately, and provides clarity on quality and secondary market valuation of NCDs. The alternative plan is a highly leveraged structure with minimal equity. The letter from Oaktree appears to be under the mistaken belief that threatening COC members with consequences is going to alter these facts and change the course of a legally run, transparent process in our country."

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