The beleaguered home financier owes Rs 83,873 crore as of July 6, 2019 to banks, the National Housing Board, mutual funds and bondholders, including retail bondholders.
Lenders to the crippled mortgage lender Dewan Housing Finance (DHFL) are hopeful of passing a resolution plan successfully at the earliest even as mutual funds are not yet on the same page with the bankers’ plan. The beleaguered home financier owes Rs 83,873 crore as of July 6, 2019 to banks, the National Housing Board, mutual funds and bondholders, including retail bondholders. According to the Reserve Bank’s June 7 NPA resolution framework, for a resolution plan to be passed 75 percent of lenders by value and 60 percent by numbers must approve it and sign the inter-creditor agreement.
In August, the lenders had signed an inter-creditor agreement. But the problem is that MFs are not coming on board despite Sebi allowing them to become part of ICA. Insurance regulator Irdai has also allowed insurers to be sign ICA. “We hope we can get the numbers (to pass the resolution),” Union Bank managing director Rajkiran Rai G told reporters on the sidelines of a banking HR conclave orgainsed by the IBA.
“Whoever is trying to take the legal route will ultimately understand. We have done our best to put a resolution plan across,” he added. Union Bank is the leader of the consortium of lenders. He said banks are waiting for certain clearances for the resolution plan to be passed but refused to give a timeline for the same. For the dissenting mutual funds, getting the liquidation value can be one of the solutions but it has not been explicitly discussed, he explained. “Sebi has already given the go-ahead for mutual funds to be part of ICA. I feel MFs have value only as a going concern. If you get into liquidation then everyone loses money and I hope better sense will prevails and everybody agrees to the plan,” he said.
As of July 6, DHFL’s secured debt was Rs 74,054 crore while the unsecured debt stood at Rs 9,818 crore. Under the draft resolution plan submitted by DHFL, the lenders would pick up 51 percent in the third largest mortgage lender by converting a part of their debt into equity. The company has been facing liquidity issues since last September and yet has paid back Rs 41,000 crore of its financial obligations through a combination of securitization of assets and repayment collections since.
The Wadhawan family, who owns a little over 39 percent in the company, has been looking at various ways to come out of the stress which first came to light late last year following the IL&FS bankruptcy. These include selling stakes in group entities, including in the flagship to the extent of giving up management control. The board of DHFL is meeting on Thursday to approve June quarter results.
Talking about Jain Irrigation, which has defaulted on repayments, Rai said the company also has to go for restructuring. “We saw stress in this account in the last one or two months. We are working on a resolution plan. We need to really look at the company and understand the issues,” he said. About the amalgamation of Union Bank with Andhra Bank and Corporation Bank, he said the process to appoint a consultant is in progress as different committees have been formed where officials of all the three banks are involved.
“They are preparing a framework to understand that as a combined entity what will be the products and processes. We are trying to understand each other’s best practices. This process is going on and we hope that whenever the merger is announced, we are ready,” Rai said.