In a relief to the Piramal Group as well as the lenders of Dewan Housing Finance Limited (DHFL), the Mumbai bench of the National Company Law Tribunal (NCLT) has approved Piramal’s Rs 37,250 crore resolution plan. In a much awaited verdict, the NCLT said that the plan has been approved subject to a few conditions pertaining to the distribution of funds for small operational creditors and fixed deposit holders.
While pronouncing the order, NCLT said that they hope the Committee of Creditors (CoC) can extend the “kind gesture” of increasing the payout amount for small operational creditors and fixed deposit holders.
“We cannot comment on the commercial wisdom. We are not reverting the plan back to the CoC, but we expect the CoC to consider the payout aspect,” the judges added.
The bench also said that they are satisfied with Piramal’s source of funds for implementing the resolution plan as explained by the legal representatives of the RBI appointed Administrator R Subramaniakumar and the CoC.
Meanwhile, erstwhile promoter Kapil Wadhawan’s plea is pending in the Supreme Court to consider his Rs 91,158 crore settlement offer. Wadhawan argued in his petition that his proposal offers a complete recovery to lenders as opposed to the Piramal plan which envisages a 58 per cent hair cut on the total exposure of financial creditors.
Sanjay Asher, Senior Partner at Crawford Bayley & Co believes that NCLT’s nod is just the first battle and there is still a long way to go before Piramal can implement the resolution plan. “The Supreme Court may look at Wadhawan’s proposal in light of a higher recovery for lenders. Of course they may look to resolve it expeditiously but I expect it to take anywhere between six to 12 months more,” Asher said.
Piramal Enterprises’ bid at Rs 37, 250 crore offers the financial creditors a recovery of around 42 per cent. According to sources, the bid includes Rs 17,700 crore of upfront cash to be paid to creditors and repayment via Non-Convertible Debentures (NCDs) worth Rs 19,550 crore over a period of 10 years. The bid also ascribes Rs 1,000 crore for DHFL’s stake in Pramerica Life Insurance.
The Piramal Group welcomed the judgement and said that it follows the endorsement of 93.65% of lenders who voted in favour of the plan, and the subsequent approvals from RBI and CCI.
“This is one of India’s largest IBC proceedings, and the very first in the financial sector. In that regard, it is an important and positive trendsetter for the future. The approval from NCLT is a significant milestone in DHFL’s resolution and an affirmation of the sanctity of the IBC process in India,” the Group said in a statement.
“We are committed to collaborating with all relevant authorities, regulators, creditors and investors involved in this resolution and look forward to a speedy culmination of the resolution process,” it added.
The total admitted claims from financial creditors against DHFL stands at Rs 87,082 cr, as on December 21, 2020. Bondholders make up the largest share of this amount with over Rs 46,000 crore owed to them.
