SBI sees DHFL book fetching more value

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State Bank of India (SBI), the lead lender to Dewan Housing Finance Corp. Ltd, (DHFL) has asked all four suitors to the bankrupt home financier to upgrade their offers as a rapid improvement in the asset quality of the mortgage lender has made it more valuable, two people aware of the development said.

SBI, India’s largest bank, conveyed its decision to other members of a creditors’ consortium in a meeting on Tuesday to evaluate the revised bids received from Oaktree Capital Management, Piramal Enterprises Ltd, Adani Enterprises Ltd and SC Lowy, the people said on condition of anonymity. The easing of the lockdown has led to a rapid improvement in the asset quality of DHFL with many borrowers, including home buyers and property developers, starting to repay their loans. This has boosted cash flows of the struggling lender, prompting SBI to seek significantly higher bids from the four companies.

SBI’s move also comes close on the heels of the former promoter of DHFL, Kapil Wadhawan, shooting off letters to the committee of creditors (CoC), the RBI and the Prime Minister’s Office to express his displeasure about the bidding process, alleging that the valuation of the property financier was much lower than its fair value. “In the latest meeting of the CoC, SBI has conveyed to the CoC that the bidding rounds for all potential investors should continue to evaluate if there can be better price realisation,” said one of the two people cited earlier.

In a letter sent on November 11, Wadhawan said that the value of the underlying assets of DHFL would be worth at least ₹43,000 crore and that the bids received so far were lower than the intrinsic value of the company, which has shown significant recovery in asset quality since it was referred to bankruptcy. DHFL owes ₹87,000 crore to lenders and bondholders together.

The sale process of DHFL took an unexpected turn last week after the Adani group offered to buy DHFL’s entire business instead of the select portfolio that it bid earlier.

So far, Piramal has offered ₹26,000 crore for DHFL’s retail loan book while Oaktree has bid ₹31,000 crore for the entire company. Adani had first bid around ₹2,700 crore for the wholesale/slum redevelopment authority loan book. Soon after Adani’s revised offer, Piramal wrote to creditors of DHFL threatening to take legal action if Adani’s bid was accepted, which it said came after the closure of the formal deadline.

Caught in a bind, the lenders have sought the bankruptcy court’s direction, said the second person, and were told that “bidders are free to amend or upgrade bids within the ambit or the scope of their first (original) bids until a final decision is taken on December 3,” said the first person. This means Adani can keep revising its bid amount but only for the wholesale assets of DHFL.

“Adani has the option to approach NCLAT (appellate tribunal) or a high court to get this roadblock removed,” said the first person. CoC had fixed November 17 as deadline for the third round of bidding for DHFL’s assets. CoC has put the voting process on hold till December 3. In all, dues of 58 creditors are at stake.

DHFL said in an exchange filing on Thursday, “CoC during its meeting discussed various aspects regarding consideration of the bids received from prospective resolution applications (PRAs) on November 17…the administrator has received ‘final resolution plans’ from four (4) PRAs with respect to the options given to PRAs as per the invitation for expression of interest for submission of resolution plan for DHFL dated January 28. The administrator has also received a email with certain attachments from one of the PRA”.



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