Piramal Enterprises today (Wednesday) has announced the acquisition of Dewan Housing Finance Limited (DHFL) by paying the consideration amount of Rs 34,250 crore. This is the first successful resolution of a financial services company under the Insolvency and Bankruptcy Code (IBC), and will help Piramal grow its retail book 5 times.
The total consideration paid by the Piramal Group includes an upfront cash component of Rs 14,700 crores and issuance of debt instruments of Rs 19,550 crores (10-year NCDs at 6.75% p.a. on a half-yearly basis).
In a statement to the exchanges, Piramal Enterprises said, the creditors of DHFL will recover an aggregate amount of Rs 38,000 crore from the DHFL’s resolution, which includes Rs 34,250 crore paid by Piramal Enterprises and Rs 3,800 crore from the cash balance of DHFL.
“There were 70,000 creditors of DHFL and most of them are recovering nearly 46 per cent of their pending dues through the successful completion of the resolution process”, the statement added.
According to the resolution plan, Piramal Capital and Housing Finance Ltd. (PCHFL) will merge with DHFL and the merged entity will be 100 per cent owned by Piramal Enterprises Limited. The merged entity will have 301 branches and 2,338 employees catering to approximately a million lifetime customers across 24 states, making it one of the leading housing finance companies in India, focusing on affordable housing segment.
Piramal Group DHFL Acquisition marks first successful resolution under the IBC route
The acquisition of DHFL will enable Piramal to grow its retail book approximately 5 times and will also lead to diversification of the overall loan book, thereby achieving the desired mix of nearly 50:50 retail wholesale mix.
“..the transaction will lead to a reduction in weighted average borrowing cost by nearly ~130 basis points and should further improve the Asset Liability Management (ALM) profile of our financial services business,” Piramal Enterprises said.
“The transaction will also significantly improve the utilization of equity in our financial services business, with net debt-to-equity of the financial services business getting efficient from 1.6x as of June-2021 to 3.5x in the near term,” it added.