Cash-strapped DHFL gets 7 days to finalise and present a resolution plan

A woman walks past a signboard of DHFL outside its office on the outskirts of Mumbai Photo: reuters
In a meeting on Thursday, lenders to the troubled housing finance company (HFC) Dewan Housing Finance Corporation (DHFL) agreed to allow the firm to finalise and present a resolution plan to the consortium within seven working days, said people in the know. 

After the signing of the inter-credit agreement during the second round of meeting —involving banks and holders of non-convertible debentures (NCDs) — it was proposed that the HFC and banks be given more time to draw up a comprehensive plan agreeable to all lenders, including NCD holders. “Additional time is being granted, as banks are in the process of scrutinising DHFL’s loan book in total,” said a person aware of the development. 

According to people in the know, DHFL will, under the new resolution plan, seek Rs 1,300-1,500 crore from banks every month (in a fresh line of credit), to help it resume lending to consumers — which had been earlier suspended.

These loans will be securitised against such disbursements after a period of six months. A person in the know said: “These loans will be sold to banks that have a healthy portfolio on their books, while DHFL will earn a fee income and margin to the tune of 1.5 per cent. This is with a view to churn the portfolio.”

Others in the know added that DHFL would seek extension between eight months and three years for loans taken. The banks are said to have set September 25 as the deadline for execution of the resolution plan. The people cited above added that the resolution plan will be binding on both banks and promoters.

Banks have said they are likely to extend the tenure of existing loans if DHFL’s loan book is found suitable. In the first meeting on July 10, institutional NCD holders are said to have agreed with banks to extend the term of existing loans. “Some of the retail NCD holders, though, expressed some concern and wanted their exposures settled, as and when due for maturity,” said a person close to the development. 

Accordingly, banks are in the process of estimating the quantum of NCDs to mature in the near term, and whether the mortgage lender will be able to meet this obligation using cash flows it receives from borrowers. DHFL has to pay the principal amount on NCDs from July to September — amounting to Rs 6,500 crore. It is selling part of its wholesale loan portfolio to raise the funds. 

As part of the binding agreement, the promoters have to give a non-disposal undertaking binding on their shares for availing refinance facility from banks, as stated in NBFC regulations. The people said that banks, during the meeting with DHFL, were keen to know if the company had the management and bandwidth to get the business going again. The firm assured them it was adequately equipped. DHFL was also asked to fill up vacant positions in the top management, if any, before the deadline. However, there was no discussion on the future of Kapil Wadhawan, although he has made it clear he is ready to step down from one of the two posts he holds at present — chairman and managing director — if needed.

Two foreign private equity (PE) players are in the final stages of picking a stake in the firm. They are AION Capital (a JV of ICICI Venture and Apollo Capital Management), and Cerberus Capital Management, who happen to be the final contenders. “Once the resolution plan is approved by the banks, the PE investment will flow through. Strategic investors are also in regular contact with banks,” said the person quoted above. It is learnt that DHFL’s board could be reconstituted to include a nominee proposed by the PE investor. Lenders, too, may have one or two representatives on the board.  

DHFL is scheduled to announce its audited March 2019 quarterly results on July 13.



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