Piramal Enterprises has been voted the successful bidder for Dewan Housing Finance Corporation Ltd (DHFL) after the latter went through insolvency proceedings last year. However, Piramal’s bid is not fully confirmed at this point given that unsuccessful bidders have the option to seek legal action.
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Further, retail fixed deposit holders can approach the court if they are not happy with the plan. But despite these potential bottlenecks, it seems like Piramal Enterprises will end up acquiring DHFL.
As per some reports, Piramal offered ₹37,300 crores for the acquisition of DHFL which will consist of an upfront cash payment of ₹12,700 crores, ₹3,000 crores as interest income from DHFL’s operations, and approximately ₹20,000 crores worth of long-term bonds to banks.
One of the primary advantages for Piramal with this deal is getting access to DHFL’s large workforce as well as the 250 branches it operates. Some believe that the existing infrastructure may help Piramal bring DHFL back into profitability. It’s worth noting that DHFL’s quarterly net loss fell in the quarter that ended in December 2020.
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As with any acquisition, this deal isn’t without its own set of concerns for the buyer. For starters, Piramal has a loan book of Rs 52,000 crores whereas DHFL’s loans stand at Rs 75,000 crores with 46% of them being wholesale. Piramal may have some difficulty managing the loan books of the two companies given that it is inheriting a loan book larger than its own.
Piramal will also have to contend with meeting the demand of the creditors. In this case, banks may be expecting compensation for the hit caused by DHFL’s fraudulent transactions.
Meanwhile, the shares of Piramal Enterprises have seen a rise of 21% since the company pushed its bid for DHFL during the middle of December 2020. This goes to show that market expectations are very high and that Piramal will leave no stone unturned in making sure the deal goes through.
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