Piramal Cap edges past Oaktree in battle for control of DHFL

The flurry of bids and counterbids for Dewan Housing Finance Corp. Ltd (DHFL) continued with Piramal Capital and Housing Finance Ltd sweetening its offer to top rival Oaktree Capital’s bid, two people directly aware of the development said.

Piramal raised its total offer for DHFL to Rs 38,250 crore on 24 December, improving on Oaktree’s commitment of Rs 36,400 crore, and emerging as the top bidder based on evaluation metrics set by the lenders to the bankrupt mortgage lender, the people said on condition of anonymity.

The two groups are engaged in an intense bidding war to take control of DHFL, which has seen its asset quality improve as India lifted lockdown curbs.

Until the fourth round, Oaktree’s bid was the highest among the two bidders with Piramal’s offer at Rs 32,250 crore. “Late on Friday, as per the evaluation metrics based on a formula stipulated under the Insolvency and Bankruptcy Code, the committee of creditors found Piramal Group’s total score to be 91 points on a scale of 100, while Oaktree scored 85 points,” said one of the two people cited above.

According to the final evaluation matrix, Piramal and Oaktree scored the maximum 15 points on qualitative parameters. But, on the quantitative matrix, Piramal scored 76 while Oaktree scored 70, the person said.

“This is because of two factors—one, Piramal’s upfront payment to creditors and the equity infusion offer into DHFL are much higher than Oaktree. Second is Piramal’s offer for an outright buyout of the insurance business, which will immediately go to creditors. This commitment has an element of certainty, which Oaktree’s commitment does not have,” the person said.

“Oaktree’s offer for the insurance business is to credit Rs 1,000 crore in an escrow account, conditional and contingent on the outcome of legal cases against DHFL. This has lowered Oaktree’s score as per the internal evaluation matrix assessed by SBI Caps and CoC members on Friday and Saturday,” said the second person.

On 22 and 23 December, both Oaktree and Piramal Group made a number of additional commitments over and above their fourth-round bid amounts. “As per the final bid structure, Oaktree has offered to infuse at least Rs 1,000 crore equity into DHFL within 10 months if it wins,” said the first person. Piramal has already committed to infusing around Rs 4,000 crore into DHFL within 10 months if it wins the bid.

Also, Piramal has sweetened its offer for the insurance business. The company has now offered to buy out the entire life insurance business of DHFL’s Pramerica Life Insurance Co. Ltd unit for Rs 1,000 crore. Earlier, Piramal had offered to pay Rs 300 crore for the 51% stake held by DHFL Investments Ltd (DIL) in the life insurer.

“Oaktree has made two proposals—one, it will invest Rs 1,000 crore in DIL through a domestic AIF,” said the first person. Secondly, Oaktree has also agreed to withdraw the holdback clause pertaining to a portion of the payment to lenders for the insurance business against any future tax liability. In its previous offer, Oaktree had stated that a sum will be kept as a holdback by it for an unspecified period from its upfront payment offer worth Rs 11,700 crore.

Piramal, on the other hand, has made an upfront payment offer of Rs 12,700 crore and has not kept any holdback condition.

These new offers made by Oaktree and Piramal are over and above the offers made by the two bidders to pay the creditors during the period lapsing between NCLT’s nod and actual implementation of the deal.

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