Lenders are sceptical about the offers made by the former promoters of Videocon group and Dewan Housing Finance Ltd (DHFL) to settle their dues if the banks withdraw the respective insolvency processes.
The Dhoot family has offered to repay ₹30,000 crore to lenders and take 13 out of 15 companies that it formerly controlled out of the Insolvency and Bankruptcy Code (IBC) process. On 22 October, Dhoot said that once the management of the companies under IBC is under their control, they propose to monetize the assets, including real estate, to repay the loan. The family also aims to generate a revenue of ₹6,000 crore from its consumer electronics and home appliance business in fiscal 2021. The funds will be brought in over a period of three years, Dhoot said.
Similarly, the promoters of DHFL have proposed to transfer the rights, title and interest in at least 10 projects valued at ₹43,879 crore. A Press Trust of India report dated 19 October said the erstwhile promoters have written to RBI appointed administrator Subramaniakumar saying their offer would ensure maximum value for the assets that are on the block.
“In both the offers, promoters are not making any claims to make any upfront cash payment. Instead, they promise to make the payment in future, which is unlikely to be accepted by any bank,” said a banker on condition of anonymity.
According to the chief of a public sector bank who spoke on the condition of anonymity, any offer to settle the dues beyond three months will tantamount to restructuring as per Reserve Bank of India regulations.
“If we agree to the proposal, then we will have to restart the entire process of restructuring. We will need to therefore read the resolution plan carefully,” he said.
A similar offer was made by Essar Steel promoters to repay ₹54,389 crore to the lenders and withdraw the case under Section 12 A. However, the court rejected this offer and went ahead with the lenders’ decision to accept the bid by Arcelor Mittal.
Lenders are staring at huge haircuts in the resolution processes of DHFL and Videocon group.
In the DHFL case, the resolution process is nearing completion with the latest bid coming from US-based asset management company Oaktree Capital, which has offered Rs 28,000 crore for the mortgage company’s entire portfolio. Others like Adani Properties, Hong Kong-based SC Lowy, and Piramal Enterprises, have also submitted bids albeit for only part of DHFL’s portfolio. The deadline for submitting bids for the bankrupt housing finance company was 17 October.
In Videocon’s case, 11 bidders, including US-based Eight Capital and a Vedanta affiliate company have submitted binding offers.
In both cases, the offers made are higher than the value of bids submitted by the resolution applicants.
However, questions have been raised over the source of funding and the timing behind these offers.
In a press release on Thursday, 63 Moons Technologies, which had filed a lawsuit against the DHFL promoters, questioned their source of funds and stated that the promoters cannot sell any assets as they have been attached by the investigative agencies.