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Piramal Capital & Housing Finance will sell its inherited portfolio of bad loans totaling 5,546 crores from Dewan Housing Finance (DHFL) to JM Financial Asset Reconstruction Company following the failure of a Swiss challenge auction to elicit any counter offers. JM Financial ARC has made an offer to buy the portfolio for 2,550 crore which works out to a 46% recovery rate.
By launching a Swiss Challenge in response to the ARC's anchor bid, Piramal Capital invited additional interested parties to submit expressions of interest by March 15. The size of the offer had to be at least 10% higher than the basic offer of Rs. 2,550 crores.
Piramal Capital or one of its affiliates will subscribe for 85% of the security receipts that make up the purchase consideration for JM Financial ARC with the remaining 15% being paid in cash. When the ARC is successful in collecting the underlying debt, these receipts serve as quasi-debt instruments that are redeemed.
Piramal Capital purchased DHFL at a bankruptcy auction in September 2021 for 34,250 crores for which 14,717 crores was paid in cash and the balance of 19,532 crores was paid through bonds issued to DHFL lenders. Piramal Capital has been actively selling bad loans to clean up the stressed book of DHFL.
It sold VSJ Investments distressed loan portfolios totalling 4,451 crore in June 2022 at a substantial reduction. The distressed portfolio was sold in two tranches with the first tranche worth 2,748 crores going for 275 crores yielding a 10% recovery and the second worth 1,467 crores going for 270 crores yielding an 18% recovery.
Piramal Capital is the financial services arm of the Piramal Group, a diversified conglomerate with interests in healthcare, real estate, and financial services. Piramal Capital provides a range of financial solutions, including corporate finance, real estate finance, and emerging corporate lending. The company has a strong track record of supporting the growth of small and medium enterprises, and has played a significant role in financing some of India's most prominent real estate projects.
JM Financial Asset Reconstruction Company (ARC) is a leading asset reconstruction company in India. It is a subsidiary of JM Financial Limited, a prominent financial services group in the country. JM Financial ARC specializes in acquiring and resolving stressed assets, primarily in the corporate sector. The company has a team of experienced professionals who work closely with banks and other financial institutions to restructure and recover non-performing assets (NPAs).
Dewan Housing Finance Limited (DHFL) was a prominent housing finance company based in India. The company provided home loans, mortgage finance, and other financial services to customers across the country. The company faced a financial crisis in 2018, which led to a default on its debt obligations and a subsequent takeover by the Reserve Bank of India. The company's assets were subsequently sold to a consortium led by Piramal Group in 2021. The DHFL saga has been a significant event in India's financial sector, highlighting the challenges faced by non-bank financial companies and the need for regulatory reforms.
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