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Piramal group acquires Dewan Housing Finance Corporation Ltd

This marks the first successful resolution of the Insolvency and Bankruptcy Code in the financial services sector
Representational image.
Representational image.
File photo

Our Special Correspondent   |   Mumbai   |   Published 30.09.21, 02:53 AM

The Piramal group has completed the acquisition of Dewan Housing Finance Corporation Ltd (DHFL) by paying Rs 34,250 crore to the creditors of the housing finance company.

This marks the first successful resolution of the Insolvency and Bankruptcy Code in the financial services sector. In value terms, the transaction is amongst the largest resolution in the country.

The creditors will get Rs 14,700 crore in cash and Rs 19,550 crore in the form of non-convertible debentures (NCDs) that will be paid over 10 years at an interest rate of 6.75 per cent per annum payable half-yearly. 

They will also be entitled to Rs 3,800 crore from the cash balance available with DHFL.

In January, 94 per cent of the creditors of DHFL had voted in favour of Piramal’s resolution plan over competitor Oaktree Capital.

Piramal group firm Piramal Capital and Housing Finance Ltd will merge with DHFL. The entity will be called PCHFL. The merged entity will be 100 per cent owned by Piramal Enterprises Ltd.

Ajay Piramal, chairman, Piramal Group, said the merger will take place in the next couple of weeks. Most of the 70,000 creditors of DHFL would get back 46 per cent of their dues, Piramal said.

“This accelerates our plans to become a leading digitally oriented, diversified financial services conglomerate that focuses on serving the financial needs of the unserved and undeserved customers of our country,’’ he added.

The merged entity will combine Piramal group’s financial strength with DHFL’s geographic footprint and distribution network of 301 branches and 2,338 employees catering to close to 10 lakh customers across 24 states.

Piramal said the transaction will not only grow the retail book to nearly five times but also lead to diversification. 

It will create a platform focused on the affordable segment with average loan of nearly Rs 17 lakh even as close to 38 per cent of the retail loans will be Rs 10 lakh or below. 

The merger will lead to a reduction in weighted average borrowing cost by nearly 130 basis points.

The company will now offer services such as used cars and two-wheeler loans, education loans for vocational and online courses, small builder finance to meet construction finance requirement, unsecured business loans, personal loans and loan against securities.

Over the next three or four years, the company plans to be present in 1,000 locations and hire at least 1,000 more people in the near- to mid-term.

Shares of Piramal Enterprises on Wednesday closed 1.45 per cent higher at Rs 2,641.35 on the BSE.

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