Tag: Piramal group

Piramal may turn into retail facing financial powerhouse with DHFL acquisition, BFSI News, ET BFSI

Personal Finance

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Piramal Group, which bought the troubled mortgage loan player DHFL for about Rs 38,000 crore, is set to expand its retail loans business manifold.

The merger offers Piramal‘s financial services company 301 branches. At present, it has merely 14 branches and 23,286 customers. The merger would also help in improving the asset-liability portfolio and boost the share of retail loans to about 50 per cent, with the rest being wholesale book.

The merged entity aims to be the fastest-growing company in the affordable housing segment and aims to expand the branch network to 1,000 over the next 4-5 years.

Huge upside

At Rs 37,250 crore, analysts say Piramal Group is getting these assets for a steal, leaving ample room for upside.

About Rs 17,700 crore of cash in DHFL’s books will help Piramal retire a significant portion of the debt to start with and with no immediate outflow of funds from its end. For the rest, non-convertible debentures (NCDs) will be issued.

The initial five years of NCD repayments can be easily met by DHFL’s high-yielding retail book, where the rate of lending is at least upwards of 10%. It also leaves a surplus that can be reinvested in the wholesale book.

At a steeply marked-down value of about Rs 9,860 crore, the wholesale or developer book of DHFL could be a googly for Piramal.

Retail boost

Piramal may turn into retail facing financial powerhouse with DHFL acquisition

Setting up of retail business necessitates huge spends and gestation periods. It requires manpower, talent, setting up processes and branches, which Piramal gains with DHFL.

DHFL has close to 10 lakh customers and an extensive branch network, which is the main attraction for Piramal. DHFL is present in around 305 locations across the country.

The DHFL acquisition would lead to an increase of the share of retail loans in Piramal’s book to around 45% by the end of this financial year from 12%. As on March 31, the loan book stood at Rs 44,700 crore. On the other hand, Dewan Housing‘s loan book stood at Rs 38,500 crore, with retail loans at Rs 29,000 crore. Piramal is targeting 50% from retail loan book, including inorganic acquisitions.

The offer of Piramal Enterprises for DHFL is almost 60% lower than the size of the troubled lender’s balance sheet, which may take care of any issues with the loan book.

Given that both real estate sales and the trend in home loans is encouraging, Piramal may benefit more from DHFL.



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NCLT clears Piramal’s resolution plan for DHFL

Banking & Finance

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After many a twist and turn, the debt resolution plan submitted by Piramal Group for Dewan Housing Finance Corporation Ltd (DHFL) has been finally approved by the National Company Law Tribunal.

DHFL is the first financial services company to get the NCLT nod under the insolvency process. The Committee of Creditors of DHFL had in January voted in favour of the resolution plan of Piramal Capital and Housing Finance Limited (PCHFL), a wholly-owned subsidiary of Piramal Enterprises Ltd.

According to the resolution plan, the total consideration for DHFL will be ₹37,250 crore, including an upfront cash payment of ₹12,500 crore and a deferred component of ₹19,550 crore.

“This is one of India’s largest IBC proceedings, and the very first in the financial sector. In that regard, it is an important and positive trendsetter. The approval from NCLT is a significant milestone in DHFL’s resolution and an affirmation of the sanctity of the IBC process,” a Piramal Group statement said.

Challenges ahead

According to sources, the Piramal Group is looking to complete the resolution process by August. However, it is likely to be delayed with many parties contemplating  approaching higher courts. DHFL’s erstwhile promoter, Kapil Wadhawan, has made an offer to take back control of the company and wants the top court to pass an order asking the CoC to vote on his proposal.

The NCLT’s Mumbai Bench, comprising HP Chaturvedi and Ravikumar Duraisamy, on Monday said the approval is subject to the Supreme Court decision on the petition filed by Wadhawan. The NCLT, however, dismissed a plea by Wadhawan, who had sought a copy of the successful resolution plan.

FD holders to move NCLAT

The other challenge could be from fixed deposit holders, who are demanding full payment under the debt resolution process. Vinay Kumar Mittal, a lead petitioner in the court on behalf of FD holders of DHFL, said they would be filing an appeal in the NCLAT. “We want 100 per cent payment. The moment the NCLT order is uploaded, we will be moving the NCLAT,” he told BusinessLine.

It is to be seen if other parties such as Wadhawan or 63 Moons Technologies take up a similar line of action.

Piramal Enterprises shares closed 1.87 per cent higher on the BSE at ₹1,960.75 a piece, while the DHFL scrip also rose  9.76 per cent to ₹20.8.

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NCLAT stays NCLT order on DHFL

Banking & Finance

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In a relief to the ongoing resolution process of Dewan Housing Finance Corporation Ltd, the National Company Law Appellate Tribunal (NCLAT) has stayed an order by the National Company Law Tribunal (NCLT), which had directed the lenders to consider the offer made by Kapil Wadhawan.

The NCLAT heard the plea by the Committee of Creditors of DHFL challenging the May 19 order of NCLT on Tuesday.

Also read: DHFL lenders appeal against NCLT order on Wadhawan offer

Both the Committee of Creditors of DHFL as well as the Administrator had filed separate applications challenging the NCLT order to consider the offer made by its former promoter Kapil Wadhawan within the next 10 days.

Meanwhile, the Piramal Group on Tuesday also filed a separate appeal in the NCLAT challenging the NCLT order on DHFL.

The lenders termed Wadhawan’s proposal as flimsy, replete with misrepresentations, falsehoods, without financial backing or commitments, and tendered in disregard of the scheme of the insolvency code.

The administrator questioned the NCLT order’s timing given that the Bench is to retire in June and any delay could lead to a situation where the case would have to be re-argued before a new Bench. The application sought a direction from the NCLAT to the NCLT to pass an order on the offer by the Piramal Group within one week.

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Piramal Retail Finance enters consumer & used car finance

Banking & Finance

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With a focus on retail lending, Piramal Retail Finance on Thursday announced its foray into consumer and used car finance, even as it expects the retail share of the lending book of the Piramal Group to increase to over 40 per cent with the merger of Dewan Housing Finance Corporation Ltd (DHFL) with Piramal Capital and Housing Finance Ltd.

“The overall lending book is at about ₹45,000 crore, of which ₹5,000 crore or 11 per cent of the total lending book is from retail. DHFL book has got a substantial retail portion as well. By end of the fiscal year, retail share of the financial services business is likely to grow to mid-40s,” said Jairam Sridharan, Chief Executive Officer, Piramal Retail Finance.

focus on Non-mortgage products

In the medium term, it plans to grow the retail book to about two-thirds of the financial services business.

“With DHFL, though we have launched a lot of non-mortgage products, our business will become very mortgage heavy. We are keen to launch more non-mortgage products so that we can cross sell products to these consumers as and when the transaction happens,” Sridharan told reporters at a virtual press conference.

“The acquisition of DHFL fits perfectly into our overall retail strategy,” he said.

Earlier this week, the Competition Commission of India gave its nod to the acquisition of DHFL by PCHFL. Sridharan did not give a timeline for the expected approval from the National Company Law Tribunal but said the process is going as per expectations.

The Reserve Bank of India had in February this year approved the resolution plan for DHFL submitted by the Piramal Group.

Expansion plans

Meanwhile, elaborating on plans for Piramal Retail Finance, Sridharan said it aims to be one of the top five non-bank retail lenders over the next five years.

On Thursday, it announced the launch of its expanded multi-product retail financing platform. It is targeting ₹3,000 crore of new loan originations organically in next 12 months, in addition to inorganic growth.

Sridharan said the company, which plans to launch four more products this fiscal, is also looking at two wheeler financing and education financing in the next 12 months.

“We are working on a loans-against-shares product as well. We will also grow unsecured and multi-collateral lending products for small businesses,” he said.

At present, Piramal Retail offers seven products in its target markets –affordable housing loans, mass affluent housing loans, loans against property, secured small business loans, purchase finance, unsecured loans, and used-car loans. It is also looking to expand to 10 more locations in the next three months over the 40 locations it is already present in.

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