Even as Oaktree Capital has emerged as the highest bidder for Dewan Housing Finance Corporation Ltd (DHFL) in terms of value, Piramal Capital and Housing will try to convince the lenders to look at its overall bid proposition. It is also hopeful that its position of being already entrenched in the NBFC space will give it an additional edge over other bidders.

What could work in Piramal’s favour is that it has offered the highest cash upfront at about ₹12,700 crore while Oaktree has offered about ₹11,600 crore. Piramal is also committing its entire Financial Services Business Unit (FBSU) equity capital of ₹15,600 crore. In addition, an incremental equity of ₹10,400 crore will also be available, if required. This FBSU enjoys AA rating, 33 per cent capital adequacy ratio and 2.2 times debt to equity ratio.

Reverse merger

Piramal is proposing to acquire DHFL through reverse merger of Piramal Capital and Housing. Post-merger debt-equity ratio is estimated to be about three times. “Piramal’s plan does not envisage any junior debt held by Piramal or any provision to extract cash which may compromise or jeopardise financial creditors’ interest. In addition, taking into consideration the hardship and difficulties of the retail fixed deposit holders, Piramal has specifically committed to pay retail FD holders an additional amount equal to 10 per cent of the amount which may be allocated by the Committee of Creditors,” said a source close to the Piramals.

Oaktree’s bid

Oaktree Capital’s revised bid is estimated at ₹,36,700 crore while Piramal has put in a bid for ₹35,500 crore. Both companies are understood to have put in unconditional bids for DHFL. Excluding funds for insurance and interest earned, Oaktree has bid ₹32,646 crore for DHFL, which is just marginally higher that Piramal’s offer of ₹32,200 crore.

The acquisition of DHFL’s insurance arm could be another deciding factor. While Piramal has offered ₹300 crore for the insurance JV, Oaktree has only said that the lenders can recover about ₹1,000 crore from the sale of the insurance venture to a third party. Since Pramerica Life Insurance is already a 49 per cent foreign-owned, Oaktree Capital as a non-resident, may not qualify to acquire DHFL if it has an indirect shareholding in the life insurer.

Oaktree Capital has also been the highest bidder consistently on multiple rounds. “This will test how banks and the government deals with foreign investors, especially when domestic investors are also interested,” said a source.

The CoC is expected to meet later this month to vote on the two top bids for DHFL.

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