DHFL lenders ease bidding criteria for prospective buyers
THE MINIMUM NET WORTH REQUIREMENT OF BIDDERS WAS SLASHED TO ₹3,500 CR FROM THE ₹5,000 CR PROPOSED BY THE RBI-APPOINTED ADMINISTRATOR
MUMBAI: Lenders to Dewan Housing Finance Corp. Ltd have eased the eligibility criteria for those seeking to purchase the assets of the insolvent home financier, fearing the strict norms proposed by the administrator would deter potential buyers, said a person aware of the development.
While the minimum net worth requirement of bidders was slashed to ₹3,500 crore from the ₹5,000 crore proposed by the Reserve Bank of India (RBI)-appointed administrator, the criteria for assets under management and committed funds were lowered to ₹10,000 crore and ₹3,500 crore, respectively, from ₹12,000 crore and ₹5,000 crore, the person cited above said on condition of anonymity.
“Lenders said that a high minimum net worth criterion will leave out a lot of potential investors from the bidding process and, therefore, it should be reduced, along with other requirements,” the person said, adding that even SBI Capital Markets Ltd, the adviser to banks on the DHFL matter, sought lower eligibility requirements.
Banks’ fear that potential investors may stay away from the bidding process could have been influenced by their experience in the case of bankrupt Jet
Airways (India) Ltd, which drew a tepid response from bidders despite multiple attempts to revive the airline.
“Greater participation will lead to better price discovery of the asset. If suppose, the minimum net worth requirement is too high and only a couple of bidders show interest, lenders may not have enough leverage in the process and may lose out on price maximization,” said Nirmal Gangwal, founder of debt restructuring advisory firm Brescon and Allied Partners Llp, adding that setting the criteria for potential bidders is the prerogative of the committee of creditors (CoC).
Creditors to DHFL last met on 16 January to discuss the eligibility criteria for prospective resolution applicants. Other things on the agenda were updates on the insolvency process since the first meeting on 30 December; a resolution strategy for the lender; and an update on operations.