DHFL creditors reject new distribution plan
The proposal was also rejected by depositors who have a voting share of 6.18%
MUMBAI: The committee of creditors (CoC) to Dewan Housing Finance Corp Ltd (DHFL) has rejected a proposal to increase recoveries for smaller investors, including fixed deposit (FD) holders by an overwhelming majority of 89.19%, documents showed.
Interestingly, the proposal was also rejected by depositors who have a voting share of 6.18%. This means they are now likely to receive ₹1,241 crore or 23% of their total claim of ₹5,299 crore. DHFL’s committee of creditors voted on a proposal to approve an additional ₹966 crore for FD holders from the recoveries made.
The proposal had sought to increase fixed depositors recovery to 41% from 23% earlier, one of the people quoted above said. Similarly, in case of unsecured NCD holders, the proposal suggested the recovery rate be increased from 5% to 41%, this person added.
While the National Company Law Tribunal (NCLT) approved Piramal Group’s plan to buy DHFL under the Insolvency & Bankruptcy Code, it had requested the creditors to consider increasing the payments to smaller creditors.
In its order on June 7, the tribunal said that investment in FDs, non-convertible debentures (NCD) are considered as a lowrisk investment compared to equity. And so, small investors should not be put to more risk and take a larger hair cut than stronger financial institutions. The tribunal gave the creditors two weeks to complete the process and report back.
The fixed depositors and unsecured NCD holders had voted against the Piramal Group plan, making them dissenting financial creditors in the scheme. Fixed depositors had admitted claims worth over ₹5,400 crore, while unsecured NCD holders had claims worth ₹1,500 crore.
Lenders also put to vote proposals to distribute an additional ₹540 crore for unsecured NCD holders, ₹263.6 for small secured NCD holders. Others eligible for more funds than originally envisaged include the Army Group Insurance Fund, which will get ₹21.85 crore; the Navy Children School, which will get ₹1.95 crore; and the Air Force Group Insurance Society, which will get ₹56.09 crore.
Going by the outcome of this voting, none of them would receive any additional funds. Of the 75 votes, only eight supported the proposal while 52 votes were polled against, and 15 abstained. Among those that voted against are State Bank of India (SBI), Bank of India, National Housing Bank, Union Bank of India, Canara Bank, Central Bank of India, among others.
Had it been approved, secured financial creditors such as banks would have had let go of ₹1,853.2 crore or 5.4% of the total resolution value. Thee-voting window remained open from 2 am on June 20 to 9 pm on June 22.
Revisions in the distribution mechanism was proposed after the Mumbai bench of the NCLT suggested that creditors relook at the distribution of funds. On June 7, the dedicated insolvency tribunal approved Piramal Capital and Housing Finance Ltd’s bid to take over DHFL for ₹37,250 crore. The tribunal said that considering lakhs of small investors and senior citizens had deposited their savings, they should get a “fair” share of the resolution money.
Piramal Capital had received approvals from the Competition Commission of India and the Reserve Bank of India for its bid to take over DHFL.