MUMBAI: Banks have proposed a four-month programme to resolve the Dewan Housing Finance (DHFL) case, the biggest bankruptcy case in the financial services sector after the Insolvency and Bankruptcy Code, said three people involved with the process.
Lenders have already discussed about the ‘timeline’ with the banking regulator Reserve Bank of India, which favoured a quick plan unhindered by multiple legal tangles.
The government amended the Insolvency and Bankruptcy Code brought financial services companies for the first time now under the purview of the law. RBI did not respond to ET’s email query regarding the development.
“We are looking to resolve it in the next three-four months as any lingering court case will hit employee morale, leading to attrition,” said an executive involved in the process.
Lenders are looking to rework previous equity investments plans from outsiders and with little involvement from the Wadhawan family, sources said. But they are fighting to retain and incentivise existing staff who know the borrowers so that the recovery is quicker.
Lenders collectively bought over Rs. 40,000 crore worth of securitised loan portfolios. If the indebted company finds any shortage in employee strength, it could hurt the recovery processes.
“Any delay in resolution might cause increase in customer defaults, both wilful as well as genuine reason,” said another executive involved in the resolution exercise citing the Essar Steel resolution case that wound up after two years.
Private equity firms Apollo Capital and Cerberus are competing with the Adanis for a stake in DHFL as they work out a revival package.
DHFL has already submitted a resolution plan, which lenders considered. As part of the capital restructuring, the promoters were supposed to bring down their stake to 19% from 40%. The new investor will buy 26% by way of fresh issuance of shares.
“DHFL case is not a fresh-start as background work is almost done. Speed is an essential component for a financial services company’s debt to be restructured,” said an official from an institutional investor.
Asset valuation is one of the key points in any resolution and to realise full value, speed of decision making becomes a critical component to make it attractive for new investor, one of the lenders said. The non-banking finance company is looking for fresh lending as the business needs to be sustained.
Source: Economic Times