In its first action against the troubled housing finance company, Reserve Bank of India (RBI) on Wednesday superseded the board of Dewan Housing Finance Corporation Ltd (DHFL) over governance concerns and defaults on payment obligations.
RBI said in a statement that it had appointed R Subramaniakumar, former managing director and chief executive of Indian Overseas Bank, as the administrator of DHFL, to run the affairs of the entity which was once controlled by the Wadhawan family.
The RBI will shortly initiate the process for resolution of the company under the Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority Rules, 2019. The regulator will also approach the National Company Law Tribunal (NCLT) for appointment of the administrator as the insolvency resolution professional.
Lenders are already working on a new plan for resolution after the IBC proceedings against DHFL are admitted in NCLT. Under this, banks might convert part of their loans to equity. Lenders also plan to get private equity investors for fresh capital.
Banks would own 25 per cent equity and the private equity players would have a 26 per cent stake in the augmented capital. “Since holding a 51 per cent stake in the company required a lot of regulatory go-aheads, banks have decided to restrict debt conversion to 25 per cent,” said a banking sector source.
This time, banks are likely to enter into back-to-back agreements with investors interested in buying out their shares in 12-18 months of conversion. Banks also reserve the right to sell their stake in the open market if investors fail to do so.
PE investors like AION Capital and Cerberus Capital, which had earlier evinced interest in DHFL, are believed to be in talks with banks again.
Since the assets of DHFL cannot be restructured or reorganised immediately, investors will buy stake in the company in totality — that is, including retail and wholesale assets. “It is possible that two PE firms will buy 10-16 per cent stake each,” said a source.
DHFL's board was slated to meet on November 25 to consider the entity's performance in the September quarter and the first half of the financial year, besides a report by statutory auditors. Its stock closed 3.82 per cent lower on BSE on Wednesday at 20.15 a share.
RBI said in a statement that it had appointed R Subramaniakumar, former managing director and chief executive of Indian Overseas Bank, as the administrator of DHFL, to run the affairs of the entity which was once controlled by the Wadhawan family.
The RBI will shortly initiate the process for resolution of the company under the Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority Rules, 2019. The regulator will also approach the National Company Law Tribunal (NCLT) for appointment of the administrator as the insolvency resolution professional.
Lenders are already working on a new plan for resolution after the IBC proceedings against DHFL are admitted in NCLT. Under this, banks might convert part of their loans to equity. Lenders also plan to get private equity investors for fresh capital.
Banks would own 25 per cent equity and the private equity players would have a 26 per cent stake in the augmented capital. “Since holding a 51 per cent stake in the company required a lot of regulatory go-aheads, banks have decided to restrict debt conversion to 25 per cent,” said a banking sector source.
This time, banks are likely to enter into back-to-back agreements with investors interested in buying out their shares in 12-18 months of conversion. Banks also reserve the right to sell their stake in the open market if investors fail to do so.
PE investors like AION Capital and Cerberus Capital, which had earlier evinced interest in DHFL, are believed to be in talks with banks again.
Since the assets of DHFL cannot be restructured or reorganised immediately, investors will buy stake in the company in totality — that is, including retail and wholesale assets. “It is possible that two PE firms will buy 10-16 per cent stake each,” said a source.
DHFL's board was slated to meet on November 25 to consider the entity's performance in the September quarter and the first half of the financial year, besides a report by statutory auditors. Its stock closed 3.82 per cent lower on BSE on Wednesday at 20.15 a share.
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