“It’s a defining milestone,”
Group chairman Ajay Piramal said this on Wednesday. “This gives us an opportunity to meet the financial needs of the underserved ‘India’ market in the affordable (housing) segment.”
The total size of the resolution is Rs 38060 crore, which is about 46% of the total outstanding dues to the creditors. Out of this, Rs 34250 crore is being paid by Piramal Group and the remaining Rs 3810 crore is cash balance lying with DHFL.
The payment by the group includes issuance of 10-year non-convertible debentures worth Rs 19,550 crore with an upfront cash component of Rs 14,700 crore and a coupon of 6.75% p.a.
The depositors of DHFL got back around 23% of their money. In all, they received a total of Rs 1250 crore out of Rs 5400 crore of deposits as per the resolution plan approved by the regulators.
Piramal Enterprises, a listed entity, will merge DHFL with its wholly owned Piramal Capital & Housing Finance, a registered housing finance company. Ajay Piramal said, “The merger will happen in a few weeks.”
The merged entity is likely to have a loan portfolio of around Rs 65,000 crore. The group’s chairman said the final calculations were not yet complete.
“We will use technology to be competitive,” Piramal said. Most of the borrowers of DHFL are non-salaried in Tier 2 and Tier 3 cities. Average borrowing cost will also be reduced by 130 basis points.
The merger gives Piramal’s financial services company a pan-India distribution network with 287 branches and approximately 76000 customers. At present, Piramal Capital & Housing has only 14 branches and 23,286 customers. The merger will also help in improving the asset liability portfolio and halving the share of retail loans.
The company, which has so far largely relied on wholesale business, is looking to increase the retail debt share to two-thirds in the medium term.
The merger will also improve the utilization of equity. “Our financial services business is adequately capitalized and there is no need to infuse more capital over the next five years,” the chairman said.
Piramal Capital and Housing raised equity worth Rs 18,000 crore in the last two years by selling its stake in companies and issuing fresh shares.