Banking News

arc: Piramal to sell DHFL loans to JM Financial ARC

Piramal Capital & Housing Finance will sell its ₹5,546-crore bad loan portfolio inherited from Dewan Housing Finance (DHFL) to JM Financial Asset Reconstruction Company after a Swiss challenge auction failed to attract any counter offer, two people aware of the development said.

JM Financial ARC has offered to purchase the portfolio for ₹2,550 crore, equating to a 46% recovery rate.

Piramal Capital had initiated a Swiss Challenge against the ARC’s anchor bid, inviting other interested bidders to submit expressions of interest by March 15, with the offer amount required to be a minimum of 10% higher than the base offer of ₹2,550 crore.

“No bidders showed interest during the Swiss challenge and therefore Piramal will proceed with JM Financial ARC to sell the pool and look to close the deal by end of this month,” one of the people cited above said.

JM Financial ARC’s purchase consideration comprises 15% in cash and 85% in security receipts that will be subscribed by either Piramal Capital or its affiliates. These receipts act as quasi-debt instruments that are redeemed when the ARC recovers the underlying debt.

Both JM Financial ARC and a Piramal Capital spokesperson declined to comment.

Piramal Capital has been actively selling bad loans to clean up the stressed book of DHFL, which it had acquired in a bankruptcy auction in September 2021 for ₹34,250 crore, which comprised ₹14,717 crore in cash and the remaining ₹19,532 crore through bonds issued to DHFL lenders.In June 2022, it sold distressed loan portfolios totalling ₹4,451 crore to VSJ Investments at a significant markdown. The distressed portfolio was sold in two parts: the first tranche of ₹2,748 crore was sold for ₹275 crore, resulting in a 10% recovery, while the second tranche of ₹1,467 crore was sold for ₹270 crore, resulting in an 18% recovery.

Piramal is currently concentrating on developing a new asset-backed wholesale book known as ‘Wholesale 2.0’ for real estate and corporate mid-market lending. During the third quarter, Wholesale 1.0 was decreased by 20% year on year to ₹35,101 crore, while the total assets under management amounted to ₹64,867 crore.

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