Oaktree Capital has upped its offer for Dewan Housing Finance Ltd (DHFL) by ₹1,700 crore on Thursday, intensifying a protracted bidding war with Piramal Capital and Housing Finance Ltd for control of the bankrupt mortgage lender.
Oaktree’s offer came a day after Piramal Capital raised its bid by ₹1,000 crore and also improved its offer for a controlling stake in DHFL’s Pramerica Life Insurance Co. to ₹1,000 crore from ₹300 crore. Oaktree had bid ₹32,700 crore in the fourth round that concluded on 14 December, trumping Piramal’s offer of ₹32,250 crore.
The intense takeover battle has forced both contenders to raise their bids by about 15% from their initial offers. This comes amid a recovery in the quality of DHFL’s loan assets from the initial months of the pandemic and a wider revival in the non-banking space.
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“We understand that the bidder that submitted the second highest bid has sought to increase its bid by means of (a) allocating additional interest income to the financial creditors and (b) increasing its bid for the insurance stake. As required, we are allocating an additional amount of ₹1,700 crore as additional interest income to the financial creditors,” Oaktree said in a letter to the creditors.
In the meeting held on 18 December, the committee of creditors asked both Oaktree and Piramal Capital to sweeten their bids as the sale process entered the final lap. The panel also asked the bidders to specify the proposed shareholding structure of DHFL’s insurance business, where foreign ownership is currently capped at 49%.
The lenders have also asked the two bidders to clarify their positions on the holdback clause relating to the treatment of future tax liabilities of the company.
Holdback entails withholding payment of a portion of the acquisition price until certain post-closing conditions are met.
A spokesperson for Oaktree declined to comment. Emailed queries to Piramal received no response at the time of going to print.
Oaktree and Piramal Capital had initially proposed to set aside ₹1,500 crore and ₹300 crore, respectively, out of the financial creditors’ entitlement amount in an escrow account to meet tax liability arising from the sale of investments in the insurance firm.
In its previous offer, Oaktree had stated that the sum will be kept as a holdback by it for an unspecified period from its upfront payment offer worth ₹11,700 crore.
Oaktree has since then agreed to waive the holdback clause completely and has reiterated that there is no conditionality attached to its bid except for bankruptcy court approvals.
Lenders to DHFL who began voting on the bids on Thursday are now expected to extend the voting process by a few days to consider the revised offer by Oaktree.
DHFL owes close to ₹85,000 crore to a consortium of lenders led by State Bank of India (SBI) who are poised to recover more than 40% of the dues if Oaktree’s offer is accepted.
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