DHFL gets 4K cr bailout; 11K cr more in pipeline

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The stressed shadow bank Dewan Housing Finance Limited (DHFL) is set to get Rs 15,000 crore from various investors in a bid to improve its cash flows.

Two sources in the know confirmed to DH that the stressed non-banking financial corporation has already signed two deals in this regard – one with Blackstone and another one with Warburg Pincus. The Blackstone deal will fetch the cash strapped company around Rs 2,700 crore, while the Warburg Pincus will pitch in with Rs 1,100 crore. According to the sources, both the deals were closed on Friday.

The company has also received a binding term sheet from Oakbridge Capital for a whopping Rs 11,000 crore worth of funding and might be signed anytime next week, according to the sources.

A term sheet is a nonbinding agreement setting forth the basic terms and conditions under which an investment will be made. It serves as a template to develop more detailed legally binding documents.

“The issue is the cash flown right now. So this will help sustain the liquidity issues of the NBFC for now,” a highly placed sources told DH.

As part of the deal, DHFL would be selling its performing assets – loans rented to multiple entities – to these three investors.

These bailouts are expected to save DHFL the day for the next one year, till the day they go through the strategic sale of various assets – which would help them raise much-needed cash. According to the sources, the company has repayment obligation of about Rs 7,000 crore in the next three months, and close to Rs 16,000 crore over the next one year.

“It will help the company last for 6 more months, if not a full year,” sources said.

DHFL, the third-largest pure-play mortgage lender, has received rating downgraded on its Rs 850 crore worth commercial papers (CPs) to default grade by Crisil and ICRA due to delay in meeting its obligations.

The mortgage lender had defaulted on bond repayments on June 4.

The company said there has been a delay in payment of interest on non-convertible debentures issued by the company through public issue, and said that it's doing everything possible to meet obligation within the next seven days.

The country’s largest banker State Bank of India has also stepped into the action, saying that it’s closely monitoring the situation.

This is the second major default by an NBFC since September 2018, when the behemoth IL&FS had defaulted.  Since then, the shadow banks have reeled and continuous stress. The industry players are not happy with the way the situation has been handled.

“The response by the government and the regulators has been pathetic. They could have handled things better. And even after the default, the RBI’s latest monetary policy statement had nothing to say on the issue,” an industry captain with large stakes in the NBFC sector told DH.