New Delhi, Jan 8 : The Piramal Group has said its bid for DHFL offers the lenders the highest upfront cash recovery, has the highest score on the COC evaluation matrix, is fully compliant with all regulatory norms, and is fully and immediately implementable.
“We have full faith that the committee of creditors, comprising some of the most reputed financial institutions of our country, will make the fair and just choice in the voting process,” the Piramal Group said in a statement.
It also issued a “Fact vs Fiction in Competing Bidders’ claims”, responding to claims made by another bidder, Oaktree.
Piramal said that Oaktree is bringing in minimal equity into DHFL. “The initial equity being brought in is a mere Rs 1 lakh. There is a promise of Rs 1,000 crore of equity/ NCDs/sub-debt that can be brought in later if required. This wafer-thin equity is supposed to support an entity with a balance sheet that will be around Rs 40,000 crore,” it said.
It is being falsely claimed that an NCD written on such a weakly equitised business, built entirely on a Leveraged Buy Out model, would somehow receive a AAA rating, it added.
“Oaktree claims that they have received ‘preliminary feedback from credit rating agencies’ that their NCD would be assigned a AAA rating. There are 2 serious violations of SEBI norms in this claim: CRAs are not allowed by law to provide any ‘credit opinion’ or have ‘indicative credit rating discussions’,” Piramal said.
“Without a formal rating being published, an issuer is prohibited by law from marketing an instrument to potential subscribers. In other words, till there is a formal rating published, SEBI norms explicitly prohibit the bidder from marketing their NCDs to COC members as something that ‘is likely to be assigned AAA rating’. Oaktree’s claim is in direct violation of these 2 laws of the country,” Piramal said.
The PwC report is a purely mathematical exercise that ‘assumes’ that there will be a AAA rating, and then calculates, with other arbitrary assumptions, what the value of the NCDs would be if this were true. E.g. To arrive at an inflated number, the report arbitrarily increases the discount rate for Piramal NCDs to 15 per cent, it said.
“A serious falsehood is being spread – at some places the competing bidder says they have received feedback from CRAs for AAA rating, at other places they say it is PwC’s assessment that NCDs will get AAA rating – if H2 bidder has not received CRA feedback as claimed in the Resolution Plan then a material information is being misrepresented to COC members. A castle in the air is being falsely marketed as manifest reality,” Piramal said.
Piramal said Oaktree has put forth a generic proposal on the lines of “we will identify an Indian owned and controlled AIF and fund them Rs 1,000 crore and they will own the insurance company”. “No specific AIF has been named. An AIF was named and a letter agreement added as part of the formal bid. But this AIF has since withdrawn in writing.”
“There is no precedent for an AIF being promoter of a Life Insurance company in India. An AIF funded by a foreign entity explicitly for the purposes of buying an insurance stake clearly violates the spirit of Indian laws on ‘Indian owned and controlled’ insurance promoters. In effect, there is no implementable solution that has been identified for the Insurance business. This is acknowledged in as many terms by Oaktree when their letter states they ‘remain available to explore any other legally viable solutions to the satisfaction of the COC’. In other words, there is an intractable legal obstacle to the implementation. And the burden of overcoming this obstacle is being placed on the COC itself!” Piramal said.
Reiterating that Oaktree has offered a mere Rs 1 lakh as committed equity, Piramal said that in contrast, its plan commits Rs 3,8000 crore of equity.
“In addition, we have Rs 16,000 crore of equity in our financial services business available for DHFL, and another Rs 10,000 crore at the PEL level ready to be infused as necessary. The competing bidder’s offer falls short on basic capital adequacy norms laid down by the regulator, and allows them to benefit from the cashflows of DHFL with no skin in the game,” it added.
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