DHFL small investors shortchanged, check details

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Smaller investors, including fixed deposit holders of the beleaguered home financier Dewan Housing Finance Corporation (DHFL), will lose Rs 4,058 crore, nearly 77% of their total claims. The FD holders, who hoped to get a better deal from the firm’s insolvency proceedings, are a rejected lot.

The fight to recover their savings ever since the mortgage lender was admitted to the insolvency tribunal in December 2019 has come to an abrupt halt. While lenders recover nearly one-third of their claims, small investors end up gaining less than one-fourth of their investments.

What’s in it for small investors?

The small investors will receive only Rs 1,241 crore of their total claim of Rs 5,299 crore. This follows the recent voting on a proposal by DHFL’s committee of creditors (CoC) to approve an additional Rs 966 crore for FD holders from the recoveries made. The committee rejected the proposal by an overwhelming majority of 89.2%.

Lenders had also put to vote proposals to distribute an additional Rs 540 crore for unsecured non-convertible debenture (NCD) holders and Rs 263.6 for small secured NCD holders.

As the secured lenders were getting only a fraction of their investment from the proceedings and writing off most of their sunken money, a majority of them were against sacrificing their share in favour of small investors.

Resolution plan

The successful resolution plan by Piramal Group offered DHFL’s committee of creditors an amount of Rs 37,250 crore. Though the other bidder Oaktree offered Rs 38,400 crore, Piramal had offered a higher upfront cash payment. The total dues of DHFL stood at around Rs 90,000 crore.

The revision in the distribution mechanism was proposed after the Mumbai bench of the National Company Law Tribunal (NCLT) suggested lenders to take a relook at increase their share of the payout. Of the 75 votes, only eight supported the proposal, while 52 votes were polled against, and 15 abstained. Lenders such as State Bank of India, Bank of India, Union Bank of India and Canara Bank, among others, voted against the proposal.

In case the proposal was approved, secured financial creditors including banks would have to forgo Rs 1,853.2 crore, nearly 5.4% of the total resolution value.

As per the documents, the proposal was also rejected by depositors who have a voting share of 6.18%.

Piramal Group has already received approvals from the Reserve Bank of India and other statutory regulatory bodies for the DHFL takeover.

“With regard to the decision on distribution to public depositors, fixed deposit holders and subscribers to NCDs, we request the CoC to reconsider their grievances… their request is only to enhance the percentage of the payment made in the plan,” said the NCLT order. The tribunal, however, made it clear that the review was only with regard to the distribution of funds and did not concern the total resolution plan outlay.