Lenders led by State Bank of India (SBI) are set to log recoveries of Rs 37,400 crore this week, as Piramal Capital and Housing Finance’s (PCHF) acquisition of Dewan Housing Finance (DHFL) should be completed this month itself, multiple people aware of the deal told ET.
Banks will get a mix of upfront cash and non-convertible debentures (NCDs) due in seven years to complete what is billed as the biggest recovery of stressed loans this fiscal.
The cash component, due to reach the banks concerned this week, will help them write back provisions on these advances, potentially boosting bottomlines in the second quarter.
“Piramal will make the payment early on Tuesday,” said a person familiar with the distribution.
Banking on it
- SBI, BoI, Union Bank NSE 3.00 % of India among top beneficiaries
- About Rs 17,400 cr likely to be divided among creditors by Sept 30
- Recovery likely to be one of the largest for banks this fiscal
- A sum may be set aside till NHB plea on priority charge is settled in NCLAT
Recovery includes 20% cash, 23% NCDs
“The distribution – from fixed deposit holders to banks – will be completed by September 30. About 20% of the recovery is in cash, which will flow into lenders to be accounted for this quarter,” said the person familiar with the distribution.
Financial creditors led by SBI had admitted claims of Rs 87,000 crore. Of this, SBI alone had an exposure of Rs 7,267 crore to the distressed home financier. Bank of India (BoI) had claims of Rs 4,125 crore and Union Bank of India (UBI) Rs 3,605 crore.
Piramal’s total bid, at Rs 37,400 crore, amounts to about 43% recovery on admitted claims. This recovery is further divided into 20% cash and 23% through NCDs.
By these calculations, SBI will gain Rs 1,453 crore in recoveries, which will be written back from provisions this quarter. BoI will gain Rs 825 crore and UBI Rs 721 crore. These sums will directly flow into their profits this quarter.
“These writebacks will be accounted for this quarter 100%. Banks will gain, presuming they do not have to provide for some fresh slippages during the quarter,” said an executive cited above.
Landmark Resolution
In June, the Mumbai bench of the National Company Law Tribunal (NCLT) approved PCHF’s resolution plan for DHFL six months after the group was declared the preferred bidder, securing 94% of creditor votes.
DHFL’s resolution is a landmark for the five-year-old Insolvency and Bankruptcy Code, being the first debt resolution in a financial company under this recovery mechanism.
