The tussle between the two serious bidders -- Piramals and Oaktree -- over the acquisition of failed Dewan Housing Finance Corporation (DHFC) with assets of Rs 80,000 crore is getting murkier with Piramals citing two serious violations of the Securities and Exchange Board of India (Sebi) norms.
A war of words from both sides is already in public as the voting by the committee of creditors (CoC) on both the proposals would take place on January 14.
Both the bidders are offering around Rs 38,000 crore, which includes upfront cash and a substantial part in the form of non-convertible debentures (NCDs) of varying maturity and interest. The CoC computes the present value of future cash flows and also assigns a total 100 marks for quantitative as well as qualitative aspects.
The US-based distressed asset investor Oaktree had claimed that they have received 'preliminary' feedback from credit rating agencies that their NCDs would be assigned triple A rating. The higher rating increases the fair market value of NCDs, which could give higher marks to Oaktree Capital.
"Credit rating agencies are not allowed by law to provide any credit opinion or have indicative credit rating discussions," counter Piramals.
In addition, they state that without a formal rating being published, an issuer is prohibited by law from marketing an instrument to potential subscribers.
"In other words, till a formal rating is published, SEBI norms explicitly prohibit the bidder from marketing their NCDs to CoC members as something that is likely to be assigned triple A rating," say Piramals.
The evaluation metrics approved by the CoC include upfront cash, net present value of cash recovery, equity allotment, fresh infusion of capital, track record of bidders and quality of management. The last two are the qualitative parameters. Clearly, the selection of successful bidder will have to be done within these parameters.
The stakes are high for billionaire Ajay Piramal, who has bigger financial services ambitions. In the past, Piramal's big strategic moves like Shriram Group stake and merger proposal with IL&FS and IDFC Bank didn't fructify. Piramals look to be very close to acquiring the failed DHFL, which is a strategic fit as the company has retail assets, branches and good network in smaller geographies.
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