27 June 2019: The promoters of Dewan Housing Finance Corporation (DHFL) are willing to give up their controlling stake to global private equity (PE) funds, according to people in the know. They said the firm is looking to raise Rs 7,000-8,000 crore of fresh equity capital, at a substantial premium to the market price.
The Wadhawan group controls 39.21 per cent and was earlier looking to reduce its stake by half and retain joint control of the firm with PE investors. The market capitalisation of the company, at the close of trade on Wednesday, was Rs 2,366 crore. The promoters are in talks with three PE funds, which include AION Capital (a JV between ICICI Venture and Apollo Global Management), True North, and KKR. However, a deal is expected to fructify only in a couple of months.
DHFL is also in talks with banks and other funds to sell close to Rs 6,000 crore of its wholesale loan portfolio, on which it will get a fee and margin from the buyer. This provides the firm a cushion for paying off about Rs 6,500 crore — due as principal amount of the non-convertible debentures — in July, August, and September. The outgo, said the people cited above, stands at slightly over Rs 2,000 crore a month.
People close to the negotiations said: “The promoters say they will do whatever they can to ensure fresh infusion of equity capital, and if that means giving away controlling stake, so be it. Only PE funds have the cash and can raise ECBs (external commercial borrowings), without depending on banks to get more funds.”
DHFL has sold as much as Rs 41,000 crore of its Rs 78,000-crore retail loan portfolio to banks and others, bringing the same down to Rs 37,000 crore. The proceeds have been utilised in making repayments. Similarly, its total wholesale loan portfolio of Rs 30,000 crore will also reduce by over Rs 9,000-10,000 crore after the proposed sale. It had already sold its wholesale loan portfolio of around Rs 4,000 crore earlier.
DHFL and its promoters have been selling assets to raise cash for a while. The promoters, as well as the firm (which held the entire stake in Avanse Financial), received a nod to sell the stake to Warburg Pincus for Rs 1,200 crore. It has also sold its stake in Aadhar Housing Finance Corporation to Blackstone for Rs 800 crore. The firm on Tuesday paid 40 per cent of its Rs 375 crore to pay on its commercial papers. However, people in the know said it is expected to complete the entire repayment over the next few days.