As the sale of the ailing DHFL is all set to close, over 55,000 fixed deposit (FD) holders, whose life’s savings are stuck for long, are waiting with bated breath. Their claims have added up to around ₹5,375 crore, with retail FD holders accounting for 40%.

People close to the resolution process said the lenders are yet to take a final call on FD holders. “The fact is that the average recovery for everyone will be around 30%, given the total claims of ₹90,000 crore and the bids in the range of ₹35,000 crore. But some lenders are a little more sympathetic about FD holders. A decision on how much to pay FD holders is expected in the next couple of days,” he said.

In all likelihood, FD holders will end up with a 30%-35% recovery. Many see it as “too little too late”.

According to the new schedule set by the Reserve Bank of India-appointed administrator, the bidders are going to make their final clarifications on Tuesday (December 22) morning, instead of the earlier proposed December 21. “The committee of creditors’ (CoC) meeting is also postponed by a day, to Thursday (December 24). Voting by creditors will start on December 24, which will decide the winner among the three bidders. We hope to end the process by the year-end. We can’t rule out more delays since there are thousands of creditors and many may have to seek internal approvals before they come to voting,” said sources.

The lenders had earlier proposed to keep aside an amount—probably 5% of the claim amount—for small investors, with an individual cap of ₹10 lakh. “Some lenders are in favour of apportioning more funds for FD holders. This would mean some creditors taking a deeper cut on their recovery. The discussions are yet to be concluded,” said sources.

Apart from the option of keeping aside some funds, lenders had also discussed the ‘waterfall mechanism’ under Section 53 of the Insolvency and Bankruptcy Code (IBC) Act, whereby the proceeds from the sale of the liquidation assets in respect of a corporate debtor could be distributed in a certain order of priority. Under the scheme, secured creditors have to be paid fully before any payments can be made to unsecured financial creditors who in turn have priority over operational creditors. Some lenders are in favour of the pari-passu distribution mechanism.

“This is also under discussion. We will have some clarity by December 24,” said sources.

Under the IBC, fixed depositors fall under the category of unsecured financial creditors in the claims pecking order. In the DHFL resolution, unsecured creditors represent a small portion of the CoC voting share.

Interestingly, one of the leading bidders, Piramal Enterprises, has offered to pay an additional 10% to the FD holders of DHFL, over and above what lenders finally decide to give them. The other two bidders—Oaktree Capital and Adani Group—have not made any such promises.

In January 2020, the Supreme Court had dismissed a petition by DHFL’s FD holders seeking the release of their deposits before the beleaguered home financier restarted lending. The FD holders had argued that if DHFL was a going concern and was competent to lend and receive deposits, then it couldn’t argue against paying them.

The apex court had said it didn’t intend to interfere in the issue then as the deposit holders were being represented by their authorised representative in the DHFL CoC. The apex court had asked the deposit holders to go back to the National Company Law Tribunal (NCLT), and raised hopes that the CoC would address their concerns. “We leave it open to the appellants to raise all points and contentions before the CoC, the administrator, and if necessary, the NCLT,” the judgment had said.

DHFL had stopped accepting public deposits and renewing existing deposits on May 21, 2019, several months before the mega financial fraud shocked the country. The stressed housing finance company also stopped premature withdrawals of existing deposits in a vain effort to reorganise its liability management.

The final bids for DHFL are in the range of one-third of the total claims. Oaktree’s bid (net of insurance) is ₹32,700 crore (with cash of ₹11,700 crore and non-convertible debentures of ₹21,000 crore), which is marginally higher than the ₹32,250-crore bid submitted by Piramal Group (with cash component of ₹12,700 crore and NCDs of ₹19,550 crore). Adani is a distant third with a ₹29,860-crore bid (cash of ₹10,750 crore and NCDs of ₹19,110 crore). While Oaktree has offered to make the remaining amount over seven years with a three-year moratorium, Piramal has said it would pay the remaining amount over a longer period of 10 years without any moratorium. If it wins the bid, Piramal has offered to infuse ₹10,000 crore of equity into DHFL through a reverse merger of Piramal Capital & Housing Finance Ltd, its financial services company, into DHFL.

The higher upfront cash component of ₹12,700 crore by Piramal has given it an edge over Oaktree, which has promised an upfront cash component of ₹11,700 crore.

Being the first case of a finance company undergoing the Corporate Insolvency Resolution Process according to the IBC, everyone is keen to see a positive outcome. DHFL is facing claims of ₹87,031 crore from lenders including State Bank of India (SBI), along with SBI Singapore, (₹10,083-crore exposure), Bank of India (₹4,125 crore) and Canara Bank (₹2,681 crore), among others.

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