Ajay Piramal-led Piramal Group, which has completed the acquisition of Dewan Housing Finance Corp. Ltd (DHFL) under the insolvency and bankruptcy code (IBC), has made ambitious plans for the merged entity.
The merged entity aims to be the fastest growing company in the affordable housing segment and aims to expand the branch network from the existing 301 to 1,000 over the next 4-5 years, said Anand Piramal, executive director, Piramal Group. It will have more than 1 million lifetime customers, he said. “The vision for the financial services entity is to be the pre-eminent lender for Bharat, Tier 2 and Tier 3 cities, and to build a digitally-oriented business that serves un-served and underserved customers in semi-urban areas,“ Piramal said.
The bidding was competitive and the group used artificial intelligence and machine learning during the due diligence process to predict how the DHFL book will perform and whether there is any underlying fraud, said Jairam Sridharan, chief executive, Piramal Retail Finance. “We took the entire database and built a machine learning model on top of it, which predicted customer by customer what the probability of default would be. We met 1,400 customers who were specifically chosen and made sure they were real. All of that was done as part of the survey process,” he said.
The creditors of DHFL, including fixed deposit holders, will recover ₹38,000 crore from the resolution process of DHFL, including a payment of ₹34,250 crore in cash and non-convertible debentures by Piramal Capital and Housing Finance, besides ₹3,800 crore from DHFL’s cash balance, according to the company statement.
The consortium of lenders, led by State Bank of India, will recover 43% of the claims. Fixed deposit holders will recover 23%. The Piramal Group will make an upfront cash payment of ₹14,700 crore and issue debt instruments of ₹19,550 crore (10-year NCDs at 6.75% per annum on a half-yearly basis). The group has raised ₹18,000 crore of equity to fund this transaction, said Ajay Piramal, chairman, Piramal Group. “For Piramal Capital, debt-equity was 2.1 times. After the merger it is 3.5 times. We have enough funding and don’t plan to raise more equity,” he said.
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