This week, lenders, led by the State Bank of India (SBI), are expected to recover 37,400 crore because the PCHF acquisition of Dewan Housing Finance (DHFL) is expected to be finalised this month, according to various persons familiar with the deal.
Banks will get a combination of upfront cash and seven-year non-convertible debentures (NCDs) to complete what is being hailed as the largest recovery of stressed loans this fiscal year.
The cash component, which is expected to reach the banks implicated this week, will enable them to write down provisions on these advances, potentially boosting second-quarter earnings.
Making a wager on it:
- SBI, Bank of India, and Union Bank of India are among the biggest beneficiaries.
- By September 30, around Rs 17,400 crore is expected to be split among creditors.
- This fiscal year’s recovery is anticipated to be one of the largest for banks.
- A sum may be held aside until the NHB’s priority charge appeal is resolved in the NCLAT.
“By September 30, the distribution – from fixed deposit holders to banks – will be complete. Around 20% of the recovery is in cash, which will be deposited with lenders to be accounted for “uarter,” a source familiar with the distribution said.
SBI and other financial creditors admitted claims totaling Rs 87,000 crore. SBI alone had a Rs 7,267 crore exposure to the distressed house financier. Bank of India (BoI) asserted claims totaling Rs 4,125 crore, while Union Bank of India (UBI) asserted claims totaling Rs 3,605 crore.
Piramal’s overall proposal, valued at Rs 37,400 crore, represents about a 43% recovery on agreed claims. This recovery is further subdivided into a cash component of 20% and a non-cash component of 23%.
SBI will receive Rs 1,453 crore in recoveries, which will be written back from provisions this quarter, based on these estimations. BoI will profit by Rs 825 crore, while UBI would profit by Rs 721 crore. These funds will be incorporated immediately into their quarterly profits.
“These writebacks will be fully accounted for in the current quarter. Banks will benefit, assuming they do not have to make further provision for slippages during the quarter “According to the executive described above.
PCHF’s resolution plan for DHFL was authorised by the Mumbai bench of the National Company Law Tribunal (NCLT) in June, six months after the group was designated the preferred bidder, earning 94 percent of creditor votes.
The resolution of DHFL is a watershed moment for the five-year-old Insolvency and Bankruptcy Code, as it is the first resolution of debt in a financial company under this recovery process.
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