‘DHFL takeover to be structurally positive for PEL’ | Economic Times

Mumbai: The Dewan Housing Finance Corp (DHFL) takeover will not only be structurally positive for Piramal Enterprises but also for lenders such as Bank of India, Canara Bank, Union Bank and Yes Bank. However, DHFL shareholders might not benefit much as the stock is valued at zero, said analysts. DHFL’s creditors chose Piramal Capital and Housing Finance over US-based asset manager Oaktree Capital Management and the Adani Group in the administration-monitored takeover.“Structurally, we see this development as a positive for Piramal Enterprises, resulting in much needed diversification in the portfolio, effective use of capital and a possible improvement in the credit rating,” said Alpesh Mehta, analyst, Motilal Oswal Financial Services. “It also helps in reduction of cost of funds and an increase in granularity on the balance sheet.”Shares of Piramal Enterprises declined 2.5 per cent to close at Rs 1,584 on Friday while DHFL stock ended at 5 per cent upper circuit at Rs 27.50.Analysts warn retail investors to stay away from DHFL as they are likely to get nothing at the end of the resolution.“Retail investors should not be carried away by these defaulting companies being bought by top brands under the Insolvency and Bankruptcy Code (IBC) as investors in majority of the IBC cases have lost their entire capital,” said Ambareesh Baliga, independent analyst.As per the resolution plan, Piramal Group would pay a total of Rs 37,250 crore, including upfront cash of Rs 12,700 crore, Rs 4,000 crore of interest income on DHFL’s book and Rs 19,550 crore of non-convertible debentures to be repaid in 10 years. Thus, the estimated recovery for creditors stands at 43 per cent .“The deal may lead to 40 per cent recovery and be marginal positive for lenders such as Bank of India (BOI), Canara Bank, Union Bank and Yes Bank with higher exposure,” said Jefferies in a note.Among the key lenders, SBI has the highest exposure of Rs 10,200 crore followed by BOI at Rs 4,100 crore and Canara Bank Rs 3,800 crore.