Adani indicates it can improve DHFL takeover offer, seeks forfeiture of deposits of those seeking to vitiate auction

Billionaire Gautam Adani's roads-to-mining group has indicated that it can improve on its Rs 33,000 crore takeover offer for collapsed housing lender DHFL and has sought forfeiture of deposits of bidders seeking to vitiate auction by questioning maximum recovery of public money.

In an email written to the administrator, who is running the DHFL auction under insolvency process, the Adani Group said it has followed due process scrupulously and its "intent has always been to provide an unconditional offer and potential value maximisation for all the stakeholders and at the same time ensuring an expeditious consummation of the process".

In the email, uploaded on DHFL data room and seen by PTI, the Adani Group said it was pained at some bidders resorting to media to sensationalise issues with an aim to prevent value maximisation for the lenders and depositors.

Four entities -- Adani Group, Piramal Group, US-based asset management company Oaktree Capital Management and SC Lowy -- submitted bids for DHFL in October but lenders, who are getting DHFL auctioned to recover unpaid loans, wanted suitors to revise their bids as original offers were low.

The Adani Group, which had initially bid only for DHFL's wholesale and Slum Rehabilitation Authority (SRA) portfolio, in the revised offer submitted on November 17 bid for the entire book, offering a total of Rs 30,000 crore plus interest of Rs 3,000 crore, a source in lenders consortia said.

This was more than Rs 28,300 crore offered by Oaktree, the source said adding the US firm's conditional bid had outlined that it would hold back Rs 1,000 crore on insurance claims.

Piramal quoted Rs 23,500 crore only for the retail portfolio of DHFL while Hong Kong-based SC Lowy bid Rs 2,350 crore for SRA.

Soon after, rival bidders cried foul over Adani's bid, saying the group had submitted the bid past the deadline and that it cannot expand on its original plan.

All the three rival bidders sought disqualification of Adani, the source said.

In the November 22 email, the Adani Group said it had originally put in an expression of interest or EoI for both Option 1 and 2 (full book and part of the portfolio.

It said its October bid was only for wholesale and SRA assets of DHFL as it was hopeful that it along with the Piramal Group would complete the deal (Piramal Group bid only for the retail assets).

But on the opening of bids on November 9, Adani saw bids put in by rivals did not reflect the value of the company and decided to bid for the entire book.

Adani has cited 4.2.6 and clauses 7.3(a) read with Clause 3.15.22(b) of the bidding process document and said it "bid is as per the process" and "no resolution applicant has any right to object".

Also, the Committee of Creditors (CoC) and the Administrator are duty bound to take steps which result in value maximisation, it said.

The Adani Group said rival bidders had formed a cartel and threat by some of them to pull out of the auction was a "coercive" means to harm the bidding process.

The bid process provides for the administrator/CoC "forfeiting the earnest money of such a resolution applicant" who has "directly or indirectly engaged in coercive practice and/or restrictive practice".

"We reiterate our intent has always been to provide an unconditional offer and potential value maximisation for all the stakeholders and at the same time ensuring an expeditious consummation of the process," Adani wrote. "We also stand committed to further improve our offer when revised offers are invited."

A person close to the situation said it was surprising that when Adani submitted a letter on November 12 stating they would be bidding for Option 1, then why would the Administrator in his email communication dated November 13 to the bidders invite bids only for the parts they had originally bid for?

More so when the bid process provides clearly that a bidder can submit an offer at any tome. It appears they were not inclined to entertain the Adani offer even though it appeared to be the highest offer, the person said.

Adani has further mentioned some of the bidders have formed a cartel with the objective of restricting a full and fair competition in the resolution plan submission process.

As per Clause 7.7 of the bid process, the lenders and Administrator are within their rights to forfeit the earnest money deposit of such resolution applicants.

Adani's offer includes upfront cash of Rs 11,000 crore and another Rs 19,000 crore to be paid to the lenders with interest of Rs 3,000 crore.

It has also reiterated that it's offer is unconditional with no hold back.

Surprisingly, the Adani email was not mentioned by the Administrator in the CoC meeting - but was later uploaded in the data room.

A lending source said in the Binani Cement acquisition, a late bid by Ultratech was not only entertained by the lenders but it was even upheld by the Supreme Court.

Kapil Wadhawan erstwhile promoter of DHFL has filed an application in NCLT saying the offers of Piramal and Oaktree do not reflect the true value of the company and they are trying to get the company virtually for free with minimal investment by themselves.

In the email, the Adani Group said, its bid was submitted before 10 am on November 17 and was in accordance with the bid document.

It went on to quote the relevant section of the bid document that gave liberty to the administrator to examine the bid received at any stage of the resolution plan submission process and rival bidders had no right to object to such submission.

In November last year, the Reserve Bank referred DHFL, the third-largest pure-play mortgage lender, to the National Company Law Tribunal (NCLT) for insolvency proceedings.

As of July 2019, the company owed Rs 83,873 crore to banks, the National Housing Board, mutual funds and bondholders.