The Reserve Bank of India (RBI) on Friday set up a three-member advisory committee to assist the administrator at Dewan Housing Finance Corporation Ltd (DHFL).
On Wednesday, the central bank had superseded the board of DHFL and appointed R. Subramaniakumar as the administrator. Subramaniakumar is the former managing director of state-run Indian Overseas Bank.
Subramaniakumar will be helped by the advisory committee, consisting of IDFC First Bank non-executive chairman Rajiv Lall, ICICI Prudential Life Insurance chief executive N. S. Kannan and mutual fund body Amfi chief executive N. S. Venkatesh, an official statement from the central bank said.
The panel will be assisting the administrator in “discharge of his duties”, it added.
The RBI further said the move was in line with the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019, which provides for appointing such a panel to advise the administrator “in the operations of the financial service provider during the corporate insolvency resolution process”.
DHFL is the first non-manufacturing company to go for a bankruptcy resolution.
Last week, the government had notified Section 227 of the IBC, empowering the RBI to refer financial sector players such as NBFCs and HFCs, but excluding banks. The financial service providers who have assets worth at least Rs 500 crore can be taken to the insolvency courts.
As of July 2019, DHFL owed Rs 83,873 crore to various entities, including banks, mutual funds and bond holders.
While explaining the rationale behind superseding the board of DHFL, the RBI said the company defaulted on its payment obligations in respect of bank and market borrowings, which reveals serious concerns about the conduct of the affairs of the company.
Banks had earlier envisaged a resolution plan that consisted of splitting the amount owed in sustainable and un-sustainable debts. Of this, the sustainable portion was proposed to be serviced from cash flows from its retail assets.
The DHFL stock on Friday settled nearly five per cent higher at Rs 22.20.
Meanwhile, in a regulatory filing to the stock exchanges on Friday, the company said that in September, its board had appointed Vaijinath M. Gavarshetty as the CEO with effect from October 1.
“Vaijinath M. Gavarshetty has assumed his office as CEO of the company with effect from November 21, by reporting to Subramaniakumar, the administrator appointed by the RBI,” DHFL added.
Results postponed
DHFL informed the bourses that it will not be able to declare its second-quarter results on the scheduled date as the new administrator needs to have detailed discussions with the statutory auditors. DHFL was scheduled to announce its financial result on November 25.
