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Whistleblower Seeks Sebi Probe Into Piramal Entity Selling DHFL Loan At Steep Discount

Palak Shah Nov 14, 2024

PCHL, a 100 per cent subsidiary of Piramal Enterprises, a public company, acquired Rs 90,000 crore DHFL loan portfolio. PCHL sold a Rs 2000 crore loan for Rs 250 crore to an entity, which was later settled with the original DHFL borrower at Rs 900 crore

Market regulator Sebi is looking into whistleblower allegations involving the erstwhile DHFL (Diwan Housing Finance) loan portfolio, sources told BW Businessworld. DHFL was admitted to bankruptcy from where it was acquired by Piramal Group. The whistleblower has raised red flags against Piramal Capital & Housing Finance Limited (PCHFL), a wholly owned unlisted subsidiary of Piramal Enterprises Limited (PEL), for transferring loans acquired from DHFL at a steep discount to certain entities. These entities in turn settled the loan with the original borrower of DHFL at a higher price, thereby causing a loss to PCHFL and public shareholders of PEL, a listed entity, the whistleblower has said.

PCHFL merged with DHFL with effect from September 2021 and gained control of a debt portfolio worth around Rs 90,000 crore. PCFHL's acquisition of DHFL was for a consideration of Rs 34,250 crore, which included upfront cash payment of nearly Rs 14,700 crore and issuance of debt instruments of nearly Rs 19,550 crores (ten-year NCDs at 6.75 per cent p.a. on a half-yearly basis). PCHFL is a 100 per cent subsidiary of PEL, which has lakhs of public shareholders including retail, mutual funds, LIC, other financial institutions and foreign investors. Hence, any loss to PCHFL directly affects PEL's public shareholders.

The whistleblower has alleged that PCHFL was transferring the loans it had acquired from DHFL to certain entities at a steep discount and these entities were connected to Piramal Group promoters. BW has a copy of the whistleblower letter. An email sent to SEBI and Piramal Group on 7 November remained unanswered to date. A copy of the whistleblower letter was attached to both emails. Responses from Sebi and Piramal Group will be added to this story as and when received.

Whistleblower Allegations
It is alleged that Encore Natural Polymers and APRN Enterprises may be connected to the Piramal Group promoters and part loan portfolio was transferred to these companies at a steep discount.

First the loan moved from PCHFL to Encore at a steep discount and from Encore to APRN. The original borrower of DHFL later settled the loan with APRN at a price difference of Rs 650 crore (higher) than it was originally sold by PCHFL, thereby causing a loss to PEL shareholders.

Reportedly, PCHFL had initiated the sale of Rs 5,546 crore of bad loan portfolio inherited from DHFL, with the purchase price in the binding bid set at a 46 per cent recovery threshold of Rs 2,550 crore. The whistleblower letter says that loan transactions of over Rs 2,000 crore involving three Sahana Group entities of Sudhakar Shetty (original borrower of DHFL), were sold to Encore Natural Polymers for paltry Rs 250 crore. Then, Encore sold these loans to APRN Enterprises at Rs 450 crore, which settled the loan with Sudhakar Shetty's Sahana Group at Rs 900 crore.

This Encore Natural Polymers, says the whistleblower, is alleged to be related to the promoters of Piramal Group. "Relationship of Ajay Piramal and the Merchant Family (promoters of Encore) and financial dealings between them is a matter of investigation," the whistleblower has said.

As per publicly available data, Sudhir Ajitkumar Merchant, Chairman at Encore Natural Polymers was earlier the chairman at Piramal Realty and director at Piramal Estates. Same Sudhir Merchant owns a controlling stake of 65 per cent in APRN Enterprises through his company Encore, the whistleblower has alleged. Public data also shows that in Alpex Holdings Pvt Ltd, promoters of Piramal Group and Merchant Family Are directors on board of the company. There is other data where they are shareholders together in various companies.

The promoters and directors of APRN are Arvind Agarwal, Gautam Agarwal and Aditya Agarwal. Also, another entity Emblem Holdings owns a 64.96 per cent stake in APRN, Gaiety Holdings has a 7.09 per cent stake and Nifty Holdings has an 8.74 per cent stake in APRN. Interestingly, the registered office addresses of Emblem Holdings, Gaiety Holdings and Nifty Holdings are exactly the same as APRN, where the Merchant Family owns a majority stake. It is just circular ownership.

When Shetty's Sahana Group entities settled the Loan from APRN Enterprise for an amount of over Rs 900 crore, APRN Enterprise made a huge 100 per cent profit of Rs 450 crore in a very short period of time. When Encore, which had bought the loan from PCHFL at a paltry Rs 200 crore, sold it to APRN, it made a quick profit of Rs 200 crore," the whistleblower said.

How Did Shetty's Sahana Group Generate Cash
Reportedly, DHFL had allegedly diverted funds worth over Rs 14,683 crore through nine real estate firms controlled by then chairman-cum-managing director Kapil Wadhawan, director Dheeraj Wadhawan and businessman Sudhakar Shetty, where they had financial interests, the CBI has alleged.

The role of these real estate firms - five belonging to Shetty's Sahana Group and four others - had come under the CBI scanner in a Rs 34,615 crore scam in DHFL as it has surfaced that loans to the companies were allegedly disbursed under the instructions of Kapil Wadhawan and Dheeraj Wadhawan. The Union Bank of India, which has approached the CBI, has alleged that Amaryllis Realtors, Gulmarg Realtors and Skylark Buildcon owe Rs 98.33 crore, and Darshan Developers and Sigtia Constructions owe Rs 3,970 crore as outstanding towards DHFL. All five companies belong to the Sahana Group, the officials said. It is also alleged that Darshan Developers and Sigtia Constructions were controlled by the Sahana Group.

According to the whistleblower, a news report published in the Hindustan Times dated 6 February 2023 titled Worli ‘distress sale’: Damani daughters among 28 buyers," gives a clue of how Sahana Group generated the cash for the deal to settle loan with APRN Enterprises. The news report said, "In one of the first big-ticket transactions D Mart owner Radhakishan Damani, his immediate family and close associates have purchased 28 units in a bulk deal at discounted rates in Worli for a total of Rs 1,238 crore. Industry sources said the bulk deal appears to be to bail out Sudhakar Shetty, whose company SkyLark Buildcon is the partner in this project. The company had taken a loan of Rs 1,000 crore from DHFL (now Piramal Finance) in 2019, and units were provided as collateral. Real estate experts said lender pressure for repayments could have been why the flats were sold at discounted rates."

Palak Shah

BW Reporters The writer is author of the book: The Market Mafia - Chronicle of India’s High-Tech Stock Market Scandal & The Cabal That Went Scot-Free. Palak has been a journalist in Mumbai for nearly two decades now. He has worked for most premier pink papers including The Economic Times, Business Standard and The Financial Express and The Hindu Business Line. He was drawn to crime reporting at the age of 19 but a few years in the field told him that the fabric of crime had changed and the organised gangs, as Mumbai had witnessed during the eighties, no longer existed. It was business and markets that dominated the scenario. His passion to unravel the intricacies of the ‘white money’ economy led Palak to the world of finance and regulations.