Piramal Capital sells ₹4,451-cr bad loans at a steep discount

Piramal Capital and Housing sold distressed loan portfolios aggregating to ₹4,451 crore to a little-known finance company VSJ Investments at a steep discount, two people aware of the development told ET.

The finance company sold its distressed portfolio in two tranches - ₹2,748 crore for ₹275 crore, equating to a recovery of 10 paise on a rupee, and ₹1,467 crore at ₹270 crore, equating to 18 paise of recovery for each rupee.

Both tranches were sold against upfront cash payments in the first quarter of this year.

VSJ Investments won both the portfolios at an uncontested Swiss challenge auction, the people cited above said. Under Swiss auction, the VSJ Investments offer would be the anchor offer and it would have first right to match any counter bid that Piramal would have received.

Most of the portfolio consisted of loans from DHFL, the housing finance firm it acquired last year under an insolvency process.

Piramal Capital did not respond to requests for comments. VSJ Investments could not be reached for comments.

RBI has encouraged banks and finance companies to sell big-ticket distressed loans by auctioning them rather than entering into bilateral agreements. But at the same time, the banking regulator has frowned upon lenders selling distressed loans to their affiliate or related companies without conducting a Swiss challenge auction, said a senior official from an asset recast company (ARC).

Piramal Capital sold one of the largest pools of the distressed portfolio this quarter with outstanding loans of ₹4,367 crore to India Resurgent Fund ARC, a joint venture between Bain Capital and .