HDFC attempts to sell stressed loans ahead of merger with HDFC Bank
ECONOMY & POLICY

HDFC attempts to sell stressed loans ahead of merger with HDFC Bank

Mortgage-lending pioneer Housing Development Finance Corp (HDFC) is attempting to sell around £200 million worth of stressed loans that it had extended to developers before its merger with the bank it founded almost three decades ago. These loans are spread across 7-8 accounts and include advances to the local owners of Radisson Blu properties, according to two banking sources close to the development, who spoke to ET.

HDFC is presently in talks with asset reconstruction companies to sell these loans, both sources said. Alvarez & Marsal, a consulting firm, is actively seeking potential buyers for the loans, they added. "HDFC is seeking to sell a portion of its distressed loans in preparation for its merger with HDFC Bank. The merger is expected to be finalised by early next quarter," said the first of the two executives cited above.

"The loan portfolio is presently valued at roughly £200 million, although HDFC continues to include or exclude certain loans from this pool," the person said.

An HDFC spokesperson did not respond to an email inquiry, while an Alvarez & Marsal spokesperson did not respond immediately.

Some of these loans may include non-performing assets (NPA), while others may be stressed but have not been officially declared as NPAs yet.

In March, HDFC had showcased some of these accounts for potential sale but ultimately did not proceed due to lower-than-expected recovery prospects. It had sold only £15 million in bad loans - its exposure to Matoshree Developers - to Omkara ARC, according to both sources cited above.

Omkara purchased the outstanding loans of Matoshree Developers valued at £15 million for £5 million, which entails a 33% recovery for HDFC.

During the last quarter, HDFC had received a bid from Omkara ARC for around £110 million pooled stressed assets, but the bid value fell short of the mortgage lender's expectations, resulting in the sale not taking place.

In FY23, Assets Care and Reconstruction Enterprise (ACRE) had twice bought developer loans at around 50% of the loan value. They paid £27 million against a total loan of £57.7 million, resulting in a 47% recovery in the first quarter of FY23 and £60.2 million for a £118 crore loan pool, resulting in a 51% recovery in the third quarter.

HDFC's asset quality has been improving over the past few quarters, with individual Gross Non-Performing Assets (GNPA) decreasing from 0.99% to 0.75% as of March 31, 2023. Non-individual GNPA decreased from 4.76% to 2.9%. The total restructured pool stood at 0.6% of assets under management (AUM), down from 0.8% in the previous year.

The company management expects the effective date of the merger to be in July.

HDFC has been reducing certain non-individual exposures ahead of the impending merger with HDFC Bank. Non-individual loans continued to decline, primarily due to payment of previous facilities, resolutions, and a reduction in certain exposures stemming from the merger.

Also Read
RVNL and Siemens consortium awarded Mumbai Metro 2B project
Tricity Metro Project in Punjab and Haryana gains momentum

Mortgage-lending pioneer Housing Development Finance Corp (HDFC) is attempting to sell around £200 million worth of stressed loans that it had extended to developers before its merger with the bank it founded almost three decades ago. These loans are spread across 7-8 accounts and include advances to the local owners of Radisson Blu properties, according to two banking sources close to the development, who spoke to ET. HDFC is presently in talks with asset reconstruction companies to sell these loans, both sources said. Alvarez & Marsal, a consulting firm, is actively seeking potential buyers for the loans, they added. HDFC is seeking to sell a portion of its distressed loans in preparation for its merger with HDFC Bank. The merger is expected to be finalised by early next quarter, said the first of the two executives cited above. The loan portfolio is presently valued at roughly £200 million, although HDFC continues to include or exclude certain loans from this pool, the person said. An HDFC spokesperson did not respond to an email inquiry, while an Alvarez & Marsal spokesperson did not respond immediately. Some of these loans may include non-performing assets (NPA), while others may be stressed but have not been officially declared as NPAs yet. In March, HDFC had showcased some of these accounts for potential sale but ultimately did not proceed due to lower-than-expected recovery prospects. It had sold only £15 million in bad loans - its exposure to Matoshree Developers - to Omkara ARC, according to both sources cited above. Omkara purchased the outstanding loans of Matoshree Developers valued at £15 million for £5 million, which entails a 33% recovery for HDFC. During the last quarter, HDFC had received a bid from Omkara ARC for around £110 million pooled stressed assets, but the bid value fell short of the mortgage lender's expectations, resulting in the sale not taking place. In FY23, Assets Care and Reconstruction Enterprise (ACRE) had twice bought developer loans at around 50% of the loan value. They paid £27 million against a total loan of £57.7 million, resulting in a 47% recovery in the first quarter of FY23 and £60.2 million for a £118 crore loan pool, resulting in a 51% recovery in the third quarter. HDFC's asset quality has been improving over the past few quarters, with individual Gross Non-Performing Assets (GNPA) decreasing from 0.99% to 0.75% as of March 31, 2023. Non-individual GNPA decreased from 4.76% to 2.9%. The total restructured pool stood at 0.6% of assets under management (AUM), down from 0.8% in the previous year. The company management expects the effective date of the merger to be in July. HDFC has been reducing certain non-individual exposures ahead of the impending merger with HDFC Bank. Non-individual loans continued to decline, primarily due to payment of previous facilities, resolutions, and a reduction in certain exposures stemming from the merger. Also Read RVNL and Siemens consortium awarded Mumbai Metro 2B project Tricity Metro Project in Punjab and Haryana gains momentum

Related Stories

Gold Stories

Next Story
Infrastructure Urban

KONE Opens India's First Digital Experience Centre in Pune

KONE, a global elevator and escalator manufacturer, has inaugurated its first Digital Experience Centre (DEC) in India, located in Pune. The facility aims to showcase how artificial intelligence (AI), connectivity and data-driven technologies can enhance customer experiences and improve building operations.The centre was inaugurated by Jussi Herlin, Executive Vice Chair, KONE Corporation; Philippe Delorme, President and CEO, KONE; and Nandan Nilekani, Co-founder and Chairman of the Board, Infosys.Designed as an interactive customer environment, the facility demonstrates digital solutions cover..

Next Story
Infrastructure Urban

CII GreenCo Launches Circularity Guidelines for Indian Industry

The Confederation of Indian Industry (CII) GreenCo Council has launched the CII GreenCo Circularity Guidelines – Pilot Version at the 17th CII GreenCo Waste & Resource Management Summit 2026 in Chennai. The initiative aims to strengthen resource efficiency, waste reduction and circular economy practices across Indian manufacturing and process industries.The guidelines introduce a structured framework with circularity indices covering raw materials, consumables, packaging and other resource inputs. These indicators will help industries assess existing practices, identify opportunities to ..

Next Story
Infrastructure Energy

Global Electronics Association Launches IPC-1783-CO2E Standard

The Global Electronics Association has introduced IPC-1783-CO2E, a new international standard aimed at improving consistency, transparency and comparability in product carbon footprint reporting across the electronics manufacturing industry.The standard, titled International Standard for Data Collection and Reporting of CO2 Equivalent (CO2e) Emissions for the Electronics Manufacturing Supply Chain, provides industry-specific guidance for collecting, estimating and reporting carbon emissions data.With increasing regulatory requirements and customer expectations, electronics manufacturers face c..

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

SPECIAL OFFER
QR Code