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Housing Development Finance Corp (HDFC) is seeking to sell stressed loans amounting to over 2,000 crore that it extended to developers prior to its merger with HDFC Bank. These loans, spread across multiple accounts, including advances to owners of Radisson Blu properties, are now being discussed with asset reconstruction companies for liquidation. Alvarez & Marsal, a consultancy firm, is actively searching for potential buyers. The sale of distressed debts is aimed at preparing for HDFC's upcoming merger with HDFC Bank.
Housing Development Finance Corp (HDFC), a leading mortgage lender, is making a final effort to sell stressed loans amounting to over 2,000 crore that were extended to developers before its merger with HDFC Bank. The loans, spread across 7-8 accounts and including advances to local owners of Radisson Blu properties, are now being discussed with asset reconstruction companies for liquidation.
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Alvarez & Marsal, a consultancy firm, is actively seeking potential buyers for these debts. HDFC aims to sell a portion of its distressed debts in preparation for its merger with HDFC Bank, which is expected to take place in July.
In March, HDFC had considered selling some of these accounts but decided against it due to lower-than-expected recovery prospects. However, the company did sell its exposure to Matoshree Developers to Omkara ARC for Rs. 150 crore, resulting in a recovery of 33%.
Omkara ARC had also submitted a proposal to HDFC for around Rs. 1,100 crores of pooled stressed assets, but the sale was cancelled as the bid amount fell short of HDFC's expectations. Assets Care and Reconstruction Enterprise (ACRE) purchased developer loans from HDFC twice in FY23, resulting in recoveries of 47% and 51% for the respective loan pools.
HDFC has been focused on improving its asset quality, with a decrease in individual Gross Non-Performing Assets (GNPA) from 0.99% to 0.75% and non-individual GNPA from 4.76% to 2.9% as of March 31, 2023. The company has also been reducing its non-individual exposures in preparation for the merger, with the total pool of restructured assets decreasing to 0.6% of the assets under management (AUM). Repayments of prior facilities, resolutions, and reduced risks associated with the merger have contributed to the decline in non-individual loans.
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