DHFL receives nod to continue offering home loans
Crisis-laden Dewan Housing Finance Corporation Limited (DHFL), which is presently under the process of insolvency resolution with the NCLT, can now resume offering housing loans. The in-principle approval was given by the Committee of Creditors (CoC) of DHFL to permit the company to resume lending but the limit will be capped at Rs.500 crore a month. The explanation that was provided for stopping the lending operations was the erosion of the company’s net worth and the realisation of lenders that if one of the solutions at the NCLT proceedings is to find a buyer to take over the housing finance firm, a higher value won’t be fetched. This is also one of the major reasons why it was decided that DHFL starts disbursing fresh loans. Repayments have been remitted by the borrowers of DHFL and about Rs.1,700 crore to Rs.1,800 crore is being collected. Since the promoters have no control of the firm, the funds have been idle but with the recent decision, the firm can resume lending as it will have access to the funds. However, the company has confirmed that there will be no fund infusion from external sources.
Creditors allow DHFL to resume lending operations
A plan has been approved by the committee of creditors (CoC) that will allow the Dewan Housing Finance Corp. Ltd (DHFL) to resume its operations for home loans advance. However, the amount will be restricted to Rs.500 crore a month so that decline can be stopped.
According to a document submitted by an administrator that was appointed by the central bank, the company is recovering from past loans ranging between Rs.1,700 crore and Rs.1,800 crore on a monthly basis. Due to the company facing liquidity, they have not disbursed any loans for the past six months. Currently, the assets under management of DHFL stand at Rs.1,19,952 crore. In order to reduce operational costs, the representative offices of DHFL in London and Dubai have been shut by the administrator. Despite the approval, there are still doubts about the lending viability of DHFL. On 10 October 2019, a Bombay high court had stopped payments to unsecured creditors. However, this was later changed on 13 November 2019.
DHFL writeoff leads to Indian banks taking a hit of Rs.36,000 crore
The declaration of Dewan Housing Finance Corp. as a fraudulent account will lead to the risk of heavy writeoffs and cause further trouble to the Indian shadow banking sector. After the shutting of new credit to the Non-Banking Financial Company (NBFC) sector due to the spreading banking crisis, DHFL has been struggling to meet its debt obligations. The shares of the company have dropped by more than 90% so far this year. The formation of a debt resolution plan will be discussed by the committee formed for the purposes, led by the Union Bank of India. Once DHFL is admitted to the bankruptcy court, the plan will be evaluated by a resolution professional. Earlier in February, KPMG was appointed to look into the books of DHFL after allegations of the firm diverting funds to shell companies were made by Indian website Cobrapost. According to the Finance Ministry, in the six months ended 30 September, Rs.95,760 crore of fraudulent accounts were reported by banks. Banks may request the Reserve Bank of India (RBI) for a special dispensation to permit them to provide only for amounts earmarked as fraud instead of the entire exposure.
Stocks of Dewan Housing Finance decline by 4.9% as it comes under ED scanner
The stock prices of Dewan Housing Finance Limited (DHFL) dipped by 4.9% intraday on the Bombay Stock Exchange (BSE) when it came under the scanner of the Enforcement Directorate (ED) for giving loans to Sunblink Real Estate Private Limited. On the BSE its stocks opened with a 4.9% loss at Rs.20.4. According to the BSE’s market depth data, there is selling of 71% against a buying of 28% on the share value. The stocks are trading lower than the simple moving averages of 30, 50, 150, and 200-day. A total of 5.99 lakh shares of DHFL were traded on the BSE while on the National Stock Exchange (NSE), around 4.99 lakh shares were traded. On the BSE, the shares of DHFL were trading at Rs.20.40 with 1.49 lakh sellers while there were no buyers bidding on the stock.
Resolution plan of DHFL likely to receive approval from majority of lenders
Dewan Housing Finance Ltd. (DHFL) is likely to get a nod for its resolution plan from its lenders despite mutual funds shying away from the inter-creditor agreement. This was revealed by the Managing Director and CEO of Union Bank of India who has revealed that the loan pools brought from DHFL have been performing well. It was further revealed that the recent downgrade of these pools by ICRA to default grade likely considers the Bombay High Court Order that restricts DHFL to make any repayments to its creditors. On the resolution plan, the CEO has commented that lenders were waiting for various clearances. To receive approval, 75% of lenders by value of loans and 25% of lenders by number, should accept the resolution plan. Among the consortium of lenders to DHFL, Union Bank of India is the lead bank. The CEO was quoted saying, ‘If approved, the resolution plan will entail higher provisions for banks. “It is a provisioning requirement because the kind of instruments we are going to create, they may need some provisions as per regulatory prescription.’
DHFL requests lenders to take a 35% haircut
A proposal has been made to the Union Bank of India by the Dewan Housing Finance Limited (DHFL) for a 35% haircut to all its lenders. According to the plan, there will be no haircut in the principal.
According to an individual who knows about the development, a resolution plan has been submitted by DHFL and it will be discussed in the coming days by the core committee of banks. The plan has been submitted by DHFL under the new resolution framework circular that the Reserve Bank of India (RBI) issued on 7 June 2019. In order for the resolution to be effective, 60% of the lenders must approve of an inter-creditor agreement. Once the conversion of debt to equity is completed, banks will have equity in the lender. DHFL has made various offers such as the conversion of a 10-year debt into equity. Over the last nine months, home loan assets worth above Rs.40,000 crore have been securitised by DHFL. High-street lenders and bondholders have loaned out Rs.35,000 crore and Rs.45,000 crore to the home financer. A moratorium has been sought by DHFL for the debt repayment of above 6 months.
DHFL denies getting a clean chit from NHB
After media reports emerged that Dewan Housing Finance Corp Ltd (DHFL) had got a clean chit from the National Housing Bank (NHB) regarding the creation of shell companies to divert funds, the mortgage lender denied the development.
In a statement released by the company, it said that the meeting about which media reported was called for ‘regular agenda items’ and to present the report that was made by auditor T P Ostwal and Associates LLP.
It needs to be mentioned here that a media report had raised allegations that DHFL had created shell companies to divert funds. The allegations were dismissed by an auditor last week but the firm’s monitoring of loans was found to be inadequate which raised the risk that some of them would turn sour. It is noteworthy to mention here that a four-member committee of the National Housing Bank (NHB), the country’s housing regulator is expected to submit its report regarding the allegation in the next few weeks.
Stocks of DHFL rise by 21%
The stocks of Dewan Housing Finance Limited (DHFL) have risen by more than 21% after a report prepared by an independent auditor stated that the company had not created shell companies in order to divert funds. The share price of DHFL increased from 133.90 to 162.30. On the Bombay Stock Exchange (BSE), the share price rose from 134 to 160.80 after previously closing on 134. The shares of DHFL have seen a major dip in the last year with share price falling by 69.86% at a time.
However, things are looking up for the company once again as the prices have risen by 22.25% during the last week. Cobra Post, an investigative portal had alleged that the promoters of DHFL had wiped of loans worth Rs.31000 crore by creating shell companies. The investigative portal had alleged that DHFL had committed one of the biggest financial scams that the country had ever seen. The independent audit done quashed the claims of Cobra Post saying that no shell companies had been created to divert the funds. The private firm that conducted the audit was hired by DHFL itself.
DHFL Independent Director V K Chopra Resigns
In a statement to the Bombay Stock Exchange (BSE), Dewan Housing Finance Corporation Limited (DHFL) stated that the V K Chopra the company’s independent director had resigned. Though V K Chopra’s tenure as an independent director was supposed to end 31 March 2019, the Board of Directors had decided to re-appoint him as an independent director even after the tenure. However, Chopra expressed his desire to resign from the Board of Directors, following with his resignation was accepted. According to source, the Board of Directors has decided to appoint new independent directors while looking to improve the bank’s governance structure. DHFL Bank offers various loan products such as home loans and vehicle loans at attractive interest rates with extended tenures and simple documentation.
Share price of Dewan Housing Finance drops to lowest in 5 years due to allegations of financial delinquency
On Monday, 4 February 2019, the shares of Dewan Housing Finance dropped to its lowest in over 5 years due to speculation over financial mismanagement by the company.
It all started when Cobrapost, the investigative media company had allegedly claimed that various loans from Indian state banks were diverted to various shell companies, some of which were controlled by shareholders of Dewan Housing. However, the housing finance corporate immediately issued a statement denying any kind of transaction with shell companies and also about receiving any communication about a government investigation about the claims.
However, due to the various allegations by Cobrapost, the share price of Dewan Housing Finance dipped by 13% to Rs.96.8 on Monday which was the lowest price of the share since 23 December 2018
On 2 February 2019, Dewan Housing Finance mentioned that they would be selling 9.15% of their stake in the Aadhar Housing Financing Limited to Blackstone Group LP’s private equity funds. Apart from Dewan Housing Finance, Blackstone Group LP will also receive 70% stake in Aadhar Housing Finance which will be sold by Wadhawan Global Capital.
Cobrapost alleges DHFL of Rs.31,000 crore fraud
Cobrapost, a non-profit journalism company has alleged Dewan Housing Finance Corporation (DHFL) of a fraud worth Rs.31,000. The investigative platform claimed that DHFL siphoned off Rs.31,000 crore into promoter companies to create private wealth through a network of shell companies. According to the Cobrapost expose, DHFL, which has a net worth of Rs.8,700 crore, raised Rs.96,000 crore through loans and public deposits. Responding to the charges, DHFL issued a statement saying: “This mischievous misadventure by Cobrapost appears to have been done with a mala fide intent to cause damage to the goodwill and reputation of DHFL and resulting in erosion in shareholder value. DHFL received an email at 8.44 a.m. (Tuesday) with a follow-up reminder one hour later, seeking answers to 64 questions from Cobrapost, many of which were laced with political innuendos.”
During the press conference, Cobrapost alleged that DHFL routed money through dubious companies to acquire assets following which the money was re-routed to the firms allegedly controlled by them. The website further added that the public sector banks have disbursed Rs.7,000 crore to the DHFL promoters. The largest lender in the country, State Bank of India (SBI) had the highest exposure at Rs.11,500 crore. Meanwhile, Bank of Baroda has an exposure of Rs.4,000 crore in the group. The investigative platform stressed that the aforementioned revelations were not based on whistle-blowers documents but a result of its research. Cobrapost added that the money has been used to buy shares and other private assets in India and abroad, including in countries like Mauritius, the UK, Dubai, and Sri Lanka. DHFL has denied all the charges and said it was a publicly listed one and regulated by the National Housing Bank and the Securities and Exchange Board of India, among other regulators.