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Tuesday, May 26, 2020

‘Ability to raise funds substantially impaired’, DHFL shares drop 29%

Expect to ‘restart business in August 2019’, company says in statement on Monday.

By: ENS Economic Bureau | Mumbai | Updated: July 16, 2019 3:00:40 am
dhfl, dhfl loss, dhfl losses, Dewan Housing Finance Corporation, Dewan Housing Finance Corporation business With Monday’s fall, DHFL stock had plummeted around 96 per cent from the 52-week level of Rs 690, leading to significant losses for the investors.

Shares of Dewan Housing Finance Corporation (DHFL) on Monday plunged 29.15 per cent to Rs 48.50 on the BSE after the company on Saturday, in a stock exchange filing, said business has been “brought to a standstill” and raised “significant doubt on the ability of the company to continue as a going concern”.

With Monday’s fall, DHFL stock had plummeted around 96 per cent from the 52-week level of Rs 690, leading to significant losses for the investors. The company, in a statement issued on Monday, said it expects to “restart business in August 2019”. The company had on Saturday said there’s “minimal or virtually no disbursements”. DHFL, which owes around Rs 1 lakh crore to banks and investors, said “it is undergoing substantial financial stress since second half of the current financial year.”

“The company’s ability to raise funds has been substantially impaired and the business has been brought to a standstill with there being minimal/virtually no disbursements,” it said in the stock exchange filing. “These developments may raise a significant doubt on the ability of the company to continue as a going concern,” DHFL said.

Kapil Wadhawan, chairman & managing director, DHFL, said on Monday, “The joint lender forum has also taken into account the need for recommencement of business by DHFL and commence originating new home loans. Banks would enable the infusion of necessary liquidity into the system. It is expected that DHFL will be able to restart its business in August 2019 and scale it up in the months ahead.” “Since the last 9 months … we have met all our financial obligations and are looking to return to business normalcy at the earliest. Since September 2018, DHFL has managed to make repayments of over Rs 41,800 crore primarily through securitization of assets and repayment collections,” he said,

In the backdrop of a significant slowdown in disbursement and loan growth post September 2018, the financials of the company have been quite strained for the quarter impacting the overall performance of the year, DHFL said. The operating profit was Rs 372 crore for the quarter and Rs 2,378 crore for the whole year. However, due to the additional provisioning of Rs 3,280 crore (including net loss on fair value), the company reported a net loss of Rs 2,223 crore for the quarter and net loss of Rs 1,036 crore for the whole year.

“DHFL has had a strong history and standing with more than 30 banks in the country — whether it is in terms of term-loan borrowings or selling loans to them, which has been much appreciated by the participants since the quality of assets has been of high order,” Wadhawan said.

“The company is in an advanced stage of submitting its resolution process under the inter-creditor agreement as entered into by banks. As already announced, the inter-creditor agreement will examine and firm up the terms of the resolution process by July 25, 2019 and make it operational before September 25, 2019,” he said.

He said the process of identifying a strategic investor is also nearing completion which will bring in an equity investor into DHFL to bolster its capital base. The board will be reconvening in the next two weeks to look through the potential proposals and will decide accordingly on the way forward. “We are closely working with the stakeholders /creditors to ensure that there is a comprehensive resolution, without any haircut to the lenders, as has been speculated by few sections of the media,” he said.

DHFL said “it aims to continue to protect all stakeholders, creditors & investors — big or small.” “With a prime focus on the lower and middle-income segments in tier-II and tier-III markets, DHFL has been one of the largest contributor to the government’s PMAY-CLSS Scheme financing more than 100,000 units over the last three years. We are very enthusiastic about starting our business operations soon so that we can continue to contribute to the success of the … national ‘Housing for All by 2022’ mission,” DHFL said.

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