Tag: Dewan Housing Finance

DHFL shares surge 40% after Special Committee approves resolution plan

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Shares of Dewan Housing Finance Limited (DHFL) surged nearly 40 percent on Tuesday after the cash-strapped lender said the Special Committee has approved the resolution plan to the lenders of the company.

According to the resolution plan, DHFL’s creditors would not have to take any haircut on their principal exposure as per the draft resolution plan that has now been approved by the mortgage lender.

The stock gained as much as 39.6 percent to Rs 58.60 per share on the BSE. At 3:15 PM, the stock was trading 31.7 percent higher at Rs 55.25 as compared to a 0.85 percent (310 points) gain in BSE Sensex at 37,010.

In a regulatory filing this morning, DHFL said the Special Committee for Resolution Plan today took on record the draft resolution plan formulated by the company in consultation with the committee and its financial advisors, Ernst & Young. The special committee, which was formed by DHFL to work on the revival plan, has approved the submission of the draft plan to the lenders, who are then expected to deliberate on the proposal before the resolution plan is finalised.

According to DHFL, this draft resolution plan has four salient features. One, that there will be no principal haircuts to any creditors. Two, the plan proposes steps towards addressing aligning asset-liability mismatch problem. Three, it also envisages a moratorium on repayments to various creditors, and lastly, it will seek funding from the banks/National Housing Bank (NHB) for starting its retail funding activity.

With DHFL submitting its resolution plan to lenders, banks will soon convene a meeting of key stakeholders under the Inter-Creditor Agreement to deliberate on the final contours, sources said.

State Bank of India has an exposure of about Rs 10,000 crore to DHFL, and is the largest financial creditor to the company. Other lenders include Union Bank of India, Bank of India, Central Bank of India, Andhra Bank, Canara Bank, Punjab National Bank and Corporation Bank, among others.

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DHFL draft resolution plan cleared by special committee, to be submitted to lenders

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Cash-strapped Dewan Housing Finance Limited today said its creditors would not have to take any haircut on their principal exposure as per the draft resolution plan that has now been approved by the mortgage lender.

In a regulatory filing this morning, DHFL said the Special Committee for Resolution Plan today took on record the draft resolution plan formulated by the company in consultation with the committee and its financial advisors, Ernst & Young. The special committee, which was formed by DHFL to work on the revival plan, has approved the submission of this draft plan to the lenders, who are then expected to deliberate on the proposal before the resolution plan is finalised.

According to DHFL, this draft resolution plan has four salient features. One, that there will be no principal haircuts to any creditors. Two, the plan proposes steps towards addressing aligning asset-liability mismatch problem. Three, it also envisages a moratorium on repayments to various creditors, and lastly, it will seek funding from the banks/National Housing Bank (NHB) for starting its retail funding activity.

CNBC-TV18 had reported on the draft contours of the resolution plan earlier. Sources close to DHFL had indicated to CNBC-TV18 that the mortgage lender will propose September 25 as the longstop date for execution of the resolution plan, which will involve a mix of fresh equity, debt conversion, restructuring, some moratorium as well as a fresh line of credit. Sources had indicated that to restart its retail lending operation, DHFL will seek Rs 1,200-1,500 crore per month for at least a period of one year from its lenders, which it will propose to repay via securitisation at a later date.

However, an important part of the resolution for DHFL remains the closure of the deal with a private equity player to raise fresh equity and bring in much-needed cash into the company. On July 22, DHFL had stated that it had received non-binding indicative term sheets as a part of the corporate restructuring plan. The resolution proposal outlined by DHFL to exchanges today did not mention the progress of the proposed stake sale deal.

With DHFL submitting its resolution plan to lenders, banks will soon convene a meeting of key stakeholders under the Inter Creditor Agreement to deliberate on the final contours, the sources added.

State Bank of India has an exposure of about Rs 10,000 crore to DHFL, and is the largest financial creditor to the company. Other lenders include Union Bank of India, Bank of India, Central Bank of India, Andhra Bank, Canara Bank, Punjab National Bank and Corporation Bank, among others.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Resolving DHFL crisis: Experts discuss resolution road map

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The resolution of Dewan Housing Finance Corporation (DHFL) is an acid test for Indian banks, mutual funds, insurance companies, Reserve Bank of India (RBI) and Securities and Exchange Board of India (Sebi) and the government itself. It is the second big non-banking finance company (NBFC) to require restructuring after IL&FS. Both companies have loan book of around Rs 1 lakh crore each. While IL&FS resolution is being spearheaded by a special board led by banker Uday Kotak and supervised by the National Company Law Tribunal, lenders are seeking to resolve DHFL among themselves under RBI’s June 7 circular.

CNBC-TV18 has reliably learnt that the company’s proposed resolution plan requires restructuring of loans, extension of repayment tenors, some moratorium on some loans and fresh loans to complete commitments to some borrowers. Bankers say come private equity companies like Aion Capital may be interested in coming in with some money to buy a stake, other funds may be interested in buying part of loan book.

Also Read: DHFL to present resolution proposal to its lenders today

However, resolving DHFL is not so simple. Firstly going by the latest result of the company, auditors are unsure about the quality of over Rs 35,000 crore or 40 percent of the loans. This leads to questions such as how much of the loan is bad, who decides how much is bad, how much can be salvaged and who takes the haircut and how much. Should those who want their money back first be given a larger cut? If yes, again, how much?

The second question is who decides. The bankers have signed an inter-creditor agreement. But even if all bankers agree to a haircut or an extension, they account for only 40 percent of the loans. The remaining is accounted for by mutual funds, LIC, other insurance companies, pension funds, corporate treasuries and thousands of retail investors in DHFLs debentures and deposits. How can all these lenders be given a voice? How?

The third question is on the involvement of the promoter. While in a non-financial company it is best to change the promoter, in a financial company, the promoter, especially if he has siphoned some money or lent to related parties, may be glad to leave but lenders may want him to stay and take responsibility, but under the control of a board appointed by the lenders.

We posed all these questions to former Sebi ED and promoter of Finsec Law Advisors Sandeep Parekh, former deputy MD of SBI Sunil Srivastava and Head of Fixed Income at Mirae Global Investments Mahendra Jajoo, who spoke on behalf of mutual funds.

The experts were divided on whether to just sell off the good loans and let lenders absorb losses of the bad loans or to work towards keeping the company going. What they were agreed on is the regulators RBI, Sebi, Irda and may be the Finance Ministry and the Corporate Affairs Ministry need to sit together and hammer out a template to resolve all stressed finance companies.

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Rakesh Jhunjhunwala has lost Rs 149 crore in just 7 months to this stock

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Ace investor Rakesh Jhunjhunwala has taken a huge hit from his investment in Dewan Housing Finance (DHFL). The investor initially bought 25 lakh shares of DHFL for Rs 34 crore in October 2013. Till December 2013, he increased it to 51 lakh shares of the company. He then gradually rose his stake in the company to 1 crore shares by September 2015.

In December 2018, he decreased his holding to 77.2 lakh shares but after a sharp drop in the stock price, he increased it back to 1 crore in March 2019 quarter. Currently, he holds 77.2 lakh shares, as per the data available on the BSE.

On September 30, 2015, his 1 crore shares in the NBFC were valued at Rs 220 crore, which was reduced to Rs 150 crore by March 29, 2018. His current holding would be valued at Rs 43.65 crore, which is over Rs 175 crore less as compared to the September 2015 value.

Since December 31, 2018, till date, the value of his holding has been reduced by Rs 149 crore.

The stock has been under heavy selling pressure, following allegations of corporate governance lapses and concerns on the housing finance company’s liquidity.

The small-cap share tanked 91 percent in the last one year and 78 percent since the beginning of this year.

The company’s share price first took a hit after a crisis emerged at IL&FS. Post that, loan defaults, rating downgrades, disappointing Q4 earnings, and negative management comments have perturbed the stock.

The NBFC reported a standalone loss of Rs 2,224 crore in Q4FY19 compared to a net profit of Rs 134 crore in the corresponding quarter a year ago. In FY2019, DHFL reported a net loss of Rs 1,036 crore compared to a net profit of Rs 1,240 crore in FY2018.

The company also warned that its financial situation was so grim that it may not survive. The company said it was “undergoing substantial financial stress” and its ability to raise funds was “substantially impaired and the business has been brought to a standstill with there being minimal/virtually no disbursements.”

“These developments may raise a significant doubt on the ability of the company to continue as a going concern,” chairman and managing director Kapil Wadhawan said in a BSE filing.

The Wadhawan family, which owns a little over 39 percent in the company, has been looking at various ways of coming out of the stress. These include selling stakes in group entities, including in the flagship to the extent of giving up half of their stake.

In the latest development, the company is set to present its proposal for a resolution to its lenders today, sources told CNBC-TV18. The proposal DHFL submits to its lenders will, by no means, be the final resolution plan, and will be scrutinised by all banks in the consortium before it can be implemented, explained the sources, who did not want to be named.

Disclaimer: CNBCTV18.com advises users to check with certified experts before taking any investment decisions

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DHFL shares gain over 6% after repayment of interest on NCDs

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Shares of Dewan Housing Finance (DHFL) gained on Wednesday after the company said it has cleared all its overdue payments on non-convertible debentures (NCDs). The NBFC also paid Rs 962 crore in interest on NCDs), which fell due on June 4.

The stock rose as much as 6.6 percent in morning deals to Rs 95.90 per share on BSE. At 9:35 am, the stock was trading 4.3 percent higher at Rs 93.85 per share as compared to a 0.36 percent (145 points) fall in BSE Sensex at 39,804.

The company confirmed that it has made a full payment towards interest payable on secured redeemable NCDs issued by way of a public issue within the cure period of seven working days. “The Company has made interest payments in lieu of Rs. 961 crores as committed to its debenture holders. With this tranche, the company confirms full payment and will seek rating upgrades from agencies,” it added.

Earlier, ICRA and Crisil had downgraded ratings on DHFL’s commercial papers worth Rs 850 crore to default due to a delay in payments. Crisil and ICRA downgraded the commercial paper to ‘D’ from ‘A4+’ and ‘A4’, respectively.

Also Read: DHFL is not facing any solvency issues, says Kapil Wadhawan

Since September 2018, the company has managed to make liabilities payment of over Rs 36,000 crore without availing any fresh funding from any lender. The Company reaffirms that they are committed to meeting all future debt servicing obligations in a timely manner, through further asset monetisation plans as well as onboarding of a strategic partner for its business, the filing added.

Recently the NBFC sold its entire stake (9.15 percent) in Aadhar Housing Finance to Blackstone. As part of the deal, the DHFL promoter group will get Rs 800 crore from the stake sale.

Since January, DHFL has tanked 64 percent. The one-year return on DHFL stock is negative, with the NBFC stock down by over 85 percent. During the same period, the Sensex has risen 12 percent.

Also, catch all the action and updates in our Market Live blog.

Disclaimer: CNBCTV18.com advises users to check with certified experts before taking any investment decisions

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Cash-strapped DHFL plans three-way split of corporate and retail business

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Cash-strapped Dewan Housing Finance Limited (DHFL) is likely to be split into three parts as part of the deal, it is learnt.

The developments at the housing finance company, which is battling a cash squeeze, are being keenly watched by the street and while there is still some time before a final deal is clinched, CNBC-TV18 has received information on how a deal may be structured, and the investor interest in such a deal.

The company has received term sheet from investors for the wholesale book. The company is likely to be split into corporate and retail, and within corporate into SRA and non-SRA portfolio. Investments will be funneled into these three individually or separately.

Oaktree Capital will be investing in the non-SRA portfolio of the corporate portfolio, while Wadhawan Global Capital will be infusing money into the SRA portfolio of the corporate portfolio. Piramal Group will infuse equity for majority stake in the retail portfolio or they may rope in private equity investors to buy into the retail business.

Oaktree and DHFL declined to comment to CNBC-TV18’s query. However, Piramal Enterprises responded saying that the company has no plans to acquire or invest in the shares of DHFL.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

RBI concerned to avert contagion from NBFC liquidity issues

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Reserve Bank of India (RBI) is concerned about liquidity issues facing some Indian non-banking finance companies (NBFCs) such as mortgage or auto lenders and wants to ensure the problems do not become a systemic issue, two sources told Reuters on Wednesday.

After its central board met on Tuesday, the RBI said it had decided to form a separate supervisory and regulatory cadre in the bank after reviewing the institution’s current supervisory structure.

The central bank is hoping to use banks to support NBFCs and it will look at options to strengthen risk management systems at these companies, said the sources, who asked not to be named as they are not authorized to discuss the matter with media.

The RBI‘s board discussed various means to tackle the liquidity problems in the NBFC sector and it has decided to handle it in a “nuanced” manner by improving liquidityand tightening regulatory norms without sending a “panic” signal to the market, said a senior official, directly aware of the discussions.

Another source said the board was concerned about the liquidity situation, but felt it was not right to call it a “systemic issue”.

“There is no liquidity crisis. There are select NBFCs whose balance sheets are under strain and the entities, or banks who were lending are not lending to them anymore or are lending at much higher rates,” the second source said. “It’s not across the entire spectrum of NBFCs.”

The RBI did not immediately respond to requests for comment.

The discussion comes even as Dewan Housing Finance (DHFL) – an NBFC that is one of India’s largest home loan lenders – said it has stopped taking new deposits and blocked premature withdrawals after a credit rating downgrade, dragging down its shares and those of other NBFCs on Tuesday.

EASING LIQUIDITY

The RBI officials and board members are worried defaults by some of the NBFCs could hurt the economy and financial markets, but RBI Governor Shaktikanta Das made it clear the RBI cannot directly provide any help to the sector, both sources said.

The RBI could instead announce a raft of measures including another round of forex swaps soon to inject liquidity into the market, as part of “nuanced” attempts to handle the issue.

Earlier in May, three sources had told Reuters that the RBI would likely conduct another forex swap after the general election, along with further quantitative easing measures to boost liquidity and lower borrowing costs that remain stubbornly high despite the RBI‘s recent policy rate cuts.

The board members also suggested tightening provisioning norms for the banks, said the first official.

“We have to adopt every possible way to prevent this from becoming a systematic risk to the economy,” the official said, adding defaults by some NBFCs could have “serious implications” for the consumer market as well.

Once a new government takes charge, the RBI will meet the new finance minister to hold further discussions on this and other related issues, the official said.

The results of the election, which was staggered over several weeks of voting, are expected on Thursday. Exit polls predicted Prime Minister Narendra Modi is headed toward securing a second term in office, although such polls have proved misleading before.

The RBI is also holding consultations with the banks and NBFCs to find solutions to deal with the liquidity crunch, the official said.

Among other measures, the RBI in October allowed banks to allocate up to 15 percent of their lending to NBFCs that do not finance infrastructure projects, up from an earlier limit of 10 percent.

The collapse of the Infrastructure Leasing and Financial Services (IL&FS) last year triggered a series a defaults across the shadow banking sector, as borrowing costs for the sector surged.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow