DHFL Falls 31% after Warning Investors It May Not Survive as a Going Concern

Moneylife Digital Team 15 July 2019

Investor Interest

Home financer Dewan Housing Finance Corp Ltd (DHFL) shares hit a 52-week low on Monday due to a warning about its financial stress issued by the lender in notes accompanying its financial results on Saturday. Since the past few months, the company is unable to raise funds and its disbursement has come to a standstill, it had said.

DHFL had said, "The Company is undergoing substantial financial stress since second half of the current financial year. The Company has suffered consistent downgrades in its credit ratings since February 2019. On 5 June 2019, the credit rating was reduced to 'default grade' despite there being no default till that date.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. These developments may raise a significant doubt on the ability of the Company to continue as a going concern."

On Monday, DHFL hit its 52-week low at Rs46.70 on the BSE. At 11.37am, DHFL was trading 31% down at Rs47.30 while the 30-share Sensex was flat at 38,775.

Last week, the home finance company reported a net loss of Rs2,223 crore for the quarter ending March 2019 against a profit of Rs134 crore, for the same period a year ago.

Against the backdrop of a significant slowdown in disbursement and loan growth post-September 2018, the financials of DHFL have been quite strained for the quarter, impacting the overall performance of the year. The operating profit was Rs372 crore for the quarter and Rs2,378 crore for the whole year. However, due to the additional provisioning of Rs3,280 crore (including net loss on fair value), the company reported a net loss of Rs2,223 crore for the quarter and net loss of Rs1,036 crore for the whole year, DHFL said in a statement.

In the statement, Kapil Wadhawan, chairman and managing director of DHFL said, "Since the last nine months, with single minded focus, 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 Rs41,800 crore primarily through securitisation of assets and repayment collections."

Earlier this month, the National Housing Bank (NHB) sent a letter to DFHL that contains certain observations for the year ended 31 March 2018. NHB, after an inspection, has observed capital adequacy ration of DHFL to be reduced to 10.24% and directed the lender to provide specific response on this within 21 days.

DFHL, however, says, the observations from NHB may not have any implications as such. "on account of classification of project loans, SRA loans and wholesale mortgage loans as Fair Value through Profit or Loss (FVTPL) due to the change in business model as at 31 March 2019, has resulted in a charge of fair value loss aggregating to Rs3,190 crore to the statement of Profit and Loss. In view of these results being prepared using Indian accounting standards (IndAS) while the NHB observations relate to numbers compiled on the basis of regulatory guidelines, the Management believes that the afore said observations may not have any implications on the same," it added.

On Monday, DHFL closed 29.15% down at Rs48.50 on the BSE, while the benchmark Sensex ended the day marginally up at 38,896.71.

Comments

User

AAR

7 years ago

All 3 Indian business magazines BW, BI, BT say the same reason for collapse of real estate, infra companies Relinfra, DHFL, IFLS, Unitech that these companies rely on short term borrowings for long term projects and when they couldn't renew the short term fundings when it falls due, the collapse happen.

Mohan Krishnan

7 years ago

Heavy exposure to Developers Mafia. This will never be paid back. Good Luck DHFL. You have ignited subprime crisis in India.