Consider the irony. On the one hand, fixed deposit (FD) and non-convertible debenture (NCD)-holders are on the verge of losing a significant chunk of their tax-paid, hard-earned savings in Dewan Housing & Finance Ltd (DHFL), because they relied on dubious and falsely high credit ratings. On the other hand, when a complaint about rating agencies has landed up before the Competition Commission of India (CCI), the market regulator SEBI (Securities and Exchange Board of India) has suddenly woken up to its territorial rights and asked CCI to keep off its jurisdiction, knowing full well that compromised ratings are the root cause of the losses inflicted on investors.
Another irony is that the rating agency that has approached the CCI is one of the two that had rated DHFL’s NCDs so highly. Both, CARE and Brickworks, gave DHFL NCDs ‘AAA’ rating (highest possible) from July 2016 to January 2019 and, then, suddenly, downgraded them to default rating (D), in a span of just three months after DHFL started defaulting. But this column is not about regulators’ turf wars but about the fate of investors crushed by the collapse of DHFL.
For starters, this is one more bankruptcy resolution that is moving ahead in record time, after the sale of the steel companies. About Rs35,000 crore may be recovered (against admitted claims of Rs87,083 crore) Also, Kapil Wadhawan’s attempts (like those of the Ruias of Essar Steel) to derail the resolution have failed. Two branches of the Wadhawan family had been allowed to run riot and decimate a lot of wealth in poorly-supervised listed entities. While Kapil and Dheeraj Wadhawan have looted and run DHFL to the ground, their relatives did the same with Housing Development and Infrastructure Ltd (HDIL) and Punjab and Maharashtra Cooperative Bank (PMC Bank). Members of both families are now in jail.
Purely from a macro perspective, that 35% of the money in case of DFHL’s outstanding is being recovered, and rather quickly by Indian standards, through bankruptcy proceedings and several thousand jobs saved, is a positive outcome. The government and regulators will chalk it up as a big success.
FD- and NCD-holders are the biggest lenders to DHFL at Rs45,000 crore and they represent the savings of ordinary people. Another Rs35,000 crore is owed to commercial banks; but they dominate the committee of creditors (CoC) and will influence the outcome. The losses, even after a successful sale, are massive—over Rs52,000 crore. Other than those who invested up to Rs2 lakh (who will get back their entire principal, not interest), the FD-holders stand to lose 75% of their investment, while those with secured NCDs will lose 60%.
The key issue here is: What happens to Rs33,309 crore siphoned away by the Wadhawans which was established by the Grant Thornton forensic audit report? Can any part of it be recovered? If, yes, who gets the recovery proceeds, if any? Shockingly, this money may go to the new bidders, depending on who wins. At the moment, there are two serious bids for DHFL: one from the Piramal group and another from Oaktree Capital Management. A final decision will be taken on 14th January.
One of DHFL’s largest investors, 63 Moons Technologies (formerly Financial Technologies), has raised some valid concerns and invited FD- and NCD-holders to join it in opposing the resolution plan at the National Company Law Tribunal (NCLT). It has demanded that any future recoveries should go only to financial creditors. There are valid reasons for its worry. According to the Oaktree proposal, accessed by an investor, the recoveries will be a pass through to financial creditors, so long as the company’s assets are not impacted.
However, the Piramal plan has assigned a value of one rupee to the massive money siphoned off and all recoveries will accrue to the new company as a big bonanza. Unless investors ensure that NCLT spells out what happens to this money, FD- and NCD-holders could end up losing again.
Remember, all of India’s elite investigation agencies, such as the Central Bureau of Investigation (CBI), the Enforcement Directorate and the Serious Frauds Investigation Office (SFIO) as well as economic offences wings of the police in some states, are investigating the DHFL fraud and would, hopefully, manage to recover at least some of the money siphoned off. Since neither of the current bidders has made bids on the expectation of substantial recovery of this siphoned off money, should they get a bonanza, if there is any recovery?
63 Moons fears that banks may find a way to exercise personal guarantees by the Wadhawans and only FD- and NCD-holders would be left high and dry, if the siphoned money is, indeed, recovered. The documents, painstakingly obtained by an investor, show that financial creditors (read FD-/NCD-holders), who do not accept the resolution, will get only liquidation value in cash (about Rs30,000 crore), while other financial creditors would then divide the balance as per the approved resolution (the bid amount of about Rs38,000 crore minus costs). The difference between the two is hefty. All this only goes to show that investors need to put up a fight to protect their rights and look at some interesting facts, painstakingly obtained by a diligent investor who wants to remain unnamed.
The National Housing Bank (NHB), a regulator, which abjectly failed to exercise adequate oversight over DHFL, has filed a preferential claim over other financial creditors to get Rs2,436.67 crore. Why should NHB, a subsidiary of the Reserve Bank of India (RBI), get this benefit? In response to an investor’s objection to this preferential treatment, the administrator has said that ‘the legalities of NHB’s claim’ will be decided by NCLT. But most investors who stand to lose are, probably, unaware of the proposal.
Another concern is that legal advisers of the CoC (read bankers) will walk away with Rs100 crore in fees as seen in the table below.
Separately, Ernst & Young, as process advisers to the administrator, will get a success fee of Rs15 crore on successful resolution and legal advisers will get Rs2 crore.
Even the debenture trustees, Catalyst Trusteeship and IDBI Trusteeship Services, who have failed to protect investors, are being taken care of in the resolution by creating a corpus of Rs7 crore for their costs. Is it any wonder that debenture trustees are careless about their fiduciary obligations and duties?
The tragedy is that DHFL’s losses could have been contained if the regulators had acted swiftly. The company has been tottering since late-2018. In December of that year, Debashis Basu wrote how loans to promoters and poor disclosure were used to boost net worth and valuation. Even earlier, we wrote how Templeton Mutual Fund and Aditya Birla Mutual Fund subscribed to DHFL’s NCDs without revealing that the Wadhawans had pledged shares against them. The regulator did nothing. Today, investors stand to lose heavily from a successful resolution, with no sign of justice. There is no guarantee that this kind of fraud will not happen over and over again. After all, no institution has been inflicted with exemplary punishment for what is a failure of fiduciary duty, at best, and collusion, at worst.
I am a small investor. I have lost my job during demonetisation time and after that I am still unemployed. I have invested in DHFL & SEFL secured ncds opted for annual interest payout and my family dependant on interest income. Hv not received interest except for last one and half year with delayed payment. Am in dire necessity of funds.I want full refund of my investments alongwith the due interest at the earliest.Kindly accept my request and let me know what to do further.Request regulators and other organisations interested in safeguarding interests of small investors to help investors like me.
I am a small investor. I have lost my job during demonetisation time and after that I am still unemployed. I have invested in SEFL secured ncds opted for annual interest payout and my family dependant on interest income. Hv not received interest except for last three year with delayed payment. Am in dire necessity of funds.I want full refund of my investments alongwith the due interest at the earliest.Kindly accept my request and let me know what to do further.Request regulators and other organisations interested in safeguarding interests of small investors to help investors like me.
I am a small investor. I have lost my job during demonetisation time and after that I am still unemployed. I have invested in DHFL & SEFL secured ncds opted for annual interest payout and my family dependant on interest income. Hv not received interest except for last three year with delayed payment. Am in dire necessity of funds.I want full refund of my investments alongwith the due interest at the earliest.Kindly accept my request and let me know what to do further.Request regulators and other organisations interested in safeguarding interests of small investors to help investors like me.
I am a small investor. I have lost my job during demonetisation time and after that I am still unemployed. I have invested in SEFL secured ncds opted for annual interest payout and my family dependant on interest income. Hv not received interest except for last three year with delayed payment. Am in dire necessity of funds.I want full refund of my investments alongwith the due interest at the earliest.Kindly accept my request and let me know what to do further.Request regulators and other organisations interested in safeguarding interests of small investors to help investors like me.
I am a small investor. I have lost my job during covid19 pandemic time and after that I am still unemployed. I have invested in DHFL & SEFL secured ncds opted for annual interest payout and my family dependant on interest income. Hv not received interest except for last three year with delayed payment. Am in dire necessity of funds. Request regulators and other organisations interested in safeguarding interests of small investors to help investors like me.
had sent a mail in the e mail given by moneylife to 63 moons for adding several of our people who had showed interest there but till now no response from them on this.
I am a small investor. I have lost my job during demonetisation time and after that I am still unemployed. I have invested in DHFL & SEFL secured ncds opted for annual interest payout and my family dependant on interest income. Hv not received interest except for last three year with delayed payment. Am in dire necessity of funds. Request regulators and other organisations interested in safeguarding interests of small investors to help investors like me.
I have invested my hard earned money in SEFL secured NCD. I want full refund of my investments alongwith the due interest at the earliest. Please add me to 63 moons and any other forum so we can all collectively recover our money.
I invested my hard earned money in DHFL secured NCD. I want full refund of my investments alongwith the due interest at the earliest. Please add me to 63 moons and any other forum so we can all collectively recover our money.
The NCDS TAKEN AWAY FROM OUR ACCOUNT DURING LAST WEEK OF JULY. UP TO NOW NO PAYMENT RECEIVED. A NEW WAY OF CHEATING AND LOOTING POOR INDIAN INVESTORS BY EVERY BODY
You and your group can register as members on our website : Become a Member of Moneylife Foundation (mlfoundation.in) Membership is totally FREE! Please do spread the word on your group. Moneylife can help you stay updated on all such issues as and when they happen.
The NCLAT has already refused a stay and the resolution plan is almost complete now… In fact, they also announced that 30th July would be the delisting date for the NCDs. Payment as per the approved resolution plan is expected this month ... they are currently confirming payment details (bank details) with demat / physical NCD holders.
However, you can reach out to [email protected] in case you want to join them in their legal battle.
We have extensively written on the subject and have covered the DHFL case in our news articles too. Please check this link to stay updated on all the news related to DHFL : https://moneylife.in/tags/dhfl.html
I am a senior citizen lady invested with my hard earned income tax paid amount in dfhl secured ncd relying on the excellent ratings given by the credit rating agencies. Please guide me how can I join 63 moons and also how can we bring this to the notice of Finance Minister and Honourable Supreme Court for remedy
How do we all bring it to the notice of the Finance minister to take action on nclat etc in safeguarding the interests of the small investors.There should be a way in it.Can we make this document into a pdf and send it to her e mail to look into it the same.What do all the people who are in the link say and also if 63 moons can help it will be great.My e mail is [email protected]
You and your group can register as members on our website : Become a Member of Moneylife Foundation (mlfoundation.in) Membership is totally FREE! Please do spread the word on your group. Given that you are a senior citizen, Moneylife can help you stay updated on all such issues as and when they happen.
The NCLAT has already refused a stay and the resolution plan is almost complete now… In fact, they also announced that 30th July would be the delisting date for the NCDs. Payment as per the approved resolution plan is expected this month ... they are currently confirming payment details (bank details) with demat / physical NCD holders.
However, you can reach out to [email protected] in case you want to join them in their legal battle.
We have extensively written on the subject and have covered the DHFL case in our news articles too. Please check this link to stay updated on all the news related to DHFL : https://moneylife.in/tags/dhfl.html
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Fiercely independent and pro-consumer information on personal finance.
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Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
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The NCLAT has already refused a stay and the resolution plan is almost complete now… In fact, they also announced that 30th July would be the delisting date for the NCDs. Payment as per the approved resolution plan is expected this month ... they are currently confirming payment details (bank details) with demat / physical NCD holders.
However, you can reach out to [email protected] in case you want to join them in their legal battle.
We have extensively written on the subject and have covered the DHFL case in our news articles too. Please check this link to stay updated on all the news related to DHFL : https://moneylife.in/tags/dhfl.html
Moon 63 take up matter on behalf of scattered investor .How I join Moon 63 .pl. guide
The NCLAT has already refused a stay and the resolution plan is almost complete now… In fact, they also announced that 30th July would be the delisting date for the NCDs. Payment as per the approved resolution plan is expected this month ... they are currently confirming payment details (bank details) with demat / physical NCD holders.
However, you can reach out to [email protected] in case you want to join them in their legal battle.
We have extensively written on the subject and have covered the DHFL case in our news articles too. Please check this link to stay updated on all the news related to DHFL : https://moneylife.in/tags/dhfl.html