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

    COMMENTS

    AAR

    5 months 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

    5 months ago

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

    Nifty, Sensex Still Under Pressure – Weekly closing report
    We had mentioned in last week’s closing report that Nifty, Sensex were headed lower. The major indices of the Indian stock markets suffered a correction. The trends of the major indices in the course of the week’s trading are given in the table below:
     
     
    On Monday, the major indices suffered a deep correction. On the NSE, there were 387 advances, 1,382 declines and 324 unchanged. Disappointment over the budget proposals led the Sensex to log the heaviest fall in seven months on Monday. 
     
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    Yes Bank shares jumped 5% after it clarified about management stability and appointed two management leaders. The bank appointed Anurag Adlakha as senior group president and head financial management and strategy.  
     
    On Tuesday, the major indices opened low and closed flat. On the NSE, there were 860 advances, 871 declines and 351 unchanged. Sensex and Nifty fell during the early trade on Tuesday as the streets continued to react negatively to the Budget proposal. 
     
    Bajaj Finance reported the highest loan growth in the last 11 quarters. As per the provisional data, the non-banking finance company booked 7.3 million new loans during the quarter ended June 2019 against 5.6 million in same period last year. Bajaj Finance further said its assets under management (AUM) stood at approximately Rs1.29 lakh crore as of June 2019, up 41.30% compared to Rs91,287 crore as of June 2018. The stock bounced back 5.52% after falling over 8% yesterday.
     
    Shares of Tata Consultancy Services (TCS) declined 2% in Tuesday’s trade ahead of the IT major's June quarter results. Shares of watch and jewellery maker Titan slipped 12% on Tuesday as rising gold prices hit quarterly sales during April-June quarter. In June, global gold prices rose 8% month-on-month which analysts believe hurt consumer demand for the precious metal.
     
    On Wednesday, the major indices suffered a correction. On the NSE, there were 607 advances, 1,138 declines and 339 unchanged. Domestic passenger car sales continued to slump with the segment's offtake falling 24.07% in June. According to the Society of Indian Automobile Manufacturers (SIAM), passenger car sales in the domestic market dropped to 139,628 units from 183,885 units sold during June 2018. Shares of IndiGo fell 10.74% on Wednesday after the dispute between its promoters came out in the open. Gangwal lamented that IndiGo has started veering off from the core principles and values of governance that made IndiGo what it is today. 
     
    On Thursday, the major indices rallied. On the NSE, there were 912 advances, 805 declines and 368 unchanged. The Sensex and Nifty opened higher on Thursday after US Federal Reserve Chairman Jerome Powell hinted at a rate cut. Public sector Bharat Sanchar Nigam Ltd (BSNL) is in the process identifying land parcels all over the country for monetisation, which as per its internal estimate is valued at Rs20,000 crore in 2018-19. 
     
    Shares of GTPL Hathway rallied after the company reported stellar earnings performance for the quarter ended June 2019. Consolidated profit during the quarter jumped 120% year-on-year to Rs29.45 crore. Revenue from operations grew 50% to Rs445.5 crore with subscription business showing a whopping 47% growth YoY in Q1.
     
    Vedanta Ltd on said it spent around Rs10,000 crore in FY 19 on capital expenditure. Larsen & Toubro (L&T) received orders across various business segments in the domestic and international market. Although the company did not provide value of the contracts but said the orders fall under "significant" category which ranges between Rs1,000 crore and Rs2,500 crore as per its classification of contracts.
     
    On Friday, the major indices were volatile and closed with losses. On the NSE, there were 883 advances, 847 declines and 357 unchanged. Sensex and Nifty traded slightly lower during the early trade on Friday ahead of the release of key data points, Consumer Price Index (CPI) and Index of industrial production (IIP).
     
    State-run lenders currently under the RBI's Prompt Corrective Action (PCA) framework may not be allowed to buy the pooled retail assets of non-banking finance companies (NBFCs) under the scheme announced in the Budget, official sources said. This would leave space for only SBI, Canara Bank, Bank of India, Bank of Baroda to make such purchases. 
     
    In the Budget 2019-20, the Centre has allowed a one-time, partial credit guarantee of six months to public sector banks (PSBs) on their first loss of up to 10% for purchase of high-rated pooled NBFC assets of Rs1 lakh crore.
     
    Textile firm KPR Mill withdrew buyback proposal due to the tax proposed on buyback obligations in the Finance Bill 2019. The company had proposed (on 18 April 2019) and approved (on 30 April 2019) buyback of 3.75 million equity shares, representing 5.17% of the total share capital, at a price of Rs702 per share for a consideration not exceeding Rs263.31 crore.
     
    Religare Enterprises on Thursday announced that it has entered into a binding term sheet with TCG Advisory Services Pvt Ltd for sale of its entire stake in its NBFC arm, Religare Finvest Ltd (RFL), along with RFLs housing finance subsidiary, Religare Housing Development Finance Corporation (RHDFC).
  • User

    COMMENTS

    Ravi Ranjan

    5 months ago

    Is this similar to subprime crisis ? Does this company lends to builders? What is the real cause of this massive loss?

    Weekly Moneylife Indices & Sector Trends
    INDIAN MARKET TRENDS
    For the period from 5 July 2019 to 11 July 2019, the Sensex, the NIFTY and ML Mega-cap Index fell 2% each. ML Large-cap Index, ML Mid-cap Index fell 3% each, while both, ML Micro-cap Index and ML Small-cap Index, fell 4%.
     
     
    FUND FLOWS
    Foreigners: Foreign institutional investors were net sellers of equities for the period (Rs1,998.05 crore)....
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