DHFL Crisis: Mortgage Lender Seeks Rs 15,000 Crores From Banks
Dewan Housing Finance Ltd (DHFL), which is facing a liquidity crunch, has sought Rs 15,000 crores funding from banks, to lend to its retail customers and developers. The 35-year-old company hit a low, when it defaulted on repayments. Its shares tanked significantly in June 2019, leaving many investors in a fix. DHFL’s volume of pending debt repayments to banks and other creditors, amounts to nearly Rs 90,000 crores.
In July 2019, the Corporate Affairs Ministry proceeded with investigations into reports of siphoning of Rs 31,000 crores by DHFL through its shell companies, as alleged by Cobrapost. Analysts maintain that this could have significant ramifications on the sector, given that DHFL is heavily into housing construction loans, real estate financing, SME loans, loan against property, etc.
As per latest developments, DHFL has sought an immediate funding from banks, to lend to its retail customers and developers. This comes a week after the company had drafted a resolution plan, which is still awaiting the approval of its lenders. The additional funding will be used for lending to viable projects that are stuck.
Analysts studying the situation say that DHFL is not insolvent and has funds to keep it afloat for a few months. However, the role of perception in such matters is important, and the testing times, may make it tougher for the company to raise funds. DHFL has moved to restrict lending and this, analysts say, does not go well with the reputation of a non-banking finance company (NBFC). As of now, DHFL’s auditor, Deloitte, has resigned, citing concerns over the information deficit over loans aggregating to Rs 24,07,772 and inter-corporate deposits of Rs 5,653 crores.
Series of losses
By January 2019, fresh loan disbursements by DHFL had plummeted by 95 per cent. Besides incurring losses to the tune of Rs 1,036 crores and liabilities estimated at Rs 755 crores, as on March 31, 2019, DHFL has been reduced to a ‘default grade’, as per credit rating agencies. On August 8, 2019, DHFL also informed the stock exchanges that it may not be able to meet its financial obligations in the near future.