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DHFL takes India’s most famous investor down with it

Anyone who follows the financial news, or tracks the market even half heartedly, knows what the fate of the country’s fourth largest housing finance company, DHFL, has been over the last ten months. A quick recap would look like this.

It all started with the liquidity crisis in September of 2018 when IL&FS defaulted, before which, DHFL was hale and hearty and trading with a share price of ₹ 680 per unit. A funding crunch followed, where banks became sceptical about lending to NBFCs, which, in DHFL’s case was aggravated by its commercial paper being sold at a discount by one mutual fund house. From then onwards, it’s all been downhill. Defaults, downgrades, asset sales, allegations of fraud, talks of shutdown, and, to top it all off, a recent declaration of its biggest ever quarterly loss totalling ₹ 2,223 crore. Naturally, all these events have taken a toll on its share price, which, from its peak, a few months ago, has tumbled like a rollercoaster at a theme park. Currently, it stands at close to levels of ₹ 56 per share, which equals a loss of more than 90%.

The usual suspects such as banks, mutual funds, insurance companies, pension funds and of course retail investors have lost money because of this dramatic fall in share price. However, someone who we probably didn’t expect to be a part of a faltering stock, and consequently, not be a part of the fall, is none other than ace investor Rakesh Jhunjhunwala.

Mr. Jhunjhunwala, or the big bull, as he is often referred to, has lost close to ₹ 219 crores in terms of wealth erosion betting on DHFL.

DHFL already formed a part of Mr. Jhunjhunwala’s portfolio to begin with. He began accumulating more shares when the stock was in the midst of a crash, sometime during the July to September quarter of 2018, and, by the end of the September quarter, he owned a neat 3.19% shares in DHFL, which took his total number to 1,00,00,000 shares, according to exchange filings. Along with LIC, which holds 3.44% in the mortgage lender, Mr. Jhunjhunwala is the biggest public shareholder in DHFL, both owning in excess of 3% in the now beleaguered NBFC.

As of September 28th 2018, which was the last trading day for the quarter, the price of Dewan Housing was ₹ 275 per share, taking the total value of Mr. Jhunjhunwala’s stake to ₹ 275 crore on that day. Fast forward nine months and eighteen days later to present day, and we notice DHFL’s stock doddering at ₹ 56 per share levels. A simple calculation will tell you that betting on DHFL has managed to leave the big bull of Dalal Street poorer by a whopping ₹ 219 crore. And, while this figure of ₹ 219 crore is not exactly his loss, because we aren’t sure of his average acquisition cost, nor has he sold his holdings to book the loss, however, taking the two dates into consideration, the billionaire investor has seen his wealth erode substantially.

 

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