Once the third largest housing finance company in the country, DHFL is nearly on the verge of collapse. A decline that started around ten months ago, when the defaults of infrastructure lender IL&FS led to a liquidity crisis in the financial system, which in turn led to banks not lending money and mutual funds not investing money with NBFCs for fear of default, that decline has not yet seen its bottom in the case of DHFL, which has seen its share price fall more than 90% since September, and taking yesterday’s close, was at its lowest level in more than a decade since May 20th
One tragedy after another has plagued the beleaguered mortgage lender, which include a series of defaults and subsequent downgrades by credit rating agencies, accusations of siphoning off loans worth ₹ 31,000 crore by Cobra Post, a media outlet that specialises in sting operations.
Then, most recently, after delaying their results multiple times, DHFL declared their biggest ever quarterly loss in history coming in at a whopping ₹ 2,224 crore for the March 2019 quarter. In spite of total income and assets under management rising, which is a very good sign considering its financial position, additional provisions to the tune of ₹ 3,280 crore is what really hit DHFL badly this quarter.
And, as if that were not bad enough, based on a regulatory filing, a report emerged that the company was unsure about its ability to continue as a going concern. It was this loss, which was declared on the weekend and the question mark on its future, which led to a further free fall in the price of the stock in yesterday’s trade by a massive 30%, which saw it at its lowest level in a decade.
Today’s session saw a relief rally of over 4% after DHFL clarified that only selective quotes were made public from the regulatory filing and blamed the media for creating panic regarding the statement on going concern.
A debt restructuring plan is currently being worked out, and according to sources, banks, mutual funds and other lenders are willing to accept a limited haircut as part of the rescue package. DHFL has a staggering 1 lakh crore or ₹ 1 trillion of debt as of 31st March 2019.
However, what the company needs more than a restructuring of existing loans, is fresh inflow of capital, and preferably from the equity route. Experts estimate it would require anywhere between ₹ 2,500 to 3,000 crore to be able to sustain lending operations. Talks about a strategic investor coming on board have also been doing the rounds, but nothing has materialised so far.