DHFL diverted Rs 12,700 cr into 79 shadowy firms linked to promoters: ED

Dewan Housing Finance (DHFL) diverted Rs 12,773 crore of loans to 79 shadowy companies allegedly associated with its promoters in the garb of retail loans to about 100,000 fictitious customers between 2010 and 2015, according to the Enforcement Directorate (ED).
The ED, which is probing the DHFL promoters' role in financing funds to gangster Iqbal Memon (alias Iqbal Mirchi), said Kapil Wadhawan, former chairman and managing director of the debt-laden company, played a very crucial role in these “nefarious transactions” by way of money laundering.

Wadhawan was arrested by the agency earlier this week in connection with the money-laundering case linked with properties involving Mirchi. He was remanded in ED custody till Friday.
“This appears to be a scam of wider ramifications wherein the preliminary investigation conducted indicates that more than Rs 12,700 crore have been diverted illegally, and the ‘orchestrator and prime conspirator’ for the scam was Kapil Wadhawan,” the ED said in its enquiry report. The agency said the search operation was underway to unearth further incriminating documents and records, and that it was suspected that the quantum of scam might increase.
Books of accounts of DHFL showed that Rs 2,186 crore loans (of the Rs 12,773 crore) were given to five companies — Faith Realtors, Marvel Township, Able Realty, Poseidon Realty, and Randon Realtors, which later got amalgamated with Sunblink Real Estate, a company which has been under the ED lens for its transactions with Mirchi properties.
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Kapil Wadhawan first diverted huge funds from DHFL to the five shell companies and later amalgamated them with Sunblink to cover the alleged diversion of loans acquired from DHFL, the ED said. These five entities and Sunblink are inter-related and have been used and controlled by Kapil Wadhawan to layer and obfuscate the origin on monies, it noted.
These loans were disbursed and diverted in five to six years (2010-2016), when in 2010, Kapil’s brother and DHFL promoter Dheeraj Wadhawan bought three properties in Worli, Mumbai, from Mirchi in the name of Sunblink. This deal was allegedly finalised for surrender of tenancy rights in favour of Sunblink for Rs 225 crore. The source of the amount paid in India towards the deal, Rs 111 crore, was arranged by DHFL and RKW Developers.
Explaining the modus operandi, the ED said the Wadhawan duo, in connivance with Sunny Bhathija (brother-in-law of Dheeraj and also director of the real estate firm), purchased shares of these five companies. Essentially Rs 50 crore was disbursed to Sunblink, even when there were no assets in the name of the company except one dilapidated building purchased from Mirchi.
The declared loan policy was given a complete go-by while disbursement. The payment of this building was made from the loan money and the rest was made in Dubai by Dheeraj. Further, DHFL extended the loan to five firms amounting to Rs 1,500 crore between 2010 and 2011, which added up to Rs 2,186 crore in the books of DHFL until July 2019.
The enquiry further reveals that DHFL had conveniently surpassed the finance committee of directors whose approval was required for any loan sanction above Rs 200 crore. However, Kapil Wadhawan during the questioning stated that there were certain unsecured loans with DHFL and these were to be secured. It is seen that new properties purchased from Mirchi were shown as mortgaged against the existing loans.
The so-called third-largest mortgage player has been in the liquidity crisis for long. On November 20, 2019, the Reserve Bank of India superseded its board and placed under an administrator.

DHFL administrator calls creditors' meet on Monday to discuss resolution

The Reserve Bank of India-appointed administrator of the crippled Dewan Housing Finance Ltd (DHFL) called for a meeting of its creditors for the first time on Monday after the mortgage lender was admitted for insolvency proceedings.
The third-largest pure play mortgage player is the first non-banking financial company or housing finance company to face the corporate insolvency resolution process.

The Mumbai bench of the National Company Law Tribunal (NCLT) had admitted the company for insolvency resolution on December 2 and appointed Indian Overseas Bank former managing director and CEO R Subramaniakumar as the company's administrator.
"Since the resolution professional (administrator) has now been appointed, he is meeting all the creditors and will discuss the way forward for resolution of the company," a source told PTI.
DHFL did not respond to an e-mail query.
The meeting on Monday will be attended by all creditors of the company including banks, bondholders, insurance and mutual fund companies.
Subramaniakumar will also discuss timelines so that the account is resolved at the earliest, he said.
"The status of the claims that have been received so far by the company will also be decided upon," said another source.
In its order on December 3, the NCLT asked the company's administrator to update the list of depositors, along with the amount payable to each of them. Following this, the administrator had reportedly asked all its fixed depositors and bondholders to file their claims by December 17.
The NCLT order had also noted that the company has an outstanding unsecured loan of Rs 18,882 crore as of March 31, 2018. The unsecured loans constituted Rs 10,243 crore of public deposits for the same period.
Citing governance issues and severe liquidity crisis, the regulator on November 20 superseded the board of DHFL and appointed Subramaniakumar as its administrator.
The decision on DHFL came after the government on November 15 notified Section 227 of the Insolvency and Bankruptcy Code (IBC), empowering the RBI to refer stressed financial service providers with an asset size of at least Rs 500 crore to insolvency courts.
The central bank has also appointed a three-member committee, consisting of IDFC First Bank Non-Executive Chairman Rajiv Lall, ICICI Prudential Life Insurance Managing Director and CEO N S Kanan, and Association of Mutual Funds in India CEO N S Venkatesh, to advise the company's administrator in the resolution process.
As of July 2019, the beleaguered home financier owes Rs 83,873 crore to banks, National Housing Board, mutual funds and bondholders/retail bondholders. Of the total, secured debt stands at Rs 74,054 crore and unsecured Rs 9,818 crore. Most banks have or are going to declare DHFL account as non-performing assets in the third quarter.

RBI begins bankruptcy proceedings against DHFL, sends stressed NBFC to NCLT

The Reserve Bank of India has filed an application to begin bankruptcy proceedings against shadow lender Dewan Housing Finance Corporation Ltd (DHFL), it said Friday.
DHFL, once one of India's top shadow lenders, owes its creditors - which include mutual funds, banks, pension funds, insurance firms and retail investors - close to Rs 1 trillion ($13.93 billion).

The country's shadow banking sector, a key source of credit to millions, has been plagued by a credit crunch triggered by the collapse of lending major IL&FS last year.
India's central bank said earlier this month it would begin bankruptcy proceedings against DHFL, and superseded the company's board, while appointing an administrator.

Total loan portfolio of DHFL at Rs 95,615 crore: Govt to Lok Sabha

The Regional Director (Western Region) of Ministry of Corporate Affairs has conducted an inspection of DHFL and submitted the inspection report to the Finance Ministry and as per that it has a total loan portfolio of Rs 95,615 crore, the Lok Sabha was informed on Monday.
The Regional Director (Western Region) has conducted an Inspection of DHFL and submitted the inspection report to the Ministry on 24.10.2019. As per the inspection report, the company has taken several loans as on 31.03.2019, the Finance Ministry said in a statement.

It has a total loan portfolio of Rs 95,615 crore which includes housing loans of Rs 44,851 crore, non-housing at Rs 13,590 crore, SME loans Rs 4,924 crore under the retail loans. Under the wholesale loans, housing of residential projects at Rs 15,655 crore, SRA project, 7,021 crore, non-housing at Rs 9,340 crore and commercial at Rs 233 crore.
The ministry has ordered Investigation of DHFL and 5 other companies namely Immediate Real Estate Pvt. Limited, Tenacity Real Estate Pvt. Limited, RKW Developers Pvt. Limited, Darshan Developers Pvt. Limited and RajenSkycrapersPvt. Limited to be conducted by SFIO through an order of November 6, 2019.
The inspection report submitted by the Regional Director (Western Region) has not gone into the involvement of banks and officials, it said.

Rs 4,000 crore PF scam: Yogi govt underwrites 'illegal' investment in DHFL

Averting a major showdown with the Uttar Pradesh power employees on the illegal investment of their provident fund (PF) in Dewan Housing Finance Corporation Limited (DHFL), the Yogi Adityanath government has announced to underwrite the outstanding corpus.
Besides, the state has also started the process of disinvesting the PF corpus in two other non-banking finance companies (NBFC) as well viz. LIC Housing Finance and PNB Housing Finance, which would be invested in other public sector financial institutions as per norms.

While Rs 4,122 crore were invested in DHFL alone by the two trusts managing the PF of the power employees between March 2017 and December 2018, about Rs 2,267 crore are still to be repaid by the company, which has been barred by the Bombay High Court from making fresh repayments.
The employees had been demanding the state to issue a gazette notification undertaking to ensure repayment of the corpus in DHFL, which is being probed by the enforcement directorate (ED) for money laundering.
While the employees had observed 48 hour ‘work boycott’ on November 18-19, they had further announced to proceed on indefinite stir beginning November 28 if the state government failed to concede to their demands.
Yesterday, UP power principal secretary Arvind Kumar held a meeting with the representatives of the 45,000 power employees, wherein he apprised them of the decision taken by the state government regarding taking over the responsibility of repayment in case DHFL defaulted on its commitment.
According to the UP Government Order (GO), the state would first harness legal avenues to secure the PF investment in DHFL, failing which the UP Power Corporation Limited (UPPCL) would be asked to arrange funds out of its own resources to repatriate the corpus. In case, the power utility failed to mobilise funds, the state government would offer interest free loan to the UPPCL to make up for the purported loss.
Following this significant development, the UP power employees joint action committee announced to defer its stir.
According to sources, while Rs 4,122 crore was invested in DHFL alone, PF investments were also parked in LIC Housing and PNB Housing with the investments in the three NBFCs to the tune of almost Rs 6,600 crore.
The power employees apprehended losing their entire corpus after the Reserve Bank of India (RBI) on Wednesday superseded the board of DHFL and appointed a former banker as the administrator of the beleaguered company, once considered a shining star in the league of private sector mortgagor.
Since, DHFL investments were made after flouting norms, the government had recommended a CBI probe with the state economic offenses wing (EOW) probing the case till the central agency takes over. So far, five persons, including three retired and serving UPPCL officials, have been arrested in the case.

DHFL postpones release of financial results; new date to be announced later

Crippled mortgage lender DHFL, whose management has been taken over by the RBI, on Friday informed stock exchanges that it will not be able to declare financial results on the scheduled date as the new administrator needs to have detailed discussions with the statutory auditors.
DHFL was scheduled to announce its financial result on November 25.

Earlier in the day, the Reserve Bank constituted a three-member panel to advise its administrator, R Subramaniakumar, ex-MD of the state-run Indian Overseas Bank, to help recover nearly Rs 84,000 crore that the troubled company owes to the system.
The RBI had on Wednesday used the recent changes in the laws to supersede the board of DHFL, announced to resolve the issue under the provisions of the bankruptcy code and appointed the administrator.
"The Administrator needs to have detailed discussions with the statutory auditors of the Company for the purpose of finalisation of the financial results," DHFL said in a regulatory filing.
The administrator and advisory committee will require some time to formulate the working modalities.
"Please note that considering the above factors, as directed by the Administrator, the aforesaid scheduled date of declaration of the financial results i.e. November 25, 2019 is hereby postponed and the Board Meeting scheduled for such approval has also been deferred," it said.
The revised date will be intimated in due course, it added.
As of July 2019, the home financier owed Rs 83,873 crore to banks, the National Housing Board, mutual funds and bondholders, including retail bondholders. Of this, secured debt is Rs 74,054 crore and Rs 9,818 crore is unsecured.
Most banks have or are going to declare DHFL account as NPA in the third quarter.
DHFL defaulted on its payment obligations in respect of bank and market borrowings, which reveals serious concerns about the conduct of the affairs of the company, the RBI said.
DHFL lenders were working on a resolution plan to pick up 51 per cent in the company by converting a part of their debt into equity. But the plan was yet to be formally cleared.

Govt not planning to help banks rescue shadow lender DHFL: Report

India’s government has no plans to participate in the rescue of Dewan Housing Finance Corporation Ltd (DHFL), according to two sources involved in talks on how to restructure the shadow bank’s near 1-trillion-rupee ($14 billion) debt.
A consortium - led by Union Bank (UNBK.NS) and State Bank of India (SBI.NS) - was set up to restructure DHFL’s (DWNH.NS) debt a month after it first defaulted in June.

But having struggled to come up with a rescue plan, the banks last week turned to the government for help, the two sources directly involved in the talks told Reuters. But as DHFL is a private company with limited links to government, New Delhi is likely to stay clear, said the sources, who requested anonymity as the discussions were private.
“There is no question of the government issuing directions to the banks (to support DHFL),” one senior government official with direct knowledge of the issue told Reuters.
DHFL is currently classified as a “stressed account” on creditors’ books but will slip to a Non-Performing Asset (NPA) by Dec. 31 unless a resolution is found.
That means banks will have to set aside a higher provisioning amount and it will also impact the overall financial health of the lenders.
“If the government of India steps in, it will be a welcome step but our talks suggest that it is unlikely to happen,” said the second source, from one of the lead banks in the consortium.
DHFL’s creditors include mutual funds, pension funds, insurance firms and a wide array of retail investors, and its potential collapse could impact India’s already ailing banking sector and further weaken economic growth.
“Risk aversion in the system has increased in the past few quarters... The situation could worsen if DHFL’s debt can’t be restructured,” said Mona Khetan, banking analyst at Reliance Securities.
A government spokesman declined to comment. DHFL did not respond to a request for comment. Neither Union Bank nor SBI were immediately available for a comment.
“UTTER CONFUSION”
Banks, that have lent nearly 400 billion rupees to DHFL, are looking to convert their debt into DHFL equity and receive a 51% stake in the shadow bank.
But mutual funds and a majority of DHFL’s over 85,000 bondholders have rejected the banks’ plans.
The Serious Fraud Investigation Office (SFIO) is also investigating DHFL after a forensic audit by accounting firm KPMG suggested that money was siphoned off from DHFL to other entities.
A government source said on Thursday that an initial probe into the case concluded there had been “diversion of funds” but stressed that banks were free to proceed with their resolution plans despite the ongoing SFIO probe, which could last up to six months.
Banks are preparing to ask authorities if they can only set aside the amount under investigation and restructure remaining loans, three sources briefed on the plan said.
Typically, a fraud investigation requires that lenders set aside the entire questioned loan amount for four quarters.
“We are still continuing with the plan but no one knows anything about what may happen,” said one of the bankers. “There is utter confusion.”

Govt orders SFIO probe into Rs 31,000-cr financial irregularities at DHFL

The government has ordered an SFIO probe into alleged financial irregularities at mortgage lender DHFL after finding instances of suspected fund diversions, according to a source.
Dewan Housing Finance Ltd (DHFL) came under the scanner in the wake of allegations that the company had siphoned off Rs 31,000 crore worth bank loans through layers of shell entities.

The Ministry of Corporate Affairs carried out a detailed examination of the allegations of financial misdoings against the company's promoters through the Registrar of Companies (RoC).
The RoC report indicated suspected fund diversions at the company, following which the ministry has asked the Serious Fraud Investigation Office (SFIO) to probe the case, as per the source.
On October 29, a senior official said there were good enough reasons to refer the DHFL matter to the SFIO. The probe agency comes under the ministry.
Separately, a forensic audit by KPMG has reportedly found massive fund diversion by the promoters.
DHFL, the third largest mortgage lender in the country, had sought a Rs 15,000-crore lifeline from the lenders as they finalise the resolution plan, which may also include picking up 51 per cent equity in the company by converting their debt into equity.

Govt likely to order SFIO probe into financial irregularities at DHFL

The government is likely to order an SFIO probe on the financial irregularities at troubled mortgage firm DHFL soon, an official said.
The Registrar of Companies, Mumbai office, has submitted its report on Dewan Housing Finance Corporation (DHFL) to the Ministry of Corporate Affairs a couple of days ago, an official said.

There is good enough reason to refer the DHFL matter to Serious Fraud Investigation Office (SFIO), the official said adding, the report indicates fund diversion and siphoning.
The matter will be referred to the agency in the next few days, the official added.

ED searches DHFL premises over exposure to firm linked to Iqbal Mirchi

The Enforcement Directorate (ED) is conducting search operation on Dewan Housing Finance ( DHFL) premises in connection with its exposure to real estate firm Sunblink Developers, which is under the probe agency's lens for its property dealing with late gangster Iqbal Memon.
Confirming the development, an ED official said that searches have been carried out since morning at seven to eight locations in Mumbai covering offices and residences of some of the directors of the company. The searches will continue for two more days, he added.

A text message to DHFL regarding searches remained unanswered.
During the probe, ED has found that Sunblink had received a loan of Rs 22 crore from the DHFL in the year 2010. In nine years the total dues went up to Rs 2,186 crore.
Sources say that ED is examining the financial ties between the non-banking finance company and the Sunblink developers, which had played a key role in diverting money for Memon.
On the exposure to Sunblink Developers, DHFL on Friday made a clarification to the stock exchanges. It said that DHFL in the normal course of business funded certain project of various companies which were executed in and around Mumbai. “Due to market conditions, the borrowers had streamlined their internal operations whereby they have, by certain corporate actions undertaken recently, merged certain of their companies into Sunblink. As a result, as on date, Sunblink is mentioned as a borrower,” it said.
The exposure of the NBFC came to light when the enforcement agency had arrested Iqbal Memon alias Iqbal Mirchi’s close aides — former chairman of Sir Mohamed Yusuf Trust, Haroun Yusuf, and real estate broker Bindra last week.
ED is probing several property deals involving Iqbal Mirchi, Sir Mohamed Yusuf Trust and Millennium Developers, controlled by Nationalist Congress Party member and former Civil Aviation Minister, Praful Patel. Patel was questioned by ED on Friday for these property dealings.

ED searches DHFL premises over exposure to firm linked to Iqbal Mirchi

The Enforcement Directorate (ED) is conducting search operation on Dewan Housing Finance ( DHFL) premises in connection with its exposure to real estate firm Sunblink Developers, which is under the probe agency's lens for its property dealing with late gangster Iqbal Memon.
Confirming the development, an ED official said that searches have been carried out since morning at seven to eight locations in Mumbai covering offices and residences of some of the directors of the company. The searches will continue for two more days, he added.

A text message to DHFL regarding searches remained unanswered.
During the probe, ED has found that Sunblink had received a loan of Rs 22 crore from the DHFL in the year 2010. In nine years the total dues went up to Rs 2,186 crore.
Sources say that ED is examining the financial ties between the non-banking finance company and the Sunblink developers, which had played a key role in diverting money for Memon.
On the exposure to Sunblink Developers, DHFL on Friday made a clarification to the stock exchanges. It said that DHFL in the normal course of business funded certain project of various companies which were executed in and around Mumbai. “Due to market conditions, the borrowers had streamlined their internal operations whereby they have, by certain corporate actions undertaken recently, merged certain of their companies into Sunblink. As a result, as on date, Sunblink is mentioned as a borrower,” it said.
The exposure of the NBFC came to light when the enforcement agency had arrested Iqbal Memon alias Iqbal Mirchi’s close aides — former chairman of Sir Mohamed Yusuf Trust, Haroun Yusuf, and real estate broker Bindra last week.
ED is probing several property deals involving Iqbal Mirchi, Sir Mohamed Yusuf Trust and Millennium Developers, controlled by Nationalist Congress Party member and former Civil Aviation Minister, Praful Patel. Patel was questioned by ED on Friday for these property dealings.

Sebi letter ends MFs' hopes of joining DHFL resolution process

The mutual fund (MF) industry's hopes of becoming part of the resolution process of Dewan Housing Finance Corporation (DHFL) under the inter-creditor agreement (ICA) framework got quashed on Thursday with the Securities and Exchange Board of India (Sebi) clearly stating that only those MF schemes that have already side-pocketed the affected debt exposure can participate in any ICA process.
Sebi was replying to a representation made by the industry body Association of Mutual Funds in India (Amfi), which had asked the regulator if the action of joining DHFL-ICA can itself be sufficient condition to side-pocket exposure to the troubled housing finance company.
However, Sebi's response means that more than 100 open-end schemes exposed to DHFL's debt papers won't be able join DHFL's ICA as they are yet to complete the stipulated process before side-pocket option can be availed of. The MF industry's exposure to DHFL stood at over Rs 4,000 crore. Overall, the systemic exposure to DHFL is Rs 90,000 crore, which is similar quantum to that of IL&FS.
According to Sebi's letter, reviewed by Business Standard, "Segregation of portfolio pursuant to a credit event, in terms of Sebi circular dated December 28, 2018, should be pre-condition for signing ICA for the assets in the segregated portfolio."
"As per Sebi's direction, MFs can participate in future ICAs, but not DHFL. The same-day side-pocket rule has not been relaxed by the market regulator, so most of the exposed MFs will be out of this resolution process," said chief executive officer of a fund house, requesting anonymity.
As per Sebi's stance on ICA, only three schemes of Tata MF will be able to join DHFL's resolution process. Tata Corporate Bond Fund, Medium Term Fund and Treasury Advantage Fund are the only MF schemes that have so far side-pocketed the exposure. An email query sent to Tata MF on whether they would join the ICA framework for DHFL, didn't elicit any response at the time of going to press.
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Meanwhile, legal route will continue to be an option on the table even for those MFs that initially opt for ICA framework for any distressed exposure.
"If the Resolution Plan (RP) imposes conditions on the asset management companies (AMCs), which are not in accordance with the provisions of Sebi (Mutual Funds) Regulations and circulars ... AMCs shall be free to exit the ICA altogether with the same right as if it had never signed the ICA," Sebi's letter read.
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Amfi had sought clarity from Sebi on what should MFs do if RP terms restrict MFs from selling the debt securities or infuse further funds into the borrower.
While MFs can exit if terms are not in-line with Sebi norms, MFs can also exit ICA if the RP is not implemented within 180 days of the review period.
This provision is in-line with the Reserve Bank of India's (RBI) June 7 circular.
Subject to approval from board and trustees, MFs can at the most give extended timeline of 365 days for RP's implementation. As per RBI norms, the review period starts on the reference date, which is date when borrower is referred to ICA (i.e. June 29, 2019, in DHFL's case).
Earlier, the MFs holding debt papers of DHFL were seeking one-time relaxation from Sebi on various regulatory provisions to to side-pocket exposures to debt-riddled company.
The norms require MFs to take side-pocket decision on the day of the credit event. However, when DHFL was downgraded to below-investment grade on June 5, 2019, MFs were not in a position to use the option as they had not completed the due procedures required as per Sebi regulations.
Apart from taking decision to side-pocket on day of credit event, the provisions also require MFs to give a 30-day load-free exit window to investors. Further, MFs need to put in place a detailed policy on the creation of a segregated portfolio, which is approved by the trustees.
Earlier, Insurance Regulatory and Development Authority of India had allowed insurers exposed to DHFL to become part of the ICA. The move had made MFs cautiously positive that Sebi would also allow them to join DHFL-ICA.
Opening the gates
MFs can exit ICA in case resolution terms clash with Sebi regulations
Legal route remains open for fund houses that join ICA process in future
Only schemes that have side-pocketed affected exposure can participate in any ICA process
Fund houses have sought clarity on impact of ICA on fixed maturity plans
MFs instructed to keep investors’ interests in mind before any move
Only three schemes of Tata MF cleared to join DHFL resolution process

DHFL seeks a Rs 15,000-crore lifeline as resolution plan gets delayed

Troubled mortgage lender Dewan Housing Finance (DHFL) has sought Rs 15,000 crore from banks immediately to pay its retail customers and project developers, said sources.
The company last week submitted a draft resolution plan to lenders. "The money will be used to fund viable projects that are stuck due to lack of money," said a source.

A DHFL spokesperson said the company did not have any comment to offer apart from what it has informed the stock exchanges last week on the draft resolution plan.
Under the draft resolution plan, the company has asked for funds from banks or the National Housing Bank (NHB) for restarting retail funding which was stopped after liquidity crisis hit it last year. According to sources, the decision on any additional or the quantum of funding will be taken only after due deliberations by lenders.
The home financier, which has defaulted on payment to bondholders since June, owes an estimated Rs 90,000 crore to banks, the NHB and other creditors.
Last month, lenders had signed an inter-creditor agreement (ICA), as mandated by the Reserve Bank in the new NPA resolution/recognition framework effective June 7.
In a filing to exchanges on August 8, the company said it may not be able to meet its financial obligations in the near future.
"Given the ongoing discussions on the resolution plan with the lenders who have signed the ICA, we believe that our payment obligations falling due in the immediate future, may not be met as per their existing schedule," the company informed the exchanges.
It has been facing liquidity issue since last September and has back paid Rs 41,000 crore of its financial obligations through a combination of securitization of assets and repayment collections since.
The Wadhawan family, who owns a little over 39 per cent, has been looking at various ways to come out of the stress which first came to light late last year following the IL&FS bankruptcy. These include selling stakes in group entities, including in the flagship to the extent of giving up half of their stake.
DHFL has seen a rash of rating downgrades in June after it defaulted on Rs 1,150 crore to its bond-holders due on June 4. This led to a downgrade of its Rs 850-crore commercial papers to 'default' by three rating agencies.

DHFL shares resolution plan; seeks moratorium on bank loan repayments

After months of deliberation, the troubled housing financier Dewan Housing Finance Corporation (DHFL) has finalised and placed a resolution plan to its lenders on Tuesday. The company, in an intimation to stock exchange, communicated that the draft resolution plan was formulated in consultation with a special committee set up for this purpose and its financial advisor, Ernst & Young. The plan was submitted to its lenders on Tuesday.
As per the proposed resolution plan, lenders may not have to take a principal haircut on their exposure to DHFL. It has proposed steps and measures towards addressing asset-liability mismatch, while seeking moratorium on bank loan repayments. DHFL is also seeking fresh lines of credit from banks and/or National Housing Bank (NHB) for restarting its retail lending business. DHFL stock rose by 8.58 per cent in BSE to trade at Rs 45.55 apiece.

Banks have an exposure of Rs 40,600 crore to DHFL as on March 31, 2019 while the housing financier has an obligation of Rs 45,380 crore towards those holding its bonds and debentures. DHFL’s loans assets totalled to Rs 98,000 crore. It is understood that DHFL has sought fresh loans of Rs 1,200 crore – Rs 1,500 crore a month which will be backed by fresh loans the company will lend after restarting its business. Also, DHFL is seeking a moratorium of 6 – 12 months on these fresh loans while it is also seeking for an extension of tenure on current loans as well. The consortium of bankers led by Union Bank of India is yet to approve these proposals put forth by DHFL.
In another development, DHFL intimated that one of its joint statutory auditors - Deloitte Haskins & Sells LLP tendered its resignation as statutory auditors of the Company. DHFL is in discussion with reputed audit firms for appointment as statutory auditors. Deloitte in its resignation letter has stated in the disclaimer of opinion in DHFL’s financials for FY19, its consequential effect on reporting under the Companies Act, and Deloitte’s policy on client acceptance and continuation does not permit the firm to continue as statutory auditors of DHFL.

'Substantially impaired': The reason DHFL fears it may not survive

One of India's biggest housing finance companies, Dewan Housing Finance Corp Ltd (DHFL) , has warned that its financial situation was so grim that it may not survive.
The company said it was "undergoing substantial financial stress" and its ability to raise funds was "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," it said in notes accompanying results for the fourth quarter ending March 31, signed by Chairman and Managing Director Kapil Wadhawan.

DHFL posted a net loss of Rs 2,223 crore ($324.3 million) during the quarter compared with a profit of Rs 134 crore in the same period a year earlier.
DHFL separately announced on Saturday it had defaulted on interest payments worth Rs 28.58 crore on non-convertible debentures, due on July 6 and July 8.
The results are the latest sign of stress in India's banking and shadow lending sectors. The nation's state-owned banks have been burdened with bad debts for several years.
Reforming and restructuring banks and shadow lenders so they can do more to finance economic growth is a major challenge for the government of Prime Minister Narendra Modi, who recently secured a second term in an election landslide.
India's economic growth slipped to 5.8% in the January-March quarter, the lowest quarterly figure in more than four years DHFL said it was talking to bankers and other lenders on restructuring its borrowings, was in discussions over the sale of its retail and wholesale portfolio, and had also had talks with a potential strategic partner to take a stake.
Provisions
"The ability of the company to continue as a going concern is predicated upon its ability to monetize its assets, secure funding from the bankers/investors, restructure its liabilities and recommence its operations," it said in the notes.
The results published late on Saturday were unaudited. It was not immediately clear why its auditors had not signed off.
The audit committee had asked the board to submit audited stand-alone and consolidated financial results by July 22. The firm previously said it had delayed announcing results for the year to March 31 due to "unforeseen operational engagements." The reported loss was largely due to additional provisions related to an assessment of fair value of its portfolio and for an expected credit loss, the firm said.
Two major credit ratings agencies - ICRA, an affiliate of Moody's Investors Service, and Standard & Poor's local unit Crisil - last month categorised DHFL's commercial paper at default levels for missing bond payments.
The shadow banking sector has been in turmoil since September as Infrastructure Leasing and Financial Services (IL&FS), one India's largest non-banking financial firms, defaulted, sparking fear of contagion risk.
IL&FS' series of debt defaults last year showed much of the sector was highly leveraged.
The Reserve Bank of India, the country's central bank, is taking a more active role in scrutinising the sector. It said last month that the failure of a large non-banking financial company could cause as much damage as the collapse of a big bank.

Adding to concerns about bad debts, Allahabad Bank on Saturday became the second Indian state-owned bank this month to report a major alleged fraud by bankrupt steelmaker Bhushan Power & Steel Ltd.
Last week, the government announced a fresh capital infusion of about $10 billion into state banks and credit guarantees to support shadow lenders. Tens of billions of dollars of taxpayers' money has gone to the banks in the past four years.

DHFL defers March 2019 quarter results; stock tanks 13%

Dewan Housing Finance Corporation Limited (DHFL) shares dipped 13 per cent to Rs 70.70 on the BSE during intra-day trade on Friday, after the company deferred the release of its March 2019 quarter (Q4) results which were schedueled to be announced on Saturday (June 29) to July 13.
The stock closed the day 11.75 per cent lower at Rs 72.10 as compared to a 0.48 per cent dip in the benchmark S&P BSE Sensex.

In a regulatory filing, the company cited "certain unforeseen operational engagements including nonavailability of a few directors to ensure participation of all the members of the Audit Committee as well as the Board" for deferring the results. READ THE RELEASE HERE
Earlier on Tuesday, the company said it has defaulted on unsecured commercial paper (CP) of Rs 225 crore. Within 10 months of starting wealth management business WGC Wealth, Wadhawans, the promoters of beleaguered Dewan Housing Finance Corporation (DHFL), have exited the venture by selling stake to employees. The unit was renamed Validus Wealth after the transaction.
Facing pressure of meeting repayment obligations for housing finance unit DHFL, Wadhwans have been divesting group businesses. They have sold Aadhar Housing Finance to PE firm Blackstone. They have also sold education finance subsidiary, Avanse Financial Services, to an affiliate of the Warburg Pincus Group. They are also in process of selling stake in life insurance firm and mutual funds. READ MORE HERE
Lenders to DHFL will meet early next month to hammer out a rescue package, which will include the reworking of loan payments, fresh working capital support, roping in a financial investor, and the promoters ceding control.

DHFL impact: Partial relief for some MFs; BNP Paribas, Reliance get dues

Dewan Housing Finance Corporation (DHFL) has settled some of its dues pending with mutual funds (MFs). According to people in the know, BNP Paribas MF on Friday received payment towards the zero coupon bonds of DHFL.
The dues were pending since Tuesday (June 4), when these papers matured. However, sources say that interest payments towards bonds maturing in 2021 are still due.

Meanwhile, Reliance MF has also received payments from DHFL that were pending since Tuesday.
These receipts would be a source of relief for the fixed maturity plan (FMP) investors of Reliance MF, which had to bear a cut on the redemption amount on Thursday.
"The fund house will pay proportionately to all the unit-holders of FMPs that matured on Thursday (June 6) in the next two working days," said people privy of the development.
Five FMPs of Reliance MF -- which had exposures to DHFL in the range of 6-10 per cent -- matured on Thursday. After DHFL was unable to make its interest payments on Tuesday, the net asset values of these FMPs fell in the range of 6-10 per cent.
The interest miss by DHFL led to the MF industry marking down their debt exposures to the firm by 75 per cent. The steep markdown was in-line with the new norms laid down by the Association of Mutual Funds India.
The MF industry has been exploring ways to contain the DHFL risk from spilling over. Some of the fund houses have already stopped accepting fresh flows in schemes exposed to DHFL. The move is aimed at preventing undue advantage to new investors post the NAV markdown in the affected schemes.
Overall, more than 150 MF schemes have exposures to DHFL, with over Rs 5,000 crore of investor money riding on these exposures. At an individual level, several schemes have sizeable exposures to DHFL. According to a Morgan Stanley note, 105 schemes had more than 5 per cent of the scheme assets exposed to DHFL debt. This amounted to Rs 3,040 crore of investor money. Meanwhile, 24 schemes had more than 10 per cent exposure and three had more than 30 per cent exposure to DHFL's debt papers.
Among other fund houses, Tata MF has already announced its plans to side-pocket some of its schemes, which are affected due to DHFL exposures.
On Friday, UTI MF increased the markdown on its exposures to DHFL from 75 per cent to 100 per cent. The fund house, in its note, said that the recovery efforts of DHFL could get delayed as it anticipates legal proceedings by lenders and also the possibility of early redemption clauses getting invoked by lenders.
The fund house also put exit loads in exposed schemes -- UTI Treasury Advantage Fund, UTI Ultra Short Term Fund, UTI Short Term Income Fund, UTI Dynamic Bond Fund and UTI Bond Fund -- to deter to speculative activity in the funds.

Rakesh Jhunjhunwala, LIC see 38% dent in their DHFL holding

Savvy investors, at times, look up to their ‘investment gurus’ for taking a call on the broad market direction and even ape their stock calls. A decision, if proven correct over time, can see their stock and portfolio value surge manifold. But then, even market gurus, sometimes, falter.
The liquidity crisis at Dewan Housing Finance Corporation Limited (DHFL) has dented the fortunes of ace investor Rakesh Jhunjhunwala, who increased his stake in the troubled company in the March 2019 quarter (Q4FY19).
As per the shareholding pattern mined from ACE Equity, Rakesh Jhunjhunwala increased his stake in DHFL to by 73 basis points (bps) 3.19 per cent as at the end of the March 2019 quarter – valued at Rs 150.25 crore – as per DHFL’s closing price on March 29, which was the last trading day of financial year 2018 – 19 (FY19). READ MORE ABOUT HIS HOLDING HERE
That apart, Life Insurance Corporation of India (LIC) has also suffered a blow to its investment in the company. The life insurer held 3.44 per cent stake in DHFL as at the end of March 2019, valued at Rs 162.2 crore. (See table below)
ALSO READ: Why Modi govt should plan mega-bailout of distressed financial industry now

Assuming both Jhunjhunwala and LIC still have their holding intact in DHFL, the value of their holding in the company has dropped by nearly 38 per cent since March 2019-end, with the DHFL's stock plummeting from Rs 150 levels on March 29 to Rs 93 levels as on June 6. Based on Thursday's closing price, Jhunjhunwala's shares in DHFL are valued at Rs 94 crore and of that LIC at Rs 101.4 crore on the NSE.
ALSO READ: Mutual fund industry in a tizzy over DHFL fallout, halts fresh inflows
Both Jhunjhunwala and LIC are the biggest public shareholders in DHFL with a holding above 3 per cent as per March 2019 quarter shareholding pattern, ACE Equity data show.
Meanwhile, the recent default of around Rs 1,000 crore by Dewan Housing Finance (DHFL) on interest payment to its debenture-holders can accentuate a contagion risk and expose Rs 1-lakh crore in borrowing to risk of default / haircuts, says a recent report by global research and brokerage firm CLSA.
ALSO READ: DHFL's default can expose Rs 1-trn in borrowing to risk of default: CLSA
The development, it says, can have a far-reaching impact on the financial sector with the fortunes of select non-bank finance companies (NBFCs) / housing finance companies (HFC), real estate, housing, auto and small-and-medium enterprises (SMEs) bearing the brunt.
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Dewan Housing Finance Company (Dewan HFC), according to CLSA’s estimates, has Rs 1-lakh crore in borrowing with banks having funded half of this borrowed amount, followed by insurers and mutual funds. Nearly 10 per cent of this borrowing (Rs 10,000 crore) is through deposits.
However, some analysts do see a silver lining amid this. G Chokkalingam, founder and managing director at Equinomics Research, for instance, believes that the non-bank finance companies (NFBC) and the housing finance sector will be resolved over the next few quarters if there is an overall economic buoyancy.
“This is a liquidity crisis and not an asset crisis and one must be able to distinguish between the issues troubling the public sector banks (PSBs) – which is the non-performing assets issue – and the liquidity crisis, which is bothering the housing finance companies. In case of the latter, asset sales can come to the rescue and help the HFCs come out of troubled waters,” he says.
Analysts at CLSA, too, echo the same view as regards DHFL. Going ahead, their analysts believe asset sales to be the key to prevent defaults by DHFL, as expected repayments over the next two months are higher at Rs 6,000 crore versus expected collections of Rs 4,000 crore.

Sensex tanks 554 pts, biggest one-day fall in 2019, despite RBI rate cut

Benchmark indices posted their biggest one-day loss in 2019, dragged down by financials and bank stocks even though the monetary policy committee (MPC) of the Reserve Bank of India (RBI) reduced the repo rate by 25 basis points (bps) to 5.75 per cent in the second bi-monthly monetary policy meet of the financial year 2019-20 (FY20).
Financials drop post DHFL crisis, liquidity issues, and trimmed GDP growth projections were among the major factors that dragged the markets lower on Thursday. READ THE FULL REPORT HERE
The benchmark S&P BSE Sensex slipped 554 points, or 1.38 per cent, to 39,530, with IndusInd Bank, Tata Steel, YES Bank, Larsen & Toubro, and State Bank of India were among the top losers. Only eight of the 30 BSE Sensex constituents ended the day in the green. The broader Nifty50 index tumbled 178 points, or 1.48 per cent, to 11,844.
All the Nifty sectoral indices ended Thursday's session with losses, led by Nifty PSU Bank, down 4.9 per cent, and followed by Nifty Private Bank, down 2.29 per cent.
In the broader market, the S&P BSE MidCap index tumbled 269 points, or 1.77 per cent, to 14,931, while the S&P BSE SmallCap index settled at 14,673, down 238 points, or 1.6 per cent.
Buzzing stocks
Shares of Dewan Housing Finance Corporation (DHFL) tanked 15.86 per cent to Rs 93.90, hitting an over five-year low on the BSE after rating agencies downgraded its commercial papers (CP), citing delays in debt servicing. The stock was trading at its lowest level since December 23, 2013 on the BSE. READ MORE
Shares of Eros International Media were hammered by heavy selling during the early morning deals on Thursday after ratings company CARE cut its long-term loan facilities ratings from 'BBB-' to 'D'. The stock was locked in the lower circuit of 20 per cent at Rs 53.10 per share on the BSE, which was also its lifetime low. READ MORE
Shares of GAIL (India) hit an over three-month low of Rs 316.3, down 11.77 per cent, on the BSE on the back of heavy volumes. The stock was quoting at its lowest level since February 26, 2019. READ MORE
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04:04 PM
Stocks that hit 52-week low on S&P BSE Sensex
COMPANY PRICE(RS) 52 WK LOW CHG(RS) CHG(%)
BAYER CROP SCI. 3680.00 3601.00 -21.15 -0.57
CENTRAL BANK 24.75 24.50 -0.55 -2.17
DEWAN HSG. FIN. 93.90 91.50 -17.70 -15.86
ERIS LIFESCIENCE 510.10 500.00 4.15 0.82
FORTIS HEALTH. 121.90 121.90 -2.25 -1.81
» More on 52 Week Low
04:03 PM
Top losers on BSE500
COMPANY PRICE(RS) CHG(RS) CHG(%) VOLUME
DEWAN HSG. FIN. 93.90 -17.70 -15.86 6582147
HIMATSING. SEIDE 167.00 -26.65 -13.76 255664
RELIANCE INFRA. 84.95 -12.05 -12.42 3451026
GAIL (INDIA) 316.30 -42.20 -11.77 1681262
FDC 183.65 -19.75 -9.71 22610
» More on Top Losers
04:02 PM
Heatmap: S&P BSE Sensex
04:01 PM
Nifty sectoral indices at close
04:01 PM
Market at close
03:33 PM
Market at close
The S&P BSE Sensex ended at 39,530, down 554 points while the broader Nifty50 index settled at 11,847, down 175 points.
03:13 PM
Anand Rathi on RBI rate cut
"RBI carried out the third successive rate cut. Low inflation and subdued growth are the drivers of the move. Yet, the real concern is lack of transmission of rate cuts into effective lending rate. Liquidity conditions also remain tight for large part of the corporate sector. Effective transmission and adequate liquidity remain key challenges."

-- Sujan Hajra, Chief Economist and Executive Director, Anand Rathi Shares & Stock Brokers
03:06 PM
NEWS ALERT | Infosys in pact with Microsoft for digital services for real estate firms: CNBC TV18
02:58 PM
RBI to issue revised circular on NPA resolution norms in 3-4 days: Das
The Reserve Bank will issue a revised circular on bad loan recognition within the next three-four days, replacing the February 12 circular that was struck down by the apex court.

On April 2, the Supreme Court had declared as "ultra vires" the February 12 circular that mandated banks to label even a day's default as NPA. READ MORE
02:53 PM
NEWS ALERT | Crisil reaffirms Tata Power's long-term loan rating at AA-
- Revises the outlook to positive from stable
02:52 PM
NEWS ALERT | Bank Rate is revised downwards by 25 bps from 6.25% to 6.00% with immediate effect: RBI
02:50 PM
NEWS ALERT | RBI to release minutes of the MPC meeting on June 20
02:47 PM
RBI to issue draft guidelines for ‘on tap’ licensing of Small Finance Banks by the end of August 2019
02:41 PM
Nifty PSU Bank index slips 5% post RBI policy outcome
02:39 PM
NEWS ALERT |New cabinet committee readying plan for revival of MTNL, BSNL, reports CNBC TV18 quoting DoT official
- The revivial is being planned through proposed equity infusion of 4G spectrum.
02:35 PM
Nifty Bank index slips over 2% on concerns over DHFL
02:28 PM
Biggest losers of the day
Security LTP (₹) Change % Change
SYNDIBANK 33.75 -2.95 -8.04

GHCL 242.00 -21.50 -8.16

GAIL 320.70 -37.80 -10.54

RELINFRA 86.20 -10.80 -11.13

DHFL 93.25 -18.35 -16.44


02:25 PM
COMMENT ON RBI POLICY :: Ajay Bodke, CEO and chief portfolio manager, Prabhudas Lilladher
Ajay Bodke, CEO & Chief Portfolio Manager (PMS) of PL, shares his views On RBI's Monetary Policy. pic.twitter.com/SzRbNHwYTa
— Prabhudas Lilladher (@PLIndiaOnline) June 6, 2019
02:24 PM
NEWS ALERT | Jindal Stainless eyeing a revenue of Rs 200 cr in the e-rickshaw market, reports CNBC TV18
- Forecast highest demand in Uttar Pradesh
02:23 PM
Market breadth in favour of decline as Sensex slips over 500 points
02:05 PM
Nifty sectoral indices at this hour
01:54 PM
Sensex sheds 500 pts after RBI cuts GDP growth forecast for FY20
Index Current Pt. Change % Change

S&P BSE SENSEX 39,581.67 -501.87 -1.25

S&P BSE SENSEX 50 12,360.27 -163.35 -1.30

S&P BSE SENSEX Next 50 32,589.54 -640.96 -1.93

S&P BSE 100 11,975.90 -168.60 -1.39

S&P BSE Bharat 22 Index 3,719.75 -79.75 -2.10


01:46 PM
Repo rate at lowest level in 9 years. Key takeaways from RBI's policy meet
As expected, the six-member monetary policy committee (MPC) of the Reserve Bank of India (RBI) unanimously voted to lower the repo rate by 0.25 per cent in its three-day monetary policy meet, which ended on Thursday. The repo rate that stands at 5.75 per cent post the Thursday’s review is the lowest in nine years. This the first time in 2019 when all members of the MPC (Dr. Chetan Ghate, Dr. Pami Dua, Dr. Ravindra H. Dholakia, Dr. Michael Debabrata Patra, Dr. Viral V. Acharya and Shri Shaktikanta Das) unanimously decided to reduce the policy repo rate by 25 basis and change the stance of monetary policy from neutral to accommodative. READ MORE

01:42 PM
YES Bank falls 3.8%
01:36 PM
Nifty Bank slips under 31,000
01:32 PM
COMMENT ON RBI POLICY :: R. K. Gurumurthy - Head Treasury, Lakshmi Vilas Bank
Bond prices have seen a broad based rally on the day, post policy. With system liquidity close to 1 lac crore on the back of government spending and an OMO of 15k Cr to happen next week, the bond rally may have legs. One would however tread with caution as the budget is slated for early july 2019 where the fiscal road map would be key to bond-supply dynamics. Also, many expected direct measures/announcements on NBFC issues. RBI may wait and achieve that possibly with the recommendations of the working group on liquidity management
01:31 PM
Bank, auto, realty stocks trade lower despite 25 bps repo rate cut by RBI
Shares of interest rate sensitive sectors such as automobiles, real estate, and banking were trading weak despite the monetary policy committee (MPC) of the Reserve Bank of India (RBI) on Thursday reducing the repo rate by 25 basis points (bps) from 6 per cent to 5.75 per cent in the second bi-monthly monetary policy meet of the financial year 2019-20 (FY20). The policy stance was also changed to 'accommodative' from 'neutral'. READ MORE

RBI rate cut
Illustration by Binay Sinha
01:31 PM
COMMENT ON RBI POLICY :: Arvind Chari, Head – Fixed Income & Alternatives , Quantum Advisors
That the Repo rate has been cut below 6% and the stance has changed to accommodative has happened only twice in the last 20 years; Once post the Lehman crisis, 2008-2009 and the other post the dot com, global slowdown in 2002-2003 period. So it is not a common occurrence in India. We should also note that growth levels and prospects was way lower during those times to justify Repo rates well below 6%.
Bond yields may have further room to drop as the markets will except further rate cuts especially another 25 bps in August to take the Repo rate to 5.5%. 10 year bond government bond yield at around 6.9%, is still attractively valued as more rate cuts gets priced in. We expect another rate cut in August but will caution against too much exuberance.
01:30 PM
Market check
01:30 PM
Market check

DHFL-exposed MF schemes suffer 30-50% drop in NAVs, Icra data shows

The mutual fund (MF) industry faces another round of markdowns following delay in interest payments by Dewan Housing Finance Corporation (DHFL). The firm was supposed to meet obligations amounting to Rs 960 crore on Tuesday.
On Tuesday, schemes with top exposures to DHFL debt paper saw a sharp fall in their net asset values (NAVs). The NAV of DHFL Pramerica medium-term fund (exposure 37 per cent) fell by 53 per cent on Tuesday, while that of its floating-rate fund (exposure of 32 per cent) was down 49 per cent. Among other schemes, the NAV of Tata corporate bond fund (exposure of 28 per cent) shed 29 per cent on Tuesday. BNP Paribas Medium Term Fund and JM Low Duration Fund (exposure of 14 per cent and 18 per cent, respectively) saw 10-12 per cent fall in NAVs on Tuesday. The above data is collated from Icra's MF database and Value Research.

According to people in the know, several schemes would have to bear the brunt of a downward revision in the valuation of DHFL bonds, as the housing finance company was widely-held by MFs. According to sources, the valuation agencies have already given the lowered pricing to MFs to revise valuations of their DHFL exposures.
ALSO READ: Liquidity-starved DHFL stops fresh deposits, premature withdrawals

"We have already received the pricing change from valuation agencies. However, the papers are not yet downgraded to 'default or D' grade," said a fund manager, requesting anonymity.
DHFL was unable to make the interest payment due on Tuesday, on some of its non-convertible debentures (NCDs). Most of the outstanding exposures of MFs are related to DHFL's NCDs as fund houses have reduced exposure to the firms' commercial papers post IL&FS-crisis.
According to data from Prime MF database, MFs exposure to DHFL debt paper stood at Rs 5,169 crore at April-end. Under the new norms laid down by industry body Association of Mutual Funds in India (Amfi), an instrument downgraded to 'default or D' grade has to be marked down at 75 per cent.
Fund managers say they are keenly watching how rating agencies act as DHFL has maintained that the payment miss should be construed as 'delay' not 'default'.
Meanwhile, the Securities and Exchange Board of India (Sebi)'s proposed definition says a single day's delay of even a rupee of interest or principal should be regarded as a default.