DHFL looks to rope in a strategic partner

To broad-base professional ownership to boost investor confidence: Wadhawan

The promoters of Dewan Housing Finance Corporation Ltd. (DHFL) are looking for a strategic partner and expect to complete the deal in the next 90 days.

After completely exiting Aadhar Housing Finance last week — a home financier focused on affordable housing — the mortgage lender is in advanced stages of selling investments in the life insurance business.

CARE downgrades NCDs

On Sunday, CARE Ratings downgraded DHFL’s non-convertible debentures, fixed deposit programme and long-term bank facilities.

“The events since September 21, 2018, have accelerated the process of realigning the ownership and management to bring in a broad-based professional ownership on a day-to-day management to enhance stakeholders’ confidence,” Kapil Wadhawan, chairman and managing director, DHFL, told analysts.

DHFL stocks tanked 42% on September 21 following the crisis at IL&FS, which impacted many other NBFC stocks.

“We intend taking this further to pave way for on-boarding a strategic partner and we have already started parallel discussions to achieve this over the next 90 days. “This is not an afterthought but something we started post September 21, 2018,” he said.

On September 21, the DHFL stock tanked 42% following the crisis at IL&FS, which impacted many other NBFC stocks.

Recent allegations

The stock came under further pressure last week, when a portal alleged that the company had siphoned off ₹31,000 crore of public money. DHFL, however, refuted the allegations.

Mr. Wadhawan said he was ‘surprised and shocked’ with the recent rating downgrade but clarified that the company had enough liquidity to service its debt.

On Sunday, CARE Ratings had downgraded DHFL’s non-convertible debentures, fixed deposit programme and long-term bank facilities.

“The re-rating is not a reflection on any deterioration of our credit quality or liquidity, it is more because of the decline in our share prices and the rise in the bond yields, which have been observed by the rating agencies in their rationale. We continue to be well capitalised and have enough liquidity to service our obligations,” he said.

Credit Suisse, in a note to its clients, said domestic debt funds were facing rising concerns on their exposure to DHFL. The note observed that DHFL was also among the larger borrowers from mutual funds and their aggregate exposure (₹8,500 crore) was 70 basis points (bps) of debt AUM as of December 2018.

Banking sector exposure to the company was ₹40,000 crore (40 bps of loans).

“Exposure for some fund houses is larger, at 2-10% of total debt AUM, with some schemes having up to 30% of their AUM to Dewan. Overnight, some schemes have taken MTM losses on this exposure with Dewan paper being repriced at higher yields,” the note said adding that if this continues and leads to redemption pressure, there could be a second wave of risk aversion in domestic debt fund and volatility in their flows.

Newsletter Subscription

Sign Up to enjoy top Finance Articles and Insights Delivered to your inbox.
  • Programic Asia Pvt Ltd may keep me informed with eMails about cfoengage.com & finance newsletters. See our Privacy policy for more details