DHFL loans set for rejig post forensic audit

Banks will approve a restructuring package only after the forensic audit on Dewan Housing Finance Corporation Ltd (DHFL) is completed, a senior banker said. The housing finance company is saddled with loans of over Rs 1 lakh crore and banks want clarity on whether there has been any fund diversion.

DHFL is expected to submit its restructuring proposal to the lenders next week. It will be vetted by SBI Caps and then referred to the oversight committee, which will have external members scrutinising the deal. Union Bank of India was the lead banker in the lenders' consortium but as the State Bank of India (SBI) had the largest exposure, the mandate is now with SBI to lead the restructuring plan.

"Before a restructuring package is offered to DHFL, we will have to complete a forensic audit to see if there has been any fund diversion," said a senior banker whose bank has invested into the non-convertible debentures (NCDs) of the company and also given loans to it.

DHFL owes Rs 35,000 crore to the banks while over Rs 60,000 crore is the current outstanding to the debt market, where banks, mutual funds, insurance companies and other investors have invested in the NCDs of the company. In the last six months, DHFL has been able to repay Rs 300 crore of debt in the corporate debt market after banks bought their portfolios selectively.

DHFL's deep financial stress has raised doubts on the ability of the company to run its operations. While announcing the fourth-quarter financial results, 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. After delaying its results for over four months, DHFL reported a Rs 2,223 crore loss for the fourth quarter ended March 2019, due to additional provisioning of Rs 3,280, as against a net profit of Rs 134 crore posted a year ago.

"These developments may raise a significant doubt on the ability of the company to continue as a going concern," it said in the notes accompanying results for the fourth quarter, signed by the chairman and managing director Kapil Wadhawan.

Another banker said, "The restructuring package will depend on how much of share pledge or equity the promoters will be able to put. Banks have been helping the company repay the debt by buying their portfolio. They still have Rs 1 lakh crore of repayments to the banks and the bondholders. The asset-liability mismatch is leading to financial stress among the shadow lenders."

DHFL separately announced on Saturday that it had defaulted on interest payments worth Rs 28.58 crore on NCDs, due on July 6 and 8. Bankers have already signed inter-creditor agreements with the bondholders. But many like mutual funds and insurance companies may have regulatory restrictions on entering into a pact with creditors.