Investors and bankers are concerned about Dewan Housing Finance Corporation Ltd (DHFL) reporting a huge standalone net loss of ₹2,223 crore in the fourth quarter ended March 31, against a net profit of ₹134 crore in the year-ago quarter.
The company has already defaulted on payments and its inability to raise funds has raised a significant doubt on whether it will continue to operate as a going concern.
"The company’s ability to raise funds has been 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,” DHFL said in the notes to accounts while declaring the quarterly numbers on Saturday.
The company, however, added that it is in the process of submitting a resolution plan (RP) to its lenders, who are expected to approve the plan in principle by the month-end.
DHFL said it is taking steps to monetise its assets and is in discussions with multiple Indian banks and international financial institutions to sell off its retail as well as wholesale portfolios. “There have been discussions for a stake sale by the promoters to a strategic partner with further equity infusion,” it added.
It further said it held a meeting on July 1 with its consortium of lenders, who agreed to enter into an inter-creditor agreement (ICA) for a potential restructuring of its liabilities.
The requirements in respect of the creation of a debenture redemption reserve and the corresponding deposit in liquid assets will be assessed upon the conclusion of the RP, it added.
The ICA will examine and firm up the terms of the RP by July 25, and make it operational before September 25, said the DHFL statement.
“Banks would enable the infusion of necessary liquidity into the system. It is expected that DHFL will be able to restart its business in August 2019 and scale it up in the months ahead,” it added.
Cobrapost allegations
Referring to the action-taken report tabled before the audit committee on March 29 following news portal Cobrapost.com’s allegations against the company’s management and promoters, DHFL said it has sought written explanations from the borrowers for the loans where end-use monitoring was not effected.
The company is yet to receive responses from the borrowers; once it gets them, it will decide on remedial measures including recalling the monies advanced, it said.