Financially-stressed Dewan Housing Finance Corporation Ltd (DHFL), on Wednesday, said its board took cognizance of the key observations from the draft report prepared by KPMG. Though the company did not disclose its contents, the draft report is believed to have found diversion of funds to the tune of about ₹20,000 crore.

This alleged diversion, coupled with the ongoing investigation by the Enforcement Directorate, could complicate the resolution plan for DHFL that is currently in the works.

DHFL, in a stock exchange notice, said the board has directed it to review the aforesaid key observations and also present a detailed response to the said key observations before the audit committee. The board also directed the company to share the responses with the lenders.

KPMGwas appointed by Union Bank of India, the lead banker of the consortium, to conduct forensic audit of DHFL.

Last Sunday, the company, in a stock exchange notice, clarified that the officers of the Enforcement Directorate visited one of its offices and “had raised certain queries to the senior officials of the company”.

“The company has provided the necessary documents and clarifications as required by the department as part of their investigations, and remains committed to co‐operate with the authorities and respond to any queries by them,” the notice said.

As per DHFL’s resolution plan, 2.3 per cent of each category of lenders’ debt exposure to the company will be converted into equity at an assumed price of ₹54 per equity share.

What this means is that 2.3 per cent of banks’ exposure of ₹38,342 crore will be converted into equity (₹871 crore). Similarly, 2.3 per cent of non-convertible bond holders’ exposure of ₹30,616 crore will be converted into equity (₹695 crore).

The same debt-to-equity conversion formula will apply to external commercial borrowings (exposure: ₹2,747 crore), the National Housing Bank (₹2,350 crore), holders of perpetual debt (₹1,263 crore), commercial paper (₹100 crore), and subordinated debt (₹2,267 crore).

If this conversion happens at ₹54 per share, lenders will acquire 51 per cent stake in DHFL. However, it remains to be seen if lenders will be agreeable to the conversion price, as DHFL’s shares on Wednesday closed at ₹19.40 apiece, down 4.90 per cent over the previous close on BSE.

DHFL said it remains committed to working with its lenders on the debt resolution plan.