DHFL says working with stakeholders to resolve liquidity issues

DHFL, one of India’s major home loan providers, on Saturday warned that its financial situation was so grim that it may not survive as a going concern. 

Crisis-hit home DHFL on Saturday reported a loss of Rs2,223 crore for the fourth quarter of 2018-19 financial year, compared with a profit of Rs134 crore in the same period a year ago. 

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. 

“We are closely working with the stakeholders/creditors to ensure that there is a comprehensive resolution, without any hair cut to the lenders, as has been speculated by few sections of the media,” DHFL said in a regulatory filing.

Further, DHFL said the sectorial stress is well known for months, the company has withstood intense pressure and continues to remain strong and solvent.

DHFL has also cleared significant amount of obligation to the tune of Rs41,800 crore since September 2018, it added.

“Since the last nine months, with single minded focus, we have met all our financial obligations and are looking to return to business normalcy at the earliest. Since September 2018, DHFL has managed to make repayments of over Rs41,800 crore primarily through securitisation of assets and repayment collections,” said Wadhawan.

The company said due to a significant slowdown in disbursement and loan growth post September 2018, the financials of the firm have been quite strained for the quarter impacting the overall performance of the year.

DHFL also said it is in an advanced stage of submitting its resolution plan under the inter-creditor agreement as entered into by banks.

The inter-creditor agreement will examine and firm up the terms of the resolution process by 25 July 2019 and make it operational before 25 September 2019, it said.

“The process of identifying a strategic investor is also nearing completion which will bring in an equity investor into DHFL to bolster its capital base. The board will be reconvening in the next two weeks to look through the potential proposals and will decide accordingly on the way forward,” the company said.

The joint lender forum has also taken into account the need for recommencement of business by DHFL and commence originating new home loans. 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.