The deposit-taking housing finance company, Dewan Housing Finance Corp. Ltd (DHFL), needs immediate equity funds between ₹2,500 crore and ₹3,000 crore to continue its operation, financial daily Mint has reported. Last week, in its quarterly result announcement, the mortgage lender declared a quarterly loss of ₹2,224 crore. DHFL said that the National Housing Bank, which is currently the regulating authority of housing finance sector, had partially reaffirmed its capital adequacy ratio (CAR) for the financial year 2018-19 at 10.24%. But shockingly, this value is lower than its own assessment of 15.29% and even the regulatory minimum of 12%. However, DHFL argued that the housing finance regulator's observation is not accurate.
It is to be noted that CAR is a measurement of a bank's available capital expressed as a percentage of a bank's risk-weighted credit exposures. CAR is used to protect depositors and promote the stability and efficiency of financial systems around the world.
DHFL's survival is hanging on a thin thread and it desperately needs additional capital inflows. Lenders, especially banks, are showing their reluctance to give fresh loans unless DHLF secure fresh funds. "According to assessments by potential investors, DHFL will need anywhere between ₹2,500 crore and ₹3,000 crore in fresh equity immediately to meet capital adequacy requirements,'' said one of the sources. Amid the crisis in the non-banking sector, DHFL has been worst hit by cash crunch triggered by defaults at Infrastructure Leasing and Financial Services Ltd (IL&FS).
The beleaguered company is looking for a strategic investor to buy stakes. PE firms Oaktree Capital, Cerberus Capital and AION Capital have already submitted non-binding offers. "Many investors have sought assurances from DHFL's lenders that they would infuse fresh loans into the company after the infusion of equity," the source added.
The shares of DHFL reacted sharply to a quarterly announcement made by the company on Saturday. After hovering at around ₹61.65 on BSE during the initial hours of trade, DHFL shares tanked 32% to their lowest in a decade. The price corrected marginally later on and ended at ₹48.50. Assuring all possible cooperation to all the stakeholders, DHFL, in its stock exchange filing, said that it was "closely working with the stakeholders/creditors to ensure that there is a comprehensive resolution, without any haircut to the lenders, as has been speculated by few sections of the media".
