Debt-laden Dewan Housing Finance Ltd (DHFL) has stopped allowing premature withdrawal of fixed deposits (FD)s, even for medical and financial emergencies, affecting thousands of retail investors, including senior citizens.
Though the company had recently stopped premature FD withdrawals, it was allowing the ones for medical and financial emergencies, subject to the submission of relevant documents.
DHFL's nodal officer Vijay Z, in a recent communication to a Mumbai-based FD investor, said that the company has stopped processing requests for premature closure of deposits, as advised by the consortium of lenders, until further notice. An intimation regarding it has also been made to National Housing Board, the nodal official said. The company said that it has met its financial obligations during the period of liquidity crisis since September 2018 mainly through a combination of securitisation of assets and repayment collections.
SMALL INVESTORS IN A FIX
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- Rs 12,000 cr – Estimated fixed deposit liability of DHFL
- Rs 40,600 cr – Exposure of banks to the housing finance co
- Rs 45,380 cr – exposure of bondholders to the firm
- 8.2-9.25% – interest rate DHFL offers on its fixed deposits
- 39.21% – the promoter group’s holding at present in the company
- Under 10% – Lenders want the promoter stake brought down to
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An email sent to DHFL's spokesperson did not elicit any response.
DHFL, which is amongst the country's largest housing finance companies, had in May announced that it has stopped accepting fresh public deposits and renewals of existing deposits after the downgrade of its fixed deposit programme by the credit rating agencies. DHFL offered deposits to the public for tenors ranging from 12 months to 120 months with interest rates ranging from 8.2% to 9.25% (for deposits of less than Rs 5 crore). The company's fixed deposit liability is estimated to be about Rs 12,000 crore.
Last month, lenders had signed an inter-creditor agreement (ICA), as mandated by the Reserve Bank of India in the new NPA resolution/recognition framework which came into effect from June 7. Further, lenders of DHFL have reportedly agreed to a resolution plan which may see their debts getting converted into equities as well as the issuance of non-convertible debentures. Moreover, the lenders are seeking stepping down of Kapil Wadhawan from the post of chairman and managing director of DHLF and the promoter stake be brought down to under 10%. The promoter group's holding at present is 39.21%. Banks led by State Bank of India, Bank of Baroda and Union Bank of India have collective exposure in excess of Rs 40,600 crore and the bondholders have much higher at Rs 45,380 crore.
According to the analysts, the move by lenders should be seen in the context of PE investment in DHFL taking longer than anticipated, thereby prompting the banks to fill the void and helping in resuming the operations. As per the plans, once DHFL is able to bring any PE investor on board, then the banks will make an exit selling of its stakes in the company. DHFL is reported to be in talks with PE players, including AION Capital and Cerberus Capital.
DHFL has not been able to fulfil its obligations towards debt repayment in the recent months, and therefore has sought fresh loans of Rs 1,200-1,500 crore a month, in order to restart its lending business. Further, the company has also sought for a moratorium of 6-12 months on these fresh loans in addition to the extension of tenure on current loans.
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An email sent to DHFL's spokesperson did not elicit any response.
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