DHFL lenders may skirt equity route, consider liquidation

Wary of converting Dewan Housing Finance Ltd’s (DHFL) loans to equity after a forensic audit revealed a Rs20,000 crore hole in the company’s accounts, lenders are now looking at liquidating or buying out the assets of DHFL in lieu of overdue loans.

Banks have total exposure of Rs 47,000 crore, including non-convertible debentures (NCDs), in beleaguered housing finance company. And, with growing speculation on the quality of DHFL’s assets, lenders are looking at alternatives to recover their dues. 
Lenders are now on the backfoot following rumours of the company’s involvement is illegal activities, including possible terror financing, following reports of the promoter’s dealings with terror groups.
A forensic audit of DHFL by KPMG, commissioned by top lenders is understood to have revealed diversion of Rs20,000 crore to private entities of the promoters through ‘box companies’. 
DHFL is burdened with a debt of at least Rs1 lakh crore.
DHFL’s project loans amount to Rs35,078 crore, while its funding of Slum Rehabilitation Authority projects stands at Rs11,967 crore. 
DHFL wants lenders to finance these projects, which would fetch them some returns. An internal calculation by the company shows that if banks provide mezzanine finance at 8 per cent, the projects would generate returns in the next 5-10 years.
But, with growing allegations of financial misappropriation, no lender is willing to take risk.
DHFL promoter Dheeraj Wadhawan was named in a case of alleged terror financing against late gangster Iqbal Memon, alias Iqbal Mirchi. A close aide of Mirchi — Humayun Suleman Merchant — told a special court that he received Rs5 crore from Wadhawan for facilitating a deal with Sunblink Real Estate. Wadhawan is being probed by the Enforcement Directorate, which has found a web of transactions between real estate firms linked to him and Sunblink, to which his non-banking finance company DHFL gave loans worth Rs2,186 crore.
Banks, mutual funds and insurance companies have been trying to resolve DHFL’s debt under the Reserve Bank of India’s framework for resolution of stressed assets. Banks also signed an inter-creditor agreement and were working on the proposal submitted by the DHFL management, including converting part of the debt into 51 per cent equity.