New Delhi: Dewan Housing Finance Corp. Ltd (DHFL) shares recovered as much as 10% in early trade on Monday on reports that the company managed to make partial payments to investors of non-convertible debentures (NCDs).
A media report said that Reliance Nippon Life AMC (RNAM) has received some payment from DHFL Securities and RNAM will pay proportionately to all the unitholders of fixed maturity plans (FMPs) maturing on 6 June in the next two working days.
Another media report said DHFL was confident of honouring all its repayment obligations by the close of 13 June. In an interview to CNBC TV18, DHFL chairman Kapil Wadhawan affirmed that the company is not facing any solvency issues and is well on track with the NCDs payout. “Investors will be worried about their investment but...we are a solvent company, we have cash that keeps coming into the system... We will make sure that every penny is paid for,” said Wadhawan.
According to DHFL chairman, terming the present crisis as a solvency issue is a misnomer. “I have heard some market experts talk about solvency issues, about DHFL being tagged with some other companies which have had similar problems from different sectors. We are a financial institution, we have underlying assets which keep on giving us cash flow even today. Now if you abruptly stop the lending activity for a large institution like us with more than Rs 1.25 lakh crore worth assets under management and expect us to start paying down the liabilities of all creditors, even a bank today would not survive,” Wadhawan told CNBC-TV18.
On 4 June, DHFL was to pay interest and principal payments to the tune of Rs 1,160 crore to bondholders. The company delayed the payment and asked for a seven-day grace period. Consequently, CRISIL, ICRA and CARE Ratings downgraded their rating on DHFL’s Commercial Paper (CP)/Non-Convertible Debentures (NCD) to “D”, based on delay in debt servicing due to inadequate liquidity, modest capital position and modest earnings.
DHFL responded strongly in a statement by saying, “The action by the rating agencies is extremely surprising as the company has been making and continues to make substantial efforts in ensuring no defaults on any bonds, repayment of its financial obligations. These actions are unwarranted and the company is seeking clarification on the rationale that predicts DHFL’s inability to service pay‐outs on the due dates. Such a speculative rating rationale is not adequate.”
At 10:08am, DHFL shares were trading at Rs 87.40 apiece, up 4.9%, on BSE.
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