Millennium Post

RBI sacks DHFL board

Mumbai-based pure-play mortgage lender becomes the first NBFC/HFC to go for bankruptcy resolution

Mumbai: Within days of the government empowering it to refer stressed shadow banks to insolvency courts, the Reserve Bank on Wednesday placed the crippled Dewan Housing Finance (DHFL) under an administrator and said the resolution process for the lender will begin shortly.

The city-headquartered pureplay mortgage lender becomes the first NBFC/HFC to go for bankruptcy resolution.

The central bank superseded the board of the third largest pureplay mortgage lender in the evening, citing governance issues and severe liquidity crisis which led to a string of defaults.

Last Friday, the government had notified Section 227 of the IBC empowering RBI to refer financial sector players like NBFCs and HFCs, but excluding banks, with assets worth of at least Rs 500 crore to insolvency courts.

"The RBI has decided to supersede the board of DHFL owing to governance concerns and defaults in meeting various payment obligations," the central bank said in the order.

The RBI also appointed Indian Overseas Bank's former managing director R Subramaniakumar, as its administrator.

"We also intend to shortly initiate the process of resolution of DHFL under the insolvency and bankruptcy code and would also apply to NCLT seeking appointment of the administrator as the insolvency resolution professional," the RBI statement added.

When contacted by PTI, DHFL refused to comment. But later in the day it informed the exchanges about the RBI order issued under Section 45 IE of the RBI Act, 1934.

"The statutory inspection of DHFL conducted by the National Housing Bank under Section 34 of the NHB Act of 1987 revealed serious deterioration in its financial position," DHFL informed exchanges quoting the RBI order.

As of July 2019, the beleaguered home financier owes Rs 83,873 crore to banks, the National Housing Board, mutual funds and bondholders/retail bondholders. Of this secured debt is Rs 74,054 crore and Rs 9,818 crore is unsecured. Most banks have or are going to declare DHFL account as NPA in the third quarter.

DHFL defaulted on its payment obligations in respect of bank borrowings and market borrowings, which reveals serious concerns about the conduct of the affairs of the company, the RBI said.

DHFL lenders were working on a resolution plan to pick up 51 percent in the company by converting a part of their debt into equity. But the plan was yet to be formally cleared.

Meanwhile, Sebi chairman Ajay Tyagi meeting said mutual funds would join the DHFL bankruptcy process.

Meanwhile, in more regulatory actions on crippled NBFCs, the RBI is learnt to have decided to refer Altico Capital and Religare Finvest, the NBFC arm of Religare Enterprises, also to NCLTs.

Altico Capital had outstanding debt of Rs 5,319 crore as of March 2019. In September, it had defaulted on an interest payment of Rs 19.97 crore, on a principal of Rs 347 crore loan taken from Mashreq Bank.

Altico did not reply to the queries emailed by PTI.

Religare was mired in controversies due to alleged financial mismanagement by promoters Malvinder and Shivinder Singh who are now behind the bars on a cheating case involving Japanese firm Daiichi which had bought the group's flagship Ranbaxy Labs in 2012.

In an email to PTI, Religare Finvest said, "we haven't received any communication from the regulator in this regard and there is no question of Religare Finvest being put under the IBC.

"The proposed debt restructuring is progressing well and we have already received approvals from many banks and we expect the debt resolution to be implemented in a few weeks' time," the company said in an email.

Last month, Religare Enterprises sold its entire stake in Religare Finvest to TCG Advisory Services for around Rs 330 crore.

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