DHFL tanks 42%, pulls down HFCs

Our asset quality is robust: Wadhawan

September 21, 2018 10:45 pm | Updated 11:02 pm IST - Mumbai

17/05/2018 MUMBAI: Kapil Wadhawan, CMD, DHFL  at a press conference held in Mumbai on May 17, 2018.  Photo: Paul Noronha

17/05/2018 MUMBAI: Kapil Wadhawan, CMD, DHFL at a press conference held in Mumbai on May 17, 2018. Photo: Paul Noronha

Nervous investors dumped Dewan Housing Finance Ltd. (DHFL) stocks after a fund house, facing redemption pressure, sold the firm’s commercial papers at a higher yield.

DHFL stock tanked almost 60% intraday, dragging down the shares of other housing finance companies’ (HFCs) such as Indiabulls Housing Finance, Srei Infrastructure Finance and PNB Housing Finance, among others.

DHFL lost 42.43%, or ₹259.05, to close at ₹351.55. Earlier in the day, it touched a low of ₹246.25 – an almost 60% fall from the previous day’s close of ₹610.60.

The panic was triggered after DSP Mutual Fund sold ₹200 crore to ₹300 crore worth of commercial papers of DHFL at a discount.

Indiabulls Housing Finance lost 8.18% to close at ₹1,061.90. It managed to recoup most of its losses as during intraday trades, it touched a low of ₹752, which was almost 35% lower than the previous day’s close.

“One of the mutual funds has sold papers at higher yields …but the ferocity cannot be explained that someone sold the papers at a higher yield,” Ashwini Kumar Huda, deputy managing director, Indiabulls Housing Finance told The Hindu.

“It has come as a big surprise to us also,” Kapil Wadhawan, chairman and managing director, DHFL told The Hindu in an interaction.

“All I can say is there is sufficient liquidity with us. As a prudent policy we maintain good cushion on liquidity to cover at least six months of interest and principal. Our asset quality continues to be robust,” Mr Wadhawan said.

“I think it has got to do with larger issues with the market with respect to another entity, it has nothing to do with DHFL,” he said adding that DHFL holds a liquidity of around ₹10, 000 crore in the system which equates to six months of cash and it’s short term borrowings are 5-6% of the total liabilities which are over ₹1 lakh crore.

Both Mr Wadhawan and Mr Huda clarified that they have no exposure to IL&FS - the troubled firm that is facing liquidity pressures and has defaulted on commercial papers which has led to rating downgrade.

“We are the one of the most liquid housing finance companies with ₹20,000 crore of cash invested in T+1 papers, so tomorrow the money is available. We are well capitalised with 25% capital adequacy ratio,” Mr. Huda said on when asked what will his message to address investor concerns.

“The amount of liquidity we have will pay all our liability in the next six months. It will allow us to disburse our home loans and we do not have to borrow a single rupee and still will be left with 25% margin,” he added.

Multiple issuers

Meanwhile, DSP Mutual Fund clarified that they sold a range of securities across the rating spectrum and multiple issuers over the last several months. “[The] recent sales are a reflection of our interest rate view and not a credit view on any specific issuer,” it said in a statement. “We wish to give you confidence, that we are not facing any redemption pressure beyond the seasonal outflows,” the fund house said.

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