Money & Banking

DHFL reports standalone net loss of Rs 2223 cr in Q4FY19

Our Bureau Mumbai | Updated on July 13, 2019 Published on July 13, 2019

Cash-strapped Dewan Housing Finance Corporation Ltd (DHFL) reported a huge standalone net loss of Rs 2223 crore in the fourth quarter ended March 31, 2019 against a net profit of Rs 134 crore in the year ago quarter.

The housing finance company also reported a default in interest payment to non-convertible debenture (NCD) holders aggregating Rs 48 crore. In FY2019, DHFL reported a net loss of Rs 1036 crore against a net profit of Rs 1240 crore in FY2018.

In the reporting quarter, interest income was up 22 per cent year-on-year (yoy) to Rs 3014 crore. Net gain on derecognition of assigned loans was sharply down by 74 per cent yoy to Rs 35 crore. Finance costs rose 17 per cent yoy to Rs2349 crore. Employee benefit expenses shot up 61 per cent yoy to Rs 156 crore.

Further on the expenses side, net loss on fair value change was Rs 2550 crore (nil in the year ago quarter) and provision for expected credit loss soared 95.50 per cent yoy to Rs 729 crore. The loss in the reporting quarter comes despite the company getting a huge deferred tax benefit of Rs 775 crore against a benefit of Rs 91 crore in the year ago quarter.

Financial stress and going concern

DHFL emphasised that it is undergoing substantial financial stress since second half of the current financial year. In its notes to accounts, the Company said it has suffered consistent downgrades in its credit ratings since February 2019. On 5th June 2019, the credit rating was reduced to 'default grade' despite there being no default till that date.

"The Company's ability to raise funds has been substantially impaired and the business has been brought to a standstill with there being minimal/virtually no disbursements. These developments may raise a significant doubt on the ability of the Company to continue as a going concern," as per the notes to accounts.

DHFL said its ability to continue as a going concern is predicated upon its ability to monetize its assets, secure funding from the bankers / investors, restructure its liabilities and recommence its operations.

NHB observations

DHFL said it has received a letter dated July 3, 2019, from the National Housing Bank (NHB) containing observations emanating from the inspection carried out by the regulator for the year ended March 31, 2018 as per the provisions of the National Housing Bank Act, 1987. There are observations in the letter inter-alia being impact on the Capital Adequacy Ratio of the Company as at March 31, 2018 reduced to 10.24 per cent.

"NHB has directed the Company to provide a specific response to all the observations within a period of 21 days. The management does not concur with the observation of the NHB and will provide an appropriate response within the stipulated time," DHFL said.

Inter Corporate Deposit

The unsecured Inter Corporate Deposit (ICD) aggregating Rs 5,653 crore were outstanding as at March 31, 2019 and includes ICDs of Rs 5,025 crore granted during the year. Of these, ICDs aggregating Rs 328 crore have since been repaid while ICDs aggregating Rs 4,018 crore are expected to be repaid shortly, DHFL said. Balance ICDs aggregating to Rs. 1,307 crore are being converted into secured term loans, it added.

"There are documentation deficiencies with respect to grant/rollover of ICDs which are being rectified. The ICDs have been advanced towards regular business activities and were either extended as a temporary loan pending full valuation of project funding or short term corporate requirements. Pending conclusion of these actions, the Management believes that no adjustments are required to the carrying value of the ICDs," the company elaborated.

Published on July 13, 2019
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