DHFL: Free fall

The stock of DHFL (Dewan Housing Finance Company) was back in focus last week. The stock witnessed a sharp weekly fall of 24 per cent, as concerns over the company’s persisting liquidity stress became accentuated. Fresh trouble began as the housing finance company delayed interest payment on its bonds and bond repayments due on June 4, 2019.

Following this, both Crisil and ICRA downgraded the ratings of DHFL’s commercial papers on Wednesday to default. Crisil said that DHFL has ₹850 crore of outstanding CPs, of which ₹750 crore is due in June 2019. According to reports, by the end of the week, DHFL had settled some of its dues, offering respite to investors.

 

 

The IL&FS crisis, which snowballed into a liquidity crisis for NBFCs since last October, increased DHFL’s dependence on securitisation (portfolio sales) to meet its funding requirements. The worsening liquidity stress and limited visibility on fresh funding will continue to add pressure on the DHFL stock.

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