A crash in Dewan Housing Finance Limited (DHFL) share price has left ace investor Rakesh Jhunjhunwala poorer by Rs 178.29 crore since the beginning of this year. DHFL share price fell 92.6% or 230.95 points during the period. Rakesh Jhunjhunwala held 77.20 lakh or 2.46% in the firm at Rs 249.4 per share on December 31, 2018. Total value of his stake at the end of December quarter stood at Rs 192.53 crore.
DHFL share price was stuck in lower circuit of 5% today at Rs 18.45 compared to the previous close of Rs 19.40 valuing his current holding at Rs 14.24 crore. DHFL's current share price is also a fresh 52-week low for the housing finance share. The microcap share has lost 14% in last three sessions. There were only sellers and no buyers in the stock. DHFL share price is trading lower than its 5-day, 20-day, 50-day, 100-day and 200-day moving averages. It has lost 90% of its value in last one year.
DHFL share price has been hit by a flow of negative news since September-end last year. Of late, findings of a forensic audit of the firm have roiled the stock.
A forensic audit of the company by KPMG found that DHFL had lent Rs 14,000 crore to about 25 group companies, which had posted an average profit of about Rs 1 lakh, Mint reported. That raised suspicion that the mortgage lender may have diverted funds.
The draft report of the audit was shared with the members of DHFL's committee of creditors (CoC) last week and will be presented to the board of the mortgage lender once it is finalised.
Also read: DHFL lent Rs 14,000 crore to 25 group firms, reveals forensic audit
In February, the Finance Ministry had directed DHFL's top three lenders - Bank of Baroda, State Bank of India and Union Bank of India - to initiate a forensic audit following allegations of fund diversion by investigative news portal Cobrapost in the previous month.
The portal alleged that the housing financier had sanctioned and disbursed large loans without filing any charge documents with the Ministry of Corporate Affairs (MCA) in most of the cases. The promoters, the Wadhawan family, were accused of siphoning off funds through a network of shell companies to create personal wealth. The expose pegged the size of the scam at Rs 31,000 crore.
The firm's financial performance too has been dismal. The firm is yet to announce its earnings for the quarter ended September. On October 18 this year, the firm announced its earnings for the first quarter.
The debt-laden housing finance firm reported a consolidated net loss of Rs 242.48 crore in Q1 compared to net profit of Rs 431.71 crore in the corresponding April-June period of 2018-19.
DHFL said the losses registered in Q1 of this fiscal were fully attributable to owners of the parent (company). Total income of the company declined to Rs 2,399.84 crore during the three months to June 2019, as against Rs 3,154.25 crore in the year-ago period. DHFL said the company is undergoing substantial financial stress since the second half of the previous financial year. The company has suffered consistent downgrades in its credit ratings since February 2019.
Also read: Rakesh Jhunjhunwala earned Rs 85 lakh every trading session for a month with VIP Industries stock
In the fourth quarter of the previous fiscal too, DHFL reported a huge standalone net loss of Rs 2,223 crore compared to a net profit of Rs 134 crore in the corresponding quarter an year ago. In FY2019, DHFL reported a net loss of Rs 1,036 crore compared to net profit of Rs 1,240 crore in FY2018.
During the earnings release of the fourth quarter, the housing finance company said its financial situation was so grim that it may not survive. The company said it was "undergoing substantial financial stress and its ability to raise funds was 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," it said in notes accompanying results for the fourth quarter ending 31 March, signed by Chairman and Managing Director Kapil Wadhawan. The firm also defaulted on interest payment to non-convertible debenture (NCD) holders aggregating Rs 48 crore.
The series of negative developments started for the firm on September 21 last year when news spread that DSP MF was forced to sell commercial papers of Dewan Housing Finance in the secondary market at a higher yield. The higher yields for the commercial papers were due to tight liquidity into the system.
Dewan Housing Finance share price fell 59.67% intra day or 364 points to a new low of 246.25, the most among the NBFCs on September 21. It lost nearly Rs 8,129 crore in market capitalisation on the same day. Till date, the firm has lost Rs 17,441 crore in market capitalization on BSE.
Seeking to exploit the huge fall in share price, ace investor Rakesh Jhunjhunwala bought 13.34 lakh shares of the housing finance firm, raising his stake to 3.19% at the end of September quarter compared to 2.8% for the quarter ending June. Jhunjhunwala bought the distressed stock to raise his holding to 1 crore shares for the quarter ending September compared to 86,65,264 shares in the previous quarter.
Also Read: Rakesh Jhunjhunwala, wife Rekha earned Rs 483.75 crore with this stock in just four trading sessions
However, Dewan Housing Finance has seen a series of downgrades by credit ratings agencies sending its share price into tailspin. On June 6 this year, Icra and Crisil downgraded rating on Rs 850 crore worth of commercial paper of DHFL to 'default' from 'A4' due to the mortgage lender's deteriorating liquidity condition.
Crisil, in a note, said the downgrade to 'default' or 'D' reflects delays in debt servicing by DHFL on some of its non-convertible debentures (NCDs) because of inadequate liquidity. The payments were due on June 4, 2019. The NCDs are not rated by Crisil.
In a separate note, Icra said, "The rating revision factors in further deterioration in company's liquidity profile and delays in meeting scheduled debt obligation on June 04, 2019."
Icra added that given the stretched liquidity profile and limited visibility on fresh funding, the company is unlikely to be able to service its debt obligation with regard to commercial paper programme in a timely manner. The company has commercial paper (CP) worth Rs 750 crore maturing in June 2019 with the first repayment on June 7.
"With liquidity inadequate as on date to service debt and visibility very low on timely fund raising, we expect the CP to be in default on maturity," Crisil said.