July 15, 2019
The slump in Dewan Housing Finance Limited (DHFL) share price has left ace investor Rakesh Jhunjhunwala poorer by Rs 88.85 crore since quarter ended March 31 this year. DHFL share price has fallen 59% or 88.85 points during the period. Rakesh Jhunjhunwala held 1 crore shares or 3.19% stake in the firm at Rs 150.5 per share on March 29, 2019. Total value of his stake at the end of March quarter stood at Rs 150.5 crore. DHFL share price hit lower circuit of 9.93% to 61.65 in early trade today valuing his holding at Rs 61.65 crore.
Big bull Rakesh Jhunjhunwala is sitting on a loss of Rs 88.85 crore with respect to his investment in Dewan Housing share. The small cap share has been losing for the last two days and fallen 13.47% during the period. DHFL share price is trading 2.68% away from 52-week low of Rs 60. DHFL share price has lost 89.83% during the last one year and fallen 75.28% since the beginning of this year.
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Dewan Housing Finance share price has been hit by a flow of negative news since September end last year. Of late, its disappointing Q4 earnings and negative comments from the management have roiled the stock.
On Saturday, cash-strapped DHFL reported a huge standalone net loss of Rs 2,223 crore in the fourth quarter ended March 31, 2019 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.
In another development, 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 news 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.
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.