Dewan Housing Finance Limited

(stockpicker123) #486

Quick thoughts on current situation at DHFL : disc - invested

  1. It has worked to bring down CP to 0. CP’s were low to begin with (10% vs 20-40% for peers). While more celebrated peers were on leading business channels to register their daily cribs, this company (probably its was hit the worst in terms of sentiment) had its head down and worked on the issue.
  2. Bringing down CP in this market means it needed to find alternate finance - therefore its selling its non core (non lending) or smaller lending businesses
  3. The insurance business sale was a huge equity injection for the lending business - and helped it grow. Agreed that the structure is complex, but whether there was false disclosure/illegality it is not clear.
  4. Q3 will be very painful. General lending had slowed down, and the company has chosen this time to actually reverse its strategy to increase developer funding - which it pursued for 4 years. The only silver lining is that developer exposure is also the least amongst peers.
  5. Don’t see any reason for a spike in NPL’s on account of the liabilities’ side issues.
  6. As liquidity situation improves, growth will come back (sans developer funding). Overall, expect tepid growth for a few quarters atleast.
  7. Overall the company seems to be doing the right things for the long term and and valuations might creep up gradually as the dust settles.

(abhishkjain2626) #487

might seem a little off-topic, and as I am only 2 years into the market, I wanted to know if there have been instances where a stock fell 40-50-60% in a day, and managed to recover even some of its lost glory, if at all. My experience is limited to PCJ and Infibeam…


Very interesting info here

Towards this, HFCs should be given time till December 2020 to comply with the requirement that individual home loans should be more than 50 per cent of their assets.

Investor presentation of DHFL in Q1 shows asset mix of retail at 80% and projects at 20%.
Investor presentation of IBULHSGFIN in Q2 shows asset mix of mortgage loans at 80% and corporate mortgage loans at 20%.

(Dinesh Sairam) #489

Curious developments for HFCs.

During the meet, Assocham suggested that systemically-important NBFCs must be allowed to accept public deposits, and to revive HFC lending, especially towards individual home loans, they should be permitted access to National Housing Bank’s refinance facility.

If this happens, then it’s a big positive for all HFCs. HFCs will essentially become banks, except their major lending activity being to the housing sector. I doubt this will happen, though. If it still does, I think perhaps a select few large HFCs may get the go ahead first (The likes of HDFC, DHFL and IBHF, if I had to guess).

Towards this, HFCs should be given time till December 2020 to comply with the requirement that individual home loans should be more than 50 per cent of their assets.

This looks like a negative, but it is in line with AssoCham’s earlier suggestions. If a firm accepts deposits from the public, then the RBI won’t encourage single-point failures. They’ll have to ask HFCs to diversify their lending practices regardless of their disposition or values.

It has also demanded that the Reserve Bank of India provide a liquidity window for NBFCs/ HFCs against sale of secured loans by taking appropriate margin on these secured loans, maybe at a higher rate, to help restore confidence in the sector.

This has been suggested earlier by others. I personally don’t think this is required. The RBI need not repair what’s not broken. Debt Market Yields were scary a few months back, but they have since climbed back down.

Overall, for investors in DHFL, this is a crucial turning point. The company’s primary value proposition was their concentration of Retail loans, so these changes may mean a complete overhaul of the currently operative business model (As Mr. Wadhwan had hinted at earlier). But let’s not get ahead of ourselves. These are just suggestions for now. We’ll wait for news to start drawing conclusions.

(uditvd) #490

Does this mean, if I buy the NCD at CMP and hold it till maturity, then I can realize 18.21% annualized returns ?

(sandeep17) #491

Yes, that’s correct.

(uditvd) #492

And how would I get the coupon payment ?

Also, is this the dirty price or clean price ?

(KunalKothari) #493

The price is what you will pay, regardless of the interest accrued (or not accrued).
Only problem is, liquidity might be low at a certain price, so you may be able to buy a lot at 14% yield, but next to nothing at 18% yield (just an example).

(KunalKothari) #494

In this case, you will get Rs 1092 in your bank account on 16 Aug 2019, against the Rs 1000 or so you will pay.

(Deepender Singla) #495


Please can you tell on what is the website of screenshot?

(KunalKothari) #496

Edelweiss. You can Google search DHFL NJ

(sandeep17) #497

Yes except that he will get Rs 1092 against the Rs 990 that he would pay - resulting in a 18% yield on 16 Aug 2019.

(KunalKothari) #498

He won’t get for 990. Probably not even for 1000. Unless there is some bad news which affects the credit quality of course.
Anyway, he who wants to buy can monitor the prices.

(Mikesingh) #499

You guys are cluttering the thread with unnecessary messages. Hope admins take note.

(saumya) #500

(Roy) #501

I doubt that. If my memory serves me right, Tranche 1 - Series X is a floating rate NCD. The coupon rate of 9.20 is applicable only for the first year. For subsequent years, the coupon rate would be CPI + 4.18%.

P.S. - My apologies for the off-topic post. I Just wanted to warn investors looking at purchasing the above mentioned NCDs. Mods please feel free to delete if inappropriate.

(KunalKothari) #502

Thanks for pointing this out, and apologies for missing this. This is for Series X specifically, hence I got confused. Although I must say that as per my understanding, the minimum you will get on maturity is Rs 1089, as 8.90% seems to be the ‘floor’ interest rate, below which it cannot go, even with a very low CPI. However, please confirm before bidding, @uditvd @sandeep17

Let’s take this private if any further discussion.

(devarshi84) #503

When DHFL fell off the cliff, Mr. Rakesh Jhunjhunwala was declared to have increased stake, but recent shareholding shows a reduced stake instead.

This just reiterates the belief that you should never try to copy them.

If DHFL gives a consistent result, I would increase my holding further, only time will tell.

(Mahendra243) #504

Bad…i think its already factored in

(rkatikam) #505

When disbursements stop, there is no new growth. With so much of sell downs there is going to be a de-growth. In fact now comes the biggest issue which is the NPAs . Till now growth might have kept the NPAs low. Also why so many assets are being sold out? Is it for margin funding the shares (referring to the money life article).