The degrowth was already factored when the stock price fell more than 75pct from it’s 52 week peak. New growth will be fast with govt incentivised changes in place and DHFL network but still sometime away before it catches up to previous numbers.
Selling loan books and assets is a way of keeping liquidity position healthy to pay short term liabilities. It is a positive and already hinted at during previous announcements. Also, personally, looking at q3 NPA, I assume that investor money is safe unless a big default happens. Most individual loan takers would prioritize their mortgages.
DHFL has not been the only HFC hurt by the liquidity crisis, but definitely the most publicised and affected. Honestly, it will be a couple of quarters before the investors start regaining confidence. Also, previous legacy of the Wadhwan family sister concerns had been the first reason most people have pointed out.
They have sold some project finance loans to Oaktree capital. Howard Marks is one of the partners, if I remember correctly. When loans are securitized like this, does the interest revenue go down?
If you lend money to shell companies or to dud real estate companies as this expose alleges, you won’t get back your money meaning you won’t be able to pay your creditors.
This would mean defaults which so far haven’t happened, also 33k cr of sham loans is a Fourth of their AuM , so we should soon be seeing 25% NPAs!
DHFL has some major shareholders and funds invested including JhunJhunwala, Lazard and LIC. Additionally, more than 30 banks have lent to DHFL. Were they note scared when DSP started selling DHFL bonds? Haven’t these Big shots ever checked and audited DHFL books like ‘Cobrapost’ claims they did before investing? isn’t 31000cr big enough to not go unnoticed in the books?
Also 31000cr is no small amount, how did this company receive positive ratings from credit rating agencies in the first place? Did DSP already know of the scam when they decided to sell DHFL bonds in the market? How did DHFL show the capability to pay off short term debt if such a huge amoung of money was siphoned off?
Also one of the articles states donations to BJP. Cobrapost’s previous scam was on Media promoting Hindutva which is a BJP pitch (Most were dancing when Priyanka Gandhi entered Politics). They also showed a scam on Paytm ( I personally feel Paytm is backed by some PM supported company). Ironically, this scam also cam a day after the company declared results. Is it a calculated move before the budget and elections?
The promoters of DHFL in recent times have taken investor friendly moves, this wont be possible with a company valued at 11000cr siphoning 31000cr. Unless, Mr. Wadhawan has already left the country. We need to wait for a clarification from the company tomorrow morning.
Looking to the fall in share prices, Somebody knew in advance or somebody has been responsible for this fall (either Mr. Wadhawan or person from opposition).
I agree with everything you said, including the suspect motivations of Cobrapost. I recall a discussion with a friend in ‘mainstream’ journalism where they said that Cobrapost has always been the underdog trying hard for mainstream attention with audacious sting operations and the like.
That being said, I have gone through the entire article, including the annexures, and some of the loan sanctioning documents and financial reports of the shell companies look very damning. For instance, there is a balance sheet that shows a defunct company one year, and then borrowings and loans and advances jump by ~Rs.400 Cr in the next year, while revenue stays nil. How exactly these 26 shell companies have been linked to DHFL has escaped me, and therein lies DHFL’s vindication, if at all.
This is my opinion only and I reserve the right to be wrong. It seems extremely implausible that 1/3rd of the lending book of a company is essentially an NPA and the company continues to function without disruption. For that to happen, a Satyam type scam needs to happen and again while remotely possible, it seems highly unlikely. I have nothing against cobrapost but they dont have the brand equity that some established media houses have and needless to say if this report was published by an ET, HT or BS, its credibility would be a lot higher. Just think about it - 30000 cr = approx 2400 cr of interest an annum (@8% interest). Its just not possible to service that kind of loan without this being a huge Ponzi scheme with completely cooked books.
That said, generally speaking there is no smoke without fire. There MIGHT be a few cockroaches in the closet if at all. Only I doubt it to be 31000cr cockroach. Might result in some sort of investigation. One of the reasons for me feeling this way is that in that presentation it says that HDFC Bank and Kotak Bank have lent to DHFL to the tune of 823cr and 320cr respectively. These banks are generally extremely tight with their due dilligence and it is once again difficult to understand how a scam of this magnitude could escape the DD of these 2 banks. The only sad thing is that this might once again freeze up the NBFC industry. Also, whether or not it is true it might again become difficult for DHFL to raise funds because of the trust deficit this report will cause.
But statement does not state any “practicle point” W.r.t defamation of allegations put on dhfl.
Dhfl should come with proper pin point statement clearly putting statements of cobrapost on one side and its reply on other, which could really save dhfl
I was wondering how they linked Galaxy, Hemisphere and Silicon back to the promoters because these entities held 11% of the company until about a year back but held only 4.5% as of December. The full names of these companies have realtors and infraprojects and such in them which is usually a red flag (from the past holdings I have seen on Vakrangee, BEPL etc)
They have taken all 11 current directors in these three firms and linked them back through the network of companies/directors past and present and they have done these for each of the directors.
And then there is details the unsecured loans given to these 3 companies and how and when these companies bought shares.
So not only have they siphoned off funds from shareholders, they have used it to pump up their own shares and dump them as well at peak valuations adding insult to injury.
Update: When I go back and see the posts around September and also that concall audio where the concerns were raised which the management brushed off while laughing more than once, it is all the more brazen what they have done. They were organising this call and brushing away the concerns while selling out at the same time through their benami holdings. Reminds me of 8k miles
Honestly, I had already read someplace beforehand how Cobrapost was going to name DHFL after following a post on JK paper on this site. I cannot recall where. I as an investor would never want to be in this position.
A lot of auditors resigned recently when companies did not follow fair practice. DHFL is audited by a reputed firm. Whether DHFL did scam in reality or is being victimised by a bigger power, investor wealth will be eroded.
I am going to take the wait and watch stance. If DHFL has paid back 15-20000 cr in the last quarter when the going was tough, I will stay invested.
I will end my post with a question. If the so called loans go back to 2015, has DHFL been paying the interest on these loans back to the banks? How have they managed to stay afloat and generate the money to pay back? If shareholding value was manipulated as alleged, did they sell or pledge the shares of DHFL? Why manipulate shares of a company where you are going to scam 31000cr?
I will end my post with a question. If the so called loans go back to 2015, has DHFL been paying the interest on these loans back to the banks?
They siphoned off the money taken from banks,NCDs etc. Now who is paying interest on the loans? The company and not the promoters. Also when there is an intent to cheat big, the interest cost to be paid is nothing compared to the benefit from the siphoned off money.
How have they managed to stay afloat and generate the money to pay back? If shareholding value was manipulated as alleged, did they sell or pledge the shares of DHFL? Why manipulate shares of a company where you are going to scam 31000cr?
They are staying afloat by selling off all high quality loans. The true book value actually may be what 10% or 30% of the reported book value? What is the need to pledge or sell if they can do insider trading and pump and dump the stock. Pumping and dumping with pledged shares is not easy right?
Exactly my point. The promoters are not honest but 31000cr is in the leagues of Ambanis and Videocon.
Also, will Deloitte Haskins take the risk and money to go ahead and sign the dotted line where book value is only 10-30% and where the company is in no way capable of meeting short term loan obligations for the next 2 years?
Again, how come so many big names invested in this stock did not find these loopholes which Cobrapost did?
I attended the call today. The Management’s contention that their side of the story / rebuttal has not been given time is quite valid. They have promised to rebut the supposed expose once the important activities such as getting funds / selling Aadhar HF are completed.
I’d personally wait for the promised explanation from the Management’s side instead of making any half-baked comments.
The question is not whether the fraud size is Rs. 31000 crore or not. Would you believe a guy if he proves that he stole less than what is alleged? The real question is whether any fraud is committed or not. The cobrapost analysis seems pretty detailed and exhaustive. Until and unless the management commentary proves otherwise, I would be on the side of caution on this one.
Disc.: Held for couple of years. Was lucky to get out on October 2017. Views may be biased.
The big issue is how SBI will behave. They are the largest lender to DHFL. The new SBI leadership is quite capable and cleaning up their affairs fast. I doubt they will tolerate such murky and very suspicious transactions. There is just too much smoke here for their not be a significant fire. If SBI (+others) limit incremental funding further/prevent rollovers (besides the recent tightening) it can quickly escalate to a severe liquidity crisis for DHFL depending on the size of the actual hole in DHFL’s books.
I guess Ajay Piramal was likely talking of DHFL a couple of days back when he warned of another one or two NBFC blowing up in the coming months. He would know. DHFL looks ripe to burst.
