Can anybody answer my question?
I have debt funds which invested in DHFLâs NCD and CP, the NAV fell substantially, so loss is also the same. So can anybody tell me, if it is possible for DHFL to repay the principal at least, or it will default?
Watching the above interview of the CMD, he talks about quality of their assets, and the cashflows but I get no confidence. While Sundaram MFâs MD says to stay put and all is not lost (inteview above). What can you investors say? Do they have assets to sell and pay all their obligations, and it takes time? Or whatâs gone is gone?
I have had losses in stocks, I may lose again and thatâs alright, but this loss is hard to digest because this is debt and this is indirect.
I feel like I too am an investor in DHFL 
I feel dhfl will come back they will not go bankrupt. If they survive till sep 3019 they will mostly stay alive and will be taken over. They have about 7 to 8k crores pending⌠they company has liquidity crisis I have strong feeling modi govt + rbi will do something wrt liquidity
Hope so. The CMD said they had paid 35,000 crores of liabilities since the crisis, and they will pay the dues on NCDs within 7 days. Hope they do. To lose a hand in a battle which you are fighting is one thing and to have a limb cut off because your King promised so to his rival is another. Stocks vs bonds.
626 crore loss in the fund is too big to ignore or taken lightly. I can only imagine the plight of investors in DHFL Pramerica funds, they lost more than 50%.
I think a lot depends on whether there was any âhanky pankyâ in the company with respect to corporate governance. If not, they should be able to repay lenders, and even if they arenât able to repay everything, lenders might not have to take big haircuts (loss given default should be small).
Disc: Not invested
I donât understand why would any strategic investor come in now? What do they get â a bombed out portfolio which is shrinking everyday. Whole lot of retail and developer clients completely pissed off to do business again with DHFL. Liability providers (MFs, wealth Manager etc) who are scared of losing their own clients. DHFL should have exited much earlier but the issue is opaque holding structure and future liabilities arising out of the shell company violations.
If only that was true, this much of smoke would not have come if there was no fire. So we have to wait for the week to see if the situation gets resolved to our satisfaction, like the CMD says. I am prepared for some haircut, let alone the interest, give me back my principal.
Looks like there was a meeting and there is a possibility that 1500 crores coming in the next 3 months from the same banks which have been lenders. And the CMD says they have been selling assets and their assets are of good quality and will continue to do so. I donât know what banks they are, I donât know what would they gain by lending more, they could be PSU banks or private banks which see some value in the asset quality and it has been said the Government should intervene DHFL will be bailed out as this could turn ugly as the total exposure to DHFL from various institutions is to the tune of 1 lakh crores.
I came to know that IB HFC actually declined to disburse pending funds to one of my friendâs home loan. They forced him to move the loan to any other lender so he moved it to HDFC finally. These guys are showing false sense of confidence while the on the ground situation is much worse for some. This is becoming systemic issue with two large HFC gone, I guess it would be party time for PEL, PNB housing and HDFC if they come out unscathed from this turmoil.
How many loans have IBulls stopped disbursing, I donât think they are in deep trouble like DHFL, that could be a temporary stand as the crisis is still cooking. With more rate cuts, things might improve from here. So I would not put IBulls in the same boat of DHFL. And HDFC, as they are HDFC should come unscathed, if not that would be a time to really put management first and discard growth, value, and every principle in between and invest in such companies.
I would like to see some kind of positive news the next weeks if not the next few days are going to bring to the debt investors. Looking at the size of the loss, I am sure everyone is ready for some haircut.
Excuse my blabbering, I am posting in this thread as an indirect investor of DHFL who will be more than happy to get out of this thread once I get my dues back.
Here is the full video of the interview with Mr. Wadhawan
Thank you for sharing @varunm2112
Itâs tough to be interviewed in such a situation, and I think it was good of Kapil (separating the sin from the sinner) to face tough questions.
The key point he makes is that itâs a liquidity issue and not a solvency issue. Probably it means that âour assets are good, it is just that we donât have cash to pay and rollover our liabilitiesâ. But itâs not that easy to say there is no solvency issue, when your book is mostly developer loans with a long moratorium.
The âš 900 cr they raised by securitising developer loans on very onerous terms highlights that.
The article says that the developer loans were for 6 years and made with a 4 year moratorium. Which means the loan will appear good for 4 years because nothing needs to be paid anyway. This also means most developer loans were likely similar, and solvency of such assets is in reality indeterminate, unlike a retail loan which mostly has an EMI. No wonder the buyers asked for DHFL to provide âš 1,100 crores of similar loans as âsort of collateralâ. This means for every âš 100 of developer loans in its books, even at 100% securitisation of developer loans, they can raise only âš 45.
DHFL has also asked for an extension to submit audited results citing IndAS and finance personnel being involved elsewhere as reasons. Every listed NBFC had this transition and none in its peer group had delayed, and as for its finance personnel being busy elsewhere seems unsatisfactory for investors who would have seen timely declaration as a sign that itâs just a liquidity issue.
Prof Bakshi had called it out right that NBFC is a fragile business model. I understand it so because while the asset side is in your control,the liability side can turn upside down literally overnight (at least a Bank can go to the Central Bank). And if you are in a thin spread business and asset goes wobbly at the same time, even best ALM practices cannot help. And I think it is not given to everyone (especially if the promoter has one eye on the stock price) to have an ALM discipline when the spreads look so juicy with say a CP at 6%, rolled over easily and an asset at 13%.
Nice positive ALM buckets for 7 day, 15 day etc with undrawn bank lines can be shown but a liability maturing on day T satisfied only by a matching asset maturing on date T+1 is called a default, and thatâs as fragile as a baby holding a Chinese vase. Just one error away from collapse.
BNP Paribas.pdf (180.5 KB)
âWe believe DHFLâs problems seem to be contained in the wholesale lending book and we note that
the companyâs retail business continues to perform well with collection ef ficiencies of 99-99.5%4.
While in the past there has been news flow on potential sell down of this book, but no fi rm
announcement has been made by the company. We believe current mark down is reasonable in
nature and adequately prices in the default risk. We assure you the measures taken by BNPP AMC
are in the interests of investors and all stake holders.â
They have taken markdown of 75-100%
Hi All,
This post is meant to be a learning exercise in decision making. I am seeking a response from all those who had invested in DHFL earlier, may or may not be invested now.
If the hypothesis of investment for DHFL was that of it as a value investment, which related event or information disclosure (throughout the series of incidents) made you realize that the fundamental story for DHFL has changed & you decided to exit the business?
I want to understand, how all of you as an investor evaluate an emerging situation without letting hope or the biases behind initial investment decision affect future decisions.
Thanks. Disc - not invested.
DHFL was always a value buy even at its peak compared to its peers due to its history of lack of corporate governance at the group. Even when I invested a couple of years ago, all looked rosy with a lot of value yet to be unlocked. Multiple big name investors and organizations were all gung ho about DHFL at the time.
On an alternate topic, AFAIK, a Debt fund and a liquid fund are perpetual in nature and always invested in multiple bonds, cpâs and other avenues with different dates of maturity. I am also sure that 100% of the investors never redeem money when a particular bond or cp is maturing rather than when the money is needed. What led to the AMCâs to go outright before the end of 7 days grace period and write off 100% of the value? Is this not against the investors interest if they have to withdraw at a loss due to rerated NAVâs ? Who pockets the profits now if DHFL goes ahead and pays their dues to the AMCâs?
My second gripe is about the biggest global scam called the credit rating agencies. A certain known personality in the markets was first to break the news about non-payment on Twitter. Why not the one of the credit rating agencies?
Update:
I think it is not a choice for the AMCs to choose when they can mark down the relevant debt issues once the company defaults. As soon as a company defaults on interest payments SEBI mandate is to mark down such investments by 75 percent. In my view it is actually the AMCs who waited till the last minute to mark down their investment which in a way gave existing investors an opportunity to exit and trapped unaware new investors which is definitely wrong in the AMC part.
Relance Nippon AMC received payment as per news.
NAV is not valued at the AMCâs whim but based on guidelines, and SEBI had been guiding valuation, the last being on March 19 here. Generally as rating declines the value of that instrument declines and NAVs used for purchase or redemption will also decline.
Rating agencies job is to rate and not to inform on defaults. By downgrading to D they indicated that the rating was Default and in this case atleast the agencies have been continually downgrading from AAA to D.
The Mirchi Saga of Wadhwans, Baba and Bindra - Part 1 - PGurus.pdf (111.7 KB)
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