Home / Companies / News /  DHFL board okays agreements for project development under wholesale book

Mumbai: The board of directors of Dewan Housing Finance Corp. Ltd (DHFL) has approved definitive agreements received from leading business groups with interest in real estate projects, for development management of large projects financed under the wholesale book of DHFL.

In a statement accompanying its Q1 FY20 results, the stressed mortgage lender said that this proposal will be placed before lenders for their approval.

“The agreements envisage part-financing of working capital requirement by the business houses undertaking development management of such projects and balance financing by the lenders of DHFL," it said.

These agreements, DHFL said, also provide for comprehensive turnkey management of the projects including business planning, design and development.

“In a parallel initiative DHFL has also entered into term sheets with foreign institutional investors who are willing to provide working capital to such projects loans where DHFL had discontinued further disbursement with the onset of the liquidity crises," it said, adding that such loans will be in the nature of priority debt but will ensure that the projects start generating cash flows in a more sustainable and timely manner.

The company reported a standalone net loss of 206.4 crore in the June quarter of FY20, against a profit of 435 crore in the same period last year.

Meanwhile, its auditors have raised questions on its ability to continue operations as a going concern. Auditors said that DHFL’s credit rating has been reduced to 'default grade' subsequent to the previous year-end which may substantially impair its ability to raise or generate funds to repay its obligations.

“All these developments raise a significant doubt on the ability of the company to continue as a going concern and therefore it may be unable to realize its assets and discharge its liabilities including potential liabilities in the normal course of business," the auditors said.

They added that the ability of the company to continue as a going concern is dependent upon its ability to monetize its assets, secure funding from the bankers or investors, restructure its liabilities and recommence its operations, which are not wholly within its control.

Mint reported on 16 October that lenders, led by Union Bank of India, will soon vote on the resolution plan without giving specific timelines. The plan envisages conversion of debt into equity for lenders, giving them a 51% stake in the company. As on 6 July, the company’s total debt stood at 83,873 crore, of which 38,342 crore was owed to banks.


Shayan Ghosh

Shayan Ghosh is a national writer at Mint reporting on traditional banks and shadow banks. He has over a decade of experience in financial journalism. Based in Mint’s Mumbai bureau since 2018, he tracks interest rate movements and its impact on companies and the broader economy. His interests also include the distressed debt market, especially as India’s bankruptcy law attempts recoveries of billions worth of toxic assets.
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