Shares of one of India’s largest housing finance companies, DHFL went high on Wednesday by 18% after the firm said that it will not accept new deposits, while halting renewals of existing ones, with immediate effect. The company also said that it will not allow premature withdrawals to “help reorganise its liability management.” This step follows the latest
revision of the credit rating of its fixed deposit programme.
Today, shares of DHFL hit a low of ₹107.15 on the BSE, falling as much as 17.51%, while India’s benchmark Sensex Index was up 0.15% to 39,027 points. At 9.25 am, the scrip traded at ₹112.80, down 13.16% from its previous close. So far this year, the stock has declined 54%
DHFL has been the subject of multiple downgrades in recent months. The most recent downgrade by Care Ratings was for borrowings including long-term bank facilities, fixed deposit programme, perpetual debt, subordinated debt and non-convertible debentures (NCDs) worth ₹1.13 trillion. Of this, the fixed deposit programme worth ₹20,000 crore was downgraded from CARE A to CARE BBB- (Credit Watch with negative implications). According to CARE Ratings, CARE A signifies ‘low’ credit risk, while CARE BBB signifies ‘moderate’ credit risk.
DHFL offers deposits to for tenors ranging from 12 months to 120 months and with interest rates ranging from 8.2% to 9.25% (on deposits of less than ₹5 crore).
“In view of the recent revision in the credit rating of our fixed deposit program, acceptance of all fresh deposits, as well as renewals, has been put on hold with immediate effect”, the company said in a statement late on Tuesday.
It is to be noted, however, that DHFL has not defaulted on any of its borrowings. “Over the last few weeks there has been several unwarranted speculation in the market about the creditworthiness of DHFL. We assure you that we stand committed to honouring all our liability payments, and have demonstrated this by repaying liabilities amounting to approximately ₹30,000 crore since September 2018, without a single day’s delay”, the company said.
Last week, ratings firm ICRA downgraded securities called pass-through certificates issued under six loan pools by Dewan Housing, citing sustained deterioration in its credit profile.
“The crisis in asset-liability mismatch is a fundamental problem faced by the NBFC sector and this distress needs to be addressed at a policy level by the new government,” an analyst said on condition of anonymity.
Since the beginning of this year, DHFL has seen its credit rating fall four notches at CARE Ratings and also at Brickwork Ratings to BBB+.
In January, Cobrapost accused the company of a financial scam worth ₹33,000 crore. However, DHFL has denied the allegations and called its disbursements in line with regulations.