Cobrapost exposé finds DHFL promoters siphoned over ₹31,000 crore

[annacola]

The story alleges that the scam was mainly pulled off through grants of loans and advances to shell companies. The same money was then re-routed via these dubious companies and parked outside India so as to acquire assets.

...

The story alleges that DHFL and its primary promoters created dozens of shell companies with a nominal capital of ₹1 lakh, and divided them into smaller groups of 2-4 companies. A lot of these companies have the same or similar addresses and the same set of initial directors, as well as the same group of auditors to cover up the financial details of these companies. It has been alleged that DHFL’s primary promoters disbursed huge loans to these groups of shell companies—mostly without any kind of collateral— the proceeds from which “appear to have been used for creation of private assets both offshore and in India”. The story claims that DHFL’s primary promoters disbursed thousands of crores worth of loans to these shell companies in the name of secured loans against slum development projects, without any due diligence or maintaining an equity ratio.

...

What is notable is that according to a copy of DHFL’s annual report, the company has secured loans from at least 36 banks in total—32 nationalised and private banks and six foreign banks. Of the 32 nationalised banks, State Bank of India had sanctioned the highest amount of loan to DHFL as on April 6, 2018, amounting to nearly ₹12,000 crore, followed by Bank of Baroda (₹4,396 crore), Bank of India (₹4,150 crore) and Canara Bank (₹3,100 crore). When it came to foreign banks, these included CTBC Bank Co Ltd, which had loaned DHFL a whopping $10,0000,00, Taiwan Business ($5,000,000), and Barclays Bank PLC ($30,000,000).

Source: https://www.newslaundry.com/2019/01...s-siphoned-over-rs31000-crore-of-public-money

Presentation:

 

[drjoe]

@annacola Will the stock prices be affected negatively? It has already come down more than 60% since September.

 

[annacola]

@drjoe It's probably 'priced in' with the stock falling ~25% in last few days though one can't say for sure.

 

[lunanica]

@annacola Not for this reason.

 

[jwd]

@annacola I have DHFL insta liquid fund on Kuvera. Is that in risk?

 

[resjudicata]

@jwd Looking at its portfolio it doesn't own any DHFL paper, so it's safe. Might as well redeem it though.

This got me looking at their other debt funds and holy Conflict of Interest!!! DHFL paper is 2nd or 3rd largest holding( 12-15% ) in Short Maturity and low duration funds.

DHFL Pramerica Ultra Short Term Fund has 33 percent of its assets in Dewan. Wtf, how is that even allowed.

 

[thoughtlessdepth]

@resjudicata

DHFL Pramerica Ultra Short Term Fund has 33 percent of its assets in Dewan. Wtf, how is that even allowed.

I wondered about this too earlier this month. Apparently this fund saw a lot of redemption last quarter or so.

But still, reeks of poor governance imo.

Also, DHFL sold its stake to Prudential (Pramerica's parent). Dunno when it'll be finalised.

 

[jwd]

@resjudicata DHFL says allegations are frivolous and will pursue them to logical conclusion

https://twitter.com/i/web/status/1090241276560068608

 

[resjudicata]

@jwd Meh. They all say that and then they go belly up. Maybe this one doesn't but for most promoters their words are worth 0.

I mean their disbursals are down 95% this quarter. That's a fact and a huge red flag. That does not happen unless market has stopped giving them money. And that does not happen unless market knows something.

P.S. Their was a recent moneylife report about DHFL promoters raising money indirectly pledged against their security and then using that money to increase Equity in company itself that is such a sham.

 

[jwd]

@resjudicata Im following what they say closely, or any bank that is a creditor, because I have a 2L liquid MF with them which I dont want to take out after 1.5 years and pay huge tax on it... :/

I just cancelled other MF last week which had rumours of default - HDFC short term fund...

I really hope this isnt some pattern that keeps repeating

https://twitter.com/i/web/status/1090240238822273028

@DHFL_India Clarifies On @cobrapost: Loan Disbursements In Line With Existing Rules

Co, Group Cos Confident Of Meeting Any Scrutiny On Any Aspect Of Our Operations

Co Is Fully Compliant And Its Books Are Audited By Global Auditors

 

[resjudicata]

@jwd

Im following what they say closely, or any bank that is a creditor, because I have a 2L liquid MF with them which I dont want to take out after 1.5 years and pay huge tax on it... :/

The only problem is if their redemption pressure from other unitholders, they will be selling some holdings to generate cash. And that would obviously be stuff that is easier to sell i.e. better quality holdings. So in the end it would be a small set of unitholders and a relatively worse quality of paper in their basket. If something defaults then, you'll take a much bigger hit as a percentage, since early leavers were made whole by selling better quality papers.

That markdown might be more than your outstanding tax right now.

 

[jwd]

@resjudicata Yeah. You are right man. Im going to do the sensible thing better tha nending up with egg on my face....

 

[sodafox]

@jwd Just Bought 10 DHFL at Rs155 now

 

[jwd]

@sodafox Many guys bought the crash

https://twitter.com/i/web/status/1090456513607491586

Must thank #Cobrapost - gives me a chance to average DHFL ....thank you Cobrapost. Shall I give you a list of shares that I wish to buy at a lower price?

 

[annacola]

@jwd Unlikely. But better be alert for any further news.

Why use that fund though? Seems a strange choice for a liquid fund?

 

[jwd]

@annacola Well they had a insta redeem 30 mins feature. Plus its DHFL pramerica which is a JV with a 35 Bn group

 

[resjudicata]

@jwd Not directly related, but I have to ask this out of curiosity.

Are there any MF AMCs who are not invested in any other finance or finance-related businesses? So companies like Aditya Birla Capital, HDFC, Axis et al would not fit in this category.

 

[jwd]

@resjudicata Franklin, Parag parikh, Quantum, Motilal oswal are pure AMCs.. though some of them like MO also offer brokerage.

 

[starryeyes]

@jwd Wait for a reply or something official. This looks like a political stunt to me. The allegation is that "one of the companies of DHFL donated 19 cr to BJP" and they are making a lot of noise over this ... which is laugable to say the least, parties receive donations from every company and moreover BJP has even disclosed this donation

Edit - Care ratings affirmation of DHFL

Net assets of 100,000 Crore, and in Dec 31st 2018 period has repaid loans over 17,000 crores of liabilities.

Cobrapost has a dubious history to say the least...

If banks loan have been defaulted, why arent banks pressing the issue and why is cobra post pressing it?

 

[resjudicata]

@starryeyes Yeah, that BJP donation is a bogus allegation and they clearly don't understand what leverage is for a HFC>

But the allegation of giving unsecured loans to companies linked to promoter is already a violation of trust. Money was raised on pretext of real estate lending and it was forwarded to other companies for unsecured loans. That is enough to ensure that liquidity will totally dry up come next round of raising money from the markets, for a nbfc that's a death spiral.