Shares of Dewan Housing Finance Corporation (DHFL) were down 4 per cent to Rs 134 in intra-day trade on the BSE, extending past two days' 6 per cent decline in otherwise firm market after rating agencies downgraded the housing finance company's various debt instruments.
Brickwork Ratings (BWR) on March 8, 2019 downgraded DHFL's various debt instruments by one notch, citing de-growth in business on account of inability to raise funds.
“The ratings downgrade takes into account the de-growth in business which was on account of inability to raise funds through traditional bank lines and debt market instruments and limited progress in raising funds through securitisation of its retail loans and sell-down of its developer loans. The company’s financial flexibility has moderated and it has curtailed disbursements to conserve liquidity which has impacted the growth in business,” BWR said in a rating rationale.
Earlier on March 6, 2019, CARE Ratings downgraded long-term rating of DHFL’s debts worth about Rs 1.14 lakh crore, saying that the company has made limited progress on sell down of builder book and inflows from securitization deals.
The revision in the long-term ratings of DHFL takes into account further moderation in financial flexibility due to limited progress of earlier envisaged strategic measures and inflows from securitization deals to build up additional liquidity, since CARE’s last review on February 3, 2019. CARE has taken note of the achievement of some of the strategic milestones such as sell down of one of the builder loan exposures worth around Rs 1,375 crore and announcement of stake sale in Aadhar Housing Finance Ltd. to Blackstone, CARE Rating said in a statement.
DHFL's management expressed concern over CARE's re-rating of the company's long term debt instruments and alluded to it as "a non-merit based and entirely irrational decision".
Over the last few months, DHFL has accelerated the process of realigning the ownership and management to bring in a broad-based professional ownership with the aim of enhancing stakeholders' confidence. The company has engaged with large potential entities to identify and onboard the right strategic partner and are in advanced stages of discussions to achieve the same over the next 90 days, the company said in a media statement.
With today’s fall, DHFL's stock erased its entire 25 per cent gain recorded in two trading sessions between March 5 and 6 after an independent report commissioned by the audit committee of troubled DHFL gave a clean chit to the firm on allegations of routing money through shell companies. However, some money may have been lent to entities to buy shares of a company floated by the promoters of DHFL.
At 11:55 am, DHFL was quoting 3.5 per cent lower at Rs 135 on the BSE, against 0.87 per cent rise in the S&P BSE Sensex. A combined 10.2 million equity shares changed hands on the counter on the BSE and NSE so far.