Going concern assumption (a barometer of financial stability) is one of the three golden rules of accounting principles. If this is challenged, it implies that future operations may come under threat. In other words, if DHFL’s current loans aren’t rolled over, banks don’t approve of adequate fresh credit and PE investors doesn’t come on board, things could go from bad to worse. However, if credit does come by as expected, DHFL
believes that it should resume loan disbursements in a month.
Even then, the quality of Rs 34,818 crore of wholesale loans is a black box. DHFL
plans to monetise this portfolio. But that would depend on the outcome of asset quality scrutiny. Another important point is that Q4 numbers are unaudited. Audited numbers expected on July 22 would be based on the new accounting standards – IndAS, which is more exacting on asset quality and provisioning. Analysts say the possibility of Q4’s loss widening basis IndAS appears high and hence the downside risk to DHFL’s stock is also significant. “The bottom of the pit could perhaps be if DHFL resumes operations and banks lend the required amounts,” says a head of research at a domestic brokerage.