DHFL’s Lenders Approach NCLT To Mark Rs 14,000 Crore In Retail Loans As Fraud
Lenders have found that these loans marked as retail were actually routed to shell companies of the promoters.
Lenders to Dewan Housing Finance Corp. Ltd. have approached the National Company Law Tribunal to tag Rs 14,046 crore in retail loans as fraudulent, the company said in an exchange notification on Sept. 2.
The loans were classified as retail advances by DHFL but were actually extended to shell companies owned by promoters of the housing financier and allegedly siphoned off, three people told BloombergQuint on the condition of anonymity.
Additionally, an amount of Rs 3,348 crore has been considered as due and outstanding towards notional loss to the company on account of charging lower rate of interest to certain entities, the exchange notification said.
The committee of creditors to DHFL was made aware of these findings through a forensic audit report submitted by Grant Thornton.
On the basis of investigation and observations of the transaction auditor, the administrator has filed an application with the Mumbai bench of the National Company Law Tribunal, in respect of disbursements made to certain entities, referred to as the “Bandra Books Entities”, the notification said.
The administrator has filed the petition against 87 respondents, including promoters Kapil and Dheeraj Wadhawan, Township Developers India Ltd., Wadhawan Holdings Private Ltd., Dheeraj Township Developers Pvt. Ltd., Wadhawan Consolidated Holdings Pvt., Wadhawan Global Hotels & Resorts Pvt. Ltd., Wadhawan Lifestyle Retail Pvt. Ltd. and certain other entities, the notification added.
BloombergQuint was unable to get a copy of the petition filed by the committee of creditors and DHFL’s administrator.
Lenders led by State Bank of India are seeking to tag these accounts as fraudulent and assign nil value to these loans, as is required under fraud proceedings. Once the NCLT approves this, the lenders can fully write-down these loans in their books and initiate recovery proceedings against the promoters, the people cited earlier said. The lenders also retain the right to sell these loans to bidders at a deep discount and let them handle the recovery process, if needed, the people said.
Emails sent on Sept. 2 to SBI and R Subramaniakumar, the DHFL administrator appointed by the Reserve Bank of India, remain unanswered, while Grant Thornton refused to comment.
Kapil Wadhawan, the former chairman and managing director of DHFL, is already facing criminal prosecution by agencies such as the Enforcement Directorate and Central Bureau of Investigation. The proceedings by lenders are running parallel to those.
Last month, DHFL released its earnings for the quarter-ended June, reporting a net profit of Rs 70 crore, compared with a loss of Rs 206 crore a year ago. Net loss during the January-March 2020 quarter stood at Rs 7,635 crore.
As per the presentation, DHFL’s total loan book as on June 30 carried a net present value of Rs 65,408 crore compared with Rs 90,144 crore a year ago. The net present value is the value of the company’s loans, after deducting provisions or fair value loss. Gross wholesale loans on the balance sheet at the end of the first quarter stood at Rs 50,805 crore, while the net present value stood at Rs 30,107 crore. The remainder of the loans were marked as retail.
In July 2019, DHFL had disclosed a number of anomalies in its loan book. For one, the company said it had found “lacunae” in loan documentation for certain project and mortgage loans worth Rs 20,750 crore. It had also reviewed the fair value for a large pool of loans.
In November 2019, DHFL was admitted under the Insolvency & Bankruptcy Code after the RBI allowed lenders to initiate proceedings. Permission from the RBI was necessary since the IBC does not cover financial services companies. Financial creditors to the company have submitted claims worth over Rs 1 lakh crore as per the latest assessment by the administrator.
The creditors have decided to split the company’s assets into three parts—retail, wholesale and slum rehabilitation projects—which were put up for sale earlier this year. Bidders can choose to bid for one set of assets, or all of them, depending on their risk assessment.
In February, at least two dozen bidders had submitted expressions of interest and are in the process of firming up their bids. The deadline for bidding has been delayed owing to Covid-19 outbreak and the current deadline is set for Sept. 16.