The administrator of Dewan Housing Finance Corporation (DHFL), R Subramaniakumar, has commissioned a legal audit to ascertain the enforceability of loan documents and security associated with the company’s wholesale book. “The outcome of these procedures may provide additional facts about data,” the home financier told the exchanges in its notes to accounts for the quarter ended September on Thursday. DHFL has been undergoing insolvency proceedings since early December. It is currently being administered by R Subramaniakumar, who is assisted by a three-member advisory panel.
The wholesale loan portfolio aggregating Rs 47,136.57 crore has been fair-valued at Rs 42,284.50 crore as on September 30, based on internal valuations done prior to September 2019. The resulting loss in fair value is to the tune of Rs 4,852.06 crore, of which a loss of Rs 3,664.57 crore has been accounted up to June 30. The remaining loss of Rs 1,187.49 crore has been charged to the statement of profit and loss (P&L) for the quarter ended September.
These valuations may undergo changes as a result of further valuation exercises conducted under the corporate insolvency resolution process (CIRP). Also, the recoverability of these loans is yet to be ascertained and the company has made provisions as a prudent measure. “As a part of CIRP, Avoidance Transaction Audit as per Section 43, 45, 50 and 66 of the Insolvency and Bankruptcy Code (IBC) and valuation assessment of liquidation value and fair valuation of the company is underway,” DHFL said in the communication to the exchanges.
The committee of creditors (CoC) to DHFL has decided to invite bids for the company after splitting it into three parts to boost the chances of a successful resolution. As some banks have already classified their exposures to the troubled mortgage lender as fraud accounts, there could be hurdles along the road to resolution, particularly with respect to the quality of the wholesale book.
Earlier, FE had reported, quoting banking sources, that one problematic issue was that of loans associated with Slum Rehabilitation Authority (SRA) developments and related parties, which together amount to about Rs 20,000 crore. In order to maximise the asset’s value and recovery for lenders, the problematic loans have been split from the more attractive retail loans before being offered for sale.