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Explained: Why DHFL share hit 10% upper circuit today

In January, Piramal Capital and Housing Finance Ltd, a subsidiary of Piramal Enterprises Limited, had won a bid for acquiring DHFL. Piramal made Rs 34,250-crore bid to acquire the housing finance company

twitter-logoBusinessToday.In | June 7, 2021 | Updated 14:44 IST
The lenders of the company classified the account as a fraud on alleged fund diversion by promoters Kapil Wadhawan and his brother Dheeraj W The lenders of the company classified the account as a fraud on alleged fund diversion by promoters Kapil Wadhawan
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Share of DHFL hit a 10 per cent upper circuit at Rs 20.8 in early trade on BSE today after the company posted earnings for the quarter ended March 2021 ahead of a final verdict in the insolvency case.

The National Company Law Tribunal (NCLT) has approved Piramal Group's overall resolution plan for Dewan Housing Finance (DHFL) today.

In January, Piramal Capital and Housing Finance Ltd, a subsidiary of Piramal Enterprises Limited, had won a bid for acquiring DHFL. Piramal made Rs 37,250-crore bid to acquire the housing finance company.

The resolution plan had received approvals from RBI in February 2021 and the Competition Commission of India (CCI) in April 2021.  

Last year, Wadhawan had made his settlement offer to the CoC which was rejected due to lack of credibility and the valuations attached to the proposed asset sales. In the plan, Wadhawan had proposed to repay lenders by selling assets.

On May 25, the National Company Law Appellate Tribunal (NCLAT) stayed an order passed by the Mumbai bench of NCLT asking the lenders of bankrupt Dewan Housing Finance Ltd (DHFL) to consider the resolution plan of the company's former promoter Kapil Wadhawan.

NCLAT's final order is pending on this matter.

The stock has gained 43 per cent in the last 12 months. It stands higher than 5 day, 10 day, 20 day, 50 day, 100 day, and 200 day moving averages. Market cap of the firm rose to Rs 652.75 crore on BSE.

The NCLAT has asked the company's Committee of Creditors (CoC) to consider giving more money to small fixed deposit (FD) holders.

"We are not remanding the plan back to CoC; we respect their commercial wisdom," it said.

DHFL is currently being run under an administrator appointed by the RBI in November 2019. It is the first finance company to be referred to the NCLT by the RBI.

DHFL had gone bankrupt with more than Rs 90,000 crore in debt to various lenders, including banks, mutual funds and individual investors who kept fixed deposits with the company.

The lenders of the company classified the account as a fraud on alleged fund diversion by promoters Kapil Wadhawan and his brother Dheeraj Wadhawan.

The company posted a profit of Rs 96.75 crore in the January-March quarter. It had posted a net loss of Rs 7,507.01 crore in the year-ago quarter, while it reported a loss of Rs 13,095.38 crore in the October-December quarter of 2020.

It also reported a widening of its FY21 consolidated net loss to Rs 15,051.17 crore as compared with a loss of Rs 13,426.85 crore in FY20.

Total income declined to Rs 8,802.79 crore in FY21 from Rs 9,578.85 crore in FY20.

DHFL said it did not make any provision for interest on borrowings amounting to Rs 1,912.13 crore and Rs 7,651.55 crore for the quarter and year ended March 31, respectively, because of the company's corporate insolvency process.

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