DHFL asset sale may get further delayed over 'Bandra Book Entities' report

The report said siphoning off funds by the company was going on since 2006-07 via 91 fictitious entities operating from a Bandra branch

Bidders for Dewan Housing Finance (DHFL) are jittery about making a final bid for the bankrupt company because an investigation report by Grant Thornton has highlighted widespread fraud in its retail, wholesale, and slum redevelopment books.

The report said siphoning off funds by the company had been going on since 2006-07 through 91 non-existent entities operating from a branch in Bandra, Mumbai.
 

The report, which has been submitted to the National Company Law Tribunal and has labelled these fictitious outfits “Bandra Book Entities”, has revealed there is a Rs 14,000-crore hole in DHFL’s books, including a Rs 9,320-crore gap in the wholesale books, Rs 1,707-crore loss in the SRA (slum redevelopment authority) books, and another Rs 3,000 crore of fund diversion in the retail loan books.
 

The recoverability of these loans is in doubt, the report has warned. With this report, the sale of DHFL assets will be further delayed because bidders will require more clarity on the liabilities, said a banker.
 

A bidder said it had gone through the report and would take a call whether to go ahead with making a bid.
 

“We will look at the bidding only after we are 100 per cent sure that the books are clean and there is no future liability on the investor,” the person representing the bidder said.

 

In February this year, almost 24 companies had shown an interest in DHFL. They include Aion Capital, Adani Capital, Hero Fincorp and KKR Credit Advisors, Oaktree, Morgan Stanley, Goldman Sachs Group, Deutsche Bank, Warburg Pincus, SSG Capital, Edelweiss, Lone Star, and Blackstone. Of these, only a few are left in the race with lenders planning to extend the last date of submission to October 17.
 

An email sent to the DHFL administrator seeking comment on the Grant Thornton report did not elicit any response. But in a communication to the stock exchanges on September 9, the company, now under an administrator appointed by the Reserve Bank of India, had said that in accordance with the transaction auditor report, the monetary impact of the transactions amounted to Rs 14,046 crore, which is the outstanding amount on its books as of June 30, 2019.
 

The housing finance company owes close to Rs 15,000 crore to fixed-deposit holders and another Rs 38,000 crore to banks. The debt of DHFL is estimated at Rs 88,000 crore, including what it owes mutual funds and bond holders.
 

The company is facing investigation in Uttar Pradesh after it defaulted on payment to the electricity board employees’ provident fund.
 

In October last year, a forensic audit initiated by Union Bank of India and conducted by KPMG had confirmed that the promoters of DHFL had diverted funds from the company and in several cases there was no proper record on the end use of the funds DHFL lent.
 

Investigation by the Enforcement Directorate is on.