Dewan Housing Finance Corporation (DHFL) was unable to meet its debt-related obligations on Tuesday as it missed interest payments worth Rs 960 crore.
Company sources said: “According to the trust deed, if interest payment on the non-convertible debentures is not met on the due date, there is a cure period of seven working days to meet the obligation. In case the non-payment continues post that cure period¸ only then the same shall constitute an event of default.”
“The company is taking all steps necessary to ensure that the interest payment is made within the cure period,” they added.
According to people in the know, several fund houses also had their interest payment due dates on Tuesday. Sources said DHFL had also assured fund houses that payments would be made in a few days.
According to data from Prime MF database, MFs had debt exposure of Rs 5,169 crore as of April-end.
Besides MFs, the banking sector also has exposures to DHFL. However, the exposure levels couldn’t be ascertained.
DHFL has faced a series of downgrades from rating agencies in recent past, with raters concerned over the asset-liability mismatches in DHFL’s books. However, the firm has maintained that it has taken substantial steps to ensure adequate liquidity.
Last month, DHFL informed its depositors that it won’t allow premature withdrawals of its deposits, with immediate effect, in order to reorganise its liability management.
The housing finance company has also stopped accepting fresh public deposits and renewals of existing deposits after the company’s credit rating was downgraded by Brickwork Ratings to ‘BBB-Plus’ (from the earlier ‘AA-negative’), and put on ‘a credit watch with negative implications’.
The company's fixed deposit liability is Rs 12,000 crore, which was also downgraded by the rating agency.
However, DHFL told its distributors that it was solvent and had honoured Rs 30,000 crore of liabilities in the past and had no intention of defaulting.
The problems for DHFL started in September when Infrastructure Leasing and Financial Services (IL&FS) defaulted on its debt obligations.
The company’s shares tanked on the bourses on concerns that DHFL could also default on outstanding bond re-payments because of its exposure to the beleaguered IL&FS group and issues pertaining to the asset liability mis-management.
DHFL and Wadhawan Global Capital (WGC), the holding firm of DHFL, have sold stake in many of their subsidiaries like the Aadhar housing finance and Avanse Financial Services to reduce their debt. This is part of effort by DHFL and WGC to focus on core business of housing finance and exit from other lending activities. DHFL is also looking for a strategic investor to ensure that the organisation design reflects their current business imperatives of the company.