Crisis-hit DHFL defers March quarter financial results; stock falls by 12%

A source said the auditor has raised additional queries on the firm's accounts

Housing finance firm Dewan Housing Finance (DHFL) on Friday postponed its board meeting — to get its audited financial results for the March quarter of 2018-19 (FY19) approved — to July 13, because of non-availability of a few of its directors”. The company’s stock closed at Rs 72 a share on Friday, down 12 per cent.

The board was to meet on Saturday (June 29). In a statement, the company said: “In light of certain unforeseen operational engagements including non-availability of a few directors to ensure participation of all the members of the audit committee as well as the board for taking into consideration and approval of the financial results for the fourth quarter… the date of the board meeting is being postponed to July 13.” 

On May 29, DHFL sought additional time till June 30 to submit FY19 accounts and said the results are delayed because of “the requirement of submission of the IndAS-compliant audited standalone and consolidated financial results for the first time which requires additional resources, time and effort as also full time engagement of accounts and finance team in various non-routine audits and due diligence by various parties”.

A source said Deloitte Haskins and Sells, the auditor of DHFL, has raised additional queries on the company’s annual accounts. The queries are related to the fund deployment by the housing finance company to related parties.

“After Deloitte received summons from the Serious Fraud Investigation Office (SFIO) and was chargesheeted later for its Infrastructure Leasing & Financial Services (IL&FS) audit, the firm has become very cautious. It is not in a hurry to clear the accounts wherever any allegations are made,” said the source. Deloitte declined to comment on the status of DHFL accounts.

DHFL is already facing an SFIO probe on the allegations made by website Cobrapost which had alleged fund diversion of Rs 31,000 crore from the company early this year. The company appointed TP Ostwal & Associates LLP, a chartered accountant firm, to investigate the allegations.

In a notice to the stock exchanges, DHFL informed that TP Ostwal has given a clean chit to the company on the allegations.  However, the accounting firm pointed out a few discrepancies in the accounts. The report said DHFL had sanctioned and disbursed loans aggregating Rs 2,000 crore to Notion Real Estate, Earleen Real Estate Developers, Prashul Real Estate, and Edweena Real Estate as project loans for development under the Slum Rehabilitation Authority (SRA).

“Further examination of available financial statements of Darshan Developers indicates that the shareholding has indeed undergone a change during the period under review and it is highly probable that certain amounts lent to the four companies may have been used to purchase shares of Darshan Developers aggregating Rs 1,424.16 crore from Kyta Advisors and other instruments worth Rs 299.28 crore (total Rs 1,723.44 crore),” it said. 

The mortgage lender is going through a tough time after it defaulted on its debt payments twice. DHFL made partial payment of Rs 150 crore for its unsecured commercial papers (CPs) that matured on Tuesday. The company managed to settle 40 per cent of the Rs 375 crore that was up for maturity, thereby defaulting on unsecured CPs worth Rs 225 crore.

Meanwhile, a source said that lenders to DHFL will meet early next month to hammer out a rescue package, which will include the reworking of loan payments, fresh working capital support, roping in a financial investor, and the promoters ceding control. The package will be in line with the Reserve Bank of India’s June 7 directions on restructuring debt, a lender said. But whether the lenders can take a call in the absence of audited results for FY19 is a big question, said a source.