DHFL board approves conversion of debt to equity

DHFL board approves conversion of debt to equity

Debt-laden Dewan Housing Finance Ltd (DHFL) on Friday said its board has approved conversion of whole or part of its debt into equity shares, which may result in a change in ownership of the company.

“The board has approved conversion of the whole or part of the debt into equity shares or other securities of the company in accordance with the applicable law with the price of such conversion being in line with the applicable laws and which may result in a change in ownership of the company,” DHFL said in a filing to the Bombay Stock Exchange.

The conversion of debt into equity may result in a change in ownership, the company said adding that the plan is subjected to the approval of the shareholders of the company.

Promoters of the company, the Wadhawan family, who currently holds close to 40 per cent stake in the company, have been undergoing the process of pruning their assets to shore up liquidity into the major housing lender. Private equity firms Lone Star, AION Capital, and KKR are in talks with promoters for a strategic stake, media reports said.

The 35-year-old housing finance company has around Rs 1 lakh crore ($14.15 billion) of debt, and owes nearly Rs 40,000 crore to banks alone.

Earlier this month, DHFL had said its lenders would not have to take any haircuts on principal payments under its resolution plan. The firm will also put a moratorium on repayments and seek funding from banks to start retail lending, DHFL said in its resolution plan.

“The board has expanded the terms of reference of the special committee for resolution plan to include the finalisation of the terms of conditions of the various measures and actions contemplated by the resolution plan,” DHFL said in the exchange filing.

The mortgage lender’s board also approved a proposal to increase the authorised share capital of the company from Rs 828 crore to Rs 1,090.39 crore.

DHFL has been undergoing substantial financial stress and has defaulted on its obligations several times. The mortgage lender has been the worst hit by the liquidity crisis in the NBFC sector, that crippled numerous Indian non-banking finance companies (NBFCs) following last year’s defaults at the infrastructure lender, Infrastructure Leasing and Financial Services Ltd (IL&FS).

The embattled DHFL, that was once the second-largest private-sector HFC after HDFC, declared losses of Rs 2,223 crore for the fourth quarter of FY19.