DHFL on Tuesday managed to only meet 40% of its 375 crore repayment commitment towards commercial paper repayment. This has once again highlighted the stressful cash solution DHFL currently finds itself in and is selling assets to match its liability commitments.
"Out of the aggregate amount of Rs 375 crore, 40% has been paid on a proportionate basis, and the balance amount of Rs 225 crore shall be paid in the next couple of days," DHFL said in a statement late Tuesday.
The current situation is the result of money not finding itself in DHFL accounts by Tuesday after an asset sale triggering a delay in repayment of the commercial paper.
This is not the first time that DHFL has failed to pay on time this month. Just before Eid DHFL failed to meet payment obligations on bonds issued in the previous year. They narrowly missed the ‘defaulter’ tag by issuing the payment in the grace period.
Mid-sized mutual funds, some of which are linked to select banks or large conglomerates, invested in the short-term debt papers that came up for repayment Tuesday, market sources reported .
On June 17th the Employee Provident Fund Organization had sought details from DHFL about its plan for cash generation amid mounting concerns of default.
EPFO redeemed half its investments as it excersised the put option , which is an exit route given to investors before scheduled maturities.
EPFO invested about Rs 1,300 crore in debt securities sold by DHFL.
When EPFO made the investment in 2014-15, the company’s debt was rated ‘AAA’ by CARE. As per rules, EPFO cannot invest in any debt securities rated below ‘AA+’. But pension and insurance funds such as EPFO are not required to show mark-to-market losses.
When the investment was initially made by EPFO in 2014-15, CARE rated the company's debt at ‘AAA’ . The rules need EPFO to only invest in debt securities rated above ‘AA+’. Only a few weeks ago CARE downgraded its outlook of DHFL debt to ‘D’ , which in other words puts it in the default category and the reason for the same is delay in debt payments which now total 1,000 crores.
DHFL has been battling a liquidity crisis over the past three quarters after the IL&FS default which blocked off funds flowing into the para-banking sector resulting in ballooning cost for mortgage lenders and NBFCs.
Followed by the crash DHFL has sold assets worth Rs. 35,000-40,000 crores in an effort to raise cash to match its outstanding debt obligations.
At the end of the December 2018 quarter, DHFL was India’s third-largest home financier, with assets under management of Rs 1.3 lakh crore and debt of Rs 90,000 crore.