DHFL, Wadhawans And Ownership Webs
Comment of the Day

March 14 2019

Commentary by Eoin Treacy

DHFL, Wadhawans And Ownership Webs

This article by Aman Kapadia for Bloomberg Quint may be of interest to subscribers. Here is a section:

This story started with the loans made by DHFL to four developers. When the developers bought a stake in Darshan Developers, the money moved to Kyta. Kyta used most of the proceeds, Rs 1,324 crore, on a joint venture, details on which are not available in the company’s filings.

The remaining Rs 100 crore was used to repay unsecured loans it had received from unknown sources.

In February, BloombergQuint asked DHFL about the use of its loan funds by these developers and the connection with Wadhawan entities. The company said it was awaiting the outcome of an internal investigation into the Cobrapost allegations.

"You are aware that over the last two weeks, we have issued various media statements as also clarifications. The clarifications issued by us clearly sets out the motivation of the complainant, and also states that statements, allegations and accusations contained in the complaint are utterly false and baseless.

Eoin Treacy's view

As happens with all major collapses, the details of the wrongdoing and the untangling of the web of deceit that led to the collapse happens well after the decline. Dewan Housing Finance collapsed abruptly from its September peak, falling from INR700 to its recent low of INR100 as the full extent of the misallocation of capital started to become clear. That was helped along by the RBI stepping in to instil discipline in the banking sector which resulted in a number of privately held banks pulling back sharply.

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