November 25, 2019

Mutual Fund Firms Plan To Suggest Action Against DHFL To RBI Panel To Recover Dues, Based On Forensic Audit Report

[ By Bobby Anthony ]


Mutual fund houses with exposure to Dewan Housing Finance Corp Ltd (DHFL) plan to suggest appropriate action to the three-member committee formed by the Reserve Bank of India (RBI), in order to recover their dues.

The mutual fund companies plan to do so even if it means filing a complaint with an enforcement agency, based on forensic findings.

The mutual fund companies would also insist that while meeting the claims of retail investors, DHFL must refrain from paying retail investors in advance and should only release payments in cases where the investments have matured.

These institutional lenders want the Wadhawans, the promoters of the DHFL group, to arrange funds based on the findings of a forensic audit conducted by a Big 4 firm.

It may be recalled that as of July 2019, DHFL owed a little less than Rs 84,000 crore to banks, MFs, insurers, provident funds and bond holders, including retail investors. Of this, unsecured debt is less than Rs 10,000 crore.

Irrespective of whether the resolution path would entail a new promoter coming in to replace the existing promoter or a professional takes over and works with banks, mutual fund companies plan to put across their point that the extent of haircut which lenders will have to take would be smaller if enough pressure is put on the promoters to arrange funds.

Earlier, some of the mutual funds had moved the Bombay High Court to protect their interest in DHFL, before the government expanded the scope of the Insolvency and Bankruptcy Code (IBC) to cover non-banking finance companies.

The Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 allow the appointment of a panel to advise the administrator in the operations of financial service companies during the corporate insolvency resolution process.

Earlier, a former managing director of Indian Overseas Bank R Subramaniakumar was appointed as the administrator for DHFL by the RBI which superseded the board of the company.

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