Thread by @caswapnilkabra

A long thread to explain the @DHFL_India downfall and the situation of bad corporate loans banks are witnessing!

@gvkreddi, @Dinesh_Sairam

#economy #banking

1. DHFL owes a lot of money to banks, NHB (National Housing Board), bondholders and mutual funds. And it does not have enough money to pay them back.

2. So, to cut the long story short, DHFL’s going concern is questioned. For starters, going concern is an accounting principle which means that a company can continue its business for a foreseeable future.

3. Let us first have a look at the debt in the books of the company and which bank lent what amount to DHFL.

4. So, that is a lot of money DHFL owes to these banks and SBI tops the chart with the loan of Rs.10,000 crores. The total amount of loans given by 29 odd banks to DHFL comes to the tune of Rs.40,000 crores.

5. Now, what is more interesting here is the fact that the collateral is worth only Rs.500 crores against Rs.40,000 crore lent by banks!

6. In totality DHFL owes Rs.85,000 crores approximately to banks, NHB (National Housing Board), bondholders and mutual funds.
Hence, it is under IBC.

7. DHFL was sent to bankruptcy after the government on November 15, 2019 enabled the RBI to sent large financial services companies, excluding banks, to the National Company Law Tribunal for insolvency proceedings.

8. There were 24 odd bidders for DHFL in February 2020. These include the likes of KKR, Adani, Piramal, Kotak, AION Capital, Hero Fincorp, Oaktree capital, Goldman Sachs, etc.

9. But, now there are only 4 bidders which include the names of Adani Group, Piramal Group, US based Oaktree capital and SC Lowy.

10. Two main reasons stand out here for only 4 players being interested now

11.
Reason 1: The pandemic has hit the realty sector badly and hence, there are only a few players showing interest in DHFL.

12.
Reason 2: The main reason here is the fraudulent transactions to the tune of Rs 12,705.53 crore took place in DHFL during FY17 to FY19, according to transaction auditor Grant Thornton .

13. Of the four players the highest bid came at just Rs.20,000 crore by Oaktree, the only company to show interest in buying DHFL in entirety.

14. That’s a cheap bargain one can say. This would mean that banks and other lenders will have to take a haircut of 50,000 to 60,000 odd crores.
No prices for guessing who the biggest loser here is!

15. Time and again we see big corporates failing and all the stakeholders money go for a toss.
Banks always find money to lend it to the corporates. It is the likes of you and me, the common folks who can never avail a good amount of loan unless we are rich enough.

16. The small borrower has never been a matter of concern for banks. It is the corporates! We have enough examples to prove this theory. Jet Airways, Bhushan Steel, Kingfisher airlines, Reliance comm, etc. all are the lessons in the book of corporate failure.

17. And now add DHFL to this infamous list.

18. And now that the promoter of the company Kapil Wadhwan is in jail, he now offers to settle the claims of DHFL. by pegging profit of Rs.44,000 crore from 10 projects!
This attitude is uncalled for and we need to change the situation our banks are in!

19. But again banks will declare these loans as NPAs, lose their hopes of recovering the money, settle with a huge haircut, accept the losses and use the money deposited by commoners like you and me, refuse to give these same commoners loan easily.

20. and run behind the same bunch of corporates for giving them credit without checking the collaterals and the business position and the bad loan cycle continues!

The End!