Mumbai: Bankrupt Dewan Housing Finance Limited (DHFL), stocks of which were delisted off Indian bourses at the start of the week, may have more worries than it may have anticipated.
A week ago the National Company Law Tribunal approved the Piramal Group's offer of Rs 35,250 crores to take-over DHFL.
The ruling which pulled the rug off investors' feet also states a major challenge for DHFL.
In their judgement, HP Chaturvedi and Ravikumar Duraisamy state that DHFL was no longer a deposit accepting NBFC.
The statement on page 85 states: "It is also to be noted that while granting NoC by RBI, the status of the Corporate Debtor is changed from Deposit taking Housing Finance Company to Non Deposit taking Housing Finance Company."
R Subramanikumar, the DHFL administrator had sought the RBI's approval to the change in Jan 2021 which was approved and changed duly in February 2021.
The NCLT order states, “Pursuant to the FSP Rules, the RBI communicated its 'no objection' on February 16, 2021 for change in control/ownership/management in DHFL in terms of Rule 5(d)(iii) of the FSP Rules and also in terms of para 3 of NHB circular – housing finance companies -- approval of acquisition or transfer of control Directions, 2016, subject to (inter alia) the condition that the deposit-taking status of DHFL will be revoked and merged entity of DHFL and Piramal Capital shall function as a non-deposit taking housing finance company."
With this, DHFL has lost the precious capability to raise deposits from the public. Previously, it was among a select list of NBFCs such as Mahindra Finance or Bajaj Finance in tapping Public to raise deposits.
Only AAA rated NBFCs with sufficient market credibility usually approach the public for deposits. The RBI's 2021 Master guideline, for those curious, stipulates several quality checks for raising deposits. Significant among them is minimum grade rating from agencies such as ICRA, CRISIL, CARE, Fitch or Brickwork.
DHFL has lost two crucial factors in the last week. First, the ability to raise money by way of public deposits. Second, the trust among public and minority shareholders.
The latest judgement leaves DHFL room to only source funds by way of either bonds or loans.
An RBI FAQs section on NBFC updated as of 2017 clarifies that public funds are different from public deposits. The RBI, interesting from the perspective of the take-over, adds "indirect receipt of public funds means funds received not directly but through associates and group entities which have access to public funds."
Meanwhile, the NHB website shows Dewan Housing Finance Limited among those who have been granted a Certificate of Registration with permission to accept public deposits.