BSE, NSE suspend trading in DHFL shares; what investors should do?

BSE and NSE’s decision to suspend trading in shares of Dewan Housing Finance Corporation (DHFL) from Monday has put investors in a fix.

The move, aimed at avoiding “market complications”, comes against the backdrop of the National Company Law Tribunal (NCLT) approving Piramal Group’s resolution plan for the bankrupt-DHFL.

The resolution plan under the Insolvency and Bankruptcy Code (IBC) was approved by the tribunal on June 7.

In separate circulars issued on Friday, BSE and NSE said they would suspend trading in the shares of DHFL with effect from June 14.

As per the circulars, the company made an announcement on June 9, saying that “no value was attributable to the equity shares as per the liquidation value of the company estimated by registered valuers appointed under the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016”.

According to the circular issued by BSE, “to avoid market complications, trading in the securities of Dewan Housing Finance Corporation Limited will be suspended w.e.f June 14, 2021”.

What investors should do now?
Market watchers said that investors cannot do anything after the suspension. G Chokkalinga, Founder, Equinomics Research and Advisory said, “Nothing can be done since trading has been suspended by exchanges. An investor can just wait and hope for relisting or some open offer.”

AK Prabhakar, Head of Research, IDBI Capital Market second Chokkalingam and added that nothing can be done now. “DHFL has zero value. An investor should be careful while buying stocks involved in NCLT. Many times these things had happened and investors never learnt their lesson,” he said.

Independent market analysts Ambareesh Baliga also said investors cannot do anything now as it is a write-off.

Kranthi Bathini, an equity strategist at WealthMills Securities said, “Investors are bound to lose 90%-100% money in DHFL. In case of relisting by any chance by court order, they may get some amount back.”

In November 2019, the Reserve Bank of India (RBI) had referred DHFL — then the third-largest pure-play mortgage lender — for resolution under the IBC. It was the first finance company to be referred to the NCLT by RBI using special powers under Section 227 of the IBC.

Shareholding pattern
As of March 31, retail investors held a 42.19% stake in DHFL, while high net worth investors had an 8.15%. On the other hand, the country’s biggest institutional investor Life Insurance Corporation had a 3.44% stake in the company. Promoters had 39.21% holding in DHFL.