RBI Issues Circular On Levying Unfair Interest Charges On Customers

Piramal Group has already received approvals from the Reserve Bank of India and other statutory regulatory bodies for the DHFL takeover

Several millions of retail investors were holding equity shares of Dewan Housing Finance Company (DHFL) when stock exchanges suspended its trading on June 14. Stock price had dropped 10% to Rs 16.70 per share, with shares worth Rs 320 crore still floating in the market.

As on June 14, the total market capitalisation of DHFL stood at Rs 524 crore.

Despite Money9 raising concerns, retail investors kept buying into the stock which was to be thrown out of the trading in a couple of months. Many retail investors played with fire and looked to make a quick buck, while many others were completely clueless about the imminent suspension and invested in the stock without knowing the dangers.

Shares hit upper circuit everyday

A close look at the stock prices over the last few months reveals that DHFL shares were on a roller-coaster, directly under the nose of the market regulator. Stocks hit daily upper circuit several days, forcing Money9 to issue a few warnings in the past to the investors.

Meanwhile some investors are reportedly trying to move the court against National Company Law Tribunal (NCLT) and the market regulator Sebi for letting DHFL delist the shares without informing them adequately.

As per the company filing, the company had a total of 31.3 crore shares as on March 31, 2021.

On June 8, DHFL informed stock exchanges that no value was attributable to the equity shares as per the liquidation value of the company estimated by registered valuers appointed under the regulations governing the Corporate Insolvency Resolution Procedure (CIRP). The resolution plan had proposed to extinguish all the equity shares held by the existing shareholders of the company. This included the right to subscribe to, or be allocated such equity shares, including any employee stock options, pre-emptive subscription rights or convertible instruments held by any person.

On June 9, circulars from the BSE and NSE repeatedly said that no value was attributable to the equity shares of DHFL. Efforts were to inform investors and dissuade them from trading in the shares of the non-banking finance company. But the stocks continued to be traded with fervour on both the exchanges despite the company formally informing the exchanges that the worth of equity shares is zero.

Delisting before merging

As per the plan, the winner of DHFL bidding, Piramal Group is delisting the stock before merging it with its financial services subsidiary, Piramal Capital Housing Finance Ltd (PCHFL). The beleaguered company was being run by an RBI-appointed administrator.

As per the company filing, the promoters – Wadhawan family and Wadhawan Global Capital Ltd – held 12.3 crore shares as on March 31, accounting for 39.21% of the paid-up equity. Retail investors held around 13.24 crore shares, amounting to 42% stake. LIC held 3.44% and the remaining by NRIs, HUFs and corporate bodies.

Early this year, the company was being investigated by the Serious Fraud Investigation Office (SFIO). In the stock exchange filing, DHFL had said that an additional transaction amounting to Rs 1,039.84 crore was identified and reported during the fourth quarter.

For Piramal Group, the DHFL deal is valued at Rs 34,200 crore, comprising an upfront cash component of Rs14.700 crore (including cash on DHFL’s balance sheet) and a deferred component (non-convertible debentures of 10 years to the existing DHFL lenders) of Rs 19,550 crore.