India home lender DHFL shares fall on deposit curbs after downgrade (updated)

CARE Ratings

22/05/2019 09:49

(Adds details)
    By Chandini Monnappa
    BENGALURU, May 22 (Reuters) - Shares of Dewan Housing
Finance Corp Ltd  DWNH.NS  (DHFL), one of India's biggest home
loan lenders, fell as much as 18% on Wednesday, after it stopped
taking new deposits and blocked premature withdrawals following
a credit rating downgrade.
    DHFL is part of India's shadow banking sector which has been
struggling since a series of defaults at lender Infrastructure
Leasing and Financial Service Ltd last year.  urn:newsml:reuters.com:*:nL4N1WH20Z
    Those defaults, which some compared to the Lehman Brothers
crisis of 2008, led to increased regulatory scrutiny and some
non-banking financiers being put on a watch list.  
    "The company has stopped acceptance and renewal of fixed
deposits due to the recent revision in the credit rating," DHFL
said in a stock exchange filing. 
    Shares of the company fell by as much as 18 percent in
morning trade on Wednesday, but recovered some losses to trade
down 9 percent at 117.85 rupees at 0734 GMT.
    The move by DHFL came after ratings agency CARE Ratings
downgraded https://bit.ly/2YEmoSd some of the company's
instruments, including its fixed deposit programme and
non-convertible debentures, to a BBB- rating from A. 
    CARE A equates to a "low" credit risk, while CARE BBB
indicates a "moderate" credit risk.
    The National Housing Bank, which regulates mortgage finance
companies, does not allow firms to raise deposits if they do not
have an investment grade rating.
    "In view of the recent revision in the credit rating of our
fixed deposit programme, acceptance of all fresh deposits, as
well as renewals, has been put on hold with immediate effect,"
said a DHFL notice to distributors on Tuesday seen by Reuters. 
    "Further, to help us re-organise our liability management,
pre-mature withdrawal of deposits has also been put on hold,"
the notice said.
    "However, we will continue to honour all premature deposit
withdrawal requests in any medical or financial emergency," it
added.
    DHFL has been under scrutiny since investigative media
outlet Cobrapost alleged in January that the firm had diverted
loans from state-run lenders to shell companies, including those
linked to its controlling shareholders. DHFL said the
allegations were unfounded and malicious.  urn:newsml:reuters.com:*:nL3N20E27L
    The company has been downgraded at least seven times by
various ratings agencies in the past two months.
    In February, Chief Executive Harshil Mehta resigned amid
allegations of financial mismanagement. The company assigned
Chief Financial officer Santosh Sharma to another role the
following month.  urn:newsml:reuters.com:*:nL3N21515Q  urn:newsml:reuters.com:*:nL3N2084X6
    In the letter, DHFL said it will honour all liability
payments.
    "We ... have demonstrated this by repaying liabilities
amounting to approximately 300 billion rupees ($4.31 billion)
since September 2018, without a single day's delay," it said.
($1 = 69.6675 Indian rupees)

 (Reporting by Chandini Monnappa and Nivedita Bhattacharjee in
Bengaluru; Editing by Rashmi Aich and Darren Schuettler)
 ((chandini.m@thomsonreuters.com; +91-82-6749-7919; Reuters
Messaging: chandini.m.thomsonreuters.com@reuters.net))