The ability of troubled Dewan Housing Finance Corporation (DHFL) to remain a ‘going concern’ will depend on the resolution process, its auditor has noted. It has also reported a mismatch of ₹3,018 crore and said the recoverability of inter-corporate deposits of over ₹3,786.24 crore is “yet to be ascertained”.

These comments form part of the auditor’s note of the housing finance company’s results for the fourth quarter of FY20.

The auditors – KK Mankeshwar and Co – have also flagged a fair value loss of ₹18,853.30 crore in the wholesale loan portfolio. “Out of this fair value, loss aggregating to ₹5,986.06 crore has been accounted up to December 31, 2019, and balance loss of ₹12,867.24 crore has been charged to the Statement of Profit and Loss for the quarter ended March 31, 2020,” it further said.

The board of directors of DHFL was superseded by the Reserve Bank of India in November last year, and the company is currently going through corporate insolvency resolution under the IBC.

“…there exists mis-match amounting to ₹3,01,8.68 crore that is yet to be identified and mapped to individual parties and the underlying securities available, if any, out of the available surplus security covers, and for which the present management has initiated transaction audit which is still in process,” the auditors further noted.

DHFL reported a loss of ₹13,575.15 crore (including comprehensive Income) in FY20, which has eroded its net worth substantially.

“However these standalone Ffinancial results are drawn on going concern basis under the ongoing Corporate Insolvency Resolution Process (CIRP), the outcome of which cannot be presently ascertained, including matters also listed herein. Therefore, the company’s ability to remain as a going concern depends upon outcome of the ongoing CIRP,” it said.

It has also noted that as part of the resolution process, a transaction audit to determine avoidable transactions under various sections of the IBC and an exercise to determine the liquidation value and fair valuation of the company is underway.

While it could not be concluded due to the lockdown restrictions, the outcome of the audit would provide additional facts and information about the past data of the company, it noted.

Due to lockdown restrictions, the Committee of Creditors of DHFL has already decided to extend the deadline for submission of bids to July 24. It had received expressions of interest from 24 bidders, of which, about 22 are understood to have been shortlisted.

Published on June 24, 2020

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