Troubled mortgage lender Dewan Housing Finance Limited (DHFL), which is under insolvency proceedings, has reported a pre-tax loss of Rs 167.8 crore in Q3FY20 compared to a pre-tax profit of Rs 471.5 crore in the year ago period. In the September quarter, the company had reported a pre-tax loss of Rs 7,584.43 crore.
However, the company has reported a net profit of Rs 934.35 crore in the quarter ending December 2019 (Q3FY20) compared to a net profit of Rs 313.6 crore in the year ago period on account of a tax adjustment of Rs 1,973 crore for the first nine months of FY20.
The firm, however, said that it has not provided for interest of Rs 527.62 crore on borrowings since the insolvency commencement date, based on the opinion from legal advisors.
“Under the insolvency and bankruptcy code (IBC), the treatment of creditors under the resolution plan is as per debts due as on the insolvency commencement date and therefore, no interest is accrued and payable after this date. If the interest was accrued on borrowings, the profit for the quarter and nine months would have been lower by Rs 392.39 crore,” the company said. .
The interest income of the lender declined 28 per cent to Rs 2,384.12 crore in Q3FY20 compared to Rs 3,314.49 crore in Q3FY19. Similarly, the total income of the company dropped 26.8 per cent to Rs 2,436.90 in Q3FY20 compared to Rs 3,331.93 crore in the year ago period.
The company has said that it wholesale loan portfolio aggregating to Rs 48,347.57 crore has been "fair valued" as at 31 December 2019 based on internal valuations at Rs 42,361.51 crore, thereby resulting in a fair value loss aggregating tp Rs 5,986.06 crore.
Of the total fair value loss of Rs 5,986 crore, a sum of Rs 4,852.06 crore has been accounted up to 30 September 2019 and balance loss of Rs 1,133.99 crore has been charged to the statement of profit and loss for the quarter ended 31stDecember 2019.
“The recoverability or otherwise of these loans is yet to be ascertained and hence the appropriate provision has been made as a prudent measure”, said the company in an exchange filing.
The auditors of the company have pointed out that with the company incurring losses to the tune of Rs 6,089.12 crore during the nine months ended December 2019, the net worth of the company has eroded substantially.
The auditors have also expressed that there exists a mis-match to the extent of Rs. 3,018 crores that is yet to identified and mapped to individual parties and the underlying securities available, if any, out of the available surplus security covers.
Also, investigations relating to financial irregularities are ongoing. The Serious Fraud Investigations Office (SFIO) and enforcement directorate (ED) are investigating the matters.
“The present management believes that adjustments of the impact of these matters on the financial results including with regard to any adjustments to the carrying values of the loans, restatement of receivables/payables, related parties and other disclosures and compliances, as applicable can be made only when the same become known in definitive terms following the conclusion of the said investigations together with the outcome of the ongoing transactions audits performed by independent .
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