Dewan Housing Finance Corporation- NCD Issue - August 2016

#22
aaj bhi listing nahi hua...abhi lagta hai monday ko hoga...DHFL is using peoples money for couple of days...though they have given refund..for ppl subscribing for listing gains lose interest on the days between allotment/refund and listing....

....SEBI should fill this gap/loophole..
 
#24
Most series of this (heavily advertised!! ) issue are being quoted below issue price in secondary market...so technically speaking people who applied when the issue was launched have lost money...!!

Moral: One can lose money even in Fixed Income even of "AAA" rated issues.
 

Atiker

Active member
#25
Most series of this (heavily advertised!! ) issue are being quoted below issue price in secondary market...so technically speaking people who applied when the issue was launched have lost money...!!

Moral: One can lose money even in Fixed Income even of "AAA" rated issues.
It's a mtm loss.

If all is honky dory the regular interest will continue till maturity.
 
#26
Interest will remain the same all throughout the period..that's fine....

But, anyone who applied during the issue launch has lost money...

For e,g : Case 1 :IPO time ,,,face value is 1000/- date 1st August 2016.

Case 2: Now the same ncd bought from secondary market is available at Rs 980/-

For Case 2 the benefit is :

a) Interest amt from August 1 to sept 20th on the application money..say 4-6% pa (min for saving accounts).,(if this money is rolled over many times in intra day/f&o trading or stock buying the gains can be more)

b) Base cost saving of Rs 20 per ncd

c) For annual interest payout of ncd he will get the same interest without investing for period of 2 months.

For 1 lakh amt
a=1000
b=100*20=2000
that's 3000/-

If the price reduces more (if some more NCD issue comes ) then buying NCD during issue time is loss making..!!
 

Alchemist

Administrator
Staff member
#28
What happened with DHFL today ?

Are the "secured" NCDs safe ?

Or better to cut losses and get out.
The NCDs look safe for now.

Unless you have a big sum invested, you can stay invested.

Yesterday's panic was triggered by DSP selling DHFL's paper at a discount because DSP is facing problems with IL&FS debt.

Right now, there are hardly any buyers for IL&FS's debt and thus funds have no choice but to sell other bonds/CP/debentures where there is liquidity.

IL&FS is a big player in the CP market.

IL&FS’s outstanding debentures and commercial paper accounted for 1 percent and 2 percent, respectively, of India’s domestic corporate debt market as of March 31, according to Moody’s Investor Services.
https://www.bloomberg.com/news/arti...dow-bank-is-major-player-in-local-debt-market

NBFCs will find it a bit difficult to raise money for a few weeks. Interest rates will shoot up. The faster the debt market stabilizes the better for everyone.
 

Alchemist

Administrator
Staff member
#29
DSP's view:

But how much quantity did you sell in the Dewan Housing and what is the balance that you still have in your funds?

It was sold on Thursday. I do not have the exact figure but it is around Rs 300 crore. Now, Rs 300 crore out of total Rs 96,000 crore of our funds is a very small amount and we have nothing against Dewan Housing. We have no information on it or any other company which has gone down on Friday.
Do you think today’s market reaction was slightly freaky and silly? One news is that a small paper was sold at 11%. That maybe one desperate selling but that really spooked the entire NBFC space?

See what happened is not a mistake. It is abbreviation. Some other mutual fund has sold at 10.75% and we sold at 11%. If the market spreads are calling 10.5-11% and one of my trader or fund manager sold at 11%, I cannot blame him. He has to use his discretion.
https://economictimes.indiatimes.co...-investment-managers/articleshow/65909059.cms
 

Alchemist

Administrator
Staff member
#30
NBFCs, for the last few years. have eaten into lending businesses of banks.

The tide is turning now.

As interest rates rise, NBFCs will have to borrow at higher and higher rates.

To maintain their margins, NBFCs will have to increase their lending rates too.

However, many banks with strong CASA base, won't be under the same kind of pressure to increase their lending rates.

This will force NBFCs to either keep their lending rates lower or lend to low quality borrowers. The end result will be that their margins will get squeezed.

Asset-liability mismatches are also expected to create problems for NBFCs.
 

Alchemist

Administrator
Staff member
#32
So why did DHFL's stock crash so much & why hasn't it gone back up even after it became known that they didn't default or anything?
NBFCs have a asset-liability maturity mismatch issue and that is one major reason why NBFC stocks have sold-off in last couple of weeks.

The issue is more serious for housing finance companies as most of their assets (loans given) are long-term in nature.

If NBFCs start replacing their short-term borrowings with longer duration borrowings, their interest costs will rise sharply and the profits will dip.

I feel DHFL's stock has corrected more because there were more speculative positions in this stock compared other NBFC stocks.

Also, other NBFCs started their corrective phases much earlier than DHFL and thus have fallen less in recent days. Till mid-September, DHFL was just 10% below its all time.
 

Alchemist

Administrator
Staff member
#33
The panic is spreading from money market to banking.

Banks are sitting on huge piles of cash but are unwilling to lend.

This is compounding problems for NBFCs.

"The rollover is a lesser of an issue. It is more like banks are not willing to let withdrawal of money from their system even for sanctioned line. I think that is a bigger worry than CPs not being rolled over because after all CPs was just about 8-9 percent of my total borrowing. It is more to do with the banks where we have an issue presently," said Narasimhan.
https://www.cnbctv18.com/videos/eco...crease-in-cost-of-funds-for-nbfcs-1031821.htm
 

Alchemist

Administrator
Staff member
#34
If the debt market freezes for NBFCs, India will face its own Lehman-like crisis.

US saved itself by "printing" a lot of money. India doesn't not have that option.

The US Dollar is a currency that is accepted and hoarded all over the world.

Printing money would be a disaster for the Indian Rupee as well as the Indian Economy.

I hope the government and RBI wake up now.
 
#36
SBI has a good plan to get NBFCs out of the mess:

SBI to purchase loan assets worth up to Rs 45,000 crore from NBFCs

This way SBI will be able to create good long-term assets without much effort and NBFCs will be able to generate cash to meet their immediate liabilities.

DHFL may already have sold some loans to SBI:

DHFL likely sold Rs 5,000-7,000 crore loans to SBI
Don't NBFCs lend to people who may not have the best credit rating & cannot get a loan from regular banks and hence they go to NBFCs?

So SBI is buying loans of people who they don't lend to usually?
 

Alchemist

Administrator
Staff member
#37
Don't NBFCs lend to people who may not have the best credit rating & cannot get a loan from regular banks and hence they go to NBFCs?

So SBI is buying loans of people who they don't lend to usually?
I don't think we can make such a general statement.

Most of the HFCs have excellent asset quality and are as competitive as the banks.

HFCs have borrowed short-term and lent long-term. They don't have any NPA issues but they cannot recall loans to meet short-term liabilities.

The problem now is banks (mostly PSU) are sitting on lot of money but are not willing to put the money into anything other than government bonds.

I feel it is both a great opportunity and responsibility of the cash-rich banks to buy out good assets for HFCs and provide them liquidity.

HFCs have learnt a good lesson and are unlikely to repeat the same mistake again (in the next few years at least).

If one or more HFCs default on debt repayments because of liquidity issues, the entire Indian debt market will be in turmoil and a lot of collateral damage will happen to the economy.
 
#38
HFCs have learnt a good lesson and are unlikely to repeat the same mistake again (in the next few years at least).

Me & you have argued this before (really long back) in the context of the American Bailout :)

Only way someone learns a lesson is he pays for his mistakes. In the absence of that, there will be no learning. Only learning which will happen is that PSUs like LIC & SBI exist for the main purpose of bailing out private companies. They are also bailing out IL&FS whose people got rich by looting IL&FS.

If one or more HFCs default on debt repayments because of liquidity issues, the entire Indian debt market will be in turmoil and a lot of collateral damage will happen to the economy.

So be it.
 

Atiker

Active member
#39
WPI ..is younger brother of CPI...what the big thing abt it...model copied by DHFL...

People are so naive...
When Govt can tinker with GDP and growth rates...whats it abt CPI and WPI...
.....

Already they are doing it on average (to be on safe side)....lololol
See below...

Calculation of Reference CPI for the 1st year based on the monthly CPI reference rates for the
preceding 12 months as provided in the table below:
CPI (General)- (Rural + Urban) Combined
Sr. No Months CPI Rate
1 May 2016 (Final) 5.76%
2 April 2016 (Final) 5.47%
3 March 2016 (Final) 4.83%
4 February 2016 (Final) 5.26%
5 January 2016 (Final) 5.69%
6 December 2015 (Final) 5.61%
7 November 2015 (Final) 5.41%
8 October 2015 (Final) 5.00%
9 September 2015 (Final) 4.41%
10 August 2015 (Final) 3.74%
11 July 2015 (Final) 3.69%
12 June 2015 (Final) 5.40%
Average 5.02
Ahh, post the below quote, chances of constructive discussion are low.
:ciao:

People are so naive...
 

Alchemist

Administrator
Staff member
#40
To me, it is now certain that DHFL is going to collapse.

Promoters have diverted a large chunk of the company's money to questionable entities.

Dewan Housing FinanceNSE -4.90 % Corp Ltd promoter Dheeraj Wadhawan was directly named in a case of alleged terror financing against late gangster Iqbal Memon, alias Iqbal Mirchi, for the first time on Tuesday, when a close aide of Mirchi — Humayun Suleman Merchant — told a special court that he had received Rs 5 crore from Wadhawan for facilitating a deal with Sunblink Real Estate, the company at the centre of the probe.
https://economictimes.indiatimes.co...-to-dheeraj-wadhawan/articleshow/71714289.cms

For some unknown reasons, RBI and SEBI have done little to get into the details of what really happened at DHFL.

The question then is: Why hasn’t the DHFL board been sacked? Why do SEBI and Reserve Bank of India (RBI) allow the Wadhwan family to remain in management, even when actions of the Enforcement Directorate (ED) suggest underworld links and lending to companies belonging to Iqbal Mirchi, an associate of gangster Dawood Ibrahim?
https://www.moneylife.in/article/dh...re-hole-why-is-the-report-a-secret/58447.html

RHFL is a similar case where RBI, SEBI and the bankers have hardly shown any interest in unearthing the money trail.
 
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