DHFL reports net profit in Q3, but auditors wary

DHFL reports net profit in Q3, but auditors wary thumbnail
For the nine months to December 2019, DHFL reported a loss of ₹5,977 crore, as against a profit of ₹1,187 crore in the year earlier. 2 min read . Updated: 20 Feb 2020, 11:36 PM IST Shayan Ghosh Stressed lender posts ₹934 cr stand-alone net profit, primarily on a tax adjustmentDuring the Dec quarter, DHFL…

For the nine months to December 2019, DHFL reported a loss of ₹5,977 crore, as against a profit of ₹1,187 crore in the year earlier.

2 min read

. Updated: 20 Feb 2020, 11:36 PM IST

Shayan Ghosh

Stressed lender posts ₹934 cr stand-alone net profit, primarily on a tax adjustmentDuring the Dec quarter, DHFL gains from a deferred tax adjustment of ₹1,102 crore

MUMBAI :
Stressed mortgage lender Dewan Housing Finance Corp. Ltd (DHFL) on Thursday reported a surprise standalone profit of ₹934 crore for the December quarter, thanks primarily to a one-time tax adjustment.

The company, now in bankruptcy court, had posted a net profit of ₹314 crore in the same period last year.
During the quarter, DHFL benefitted from a deferred tax adjustment of ₹1,102 crore, without which it would have posted a loss of ₹168 crore.
On 20 November 2019, the central bank had superseded DHFL’s board and, on 3 December, referred it to the National Company Law Tribunal (NCLT). RBI named R. Subramaniakumar as administrator for the company, assisted by a team of consultants and legal experts.
As it stopped disbursing new loans amid a liquidity crunch, DHFL’s interest income declined 28% year-on-year to ₹2,384 crore, while income from fees and commission crashed to ₹43 lakh from ₹41 crore a year ago. DHFL’s total revenues fell 27% y-o-y to ₹2,432 crore.
For the nine months to December 2019, it reported a loss of ₹5,977 crore, as against a profit of ₹1,187 crore in the year earlier.
The company said the wholesale loan portfolio of ₹48,347 crore has been “fair valued” as on 31 December 2019 at ₹42,361 crore and the resulting fair value loss of ₹5,986 crore has been accounted for. Of this, the fair value loss ₹4,852 crore has been accounted for up to 30 September and balance has been charged to the profit and loss statement in Q3 FY20.
In the notes accompanying the financial results, Dinesh Kumar Bachchas, partner at audit firm K K Mankeshwar and Co. said there exists a mismatch of ₹3,018 crore in loans, yet to be identified and mapped to individual parties and the underlying securities available.
“The provisions have been made in the financial results for the same due to non-availability of internal confirmations. These provisions may undergo changes upon the actual realization on case to case basis,” said Bachchas.
Bachchas also said the company has not made any provisions since its admission to NCLT towards interest on its borrowings on the basis of an opinion from legal advisers. This interest (including penal interest) not provided for amounts to ₹527 crore.
The profit for the quarter and the losses for nine months ended as on 31 December 2019 are accordingly overstated and understated, respectively to that extent, the auditor said.
DHFL’s assets under management stood at ₹1.19 trillion, of which ₹63,690 crore is in retail loans and the rest in wholesale.
The total amount of creditor claims verified by the administrator, so far, was ₹86,035 crore, of which ₹5,015 crore was towards 60,717 fixed deposit holders.

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