Hold your horses if you are planning to invest in the stocks of Dewan Housing Finance Corporation Ltd (DHFL) as they are set to be delisted, according to analysts, after Piramal Capital and Housing Finance Ltd acquired it. Warning that the DHFL stock may be written down to zero soon, analysts have even suggested investors who currently hold the shares to exit and book whatever their profit or loss.
India’s largest brokerage firm Zerodha also warned investors that the value of DHFL shares may be written down to zero. “Equity shares of DHFL are likely to be extinguished as part of acquisition of the company due to NCLT’s insolvency process. There can be a significant risk of you losing your entire investment by trading in this stock,” the firm tweeted. The DHFL shares were locked in a 10% upper circuit on Tuesday, but this was attributed to lack of sellers.
The Piramal Group’s ₹37,250-crore bid for the firm was followed by an order from the Mumbai bench of the National Company Law Tribunal (NCLT) which approved the group’s insolvency resolution plan with certain conditions. “Resolution applicant’s amount to remain the same. Only inter-se allocation to be reconsidered,” the Mumbai bench of NCLT ruled.
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In its order, the bench has also asked DHFL’s committee of creditors (CoC) to consider giving more money to small fixed deposit holders.
The Piramal Group’s offer includes ₹12,700 crore in upfront cash, ₹3,000 crore in interest income on DHFL’s books and ₹19,550 crore worth of non-convertible debentures to be repaid over 10 years. The group is keen on the retail portfolio but has bid for both the retail and wholesale business of DHFL.
In January, lenders led by Union Bank of India favoured the Piramal Group’s bid to take over the debt-ridden mortgage firm as part of the resolution process under the Insolvency and Bankruptcy Code (IBC). After the NCLT’s order, the group expressed their satisfaction. “We are pleased with the judgment today by the NCLT for approving our resolution plan for DHFL. This follows the endorsement of 94% of lenders, and the subsequent approvals from RBI and Competition Commission of India, and reiterates the strength and quality of our bid,” they said in a statement on Monday.