DHFL lenders hire real estate consultants to check its loans

A forensic audit of DHFL’s accounts had earlier found gaps in assessment of projects against which DHFL had advanced funds (Photo: Aniruddha Chowdhury/Mint)

MUMBAI : Lenders to Dewan Housing Finance Ltd (DHFL) have hired three property consultants to examine projects to which the struggling home financier had advanced loans for determining the quality of their cash flows and funding requirements, according to documents reviewed by Mint.

As part of the investigation, CBRE South Asia Pvt. Ltd is examining large project loans, Jones Lang LaSalle Property Consultants is looking at mortgage loans and Cushman and Wakefield is scrutinizing the remaining loans, according to the documents. “The projects are being analysed for cash flows and any additional funding requirement,” said a person with direct knowledge of the matter.

Hiring the consultants to examine the health of the projects that DHFL has lent to and the quality of collateral held by it is part of a series of investigations into the debt-laden financier before the banks approve a debt restructuring proposal to revive DHFL.

Lenders have appointed several firms to conduct due diligence across various areas including accounts, wholesale book valuation, title search of loans and legal diligence, a second person with direct knowledge of the matter said, requesting anonymity.

A forensic audit of DHFL’s accounts had earlier found gaps in assessment of projects against which DHFL had advanced funds.

The debt recast plan submitted by DHFL to lenders in August spares creditors from haircuts on principal payments.

The plan proposes that the debt owed to lenders is converted to 51% equity in the home financier. Lenders are currently assessing the resolution plan.

Lenders have also asked law firm Desai and Diwanji to conduct a legal due diligence of DHFL’s wholesale borrower book, the person cited earlier said on condition of anonymity.

A forensic audit by consultant KPMG, according to a Mint report of 23 October, found that DHFL had lent 14,000 crore to 25 group companies which had an average net profit of only 1 lakh, raising suspicion of diversion of funds.

In addition, around 37% of loans availed by DHFL from banks for onward lending to home buyers were parked in mutual funds. Out of the 27,000 crore that was raised from banks, 10,050 crore was parked in mutual funds.

In addition, loans worth 7,000 crore to 15 companies were not classified as non-performing assets (NPAs) by DHFL despite their repayments being overdue. KPMG also said it has found that these group companies had invested 4,000 crore in purchasing preference shares of some other entities.

As of 6 July, DHFL had a debt of 83,873 crore, of which 38,342 crore is owed to banks.

After a board meeting on Wednesday, the company told stock exchanges that it has taken cognizance of the draft report by KPMG.

“The board has directed the company to review the aforesaid key observations and also present a detailed response to the said key observations before the audit committee. The board also directed the company to share the responses with the lenders,” it said.

DHFL also told exchanges that it was committed to working with its lenders on the resolution process.