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Retail investor shadow over DHFL resolution

Bankers estimate that DHFL raised about Rs 7,000-8,000 crore from retail investors.

, ET Bureau|
Sep 04, 2019, 08.34 AM IST
Secured instruments are through bonds sold via two series of public issuances.
Mumbai: Despite the Securities and Exchange Board of India (Sebi) allowing mutual funds to sign the inter-creditor agreement (ICA) with banks, savings by retail investors in the beleaguered Dewan Housing Finance (DHFL) could delay resolution as bankers debate how to treat these creditors some of whom are unsecured.

Bankers estimate that DHFL raised about Rs 7,000-8,000 crore from retail investors including non-convertible debentures (NCDs) and corporate fixed deposits. These NCDs are mostly secured but corporate fixed deposits have no security. Bankers are divided on how to treat these unsecured creditors of the company. “Many small investors have invested in fixed deposits of DHFL. These deposits are now at risk. Strictly speaking, these investors should be ready to take a haircut in line with the resolution plan approved but we are yet to decide on what to do with them,” said a senior banker Retail investors and provident funds together own 15 per cent of DHFL’s total Rs 90,000 crore debt which comes to about Rs 13,500 crore. To be sure, some of these bonds and fixed deposits may have been surrendered prematurely but that information could not be independently ascertained. Bankers want as many creditors to sign the ICA to ensure there is no opposition or litigation once the resolution plan is finalised. A large number of retail investors could impact this plan. “We have to put our mind on how to manage retail investors. There are lakhs of retail investors and banks are thinking how to protect them,” said another banker involved in the process.

Meanwhile, retail investors are in discussion with the debenture trustee, Catalyst Trusteeship (CTL). They are sending consent letters authorising CTL to act on their behalf in matters related to ICA. “Some investors have even approached Reserve Bank of India, Sebi and the government seeking their intervention to protect their money in DHFL,” said an executive involved in the resolution process.

Secured instruments are through bonds sold via two series of public issuances. The retail category formed 30 per cent (of Rs 25,000 crore collectively) at the time of the issuances. But many retail investors, including wealthy individuals, had purchased additional quantum from the secondary market a few years ago.

“Retail investors are now holding patient as institutional lenders are busy finalising the resolution details,” Vikram Dalal, managing director at Synergee Capital, an advisory firm.

“They are now following the basics. Just make their presence felt in the large scheme of things. All such retail bonds are secured as the borrower paid interest/repayments regularly until a few months ago. We do hope retail investors’ interest will be taken duly care by all concerned parties,” he said.
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