Cobrapost exposé accuses three promoters of money laundering through shell companies, DHFL stocks fall more than 6% on Bombay Stock Exchange.
New Delhi: The promoters of Dewan Housing Finance Corporation Limited (DHFL), one of India’s top five housing finance companies, siphoned off Rs 31,000 crore of public funds by sanctioning loans to shell companies linked to them, Cobrapost has alleged.
These secured and unsecured loans were, in turn, used to buy shares and other private assets in India, UK, Dubai, Sri Lanka and Mauritius, the investigation claimed.
As a result of the exposé, DHFL’s shares Tuesday fell more than 6 per cent to end the day at Rs 173 on the Bombay Stock Exchange. Since the allegations were made just before the end of trade, it is expected that the stock may fall further Wednesday.
The promoters named in the exposé are Kapil Wadhawan, Aruna Wadhawan and Dheeraj Wadhawan. Cobrapost alleged that Kapil and Dheeraj misused their position as members of the credit committee that approves loans worth more than Rs 200 crore to companies.
Several calls and a message to Kapil Wadhawan remained unanswered. However, later in the day, DHFL issued a statement, denying all charges.
“DHFL has a strong corporate governance regime and has received AAA credit rating from leading credit agencies. The company is fully tax compliant and its books are audited by global auditors,” it insisted.
It added that all loans are disbursed by the company in the normal course of business, in accordance with industry best practices and in compliance with all regulatory norms.
“DHFL and its group companies are confident of meeting any scrutiny on any aspect of our operations and will pursue these frivolous allegations to its logical conclusion,” it stated.
Cobrapost also alleged that the DHFL promoters made huge donations to the ruling Bharatiya Janata Party, in contravention of existing laws.
ThePrint has reached BJP spokespersons for the party’s comment. This report will be updated when they respond.
Also read: The controversial past of the man behind the Cobrapost expose
Alleged modus operandi
Cobrapost alleged the promoters created many shell companies with a nominal capital of Rs 1 lakh. Many of these companies have similar addresses and the same initial directors. The Wadhawans allegedly set up 45 companies to siphon off funds, of which 34 have no business or income reported.
DHFL then went on to disburse huge loans to these shell companies, mostly without any security or collateral. Further, the loans were allegedly disbursed in a single tranche rather than based on project completion.
The exposé also stated that the promoters indulged in insider trading and created offshore assets of approximately Rs 4,000 crore. Further, using the loan money, the promoters also purchased the Wayamba United cricket team in the now-defunct Sri Lanka Premier League.
The second big hit
DHFL — which bore the brunt of the liquidity crisis triggered by the IL&FS default — is among the few deposit-taking housing finance companies in the country, giving it access to its own source of funds, unlike other companies who have to borrow from banks for onward lending.
Its stock was one of the worst hit in the aftermath of the IL&FS crisis, after a mutual fund sold one of DHFL’s debt papers at a yield much higher than the existing price, triggering speculation about the financial situation of the company.
This article has been updated with the statement issued by DHFL Tuesday evening.
In stead of Kite Flying, please quote names of the Bsnks whose loan to DHFL have gone bad? Most of the Banks’ loans are portfolio purchase and not direct loan to DHFL. Can you please give break up ?
Their only crime appears to be Donation to BJP.
An elementary precaution would be to impound the passports of the family members, send look out notices to all airports.
When it comes to the Indian economy, no one is minding the store. After all the currency came back to the banking system post demonetisation, they were flush with funds, with few genuine takers for credit in a sluggish economy. That is when the NBFCs dipped their beaks into a swollen river of easy credit. In turn, they lent out a lot of money, including consumer credit. DHFL’s promoter family may well have siphoned off a lot of money, acquired personal assets, in India and more likely abroad. However, a lot of their loans will turn sour, ultimately adding to the bad loans of the PSBs who lent to them. 2. Compare two contrasting narratives. What is happening in this case is one part of the real economy. And then there is the fairy tale. A world of Aadhaar, PAN, shutting down of shell companies, unrelenting efforts to crack down on corruption, black money and capital flight. Voters will make their judgment calls, for the state of the economy affects each household.