The liquidity crunch resumes crushing shares of non-banking financial companies. Dewan Housing Finance Corporation (DHFL) under scanned after KPMG audit reports funds misuse. Similarly, India-bulls Housing Finance, Piramal Enterprises, and Edelweiss Financial Services are few NBFCs that have taken a hit. As an outcome liquidity crunch, DHFL reclassified loans of Rs 34,800 crore and concurred a loss of Rs 3190 crore.
KPMG audit
Addressing the concern, it is necessary to conduct a stress test for NBFC companies to refurbish investor confidence. Thereby, Union Bank of India appointed KPMG to conduct a review of DHFL accounts for the period between April 2015 and March 2019. The analysis noted an alleged misuse of funds, the mortgage lender has disbursed loans to interconnected companies amounting to Rs 19,753 crore. Furthermore, the repayment of such 28 entities worth Rs 12,541 crore is not traceable.
The report depicted Rs 97,977 crore loaned by the company, out of which Rs 24,594 crore distributed to 65 entities that possessed negligible activity and insufficient loan documentation. Moreover, the forensic audit revealed a profit of Rs 1 lakh on lending Rs 14,000 crore.
Further loss faced by DHFL as it enters Enforcement Directorate Scanner
The company suffered the most due to liquidity crunch in the NBFC sector. DHFL’s stock price fell 4.9%, a 52- week low of Rs 18.45 when bourses demanded a clear description of the special review. DHFL stock locked at 5% circuit at Rs 18.45 on BSE, against the previous close of Rs 19.40. The 5% lower circuit which has continued for three sessions, as a result, 14-15% value has dropped.
Currently, the DHFL is alleged to have connections with Global terrorist Dawood Ibrahim’s aide Iqbal Mirchi. Therefore, leading to additional scrutinization of DHFL. NBFC sector crisis concern among the consumers continues.