School Of Finance And Commerce
PRESENTED BY-:
1. ASHANK KUMAR GUPTA (21GSFC1010071)
2. PRIYANSHU DUBEY (21GSFC1010063)
3. PRATAP CHOUDHARY
4. VARUN CHOUDHARY (21GSFC1010006)
5. HARSH NAGAR (21GSFC1010014)
Program: B.Com (Hons.)
Semester: Ist
Coursecode: C010101T
Coursename: Business Organization
"I want every Indian to have
a home of his own"
BY:-Late Shri Rajesh
Kumar Wadhawan
Founder Chairman
(1949-2000)
Our vision is to transform the lives of Indian households by enabling access to home ownership
Dewan Housing Finance Corporation Ltd. (DHFL)
Piramal Capital and Housing Finance Limited
(earlier Dewan Housing Finance Corporation Ltd.
(DHFL)) is a non-deposit taking housing finance
company, headquartered in Mumbai with branches in
major cities across India.
What is the DHFL Scam?
In the recent past, the economy of India has been hit by one corporate marauder after
another. It is surprising how the people who are calling the shots in an economy on any
given day suddenly disappear from the country and turn rogue. However, this same
story has played out in India over and over again. Billionaire entrepreneurs like Nirav
Modi, Mehul Choksi, Vijay Mallya and Lalit Modi have all defrauded the people of
India. These are just a few hi-flying names. There are many promoters of small and
mid-cap companies that are known to be involved in scams.
The Indian investors, as well as the general public, was hoping that the scams had ended
and now business will continue as usual. However, it seems like they are in for a rude
shock. A little-known media company called “Cobrapost” has made some surprising
revelations against Dewan Housing Finance Ltd (DHFL) which is amongst the
renowned Non-Banking Financial Corporation (NBFCs) in the country.
DHFL has alleged that there is no substance behind these allegations and that Cobrapost
seems to have malicious intent. However, the articles being published by Cobrapost
seem to be citing exact evidence. This is the reason that these allegations cannot be
simply brushed aside even though they are not really coming from a credible source.
The Allegations against DHFL
DHFL is a non-banking financial company. This means that all
banks are supposed to lend a certain portion of their funds to
companies like DHFL. This is the reason that money deposited by
small depositors in bank accounts of State Bank of India, Bank of
Baroda, etc. ends up in the hands of NBFC’s like DHFL. As per
recent data, the Indian banking sector had invested at least $3 billion
in DHFL. Along with this amount, DHFL has also borrowed heavily
by issuing bonds and other debt instruments. These instruments are
also largely held by the retail investor. Hence, if the allegations
against DHFL are true, it could signify massive losses for the retail
investor.
The alleged way in which DHFL was able to siphon off money which was provided to it
by public sector banks for the purpose of lending to others.
1. Loans to Shell Companies: Cobrapost has alleged that DHFL has made dubious loans to shell
companies. Shell companies are pass-through entities. This means that they are not the final
destination of the money. Instead, they are just a stop on the complex route which is generally
created to confuse tax and other regulatory authorities. Cobrapost claims to have identified 34 such
corporations. These corporations have indirect links to the promoters of the DHFL group, and
reports indicate that DHFL has lent out close to $1.5 billion in unsecured loans to these companies.
The problem is that DHFL has lent money to these companies without taking inadequate security.
In the Indian banking industry, loans given to companies are secured via taking assets as collateral.
Also, promoters are supposed to give personal guarantees to further ensure the safety of these
loans. DHFL has not followed these processes. As a result, public money has been lent out to
people without collateral. Since there is no collateral, this money cannot be easily recovered. Also,
the promoters do not have any personal assets. Hence, they cannot be prosecuted either. Cobrapost
has alleged that a lot of these loans given to shell companies have now become non-performing
assets (NPA’s)
The alleged way in which DHFL was able to siphon off money which was provided to
it by public sector banks for the purpose of lending to others.
2. Round Tripping: Loaning public money without following the proper process is just a part of
the problem. The bigger problem is that the money which was loaned out has later flown back into
entities which were owned by the DHFL group. In financial parlance, this is known as roundtripping. Hence, in effect, DHFL gave an unsecured loan to its promoters. The shell companies and
other transactions were just paraphernalia which was used to cover up these blatantly illegal
transactions. If Cobrapost is able to prove round-tripping, the problems of DHFL will be magnified.
Without round-tripping DHFL is just guilty of negligence. With round-tripping, DHFL has a
malafide intent and therefore becomes guilty of fraud.
3. Purchasing Assets: Lastly, the money acquired by round tripping was used by DHFL in order to
purchase assets in other countries. It is a known fact that DHFL has invested money in startup
companies in the United Kingdom. It is also known that DHFL has purchased a cricket team in the
Sri Lankan Premier League. It is alleged that the proceeds of these loans were used to make these
transactions. Cobrapost also alleges that other personal assets have also been created in countries
like Mauritius and Dubai by the owners of DHFL. Once again, this seems like a scam because all
the assets have been created in other jurisdictions. Hence the Indian government or the tax authority
will not be able to acquire the same.
Current issues and Probes against DHFL
In 2019, DHFL stopped payment of bonds and defaulted on its loan obligations. This caused its stock to fall over 97% and a government
intervention in the company.
In August 2019, as efforts to draft a resolution plan by restructuring DHFL debt into equity, a few of the DHFL bond holders moved to the debt
recovery tribunal, which could impact the resolution process. The company meanwhile offered to repay all investors in full with due process of
inter-creditor-agreement.
In October 2019, the Enforcement Directorate conducted raids at several places of DHFL offices and promoter residences and found links of
money laundering activity in loans given to firms closely linked to the promoters of the company. Additionally the trail of the loan given by
DHFL to Sunblink real estate in 2010 lead to gangster Iqbal Mirchi, an accomplice of the organized crime mastermind Dawood Ibrahim.
On 20 November 2019, under Section 45-IE (I) of the Reserve Bank of India Act, 1934, the Indian central bank removed the board of directors
of Dewan Housing Finance Corporation Limited (DHFL). The reasons cited by the banking regulator for the dismissal of the DHFL board of
directors were: inadequate governance and the various defaults on its payment obligations.
On 27 January 2020, the promoter of DHFL, Kapil Wadhawan was arrested under the Prevention of Money Laundering Act (PMLA). The arrest
was connected to his firm's alleged involvement in providing loans to the organized criminal enterprise of Dawood Ibrahim. On 22 February
2020, the PMLA court granted bail to Kapil Wadhwan. The Bombay high court upheld the bail decision by PMLA court, rejecting
Indian Enforcement Directorate requests to stay the bail application.
The ED has linked Yes Bank for various fraud and transactions amounting to 3700 crores as debentures in DHFL. The central bank appointed
administrator at Dewan Housing Finance (DHFL) has ordered a transaction audit at the non-bank lender after allegations of money laundering
surfaced in the aftermath of the regulatory action on Yes Bank.
On 24 March 2021, CBI filed a new suit against DHFL and its promoters Kapil Wadhawan and Dheeraj Wadhawan, wherein the later were
accused of syphoning off the welfare subsidy fund of Pradhan Mantri Awas Yojana by creating 260,000 fake home loan accounts under the
same scheme under the guise of a non-existent branch. The suit says, fake loans were granted worth ₹14,046 crore of which ₹11,755.79 crore
were routed to shell corporations and citing these loans, subsidy amounts were claimed under Pradhan Mantri Awas Yojana.
SUMMARY
DHFL was established and incorporated by Rajesh Kumar Wadhawan on 11 April 1984. The name of the company was changed
to Dewan Housing Development Finance Ltd. and later to Dewan Housing Finance Corporation.
In 2010, DHFL acquired Deutsche Postbank Home Finance unit for ₹1079 crores. On 18 December 2013, DHFL acquired 74%
stake DHFL Pramerica Life Insurance Company Ltd.
On 29 January 2019, Cobrapost, an Indian investigative journalist group, published an exposé of DHFL for using various shell
corporations to siphon more than ₹ 31,000 crores of public money for the personal gains of the DHFL's primary stakeholders:
Kapil Wadhawan, Aruna Wadhawan and Dheeraj Wadhawan. In the same article, Cobrapost also raised allegations of political
donations worth crores of rupees, in violation of Section 182 of Companies Act, 2013 for political donations. DHFL filed a
response with the Bombay Stock Exchange saying the allegations raised by Cobrapost were untrue. DHFL, also rebutted these
allegations in a hosted investors / analysts conference and clarified that the ₹ 31,000 crore loans mentioned in the allegation
consist of its project loan portfolio. Also the company tried to clarify that the advances commented by Cobrapost should be ₹
21,000 Crores and not ₹ 31,000 crores. Following the Cobrapost allegations, Indian credit rating agencies reaffirmed their high
safety rating for the financial instruments issued by DHFL.
Even after the emergence of serious allegations of misconduct against its business, the Indian credit rating agencies continued to
issue high safety ratings for the DHFL financial products, but, on 6 June 2019, DHFL defaulted on its debt repayment, resulting
in a debt rating downgrade, immediately wiping out 16% of the value from its stock price. At the time, the fall in DHFL stock
price was an all year low. This rapid decline in stock price resulted in a loss of investor confidence.
On 20 November 2019, the Reserve Bank of India removed the board of directors of the company citing corporate governance
failure and the company's defaulted payment obligations.
THANK YOU.............
FINISH................