DHFL stock tanks 10%, hits lower circuit; experts warn sell now, stay away, relisting prospects unclear

Investors buying shares of Dewan Housing Finance Ltd (DHFL) could be latching onto a pipe dream which may never fructify.

Investors buying shares of Dewan Housing Finance Corporation Ltd (DHFL) could be latching onto a pipe dream which may never fructify. The soon-to-be delisted company was in high demand on the stock exchanges on Tuesday, with 44 lakh shares exchanging hand on the BSE and a whopping 1.46 crore on the NSE. Today the stock hit the lower circuit to trade at Rs 20.60 apiece. However, The sharp drop in the shares of the soon-to-be delisted company comes after the stock soared 31% in the first 8 days of this month. 

The heavy trading and delivery volumes in DHFL stock yesterday showed that investors were still buying the stock, some of them hoping to extract some value when the stock re-lists. However, this may be far from the truth with no future promises of re-listing made to shareholders. The value of DHFL shares with existing shareholders has essentially turned to trash, Vishal Wagh, Head of Research, Bonanza Portfolio, told Financial Express Online. “The wise move for investors is to sell their current holdings and invest in more lucrative options,” he added. Vishal Wagh further added that the relisting of DHFL shares remains a distant dream which may or may not be achieved.

“There is uncertainty about the future prospects of DHFL. Investors should take money out before delisting and look for opportunities where there is a certainty,” Vishal Wagh added.  India’s largest stockbroker, Zerodha has introduced a nudge feature on its platform that informs investors of the possibility of invested value being extinguished as part of the acquisition of the company.

On Monday, DHFL said in an exchange filing that Mumbai bench of the National Company Law Tribunal (NCLT) approved Piramal Capital & Housing Finance’s insolvency resolution plan with certain conditions. “As part of the Resolution Plan, the equity shares of the company are proposed to be delisted,” the company said in the BSE filing. Piramal Capital & Housing Finance will shell out Rs 37,250-crore for DHFL. This will translate to 40% recovery for financial creditors on the total claim of Rs 87,082 crore. State Bank of India is a lead creditor to DHFL with admitted claims of Rs 7,170 crore. DHFL had gone bankrupt with more than Rs 90,000 crore in debt to various lenders, including banks, mutual funds and individual investors who kept fixed deposits with the company.

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