Rakesh Jhunjhunwala loses over 13% in this NBFC stock: This is what you should know

It was two days ago, when Housing Development Finance Corp (HDFC) was enjoying its glorious days, as investors boosted the share price by 20%. When DHFL surged by 20%, it was surely ace investor Rakesh Jhunjhunwala who gained most, however, this blockbuster performance of the company was short lived. DHFL has reversed its gains into losses once again, and in fact has plunged by over 13% in just two days time. Investors such reaction comes shocking, and is due to lower in rating outlook for DHFL by Care Ratings on their business. With this, even Jhunjhunwala faced the brunt from DHFL stock. At around 1330 hours, DHFL was trading at Rs 139.80 per piece down by Rs 1.55 or 1.10% on BSE. The stock has clocked an intraday low of Rs 139.10 per piece. Interestingly, on Wednesday, the shares touched over Rs 160 price level, which has now dropped by 13.37% if we look into current low. 

On Thursday, Care Ratings revised its outlook for DHFL. These were: 

• Non-convertible debentures - Outlook now is CARE AA- (Double A Minus) from previous CARE AA+.
• Subordinated Debt - Rating is revised from CARE AA to CARE A+.
• Perpetual Debt - Revised from CARE AA- to CARE A-.
• Non-convertible debentures (public issue) - Revised from CARE AA+ to CARE AA-.
• Non-convertible redeemable cumulative preference shares - Revised from CARE AA to CARE A+.
• Fixed deposits programme - Revised from CARE AA+ to CARE AA-.
• Long term Bank facilities - Revised from CARE AA+ to CARE AA-.

CARE continues to watch credit ratings with developing implication. 

On the re-ratings of CARE, Kapil Wadhawan Chairman and MD of DHFL challenges the outlook by saying, “DHFLreiterates its steadfast commitment to all its financial responsibilities. The Company expresses concern over CARE'sre-rating of DHFL's long term debt instruments and alludes to it as a non-merit based and entirely irrational decision. Over the last few months, DHFL has accelerated the process of realigning the ownership and management to bring in a broad based professional ownership with the aim. of enhancing stakeholders' confidence. The company has engaged with large potential entities to identify and on-board the right strategic partner and are in advanced stages of discussions to achieve the same over the next 90 days." 

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Wadhawan adds, “We would like to reiterate that DHFL continues to honor timely repayments of all its financial obligations as it takes several steps to re-establish normalcy into the business. We are taking all remedial measures to protect the interests of our stakeholders with transparent communication at every stage and we continue to service all our obligations since September 2018.”

“The company continues to be well capitalized and have sufficient retail assets, which it can securitise further to preserve liquidity and service all its financial commitments,” said Wadhawan.

While DHFL does not look happy with CARE’s ratings for them, however, investors have shown their disappointment. Therefore, Jhunjhunwala’s holding in DHFL has also felt the heat. 

The big bull has removed some portion of his money in DHFL during October - December 2018 period. He reduced his holding by 0.73%, taking overall stake down to 2.46% with 7,728,500 equity shares worth Rs 109.5 crore. According to TrendLyne.com data which records real time basis gains and losses of Jhunjhunwala’s portfolio, showed that, the investor’s wealth in DHFL was near Rs 115 crore on March 06. This means the Warren Buffett of India has lost some crores with drop in DHFL share.