Kotak Mahindra AMC and Axis AMC move Bombay High Court against DHFL

Kotak Mahindra Asset Management Company (AMC) and Axis Asset Management Company (AMC) on Thursday moved the Bombay High Court (HC) against beleaguered financier Dewan Housing Finance Corporation (DHFL). The move comes a week after the Bombay HC passed an ad-interim order restricting DHFL from making payments or disbursements to any secured or unsecured creditor till further orders.

DHFL had also been directed by the court to disclose all assets and liabilities. The order was passed in response to petitions filed by Reliance Nippon Life Asset Management and Edelweiss Asset Management against the crisis-ridden non-banking finance company (NBFC).

Kotak AMC and Axis AMC’s prayers are on similar lines, seeking to restrict DHFL’s payments to third parties, their counsel told the court on Thursday. Justice AK Menon gave the parties four weeks to file replies. The October 10 order was an extension of a previous order passed by the HC on September 30 in response to an application filed by Reliance Nippon Life Asset Management seeking to recover dues from the NBFC.

The court had directed that DHFL “be temporarily injuncted and restrained from making further payments and/or disbursements to any unsecured creditors of the defendant No.1(DHFL) and secured creditors of defendant No.1, except in cases where payments made on pro-rata basis to all secured creditors, including the plaintiff, out of its current and future receivables, in preference to the payments owed to the plaintiff, without the sanction of this hon’ble court”.

In the written order, the HC also observed that Catalyst Debenture Trusteeship, which was acting as a debenture trustee for most of the non-convertible debentures (NCD) issued by DHFL, “has been slow to act in a matter of securing interest of the debenture-holders”.

On September 28, Reliance Nippon Life Asset Management had moved the Bombay HC seeking to recover dues worth `478 crore from DHFL. Edelweiss had also moved the court last week seeking to recover dues worth Rs 70 crore.

The total liabilities of DHFL stood at Rs 83,873 crore as on July 6. Of this, borrowings from banks through term loans, cash credit and working capital demand loans stood at Rs 27,527 crore. The company’s largest borrowing was through non-convertible debentures, including masala bonds, to the tune of Rs 41,431 crore. The company’s total assets stood at Rs 89,476 crore, along with Rs 1,752 crore in cash and investments.

Last month, the stressed financier disclosed a resolution plan on the exchanges, according to which, 2.3% of the debt exposure across each category of facility will be converted into equity, assuming a conversion price of Rs 54 per share. According to the plan, after the debt to equity conversion, lenders would hold 51% in the company.