The Bombay Stock Exchange (BSE) and the National Stock Exchange of India (NSE) have suspended the trading in equity shares of Dewan Housing Finance Corporation Limited (DHFL). The ban will come into effect from June 14, both the exchanges noted in their respective circulars.
The BSE and NSE circulars stated that DHFL had informed the exchanges on June 8 regarding approval of the resolution plan by the National Company Law Tribunal (NCLT), Mumbai Bench "which provides for delisting of equity shares of the company".
The resolution plan, approved by NCLT in the successful bid of Piramal Group for DHFL, envisaged zero value for the shares of DHFL. Despite this the stock was allowed to be traded.
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The BSE and NSE circulars added that the DHFL on June 9 stated that "no value was attributable to the equity shares as per the liquidation value of the company estimated by registered valuers appointed under the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016".
Further, the company has also mentioned that the written order of the NCLT approving the resolution plan is still awaited and all disclosures made remain subject to such orders, the circulars said.
"In pursuance of Regulation 3.1.2 of the National Stock Exchange (Capital Market) Trading Regulations P. A. and for reasons mentioned above it is hereby notified that the following security will bc suspended from trading w.e.f. June 14, 2021 (i.e. closing hours of trading on June 11,2021)," the NSE stated.
Also Read | Why were DHFL shares still trading?
The DHFL stock was allowed to be traded earlier this week. It was also allowed to rise 10 percent (the maximum permitted as per the applicable price band). Over 14 crore shares were traded on NSE alone and investors took delivery of over 9 crore shares valued close to Rs 200 crore on June 8.
The stocks continued to be traded on both the exchanges despite the company formally informing the exchanges that the worth of equity shares is zero. About 5 million shares were traded on June 9 as well. This had drawn criticism from market experts, who appealed to the exchanges to stop the trading of DHFL shares at the earliest to protect the interests of the investors in the securities market.
DHFL, a non-banking finance company with focus on housing finance, came under crisis in mid-2019. The company's commercial paper – short-term debt instruments – were downgraded to “D”, meaning default in June that year. The company began defaulting on a spree of payments, and was estimated to owe over Rs 90,000 crore to its lenders after it went bankrupt.
In November 2019, the Reserve Bank of India referred DHFL for resolution under Insolvency and Bankruptcy Code (IBC). It was the third-largest pure-play mortgage lender to be referred for insolvency under IBC, and the first finance company to be referred to NCLT by the central bank.