DHFL fails to reassure investors as shares continue their decline

Dewan Housing Finance Ltd (DHFL) failed to assuage investor unease over CobraPost's allegations,  pressuring the stock when it resumed trading on Wednesday.

Shares of the mortgage lender slumped as much as 12 percent to Rs 153 in early morning trade, extending previous day's selloff after investigative news portal Cobrapost accused DHFL of siphoning off Rs 31,000 crore of loans to 'dubious' companies. The stock ended 8 percent lower following the news on Tuesday.

The allegations by Cobrapost, founded in 2003 by Aniruddha Bahal of Tehelka, are based on Vikas Shekhar's complaint who is not a shareholder nor a borrower.

DHFL's management has denied Cobrapost's allegations, calling them 'frivolous.'

The company's chairman Kapil Wadhawan, in an interview with CNBC-TV18, refuted Cobrapost charges and claimed that all loans are scrutinised by DHFL's finance committee, in line with their standard operating processes.

Later in a conference call, Wadhawan said, “The motive of the said Vikas Shekhar appears to be extortion and causing wrongful loss to DHFL by damaging the goodwill and reputation of the company. In fact, the manner in which the complaint and the petition have been drafted, filed and served upon the company raises a finger of suspicious on the modus operandi of the complainant and his intentions."

Wadhawan also said that DHFL never lent to any shell company and that the company or its subsidiaries have made no political contribution.

This is not the first time that the housing finance company's shares have faced investors' wrath. DHFL has been in news since September after it was reported that DSP Mutual Funds sold a large quantum of commercial papers of the company at a steep discount. The liquidity crisis eventually unravelled the financial health of the IL&FS.

At 10:53am, DHFL stock was trading down 5 percent at Rs 161.10 on the National Stock Exchange. The stock has lost more than 21 percent of its value in the last two days, with a one-year return of negative 70 percent.