DHFL board approves plan to convert debt into equity, sell assets to raise more capital

Bengaluru: Crisis-hit shadow bank Dewan Housing Finance Corp (DHFL) said on Friday its board had approved a plan that included converting debt into equity, even as it seeks to sell assets and raise more capital. The conversion of debt into equity may result in a change in ownership, the company said in a regulatory filing, adding that the plan still needed shareholder approval. DHFL, India’s fourth-biggest housing finance company, has roughly Rs 1 lakh core ($14.15 billion) of debt, and owes about Rs 40,000 crore to banks alone. The company hasn’t been able to service its debt and it has defaulted on its obligations several times. [caption id=“attachment_6023581” align=“alignleft” width=“380”]  Representational image. Reuters.[/caption] As a result, the non-banking financial company is undergoing a restructuring process that is being deliberated upon by its lenders, to help it ride out a liquidity crunch and restart its lending business. DHFL and other shadow banking firms have been stung by a liquidity crunch following last year’s collapse of Infrastructure Leasing and Financial Services Ltd - once one of the biggest players in the sector. DHFL’s struggles also come as the domestic banking sector still grapples with nearly $150 billion of stressed assets.