DHFL investors to move Supreme Court against plan to delist stocks
- Petitioners said the NCLT and Sebi did not inform investors about the delisting
A section of retail investors of Dewan Housing Finance Ltd (DHFL) plan to approach the Supreme Court against any move by the National Company Law Tribunal (NCLT) to delist the mortgage lender’s shares as part of its resolution plan. In their petition, the investors have accused NCLT and the Securities and Exchange Board of India (Sebi) of failing to adequately inform investors about the impending delisting, which is part of the Piramal group’s approved resolution plan under the insolvency and bankruptcy code (IBC).
A petition is yet to be formalized and filed in court.
Piramal group’s proposal for delisting DHFL was accepted by DHFL’s committee of creditors in January. Unaware of the development, many investors continued to buy DHFL shares anticipating a turnaround in the fortunes of the bankrupt mortgage lender under the new owners. The number of retail shareholders of DHFL rose from 316,000 in December to 325,000 by March.
On June 14, trading in shares of DHFL was stopped on the exchanges, which informed investors that the resolution plan provides for the delisting of equity shares.
DHFL ended its trading session at ₹16.70 apiece on the day after having hit the 10% lower circuit. However, in the weeks before June 14, the stock saw significant trading, even hitting upper circuits after the resolution plan was approved by NCLT, encouraging investors.
Now, many of DHFL’s retail shareholders have formed joint action groups to try and recoup their losses. One such group with about 250 members plans to move the Supreme Court with a plea to keep DHFL listed so that they can recover at least a part of their investments. They feel DHFL has enough assets.
Mint interacted with more than a dozen investors across the country who feel victimized because of DHFL’s delisting. “DHFL has assets worth over ₹1.05 trillion and a strong loan recovery process can actually fetch more money than what has been projected by the Piramal Group,’’ said a Telangana-based investor.
“If managed well, the stock can yield decent appreciation in the market in the coming years so that the small shareholders get a natural exit through a fair market process,” said the person.
“Around ₹40,000 crore is due to be recovered from DHFL’s borrowers and even if 10% of these dues are recovered, the court or Sebi must direct Piramal to utilize a part of this recovery money to compensate retail shareholders,’’ said another investor.
“In DHFL’s case, most retail investors were of the impression that it will remain listed like Ruchi Soya, Alok Industries and Essar even after IBC, and Sebi cannot wash away its responsibility,” said a Gurgaon-based investor who lost ₹204,000 out of his ₹300,000 investment in DHFL.
“Some brokers, too, may have mis-sold DHFL stock for earning commission. Investors should have been more careful while investing in such a company. Until NCLT or a high court approves any resolution plan neither Sebi nor exchanges nor brokers themselves can ascertain whether the company will remain listed or not,” said Sandeep Parekh, founder of corporate law firm, Finsec Law Advisors. Sebi, Piramal and NCLT could not be immediately contacted.