Dewan Housing board approves conversion of debt to equity
Photo Credit: Reuters

India's 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 1 trillion rupees ($14.15 billion) of debt, and owes about 400 billion rupees to banks alone. The company hasn't been able to service its debt and it has defaulted on its obligations several times.

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 & 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.

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