What Should We Learn From DHFL Delisting By Tushar Ghone
The Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) informed that DHFL will be suspended from trading with effect from June 14, which is closing hours of trading on June 11, 2021.
“Dewan Housing Finance Corporation Limited vide its announcement dated June 08, 2021, informed the Exchange regarding approval of the resolution plan by National Company Law Tribunal (NCLT), Mumbai Bench which provides for delisting of equity shares of the Company. Further, the Company vides announcement dated June 9, 2021, 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. Further, 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,” stated both the exchanges in their respective circulars.
The stock continued to be traded on both exchanges despite the company formally informing the exchanges that the worth of equity shares is zero. On 6th June the company has filled the corporate filing that is the submission of disclosure.
Here the company discloses the debt to equity ratio as -4.35 on 6th June through retail investor invests their hard-earned money in this stock without doing fundamental analysis. Investing in stocks based on news is not helpful.
As you can see the EPS of DHFL is NEGATIVE its net worth and net profit after tax are also NEGATIVE. Its share price is zero though the share was trading on the market. For the full document click here.
Being stock has zero value the stock price made an upper circuit on 7th June and 8th June. Most of the investors are RETAIL INVESTOR who made the share price to make upper circuit but on Monday its share price will be zero. Most brokers have told that they will remove DHFL from their terminal and their value of the stocks will be zero.
Why you shouldn’t stick with the fundamentally weak stock
The above investor has stuck with his stock from 2018 and when the stock falls, he tried to average the stock. Overall, he has invested almost 2 lakhs Rs in this stock. In order to exit from the stock, he holds the stock for 4 years, and it will be zero on Monday. The main problem of Retail Investors is they can’t accept the loss so they try to hold the stock even if its performance is bad and the worst part is they try to average the stock that is they put more capital on the stock which is already weak fundamentally.
Things we have learned from DHFL
- Never invest in the stock without proper News on the stock
- Never invest in fundamentally weak stocks
- Do not average the bad stock of your portfolio
- Always do fundamental analysis for investing in the stock
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