Analysing the financial ratios of DHFL (ex-ante):

The NBFC’s industry is adversely affected post the IL & FS crisis. The asset
liability mismatch has created insolvency in IL & FS and hence had to default on
the debt repayments. The wave has created a slump in the NBFC sector as a
whole and substantially declined the NBFC market. The other NBFC’s although
were maintaining reasonably good capital adequacy were also been hit by the
sentiments of the market.
Of late, DHFL has also defaulted on the same lines. The CAR of DHFL did not
meet the regulatory requirements and hence defaulted on the same.
The March 2018 fgures show that the proft afer tax was negative (₹ 2,907.56
crores) for them and the net interest expense was around ₹ 2,349.25 crores.
D/E Ratio:
The D/E ratio of the company has been as high as 11.0 (average) for the last 10
years. NBFC’s have high Debt to the Equity ratio, as the main source of income
is through the marginal spread between the lending rate and borrowing rate
for them. Bearing to the fact, it is good to have a high D/E ratio but the industry
average is at around 3:1 but that of DHFL is exorbitantly high (=11.0).

D/E Ratio
120000

100000

80000

60000

40000

20000

0
Ma r-09 Ma r-10 Ma r-11 Ma r-12 Ma r-13 Ma r-14 Ma r-15 Mar-16 Mar-17 Mar-18
Debt Equi ty
This shows that, for covering 11 units of debt in insolvency, there is only 1 unit
of equity capital. This clearly portrays a deviation from the normal levels and
hence, this got reflected in the crisis too.
Debt to Assets Ratio:
The same inference can be drawn from Debt to Capital ratio and Debt to Asset
Ratio.
The amount of Assets which can be liquidated to meet the insolvency to the
Debt holders is almost close to 1 while it should have been close to 1.33.

Debt to Asset Ratio

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Mar-09 Mar-10 Mar-11 Ma r-12 Ma r-13 Mar-14 Mar-15 Mar-16 Ma r-17 Ma r-18
Tota l Debt Tota l As s ets

Financial Leverage:
The fnancial leverage of the frm shows how huge are the operating incomes
when compared to the earnings lef afer payment of the interest to the Debt
holders.
From December 2016 till March 2019, the values have been drastically
decreasing from as high as 5.84 to 0.19.
 Financial Leverage

5000
4000
3000
2000
1000 I T
0 EB
-1000 Dec-16 Ma r-17 Jun-17 Sep-17 Dec-17 Ma r-18 Jun-18 Sep-18 Dec-18 Mar-19
-2000
-3000
EBIT EBT

Interest coverage ratio also reflects the same thing as fnancial leverage
wherein the operating income is expressed as a multiple of the interest. This
shows that the frm is not even able to earn a substantial amount from
operations to meet the fnancial expenses, which otherwise the value would
have been 1.0 at least. It has negative profts afer tax (or losses) in the last
quarter of March 2018.

Interest Coverage Ratio

5000

4000

3000

2000

1000

0
Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Ma r-19
-1000
Interest EBIT