STRATEGIC MANAGEMENT

EXECUTIVE SUMMARY

Submitted To: Dr. Prasad SN

GROUP07-SECTION: A
BILLE SAI DINESH- 18096
DHAARINI J M-18099
KISHAN S B-18102
PAVAN KUMAR K-18105
SIDDARTH M-18109
Executive Summary
Rationale of the choice of the organization:
DHFL gives various opportunities to learn the strategic issues. It helps to learn the mistakes in
the business model of the company. This case is also a great example of poor management,
wrong decisions taken by the company. This helps to understand how NBFC industry effected.
How we can take strategically takes decisions to overcome crisis.
Back-ground of the case:
DHFL was started by Rajesh in 1984 and who was a visionary business man who saw great
opportunities in housing finance companies. After the death his son took over the company till
date he is the chairman and managing director of the company. DHFL is a non-banking
financial company, also known as a shadow bank. This means it doesn’t have a banking licence
or access to central bank liquidity, but is nevertheless involved in financial services, primarily
giving loans to home buyers in India’s tier 2 and tier 3 cities.
The project deals with how the DHFL went into crisis, What are the faults in the business
model and problems with the management and the future outlook of the DHFL.
The non-banking finance company with a focus on housing finance has reportedly missed
interest payments of Rs. 960 crore. When a big company like this defaults on payments the
market doesn’t take that kindly. So because of that credit rating companies like CRISIL and
CARE DHFL was downgraded DHFL to AA+ from AAA-rated company. This is not only
reason for crisis, they are other reasons like they stopped taking fresh deposits from the
customers and whatever deposits they had from the existing customers they had put a freeze
on those deposits so that customers cannot do premature withdrawal and they stopped lending
altogether. This basically signals distress in the company. Apart from these reasons from the
company, Government also passed “Look out” notice against promoters. All the investors loses
confidence in the company. All these things are the reasons for the DHFL crisis. Bigger
causalities in this case are the Mutual Funds. There are about 165 MFs effected because of
exposure to DHFL. So, their current NAV (Net Asset Value) got down by 50%.
Business model of the company is borrowing loans from MFs at lower interest rates and
lending long-term loans with high interest rates to retailers.
In 2018, another major NBFC, IL&FS, went bust, causing alarm bells to ring throughout the
industry. Banks became much more careful about lending money to NBFCs. But this led to a
liquidity crunch, since there was limited access to credit. Many NBFCs rely on short-term
borrowing to finance long-term lending, which puts them in a difficult spot when there is a
liquidity crunch. Failure of business model is Asset-Liability mismatch.
Along with all these, allegations were raised against companies management for siphoning
money into their shell companies. An online investigative portal alleged that DHFL promoters
had lent money to ‘shell companies’ allegedly linked to the promoters who have used this
money to buy assets abroad. All these factors led the company to go into Crisis.

To overcome this crisis DHFL mainly taking two steps. One, Selling all the assets of the
company to save the company from bankruptcy. Second, trying to find the strategic investors
so that the company can be taken over by the new management and find new direction to the
company.
How the group will address the issues
 The group in-depth discusses the problems involved in the crisis by checking their
annual reports and management actions over the years.
 How NBFC industry affected.
 We will be throwing light on how they have to change their business model