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Housing Finance cos under pressure as government raises concerns on Liquidity

Real estate agent with house model and keys

Shares of non-banking financial companies (NBFCs), particularly in the housing finance (HFCs) segment, were under pressure as government is said to have raised concerns.

PNB Housing Finance, Indiabulls Housing Finance and DHFL along with Repco Home Finance and HDFC are all down 1-11 percent on an intraday basis.

In a October 26, 2018 letter to the Ministry of Corporate Affairs (MCA) discussing the financial stability impact of the IL&FS default, the DEA described “the financial situation (as) still fragile.”

The letter points out that a prolonged liquidity crunch could hurt fund mobilisation in the debt market, impact productive sectors and affect economic growth at a time when India has emerged as one of the fastest growing major economies in the world.

According to the DEA, about Rs 2 lakh crore of NBFC/HFC debt is due for redemption or rollover by the end of December 2018. The department estimates a funding gap of as much as Rs 1 lakh crore by the end of the year if the pace of fundraising seen in the first half of October (about Rs 20,000 crore or 68 percent lower than the same period in August) is sustained.

A further Rs 2.7 lakh crore of commercial paper and non-convertible debetures will be due for redemption over January -March 2019, the letter said.

“Without additional liquidity support a significant default from among the largest NBFC and HFC could occur within six weeks and the financing cycle of productive sector would be adversely affected,” the letter states.

Further, CNBC-TV18 on November 5, 2018 reported that the MCA raised concerns with regards to PNB Housing, Indiabulls Housing and DHFL

This report has been submitted to the finance ministry, RBI and other stakeholders. They further added that PNB Housing, Indiabulls Housing and DHFL are facing severe cashflow issues.