NEW DELHI: Concerned over the looming liquidity crisis and fresh exposure to default-rated realty firm Supertech, the Non-Banking Financial Companies (NBFC) have sought a meeting with Finance Minister Arun Jaitley as they feel the measures taken by the government so far fall short of industry expectations.
While the ministry has not finalised the date of the meeting yet, a senior official told TNIE that it would most likely take place next week, depending on Jaitley’s availability.
The liquidity crisis of NBFCs was triggered by recent defaults of Infrastructure Leasing & Financial Services Ltd (IL&FS), which exposed the inherent weakness in the sector’s business model — relying heavily on low-cost, short-term debt financing to sustain itself.
While the government was quick to respond to the situation and has since then taken measures to pump in liquidity to the market, the NBFCs, however, feel what is done is “too little”. While RBI has urged NBFCs to make use of equity rather than debt to finance their operations, industry analysts feel it will be difficult to raise fund via equity.
Also, the sentiments of the sector, which was just trying to recover from the IL&FS crisis, were quite negative over their exposure to Supertech, which has been downgraded to ‘default’. Stocks of Dewan Housing Finance, Ujjivan Financial, MAS Financial Services, Edelweiss Financial, IIFL Holdings, Indiabulls Housing Finance, Satin Creditcare and L&T Finance Holdings, among others, were all down 1-8 per cent, triggered by the news of rating agencies downgrading Supertech. Indiabulls, with an exposure of Rs 600 crore loans to the firm, was the worst-hit, with its stocks dropping by 13.2 per cent.
“Investors are concerned about NBFCs’ exposure to builders, since real estate sales, realisations are low. NPA recognition, provisioning and disclosures also need to be stringent and deviations like banks need to be reported,” said Ajit Sanghvi, director, MSS Securities.
Industry-watchers feel that if this crisis is prolonged, its impact will be far more damaging for the sector.
NBFC stocks tank over liquidity fears
Shares of non-banking financial companies came under massive selling pressure Wednesday on liquidity concerns. Shares of Indiabulls Housing Finance plummeted 13.17%, DHFL by 12.34%, M&M Financial Services by 7.74% and Cholamandalam Investment and Finance Company by 6.63% on BSE.