Aavas Financiers hits new high after RBI hikes lending limit for NBFC-MFIs

Shares of Aavas Financiers hit a new high of Rs 1,693, up 5 per cent on the BSE on Friday, in an otherwise weak market after the Reserve Bank of India (RBI) increased the household income and lending limit for non-banking finance company (NBFC) and microfinance (MFIs) borrowers while announcing the October monetary policy.  

The stock of the housing finance surpassed its previous high of Rs 1,670, touched on September 23, 2019.

The RBI, on Friday, increased household income limit for borrowers of non-banking finance company - Microfinance Institutions (NBFC-MFIs) to Rs 1.25 lakh for rural areas and Rs 2 lakh for urban and semi-urban areas. The amount limit, which was previously, was Rs one lakh for rural areas and Rs 1.60 lakh for urban/semi urban areas, has been increased to Rs 1.25 lakh and Rs 2 lakh, respectively. The hike, the governor said, was in order to boost credit flow to the bottom of the economic pyramid. The central bank also raised the lending limit from Rs 1.00 lakh to Rs 1.25 lakh per eligible borrower.

The detailed guidelines in this regard will be issued shortly, the RBI said in a statement.

Aavas is a retail-focused affordable housing finance company, primarily serving low and middle-income self-employed customers. These customers make up a large proportion of India's population and have limited or no access to formal banking credit due to a lack of credit score or proven credit history. The company's product offering consists of home loans for purchase or construction or residential properties, and for the extension and repair of existing housing units.

In the past two weeks, the stock has rallied 13 per cent, as compared to a 0.38 per cent decline in the benchmark S&P BSE Sensex.

On September 16, 2019, Aavas had received an investment of Rs 345 crore from IFC, a member of the World Bank Group, through issuance of non-convertible debentures (NCDs). The company said it will use the proceeds to grow its affordable housing finance program in the rural and semi-urban areas of Rajasthan, and neighboring areas.

At 01:38 pm, the stock was trading 3 per cent higher at Rs 1,651 on the BSE, as compared to a 0.68 per cent decline in the Sensex. A combined 46,725 equity shares changed hands on the counter on the NSE and BSE till the time of writing of this report.