NBFC stocks fall; Edelweiss,GIC Housing, Reliance Capital hit 52-week lows

Shares of non-banking financial companies (NBFC) including housing finance companies (HFCs) continued to be under pressure with most of these stocks trading at their 52-week lows on concerns of rising funding costs, which will affect net interest margins (NIMs) and growth.

Edelweiss Financial Services, Srei Infrastructure Finance, Can Fin Homes and Reliance Capital were down 5% to 14% on the BSE. In comparison, the S&P BSE Sensex was trading 0.33% lower at 36,420 points at 12:36 pm.

Besides these four stocks, GIC Housing Finance, Housing and Urban Development Corporation (HUDCO), PNB Housing Finance, Motilal Oswal Financial Services and Repco Home Finance have hit their respective 52-week lows on the BSE in intra-day trade on Thursday.

“Against the backdrop of rising rates globally, local rates have been rising. AAA-rated paper for one year is currently yielding around 8.6% vs. around 6.8% a year back. The trend is likely continued to upward. Moreover, in the last few years, there was a surge in bank and bond market lending to NBFCs,” according to analysts at Morgan Stanley.

After the IL&FS default, we expect markets to be more conservative in lending to NBFCs, which is likely to push up pricing. For NBFCs as a whole, we think the issue is funding cost (and hence NIM) rather than liquidity. Also, most of these NBFCs have been priced for continued strong growth – implying increasing funding requirements. This may slow down as funding costs increase, it added.

Analysts at Jefferies believe funding cost at NBFC/ HFCs should rise due to repricing of non convertible debentures (NCDs) post maturity and increase in incremental funding costs. NBFCs with a presence in niche segments (used CV, rural segment) should be better positioned to pass thru higher cost to consumers.

IL&FS default and the turmoil in the debt markets have increased aversion towards lending to NBFCs in the short term, the brokerage firm said in a note.

COMPANY	LATEST	ONE-WEEK BEFORE	LOSS(%)
DEWAN HSG. FIN.	302.50	610.60	-50.5
SREI INFRA. FIN.	35.10	46.90	-25.2
CAN FIN HOMES	232.90	307.80	-24.3
INDIABULLS VENT.	564.85	729.80	-22.6
PNB HOUSING	960.00	1233.90	-22.2
EDELWEISS.FIN.	193.40	244.35	-20.9
IFCI	12.60	15.50	-18.7
INDIABULLS HOUS.	955.95	1156.50	-17.3
REPCO HOME FIN	424.25	510.05	-16.8
JM FINANCIAL	86.50	103.90	-16.8
RELIANCE CAPITAL	301.00	361.25	-16.7
RELIGARE ENTERP.	36.45	43.30	-15.8
CAPRI GLOBAL	101.30	120.05	-15.6
INDOSTAR CAPITAL	349.00	410.60	-15.0
SATIN CREDITCARE	289.95	340.65	-14.9
RELIANCE HOME	52.35	61.20	-14.5
UJJIVAN FIN.SER.	271.00	315.90	-14.2
CAPITAL FIRST	506.55	586.45	-13.6
SIL INVESTMENTS	184.75	213.10	-13.3
CENTRUM CAPITAL	39.50	45.25	-12.7
L&T FIN.HOLDINGS	127.60	146.10	-12.7
OSWAL GREEN TECH	17.55	20.00	-12.3
GIC HOUSING FIN	260.45	296.05	-12.0
RURAL ELEC.CORP.	100.10	113.40	-11.7
5PAISA CAPITAL	245.00	276.75	-11.5
IIFL HOLDINGS	539.00	603.40	-10.7
MUTHOOT CAP.SERV	877.80	980.95	-10.5
BF INVESTMENT	294.00	328.35	-10.5
GRUH FINANCE	297.00	330.60	-10.2
PTC INDIA FIN	15.10	16.80	-10.1
H U D C O	49.60	55.15	-10.1
MOTIL.OSWAL.FIN.	684.50	759.55	-9.9
BAJAJ FIN.	2255.90	2499.00	-9.7