 "NBFCs under pressure; DHFL, Edelweiss Financial fall over 10%")
Shares of non-banking financial companies (NBFC) were reeling under pressure falling by up to 11% on the BSE after the Reserve Bank of India (RBI) on Friday said that it will revise NBFC asset-liability norms over borrowing-lending mismatch.
Dewan Housing Finance Corporation (DHFL), JM Financial, Edelweiss Financial Services, Centrum Capital, Repco Home Finance, Reliance Home Finance, Aditya Birla Money and Indiabulls Ventures have fallen in the range of 5% to 11% on the BSE in intra-day trade on Monday. In comparison, the S&P BSE Sensex was up 0.37% at 34,502 points at 12:22 pm.
The RBI on Friday said it will revise the asset-liability guidelines for NBFCs, as there have been recent concerns over mismatches between their borrowings from the short-term money market and their lending practices.
In its recent monetary policy statement, RBI highlighted its concern on increasing asset-liability management (ALM) mismatch by NBFCs. It commented, “Relying on short-term liquidity to fund long-term assets is not a prudent strategy and companies adopted this strategy to protect margins and market share”. The brokerage firm expects regulatory directions on ALM for NBFCs shortly.
“With increasing regulatory scrutiny on ALM, we expect NBFCs to ‘normalise’ their borrowing profile, i.e., migrate from opportunistic funding to more stable and sustainable funding. This would lead to a larger-than-expected increase in the cost of funds. We believe this would have a twin impact on both margins and growth. We expect growth to taper down for some of the fastest growing NBFCs,” Motilal Oswal Securities said in a note.
“Looking at the current scenario, we believe the NBFCs, both asset financing as well as HFCs, will have to tone down their growth rates, which is logical as well. The market has taken cognizance of the slowdown in the business and hit in margins and accordingly, the stocks have corrected sharply. However, we feel the damage in terms of price has been quite significant in the last few weeks,” according to Siddharth Purohit, research analyst at SMC Institutional Equities.
Dewan Housing Finance Corporation (DHFL), JM Financial, Edelweiss Financial Services, Centrum Capital, Repco Home Finance, Reliance Home Finance, Aditya Birla Money and Indiabulls Ventures have fallen in the range of 5% to 11% on the BSE in intra-day trade on Monday. In comparison, the S&P BSE Sensex was up 0.37% at 34,502 points at 12:22 pm.
The RBI on Friday said it will revise the asset-liability guidelines for NBFCs, as there have been recent concerns over mismatches between their borrowings from the short-term money market and their lending practices.
In its recent monetary policy statement, RBI highlighted its concern on increasing asset-liability management (ALM) mismatch by NBFCs. It commented, “Relying on short-term liquidity to fund long-term assets is not a prudent strategy and companies adopted this strategy to protect margins and market share”. The brokerage firm expects regulatory directions on ALM for NBFCs shortly.
“With increasing regulatory scrutiny on ALM, we expect NBFCs to ‘normalise’ their borrowing profile, i.e., migrate from opportunistic funding to more stable and sustainable funding. This would lead to a larger-than-expected increase in the cost of funds. We believe this would have a twin impact on both margins and growth. We expect growth to taper down for some of the fastest growing NBFCs,” Motilal Oswal Securities said in a note.
“Looking at the current scenario, we believe the NBFCs, both asset financing as well as HFCs, will have to tone down their growth rates, which is logical as well. The market has taken cognizance of the slowdown in the business and hit in margins and accordingly, the stocks have corrected sharply. However, we feel the damage in terms of price has been quite significant in the last few weeks,” according to Siddharth Purohit, research analyst at SMC Institutional Equities.
| COMPANY | LATEST | 52 WK LOW | PREV LOW | PREV DATE |
| ADITYA BIRLA CAP | 105.30 | 102.50 | 106.35 | 05-Oct-18 |
| CAPITAL FIRST | 472.70 | 463.15 | 471.00 | 05-Oct-18 |
| CHOLAMAN.INV.&FN | 1081.90 | 1075.00 | 1079.00 | 26-Oct-17 |
| DEWAN HSG. FIN. | 248.90 | 242.80 | 246.25 | 21-Sep-18 |
| EDELWEISS.FIN. | 162.55 | 156.30 | 169.00 | 01-Oct-18 |
| GIC HOUSING FIN | 241.90 | 241.90 | 242.30 | 01-Oct-18 |
| H U D C O | 43.40 | 42.90 | 43.25 | 05-Oct-18 |
| I D F C | 38.65 | 37.35 | 38.00 | 05-Oct-18 |
| JM FINANCIAL | 77.40 | 76.10 | 78.45 | 01-Oct-18 |
| MAGMA FINCORP | 101.25 | 100.00 | 104.75 | 05-Oct-18 |
| RELIANCE CAPITAL | 253.75 | 250.50 | 253.00 | 05-Oct-18 |
| RELIANCE NIP.LIF | 143.55 | 143.40 | 145.00 | 05-Oct-18 |
| REPCO HOME FIN | 387.40 | 382.35 | 390.20 | 05-Oct-18 |
| TATA INV.CORPN. | 713.00 | 706.00 | 710.50 | 03-Oct-18 |
| COMPANY | LATEST | ONE-MONTH BEFORE | LOSS(%) |
| DEWAN HSG. FIN. | 245.10 | 648.35 | -62.20 |
| INDIABULLS VENT. | 415.35 | 786.65 | -47.20 |
| RELIANCE CAPITAL | 251.90 | 457.75 | -44.97 |
| EDELWEISS.FIN. | 161.00 | 261.60 | -38.46 |
| RELIANCE NIP.LIF | 143.35 | 227.95 | -37.11 |
| SREI INFRA. FIN. | 32.50 | 49.50 | -34.34 |
| JM FINANCIAL | 77.40 | 115.40 | -32.93 |
| UJJIVAN FIN.SER. | 235.60 | 344.25 | -31.56 |
| PNB HOUSING | 891.10 | 1301.65 | -31.54 |
| EQUITAS HOLDINGS | 111.00 | 157.10 | -29.34 |
| MAGMA FINCORP | 101.00 | 142.15 | -28.95 |
| REPCO HOME FIN | 385.90 | 541.00 | -28.67 |
| CENTRUM CAPITAL | 36.00 | 50.15 | -28.22 |
| L&T FIN.HOLDINGS | 120.85 | 167.95 | -28.04 |
| MANAPPURAM FIN. | 70.35 | 96.00 | -26.72 |
| H U D C O | 43.30 | 58.60 | -26.11 |
| GIC HOUSING FIN | 241.90 | 322.05 | -24.89 |
| CHOLAMAN.INV.&FN | 1080.00 | 1437.15 | -24.85 |
| CAN FIN HOMES | 233.20 | 310.30 | -24.85 |
| IFCI | 12.25 | 16.25 | -24.62 |
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