To quell concerns from investors that housing finance companies (HFCs) are facing liquidity issues, Indiabulls Housing Finance (IBHFL) on Monday said the company has a healthy liquidity position standing at Rs 200 billion as of September 2018.
Assuming there are no fresh borrowings by the company, IBHFL's six-month liquidity coverage ratio stands at 135 per cent as of date, the company said in filings with the BSE. During the January to March quarter of FY18, the company's cash position stood at Rs 165 billion, as compared to Rs 211 billion of cash available during the October to December quarter of FY18.
Despite consistently growing quarter-after-quarter, the liquidity (cash) in the company fell to its lowest level in the January to March quarter of FY18, since the April-June quarter of FY17.
Over the last 15 days, IBHFL engaged in a Rs 18.2-billion buy-back from the secondary market, and has raised about Rs 36.2 billion through primary issuances. Further, about Rs 4.1 billion worth of IBHFL debt paper were traded, the company said.
While the RBI regulations allow only for a 15 per cent mismatch for the short-term (one to 14 days, 15-30 days and one year) buckets, IBHFL's position is positive by 10 per cent (1.1x) in the cumulative 30-day bucket, and is positive by 5 per cent (1.05x) in the one year bucket.
The table below shows the asset-liability position of the company across three buckets: one year, one to five years, and above five years. IBHFL says that it has matched all its asset-liability management (ALM) in all buckets.
Further, the company raised Rs 5 billion in 2-3 buckets from insurance companies at 9.5 per cent, while the cost of funds for borrowing from CPs stood at 8.25 per cent.
These concerns over ALM mismatch were triggered by loan and debenture defaults made by subsidiaries of Infrastructure Leasing and Financial Services (IL&FS), a systemically important non-banking financial company (NBFC) and infrastructure firm.
As a result, over the last two weeks, several NBFC stocks began to fall on the stock exchanges. Stocks like DHFL, IBHFL, Bajaj Finserv, PNB Housing Finance, Mahindra Finance, among others, were affected by market sentiments.
NBFCs have excessively raised finances through a large quantum of commercial papers (CPs) and non-convertible debentures(NCDs) in the last few years.
For instance, these companies have pooled 25 to 30 per cent of their incremental funding from CPs during FY2018, according to Nomura India.
Since these NBFCs were raising money through short-term debt and were lending credit to longer term projects or for eight to 15 year mortgages, this led to ALM and liquidity issues at HFCs, given the impending maturity of the CPs and NCDs.
So far this year, there has been a substantial rise in the number of CP issuances to Rs 6.2 trillion between April and September 2018 as compared to Rs 3.8 trillion for FY2018. "About two-thirds of these issuances are from financial institutions," states a report by India Ratings.
Further, the report says that the top 12 NBFCs have about Rs 300 billion worth of CPs due for repayments in the three months ending December 2018.
RBI last week announced that it would revise the guidelines for ALM management for NBFCs.