 "hare brokers react to falling stock prices on screens of computers and television")
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.
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 |
