Dewan Housing Finance Corporation (DHFL) share price plunged as much as 60 percent to hit fresh 52-week low of Rs 246.25 amid high volumes, but managed to trim a bit of losses on Friday.
The stock settled at Rs 351.55, down Rs 259.05, or 42.43 percent on the BSE, dragged may be after selling of commercial papers worth about Rs 200-300 crore by DSP Mutual Fund recently.
Liquidity crunch and hardening bond yield, and interest payment default by big company like IL&FS to bondholders also created panic selling in the stock.
"In bond yield hardening and liquidity drying scenario, the first segment that will come under pressure would be NBFCs in general and Housing Financing Companies (HFCs) in particular. The very nature of HFCs is to have negative Asset-Liability-Mismatch (ALM) scenario wherein they liabilities (sources of financing) will have to re-priced multiple times during the life of assets (housing loans)," Jagannadham Thunuguntla, Sr. VP and Head of Research (Wealth), Centrum Broking told Moneycontrol.
In an increasing interest rate scenario (such as current times), a higher proportion of shorter tenure funding against a higher proportion of long term assets, would be harmful, he feels.
Further, with the events such as IL&FS default, the situation gets aggravated squeezing the liquidity from the money markets, he said.
Detailed below is what Kapil Wadhawan, CMD, DHFL said:
This market movement has come as a big surprise to not only DHFL as an organisation it is also for the industry at large. We wish to categorically state that DHFL has not defaulted on any bonds or repayment nor has there been any single instance of delay on any of its repayment of any liability. We do not have any exposure with IL&FS.
DHFL continues its loan growth disbursements in the affordable housing segment going forward. The Loan disbursements were Rs 13,582.9 crore for the quarter ended June 30, 2018, showing an increase of 65 percent over the corresponding quarter of the previous year.
Our fundamentals are strong and we hold a strong liquidity of approximately Rs 10,000 crore in the system which equates to 6 months of cash. Our commerical paper (CP) book shall be about 6 percent of total borrowings and the total assets and liability book is over Rs 1 lakh crore. We shall remain cash surplus even after considering repayment till March 2019 of all liabilities on account of CP, NCD, interest payment, bank dues etc. We are extremely well-matched in case of the ALM position.
Our borrowing is well diversified with a banking consortium of 31 banks, NCDs, CPs, ECB and masala bonds. We are one of the deposit taking HFC with a public Deposit portfolio of Rs 10,803 crore. Our ratings on any of our debt instruments or fixed deposits are neither under watch nor there is any down grade in the existing credit rating. DHFL enjoys high credit rating of CARE AAA (Triple A) and has been assigned BWR AAA from Brickworks Rating. There is also no regulatory issue or concern with respect to the company.
Promoters have neither pledged any of their shares nor have availed loan against shares of the company.
Our Asset quality is strong and we have registered lowest NPAs in the industry and have reported Gross Stage 3 Loan Assets (equivalent to Gross NPA percent) at 0.93 percent. The testimony of our investor's trust in the organization was proven by 3 successful NCDs.
DHFL's committed efforts towards driving financial inclusion have translated into a net profit growth of 35 percent to Rs 435 crore for the quarter ended June 30, 2018. Loan book outstanding grew 33 percent to Rs 1,00,980.50 crore during the quarter ended June 30, 2018.
Assets Under Management (AUM) grew by 37 percent year-on-year, reaching Rs 1,20,939.50 crore as on June 2018 from Rs 88,235.70 crore as on June 2017.
Strong AUM and disbursement growth, CAGR of 26.4 percent and 36.1 percent respectively. Considering that two-thirds of DHFL's home loan portfolio is retail home loans wherein average home loan ticket size is below 16.1 lakh, DHFL has always endeavoured to protect the margins at 300 to 305 bps.
DSP MF sold commercial papers worth about Rs 200-300 crore of the company recently. Wadhawan told CNBC-TV18 that this is just a secondary trade between parties. "This panic has no fundamental reasons, there must be cascading effect as we have good asset quality and NPAs are fine."
DHFL recently raised Rs 2,000 crore through non-convertible debentures (NCDs) to fund its business growth.
Read latest news on DHFL here
Indiabulls Housing Finance also plunged 35 percent intraday to hit new one-year low of Rs 752 before showing smart recovery from day's low. The stock closed at Rs 1,061.90, down 8.18 percent on the BSE.
Detailed below is what Gagan Banga, Vice Chairman, CEO & Managing Director, Indiabulls Housing Finance, told CNBC-TV18 in an interview earlier today:
We have Rs 20,000 crore in cash and 25 percent with mutual funds, which do provide some short term liability to the company.
We have enough liquidity for at least next six months. We have been keeping 20 percent of company's loan book in cash.
We have asset base of Rs 45,000-46,000 crore, and repayment of Rs 15,000-20,000 crore in next one year.
With 24 percent of capital adequacy (against 12 percent regulatory capital adequacy) which is very high among NBFCs, we are shocking to see such sharp sell-off in shares.
We have networth of Rs 16,500 crore, Rs 1.2 lakh crore in cash and net of cash under Rs 1 lakh crore.
Recently bond yield gone up 60 bps, we have factored in our numbers. Margin improved by 12 basis points from March quarter to June quarter.
DHFL as sell as Indiabulls Housing Finance management confidently said they have no exposure to IL&FS Group.
Dipan Mehta, Member BSE and NSE said companies which faced corporate governance issue earlier or analysts raised corporate governance issue are facing big hit now including Indiabulls Housing Finance and DHFL which are not liquid counters.
Not only DHFL and Indiabulls Housing but also other housing finance companies were under pressure. Can Fin Homes, Reliance Home Finance, Repco Home Finance, LIC Housing Finance and PNB Housing Finance also recovered to end lower by 5-10 percent. However, Gruh Finance rebounded to close 2 percent higher.
Other finance companies Bajaj Finance, Bajaj Finserv and Shriram Transport Finance Corporation are also under pressure, down 1-5 percent.
Detailed below is what Can Fin Homes, MD, SK Hota, told CNBC-TV18 in an interview earlier today:
Borrowing is not an issue right now and the company has strong credit line from banks.
According to him, people who have huge borrowing from market, they could be facing some issue or under pressure. "I don't think there is an issue about borrowing which are available but at higher rates."