In the past one month, DHFL, Indiabulls Ventures, Indiabulls Housing, PNB Housing, Repco Home Finance and Edelweiss Financial have tanked 35% to 65% as the crisis at Infrastructure Leasing & Financial Services (IL&FS) created panic and triggered a sell-off in these stocks. In comparison, the S&P BSE Sensex was down 7.2% during the period.
On Friday, Indiabulls Housing Finance (down 15% at Rs 688), PNB Housing Finance (14% at Rs 745), IIFL Holdings (11% at Rs 383), Bandhan Bank (10% at Rs 407) and Repco Home Finance (10% at Rs 306) have hit their respective 52-week lows, while DHFL, Edelweiss Financial Services, YES Bank, AU Small Finance Bank and JM Financials were down 5% to 11% on the BSE. In comparison, the S&P BSE Sensex was down 1.2% or 432 points at 34,347 at 11:06 am.
“The fragileness of the NBFC space is very much visible with a week of tightness in liquidity. Most players who were highlighting liquidity comfort were not able to handle stress. Though market liquidity is comforting, balance sheet liquidity will be a challenge for many NBFCs,” according to Axis Capital.
The days of making easy money are over and sensibility is now likely to prevail. Price of IL&FS debacle will be paid by the entire NBFC space. Over-confidence and the mad rush cycle is over – liquidity and solvency are the key issues, it added.
The brokerage firm Credit Suisse cautious on NBFCs with high share of short-term borrowings, large wholesale share of loan books and presence in segments of weaker pricing power.
With growth rates for NBFCs likely to moderate sharply, the premium enjoyed by NBFC stocks over private bank stocks should also erode, it added.
“NBFCs will have to slow down growth rates and many marginal/weak players will witness balance sheet contraction. Availability and pricing of liquidity will also be a challenge for weak players. Some NBFCs will have to vacate low yield businesses wherein banks will gain some market share,” analysts at Phillip Capital said in a note.