MUMBAI: ICRA Ratings has said that based on the consolidation of its rated Housing Finance Companies (HFCs) accounting for around 90% of the sectoral AUM, most players were comfortably placed terms of liquidity. The findings have indicated that HFCs weighted average on the balance sheet (b/s) cash and liquid investments stood at about 7% of the AUM as on March 31, 2020, and at 12%, including the sanctioned funding lines. The available liquidity is sufficient and could typically cover about 2 months of debt repayments (excluding securitization/direct assignment outflows) of most HFCs, while access to the sanctioned funding lines could enhance the cover to 3 months (assuming no additional collections from advances).
Giving further insights, Ms Supreeta Nijjar, Vice President, Financial Sector Ratings says, “Around 31% of the HFCs’ portfolio was under moratorium for 2-3 months as on April 30, 2020. Further most of the HFCs have not applied for a moratorium from their lenders. While the HFCs in the affordable housing segment have a higher share of portfolio under moratorium owing to the relatively marginal borrower profile, which may have been impacted more during the lockdown, they are carrying adequate liquidity to service their debt obligations till August 2020”.
Further, a rating category-wise analysis of the liquidity buffers shows that entities in the AA to A rating category were carrying significantly higher on B/S liquidity vis-à-vis the higher-rated entities as most of the AA+/AAA rated HFCs enjoy higher refinancing ability or are backed by a strong parent/group. Further, ICRA expects the inflows from advances not under moratorium to likely support the liquidity profile of HFCs. However, RBI’s extension of the moratorium till August 31, 2020, could lead to an increase in the share of the portfolio under moratorium thereby reducing the liquidity cover.
Based on the rating agency’s estimates, the total maturing debt for FY2021 is estimated to be Rs. 2.9-3.2 lakh crore of which Rs 1.4 lakh crore is accounted by debt markets. Incremental funding requirements on this account would largely be met through refinancing by banks and primary issuances by HFCs in debt markets.
ICRA expects to refinance risk to be lower for the debt market instruments as the bulk of the maturing NCDs/CP belong to the AAA/AA+ category. The maturities of AA and below-rated entities stood at about Rs. 17,800 crore, which would largely be supported by the higher on-B/S liquidity buffers maintained by these entities and the Special Refinance facility by NHB as well as inflows from collections. Moreover, as HFCs raised approximately Rs 34,000 crore through debt market route and from NHB during April and May 2020, it is expected that most of the HFCs will maintain an adequate liquidity profile for meeting their debt obligations even with lower collection levels (50-80%) in the portfolio. “However, any adverse change in collection efficiency or lender sentiments towards HFCs will continue to be a key monitorable,” added Nijjar.
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