What a Big­ger MF Debt Ex­po­sure Means for HFCs

Cap on debt pa­pers in­creased to 40%, move can open up ₹ 35,00040,000 cr of ad­di­tional liq­uid­ity for HFCs

The Economic Times - - Companies: Pursuit Of Profit -

Mum­bai: Hous­ing fi­nance companies ral­lied up to 5% on Thurs­day af­ter mar­ket reg­u­la­tor Sebi raised mu­tual funds’ ad­di­tional ex­po­sure to these companies to 15% from the ex- ist­ing10%.Thoughthe­senorms­ben­e­fit hous­ing fi­nance companies (HFCs) in terms of lower bor­row­ing cost, HFCs which are cur­rently fac­ing pres­sure of lower lend­ing rates and ris­ing bond yields, will con­tinue to see mar­gin pres­sure due to repris­ing of loan book, said an­a­lysts.

While the De­wan Hous­ing Fi­nance stock gained 5% in­tra­day, Gruh Fi­nance shares rose as much as 4%. GIC Hous­ing and Repco Fi­nance sharesjumpe­dover3%onThurs­day. How­ever, most of the HFC stocks paredtheir­in­tra­day­gain­sandended in the red in an over­all flat mar­ket.

“Thechan­gesin­norm­swill­pro­vide some relief to HFCs bor­row­ing cost, how­ever HFCs fac­ing pres­sure of lower lend­ing rates, ris­ing bond yield, con­tinue to see mar­gin pres­sure due to repris­ing of loan book,” said Mor­gan Stan­ley in a note.

Sebi has in­creased the limit for mu­tual fund in­vest­ment in debt pa­pers of HFCs to 40% from 35% in an at­tempt to pro­mote the hous­ing sec­tor. This will, ac­cord­ing to in­dus­try es­ti­mates, open up ₹ 35,000-40,000 crore of ad­di­tional liq­uid­ity for HFCs through mu­tual funds.

“Given the strong pool of liq­uid­ity open­ing up for the sec­tor, we ex­pect in­cre­men­tal cost of funds to drop by 20 bps in the short term and 15 bps at the longer end,” said Alpesh Me­hta, bank­ing an­a­lyst at Moti­lal Oswal Fi­nan­cial Ser­vices.

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