Mumbai: India’s top 15 non-banking finance companies (NBFCs) have together lost over 75,000 crore in the last two trading sessions on fears of a financial crunch in the sector. Across Friday and Monday, Housing Development and Finance Corp. Ltd (HDFC) lost around 18,600 crore, Bajaj Finance Ltd around 13,800 crore and Bajaj Finserv Ltd 4,200 crore. The other 12 NBFCs, including Dewan Housing Finance Corp. Ltd (DHFL), Indiabulls Housing Finance Ltd and L&T Finance Holdings Ltd, lost 900 to 7,500 crore in the same period.

The selloff in NBFC stocks continued on Monday, despite the government and regulators stepping in to check the panic. Finance minister Arun Jaitley tweeted on Monday that the government would take all measures to ensure adequate liquidity was provided to NBFCs, mutual funds and small and medium enterprises.

The slide in NBFC stocks started after reports that Infrastructure Leasing and Financial Services Ltd (IL&FS) and its units had defaulted on repayments, and accelerated after rumours that DSP Mutual Fund had sold commercial papers issued by DHFL in the secondary market at a discount. Shares of DHFL, which had crashed over 40% on Friday, gained over 25% on Monday after the mortgage lender clarified it had not defaulted on any repayments and had enough liquidity to meet obligations till March 2019.

“Investors raised concerns over tightness in the money market amid continuing financial crisis at IL&FS. Further, investors are risk averse after the recent experience of IL&FS, which dampened overall market sentiment," said IIFL in a 21 September note.

Analysts at IIFL said housing finance companies and NBFCs too witnessed selling, as NBFCs’ borrowing costs are expected to rise and they could face challenges in raising funds. “Market participants are linking this with other NBFCs and housing finance companies, which hold commercial papers as one of their sources of funding. In case of DHFL, commercial paper accounts for 6% of its borrowings," they added.

Despite the headwinds, Kotak Institutional Equities was positive on select NBFCs. “The recent correction on the back of debt market liquidity concerns prompts us to review a few strong NBFCs. Several factors including business tailwinds, robust operating models catering to the retail segment and parental support provide comfort to banks/debt markets and ensure that liquidity remains strong; stress, if any, remains only to near-term NIM (net interest margin)", said Kotak Institutional Equities in a note to its investors on Monday.

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Meanwhile, IL&FS Transportation Network Ltd, a unit of IL&FS, surged 20% on Monday on a media report that Japan’s Orix Corp. is keen to acquire a majority stake in its parent company. The stock lost some of its gains and closed 13% higher at 22.65.

In a clarification to NSE, IL&FS Transportation Networks Ltd said, “We wish to bring to your notice that the said news items pertains to IL&FS Ltd and not to the company, hence we are unable to comment on the same."

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