BackHousing finance companies have enough liquidity to meet two months of repayments
Icra said a rating category-wise analysis of liquidity buffers shows that entities in the AA to A category carried significantly higher on balance-sheet liquidity
PremiumMUMBAI: Housing finance companies (HFCs) have sufficient liquidity, which could cover about two months of debt repayments, excluding securitisation, said rating agency, Icra. Access to funding lines could enhance the cover up to three months, it added.
Icra said based on the consolidation of its rated HFCs accounting for around 90% of the sectoral assets under management (AUM), most companies were comfortably placed in terms of liquidity.
“The findings have indicated that HFCs weighted average on balance sheet cash and liquid investments stood at about 7% of the AUM as on 31 March, 2020, and at 12%, including the sanctioned funding lines," the rating agency said.
According to Supreeta Nijjar, vice-president, financial sector ratings, around 31% of the HFCs’ portfolio was under moratorium for two-three months as on 30 April. Most HFCs have not applied for a moratorium from their lenders, said Nijjar.
“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," she said.
Icra also said a rating category-wise analysis of the liquidity buffers shows that entities in the AA to A category carried significantly higher on balance-sheet liquidity, as compared to the higher-rated entities as most of the AA+/AAA-rated HFCs enjoy higher refinancing ability or are backed by a strong parent.
The rating agency expects the inflows from advances not under moratorium to support the liquidity profile of HFCs. However, the Reserve Bank of India's (RBI) extension of the moratorium till 31 August could lead to an increase in the share of portfolio under the relief plan, thus reducing the liquidity cover, Icra said.
Based on the rating agency’s estimates, total maturing debt for fiscal 2021 is around ₹2.9-3.2 trillion, of which ₹1.4 trillion is accounted for by debt markets.
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