NBFC Squeeze
Business Today|June 16, 2019
NBFC Squeeze

NBFCs are scurrying around for funds to cope with falling market valuations, asset-liability mismatches and rising delinquencies.

Varsha Santosh

Dewan Housing Finance is going the IL&FS way or will be eventually sold if the problem is not fixed expeditiously,” says a CEO of a Mumbai-based nonbanking finance company or NBFC. The company has been struggling with asset-liability mismatches. So far, it has taken a decision to divest two group businesses (education loan and affordable housing finance companies), sold a part of its assets and claims to have repaid over 30,000 crore to creditors, including fixed deposit holders. But the mismatches refuse to go away. It desperately needs to raise longer-term funds, ensure faster sell-down of loans to builders and bring strategic investors. Any delay will push the company, which has a bank loan exposure of close to 40,000 crore, in the danger zone. The recent credit rating downgrade has already closed the fixed deposit window.

Another NBFC, Reliance Capital, with interest in a host of financial services, including insurance, is facing repayment issues with two of its financial services arms — home finance and commercial finance units. This Anil Ambani-owned company has already decided to sell its non-core investments in media and entertainment, private equity, radio, etc. This week, it decided to sell the entire stake in the mutual fund business. Another fast-growing NBFC, Indiabulls Housing Finance Ltd, has also come under pressure due to its risky large ticket commercial real estate and loan against property portfolio. The company claimed to have raised 50,000 crore in the last six months to improve its liquidity and liability profile. Luckily, Indiabulls Finance has got a prize catch in terms of the proposed merger with private sector Lakshmi Vilas Bank.

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June 16, 2019