Shares of non-bank finance companies (NBFCs) took a massive beating on Friday, with DHFL amd Indiabulls Housing Finance tumbling around 60 per cent and 30 per cent respectively in intraday trade. DHFL lost Rs 100 billion in the m-cap during the day. However, the stocks recovered partially after the management of both companies allayed investor concerns.
Analysts say the ongoing crisis at IL&FS created a panic and triggered the sell-off in these stocks, as it was feared that an ‘IL&FS-like’ situation was emerging across NBFCs. More specifically, rumour had it that DHFL and Indiabulls Housing Finance could find it difficult to meet their respective loan obligations going ahead.
The contagion spread to the entire banking / NBFC space with Edelweiss Financial, Bajaj Finance, Shriram Transport Finance, M&M Financial Services and Indiabulls Housing slipping 10 per cent – 30 per cent in intraday trade.
“Some of the bad housing finance companies (HFCs) that have exposure to large projects are finding it difficult to recover the funds / money. Thus, the inability to recover the money that could have a bearing on the financials going ahead cast a shadow on the stocks as well. That said, not all companies face this situation. There are companies that have been victimised and have been a part of the fall given the overall negative sentiment. The companies in question – DHFL and Indiabulls – have already made their stand clear and said there is no likelihood of a default on their loans. Their main issue is inability to recover money in stuck projects and cash crisis or loan repayment default,” explains Deven Choksey, managing director, KR Choksey Investment Managers.