Fears of liquidity crisis trigger sell-off in DHFL, other HFCs
Mumbai : Shares of housing finance companies took a massive beating on Friday, with Dewan Housing Finance (DHFL) tumbling up to 42 per cent on massive selling over fears of a liquidity crisis, which had a cascading effect on the broader market as well.
The scrip of Dewan Housing Finance Corporation went into a tailspin, nosediving 42.43 per cent to end at Rs 351.55 on BSE. Intra-day, it tanked 59.67 per cent to Rs 246.25 — its 52-week low. DHFL’s market valuation tumbled Rs 8,120.41 crore to Rs 11,031.59 crore on BSE. Among others, shares of Indiabulls Housing Finance plunged 8.18 per cent, Can Fin Homes dived 5.70 per cent, LIC Housing Finance 5.05 per cent and PNB Housing Finance 4.92 per cent.
“This market movement has come as a big surprise to not only DHFL but also to the industry at large. We wish to categorically state that DHFL has not defaulted on any bonds or repayment nor has there been any single instance of delay on any of its repayment of any liability. We do not have any exposure with IL&FS,” Kapil Wadhawan, CMD, DHFL said on Friday.
Some reports suggested that one fund house tried to sell one-year commercial paper of the company.
“Our fundamentals are strong and we hold a strong liquidity of approximately Rs 10,000 crore in the system which equates to 6 months of cash,” he said.
Wadhawan further said promoters of DHFL have neither pledged any of their shares nor have availed loan against shares of the company.
The management of DSP Mutual Fund said that it sold DHFL paper worth Rs 200-300 crore recently in a bid to improve liquidity and reduce overall maturity. Further, they added that the fund house has some exposure to IL&FS Group and added that they have already marked down holding on marked to market ratio.
“Housing finance companies nosedived on rumours of liquidity crunch which caused the stocks to fall up to 50 per cent. Though the stocks are fundamentally sound, herd mentality had caused the sudden panic in these stocks. However, they have recovered from their day’s low,” said Jimeet Modi, Founder & CEO of Samco Securities & StockNote.
Reliance Securities in note said, “There is news that DHFL bond has sold for a high implied yield to maturity of 11 per cent. This has made stock investors of DHFL worried about DHFL’s liquidity and sold off the stock.”
Shares of non-banking finance firms also took a beating with Bajaj Finance falling 4.58 per cent, Edelweiss Financial Services 3.15 per cent and Shriram Transport Finance Company 2.47 per cent.
“The events surrounding Yes Bank and DHFL sent the broader markets sharply lower. The trigger on the surface seems to be the selling of debt papers of DHFL by one of the prominent AMCs, but the broader issue is that of a contagion leading to sell-off in papers of other companies,” said Joesph Thomas, Head of Research – Wealth Management, Emkay Global Financial Services.
“The IL&FS exposure led to selling by the impacted institutional investor of some other unrelated NBFC to keep the liquidity channel open. But it was bit overdone given the fact that the markets closed much higher than the lows seen earlier in the day,” Thomas added.
