Sell-off in NBFCs is panic reaction, no crisis in sector, says FIDC Chairman

By: | Updated: September 25, 2018 5:38 PM

Aggarwal said there are certain concerns relating to liquidity in the markets and also the recent IL&FS debt crisis, which is adding to the panic in the markets.

nbfc stocks, share market, ilfsAggarwal said the recent sell-off in NBFC stocks is just a typical stock market phenomenon.

Even as non-banking financial company (NBFC) stocks continued to reel under heavy selling pressure following a recent crisis in IL&FS Financial Services, the recent fall does not refer to a crisis situation, but is rather a panic reaction, says Raman Aggarwal, Chairman, Finance Industry Development Council (FIDC). Aggarwal said the recent sell-off in NBFC stocks is just a typical stock market phenomenon.

“What has happened has been more of a typical stock market phenomena than the actual reflection of the sector’s health or the inherent strength of the balance sheet,” Aggarwal said in an interview with ETNow. “It’s more of a panic reaction which has happened.”

Aggarwal said there are certain concerns relating to liquidity in the markets and also the recent IL&FS debt crisis, which is adding to the panic in the markets. “There are various factors contributing to it, and suddenly the ILFS situation developing, there is a certain loss of confidence in the market. But let us reflect it more as a de-rating of the growth. The growth, which was galloping, may be slowed down to that extent. But I don’t see any crisis situation out here,” said Aggarwal.

NBFC stocks have been on a free-fall since Friday over liquidity concerns, despite the government and regulators stepping in to check the panic. The slide had started on Friday after reports that Infrastructure Leasing and Financial Services Ltd (IL&FS) and its units had defaulted on repayments. The reports sent other NBFC stocks slumping, with shares of Dewan Housing Finance Corporation (DHFL) tumbling almost 60% at one point.

Even on Tuesday, shares of most NBFCs slumped on the domestic bourses. DHFL shares, which slumped nearly 34% during afternoon deals, recovered nearly 16% from its day’s low to finally close trade down 23.49% at Rs 300.70. DHFL shares had surged nearly 25% on Monday after a 60% plunge on Friday.

Among others, Indiabulls Housing Finance nosedived nearly 20%, Can Fin Homes plunged 14.75%, PNB Housing Finance fell 5.31% and Gruh Finance slipped 6%.

The infrastructure development and finance group IL&FS has been facing liquidity issues for some time and had defaulted on a Rs 1,000-crore debt from Sidbi earlier this month. The company had again defaulted on a repayment of Rs 105 crore CPs on September 14 and of Rs 80-crore inter-corporate deposits (ICDs) the next day, said a PTI report.

The finance ministry has maintained that IL&FS Group is independent of the government and the company needs to resolve its issues. However, some of the state-owned financial firms, including LIC and SBI, are shareholders of the non-banking financial company (NBFC). LIC, which has the largest shareholding in IL&FS, said it will not allow the debt-ridden company to collapse and explore options to revive it.

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