MUMBAI: A fall in housing finance and real estate stocks sparked a broader market-wide selloff on Wednesday as worries over the liquidity position of home loan companies re-emerged after New Delhi-based
The benchmark Sensex and the Nifty fell with the Sensex dropping 383 points, or 1.1 per cent, to 34,779.58 while the Nifty slipped 131.70 points, or 1.2 per cent, to close at 10,453.05.
Indiabulls Housing Finance led the crash in non-bank lenders and realty firms as fears of the two sectors dragging each other down due to payment difficulties gathered momentum with Supertech’s the default. Indiabulls Housing Finance crashed 13 per cent to Rs 788.85, its lowest closing in a year, wiping out shareholder wealth of about five times its exposure to Supertech at Rs 600 crore. It also dragged down other home finance stocks like Dewan Housing, Can Fin Homes, Repco Home Finance.
“The fear is that one loan default of Supertech can lead to other defaults,” said Suresh Ganapathy, head of financial sector research at Macquarie, an investment bank.
The broader market selloff came after three days of gains and the resulting negative sentiment impacted other sectors and stocks. Banks and auto companies were also hit. Yes Bank, Adani Ports, Maruti Suzuki India, Tata Motors, Tata Steel and State Bank of India ended down 3-7 per cent, and were among the worst performers on the Sensex.
Rating firm Brickwork on Wednesday downgraded the Rs 1,866-crore loan facilities of Supertech after it defaulted on loans to staterun lenders such as Syndicate Bank and Corporation Bank. Indiabulls Housing Finance and the builder say that loans to NBFCs are still being serviced.
“We have been servicing our debt from NBFCs on time. There has been a delay of around 15 days in servicing our loans from public sector lenders,” Supertech chairman RK Arora told ET. The rating was downgraded to D from BB-.
Dewan Housing Finance Corporation, Ujjivan Financial Services, Edelweiss Financial Services and Satin Creditcare Network ended down 3-12 per cent. Indiabulls Real Estate tumbled 10 per cent while DLF fell 8.7 per cent.
Indiabulls Housing Finance says it has a Rs 600-crore exposure to two projects of Supertech. Indiabulls gets Rs 30 crore per month in a dedicated escrow account for Hill Town project which is 70 lakh square foot and is 70 per cent complete. The housing finance company also has exposure to another project — Supernova — in NCR. The building is ready and is awaiting occupation certificate.
Indiabulls said that Supertech is a performing loan in its books. It also clarified that it is receiving payments from Vatika and Radius, the two other real estate firms whose financial health was under market speculation.
“All loan accounts of Supertech, Vatika and Radius are standard assets as on September 30,” an Indiabulls spokesperson said. “The servicing of both lease rental discounting facilities and construction finance facilities is happening through cash flows deposited directly into a dedicated escrow account by either tenants or home buyers. The underlying properties along with additional collaterals are exclusively mortgaged and covers the loans several times over.”
Investors fear that many housing finance companies would face the twin troubles of default by real estate companies who may find it difficult to repay loans due to slow sale, and rollover of their own obligations to mutual funds that come up for repayment.
Credit markets have tightened in the past two months after Infrastructure Leasing & Financial Services defaulted. Subsequently, the Reserve Bank of India’s rejection of another term as CEO for Rana Kapoor at Yes Bank led to worries that the real estate industry may face some funding problems. Yes Bank is a large lender to real estate companies.
Other non-banking finance companies including L&T Finance, PNB Housing and public-sector banks have exposure to the real estate firm.