Shares of housing finance firms crash sharply; DHFL tumbles 42% on massive selling over fears of a liquidity crisis
shares of Indiabulls Housing Finance plunged 8.18 percent, Can Fin Homes dived 5.70 percent, LIC Housing Finance 5.05 percent and PNB Housing Finance 4.92 percent.
New Delhi: Shares of housing finance firms came crashing sharply Friday, with Dewan Housing Finance tumbling up to 42 percent 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 percent to end at Rs 351.55 on BSE. Intra-day, it tanked 59.67 percent 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 percent, Can Fin Homes dived 5.70 percent, LIC Housing Finance 5.05 percent and PNB Housing Finance 4.92 percent.
"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 in a statement Friday.
"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.
"Housing finance companies nosedived on rumours of liquidity crunch which caused the stocks to fall up to 50 percent. 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.
Shares of non-banking finance firms also took a beating with Bajaj Finance falling 4.58 percent, Edelweiss Financial Services 3.15 percent and Shriram Transport Finance Company 2.47 percent.
"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. All these influenced the markets to a significant extent. But it was bit overdone given the fact that the markets closed much higher than the lows seen earlier in the day," Thomas added.
The BSE Sensex tumbled about 280 points to close below the 37,000-mark Friday after investors were jolted by an over 1,000-point plunge in afternoon trade.
The 30-share benchmark, which opened on a strong footing, suddenly tanked 1,127.58 points, or 3.03 percent, to hit a low of 35,993.64 at 1309 hours, before staging an equally sharp recovery.
DHFL resolution plan: Lenders want Kapil Wadhawan to step down as chairman and managing director of cash-strapped firm
The promoter would also be required to pledge a part of their remaining stake to lenders. Promoter group holding in DHFL is 39.21 percent
Shares of housing finance and NBFC companies had dropped as much as 23.5 percent on Tuesday, led by DHFL, on fears of a liquidity crisis. These stocks fell in Monday's trading session as well.
DHFL Q2 profit rises 52% at Rs 439 crore on healthy growth in loan disbursements; total income up by 32%
The company had earned a profit of Rs 288 crore in the same quarter of the previous fiscal, DHFL said in a statement.