The developments at IL&FS along with the hardening of yields because of the sharp depreciation in the rupee are turning out to be a double whammy for non-banking finance companies (NBFCs) and housing finance firms (HFCs), which borrow from the debt market.

Friday’s market crash has put the spotlight on whether at least some of these firms will have to bear the adverse impact of a liquidity crunch.

DSP move

The speculation intensified on the news that DSP Mutual Fund sold the debt instrument of Dewan Housing Finance at a relatively higher yield of 11 per cent.

While the fund is understood to have sold over Rs 200 crore of commercial papers of Dewan Housing Finance Ltd (DHFL), its top officials told a television channel that they did so only to keep higher cash levels, adding that they had no concerns about the management of the housing finance firm.

“Our fundamentals are strong and we hold a strong liquidity of around Rs 10,000 crore in the system which equates to six months of cash. Our commercial paper book shall be about 6 per cent of our total borrowings and the total assets and liability book is over Rs 1 lakh crore. We shall remain cash surplus even after considering repayment till March 2019 of all our liabilities on account of CPs, NCDs, interest payment, bank dues,” Kapil Wadhawan, chairman and managing director of DHFL, said.

“Our borrowing is well diversified with a banking consortium of 31 banks, NCDs, CPs, ECBs and masala bonds. Further, our ratings on any of our debt instruments or fixed deposits are neither under watch nor is there any downgrade in the existing credit rating,” Wadhawan added in a bid to allay apprehensions.

Kailash Baheti, CFO of Magma Fincorp, told The Telegraph that while the non-banking finance firm has not been affected by the recent developments, its housing finance arm, too, has been able to maintain a sound asset-liability match.