NBFCs have adequate liquidity to manage capital market debt repayments for 2 months: CRISIL

Mumbai: Non- banking finance companies are better placed with adequate liquidity to manage capital market debt repayments over the next two months and just about 4 percent of total debt is in shaky sectors such as aviation, gems and jewelry, real estate that could blow up, said rating company Crisil.
Among the industries, companies in pharma, telecom, fertilisers and consumer goods sector will have limited revenue impact, finds a study. Crisil’s findings are from a study of 35 industries, barring finance. It classified them into three groupings – resilient, moderately resilient and less resilient.

Nearly 44 percent of the debt in about 35 industries, excluding the financial services, which accounts for 71 percent of total debt, are in high resilience category, it said. These are like pharmaceuticals, fertiliser, oil refineries, power & gas distribution. Telecom and fast moving consumer goods.

Nearly 52% of debt is in sectors expected to be in moderately resilience category, such as automobile manufacturers, power generators, roads and construction. Only around 4% of debt is in sectors that are least resilient, such as airlines, gems and jewellery, auto dealers and real estate, given the discretionary nature of goods and services, and weak balance sheets.

"Most NBFCs rated investment-grade by CRISIL have high levels of liquidity and/or enjoy strong parentage" said Krishnan Sitaraman, senior director, Crisil Ratings. "CRISIL’s analysis of the top 100 rated NBFCs indicates that majority have liquidity buffer of over two times towards repayment of capital market borrowings due in the next two months"

But Crisil also warns that there could be challenges for some NBFCs which have borrowed through bonds and commercial paper as no moratorium has been announced on such paper.

Even as the Reserve Bank facilitating a moratorium on servicing of loans from banks has come as breather to borrowers, credit quality trends would be driven by the ability of companies to rebound from the near-standstill, said Crisil.

Crisil expects a modest recovery in vehicle loans and affordable home loans segments once the lockdown is lifted. But sees challenges in unsecured microfinance, and loans to small and medium enterprises over the next 9-12 months because of the weak credit profile of borrowers and expectations of only a gradual recovery in the economy.