Liquidity covers of non-banking financial companies (NBFCs) have not depleted significantly over the past two months, CRISIL's analysis of NBFCs it rates indicates. However, fund-raising continues to be a challenge for most NBFCs because investors remain risk-averse.
"With debt repayments remaining high in the near term - especially June 2020, how NBFCs manage the refinancing risk will be a key monitorable. In the milieu, availability of moratorium on loans NBFCs had taken from banks will offer them material liquidity support.
The liquidity covers have not depleted significantly because NBFCs managed some collections in April and May, which varied depending on the segment of operations. Negligible disbursements also helped prop up liquidity covers to some extent, compared with earlier estimations," the rating agency has stated in a report.
Says Krishnan Sitaraman, Senior Director, CRISIL Ratings, "Despite cash outflow owing to debt repayments, a combination of partial collections, incremental funding, and negligible disbursements has supported the liquidity levels of NBFCs. But June is crucial with nearly Rs 1.25 lakh crore of repayments, which is half of the ~Rs 2.5 lakh crore due through August. However, if banks were to offer moratorium on them, the proportion of NBFCs with low liquidity cover reduces significantly to just 5% from 25% envisaged in our stress-case scenario."
In terms of incremental funding, capital market issuances have dropped substantially, with investments by mutual funds- a key investor segment - in NBFC debt plunging to the lowest level in more than two years, Crisil has observed.
"The securitisation route, too, has seen very few transactions consummating in the past few months due to concerns over asset quality and lack of granular track record of collection efficiency after the pandemic onset," the rating agency has noted.