The funding situation for non-banks (non-banking financial companies and housing finance companies) continues to remain challenging, despite some increase in access to funding over the past couple of weeks.
 
In such situation, during the month of October 2018, the rollover rate of commercial papers (CPs) issued by the 50 largest CRISIL-rated non-banks was only ~40% of the average monthly issuances between June and August 2018. Consequently, non-banks have been increasingly tapping banks for funds. Nevertheless, CRISIL notes that the CP volumes have increased in the last week of October 2018 and if the trend continues, CP rollover rates should be higher in November 2018.
 
In the current environment, DHFL has been able to raise Rs 8,436 crore between September 24 and November 2, 2018, primarily through securitisation of loan receivables. DHFL has been able to securitise over Rs. 6,500 crores of loans. Further, it has also repaid over Rs 10,000 crore of borrowings (including Rs 7,115 crore of CPs) drawing from its liquidity reserve and funds raised recently. Over the last ten days, the company was able to access the debt capital market through issuance of fresh non-convertible debentures (NCDs) amounting to Rs 1,250 crore and CPs; and also roll-over bank borrowings. DHFL is also in the process of raising another Rs 1,500 crores of fresh NCDs.
 
As per information shared by DHFL, post repayment of borrowings mentioned above, liquidity reserve stood at Rs 5,852 crore (including SLR) as on November 2, 2018. Over the next two months, DHFL estimates collections from loan assets to be ~Rs 5,000 crore. Additionally, DHFL has sanctioned securitisation limit of ~Rs 3,500 crore, which is yet to be utilised. Scheduled repayments due from November 3 till December 31, 2018, are ~Rs 6,000 crore (including CPs), of this, a bulk of them are due in November 2018. However, DHFL plans to buyback majority of its CPs due in November during the first week of November itself. On the business front, like most non-banks, DHFL too has curtailed disbursements to conserve liquidity.
 
CRISIL believes that DHFL's ability to raise resources from capital markets and traditional bank lines will be important for managing current funding challenges and ensuring business growth. Therefore, these will be the key monitorables and rating-sensitivity factors.
 
Given the situation on the fund-raising and liquidity front at the industry level, asset quality on segments such as loans to small and medium enterprises (SME), loans against property (LAP) and real estate developer loans would be the key monitorables going forward.
 
This stems from the sensitivity of borrowers to prolonged funding crunch. So while current delinquencies are not high on account of stringent credit appraisals and risk-mitigating mechanisms, if the funding situation for non-banks does not stabilise over a period of time, asset quality challenges could manifest.
 
CRISIL will continue to cautiously monitor the situation with specific focus on liquidity position, access to funds, and developments on asset quality.
 
The rating on Avanse Financial Services Ltd (Avanse) and Aadhar Housing Finance Ltd (Aadhar housing) are driven by expectation of support from the Dewan group, whose flagship company is DHFL. Therefore, in the light of recent developments on liquidity front for DHFL, the rating on both Avanse and Aadhar Housing will also be closely monitored.
 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL. However, CRISIL alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.

About CRISIL Limited

CRISIL is a leading agile and innovative, global analytics company driven by its mission of making markets function better. We are India’s foremost provider of ratings, data, research, analytics and solutions. A strong track record of growth, culture of innovation and global footprint sets us apart. We have delivered independent opinions, actionable insights, and efficient solutions to over 1,00,000 customers.
 
We are majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.
 
For more information, visit www.crisil.com 

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK

About CRISIL Ratings
CRISIL Ratings is part of CRISIL Limited (“CRISIL”). We pioneered the concept of credit rating in India in 1987. CRISIL is registered in India as a credit rating agency with the Securities and Exchange Board of India (“SEBI”). With a tradition of independence, analytical rigour and innovation, CRISIL sets the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank loans, certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 24,500 large and mid-scale corporates and financial institutions. CRISIL has also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We also pioneered a globally unique rating service for Micro, Small and Medium Enterprises (MSMEs) and significantly extended the accessibility to rating services to a wider market. Over 1,10,000 MSMEs have been rated by us.

CRISIL PRIVACY
 
CRISIL respects your privacy. We may use your contact information, such as your name, address, and email id to fulfil your request and service your account and to provide you with additional information from CRISIL.For further information on CRISIL’s privacy policy please visit www.crisil.com.

DISCLAIMER

This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of doubt, the term “Report” includes the information, ratings and other content forming part of the Report. The Report is intended for the jurisdiction of India only. This Report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the Report is to be construed as CRISIL providing or intending to provide any services in jurisdictions where CRISIL does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this Report does not create a client relationship between CRISIL and the user.

We are not aware that any user intends to rely on the Report or of the manner in which a user intends to use the Report. In preparing our Report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the Report is not intended to and does not constitute an investment advice. The Report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind or otherwise enter into any deal or transaction with the entity to which the Report pertains. The Report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Rating are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities / instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its opinions and analysis. CRISIL rating contained in the Report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the Report should rely on their own judgment and take their own professional advice before acting on the Report in any way.

Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the accuracy, completeness or adequacy of the Report, and no CRISIL Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Report. EACH CRISIL PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. CRISIL’s public ratings and analysis as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any) are made available on its web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (0091) 1800 267 1301.

This Report should not be reproduced or redistributed to any other person or in any form without a prior written consent of CRISIL.

All rights reserved @ CRISIL