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MOSL: Morning India (21/June/19): 1. Financials – Housing Finance (Increasing capital requirements for HFCs); 2. Brigade Enterprises; 3. Utilities

MOrning India (21/June/19): 1. Financials – Housing Finance (Increasing capital requirements for HFCs); 2. Brigade Enterprises; 3. Utilities

 

Today’s top research theme

Financials – Housing Finance: Increasing capital requirements for HFCs; Minimum capital adequacy ratio to be increased to 15% by FY22 

• NHB has made some amendments to the capital adequacy ratio and leverage norms for HFCs. According to the revised guidelines, the minimum threshold of the CAR will increase from 12% now (minimum Tier I of 6%) to 15% by 31st Mar'22 - uniformly over the next three years. Hence, by FY22, HFCs will be at par with other NBFCs in this regard.
• Also, the minimum Tier I ratio has been increased to 10%, effective FY20. Likewise, the cap on leverage (total borrowings/net owned funds), which is currently at 16x, will be brought down to 12x by 31st Mar'22 in a staggered manner.
• According to our analysis, these amendments are unlikely to have any meaningful impact on any of our coverage companies. All HFCs under our coverage already have 10%+ Tier I capital.

Piping hot news

Sebi panel proposes cut in liquid funds’ exposure to NBFCs, HFCs

• Liquid funds may soon be allowed to invest only up to 30% of their assets in securities issued by non-banks and mortgage lenders, as the market regulator seeks to reduce the sectoral risk faced by these funds. The Mutual Fund Advisory Committee (MFAC) of the Securities and Exchange Board of India (Sebi) on Wednesday proposed that the exposure limits of liquid funds to non-banking finance companies (NBFCs) and housing finance companies (NBFCs) be reduced in a phased manner, three people aware of the matter said.