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MOSL: NBFC-Large NBFCs comfortable on liquidity front in near term

In this note, we have tried to address the recent investor queries related to NBFC liquidity and ALM, likely moratorium on the asset side and latest developments in bond market. We have analyzed the 'adjusted' ALM of our coverage universe, and on the borrowings front, due to lack of clarity on moratorium for bank borrowings, we have conducted a sensitivity ALM analysis for both scenarios - with and without bank moratorium.

** Banks are unlikely to provide blanket moratorium to the sector. Ways of providing support to NBFCs varies from term loan moratorium to additional working capital facility for new credit lines (including TLTRO money). Based on available data from ICRA (rating agency) amongst our coverage PIEL and Indostar have availed moratorium.

** While all large NBFCs under our coverage are comfortably placed with liquidity on their balance sheet to meet fixed obligation and liability repayment from a 3-6 months perspective, TLTRO (Exhibit 12) and additional facilities from Banks and support lines from parent is likely to provide additional cushion. Although so far out of TLTRO 1.0 direct support to private NBFC is very limited (Exhibit 13)

** Small and mid-sized NBFCs are likely to benefit from the refinance offered by NABARD, SIDBI, NHB, etc. However, risk aversion from the banking system remains high for small and mid-sized players (1st Auction of TLTRO 2.0 is a clear indication for the same - Auction bids are 0.5x of target of INR250b). Some form of credit guarantee from the RBI/GOI or continued liquidity support to NABARD, SIDBI, and NHB may also help in terms of improving fund flow to this segment.