The NBFC sector went through liquidity crisis in FY19.
The liquidity issue continues to impact the performance of many companies in the sector. However, there are signs that the situation is far better than it was in Q3FY19. The crisis which hit credit growth of the companies further impacted financial status of these firms. Margins growth remained under pressure for larger part of the last two quarters. The major reason for this was the growth in NBFCs was affected as management decided to curtail incremental AUM growth in order to maintain liquidity. The situation became worse as the share of fund flow from MFs to NBFC’s declined.
The sector can be expected to witness positive sentiment after the recent announcements in the budget. The boost to affordable housing will lead the way ahead for the market. The announcements such as, tax holiday has been provided for developers of affordable housing, proposal to provide additional deduction of 1.5 lakh (3.5 lakh in total) for interest on loan borrowed up to Mar 31, 2020 with a ticket size of 45 lakh, and the total benefit of 7,00,000 on interest over loan tenure of 15 years will lead the way forward.
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