Shares of NBFC Crashes In The Course Of 10 Days

Shares of non-banking
finance companies (NBFCs)
crashed further after it was
reported
that
the
Maharashtra government
will
form
a
special
investigation team (SIT) in
order
to
investigate
violations of norms by
microfinance companies.
During the last 10 trading
sessions, Bharat Financial
Inclusion Ltd gained only on one day, Shriram Transport Finance Co. Ltd,
Repco Home Finance Ltd, GIC Housing Finance Ltd gained in two sessions,
while Shriram City Union Finance Ltd, Bajaj Finance Ltd, L&T Finance
Holdings Ltd, Mahindra & Mahindra Financial Services Ltd, Equitas Holdings
Ltd and Ujjivan Financial Services Ltd increased in three sessions.
The government formed the SIT after legislators and farm activists hinted that
serious irregularities, like disbursement of loans to more number of people
than allowed and steep interest rates.
On account of political risks that are playing out in certain areas, one cannot
ignore the possibility of some write-offs. However, the current phase is
transient in nature and the strong players will endure some collateral damage.
A big positive that can emerge out of the current situation is that the
indiscipline caused by fringe MFIs could be curbed.
Also, the sentiment of investors was hurted as they expect that the cash
crunch will generate lower profitability of these companies on falling
disbursements and likely rise in credit costs. On 8th November, Prime Minister
Narendra Modi announced scrapping of Rs500 and Rs1,000 notes as legal
tender in order to cure the country of black money.

The demonetization related cash crunch has had a direct impact on the cash
intensive operations of microfinance companies in the form of a fall in fresh
disbursements and loan collection.
Also, rumors of loan waivers and associated political instigation to default are
raising risks of mass defaults in certain geographies. The situation is unlikely
to improve soon and it anticipates bank transactions to become more painful
for the coming 18-24 months.
In the last two weeks, the following shares were dipped in a great way :

Bharat Financial share price Ltd lost 25.5 per cent.

Shriram Transport share price tanked 10 per cent.

Repco share price descended 7.3 per cent.

GIC Housing Finance share price dipped 8.5 per cent.

DHFL share price fell 9.3 per cent.

Muthoot Finance share price rallied down by 11 per cent.

Shriram City share price fell 5.2 per cent.

Bajaj Finance share price lost 12.3 per cent.

LT Finance share price fell 5.4 per cent.

Mahindra Finance down by 12.3 per cent.

Ujjivan share price tanked 16 per cent.

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Article Written by
Madhurima Chowdhury