Affordable Housing Finance Companies Pay the Price of Covid: ICRA
The growth of the loan portfolio of these companies moderated to 10% over one year at the end of the March 2021 quarter due to confinements following wave 2 of the Covid; while the portfolio remained stable at June 30, 2021 compared to March 31, 2021.
“With some improvement in operating environment conditions, demand is expected to accelerate in the following quarters and loan growth could reach 12-15% for fiscal 2022,” said Manushree Saggar, vice -President and Head of Sector – Financial Sector Ratings, ICRA.
The national rating agency noted that with tighter lockdowns in various states during the June quarter, the collections of these affordable housing finance companies were affected. The impact was more visible because unlike the moratorium and a standstill clause on asset classification that were available earlier, there were no such exemptions this time around.
To put this in perspective, the 30-day delay for some of these companies has dropped to 7.2% as of June 30, 2021, compared to 3.2% estimated as of March 31, 2021.
In total, reported gross bad debts (excluding player data) amounted to 2.1% as of June 30, 2021.
“With a steady improvement in collection efficiency since June 2021, the forward movement of the compartment is likely to be contained for most players, although resolution / cancellations may take longer as it it would be difficult for borrowers from these AHFCs to clear multiple payments at the same time, “said Saggar.
The ICRA expects gross bad debt to be between 3.6 and 3.9 percent by the end of March 2022, up from 3.3 percent as of March 31, 2021.
The agency noted that the liquidity profile of these entities should remain comfortable, supported by the significant balance sheet liquidity maintained by these players. At the same time, the availability of lines of finance would be imperative for growth, he said.
“In the long term, the ability to further improve operational efficiency and control credit costs would be imperative to improve performance metrics,” said Saggar.