Housing finance companies expected to grow 8-10% in FY 22: report
The growth of the accounting portfolio moderated for HFCs in the first nine months of fiscal 2021 (compared to March 2020) to 4.3% (excluding the portfolio of a large player, which suffered significant write-offs) against a portfolio growth of 6% (YoY) in fiscal year 2020.
Icra Ratings in a report indicates that with the recovery in demand for housing credit in the sector over the last two quarters, most HFCs have already reached disbursements close to the pre-Covid level and aim to achieve disbursements even higher in the fourth quarter of fiscal 2021.
“This is expected to increase the growth rate for FY2021 to 6-8 percent. Thereafter, we estimate 8-10 percent growth for the HFC portfolio on the books in FY2022. “the agency said.
According to Icra Vice President and Sector Head Sachin Sachdeva, given the cash flow constraints facing borrowers, HFC payment delays have increased in the first nine months of fiscal 2021, as This is evidenced by the pro forma GNPA of approximately 2.7% as of December 31, 2020, compared to the declared GNPA of 2.4% as of March 31, 2020.
Asset quality metrics could be hit more in the fourth quarter of fiscal 2021, he said.
It estimates that HFCs GNPAs for FY2021 are 50-100 basis points higher than FY2020 and also remain high in FY2022.
Despite improving business in the last two quarters of fiscal 2021, relatively weaker business growth than in previous years and pressures on asset quality would moderate HFC profitability in fiscal 2021, Sachdeva said.
However, healthy provision coverage maintained by most entities should provide a cushion and protect profitability from asset quality stress related to Covid in fiscal 2022, he said.
“While HFCs are expected to regain their profitability and growth trajectory in fiscal 2022, the increase in Covid-19 infections and localized blockages remain a matter of concern. The ability of HFCs to maintain growth momentum and control slippages would be essential to maintain the credit profile, “he added.
In addition, the report states that HFCs have maintained good balance sheet liquidity over the past few quarters and have gradually reduced their reliance on short-term funding sources like CP (commercial papers), which has helped to improve asset-liability asymmetries in the near future. term buckets.
The rating agency expects HFCs to maintain healthy liquidity in the near term given the difficult environment.