How Supertech triggered Round II of NBFC selloff ?
It all re-started with the downgrading of a Rs 1,866 crore loan facility of realty developer Supertech by rating firm Brickwork, amid reports that the builder defaulted on loans to Corporation BankNSE -0.42 % and Syndicate BankNSE -1.55 %. The realtor says it has not defaulted on any of its loans.
The news triggered panic on the NBFC counter. Investors were caught in a similar situation last month when defaults mounted at infrastructure financier IL&FS.
Shares of NBFCs, mainly those of home financiers such as Indiabulls Housing, DHFL and Repco Home, took a heavy beating. There was no relief on these counters on Friday, despite RBI’s fresh measures to ease the liquidity worries in the sector.
Supertech has a total debt of Rs 2,000 crore. Indiabulls Housing alone has Rs 600 crore exposure to two of Supertech projects.
Data showed NBFC funding to real estate developers increased 35 per cent compounded annually between FY16 and FY18. Brokerage JM Financial said a recurring operating deficit and material increase in leverage meant a major portion of the funding by developers has been utilised to meet construction costs as well interest outgo on existing debt.
Some analysts fear either more developers may default or there could be a spike in retail non-performing assets due to delay in project deliveries.