Mortgage lenders Dewan Housing Finance Corporation Ltd. and Indiabulls Housing Finance Ltd. blamed rumours for the sudden plunge in shares on a day the benchmark Sensex swung the most in more than four years.
Dewan Housing Finance nosedived 60 percent in its biggest decline since listing. Indiabulls Housing Finance dropped 35 percent to a 19-month low. They recovered from the lows to close 42.4 percent and 8.1 percent lower, respectively.
The S&P BSE Sensex, which was trading about 1 percent higher at about 1.05 p.m., fell as much as 3 percent in less than 10 minutes. NSE Nifty 50 Index dropped as much as 3.27 percent during the period. The benchmark indices recovered part of the losses and were trading less than 1 percent lower at 3:00 p.m.
Ashwini Hooda, deputy managing director of Indiabulls Housing Finance, attributed the panic to one large non-bank lender defaulting on debt two weeks back, which led some mutual funds to sell bonds at distress. Kapil Wadhawan, chairman and managing director at Dewan Housing Finance, agreed. “Two weeks ago, there was a lot of panic around one of the other NBFCs. All these rumour mills have led to what we're seeing in the market today.”
While they didn't name the non-bank lender, IL&FS Financial Services Ltd. defaulted on repayment of debt recently.
Wadhawan of Dewan Housing Finance, however, assured investors that his company's liquidity and other fundamentals remain strong. “We are sitting on an extremely strong liquidity position. We have a very small commercial paper which has already been factored into our asset liability management position and liquidity. So yes, it's business as usual at our end, or at least it was as of this morning. The drop shows complete disregard for company fundamentals.”
Hooda also stressed that Indiabulls Housing Finance's financial position was strong. “If we don't borrow a single rupee for six months, we should be able to pay back all our liabilities, disburse all our home loans, and still be left with 25 percent margin cushion,” he said in an interaction to Bloombergquint. “With Rs 20,000 crore of liquid cash in balance sheet, we are the last man standing.”
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