By
Shubham Raj
These funds have a huge exposure of Rs 14,564 crore to non-banking finance companies.
Franklin Templeton India’s move to freeze nearly Rs
31,000 crore worth of assets amid “significant reduction in liquidity and
higher redemptions” has laid bare the problems with Indian debt papers,
especially sectors to which the fund house has huge exposure.
The six funds, which were closed down by the Indian arm of one of the world’s biggest fund houses, are neck deep in sectors that have been in the news in recent times due to negative reasons.
These funds have a huge exposure of Rs 14,564 cr to non-banking finance companies (NBFCs), Rs 5,532 crore to the power sector and Rs 3,480 crore to infrastructure and realty -- a combined Rs 23,567 crore ($3.07 billion) or 76.41 per cent of the total wealth under freeze, as per data available with Accord Fintech, a financial database manager.
Analysts said the health of the debt papers of many of the companies in these sectors are likely to deteriorate even though the companies have taken steps to dodge lockdown blows. They were already dealing with a liquidity crunch even before the lockdown started.
“NBFCs are lenders to the high risk space of residential developers, whom banks are not very keen on lending. They will find an added level of difficulty in getting collection from residential developers,” said Sachin Gupta, Senior Director, Crisil Ratings.
RBI on Thursday tried to open a new line of credit to banks to facilitate targeting lending to NBFCs, but there were fewer takers for the arrangement, as banks are hesitant to increase exposure to NBFCs.
The six funds, which were closed down by the Indian arm of one of the world’s biggest fund houses, are neck deep in sectors that have been in the news in recent times due to negative reasons.
These funds have a huge exposure of Rs 14,564 cr to non-banking finance companies (NBFCs), Rs 5,532 crore to the power sector and Rs 3,480 crore to infrastructure and realty -- a combined Rs 23,567 crore ($3.07 billion) or 76.41 per cent of the total wealth under freeze, as per data available with Accord Fintech, a financial database manager.
Analysts said the health of the debt papers of many of the companies in these sectors are likely to deteriorate even though the companies have taken steps to dodge lockdown blows. They were already dealing with a liquidity crunch even before the lockdown started.
“NBFCs are lenders to the high risk space of residential developers, whom banks are not very keen on lending. They will find an added level of difficulty in getting collection from residential developers,” said Sachin Gupta, Senior Director, Crisil Ratings.
RBI on Thursday tried to open a new line of credit to banks to facilitate targeting lending to NBFCs, but there were fewer takers for the arrangement, as banks are hesitant to increase exposure to NBFCs.
Source - Economic Times
