HFCs trade mixed after RBI releases new norms to align HFCs with NBFCs

As part of the further harmonisation of HFC regulations with NBFC regulations, the RBI has decided to move HFCs towards the regulatory regime on deposit acceptance as applicable to deposit-taking NBFCs.

HFCs stands for housing finance companies, while NBFCs is an acronym for non-banking finance companies.

Amid the development, shares of PNB Housing Finance traded 3 per cent higher at Rs 824.7 and Can Fin Homes traded with 0.32 per cent gains at Rs 765.75 per share. Nevertheless, LIC Housing Finance traded in the red, down by 0.2 per cent at Rs 577.5 per share.

Global brokerage Morgan Stanley said that the RBI has announced norms aligning HFCs with other NBFCs. Highlighting the measures, the brokerage said the ceiling for public deposits held by HFCs is reduced to 1.5x net-owned funds.

Further, the upper cap for public deposit tenure is slashed to five years as opposed to 10 years. Further, they will be required to maintain 15 per cent liquid assets (by March 2025) against public deposits held by them versus 13 per cent earlier, the same as NBFCs.

In respect of the stock-specific view, the brokerage noted that deposit-taking HFCs under its coverage are well within the prescribed limit.

Q2FY24 deposits/equity stood at 1.2x/0.4x/0x1x for PNBHF/LIC HF/Can Fin Homes, respectively, as mentioned by the brokerage.

Brokerage firm Citi clarified that while LIC Housing Finance and Can Fin Home Finance have less than 2 per cent of borrowings by way of public deposits, PNB Housing Finance has almost one-third of borrowings through deposits.

Global firm Macquarie believes that LIC Housing Finance meets all of the aspects as per the new norms released. The brokerage states that the stock trades at a compelling valuation, with the top pick being LIC Housing Finance in the NBFC space. The brokerage has maintained an ‘outperform’ rating with a target of Rs 650 per share.