Relaxation in prudential norms for debt mutual funds by Sebi is a positive step for housing finance companies, a report by credit rating agency Icra said today.
Sebi has recently increased the additional exposure limits provided for HFCs in the financial services sector to debt-oriented mutual fund schemes from five per cent to ten per cent, it said.
"The existing norms require debt mutual fund schemes to cap their investments at 25 per cent of the net assets of the scheme in a single sector except for the financial services sector, wherein additional exposure can be taken for HFCs," the report added.
With this change in regulation, total exposure cap to the financial services sector (including the housing finance segment) stands at 35 per cent. Total asset under debt-oriented mutual funds was around Rs 9.7 trillion as on July 2016; increase in exposure limit by 5 per cent will give headroom of Rs 500 billion worth of investments in the housing finance segment, it said.
"Factoring in an estimated credit growth of 20-22 per cent in fiscal 2017, and the re-financing requirements, we estimate that HFCs would need to mobilise a total debt between Rs 2.2-2.6 trillion during the fiscal," Icra's senior vice president and co head-financial sector ratings, Karthik Srinivasan said in a statement.
With the change in guidelines, debt market instruments could have a higher share in the incremental funds raised by HFCs, he said.
A larger part of the incremental funding is expected to be in the form of commercial paper and short-to-medium term NCDs, and thus managing the asset-liability gaps within manageable levels would remain a challenge for HFCs, given the relatively longer tenure of the assets.
"Further, given that funding from the debt markets could be at relatively lower rates than bank borrowings, this would lead to moderation in cost of funds for HFCs rated at AA category and above," he added.
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