The loan book for such companies has grown by 10% year-on-year at the end of March 2021 quarter after the lockdown. covid wave 2; Whereas the portfolio remained flat on June 30, 2021 as compared to March 31, 2021.
Manushree Sagar, Vice President and Sector Head – Financial Sector Ratings, ICRA said, “Demand is expected to pick up in subsequent quarters with some improvement in operating environment conditions and loan growth for FY22 may pick up to 12-15% ”
The domestic rating agency noted that with strict lockdown in various states in the June quarter, collections for these Affordable Housing Finance Companies were affected. The impact was more visible because unlike the moratorium and a pause clause of asset classification that were available earlier, this time there was no such arrangement.
To put this in perspective, for some such companies it increased to 7.2% as of June 30, 2021, from 3.2% estimated 30 days ago, on March 31, 2021.
Overall, the reported gross bad debt (excluding data for one player) was 2.1% as of June 30, 2021.
“With the continuous improvement in collection capacity since June 2021, forward bucket movement is likely to be involved for most of the players, however resolution/rollback may take longer as multiple installments at the same time may be required for the borrowers of these AHFCs. will be difficult to repay,” Sagar said.
ICRA expects gross bad loans to be 3.6-3.9% by the end of March 2022, from 3.3% as on March 31, 2021.
The agency noted that the liquidity profile of these entities is expected to be supported by the large balance sheet liquidity being maintained by these players. Also, availability of funding lines will be essential for development.
“In the long term, the ability to further improve operational efficiencies and control credit costs will be imperative for improving return indicators,” Sagar said.