Sebi relaxation in debt mutual funds good for HFCs: Report

Mumbai, Aug 16 (PTI) Relaxation in prudential norms fordebt mutual funds by Sebi is a positive step for housingfinance companies, a report by credit rating agency Icra saidtoday. Sebi has recently increased the additional exposure limitsprovided for HFCs in the financial services sector todebt-oriented mutual fund schemes from five per cent to tenper cent, it said. "The existing norms require debt mutual fund schemes tocap their investments at 25 per cent of the net assets of thescheme in a single sector except for the financial servicessector, wherein additional exposure can be taken for HFCs,"the report added. With this change in regulation, total exposure cap to thefinancial services sector (including the housing financesegment) stands at 35 per cent. Total asset underdebt-oriented mutual funds was around Rs 9.7 trillion as onJuly 2016; increase in exposure limit by 5 per cent will giveheadroom of Rs 500 billion worth of investments in the housingfinance segment, it said. "Factoring in an estimated credit growth of 20-22 percent in fiscal 2017, and the re-financing requirements, weestimate that HFCs would need to mobilise a total debt betweenRs 2.2-2.6 trillion during the fiscal," Icra’s senior vicepresident and co head-financial sector ratings, KarthikSrinivasan said in a statement. With the change in guidelines, debt market instrumentscould have a higher share in the incremental funds raised byHFCs, he said. A larger part of the incremental funding is expected to bein the form of commercial paper and short-to-medium term NCDs,and thus managing the asset-liability gaps within manageablelevels would remain a challenge for HFCs, given the relativelylonger tenure of the assets. "Further, given that funding from the debt markets couldbe at relatively lower rates than bank borrowings, thiswould lead to moderation in cost of funds for HFCs rated at AAcategory and above," he added. PTI KD NPANURDS