Panic selling

One of the few NBFCs that was standing tall despite the IL&FS crisis has now fallen victim to the sell-off triggered by the global pandemic. Aavas Financiers, the affordable housing financing firm has fallen 50% from its all-time high of Rs.2,101 in January this year, although it is still trading comfortably above its listing price of Rs.746. The company’s 99% loan book is made up of retail (salaried and self-employed) consumers, which could be facing a down cycle as the economy shuts down temporarily and disrupts businesses. 

Before the pandemic fear hit Aavas Financiers, the company registered a decent performance in Q3FY20. Assets under management grew from Rs.52 billion in December 2018 to Rs.71 billion in December 2019. Meanwhile, earnings increased 55% to Rs.1.8 billion in the same period. At the same time, net NPA also dropped from 0.49% in Q3FY19 to 0.46% in Q3FY20. 

As the stock price tumbles each day, non-executive nominee director Vivek Vig sold shares worth Rs.211 million on March 12. After the disposal, Vig’s stake dropped from 0.66% to to 0.50, which is worth Rs.415 million. This was Vig’s third disposal since the listing in October 2018. Earlier, in May and June last year, Vig sold shares worth Rs.95 million and Rs.43 million, respectively. In fact, over the past three months, since January 2020, insiders including Vig have sold shares worth more than Rs.7 billion, a trend consistent with the first three quarters of FY20 as well. Promoter holding has fallen from 58.15% at the end of December 2019 to 53.14% as on March 20.

Similarly, mutual funds have reduced their stake from 11.35% to 5.29% between December 2018 and December 2019. SBI MF has cut its holding from 7.50% to 3.56%, while DSP MF has reduced its stake from 2.09% to 0.89%. But FIIs have steadily increased their holding, from 11.56% in December 2018 to 18.79% in December 2019. Small-Cap World Fund, which is the largest foreign investor in Aavas Financiers, holds 2.29%. Due to the selling of late, FII holding could have also reduced in the March quarter.