Icra lowers its estimate on securitisation volume

By: |
October 23, 2020 2:30 AM

Rating firm Icra has lowered its estimate on securitisation volume to Rs 80,000-90,000 crore for the current financial year (FY), compared to earlier projection of Rs 1.2-1.3 lakh crore.

Investors have, however, tightened their eligibility criteria for pool selection.

Rating firm Icra has lowered its estimate on securitisation volume to Rs 80,000-90,000 crore for the current financial year (FY), compared to earlier projection of Rs 1.2-1.3 lakh crore. The securitisation volume dropped 78% year-on-year to Rs 22,700 crore in the first half (H1) of FY21, compared to the same period last year. However, the securitisation volume more than doubled in the second quarter to around Rs 15,200 crore, compared to Rs 7,500 crore in the June quarter of current financial year.

Securitisation is a common method used by non-bank lenders to free up capital and generate immediate liquidity by selling loan portfolios to those looking to build their loan books. Abhishek Dafria, vice-president and head-structured finance ratings, Icra, said, “We expect the momentum in securitisation volumes to continue in the second half of FY21 supported by increased investor confidence, increase in finding requirement of originators as they re-start disbursement and steady easing of business activity as lockdowns end.”

Investors have, however, tightened their eligibility criteria for pool selection, Dafria added. He also said rating firm has estimated securitisation volumes to be Rs 80,000-90,000 crore for FY21, though still significantly lower than the Rs 2 lakh crore volumes seen in FY20.

As per an Icra note, investors are drawing confidence from the healthy increase seen in collection efficiencies across all asset classes. The proportion of assets under management, which was under moratorium declined gradually during April 2020 to August 2020. Overall, about 45 originators undertook securitisation in the second quarter, as against 18 originators seen in the first quarter of FY21.

Sachin Joglekar, assistant vice-president, Icra said average collection efficiency for the all the asset classes improved to more than 75% as of August 2020. Among the segments, the collections in mortgage-backed securitisation transactions remained least impacted and showed remarkable resilience on account of prevailing online collection practices and salaried borrower class in the segment, he added.

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