Securitisation volume to reach all-time high by end of FY20: Icra

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Published: January 22, 2020 3:00:13 AM

The agency estimated that pass-through certificate (PTC) transaction volumes were around Rs 64,000 crore from April to December 2019, compared to around Rs 71,000 crore during the corresponding period in FY19.

The DA volumes saw a decline in December due to non-participation of few large mortgage loan originators that were active previously, the ratings agency said.The DA volumes saw a decline in December due to non-participation of few large mortgage loan originators that were active previously, the ratings agency said.

As non-banking financial companies (NBFCs) and housing finance companies (HFCs) continue to rely heavily on securitisation for raising funds owing to the liquidity squeeze, securitisation volumes crossed Rs 1.5 lakh crore in December 2019. The securitisation volumes are estimated to cross an all-time high of Rs 2 lakh crore by the end of the fiscal year, said ratings agency Icra.

The securitisation volume stood at Rs 1.57 lakh crore in December, compared to Rs 1.44 lakh crore a year ago, according to an Icra report. Abhishek Dafria, vice-president and head, structured finance ratings, Icra said that despite securitisation volumes being high in Q3FY20, the market faced some headwinds due to muted growth in the NBFCs’ books which reduces the eligible assets available for sale.

“Further, the default on pools of an originator due to ongoing bankruptcy proceedings against it may have made some investors cautious,” he added.

The agency estimated that pass-through certificate (PTC) transaction volumes were around Rs 64,000 crore from April to December 2019, compared to around Rs 71,000 crore during the corresponding period in FY19. Volumes in direct assignment (DA) transactions stood at around Rs 93,000 crore in the past nine months as against around Rs 1.28 lakh crore in FY19.

The DA volumes saw a decline in December due to non-participation of few large mortgage loan originators that were active previously, the ratings agency said. As a result, the share of mortgage loans in overall volumes dropped to 31% in December from around 45%-50% in FY18 and FY19. Investors showed higher preference for gold loans, with ‘other asset classes’ accounting for 11% in December 2019. Within PTCs, commercial vehicle loans continued to remain the most preferred asset class accounting for 41% of the total PTC volumes in 9M FY2020.

The share of priority sector lending-driven transactions in the PTC space, which has been facing a decline over the past 3-4 fiscals, fell to 53% during December, compared to 88% in FY17. The ratings agency said that the decline is attributed to the participation of new investor segments such as NBFCs, foreign portfolio investors, high networth individuals and insurance companies without a specific focus on PSL assets. Private banks were earlier the major investor category in PSL assets.

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