Securitisation volumes have topped Rs 1.15 trillion in the first nine months of the current financial year (FY23), up 42 per cent year-on-year (YoY) from the year-ago period, as market activity in the October – December quarter continued with the momentum witnessed in the first two quarters, said rating agency CRISIL in a report on Monday.
Further, there was marked increase in the number of originators, which topped 120 compared with 100 in the preceding year. This was because new originators such as small finance banks increased their securitised issuances in recent quarters and added this mechanism as one of their routes to access incremental liquidity, the report mentioned.
“The securitisation market is continuing to regain its mojo post the pandemic, propped up by a resurgence in microfinance and increasing preference among investors for vehicle loans. Additionally, personal and business loans seem to be gaining greater acceptance, bringing diversity to the bouquet of asset classes being securitised”, said Krishnan Sitaraman, Senior Director & Deputy Chief Ratings Officer, CRISIL Ratings.
According to the report, the commercial vehicle segment witnessed 31 per cent growth and microfinance segment saw 14 per cent growth in the securitisation market. Unsecured loans, including personal and business loans, also continued to draw investor attention, comprising 7 per cent of the securitised assets compared with 3 per cent in FY22. However, the share of property-backed loans declined to 38 per cent from 43 per cent.
Of the total securitisation volume, almost 60 per cent of the transactions took place through the direct assignment (DA) route in the first nine months of FY23, with the rest 40 per cent being accounted for by pass through certificates (PTCs). The DA route was most utilised for sell-down of mortgage and gold loans.
Among buyers, private (53 per cent) and public sector (25 per cent) banks remained the largest investor groups, while the share of nonbanks remained low with mutual funds also making sporadic investments. The state-owned lenders have invested in PTC-backed pools comprising vehicle, microfinance, and unsecured business loan receivables in recent quarters, the report said.
Meanwhile, as per the report, there has been an increasing number of PTCs that are listed on the exchanges seeing an uptick in the secondary market. “While deal arrangers continue to be the first investors in these listed deals, after holding the listed PTCs for a couple of months, these entities have been able to offload the instruments to interested investors like corporate treasuries, high net worth individuals and family wealth office firms”, CRISIL said.