Stringent monetary policy stance with respect to funding of non-financial banking companies (NBFCs) for working capital may increase the scope for securitisation transactions in their loan assets.
This is the view of Muthoot Capital Services Ltd (MCSL), a Muthoot Pappachan Group company, which has just concluded a Rs 236-crore two-wheeler securitisation transaction with HDFC-MF, the largest mutual fund in India, subscribing to the entire issuance.
This is one of the largest securitisations deals in the two-wheeler finance space and the biggest single securitisation transaction so far for MCSL, says Thomas George Muthoot, Managing Director.
The deal was arranged and structured by Vivriti Capital which runs the largest institutional debt market platform in the country. The total number of individual loan portfolios involved in the deal were 76,252.
Primarily into auto-finance business with two-wheeler and used four-wheeler financing, MCSL has a portfolio of about Rs 2,600 crore as of December 31, 2018, with seven lakh customers spread across 18 states.
The total loan book of the company had increased by 56 per cent during 2017-18 over that of the previous year, and by 31 per cent during the first nine months of the current financial year, George told BusinessLine .
The underlying loan pool received an AA rating from CRISIL, a significant achievement in this asset class.
HIGH MARKET INTEREST
In 2-wheeler financing, the company operates with collateral in the form of the vehicle financed, supported by a mandatory guarantor. The average Loan-to-Value (LTV) is in the range of 75 per cent.
The collection efficiency as of December 31, 2018, was assessed at as high as 96 per cent and the delinquency (90 days past due) trend in the overall assets under management as on the above date was at 4.80 per cent.
These are the receivables which have been now securitised, George said, adding that asset securitisations would continue to attract market interest if there is a dearth of equity coming into the NBFC sector.
"Banks/large lenders/investors looking for retail loans or looking for steady investment with regular returns are likely to approach entities like MCSL for securitisation transactions," he said.
It has caught the fancy of both the lenders and investors as a transaction that ensures stable and reasonable returns in the medium term.
'IMPORTANT MILESTONE'
MCSL has always enjoyed the confidence of marquee investors including leading mutual funds who are equity investors in the company, George said.
"The AA rating and subscription by HDFC-MF is a big validation of the inherent strength of our underwriting and servicing capabilities. This is a landmark transaction for us and paves the way for more such deals in the future."
Meanwhile, Gaurav Kumar, Founder & Director, Vivriti Capital said that the transaction size is among the largest seen in the two-wheeler financing space.
"We have been associated with MCSL since inception and believe this is an important milestone in our approach of linking investors and high-quality issuers through our debt market platform."
The AA rating that the transaction got and the onboarding of a name no less than HDFC MF is a confirmation of the high quality of the pools securitised by MCSL over the last two-three years, he added.