Securitisation volumes estimated to dip to Rs 1.2-1.3 lakh cr in FY21: Icra

“We estimate that the annual securitisation volumes should remain significantly lower in FY21 than the preceding fiscal at about Rs 1.2-1.3 lakh crore given the impact of the pandemic and the lower availability of eligible pools for securitisation,” Icra's vice president and head (structured finance ratings) Abhishek Dafria said in a report. The rating agency said the drop in securitisation volumes in the first quarter was primarily attributable to the disruptions caused by the COVID-19 pandemic.

The securitisation volumes are estimated to significantly drop to Rs 1.2-1.3 lakh crore during the current fiscal due to the impact of COVID-19 and lower availability of eligible loan pools for securitisation, says a report. The securitisation volumes in 2019-20 were around Rs 1.97 lakh crore. Volumes in the first quarter of 2020-21 dropped to around Rs 7,500 crore from close to Rs 50,300 crore in the same quarter of the previous year, rating agency Icra said in a report.       “We estimate that the annual securitisation volumes should remain significantly lower in FY21 than the preceding fiscal at about Rs 1.2-1.3 lakh crore given the impact of the pandemic and the lower availability of eligible pools for securitisation,” Icra's vice president and head (structured finance ratings) Abhishek Dafria said in a report.

The rating agency said the drop in securitisation volumes in the first quarter was primarily attributable to the disruptions caused by the COVID-19 pandemic. The nationwide lockdown severely impacted the income generation capability of a large number of borrowers.      “This made the investors wary of investing in fresh securitisation transactions given the possible deterioration in the loan repaying capability of retail borrowers,” it said.    The RBI's loan moratorium policy, though provided relief to retail borrowers, was detrimental to the securitisation market as investors stayed away from pools with irregular cash flows in the initial months, it said. The funding requirements for NBFCs and housing finance companies (HFCs) also declined during this quarter due to lower demand from the borrowers and the increased focus on collections rather than disbursements, the agency said.

According to Dafria, though the securitisation volumes were significantly lower during Q1 FY21, the market saw an uptick in volumes in June 2020.    More than two-thirds of the total volumes in Q1 FY21 were completed in June 2020, he said. “We expect the overall volumes to see further increase in the coming quarters supported by the improvement in collections being seen across asset classes that would restore investor confidence,” Dafria said.

The traction will also be supported by NBFCs who have already recommenced disbursements, albeit lower amounts at present, and would utilize securitisation of their pooled assets as a funding tool, he added. The extension of the partial guarantee scheme of the government up to March 2021 would also provide some support to increase securitisation volumes, he said.    Commercial vehicle loans emerged as the leading asset class accounting for around 31 per cent of overall volumes in the first quarter of this fiscal.

Mortgages, which accounted for around 48 per cent overall volumes in Q1 FY19, witnessed a reduction in share to 26 per cent in Q1 FY21, due to exit of a few large-size originators in recent years from the securitisation market, the report said. Share of gold loan segment increased to 32 per cent of the total volumes in Q1 FY21 as against 13 per cent in the same quarter of the previous fiscal, it said..