Srei Equipment Finance Ltd will securitise assets worth Rs 1,000 crore by March 2013. The company recently concluded a securitisation deal worth Rs 186 crore.

According to D. K. Vyas, chief executive officer, Srei Equipment, the securitisation move is to free up the NBFC’s capital. The funds, so generated, would be used for lending to new sectors, including used construction equipment and IT equipment financing.

Srei Equipment is 50:50 joint venture between Srei Infrastructure Finance and BNP Paribas Lease Group.

Securitisation involves pooling of assets and the subsequent sale of the cash flows from these asset pools to investors. It helps redistribute the credit risk and also provides an additional source of funding.

“We have already concluded securitisation of assets amounting to Rs 186 crore, another Rs 800-900 crore will be done in this quarter,” Vyas told Business Line.

High safety

The Rs 186-crore securitisation deal was rated by Crisil to have “the highest degree of safety regarding timely servicing of financial obligations”.

“Securitisation was one of our key strengths till last year. However, in 2012 we hardly saw any deals happening due to some ambiguity in guidelines. But now with clarity emerging on the guidelines we hope to opt for this route to free up our capital,” Vyas said.

The Reserve Bank of India had in August 2012 revised the guidelines on securitisation transactions for NBFCs in line with the revised norms for such transactions for banks, which was issued in May 2012.

Srei Equipment had securitised portfolio of Rs 4,334 crore in 2011-12.

The capital, which will be freed up by way of securitisation, would be used to fund its business in new sectors.

With growth in sale of construction equipment slowing, the company will focus on financing used construction equipment. According to Vyas, used equipment financing has low credit risk and will help the company garner better margins.

Mutual fund participation

Currently, priority sector lending accounts for a major chunk of the securitisation market in the country, he said, and added that the participation of mutual funds is important to grow the market.

“Earlier, mutual funds were buying such instruments, but of late they were not coming in on account of certain taxation issues,” he said.

However, the mutual fund industry’s interest might be revived as and when there is some tax relief. “Since their interest is not limited to priority sector alone, we can see the securitisation market expand,” he pointed out.

shobha.roy@thehindu.co.in

(This article was published on January 4, 2013)
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