The securitisation market is progressing steadily towards a record high in FY24, with total volumes reaching Rs 1,44,000 crore for the first nine months, and is on track to cross overall volumes of Rs 2 lakh crore in FY24. The initial half of FY24 (H1FY24) reported volumes of approximately Rs 1.01 lakh crore, predominantly driven by a stellar first quarter (Q1FY24).
The third quarter (Q3FY24) registered a combined volume (encompassing both pass-through certificate (PTC) issuances and direct assignment (DA) transactions) of around Rs 43,000 crore, according to a CareEdge report. The stagnant volumes in Q3FY24 may be linked to a mismatch in the pricing expectations of investors and originators, influenced by tighter liquidity conditions and the Reserve Bank of India’s (RBI) concerns about the rapid expansion in unsecured lending.
“Traditionally, the final quarter of the fiscal year records the highest volumes, and current trends suggest that this pattern is likely to continue. The market volume in each of the three quarters has been similar if we exclude the DA volume of the HDFC entities for Q1FY24. Despite stagnant volumes in the second and third quarters of FY24, the cumulative volume for 9MFY24 demonstrates an approximate 27% increase compared to the same period in the previous fiscal year,” the report said, adding that considering volumes by originators other than HDFC Ltd, this represents a growth rate of around 52% for 9MFY24. Asset class-wise break-up
Mortgage-backed securitisation (MBS) transactions comprised 40% of DA volumes during 9MFY24 with Assetbacked securitisation (ABS) and microfinance (MFI) loan transactions constituting around 37% and 23%, respectively.
The PTC volumes were driven by ABS pools constituting approximately 73% of the total PTC issuances followed by MBS loans and MFI loans, contributing around 16% and 11%, respectively. Vehicle loan financing (includes pools backed by loans against commercial vehicles, cars, two-wheeler construction equipment, tractors, etc.) accounted for around Rs 45,600 crore (63% of PTC issuance).
Robust growth expected
The RBI has recently adjusted its GDP growth forecast to 7% for the entire year, based on economic expansions of 7.8% and 7.6% in Q1FY24 and Q2FY24, respectively. This robust economic growth is anticipated to stimulate credit growth, potentially leading to a strong year-end performance for the securitisation market.
The composition of the securitisation market has shifted, with DA transactions comprising about 49% of the total volume for 9MFY24, trailing behind PTC transactions for the second consecutive quarter. This decrease in DA transaction volume may be attributed to the effects of the HDFC entities’ merger.
The quarterly securitisation market volume has remained in the range of Rs 42,000-Rs 45,000 crore across the three quarters in FY24 (ex-HDFC Limited volume). However, CareEdge Ratings expects that there will be significant expansion in credit growth going forward, which will boost the Q4 volumes in the Indian securitisation market.
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