Indian Structured Finance

Insights from Indian Capital Markets!

[Indian Structured Finance @isf_views]

Overall costs to government for the 1st tranche of gold bonds has worked out to be 15%, as compared to 7% for a similar tenor normal bond. The costs for 2nd issuance are even higher...

This depicts the risks in running an unhedged scheme like SGB..
Read👇
https://t.co/Ah4u04eCEY

[Indian Structured Finance @isf_views]

Many of the defaults happened due to fraudulent books/loans.
Good that framework includes minimum thresholds for branchwise audits by stat auditors.

[Indian Structured Finance @isf_views]

Good that regulator is taking steps to bring frameworks around statutory audits. While rating agencies have been criticised a lot, audit agencies have been equally responsible for defaults in financial sector.

[ReserveBankOfIndia @RBI]

Issue of Guidelines for Appointment of Statutory Central Auditors (SCAs)/Statutory Auditors (SAs) of Commercial Banks (excluding RRBs), UCBs and NBFCs (including Housing Finance Companies)
https://t.co/Ichd1DXfdd

[Indian Structured Finance @isf_views]

@CapInfiniti @wideclops Would be in MCA fillings as well. It seems exposure is between 15-20 Cr

[Indian Structured Finance @isf_views]

Stress in MFI & unsecured sectors is real. Mid sized NBFC MFI Margdarshak Finance defaults - has liabilities of 500 Cr+.
Makes sense to be in secured asset classes only for next few quarters.
Brickworks in below rating action mentions defaults in EMIs👇

https://t.co/YdhNiuMrj7

[Indian Structured Finance @isf_views]

@pramodh87 True!

[Indian Structured Finance @isf_views]

@amitmantri @varinder_bansal

[Indian Structured Finance @isf_views]

@dugalira @abhymurarka @datta_arvind

[Indian Structured Finance @isf_views]

@pramodh87 They would make (pool yield minus 4%) via this txn. This would be higher than (pool yield minus (cost of funding ~7%) ) if they retained the pool.

[Indian Structured Finance @isf_views]

Sundaram Finance doing a four securitisation paper (most likely PSL with bank) at 4% coupon 🙄

[Indian Structured Finance @isf_views]

@pramodh87 Sundaram is effectively raising money at 4% by selling down loans - very good deal for them

[Indian Structured Finance @isf_views]

* SFL doing a four year PTC

[Indian Structured Finance @isf_views]

With limited disbursements due to Covid, banks seem to be struggling to find good quality PSL assets resulting in such finely priced transactions!

[Indian Structured Finance @isf_views]

@vibhaas10 Nope

[Indian Structured Finance @isf_views]

A new product in the Indian market is something called as Covered Bond. It provides benefits of securitisation with added advantage of having recourse to issuer's balance sheet.

[Indian Structured Finance @isf_views]

@mitul_7 @dugalira @abhymurarka @KirtanShahCFP PTCs don't have recourse to issuer

[Indian Structured Finance @isf_views]

@RajanYogesh Anyone who is eligible to issue bond and has security to offer can issue covered bond

[Indian Structured Finance @isf_views]

@AnilKSood5 @dugalira @abhymurarka @KirtanShahCFP Please refer below detailed report

https://t.co/4v5BxR1W1z

[Indian Structured Finance @isf_views]

@AuditorInvestor @dugalira @abhymurarka @KirtanShahCFP DHFL has defaulted on NCDs but collections from securitisation pools are flowing to investors.
Jana MFIs pools have defaulted but NCDs are being honoured. Had both these txns been covered bonds, defaults may not have happened.

[Indian Structured Finance @isf_views]

@AuditorInvestor @dugalira @abhymurarka @KirtanShahCFP There have been examples where issuer has defaulted but securitisation txns performed relatively well (eg - DHFL) and vice versa (eg - Jana SFB). With covered bonds you get best of both the world's which significantly lowers the probability of default.

[Indian Structured Finance @isf_views]

@dugalira @abhymurarka @KirtanShahCFP

[Indian Structured Finance @isf_views]

Wouldn't be surprised if the product takes off in a big way in coming years. Globally, afterall there is a multi trillion dollar market for covered bonds!