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IIFCL to launch subsidiary for issuing asset-backed securities
ECONOMY & POLICY

IIFCL to launch subsidiary for issuing asset-backed securities

11 Nov 2024 2 Min Read CW Team
India Infrastructure Finance Company (IIFCL) is planning to establish a subsidiary to issue asset-backed securities (ABS) or covered bonds to securitise its assets and preserve capital for future business expansion. IIFCL's Managing Director, PR Jaishankar, explained to PTI that the company was approaching the threshold for its asset size and loan book. He indicated that IIFCL might not seek substantial growth in these areas but could create a separate division dedicated to securitising its assets.

Jaishankar elaborated that the goal is to grow and generate new assets by leveraging existing ones, thereby reducing the need for additional liabilities. He emphasized that this approach would allow assets to generate further assets incrementally, helping reduce capital costs, improve profitability, and enhance asset quality and viability.

The plan, he noted, is to spin off a portion of their assets, maintaining a threshold while focusing more on increasing sanctions and disbursements rather than expanding the asset or loan book size. Jaishankar further mentioned the potential for a separate vertical to issue ABS, which could involve either pass-through or pay-through securities.

He discussed the possibility of issuing covered bonds, explaining that while covered bonds are recourse-backed, ABS is not, thus providing two potential structures. Jaishankar added that these details were still under development, but once finalised, the proposal would be presented to the board for approval.

In FY24, IIFCL reported a 44 per cent increase in standalone net profit to Rs 15.52 billion, driven by a rise in lending and a reduction in non-performing loans.

India Infrastructure Finance Company (IIFCL) is planning to establish a subsidiary to issue asset-backed securities (ABS) or covered bonds to securitise its assets and preserve capital for future business expansion. IIFCL's Managing Director, PR Jaishankar, explained to PTI that the company was approaching the threshold for its asset size and loan book. He indicated that IIFCL might not seek substantial growth in these areas but could create a separate division dedicated to securitising its assets. Jaishankar elaborated that the goal is to grow and generate new assets by leveraging existing ones, thereby reducing the need for additional liabilities. He emphasized that this approach would allow assets to generate further assets incrementally, helping reduce capital costs, improve profitability, and enhance asset quality and viability. The plan, he noted, is to spin off a portion of their assets, maintaining a threshold while focusing more on increasing sanctions and disbursements rather than expanding the asset or loan book size. Jaishankar further mentioned the potential for a separate vertical to issue ABS, which could involve either pass-through or pay-through securities. He discussed the possibility of issuing covered bonds, explaining that while covered bonds are recourse-backed, ABS is not, thus providing two potential structures. Jaishankar added that these details were still under development, but once finalised, the proposal would be presented to the board for approval. In FY24, IIFCL reported a 44 per cent increase in standalone net profit to Rs 15.52 billion, driven by a rise in lending and a reduction in non-performing loans.

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