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IDBI
to mobiles Rs 1,500 cr
via securitisation
Praveen
Chandran
3 October 2002
 Mumbai:
Industrial Development Bank of India (IDBI) has decided
to securitise the assets of National Hydel Power Corporation
(NHPC), Larsen & Toubro (L&T) and National Thermal
Power Corporation (NTPC) to mobilise around Rs 1,500 crore.
The premier financial institution (FI) is likely to sign
a deal with State Bank of India Capital Markets to manage
these deals soon.
"It is expected
that the securitisation products will solve IDBI’s resource
crunch to a large extent, since an exposure to a special
purpose vehicle floated by IDBI will not be treated as
IDBI exposure as per the existing norms," say merchant
banking sources.
The sources say
IDBI has plans to raise Rs 4,000 crore through securitisation
deals this fiscal. The FI wants to mobilise around Rs
265 crore by transferring the assets of NHPC and L&T
and another Rs 1,000 crore by securitisng NTPC assets.
The securitisation process will be completed in tranches.
A senior IDBI official says the resources from the securitisation
deals will be used to refinance IDBI’s existing high-cost
debt, as well as to meet its bond-redemption payments.
Moreover, the institution has lined up several capital
expenditure projects in the infrastructure sector.
Currently, the
main problem faced by the term-lending institution is
that major institutional investors like banks are hesitant
to buy IDBI bonds, since most of them have reached their
prudential exposure limits.
Securitisation is a process whereby non-tradable or illiquid
financial assets are transformed into tradable securities.
It involves the transfer of an asset or a pool of assets,
directly or indirectly, by the owner of the assets to
a special purpose vehicle, which is funded through an
issue of debt securities or notes backed by the cash flows
generated by the assets.
Securitisation offers a numbers of advantages to the owner
of assets, to the investors and to the financial system
of the country. From the owner’s perspective, securitisation
improves the liquidity position by replacing receivables
by cash. It removes assets from the seller’s balance sheet,
thus liberating capital for other uses.
 This
leads to restructuring of the balance sheet by reducing
large exposures or sectoral concentration. It leads to
better asset-liability management by reducing market risks
resulting from interest rate mismatches. Similarly, securitisation
provides a relatively risk-free investment for the investor.
They are basically good-quality assets, helping the investors
to diversify their portfolios.
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