6th Securitisation Summit, 2017 - Vinod Kotharivinodkothari.com/wp-content/uploads/Summit_Report.pdf · one roof in the 6th Securitisation Summit, 2017 in ... Ms. Richa Agarwal focussed

6th Securitisation Summit, 2017

12th May, 2017 | World Trade Center, Mumbai

Findings and Key Takeaways

Gold Partner Silver Partner Knowledge Partner

Technology Partner Supporting Organisations

Organizers

6th Securitisation Summit, 2017 witnessed a gathering of the market players;

brain storming the prospects, challenges, issues, concerns and way forward

of the securitisation industry in India. The Summit, held on 12th May, 2017 at

World Trade Center, Mumbai, witnessed one of the critical rendezvous of the

stakeholders in the securitisation industry in India.

The Report captures the mood, motion and message of the market.

Genesis and Progress of the Summit

After the removal of the distribution tax, the Indian market posed an impressive

growth. Not only was there a shift in focus from direct assignment to PTCs, but also

several innovations were tried in the Indian market.

This years’ summit is the first one to review the market performance after the

remarkable changes in the taxation laws and also after FPIs were allowed to invest in

securitised debt instruments in India.

Vinod Kothari Consultants Private Limited (VKC), in association with the Indian

Securitisation Foundation (ISF), brought the stakeholders of the industry again under

one roof in the 6th Securitisation Summit, 2017 in Mumbai to discuss the regulatory

framework, taxation and structuring issue concerning the securitisation industry and

exploring various opportunities in order to expand the market.

The Summit witnessed an intellectual gathering and there was flurry of discussion,

exchange of opinions and views expressed. The Summit’s positive response was over-

whelming.

Also for the first time, in order to acknowledge the contributions made by various

stakeholders, Indian Securitisation Awards were introduced. This received a lot of

attention of the market participants in terms of nominations and the winners were

decided by independent and jury and on public voting.

Program

Ms. Vinita Nair, Assistant Vice-President, VKCPL, delivered the welcome

address to the Summit along with modus operandi for the live polling for each

of the sessions. The Summit progressed with overview of the Securitisation

Market, an introduction of Indian Securitisation Foundation, issues being

faced by the Securitisation Industry.

Session 1: Taking stock of market developments

Session 1 dealt with the state of the securitisation

market in India and taking a stock of the market

developments

The session was moderated by Prof. Krishnamurthy

Vaidyanathan

Mr. Kalpesh Gada deliberated on the state of Indian

securitisation market

Mr. Vikas Rungta and Mr. Maneesh Dangi spoke

about the sentiments of the investors in the Indian

securitisation market

Mr. Arvind Sampath focussed on the appetite of

foreign investors to invest in Indian securitisation

market

Mr. Sachin Bhosale focussed on whether there can

be new classes of investors in the market and

whether there will be takers for low rated PTC

tranches.

Mr. Vineet Sukumar talked about the innovative

structures tried and tested in the market during

the past year and the probable innovations that

may be tried in time to come.

Prof. Krishnamurthy Vaidyanathan -

Finance Faculty, Indian School of

Business & Visiting Faculty, University of

Connecticut [Panel Moderator]

Mr. Kalpesh Gada – Consultant –

Structured Finance

Mr. Vikas Rungta - Head- Credit

Research, Reliance Nippon Life Asset

Management Ltd

Mr. Maneesh Dangi - Co-CIO, Birla Sun

Life Asset Management Company

Mr. Arvind Sampath - Head – Treasury,

Fullerton India Credit Company Limited

Mr. Sachin Bhosale - Vice President,

ICICI Securities Primary Dealership

Limited

Mr. Vineet Sukumar - Senior Partner &

CFO, IFMR Capital

Session 2: Traditional and Alternative asset classes

Session 2 dealt with traditional and alternative

asset classes

The session was moderated by Ms. Bekxy

Kuriakose

Mr. Surendra Srivastava deliberated on the

scope of priority sector market with with MFIs

turning into banks

Mr. Rahul Chhaparwal expressed his thoughts on

the market scenario moving towards new non

priority asset classes

Mr. Sanjay Jain focussed on the NBFCs selling to

ARCs

Mr. Gaurav Bhagat talked about the potential

for green securitisation and green bonds in

India

Mr. Venkat Pala discussed spoke about the

market for securitisation of trade receivables in

India

Ms. Bekxy Kuriakose, Head- Fixed

Income, Principal Pnb AMC [Panel

Moderator]

Mr. Surendra Srivastava - CFO, MUDRA

Mr. Rahul Chhaparwal - Vice President –

Structured Finance, Kotak Mahindra

Bank

Mr. Sanjay Jain – President & COO,

ARCIL

Mr. Gaurav Bhagat - Head, Capital

Markets - FIG, South Asia, Standard

Chartered Bank

Mr. Venkat Pala – Vice President, Asset

Management & Wealth Management,

Valuelabs

Special Session : Impact of IFRS on Indian

Securitisation Transactions A detailed presentation on the IFRS and its

impact was witnessed in the special session

where Mr. Praateek Mankad.

Some of the key issues addressed in this session

were:

(a) does the securitisation transaction qualify

for de recognition at all;

(b) if it does, will the consolidation criteria

under IFRS 10 will be applicable; and

(c) assuming consolidation is not applicable,

will the disclosures as provided in IFRS 12

apply?

Mr. Prateek Mankad - Associate Director,

KPMG India

Session 3: Mortgage Lending and

Securitisation Session 3 dealt with Mortgage Lending and

Securitisation

The session was moderated by Mr. Vinod Kothari

Mr. V S Rangan deliberated on Residential

mortgage lending

Mr. Rajesh Mokashi spoke about Commercial

mortgage lending

Mr. Shadab Rizvi and Mr. Prakash Dandwani

focussed on potential for investing in RMBS &

CMBS

Mr. Peeyush Pallav gave a global overview about

covered bonds

Mr. Vibhor Mittal & Mr. Krishnan Sitaraman

discussed about the scope of covered bonds in

India

Mr. Vinod Kothari, Director, Indian

Securitisation Foundation & CEO, Vinod

Kothari Consultants P. Ltd [Panel Moderator]

Mr. V S Rangan - Executive Director, HDFC

Ltd.

Mr. Rajesh Mokashi - MD & CEO, CARE

Ratings

Mr. Shadab Rizvi - Associate Vice President –

Structured and Credit Investments, ICICI

Prudential Asset Management Company

Limited

Mr. Prakash Dandwani - Head-Debt Capital

Market, Aditya Birla Finance Ltd

Mr. Peeyush Pallav – Senior Vice President,

DBS Bank

Mr. Vibhor Mittal – Head, Structured

Finance, ICRA Ltd.

Mr. Krishnan Sitaraman – Senior Director,

CRISIL Limited

Session 4: Creating an Enabling Regulatory

Environment Session 4 dealt with Creating an Enabling

Regulatory Environment

The session was moderated by Mr. Arindam

Banerjee

Mr. Sapan Gupta stressed the need for

recasting the RBI guidelines of 2012

Ms. Bahroze Kamdin spoke about the lingering

tax concern in the market highlighting the GST

issues in assignment of actionable claims

Ms. Richa Agarwal focussed on SEBI’s role as a

key enabler

Mr. Anurag Das and Mr. M R Umarji deliberated

on whether the regulations facilitating enough

to allow trading of SRs issued by ARCs and

whether ARCs can be used for securitization of

performing assets

Mr. Arindam Banerjee,Deloitte Touche

Tohmatsu India Private Limited [Panel

Moderator]

Mr. Sapan Gupta - Partner National

Practice Head, Banking & Finance,

Shardul Amarchand Mangaldas & Co

Ms. Bahroze Kamdin - Partner – Global

Business Tax, Deloitte Haskins & Sells

LLP

Ms. Richa Agarwal – Deputy General

Manager, SEBI

Mr. Anurag Das – Managing Partner, Rain

Tree Capital

Mr. M R Umarji - Former Executive

Director, RBI

Twitter Polls

What is the most significant factor responsible for the significant growth in

securitisation volumes in 2016-17?

(A) Tax issues got cleared

(B) Investors were driven by the usual

motivation of PSL shortfalls

(C) Investors were driven by the motive of

yield enhancement Option C

Option B

Option A

Foreign portfolio investors were permitted to invest in Indian securitisation

market? Do you think there is substantial investment appetite for FPIs in Indian

ABS/MBS paper?

(A) Yes

(B) No

(C) May be Option C

Option B

Option A

Twitter Polls

What is your take on the likely shape of the market in 2017-18?

(A) Direct assignments will fade out; innovative

PTC structures will gain prominence

(B) The market will continue to choose between

direct assignments and PTCs

(C) The appeal of direct assignments will

remain

Option C

Option B

Option A

What is the top factor in 2017-18 that will drive securitisation markets?

(A) NBFCs will continue to be originators and

banks will remain investors

(B) Banks will emerge as originators and asset

managers will be investors

(C) New class of investors such as HNIs, family

offices, etc will emerge Option C

Option B

Option A

Twitter Polls

With MFIs turning into banks, do you think there will be a shortage in the supply side of

PSL portfolios?

(A) Yes

(B) No

(C) May be

Do you think, considering the long tenure of the underlying receivables in case of

renewable energy assets, green securitisation can open up investment opportunities for

institutional investors like pension funds, insurance companies etc.?

(A) Yes

(B) No

(C) May be

Option C

Option B

Option A

Option C

Option B

Option A

Twitter Polls

Considering the increasing pace of trade financing, is there a scope of trade

receivables securitisation in India?

(A) Yes

(B) No

(C) May be

Do you think increased focus on the affordable housing segment will increase the scope

of RMBS transactions in the country?

(A) Yes

(B) No

(C) May be

Option C

Option B

Option A

Option C

Option B

Option A

Twitter Polls What do you think has stopped the issuers from trying covered bonds in India?

(A) Lack of legal and regulatory clarity on the

subject

(B) Lack of interest from the investors

(C) Established market for traditional

securitisation products

(D) All of the above

Do you think we can expect the CMBS market to take off anytime sooner?

(A) Yes

(B) No

(C) May be

Option D

Option C

Option B

Option A

Option C

Option B

Option A

Twitter Polls Do you think the RBI regulations need a recast to accommodate innovative structures?

(A) Yes

(B) No

(C) May be

Do you think trading of SRs issued by ARCs, if started, will be able to gain substantial

attention from the investors?

(A) Yes

(B) No

(C) May be

Option C

Option B

Option A

Option C

Option B

Option A

Twitter Polls Do you think the GST on transfer of secured receivables will affect the market

adversely?

(A) Yes

(B) No

(C) May be

Option C

Option B

Option A

Key Takeaways

State of Indian Securitisation Market

The market crossed the INR 80K crore mark during the last year

Issuance of PTCs grew by 60%

The gap between securitisation and direct assignment got narrowed down

Maximum share of origination was done by NBFCs

Banks continued to remain to be a major investor

Of the total volume of receivables securitised – 60% towards PSL and 40% towards Non PSL

Priority Sector Lending Certificates worth INR 30K crores were issued during the last year

Innovative structures and asset classes

Several innovative structures and asset classes were tried during the year

In terms of innovative structures – Stripping of tenure of principal repayment of PTCs took place, PAR

structures were tried in multiple originator securitisation transactions

In terms of new asset classes – Letter of Credit backed receivables were securitised during the year

LAP can be a new asset class – though it will be complex, but if the pricing is good, there will be

market acceptability

Covered bonds were attempted but the first issue is yet to happen

Classes of investors in the market

Banks continue to be a major investor in the market

MFs are gradually increasing their share in the market and it is expected in the next 5 years, MFs will

be the biggest investor in the Indian securitisation market

FPIs – Major investments yet to come. Stable rupee and settled securitisation market would motivate

FPIs to invest in the Indian securitisation market

Key Takeaways

Trading of SRs

SEBI is making changes in the regulatory regime to facilitate trading of SRs

Trading of SRs will not be possible unless there are sufficient spreads available with the investors

Impact of demonetisation on securitisation

Impact of demonetisation was very clearly visible through the reduction in the volume in the second half

of the year

MFIs faced some issues owing to demonetisation, but they have already been taken care off

Role of MUDRA in securitisation

They have separate schemes for securitisation

Currently their exposure is on senior tranches of PTCs

They will extend their exposure to junior tranches as well during the year

Other asset classes and originators

There have been several multiple originator transactions

CDOs have not been tried during the year, however there can be such structures sooner than later

Securitisation of NPLs should gain momentum

Securitisation of unsecured loans will take some time to take off

Securitisation by non-financial entities has to happen outside the framework and is in nascent stage –

this needs to be developed as this will give capital relief to the originators

RBI regulations

They need a recast to allow the market to try innovations

Revolving structures are allowed under RBI regulations, however, there is lack of clarity

Key Takeaways

Green Securitisation

The definition of green has to come out clearly in the directives of SEBI

Investor diversification is required for the market to grow

There have been several issuances of green bonds in India so far including Green Masala Bonds

Green securitisation has not yet been tried in the country

Trade financing securitisation

There is huge scope in the Indian market

The market is yet to be developed

Institutional investors, Hedge funds and HNIs can be potential investors for this asset class

Mortgage Backed Securities

RMBS continues to be the only mortgage class in the securitisation market

CMBS is yet to take off

In comparison between lease rental discounting and CMBS, the former has an edge over the latter

CMBS and REITs can utilised together to structure financing of commercial properties – where

equity financing can be carried out through REITs and debt financing can be carried out through

CMBS

Taxation issues

Most of the issues pertaining securitisation taxation has been resolved

Clarity is required for taxation of FPI investment in securitisation transactions

GST is likely to cover assignment of receivables

Indian Securitisation Awards 2017

RESULTS

For more information click here

Innovative Deal of the Year India Mortgage Guarantee Corporation Limited

Arranger of the Year (Large Issuance) Kotak Mahindra Bank Limited

Arranger of the Year (Small Issuance) IFMR Capital Finance Private Limited

Trustee of the Year Catalyst Trusteeship Limited

Law Firm of the Year Wadia Ghandy & Co

Organisers

Kolkata

1006-1009 Krishna Building

224 AJC Bose Road Kolkata – 700017

Phone:033-22811276/ 22813742/7715

E: [email protected]

New Delhi

A/11, Hauz Khas, New Delhi 110016

Phone:011-41315340/ 65515340

E: [email protected]

Mumbai

403-406, Shreyas Chambers,

175 , D.N. Road, Fort, Mumbai – 400 001

Phone: 022 22614021/ 30447498

E: [email protected]