IIFCL plans subsidiary for issuance of asset backed securities

India Infrastructure Finance Company Ltd (IIFCL) is planning to set up a subsidiary to issue asset-backed securities (ABS) or covered bonds, as it aims to securitise its assets and conserve capital for further business growth.

"We are almost reaching the threshold of asset size and loan book that we should have, and we may not really look at the quantum jump in asset size or loan book size. We may have a separate vertical to securitise our own assets," IIFCL MD PR Jaishankar told PTI.

"We will try to grow our assets and generate more assets with the help of the existing assets instead of taking more liabilities...The idea is that assets should beget assets incrementally.

That will save the capital that will help our cost of funds go down, our profitability going up, and that will help improve our viability and quality of assets." The idea is to hive off part of our assets, he said, adding, "We will maintain a threshold, and we will focus on increasing the sanctions and disbursements more as compared to growing the asset size or loan book size".

Sharing further details, Jaishankar said the company can look at creating a separate vertical to issue ABS, which could be pass-through or pay-through securities. "We could have covered bonds.

Covered bonds are with recourse paper. ABS is without recourse. So, we can have two structures. So, these things will need little detailing. We can have another subsidiary for that," he said.

Presently, the company is working on details, he said, adding that once it is crystalised, we will take it to the board for its approval. During FY24, IIFCL reported a 44 per cent jump in standalone net profit to Rs 1,552 crore, aided by an increase in lending and moderation in bad loans.

The state-owned infrastructure finance company had earned a net profit of Rs 1,076 crore in the previous fiscal. The company recorded the highest-ever profit, recovery, sanction and disbursement, furthering turnaround performance that began three years ago.

For the first half ended September 2024, the infra lending company earned a standalone profit of Rs 811 crore, more than half of it earned in the entire FY24.

As regards asset quality, IIFCL's gross non-performing assets (NPAs) improved to 1.25 per cent at the end of September 2024 compared to 3.77 per cent at the end of September 2023.

Similarly, net NPA too eased to 0.34 per cent against 0.83 per cent at the end of September 2023.