SDI issuances by corporates to rise to Rs 100 crore in FY2024: ICRA

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Issuances of securitised debt instruments (SDI) by corporate entities are expected to rise to Rs 100 crore in the current financial year, according to a report by ICRA. Consequently, it will open up a new avenue for small-to-mid-size entities to attract retail investors for fundraising, the report said.

According to ICRA, since FY20, 18 SDIs have been issued by corporate entities, totalling approximately Rs 250 crore.

The trend indicates a growing participation of non-financial sector entities in the securitisation market, which was previously dominated by financial sector players. These SDIs, backed by lease rentals, trade receivables, or pools of debenture receivables, mark a departure from the loan receivables typically securitised by financial sector entities.

In contrast to the traditional securitisation landscape dominated by bank investors, SDI issuances by corporate entities have witnessed significant retail participation, including from high net worth individuals (HNIs). According to the report, around 50 per cent of corporate SDI issuances since FY20 have been backed by lease rentals.

These transactions are typically facilitated by leasing companies operating on an operating lease model. Notably, these instruments are shielded from the credit risk of the issuer, instead tied to the creditworthiness of the cash flows being securitised, such as the lessee's ability to meet payments in the case of lease rental-backed SDIs. ICRA anticipates continued growth in SDI issuances in the upcoming years, bolstered by an expanding investor base.