Dewan Hsg Plans Rs 50 Crore Mbs Issue

Dewan Housing Finance is planning to launch a Rs 50 crore mortgage-backed securitisation (MBS) issue in the coming month.

The housing finance company is in talks with a number of merchant bankers to finalise the structure of the instrument.

Dewan Housing managing director Kapil Wadhawan said that the company was looking at a coupon of not more than nine per cent for the first tranche of the issue.

This is more or less in line with the rates offered by its competitors -- Housing Finance Development Corporation (HDFC) (9.05 per cent), Canfin Homes (9.16 per cent) and ICICI Bank (9 per cent) -- last month.

 

"This off balancesheet funding results in us not having to keep a high capital adequacy ratio as our business grows. It also gives us a long-term funding solution of over seven years compared with fixed deposits," said Wadhawan.

HDFC's first tranche of the Rs 156 crore MBS issue elicited lukewarm response, while the issues of both ICICI Bank and Canfin were fully subscribed to.

Merchant bankers associated with the Dewan Housing issue said that demand for MBS issues has picked up significantly after the Reserve Bank of India announced a lower risk weightage of 50 per cent on MBS against 100 per cent earlier.

When HDFC launched its programme, the market sentiment was not positive because of the war-like situation between India and Pakistan. While HDFC's Rs 100 crore MBS issue was oversubscribed, the greenshoe option of Rs 56 crore was subscribed by the underwriters to the issue namely Citibank, DSP Merill Lynch and ABN Amro.

"This is because some interested banks were in the process of receiving board approval for investment in pass-through certificates (PTCs). We sold the PTCs in the secondary market at par once these banks got the necessary approvals," said senior officials from a leading merchant banker.

PTC is not defined in the investment norms for many public sector banks. A number of investors are in the process of getting internal approvals in place, which will then see a rise in demand.

Much depends on the comfort level the investor has in terms of the originator's skill -- in the area of internal mechanism, stringent approval process, and monthly collection facilities. It will also depend on the credit enhancement built into the structure to mitigate risks of default.