In a first for the Indian securitisation market, an asset solutions company has raised money by securitising future rent receivables from Reliance Jio's subscribers in a Rs 5,000-crore transaction, according to rating agency Icra.
In the equipment lease rental securitisation transaction, OPC Asset Solutions, which is being paid by Reliance Retail against the bundled handset sales, has raised the money against the future receivables.
Pass through certificates (PTCs) backed by the rentals due from Reliance Retail are created in a special trust called Rainbow Devices Trust.
"The lease payments from Reliance Retail to the Trust would happen at periodic intervals over a period of three years," Icra, which has rated the PTCs as 'AAA(SO)', said in a statement.
Terming it as a landmark transaction, its head for structured finance Vibhor Mittal said, "The underlying asset class is equipment lease rentals – a new asset class in the Indian Securitisation market. The issue size at Rs 5,000 crore is the single largest issuance of securitised paper in the country."
He added such a transaction shows the confidence of the mutual fund investors in the space.
It can be noted that late last year, Reliance Jio had introduced the bundled handset scheme with low upfront costs for the subscribers against a commitment to using the handsets for a period of three years.
Icra said there are credit strengths like a gap of 10 business days between the due dates of the rental payments and the corresponding PTC payout dates and also strong credit profile of Reliance Retail, an arm of Reliance Industries.
On the weakness front, it pointed out to absence of an external credit enhancement in the event of any shortfall or significant delay in payment of the equipment lease rentals, as a potential risk.