ICRA Rating



India Mortgage Guarantee Corporation Private Limited

Instrument

Amount

Rating Action

Issuer Rating

-

IrAA (Stable)


ICRA has assigned the issuer rating of IrAA (pronounced IR double A) to India Mortgage Guarantee Corporation Private Limited (IMGC)*. This is the high-credit-quality rating assigned by ICRA. The rated entity carries low credit risk. The rating is only an opinion on the general creditworthiness of the rated entity and not specific to any particular debt instrument. The outlook of the rating is ‘Stable’.

The rating action1 follows the issue of a Certificate of Registration by RBI to IMGC on April 18, 2013 permitting IMGC to commence and carry out the business of a mortgage guarantee company. The rating factors in the strong profile of the company’s shareholders, the benefits IMGC is expected to derive from NHB’s in-depth understanding of the domestic housing finance market and participants, along with Genworth’s operating expertise in managing mortgage guarantee businesses internationally. The rating factors in the strong commitment from IMGC’s shareholders to keep it well capitalized following an annual capitalization assessment process as per which, based on portfolio performance, estimated future stress losses and projected growth, IMGC will budget for any additional capital in advance. The rating is constrained by the untested nature of the mortgage guarantee business in India, likely concentration risk in the initial ramp up period and the nascent stage of the company’s operations; wherein crucial factors such as the ability of the company to manage portfolio risks, including adverse selection risks on contracts underwritten, and also charge premiums efficiently in relation to underlying risks are yet to be established. ICRA has taken note of the moderate expected build-up in operations and IMGC’s stated intent to follow a cautious/ selective underwriting approach and avoid risk concentrations, which could mitigate some of the risks during the initial build-up of its operations

About the Mortgage guarantee product

The Indian mortgage market, which stood at Rs. 6.3 trillion as on March 31, 2012, remains under-penetrated and offers growth potential to mortgage lenders. Total Housing Credit as a percentage of Gross Domestic Product (GDP) is at a low level of around 7% as on March 31, 2012.

A mortgage guarantee (MG) product is also known as mortgage insurance (MI) in global markets. The MG product is designed to offer credit protection and other benefits to lenders. Lenders can seek a MG cover on its portfolio against payment of a fixed premium, determined at the time of taking the cover. As per the RBI regulations, if a lender takes a MG protection on a home loan or a pool of home loans, they are partly protected by the Mortgage Guarantee Company (MGC) in the event of a default by the borrower. The lender has the ability to invoke the MG as soon as a product becomes a Non Performing Asset (NPA) as per the RBI norms.

This typically means that from a lender and regulatory perspective, there is an element of Risk Transfer from the lending ecosystem to the balance sheet of the MGC. This Risk Transfer enables the lender to release capital as per the Basel rules resulting in more efficient use of capital and enhanced Return on Equity (ROE) for shareholders from the same capital base.


* ICRA had on August 6, 2012 assigned a rating of IrAA (pronounced IR double A) to the company, subject to IMGC getting a license from RBI as a mortgage guarantee company

Depending on the type and level of loss share opted for, subject to loan meeting other conditions specified by MGC



About the Company

India Mortgage Guarantee Corporation Private Limited

IMGC is a joint venture between National Housing Bank (NHB) (rated by ICRA at [ICRA]A1+), Genworth Financial Mauritius Holding Limited (Genworth), International Finance Corporation (IFC) and Asian Development Bank (ADB), with shareholdings of 38%, 36%, 13% and 13% respectively. IMGC has been setup to carry out the business of Mortgage Guaranty in India; however operations are yet to commence. Reserve Bank of India (RBI) regulations for Mortgage Guarantee Companies (MGC) stipulates that an MGC cannot be a subsidiary of any company and that no shareholder can have a controlling stake in the company. The capital contribution by the shareholders in the company aggregates to Rs. 135 crore.

Genworth Financial Inc. is a US based insurance provider, and is rated at Baa3/Negative by Moody’s Investors Service. The group has a presence in more than 25 countries offering Mortgage Insurance, Life Insurance and Investment and annuity products. For the financial year ended December 31, 2012 the group had consolidated revenues of USD 10.02 billion and a Profit after tax of USD 523 million, including profit after tax attributable to non-controlling interests of USD 200 million.

National Housing Bank

National Housing Bank (NHB) (rated by ICRA for its Short Term borrowing programme at [ICRA]A1+ ) was established on July 9, 1988 under an Act of the Parliament viz., the National Housing Bank Act, 1987 (the Act) to function as a principal agency to promote Housing Finance Institutions and to provide financial and other support to such institutions. NHB, a wholly owned subsidiary of RBI, is also the regulator and supervisor for Housing Finance Companies. NHB has been contributing towards the development of the sector through its initiatives on residential mortgage backed securitization, promotion and development of other financial institutions, various training programmes etc. NHB reported a net profit of Rs. 387.10 crore over an asset base of Rs. 31,332 crore for the year 2011-12§, as against Rs. 278.93 crore over an asset base of Rs. 25,781 crore for the previous year. During H1, 2012-13 (01, July 2012 to 31 December 2012), NHB reported profit after tax of Rs 234.28 crore registering a 40% growth over the corresponding period of 2011-12. As on December 31, 2012, NHB’s capital adequacy ratio was 16.83%. ICRA’s credit rating of ICRA[A1+] on NHB factors in its sovereign ownership and the pivotal role it plays in the housing finance industry, its superior asset quality, stable earnings, adequate capitalization levels, and comfortable liquidity position arising out of strong financial flexibility and access to long tenure funds (like Rural Housing Fund).

April 2013

For further details please contact:
Analyst Contacts:

Ms. Vibha Batra, (Tel. No. +91 124 4545302)
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Relationship Contacts:

Mr. Vivek Mathur (Tel No. +91 124 4545310)
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© Copyright, 2013, ICRA Limited. All Rights Reserved.
Contents may be used freely with due acknowledgement to ICRA

ICRA ratings should not be treated as recommendation to buy, sell or hold the rated debt instruments. The ICRA ratings are subject to a process of surveillance which may lead to a revision in ratings. Please visit our website (www.icra.in) or contact any ICRA office for the latest information on ICRA ratings outstanding. All information contained herein has been obtained by ICRA from sources believed by it to be accurate and reliable. Although reasonable care has been taken to ensure that the information herein is true, such information is provided ‘as is’ without any warranty of any kind, and ICRA in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information. All information contained herein must be construed solely as statements of opinion and ICRA shall not be liable for any losses incurred by users from any use of this publication or its contents

Genworth Financial Mauritius Holding Limited is ultimately owned by Genworth Financial Inc, which is rated by Moody’s Investors Service at Baa3/Stable for its long term debt

§ July-2011 to June-2012



Registered Office
ICRA Limited
195, Kailash Building, 11th Floor, 96, Kasturba Gandhi Marg, New Delhi 19001
Tel: +91-11-93357940-50, Fax: +91-11-93357014

Corporate Office
Mr. Vivek Mathur
Mobile: 9871221122
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Building No. 8, 2nd Floor, Tower A, DLF Cyber City, Phase II, Gurgaon 199009
Ph: +91-124-4545310 (D), 4545300 / 4545800 (B) Fax; +91- 124-4050424

Mumbai
Mr. L. Shivakumar
Mobile: 9821086490
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3rd Floor, Electric Mansion, Appasaheb Marathe Marg,
Prabhadevi, Mumbai - 400 095
Ph : +91-99-9433 946/ 953/ 969/ 974/ 986/ 987 Fax : +91-99-9433 1390

Kolkata
Mr. Jayanta Chatterje
Mobile: 9845099459
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5th Floor, Karumuttu Centre, 498 Anna Salai, Nandanam,
Chennai-600035.
Tel + (91 44) 45964300, Fax + (91 44) 9434 3663

Chennai
Mr. Jayanta Chatterje
Mobile: 9845099459
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.


5th Floor, Karumuttu Centre, 498 Anna Salai, Nandanam,
Chennai-600035.
Tel + (91 44) 45964300, Fax + (91 44) 9434 3663

Bangalore
Mr. Jayanta Chatterje
Mobile: 9845099459
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'The Millenia'
Tower B, Unit No. 904, 9th floor, Level 9, 19-14, 1 & 9,
Murphy Road, Bangalore - 560 008.
Tel:91-80- 43396400 Fax:91-80-43396409

Ahmedabad
Mr. L. Shivakumar
Mobile: 9821086490
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907 & 908 Sakar -II, Ellisbridge,
Ahmedabad- 380006
Tel: +91-79-96585494, 96589008, 96585049, 96584994
TeleFax:+91-79- 9648 4994

Pune
Mr. Jayanta Chatterje
Mobile: 9845099459
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5A, 5th Floor, Symphony, S.No. 99, CTS 3909, Range Hills,
Road, Shivajinagar,Pune-411 090
Tel : (91 90) 9556 1194 -96; Fax : (91 90) 9556 1931

Hyderabad
Mr. M. S. K. Aditya
Mobile: 9963953777
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301, CONCOURSE, 3rd Floor, No. 7-1-58, Ameerpet,
Hyderabad 500 016
Tel: +91-40-9373 5061 /7951 Fax: +91-40- 9373 5159