ICRA Rating



ICRA has reaffirmed issuer rating of IrAA (Stable) to India Mortgage Guarantee Corporation Private Limited

Instrument

Rating

Rating Action

Issuer Rating

IrAA (Stable)

Re-affirmed


ICRA has reaffirmed 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 factors in the strong profile of the company’s shareholders National Housing Bank (NHB) (rated by ICRA at [ICRA]AAA for its long term bonds), Genworth Financial Mauritius Holding Limited (Genworth), International Finance Corporation (IFC) and Asian Development Bank (ADB), and the benefits IMGC derives 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, with an insurance in force of Rs. 338 crore as on Mar-15. 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 as it scales-up its operations are important rating sensitivities. ICRA however notes the moderate expected build-up in operations, intended selective underwriting approach and expertise the company derives Genworth in managing mortgage guarantee businesses internationally.

About India Mortgage Guarantee Corporation Private Limited

IMGC is a joint venture between National Housing Bank (NHB) (rated by ICRA at [ICRA] AAA), 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 as on March 31, 2015 aggregates to Rs. 215 crore.

IMGC commenced its operations in March 2014 underwriting a securitization pool originated by Dewan Housing Finance, and subsequently in FY 2015 completed underwriting transactions of contracts originated by Reliance Home Finance Limited and Home First Finance Company. As on March 31, 2015 IMGC had a total insurance in force of Rs. 338 crore against which the Risk in Force (RIF) was Rs. 34 crore. During the nine month period ended December 31, 2014 IMGC reported a loss of Rs. 7 crore on a total asset base of Rs. 159 crore. As on December 31, 2015 the company had a net worth of Rs. 153 crore.

About National Housing Bank

National Housing Bank (NHB) 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 securitisation programme and various training programmes. NHB reported a net profit of Rs. 487 crore over an asset base of Rs. 45,050 crore for the year 2013-14 as compared with net profit of Rs. 450 crore over an asset base of Rs. 38,721 crore for the year 2012-13. NHB reported gross NPA% of 0.47% and net NPA% of 0.28% as on June 30, 2014. NHB’s capital adequacy was 15.06% as on June 30, 2014.

About Genworth Financial Inc

Genworth Financial Inc. is a US based insurance provider, which is ultimately owned by Genworth Holdings Inc, rated by Moody’s Investors Service at Ba1/Negative. 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, 2014 the group had consolidated revenues of USD 9.56 billion and a Loss after tax of USD 1.24 billion, including profit after tax attributable to non-controlling interests.

May 2015

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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