Analysis of Quality of Assets for Securitization

Securitization is the act through which a company pools its illiquid assets to form financial securities that are then issued to investors who will receive interest payment. Residential mortgages, commercial mortgages, auto loans or credit card debt obligations are some of the illiquid assets that are generally converted into securities. Securitization market in India is expected to reach an all-time high of ₹2 trillion in the near future. The rising importance of securitization in Indian economy needs to be looked at closely. The research was aimed at assessing the quality of assets of corporates along with the effectiveness of the securitization process and solvency position of the corporates under study. The study focuses on 20 high market capitalization companies trading in the NSE for the time period between 2014-2019. Ratio Analysis, Dupont Analysis and Altman Z score were used to assess various performance metrics like solvency, efficiency, and risk exposure and asset quality. Majority of the companies showed positive results in all these areas except for some turnover ratios.