Tata Engineering & Locomotive Company (Telco) is planning to grow its portfolio of lease and hire purchase commercial vehicles and utility vehicles, Speaking to ET, Telco executive director finance and corporate affairs Praveen Kadle said, "We are planning to grow this as we see it as strategic to our business. In order to recycle the funds deployed in this activity we will however continue to securitise assets worth Rs 500-600 crore from this portfolio every year."

The company is now planning to sell Rs 180.9 crore worth of a portfolio of commercial vehicle hire-purchase receivable which have been rated AAA (so) {highest safety structured obligation} by Crisil. The securitisation of these receivables from its balance sheet will be done using People’s Financial Services as the Special purpose vehicle, said a company spokesperson. The transaction has been structrured such that the identified pool of receivables will be assigned to investors for a consideration equivalent to the discounted value of the future cash flow from the pool, said a press release. The credit enhancement for the transaction is provided by the hypothecation of an additional pool (called the over collateral pool) to investors and a cash collateral equivalent to five per cent of the receivables from the assigned pool, said Crisil.

"The sale of part of our portfolio of lease and hire purchase assets will enable us to reduce the capital employed, resulting in a salutary effect on the return on capital employed, " said Mr Kadle. He added that given the lower interest rate regime, securitisation of the receivables could be effected at lower implicit interest rates. "The sale transactions also help us match our asset profile to the duration of our loan funds."