ICRA Limited has rated India’s first proposed mortgage guarantee company, India Mortgage Guarantee Corporation Private Limited (IMGC). IMGC is a joint venture between National Housing Bank (NHB) (rated by ICRA at [ICRA]A1+), Genworth Financial Mauritius Holding Limited[1] (Genworth), International Finance Corporation (IFC) and Asian Development Bank (ADB), with shareholdings of 38%, 36%, 13% and 13% respectively.

ICRA has assigned the issuer rating of IrAA (pronounced IR double A) to India Mortgage Guarantee Corporation Private Limited. This rating indicates high credit quality. 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 is subject to IMGC getting a license from RBI as 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 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.