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Securitisation In India’s Consumer Market: Trends and Way Forward


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By AltG Research On Behalf Of Taponeel Mukherjee & Poornima Vardhan


As investor interest in India's consumer markets continues to grow, the recent potential $40 million bid by Tiger Global for a stake in the IPL team Rajasthan Royals at a valuation of $650 million sets the stage for further exploration of intangible assets. This move signifies the recognition of the immense value within the intangible assets associated with India's consumer market.


What Does The Tiger Global Bid For Rajasthan Royals Team Signify?

In the modern business landscape, intangible assets such as brand value, intellectual property, and customer loyalty have become increasingly important drivers of success. The Rajasthan Royals, as an IPL team, possesses intangible assets such as a strong brand presence, a loyal fan base, and exclusive broadcasting rights, which contribute to its overall value. Tiger Global acknowledges the potential for substantial returns from investing in these intangible assets by considering a bid for a stake in the team.


This development brings focus on the securitisation of contractual cash flows from intangible assets, which provides businesses with innovative financing opportunities. By leveraging these assets, companies can unlock the value they hold and use them as collateral to access new funding sources. This enables companies to fuel growth, invest in research and development, and expand their operations while minimising traditional risks associated with borrowing.


What Does Securitisation Of Intangible Assets Mean?

So, you know how you can use a building or some machinery to make money, right? Well, it turns out you can also do the same thing with intangible assets. These are things that you can't physically touch, like data, content, software code, brands, confidential information, inventions, industrial know-how, and design rights.


When we talk about securitisation for intangible assets, it means that the owner of those assets can use them as a way to get money. Let me give you an example. When you have a building, you can borrow money against the future cash that you'll earn from renting it out. It's like getting a loan based on the income you expect to make from the building.


Now, with intangible assets, it works similarly. Let's say you own the rights to TV shows and advertisements for a popular team like the Rajasthan Royals. Those rights can generate a lot of money in the future. So, instead of a physical building, you can use the expected cash flows from those TV and advertisement rights to borrow money now. Additionally, you pool together a bunch of such intangible assets and create tradable financial securities out of them so that investors also get liquidity.


This concept is often used by big borrowers, like companies or investors, who own a bunch of intangible assets. They can use all those different rights and contractual agreements to get loans or investments based on the future income they expect to earn from those assets. It's a way to turn intangible things into valuable financial resources.


Expanding The Pie For Businesses And Investors Alike


Securitisation of contractual cash flows from intangible assets presents an exciting investment opportunity for foreign direct investment (FDI) providers while also aiding Indian businesses in unlocking vital growth capital. The process involves leveraging intangible assets, such as intellectual property, brand value, or digital platforms, which generate reliable and predictable cash flows over a considerable period. By securitising these cash flows, FDI providers can invest in the future cash flows of Indian businesses, utilising their intangible assets as collateral.


  1. One of the primary advantages of securitisation is that it enables Indian businesses to access capital markets and raise funds by selling securities backed by their intangible assets. This offers an alternative financing avenue, particularly for companies with limited access to traditional lending sources or those looking to diversify their funding options.

  2. Securitisation also enhances liquidity for businesses. Intangible assets, such as brand value or intellectual property, may not be easily monetisable through conventional means. However, by converting these intangible assets into tradable securities, securitisation increases their liquidity. FDI providers benefit from the ability to buy and sell these securities, providing an exit strategy and enhancing liquidity in the market.

  3. Another advantage lies in risk mitigation. Securitisation allows for the pooling and diversification of cash flows from multiple intangible assets, spreading investment risk across a portfolio. This helps FDI providers mitigate the impact of potential defaults or fluctuations in the performance of individual intangible assets.

  4. Investing in securitised contractual cash flows also offers FDI providers the opportunity to tap into the growth potential of many Indian businesses. These companies possess valuable intangible assets with significant growth prospects. By investing in these cash flows, FDI providers can participate in the future success and growth of these businesses, aligning with India's fast-growing economy, burgeoning technology sector, and the increasing importance of brands and intellectual property.


In conclusion, securitizing contractual cash flows from intangible assets presents a compelling investment opportunity for FDI providers. By leveraging intangible assets, accessing capital markets, enhancing liquidity, mitigating risks, investing in growth potential, and fostering collaboration, securitisation helps unlock crucial growth capital for Indian businesses while offering attractive returns for FDI providers.


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