The oppressive regulatory regime has sent the country's NBFCs on a desperate race for very survival. Many have folded up under the pressures of being forced to return deposits, being unable to access public funds and being cold-shouldered by the banking sector.

In quite a few cases, they have either merged with the parent group or hived off in a bid to reduce liabilities and escape cash flow problems. The purely finance entities have not even had this luxury. And with the current state of the markets,a number of business avenues like merchant and investment banking have become cul de sacs, greatly reducing revenue-earning options.

Thus it is not surprising that each NBFC has worked out a strategy to grow out of trouble. While some have decided to merge to attain the size needed to survive the competitive pressures, others like Ashok Leyland Finance have opted to go it alone.

Securitisation, the conversion of cash flows into marketable lots of securities/debt instruments, has become popular in the nineties. Rating agencies like Crisil have even begun rating securitised packages. Crisil alone has rated packages exceeding Rs 1,100 crore so far, covering as disparate areas as vehicle loans, property loans, future oil and gas sales and receivables of the department of telecommunications.

Simply put, securitisation works thus: A company like ALF packages the receivables from a clutch of its borrowers. Another institution `buys' the package after a due diligence process. Servicing of the original loans ismost often done by the seller while the risks have been passed on to the buyer. It is a sort of second mortgage in reverse.

ALF is fast emerging as the front-runner in the Indian securitisation market. ALF has deals with about nine institutions for selling packages aggregating Rs 1,000 crore for this fiscal, according to vice-president (operations) N Sampath Kumar.

Just as it has swung into asset securitisation in a big way in the heavy commercial vehicle segment, ALF is almost certain to do the same here as well. Only here it will be buying packages. Tie-ups with regional consumer durable dealers are in the pipeline whereby ALF will buy out securitised packages.

Collections and all requisite legwork will be done by the dealers, whose risk exposure will come down considerably.

Why this emphasis on securitised packages? Nagarajan said: "Not only does it insulate us from asset-liability mismatches, but it also does the same in covering us from interest rate risks." Sampath Kumar added that the biggestadvantage is liquidity.

ALF has had reasonable success in securitisation. ICICI subsidiary I-Credit chose ALF to swing its first securitised package. Citibank and GE Caps are just a few of the other big players who have picked up asset deals, all of which come with rating to boot.

ALF has reworked its strategy on other fronts as well. With a considerable presence in the financing of heavy commercial vehicle segment, it had discovered that its earlier commitment to funding only Ashok Leyland vehicles had turned into a negative feature in these recessionary times.

Thus, it will not only fund other vehicles where it does not conflict with group interest, but also change its retail orientation with the securitisation strategy.

It has also definitely decided to reduce its dependence on fixed deposits in fund raising. The Boston Consulting study had suggested that ALF look at insurance and banking. ALF has however decided not to enter these areas as "our expertise is different from what is required in thesebusinesses," Nagarajan said.

"We will definitely be expanding our exposure to car finance, where our market share is around 1 per cent and to construction equipment where our market share is 9 per cent," he said.

The three main revenue streams will be transportation, household goods, including cars and two-wheelers and infrastructure. The biggest additions will be two-wheelers and consumer durables, areas with which ALF had experimented about 15 years ago but later discontinued. "We have decided that household and personal incomes are areas that we must definitely tap," he added.