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IFMR Capital, the Chennai based non-banking finance company (NBFC), today announced India's first collateralised bond obligation - the IFMR CBO I of Rs 98 crore, comprising multi-issuer pooled non-convertible debentures. Hinduja Leyland Finance, part of the Hinduja Group is one of the investors.
N Vaghul Former Chairman, ICICI Bank Ltd is the Chairman of Board of Governors, IFMR and Nachiket Mor Chairman, Sugha Vazhvu Healthcare is the Member, Board of Governors of IFMR.
IFMR Capital stated that the CBO includes eleven issuers and these are microfinance companies and small business lenders whose end customers are either self-employed individuals from the financially excluded segment or the ones employed in informal sectors.
All the participating companies were first time issuers of NCDs. The CBO transaction has created an efficient route for such entities to access capital markets.
IFMR Capital previously pioneered the multi-originator securitization and has to date structured such multi-issuer securitization transactions (Mosec) in microfinance and small business loans. The Mosec is a structured loan pool created by combining loans of small and medium originators in order to create a well-diversified portfolio of a critical size that can be taken to the market.
IFMR Capital Mosec - XXII was the first listed securitisation in India, issued in January 2013, with 8 originators. IFMR Capital Mosec Aurais so far the largest completed securitisation completed by IFMR Capital Rs 167 crore with five participating originators and 146,111 microloans. The CBO issuance is a significant step towards unlocking the potential of capital markets for such originators.
Kshama Fernandes, CEO of IFMR Capital commented, "this transaction is an illustration of our efforts in developing scalable structures for meeting the requirements of our clients and investors."
The diversification, credit enhancement and IFMR Capital's participation ensured that a large number of its clients could issue bonds for the very first time. Product development expertise, legal drafting capacity and execution capability are critical to pulling off a structure like this, said the CEO.
"With all these in place, we are now confident that we can take more issuers to capital markets and continue to attract new investors into such structures," added the official.
IFMR Capital structured the CBO to present the investor with diversification, strong security cover and a moderate-to-high ratings support. The issuers were selected by IFMR Capital on the basis of the diversification offered, vintage of relationship with IFMR Capital, strong governance, systems & operations and their financial performance.
"No single issuer accounted for more than 13% of the deal size, and the NCDs have a common repayment date and frequency. The CBO transaction is partially guaranteed by two guarantors (24% of the initial issuance size)".
Sachin Pillai, COO - Hinduja Leyland Finance, investor in the CBO said
while securitisation is a transaction format that the company participate in frequently, the multi-originator bond issuance is an absolute first in India .
"This new structure adds value as it gives us not only the diversity akin to a multi originator securitisation, but also provides on-balance sheet comfort and a partial guarantee cover as well. We hope to see many more of such transactions in the market."
Speaking on accessing capital markets for the first time, through the CBO, R Baskar Babu, Promoter and MD, Suryoday Micro Finance Private Limited, said, "This effort by IFMR Capital has opened up a new but most desirable vista to raise debt capital to fuel our growth. This will help us meet the credit and financial needs of our customers faster, taking us a step closer to financial inclusion."
The issuers in the transaction include Annapurna Microfinance, Asirvad Microfinance, Arohan Financial Services, Disha Microfin, Future Financial Services, India School Finance Company, Intrepid Finance and Leasing, Pahal Financial Services, Suryoday Microfinance, SV Credit Line and Svasti Microfinance. The CBO product is expected to be very scalable, with interest seen from NBFC and mutual fund investors.