18 NBFC-MFIs pool Rs 835 cr for securitisation, easing liquidity crisis

The first tranche of the pool, worth Rs 79 crore, has been bought HLF

Eighteen micro finance non-banking financial companies (NBFC-MFIs) have pooled assets worth a combined Rs 835 crore for securitisation, to tide over a liquidity problem in the sector.

The first tranche of the pool, worth Rs 79 crore, has been bought by Hinduja Leyland Finance (HLF).

In November, the Microfinance Institutions Network (MFIN) deliberated on ways to address the liquidity stress that member NBFCs faced. One of these was this pooling of assets for securitisation. A committee was formed to select a suitable facilitator and appointed Northern Arc Capital to structure and arrange funding for multiple MFIs, through a series of Multi Originator Securitisation (MOSEC TM). “HLF was the senior investor in this transaction. The multiple pools were bound by a common second loss facility being provided by Northern Arc Capital as the subordinate investor,” states MFIN.

Eleven NBFC-MFIs had their portfolio securitised in the first tranche, of which six participated for the first time. Of the total, four small ones had a gross loan portfolio (GLP) less than Rs 100 crore. Five medium-sized ones had a GLP between Rs 100 and Rs 500 crore and two large NBFC-MFIs came with a GLP more than Rs 500 crore.

The risk for the investor was further mitigated through this structure by having contracts from 17 states and giving a good urban and rural portfolio mix, said MFIN.

“It is a great example of financial collaboration within the industry to achieve a common goal,” said Harsh Shrivastava, chief executive of MFIN.

"MOSEC TM transactions provide an efficient platform for issuers to club their pools, creating a larger deal that is geographically diversified and of a critical size.  We are delighted at having enabled funding to a large number of MFIs at a critical juncture through the use of a single efficient structure,” says Kshama Fernandes, chief executive of Northern Arc.