Share & Asmitha submit business reorganiation plan to bankers

The plan includes demerge of the AP portfolio

Andhra Pradesh-based, microfinance institutions, Share and Asmitha, have chalked out a reorganisation plan for their businesses.

Both the MFIs, currently under the corporate debt restructuring (CDR) cell, have submitted the plans to their bankers for approval. Under the plan, the non-Andhra Pradesh portfolio of both the MFIs is expected to be demerged, and consolidated into one. The Andhra Pradesh portfolio of the two would be retained for recovery of dues in the state, but the arms would not be involved in any lending activity.

The two MFIs have been able to get two years' additional time from the Reserve Bank of India (RBI) for meeting regulatory capital requirements for qualifying as non-banking finance company (NBFC)-MFIs.

This apart, the existing lenders to the MFI have agreed to provide Share an additional funding of Rs 360 crore, and Rs 270 crore to Asmitha.

In April-2014, the MFIs got RBI nod for forbearance on capitalisation requirements of net owned funds and capital to risk asset ratio (CRAR) till financial year 2016.

After loan restructuring for the first time in September 2011, the MFIs had sought approval for a second round of debt restructuring. The plea was rejected by the RBI. The fresh lending by banks and the RBI forbearance comes as an alternative to the second debt restructuring plans.

According to RBI norms, an NBFC-MFI is required to maintain minimum net owned funds of Rs 5 crore, except for those based in the North East, and a CRAR of 15%. For most of the MFIs in Andhra Pradesh, the net owned funds is negative, at present.

At present, both the MFIs have nearly 60% of their total portfolio concentrated in Andhra Pradesh. While Share has a portfolio outstanding of nearly Rs 1,800 crore, Asmitha has a portfolio outstanding of Rs 900 crore.

In 2011, banks restructured about Rs.6,000 crore worth of loans to several Andhra Pradesh-based MFIs, while continuing to treat it as standard assets repayable over seven years.

For Share and Asmitha, the loans have to be repaid in two years at 13% rate of interest, informed the spokesperson of Share.