SMILE Microfin to raise up to Rs 250 cr through term loans

SMILE Microfinance Ltd, a Tamil Nadu-based micro finance institution (MFI), plans to raise up to Rs 250 crore through term loans from banks and finance companies for its lending business in the current financial year.

A Tamilarason, its whole-time director, said rating agency Icra has assigned one of BBB- for long-term bank loans. At present, it draws financial support from 21 banks and some finance companies.

It lends to joint liability groups. The borrowers can decide the payment cycle from a weekly, fortnightly or monthly payment option. Recovery rates are above 99 per cent. “This year, cumulative lending is expected to be Rs 575 crore”, he said.

In 2010-11, SMILE disbursed loans of Rs 377 crore, serving 330,000 members through 143 branches. Its asset base was Rs 192 crore at the end of March, up from Rs 166 crore a year before. For 2010-11, SMILE posted a net profit of Rs 9.1 crore, as against Rs 1.8 crore in 2009-10. Total income rose almost three times to Rs 48.1 crore in 2010-11, from Rs 16.9 crore in 2009-10, says Icra.

While loans from banks are the main source of funds, the MFI intends to keep an option raise up to Rs 150 crore through non-convertible debentures. The coupon (interest rate) for debentures would be 11-12 per cent, depending on maturity, he said.

Icra said SMILE had a comfortable capital position, good loan monitoring systems, internal audit and control systems. However, the operating environment continues to remain weak and fund flows to the MFI sector are uncertain, which has impacted SMILE’s business growth.

Tamilarason said MFI had completed an equity infusion of Rs 50 crore from investors in March. It expects the next round of capital raising infusion only when assets touch the Rs 500-crore mark.