NBFC MUDRA aims to diversify funding base with first-ever bond sale

Micro Units Development and Refinance Agency (MUDRA), an Indian non-banking finance company set up by Prime Minister Narendra Modi's government in 2015, plans to raise up to 50 billion rupees ($563.22 million) through bonds to diversify its funding base, two sources familiar with the matter said on Thursday.

 

The company, a wholly owned subsidiary of Small Industries Development Bank of India (SIDBI), is expected to issue its first tranche of 20 billion rupees before the end of the current quarter, with the second tranche slated for the last quarter of the financial year, one source said. 

MUDRA may opt for bond tenors ranging from three to seven years to align with its asset profile, though the final structure will be determined closer to the issuance date based on investor preferences, the second source said. 

The company, which did not respond to a Reuters request for comment, has received AAA ratings from Care and Icra for its bond issuance. 

"As a wholly owned subsidiary of SIDBI, MUDRA benefits from its operational and managerial support, including representation on its board," Care said in its rating note. 

The ratings reflect strong backing from the Indian government and the Reserve Bank of India through budgetary allocations and policy initiatives, Care added. 

The proposed bond issuance will allow MUDRA to diversify its funding sources beyond regular budgetary support and bank credit lines, enabling more predictable refinancing for lenders serving micro borrowers, the sources said.

MUDRA currently has outstanding loans totaling 79.50 billion rupees from SIDBI and lenders including Bank of India and IDBI Bank, according to Icra. 

SIDBI, which has a strong bond issuance track record, has outstanding bonds worth nearly 1 trillion rupees, Icra data showed.