Financial Inclusion

IFMR Capital structures India’s 1st Collateral Bond Obligation in Financial Inclusion

Eleven microfinance firms and small business lenders access debt capital markets for the first time under the path-breaking collateral bond obligation (CBO) comprising multi-issuer pooled NCDs totaling to Rs 98 crores

In keeping with its mission of providing access to debt capital for financial enterprises serving the financially-excluded communities, IFMR Capital, the Chennai based non-banking finance company (NBFC),today announced India’s first collateralized bond obligation – the IFMR CBO I of Rs 98 crore, comprising multi-issuer pooled non-convertible debentures. The CBO includes eleven issuers.

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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 many such multi-issuer securitization transactions (MosecTM) in microfinance and small business loans. The MosecTM 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 MosecTM – XXII was the first listed securitisation in India, issued in January 2013, with 8 originators. IFMR Capital MosecTM Aurais so far the largest completed securitization completed by IFMR Capital– Rs167 crores with 4 participating originators and146,111 microloans. The CBO issuance is a significant step towards unlocking the potential of capital markets for such originators.

Speaking on the CBO issuance, Dr Kshama Fernandes, CEO, IFMR Capital said, “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 our 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. 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”

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.

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