Yes Bank, one of India`s leading private sector bank, announced that it has subscribed to Rs 250 million of rated Non Convertible Debentures (NCD) issued by SKS Microfinance, India`s largest and the world`s fastest growing micro-finance institution (MFI).
The bond has a tenor of one year from the date of allotment with a coupon rate of 10.50% per annum. Yes Bank was the lead manger to the issue a first of its kind issuance of rated paper by an Indian micro-finance institution.
Microfinance has been recognized as an efficient poverty alleviation tool, its expansion in India is significantly impeded by its relatively limited access to capital markets resulting in MFIs continuing to face challenges of high cost of funds.
On successful completion of the transaction, Suresh Gurumani, MD and CEO of SKS Microfinance said, “SKS is the only MFI in the country to raise funds through non-Convertible Debenture. The funds will be utilised to provide financial services to a larger section of the poor.“
Somak Ghosh, group president, corporate finance and development banking, YES Bank, on fully subscribing to the issue said, “Yes Bank`s microfinance initiatives/approach/focus is centred on using structured capital market products to provide MFIs access to a broader base of investors and lenders thus reducing cost of funds and lowering transaction costs for the sector. The successful closure of SKS`s rated bond issue is the fruition of such efforts at Yes Bank and SKS Microfinance and will help the MFI tap sophisticated capital market investors opening up additional, cost-effective sources of funds.“
Announcing this landmark transaction, S. Dilli Raj, CFO of SKS Microfinance said, “SKS becomes the first Indian MFI to issue a rated bond. This showcases SKS`s structuring and financial innovation skills. The fact that the Bond is a stand alone issuance with no credit enhancement in the form of any 3rd party guarantee or collateral speaks volumes of SKS`s Balance Sheet strength.“