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IFMR Capital forays into Rating Advisory

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IFMR Capital recently closed its first ratings advisory with a leading NBFC in India. On the basis of its deep understanding of the sector and its robust data analytics work, the Company advised and guided the originator through the rating process which resulted in an upgrade from BBB Category to A Category. Staying true to its vision of becoming a complete debt solutions provider for its partner originators, IFMR Capital has added yet another product to its suite that will enable it to connect high quality originators to debt capital markets in an efficient and reliable manner.

The ratings advisory drew on synergies across due diligence, risk and credit analytics, on-going originator analysis and industry benchmarking conducted by teams within IFMR Capital.

IFMR Capital’s analysis of the Originator was based on the following:

  • Underwriting framework of evaluating the originator’s quality of origination to provide financial services in informal markets
  • Experience and understanding of multiple originators across the industry gained through structuring and investing in a large number of transactions over the years
  • Extensive risk analytics performed pre- and post- investments based on granular, contract level historical performance of millions of underlying loans

The application of proprietary qualitative and quantitative tools developed at IFMR Capital to evaluate entities and monitor their performance over long periods of time would continue to be critical in the advisory exercise. In addition assisting originator partners in the ratings upgrade exercise would help in expanding the investor class accessible to these originators, thus enabling them to access better pricing and tenors.

Commenting on the closure of the first transaction, Dr. Jim Roth, Director – IFMR Capital and Partner and co-founder of LeapFrog Investments said “I have long believed that asymmetric information is at the root of inefficient credit markets. By facilitating the flow of information and doing it in a sustainable way, you hit at the heart of what is preventing millions of people from obtaining quality, relevant and affordable financial services.

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  1. Unlike various agencies providing only or mainly rating services, IFMR Capital has a unique advantage of having soiled their hands in understanding the microfinance sector through direct participation with a large section of MFIs. In that respect, I am confident that your rating exercise would command greater credibility and respect among the prospective investors. I would suggest that the rating exercise may include tools to assess the ‘social performance’ of the concerned financial institution concerned (if not included in the present format).

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