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IFMR Capital structures microloan securitisation with Ujjivan

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IFMR Capital recently structured and arranged a Rs. 173 million securitisation transaction. The transaction is backed by 21,170 microloans originated by one of the leading MFIs in the country, Ujjivan Financial Services. This is the third capital market transaction for Ujjivan and first securitisation transaction. Ujjivan has raised debt capital through issuance of listed, secured, redeemable, non-convertible debentures in the last financial year.

OMEGA PIONEER IFMR CAPITAL 2011, the Special Purpose Vehicle created for the transaction, has issued two tranches of securities rated by ICRA, India’s foremost rating agency:  an 91% senior tranche rated LBBB+(so) that was subscribed to by Ratnakar Bank and a 9% subordinated junior tranche rated LBB(so) that was invested into by IFMR Capital. Both tranches have an expected maturity of 9 months.

Kshama Fernandes, the CRO of IFMR Capital said, “We are pleased to start a relationship with Ujjivan, a high quality originator. The deal affirms IFMR Capital’s commitment to the microfinance sector. Creating marketability of these assets to a broader universe of investors has expanded access to capital for micro-finance institutions”.

S.B. Mukherji, Chief General Manager, Agri. & Financial Inclusion Group, Ratnakar Bank said “Financial Inclusion is one of the cornerstones of Ratnakar Bank’s Vision and it will be executed through multiple business models, directly from our branches and through high quality partner institutions like Ujjivan and IFMR”

The structure created by IFMR Capital ensures that the incentives of the originator, servicer and structure are aligned. While the originator and servicer, Ujjivan, provides cash collateral of 10% of the pool principal, the structurer, IFMR Capital, has invested in the subordinated junior tranche. The cash collateral and the subordination of payments to junior tranche in the waterfall mechanism ensures that the senior investor is protected against losses and any first loss is borne by the originator and the second loss by the structurer.

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