On Monday, IFMR Capital listed the senior securities of IFMR Capital MosecTM XXII on BSE. This was the first instance of listing of securitised debt in India and marks a significant step towards greater transparency and sustainability in IFMR Capital’s efforts towards financial inclusion, simultaneously marking a milestone for debt securitisation in India.
Eight high-quality originators have participated in this transaction, Asirvad Microfinance Private Limited, Chaitanya India Fin Credit Private Limited, Disha Microfin Private Limited, Fusion Microfinance Private Limited, Grama Vidiyal Microfinance Limited, Sonata Finance Private Limited, Suryoday Micro Finance Private Limited and Utkarsh Micro Finance Private Limited. Together, these entities have portfolios diversified across 11 states – Tamil Nadu, Karnataka, Gujarat, Uttar Pradesh, Uttarakhand, Madhya Pradesh, the National Capital region, Haryana, Orissa, Bihar and Maharashtra. The MosecTM XXII pool is diversified across 10 states and 94 districts across India. CRISIL assigned a rating of A+ (SO) to the senior SDIs of IFMR Capital Mosec XXII, while the junior tranche received a rating of BB- (SO). The senior SDIs were subscribed to by Axis Bank.
The listing event conducted at the International Convention Hall at BSE had representation from a variety of stakeholders including regulators and transaction participants. Present at the event were Mr. Ananta Barua, Executive Director SEBI, Mr. Ashish Chauhan, MD & CEO, BSE, Mr. M V Subramanian – President, Axis Bank, Dr. Nachiket Mor – founding member, IFMR Trust, Mr. Pawan Agrawal, Senior Director – CRISIL Ratings and Mr. H Rokade – CEO, IDBI Trusteeship Services Limited.
Mr. Tamal Bandopadhyay, Deputy Managing Editor, Mint moderated the discussion amongst the participants which saw each of the speakers share their views on this first-of-its-kind listing in the debt segment of the BSE. The discussions revolved around the regulators’ efforts towards building a higher degree of transparency in the debt capital markets and how the listing of SDIs on the stock exchange would go a long way in meeting this end. Listing could also be expected to enhance liquidity and enable price discovery in securitised debt by aiding the creation of a secondary market for such instruments. The fact that it was the microfinance sector that pioneered the listed SDI transaction is further reaffirmation that the sector continues to display resilient performance while demonstrating sustainable and balanced growth post the crisis in 2010. Further, the transaction structure was a demonstration that low income households could be served by small, high quality originators, while such originators could sustainably access debt capital markets from large aggregators such as banks, insurance companies etc.
As part of the event, Dr Nachiket Mor and Dr Kshama Fernandes rang the listing bell at the BSE. The first secondary trade in the listed SDIs occurred simultaneously, with Ratnakar Bank acquiring a Series A1 SDI from Axis Bank on the exchange.
In a MosecTM (multi-originator securitisation) transaction, loan pools of multiple originators are combined and securities are issued backed by these pools. The structure therefore allows smaller originators to tap into the capital markets, while at the same time providing investors the benefit of diversification and credit enhancement.
The MosecTM structure is an example of IFMR Capital’s pioneering work towards enabling financial inclusion and capital market access to small, high-quality originators. From the first transaction closed in January, 2010, IFMR Capital has structured, arranged and invested in 22 MosecTM transactions providing access to more than INR 800 crores of financing to originators serving low-income households across over 20 states and 300 districts.
Commenting on this momentous transaction, Dr. Kshama Fernandes, CEO, IFMR Capital said “Pooling loans from multiple originators under the MosecTM structure is beneficial for all participants in the structure. IFMR Capital, over the last 4 years, has been working towards developing access to mainstream capital markets for high quality originators that impact low income households. The listing of the SDIs on the stock exchange is a giant step towards achieving this objective. This transaction is a win not just for the microfinance sector but for the Indian debt capital markets as a whole and we are proud to have played a part in this transaction.”