Birla Sun Life Mutual Fund and Ujjivan are in Rs 150-crore securitisation pact
KOLKATA: Birla Sun Life Mutual Fund and Ujjivan have struck a securitisation deal between themselves opening up the possibility of easier financing options for lenders at the bottom of the pyramid. The size of the deal is Rs 150 crore.
This is the first instance, after the Andhra Pradesh microfinance crisis of 2010, of a mutual fund investing in a securitisation deal initiated by a micro lender. The deal could give a fillip to the securitisation market with mutual fund houses showing interest to invest as government bond yields have been falling over the past one year.
“It’s encouraging as mutual funds have started coming back to invest in microfinance loan pools after the 2010 crisis,” said IFMR Capital Chief Executive Officer Kshama Fernandes. “It’s a purely commercial play for mutual funds as they look to maximise returns.”
Bond yields dipped almost 65-100 basis points since April 2016. A premium of 50 to 100 basis points is what is received by an investor from a securitised paper compared to a plain bond.
The Ujjivan-Birla Sun Life deal took place in the last week of January, just a week before Ujjivan began operations as a small finance bank. IFMR Capital arranged the deal.
“The securitisation transaction is a testimony to the company’s inherent strength and excellent risk management amid the challenges of demonetisation. It denotes the investors’ continued trust in the company’s business performance,” said Sudha Suresh, Ujjivan’s Managing Director. Ujjivan is the holding company for the small bank.
This is going to help Ujjivan unlock capital. The Bengaluru-based entity said its net profit was lower in the December quarter due to the investment incurred for setting up the small finance bank.
The investment was rated A+ by India Ratings. The securitisation pool comprises individual loans as underlying assets with one-year average duration.
Birla Sun Life said it would explore similar opportunities to invest in high-quality pool deals.
“It could be a harbinger of increased capital market interest in similar transactions by other players in the sector. Coming in the wake of demonetisation and from an astute investor, it is a significant vote of confidence in the MFI sector and our deal structuring capability,” Fernandes said.
This is the first instance, after the Andhra Pradesh microfinance crisis of 2010, of a mutual fund investing in a securitisation deal initiated by a micro lender. The deal could give a fillip to the securitisation market with mutual fund houses showing interest to invest as government bond yields have been falling over the past one year.
“It’s encouraging as mutual funds have started coming back to invest in microfinance loan pools after the 2010 crisis,” said IFMR Capital Chief Executive Officer Kshama Fernandes. “It’s a purely commercial play for mutual funds as they look to maximise returns.”
Bond yields dipped almost 65-100 basis points since April 2016. A premium of 50 to 100 basis points is what is received by an investor from a securitised paper compared to a plain bond.
The Ujjivan-Birla Sun Life deal took place in the last week of January, just a week before Ujjivan began operations as a small finance bank. IFMR Capital arranged the deal.
“The securitisation transaction is a testimony to the company’s inherent strength and excellent risk management amid the challenges of demonetisation. It denotes the investors’ continued trust in the company’s business performance,” said Sudha Suresh, Ujjivan’s Managing Director. Ujjivan is the holding company for the small bank.
This is going to help Ujjivan unlock capital. The Bengaluru-based entity said its net profit was lower in the December quarter due to the investment incurred for setting up the small finance bank.
The investment was rated A+ by India Ratings. The securitisation pool comprises individual loans as underlying assets with one-year average duration.
Birla Sun Life said it would explore similar opportunities to invest in high-quality pool deals.
“It could be a harbinger of increased capital market interest in similar transactions by other players in the sector. Coming in the wake of demonetisation and from an astute investor, it is a significant vote of confidence in the MFI sector and our deal structuring capability,” Fernandes said.
