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Small finance bank applicants like Grama Vidiyal and Sonata raise fund in pooled bond

sonata microfinance

(Applicants for small finance…)

KOLKATA: Applicants for small finance bank license such as Grama Vidiyal Microfinance and Sonata Finance have raised Rs 85 crore between them in a pooled fund raising which help them to get a better rating and attract mutual funds as investors.

These MFIs raised the fund through non-convertible debentures at 12-14% coupon and the NCDs were subscribed to by three mutual funds, according to the IFMR Capital, which arranged the issue.

Arohan Financial Services, Asirvad Microfinance and Future Financial Services have also been part of the exercise.

This pooled structure enabled these MFIs to access the mutual fund market which normally avoids investment in instruments below "A" category rating. ICRA rated the pooled issue "A (SO)" while individual rating of all but one underlying issuers is in the "BBB" range.

This is the 9th such bond issuance arranged by IFMR Capital for microfinance players and the first one subscribed to by mutual funds.

"The pooled structure created a critical size enabling the MFIs

raise the fund at a competitive rate," IFMR Capital managing director and chief executive Kshama Fernandes told ET. "This structure diversifies the risk for investors and draws interest from large capital market investors."

Grama Vidiyal along with Asirvad and Future Financial raised Rs 20 crore each. Sonata raised Rs 15 crore with Arohan raising Rs 10 crore. Arohan's majority stakeholder IntelleCash Microfinance Network, is also in the race for acquiring a small finance bank license.

Reserve Bank of India is expected to offer the first set of licenses by the end of August.

The pricing of the pooled issue was competitive given the fact that Janalakshmi Financial Services has just raised Rs 150 crore at 12-12.5% per year for maturities ranging between two and four years. The Janalakshmi issue was also subscribed to by a mutual fund.

Over the last 6-8 months, mutual funds have made a comeback to invest in MFIs with their improved credentials. "The microfinance market is doing better in terms of portfolio growth across geographies," Fernandes said.

Category: Payday loans

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