Crisil upgrades microfinance PTCs' ratings

Capital structure of securitisation

As on 22 October 2009. Source: Report from IDBI Trusteeship Services Pvt Ltd (Trustee for SPV)

IFMR Capital, the sole structurer and arranger, has provided second loss credit enhancement in the form of an investment in 100% of the Series A2 securities and the Series A1 securities have been fully underwritten by a bank investor.

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IFMR Capital, which structured and invested in the landmark transaction with Equitas, is promoting microfinance loans originated by high-quality MFIs as an attractive asset class for a new category of securities in the ABS market. The securitisation structure, pioneered by IFMR Capital in India, is expected to open up new sources of debt capital such as mutual funds, insurance companies, NBFCs and foreign banks, for the microfinance industry.

"The ratings upgrade strengthens our confidence in microfinance as a promising new asset class for debt and equity investors across the globe. The upgrade by three notches together, reflects the strength of the underlying assets. This puts microfinance firmly on the map of mainstream capital markets," said Sucharita Mukherjee, CEO, IFMR Capital.

"Equitas' unique set of processes and MIS systems have helped demonstrate the quality of our portfolio and our originating capabilities. With this rating upgrade, Equitas is now more confident of accessing the full range of capital market instruments. In the medium term, this development will usher in wider capital access for the entire microfinance sector as well," according to S. Bhaskar, COO, Equitas.

According to Ajay Dwivedi, Director-Structured Finance Ratings, Crisil, "The rating upgrades reflect the increased cover that the transaction's credit enhancement provides to the PTCs as a result of the strong collection. Continued strong collection performance in the transaction could lead to a further upward movement in the rating for the Series A2 PTCs."

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The Chennai-based IFMR Capital is a non-banking finance whose mission is to provide efficient and reliable access to capital for institutions that impact poor households. IFMR Capital acts as a bridge to mainstream capital markets for under-served sectors such as microfinance institutions, small and medium enterprises, agri-commodity backed financing and low-income housing finance.