Fintech platform CredAble and non-banking financial company (NBFC) Northern Arc Capital have announced closure of India’s first invoice backed securitisation transaction under SEBI guidelines.
Speaking on structuring of this transaction, Northern Arc Capital MD and CEO Kshama Fernandes said, “As part of the transaction we have extended our very successful MOSEC platform to non-financial entities as well. This was also the first time we have structured a ramp-up based MOSEC. This transaction will allow corporates to access the securitisation market which has so far been mostly dominated by NBFCs.”
Invoice financing is one of the oldest financial products and has traditionally been dominated by banks and a few NBFCs, while Northern Arc aims access this multi-trillion-rupee market by creating a listed instrument which can be subscribed by investors.
Under the transaction, ten vendors (suppliers) on the CredAble platform discounted invoices that were raised to several large anchors(buyers) by assigning invoice receivables to the securitisation trust. The transaction was structured by Northern Arc Capital.
An important risk mitigant in the transaction was that money due from the anchors was escrowed to minimise commingling of funds.
The transaction also has a ramp up feature under which the invoice cashflows can be reinvested to purchase a fresh set of invoices that meet predefined eligibility criteria. The transaction size was Rs 15 crore and the senior tranche was awarded the highest possible short-term rating A1+(SO) by the rating agency.
Commenting on the benefits of such transactions to investors, Kshama said, “The structure allows investors to take indirect short tenor exposure to corporates which may not have typical borrowing requirements. This helps in diversification of their overall portfolio. Furthermore, since the anchors are non-financial entities, the exposure doesn’t not come under NBFC limits for the investors.”
Nirav Choksi, chief executive officer of CredAble, said “The structure will open the short-term supply chain financing asset class to capital market investors, as well as non-traditional investors, UHNIs and FPIs. We now have potential to unlock working capital for the entire value chain of our enterprise clients, on both the payables and receivables side – covering suppliers, sub-vendors of their suppliers, distributors, dealers and retailers.”
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