Allows capital market investors to invest in ‘invoice discounting’ and take indirect exposure to high-quality corporates to whom underlying invoices have been raised
India, 18th January 2023: To ensure adequate supply chain liquidity preservation & requisite working capital, Fintech platform – CredAble with Northern Arc Capital has announced closure of India’s first securitization of a pool of trade receivable loans. The Securitization is backed by approved trade receivable invoices with Multi Anchor – Multi Vendor PERSEC RBI securitization structure. The same is said to be originated by Equentia Financial Service Pvt. Ltd. – a wholly owned non deposit taking NBFC subsidiary of Equentia SCF Technologies Private Limited (CredAble).
Securitization is the financial practice of pooling multiple kinds of contractual debt, such as home mortgages, commercial mortgages, auto loans, MSME loans or credit card debt obligations and selling their affiliated cash flows as securities, which may be alluded to as bonds, pass-through securities, or collateralized debt obligations, to third party investors (CDOs).
Today, several smaller businesses tend to face greater difficulties in accessing credit than their larger counterparts. The securitization structure will allow vendors (mostly MSMESs) of large buyers, to discount their invoices and bridge the working capital gap.
Mr. Ram Kewalramani, Co-Founder & Managing Director, CredAble says, “CredAble has a vision to enable large scale liquidity programs for enterprise clients partnering with the entire financial ecosystem including capital markets and we are pleased and elated to have associated with Northern Arc in enabling this momentous transaction. This is a huge step towards fulfilling that vision. 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.”
The captioned securitization transaction is a short tenor Series A1 pass-through Certificates named Nimbus 2022 TR Eagle. With Principal o/s of INR ~270M, the paper is rated as IND A1+ (SO)
The pool of loans is Sales invoice discounting facility including both (anchors led financing as well as vendor led financing programs) by CredAble NBFC and have been assigned subject to eligibility criteria being complied among originator, investor, and Trustee. On account of short-term nature of underlying assets, the transaction was structured to undertake replenishment and thus collections from the securitized asset pool can be utilized to purchase additional loans from CredAble NBFC after paying interest to investor on the PTCs on the scheduled payout dates for the first three months. Post the replenishment period, the transaction will start amortizing as per the prescribed waterfall. The rating of the Series A1 PTCs addresses timely payment of interest and final payout of principal on maturity date.
Manu Prakash – Managing Director, Debt & Capital Markets & Financial Institutions at CredAble said, “We are extremely proud and delighted to have partnered with Northern Arc in enabling this landmark transaction. FinTechs with captive NBFCs are playing an important role for economy and coupled with balance sheet support from large and strategic NBFC lenders, will serve to boost liquidity available to supply chain financing and also strengthen CredAble’s ability to provide liquidity solutions to our corporate clientele and their ecosystem.”
The securitization will allow capital market investors to invest in a new asset class namely, “invoice discounting” and take indirect exposure to high quality corporate Anchors from whom trade receivables are due. Securitization of this asset class can further contribute towards PSL asset outstanding for Bank Investors, as most of these borrowers (Vendors/ Suppliers) are Udyam certificate holders.
