IFMR Capital achieves its mission of connecting high quality originators in financially excluded sectors and financially excluded households with debt capital markets through:
i) catalysing debt capital markets and enabling market making,
ii) using financial structuring expertise for designing innovative, client-driven products
iii) maintaining strong standards on underwriting and expert risk management
Participation in IFMR Capital-led transactions and availing financing via IFMR Capital’s products helps our partner institutions diversify sources of funding, build reputation and credibility in capital markets, achieve lower cost of financing and in some cases enable capital release.
To maintain aligned objectives, IFMR Capital always retains its skin in the game by not only structuring and developing products, but also by investing in them or participating in the deal as a co-guarantor or credit-enhancer.
Our product suite spans the continuum of plain vanilla on balance sheet products and complex structured finance products. Provided below are the list of products IFMR Capital has developed over time and offers through its own balance sheet or structures and invests in as the case may be :
IFMR Capital offers through its own balance sheet, term loans to partner institutions. The tenor of the loans is matched to the asset-liability balance of the client. This product has seen a surge in off-take year on year owing to the fast turn-around time and organized process. Similarly, the cash credit product is offered to clients who have vintage and have demonstrated sound asset-liability management capability.
Rated securitization is one of IFMR Capital’s most popular structured products, for large and small originators alike. In addition to structuring and arranging a securitization transaction, IFMR Capital retains skin in the game by routinely investing in subordinated tranches of the securitization deal and has in certain cases picked up stake in senior tranches in addition to the subordinated tranche.
As part of structuring the deal, IFMR Capital cherry-picks loans through defined criteria from unencumbered portfolios of originators for sale to a Special Purpose Vehicle (SPV). The SPV is a private trust set up as a bankruptcy-remote entity. A rating agency evaluates the structure and underlying pool of loans to assign ratings to the tranches in the deal. To achieve the desired rating, credit enhancement is provided by the originator in the form of a first loss facility, over-collateralization or cash collateral. IFMR Capital and other investors may also provide second loss support either by way of investment in subordinated tranches or by way of a second loss facility.
The SPV then issues debt securities in the form of pass through certificates, for which investors are arranged by IFMR Capital.
IFMR Capital structures, arranges and invests in both single originator and multi-originator securitization (Mosec) deals. Over the years, IFMR Capital has spun out a large range of cost-effective structures for securitization.
Bilateral assignment is one of IFMR Capital’s long standing product offerings and involves a sale of portfolio from the Originator or seller to the assignee or buyer. IFMR Capital as a structurer and arranger, hand-picks loans from the Originator portfolio that can be bought by the assignee, identifies assignee investors, and facilitates deal execution.
In many cases, IFMR Capital participates in the deal via a risk participation facility to ensure alignment of incentives.
In a first of its kind lending programme, IFMR Capital partnered with the Asian Development Bank (ADB) in 2012 to enable partial-guarantee backed lending to Indian microfinance institutions (MFIs). Under this programme a domestic banking partner extends rupee loans to MFIs in India backed by the partial-guarantees from ADB and IFMR Capital.
Under the programme framework, IFMR Capital recommends eligible MFIs to ADB and the domestic banking partner using its own internal due diligence standards and also provides subsequent portfolio monitoring and surveillance support. As a co-guarantor under the facility, IFMR Capital’s incentives are aligned with that of ADB and the banking partner in ensuring the long-term success and sustainability of the programme.
IFMR Capital also arranges for investment in the non-convertible debenture (NCD) issuances of its partner institutions. IFMR Capital has thus far arranged for a wide variety of NCD issuances of different sizes and tenor. Investors in the NCD issuances of IFMR Capital’s partners include Foreign Portfolio Investors and Mutual Fund houses. IFMR Capital has arranged for both secured and unsecured senior NCDs and unsecured subordinated long-term NCDs.
In an effort to provide a wide-ranging product suite to its clients, spanning different tenors, IFMR Capital also arranges for investment in the commercial paper issuances of its partner institutions. Key investors in the commercial paper issuances arranged by IFMR Capital are Alternative Investment Funds (AIFs), NBFCs and large Mutual Fund houses.
External commercial borrowing
In FY 2015, IFMR Capital also concluded the placement of its first External Commercial Borrowing deal unlocking a total financing of INR 630 million. IFMR Capital continues to be a key participant in the ECB arrangement space with deals being concluded for a wide range of partner institutions. Through this route, IFMR Capital also manages to unlock subordinated debt capital in addition to senior debt.
Collateralized pooled-bond programme
IFMR Capital ended FY 2014 with the successful placement of CBO I – which was the first Collateralized Bond Obligation programme, structured, arranged and co-guaranteed by IFMR Capital. CBO I was concluded in March 2014 with an issuance size of INR 980 million and participation from eleven first-time issuers of non-convertible debentures. The structure, though complex to execute, has seen significant scale over the year under review and represents significant market-making for IFMR Capital’s clients. Banks, large NBFCs and Mutual Fund houses are key investors in the collateralized pooled-bond programme. In addition to medium and larger sized issuers, the programme finds favour with a sizeable proportion of smaller-sized originators who issue NCDs for the first time under this programme.
IFMR Capital unlocks significant value to partner institutions by arranging for subordinated debt capital through long-term unsecured NCDs and via the placement of preference shares. Investors in this segment have been FPIs and AIFs.
In addition to products that IFMR Capital structures, arranges and invests in, IFMR Capital operates an active syndication desk that performs pure-play debt syndication for partner institutions from large domestic, public and private sector banks and NBFCs.