To ensure proper supply chain liquidity preservation and required operating capital, Fintech platform CredAble has announced the completion of India’s first securitization of a pool of trade receivable loans in collaboration with Northern Arc Capital. The Multi Anchor – Multi Vendor PERSEC RBI securitization structure is backed by approved trade receivable invoices. Equentia Financial Service Pvt. Ltd., a completely owned non-deposit taking NBFC subsidiary of Equentia SCF Technologies Private Limited, is believed to have initiated the same (CredAble).
Securitization is the financial practise of pooling various types of contractual debt, such as home mortgages, commercial mortgages, auto loans, MSME loans, or credit card debt obligations, and selling their associated cash flows as securities to third-party investors, which may be referred to as bonds, pass-through securities, or collateralized debt obligations (CDOs).
Today, many smaller businesses have more difficulty obtaining loans than their larger rivals. The securitization structure will allow large customers’ vendors (mainly MSMEs) to discount their bills and bridge the working cash gap.
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.”
CredAble NBFC’s sales invoice discounting facility includes both (anchors led financing and vendor led financing programmes) and has been assigned subject to eligibility conditions being met by the originator, investor, and Trustee. Because of the short-term nature of the underlying assets, the transaction was designed to allow for replenishment, and thus collections from the securitized asset pool can be used to purchase additional loans from CredAble NBFC after paying investors interest on the PTCs on the scheduled payout dates for the first three months. Following the replenishment time, the transaction will begin amortising according to the prescribed waterfall. The Series A1 PTCs are rated for timely payment of interest and complete repayment of principal on maturity.
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.