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SKS Microfinance raises Rs 200 crore via securitisation deal with IDBI Bank

The deal assumes significance in the backdrop of growing apprehensions over a decline in the availability of assets eligible for securitisation after the banking regulator tightened norms for such deals in August.

, ET Bureau|
Nov 06, 2012, 10.40 AM IST
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The deal assumes significance in the backdrop of growing apprehensions over a decline in the availability of assets eligible for securitisation after the banking regulator tightened norms for such deals in August.
The deal assumes significance in the backdrop of growing apprehensions over a decline in the availability of assets eligible for securitisation after the banking regulator tightened norms for such deals in August.
HYDERABAD: SKS Microfinance has raised Rs 200 crore by selling its loans to IDBI Bank through a securitisation deal, enabling it to raise money for fresh lending as it tries to recover from a slump, a person with knowledge of the transaction told ET.

The deal assumes significance in the backdrop of growing apprehensions over a decline in the availability of assets eligible for securitisation after the banking regulator tightened norms for such deals in August.

SKS, whose investors include Silicon Valley venture capitalist Vinod Khosla and Infosys founder NR Narayana Murthy, plunged into a serious crisis after the Andhra Pradesh government promulgated a law in October 2010 restricting lending and recovery.

It has written off its entire loan portfolio of nearly Rs 1,500 crore in Andhra Pradesh, shut many branches and reduced staff strength to return to profitability.

The company’s shares closed nearly flat at Rs 112.20 on the BSE on Monday, mirroring the broader market. The SKS stock was worth nearly Rs 1,500 apiece in September. Including the latest one, SKS has so far sold Rs 2,050 crore in loans through 17 transactions.

In addition, it has raised Rs 2,000 crore over the past three quarters. For IDBI Bank, the purchase will help it with its target for meeting the priority sector lending target set by the Reserve Bank of India.

The Rs 200 crore in loans are spread among nearly 3 lakh poor borrowers and entitled for credit enhancement to the tune of 20% to limit risk. SKS declined to comment on ‘market rumours’ while IDBI Bank ED SKV Srinivasan did not reply to an email.

“It is very positive for microfinance sector in general, and SKS in particular, since the securitisation market was very tight for some time after the RBI stiffened guidelines on securitisation deals,” said Santosh Singh, analyst with Espirito Santo Securities. SKS’ securitisation deal, the biggest this fiscal, also comes with the highest safety rating for such a transaction in 2012-13.

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