Vivriti’s online enterprise debt platform facilitated closure of a first of its kind time-tranched securitisation structure for Muthoot Capital Services Limited (MCSL). 85% of the investment amount was assigned an AAA provisional rating by CRISIL and was subscribed to by a large India based Family Office.
This structure involves splitting the usual single tranche investment into multiple tranches that are allocated principal cash flows (i.e. due for redemption) in a sequential manner. By doing the same, some of the earlier tranches can be rated much higher than the single tranche structure with the same level of credit enhancement. This reduces the risk weight/ capital requirement for the investor and also diminishes the mark-to-market risk associated with the investment. These benefits can then be partly passed by the investor to the originator in terms of better price, resulting in substantial cost savings for the originator.
Commenting on the deal, Mr Vinod Panicker, CFO, Muthoot Capital Services Limited said, “The AAA Provisional rating and the subscription by a new class of Investor is a big validation of the confidence reposed by lenders on the robustness of the MCSL business model. We are glad to be part of this landmark; innovative transaction which we are sure will pave the way for more such deals in the future. The deal execution experience on the Vivriti’s CredAvenue and the support of the team has been commendable.”
Commenting on the deal, Vibhor Mittal, Chief Products Officer of Vivriti Capital said, “At Vivriti Capital, we are committed to design and implement innovative structured solutions that are both cost and capital efficient for all our stakeholders. A time tranched structure (TTS) is one such offering. Depending on various factors like type of asset class being securitised, duration and target rating of the instrument, cost of funds for the investor etc., TTS can result in 30-60 bps reduction in all-in-cost for the Originator and 5-10% bump up in RoE for the investor.”
About the Entities:
Muthoot Capital Services Ltd, promoted by the Muthoot Pappachan Group is a Kerala based deposit taking, systematically important NBFC. MCSL is primarily into 2 W and Used 4 W financing business with a portfolio of approx. 2,800 Crores and 7.50 lac+ customers spread across 21 states. Muthoot Pappachan Group (MPG), also known as Muthoot Blue, is a much-diversified business conglomerate providing solutions, services and expertise to millions of customers across the country in various domains like financial services, automotive, realty, hospitality, IT and alternate energy. Over the years, Muthoot Pappachan Group has grown to become a significant entity in the Indian business landscape.
Vivriti Capital: Started in mid-2017 by Gaurav Kumar and Vineet Sukumar, Vivriti Capital’s CredAvenue is an enterprise debt platform that connects issuers and investors. The platform now works with over 200+ clients across 12 sectors and 120+ investors. Vivriti has facilitated transactions of over INR 21,000 Crore through over 950 fixed income transactions.