Hinduja Leyland Finance buys Rs 107-crore worth loans from MFIs

KOLKATA: Pooling of loans to gain economies of scale is getting popular even beyond securitized loans deals. Hinduja Leyland Finance, a non-banking company primarily in vehicle financing, has bought loans worth Rs 107 crore from as many as eight firms in a single pooled loan issuance last week.
These loans are bundled together and backed by a common guarantee provided by IFMR Capital, enhancing the credit rating for the loans, making the transaction cheaper than any individual deal.
Hinduja Leyland Finance has bought the pooled loan portfolios against the loan receivables of companies operating across segments such as microfinance, commercial vehicle and small business loan. The originators of the loans include Intrepid Finance & Leasing, S.M.I.L.E. Microfinance and Svasti Microfinance, Kogta Financial (India), Pahal Financial Services, Saija Finance, Shri Ram Finance Corporation and Aye Finance.
“Such buyouts directly contributes to our loan book and help us maintain some balance in an otherwise vehicle loans-led portfolio,” Hinduja Leyland Finance chief executive Sachin Pillai told ET.

The company, a subsidiary of Ashok Leyland with 57% ownership, will get an average yield of 11.25% on these loans. Everstone holds 14% stake in it with the balance being with the Hinduja group.

The non-bank firm has Rs 14000 crore loan assets as on March 2017 with 81% of it contributed by vehicle financing. Another 10% comes from loans against property and the balance 9% is built by buying out portfolios from other companies.

“This pooled loan structure helped us taking exposure to multiple NBFCs together that are catering to small and medium borrower segment. The credit quality of the NBFCs is enhanced as 16% of the pooled value is guaranteed giving us additional comfort in taking exposure to small and mid-sized entities,” Pillai said.

Chennai based IFMR Capital structured the deal.

“On a stand-alone basis many borrowers may find it difficult to raise funds from diverse lenders at competitive pricing. Providing a common guarantee to a pool of loans improves the borrowing ability and the pricing for the borrowers”, said Kshama Fernandes, chief executive of IFMR Capital.

“This structure is scalable and we are in touch with some 120 loans originators in the MFI and NBFC space. The initial hard work in terms of building the back-end for this structure is done.” Fernandes told ET, adding that there has been keen interest from banks and NBFCs to participate in this as lenders.