New book by Larry Connors Click here Improve your trading - See how
It is also in talks with HDFC Bank for another such structured deal for around Rs 150 crore. The move is expected to help the MFI absorb the burden of rising interest costs, diversify its ability to raise more debt and make better use of capital.
"Apart from the transaction with ICICI Bank, we have in-principle sanctions and commitments for securitisation on hand from different leading banks for over Rs 1,050 crore," said YV Shiv Narain vice-president, finance, Spandana.
Securitisation is the process of converting existing assets or future cash flows into marketable securities. In this case, the loans are written in the books of the MFI and sold as future receivables to ICICI Bank. The MFI deposits the money collected from its clients (which are the receivables) in an escrow account and transfers it to the books of ICICI Bank. The bank discounts the future receivables at an interest of 12.5 percent.
Spandana, which lends money to low-income groups, has raised funds through such structured deals for over a decade now. The MFI has tied up with two dozen banks for funding and the list includes ICICI Bank, HDFC Bank, Indian Overseas Bank and HSBC, among others.
"We have used around Rs 200 crore out of the Rs 300 crore raised from ICICI Bank. We plan to use the balance Rs 100 crore before the end of this fiscal," he said. ICICI Bank, however, declined to comment on the deal.
An official spokesperson said "the bank has been extending credit to a large number of microfinance institutions in the past and will continue to do so. It is not our policy to comment on specific deals." With capital becoming scarce, Spandana's incremental interest costs have risen by around 200 basis points.
It now pays an annual interest of around 14 percent on loans from banks as compared to 12 percent it paid nearly six months ago. "But we have not passed on the burden to borrowers, as our operating costs are significantly lower than the industry average," said Shiv Narain.
By Trushna U & Aniruddha Ghosh
To see more of The Economic Times, or to subscribe to the newspaper, go to http://economictimes.indiatimes.com Copyright (c) 2008, The Economic Times, India Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
More News:
Market Updates |
Stock Alerts |
All Trading News |
Stock Index
About TradingMarkets | Contact | Advertise | Careers | Link to Us | Site Map | Help | Terms & Conditions | Privacy Policy | Return Policy | Testimonials | Feedback
The Connors Group, Inc. ("Company") is not an investment advisory service, nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities or currencies customers should buy or sell for themselves. The analysts and employees or affiliates of Company may hold positions in the stocks, currencies or industries discussed here. You understand and acknowledge that there is a very high degree of risk involved in trading securities and/or currencies. The Company, the authors, the publisher, and all affiliates of Company assume no responsibility or liability for your trading and investment results. Factual statements on the Company's website, or in its publications, are made as of the date stated and are subject to change without notice.
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results of any individual trader or trading system published by Company are not indicative of future returns by that trader or system, and are not indicative of future returns which be realized by you. In addition, the indicators, strategies, columns, articles and all other features of Company's products (collectively, the "Information") are provided for informational and educational purposes only and should not be construed as investment advice. Examples presented on Company's website are for educational purposes only. Such set-ups are not solicitations of any order to buy or sell. Accordingly, you should not rely solely on the Information in making any investment. Rather, you should use the Information only as a starting point for doing additional independent research in order to allow you to form your own opinion regarding investments. You should always check with your licensed financial advisor and tax advisor to determine the suitability of any investment.
HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING AND MAY NOT BE IMPACTED BY BROKERAGE AND OTHER SLIPPAGE FEES. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.
The Connors Group, Inc.
15260 Ventura Blvd., Ste. 2200
Sherman Oaks, CA 91403
© Copyright 2009 The Connors Group, Inc.
