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CredAble, a supply chain financing fintech platform, announced closure of India’s first invoice- backed securitisation transaction worth ₹15 crore with NBFC Northern Arc Capital.
The product works in a manner that under the transaction --discounted invoices are raised to large anchors (buyers) by the vendors (suppliers) on CredAble’s platform, and then assigned as invoice receivables to the securitisation trust.
As an important risk mitigant in the transaction, the money due from the anchors is escrowed to minimise commingling of funds. The transaction also has a ramp up feature under which the invoice cash-flows can be reinvested to purchase a fresh set of invoices that meet predefined eligibility criteria.
Pointing out at the delayed payments and consequential cash flow gap in the MSME sector and proposing necessary amendments in the existing regulations, Finance Minister Nirmala Sitharaman, in the Budget 2020 enabled NBFCs to extend invoice financing to the MSMEs through TReDS (Trade Receivables Discounting System), thereby enhancing their economic and financial sustainability.
As invoice financing is one of the oldest financial products and has traditionally been dominated by banks and a few NBFCs, capital market investors including asset management funds have not been able to access this multi-trillion market, primarily due to lack of an eligible instrument.
CredAble with Northern Arc has managed to address this issue by creating a listed instrument which can be subscribed by investors.
The transaction of ₹15 crore and the senior tranche was awarded the highest possible short-term rating A1+ (SO), by the rating agency.
Nirav Choksi, Co-Founder and Chief Executive Officer of CredAble said the structure will open short-term supply chain financing asset class to capital market investors and 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," he said.
Kshama Fernandes, Managing Director and Chief Executive Officer, Northern Arc Capital said as part of the transaction with company has have extended its successful MOSEC platform to non-financial entities.
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