Posted on June 17, 2009 - by Gavin

Standard Chartered India Completes Two Of The Largest Debt Capital Market Deals For Microfinance Institutions In India…

Standard Chartered

Hyderabad/Mumbai: Standard Chartered Bank India completed two landmark deals for Microfinance Institutions in the period April – June 2009 with two of the largest Microfinance institutions in the country – SKS Microfinance & Spandana Sphoorty Financial Ltd.

In April 2009, Standard Chartered and SKS Microfinance, India’s largest and the world’s fastest growing microfinance company completed a unique transaction in the debt capital markets by enabling the country’s first listed Non Convertible Debenture (NCD) Issue by a microfinance institution. SKS Microfinance raised INR. 750 mn (USD15mn) through an issue of 1-year NCD at a coupon rate of 10 percent. The NCDs have been listed on Bombay Stock Exchange Limited (BSE).

This was followed by another significant transaction in the debt capital market space – Spandana Sphoorty Financial Ltd., India’s second largest microfinance company with more than 2.5 million clients spread over nine states raised INR 800mn (USD17mn) through an issue of 1-year listed NCD with an yield to maturity of 10 percent. Again these NCDs have been listed on Bombay Stock Exchange Limited (BSE).

Standard Chartered India is the sole book runner and lead arranger for both the Issues

Commenting on the impact of the transaction on SKS and the sector, Suresh Gurumani, MD & CEO of SKS Microfinance, said “This transaction enables us to diversify the sources base and access capital market funding. By listing the NCDs on the stock exchange, SKS raises the bar on transparency and governance standards for the sector as a whole “.

Announcing the transaction Mrs. Padmaja Reddy, Managing Director of Spandana said, “We have one more funding route open now. This is a great beginning to diversify our funding sources and this would enhance our ability to reach out to low income households in seven new states we are planning to expand to in this year,” said. “Issuance of NCDs and listing the same on BSE have several compliances and it would improve Spandana’s corporate governance,” she added.

Joseph Silvanus, Head of Development Organizations, South and South-East Asia, Standard Chartered Bank, said, “These deals are key milestone in the industry, and consequently, Standard Chartered Bank, is proud to have facilitated them. The Bank has an agenda to support the growth of the microfinance sector in India, part of which is to help the sector broaden its fund raising base to support its rapid growth. Over a period of time, this is expected to reduce the cost of funds to the MFIs, which in turn will translate into more affordable funds for the ultimate borrower.”