Bangalore-based Ujjivan Financial Services has become the first microfinance institution in India to raise funds directly from mutual funds, and that too one of the largest mutual funds in India.
It raised Rs 50 cr from an unnamed mutual fund by placing ‘commercial paper’ (a kind of debt).
“This is the first CP issuance by Ujjivan and represents the Company’s enhanced acceptability amongst domestic capital markets investors. The 3 month tenor issuance was rated A1 by CRISIL,” it said.
Traditionally microfinance institutions, which lend very small amounts to individuals who are otherwise out of the banking system, use the stock market or traditional debt routes such as banks to raise money.
Speaking on the CP issuance Dr.KshamaFernandes, CEO, IFMR Capital — which arranged the deal — said: “The CP issuance by Ujjivan is a significant breakthrough in terms of opening up yet another instrument of fund-raising for the sector and set pricing benchmark and is another step forward for Ujjivan& IFMR Capital in our financial inclusion journey.”
“This transaction is a big milestone for both the sector and for Ujjivan as one of the largest MFIs in the sector as it represents remarkable investor confidence in the sector. In addition, this transaction has underscored investors’ faith in Ujjivan,” said Samit Ghosh, Founder and Managing Director, Ujjivan Financial Services Private Limited.
Debt oriented mutual funds usually generate 4-12% returns. Lending to microfinance companies can help them meet their targets, even though its slightly riskier than lending to traditional companies or investing in government bonds.
Ujjivan serves over 2.5 Million customers across 24 states in India through a network of 450+ branches ably supported by over 7500 employees. It has disbursed loans of over Rs.12338 Crores with a repayment rate above 99%, according to the company.
Sudha Suresh, CFO, Ujjivan said: “The pricing benchmark set by Ujjivan reinforces its strong positioning and confidence of its Investors as a high-quality lender. Increased diversification in funders as well as instruments of fund-raising will further improve efficiencies for Ujjivan which will translate into lowering of cost of lending to our borrowers,” it said.
Ujjivan Financial Services started operations in Bangalore in 2005. Ujjivan runs a robust financial literacy program for customers in collaboration with Parinaam Foundation which is a non-profit organization.