SKS Microfinance is talking to a couple of banks to securitise some portion of its receivables. In fact, Citibank has given a limit of Rs 180 crore to the company on this and the first tranche of Rs 40 crore got released recently.
According to MR Rao, chief operating officer of the company, in the micro finance industry, securitisation happens only as an off balance sheet transaction. Securitisation does not happen in the true sense as it happens in the home loan and mortgage business primarily because the ticket size of loans is very small and also most of the loans are less than one year.
?At SKS normally, we build the portfolio and sell them month on month. And over the past three months the company has done securitisation as an off balance sheet transaction worth Rs 40 crore. The deal was with recourse,? he said. Citibank has also released the first tranche of Rs 40 crore from the overall limit of Rs 180 crore which was extended to the company. ?We are also talking to a couple of banks for securitisation but nothing has been finalised. The company plans to securitise as off balance transactions at least 20-25% of its overall receivables during the current fiscal,? he added.
SKS does not look at securitisation as an avenue to raise funds. ?Companies can borrow 10 times their capital. And they resort to securitisation when they get closer to that limit to hive off some portion of it to get the necessary appetite and ability to borrow more. But in the case of SKS Microfinance, it is not an issue as our equity capital would go up to Rs 200 crore from the present level of Rs 73 crore once we raise Rs 120 crore from strategic investors as planned. Once the equity is raised we would be able to borrow to the tune of at least Rs 2,000 crore?, he explained.