Centrum Financial Services Ltd, a non-banking financial company part of Centrum Group, has raised Rs 50 crore by securitizing its supply chain loan book, which was acquired from Larsen & Toubro Finance 2 years ago. Further, the company is also looking to raise another Rs 25 crore in the same way. The company, which provides financing with an average ticket size of Rs 50 lakh to Rs 1.5 crore to micro, small and medium enterprise, supply chain dealers, and vendors, has raised the funding from high-net-worth individuals, family offices, and treasuries among others. The details of the investors could not be ascertained.
The funding was raised through Pass-Through Certificates issued by a Special Purpose Vehicle of Centrum Financial Services Ltd, which had received a CRISIL A1+ (SO) credit rating which is highest rating for a Pass-Through Certificates Centrum Financial Services Ltd has also pledged supply chain finance vendor loans in addition to the securitization of dealer loans
According to Ranjan Ghosh, Managing Director, and CEO of Centrum Financial Services Ltd, securitizing a supply chain dealer book is an industry first in India and it took the company over a year to build the concept and to implement the portfolio. In the current economic scenario with limited liquidity and refinance options, the non-banking financial company has found it difficult to sustain growth. Credit-lines and re-finance options from banks have reduced and alternate means of financing and short-term borrowings have turned expensive.
According to the company’s terms of the securitization, the investors have the first right on the receivables the Special Purpose Vehicle gets. The risk of non-payment by the vendors is underwritten up to a certain amount by the company, enabling investors to earn an interest of about 8-8.5 % per annum. Centrum Financial Services Ltd is in an advanced stage of raising an additional Rs 25 crore by issuing a second round of Pass-Through Certificates for its supply chain finance business. The company intends to raise funding before the end of the financial year.
In 2018, Centrum Financial Services Ltd had acquired Larsen & Toubro(L&T) Finance’s supply chain business, which had a Rs 650-crore loan book, 50 employees, and presence across 16 cities in the country. With a total book size of about Rs 2,000 crore, Centrum’s lending businesses comprise affordable housing finance, microfinance, and SME and micro, small, and medium enterprise loans.
