Creditaccess Grameen Limited NCD Comapny Profile:
Creditaccess Grameen Limited is a leading Indian micro-finance institution headquartered in Bengaluru, focused on providing joint liability group loans and micro-loans primarily to women customers predominantly in rural areas in India. According to MFIN India, the company was the largest NBFC-MFI in India in terms of the gross loan portfolio as of March 2022. The company offers a diverse suite of lending products that cater to the critical needs of the customers throughout their life cycle and includes income generation, health care, education, festival celebration, home improvement, water, and sanitation. The customer-centric business model, a wide range of product offerings, as well as our well-designed product delivery and collection systems, have enabled the company to achieve high customer retention rates and low credit costs.
Creditaccess Grameen Limited is coming up with a public issue by the company of secured, redeemable, non-convertible debentures of face value ₹ 1,000 each (“NCDs” or “debentures”), for an amount up to ₹250 crores (“base issue size”) with an option to retain oversubscription up to ₹250 crores, aggregating up to ₹500 crores (“tranche I issue”) which is within the shelf limit of ₹ 1,500 crores (“shelf limit”) and is being offered by way of this tranche I prospectus. The issue opens for subscription on Monday, 14th November 2022, and will close on or before Friday, 2nd December 2022. The allotment is on a first come first serve basis with the minimum application to be made is of 10 NCDs. A minimum of 75% of the Net Proceeds raised through this Tranche I Issue will be utilized for the purpose of lending, financing, for repayment of interest and principal of existing borrowings of the Company, and the remaining 25% for general corporate purposes.
Creditaccess Grameen Limited NCD Details:
|Tranche I Issue opens:||Monday, 14th November 2022|
|Tranche I Issue closes:||Friday, 2nd December 2022|
|Allotment:||First Come First Serve Basis|
|Face Value:||₹ 1,000 per NCD|
|Nature of Instrument:||Secured Redeemable Non-Convertible Debentures|
|Minimum Application:||10 NCDs (₹ 10, 000) & in multiple of 1NCD|
|Listing:||BSE & NSE|
|Credit Rating:||IND AA-/Stable for an amount of ₹ 1,500 crores by India Ratings & Research|
|Tranche I Issue Size:||Public issue by CreditAccess Grameen Limited (“the Company”) of NCDs for an amount of ₹ 250 Cr (“Base Issue Size”), with an option to retain over-subscription up to ₹ 250Cr aggregating up to ₹ 500 Cr.|
|Registrar:||KFIN Technologies Limited|
|Category||I – Institutional (“QIB”)||II – Non-Institutional (“Corporates”)||II – High Net worth
(Amount aggregating to
above ₹ 10 lakh)
|II – Retail Individual (“Retail”) (Amount aggregating up to and including ₹ 10 lakh)|
|Category Allocation of the overall Issue Size||25%||35%||15%||25%|
|Bucket Size (₹) assuming Issue size of ₹ 300 Cr₹||₹ 62.5 Cr||₹ 87.5 Cr||₹ 37.5 Cr||₹ 62.5 Cr|
Specific Terms of the Prospectus:
The terms of the NCDs offered under the Issue are as follows:
|Frequency of Interest Payment||Monthly||Cumulative||Monthly||Cumulative||Monthly||Cumulative|
|Tenor||24 months||24 months||36 months||36 months||60 months||60 months|
|Coupon (% per annum) for NCD Holders in Category I, II, III & IV||9.45%||NA||9.60%||NA||10.00%||NA|
|Effective Yield (per annum) for NCD Holders in Category I, II, III & IV||9.83%||9.83%||10.02%||10.02%||10.46%||10.46%|
|Amount (₹ / NCD) on Maturity for NCD Holders in Category I, II, III & IV||₹ 1,000||₹ 1,206.57||₹ 1,000||₹ 1,332.07||₹ 1,000||₹ 1,644.91|
|Maturity / Redemption Date (from the Deemed Date of Allotment)||24 months||24 months||36 months||36 months||60 months||60 months|
Creditaccess Grameen Limited Strengths:
Creditaccess Grameen Limited follows robust customer selection and risk management policies, which have resulted in healthy asset quality and lower credit costs. The company follows a systematic methodology in the selection of new geographies where it opens branches, which takes into account factors such as the historic PAR% of the proposed district, competition in the new geographies, potential for micro-lending, and socio-economic risk evaluation.
Due to the pandemic-led disruptions, CA Grameen reported elevated credit costs of 6.8% in FY21 and 4.5% in FY22 (FY20: 2.7%; FY19: 1.3%). Given that most MFIs have restructured their assets at end-March 2022 in the range of 5-10% as against 0.9% for CA Grameen, the credit cost for CA Grameen over two years was 10-15% lower than that of the industry (some of these costs may be borne by others in 1HFY23 as assets came out of restructuring). Even after the demonetization, most MFIs with a focus on Maharashtra/Uttar Pradesh and Madhya Pradesh had their credit costs in the range of 5-10% while CA Grameen witnessed credit costs of about 4%.
CA Grameen’s (consolidated) gross stage 3 ratio (60-day non-performing asset recognition policy for group loans and 90-day recognition policy for retail finance) decreased to 3.6% at FYE22 (FYE21: 4.4%), while the net stage 3 ratio stood at 1.3% (1.4%) with a provision coverage ratio of 64.4%. At the end-March 2022, the restructured loans remained low at 0.9%, with a provision of 30% for the same. The proportion of non-paying customers declined to 2% in March 2022 from 12.3% in June 2021.
After the pandemic, being the largest NBFC-MFI, CA Grameen got lenders’ preference due to the increased risk aversion among lenders. Moreover, the proportion of bank loans with more than three-year tenors increased to 39% in FY22 (December 2019: 15%), indicating increasing lender comfort. At end-March 2022, borrowings from policy institutions and foreign entities accounted for 41.6% of the borrowings. The management aims to reduce its monthly obligation against the collection ratio to 50% from the current 65% by increasing the proportion of long-tenor borrowings (in the form of external commercial borrowing / NCDs from global FIIs/FPIs, impact investors, multilateral/ bilateral institutions, development finance institutions, banks) to over 20% in the medium term.
Creditaccess Grameen Limited Risk factors:
Microfinance loans are unsecured and are susceptible to various operational and credit risks which may result in increased levels of NPAs, thereby adversely affecting our business, results of operation, cash flows, and financial condition.
The Company’s growth will depend on its continued ability to access funds at competitive rates which are dependent on a number of factors including the Company’s ability to maintain its credit ratings. Any downgrade of the credit ratings may increase the borrowing costs and constrain access to capital and debt markets and, as a result, may adversely affect the net interest margin, results of operations, and cash flows.
The microfinance industry in India faces unique risks due to the category of customers that it services, which are generally not associated with other forms of lending.
Creditaccess Grameen Limited’s business requires substantial capital and any disruption in the sources of its funding or an increase in its average cost of borrowings could have a material adverse effect on its liquidity and financial condition.
CA Grameen has a well-established large franchise, with an operational history of over two decades. The company is the largest NBFC-MFI in India, with assets under management (AUM) of INR166 billion and a borrower base of 3.8 million, on a consolidated basis (including its subsidiary, Madura Micro Finance Limited (MMFL)), at FYE22. CA Grameen (consolidated) had one of the lowest operating cost-to-average assets ratios (FY22: 5.2%; FY21: 5.1%; FY20: 4.8%) in the industry. The NCD has been rated as IND AA-/Stable for an amount of ₹ 1,500 crores by India Ratings & Research. Instruments with this rating are considered to have a high degree of safety regarding the timely servicing of financial obligations. Such instruments carry very low credit risk. It could be a good deal for an investor looking for a regular income. For any queries related to the NCD, you can consult the team at Elite Wealth. Since Demat is mandatory for investing in this particular NCD from NHIT, the investor must open a Demat account with a trusted broker like Elite Wealth.
CreditAccess Grameen NCD Prospectus:
- Draft filed with SE –
- Final filed with ROC –