Vivriti Asset Management Pvt Ltd, a wholly owned subsidiary of mid-market lender Vivriti Capital, Tuesday announced that it is launching a $250-million asset-backed securitization (ABS) fund for investing in India’s small and medium business enterprises.
The fund – Vivriti India Retail Asset Fund (VIRAF) – has already secured investments worth $30 million and $75 million from the International Finance Corporation (IFC) and M&G Catalyst, respectively, according to a statement issued by Vivriti Asset Management.
With investments from IFC and M&G Catalyst, the fund aims to strengthen the securitisation market and address gender gaps in formal finance, while expanding additional financing for small businesses.
Terming it as the first-of-a-kind ABS fund, Vivriti said the vehicle will focus on scaling investment in securitised debt securities predominantly microloans to micro and small enterprises, which will constitute about 90% of the fund’s portfolio.
VIRAF has a fund term of 10 years and is domiciled in GIFT City, International Financial Services Centre. IFC’s and M&G Catalyst’s participation is also expected to attract other investors, mobilising funds to channel to non-banking finance companies (NBFCs) that focus on supporting underserved MSEs in India, the statement added.
The fund is being managed by Vivriti Asset Management (VAM).
“VIRAF aims to deepen and develop India’s ABS markets, by intermediating large global capital pools to last-mile financing, thereby setting a prototype for more such vehicles. Our research indicates that Indian ABS have outperformed internationally better-rated ABS, which makes it a compelling opportunity for global investors. M&G and IFC’s participation serves as a validation of the huge and untapped potential of Indian ABS as an asset class, stability of the regulatory environment, and India’s positive macro-outlook,” said Vineet Sukumar, founder and MD, VAM.
India’s 63 million micro, small and medium enterprises (MSMEs) contribute up to 30% of GDP, generating over 40% of exports, and creating employment for over 100 million people. Yet, an IFC study estimates the MSME finance gap in India to be at $342 billion, with MSEs accounting for 95% of that gap.
“Supporting IFC’s systematic approach, this investment will bolster India’s NBFCs and enable greater institutional funding to the sector, contributing to the financial sector’s resilience while also strengthening MSMEs post-pandemic,” said Allen Forlemu, IFC’s Regional Industry Director for Financial Institutions Group, Asia and the Pacific.
“The fund will further showcase the attractiveness of securitisation as a means to access capital markets, promoting similar innovative vehicles, expanding financial inclusion and fostering greater integration within the country’s capital markets,” Forlemu added.