A climate fund managed by Zurich-headquartered responsAbility and Indian NBFC Electronica Finance (EFL) have entered into an agreement for issuance of green masala bonds.
This is India s first green masala bonds issued by a private sector non-banking finance company, said Shilpa Pophale, MD, EFL. EFL has issued green masala bonds of $10 million to responsAbility-managed Global Climate Partnership Fund.
This fund targets its investment at emerging economies with high greenhouse gas emissions for investing in energy efficiency and renewable energy.
Pune-based EFL is funding SMEs in the manufacturing industry for nearly two-and-a-half decades. EFL issued rupee-denominated senior secure bonds having a tenure of five years.
Pophale said theirs was a unique issuance and could be among the first NBFC to do so with under `100 crore and a five year tenure. They intend to build on this platform and grow their business to `8,000 crore in five years.
There is a lot of interest overseas for green initiatives and with this transaction they have been able to attract interest from other investors and could see further such rounds of fund raising.
The funds raised are going to be used to expand EFL s lending to manufacturing SMEs to finance their energy-efficient machinery buys. EFL will finance equipment such as machine tools, plastic and the printing and packaging industries. EFL will also expand into financing for solar PV for the commercial and industrial markets. EFL and responsAbility will work on a multi-phase plan for both near-term and medium-term, she said.
Machinery finance is a tough business and many large players have come into this business and given up later. So, there is not much competition in this segment, Pophale said. Large banks too have face high NPAs in this segment, while their NPA was at 1.5%, she said. There is also no competition from new generation online lending companies as most of the online players do not play in this segment and their average ticket size was at `5 lakh while EFL s average ticket size was `35 lakh and went up to `5 crore, Pophale said.
This is a risky business and needs a physical presence as all the customers in this segment are not organised and sometimes even a bank statements is not available, she added.