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Origo Trade Finance - First Securitized Transaction In Agri-commodities In Capital Markets

Date: 03 Oct, 2020
 

This transaction creates an alternative asset class through Agri-commodities

Origo Commodities, India’s leading agritech supply chain and trade finance company has come together with financial services enabler Vivriti Capital to execute a new asset class of securitized commodities in the country. The asset class will be available to institutional investors, introducing agri commodities to capital markets.

Origo provides end-to-end agriculture supply-chain solutions such as procurement, storage, and financing. With its transaction, Origo has forayed into the domestic securitization market for agricultural produce, creating access for investors to investment in agriculture through a regulated and listed instrument. The transaction is listed with SEBI and regulated by WDRA.

The first securitized transaction has already concluded through the purchase of maize in the Gulab bagh area of Bihar, for the transaction worth INR 7 crores and aiming at INR100 crores for the current fiscal year. With e-NWR, the commodity being financed is dematerialized and hence available in electronic format. With this structure, investors will be able to invest in agriculture commodities in a manner similar to other financial instruments, but with the added security of being backed by physical commodity. Vivriti Capital’s role in this transaction was instrumental, as they structured and marketed the transaction.

Investors can now purchase Pass Through Certificates (PTCs) backed by receivables and secured with the commodity as an asset. Further, backed by the high trading volumes and liquidity in food grains, along with the security of the transaction structure, the PTC has been rated as A1 by ICRA, which reflects the low-risk nature of transactions under this asset class.

Speaking on the launch, Sunoor Kaul, Co-Founder of Origo Commodities, said, “It is a great opportunity for investors to consider this as an additional option to hedge risks that other asset classes pose during market volatility. PTCs not only allow investors access to the Indian agriculture growth story but also infuse much-needed capital in this sphere. Less than 5% of the agri market has access to institutional capital today and we hope that the creation of asset classes like this will allow better penetration of formal credit into the system. Higher liquidity, in turn, will allow for better management and infrastructure for warehousing and food distribution in the country. Better food grain management and seamless transactions will also turn around the economic prospects for farmers and other stakeholders.

Adithya Murali, Vice President Structured Solutions – Enterprise Finance at Vivriti Capital said, “We are excited to launch this as a new asset class which can over time expand the securitization market in the country. This transaction, with the credit protection it provides to investors, can help establish agriculture commodities as a strong asset for debt capital markets and provide liquidity relief to several participants in the agriculture commodities ecosystem. The availability of structured finance instruments has always increased investor participation over time, and this should be no different for commodity backed issuances.

About Origo

Origo Commodities is India’s leading agriculture supply chain and trade finance company. Under its warehousing it manages assets worth Rs.8,500 crores and is present in 12 states in India. Through its trade finance platform, TradeFi, Origo enables trade and trade finance for better price discovery and a national platform for agri commodities.