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Note(\): ‘A1+’ is the highest possible rating for any short-term investment opportunity, equivalent to a long-term rating of ‘AAA’. Refer below for CRISIL’s rating scale comparison between long-term and short-term investments:
Attractive Risk-Adjusted Returns
11.5% Target IRR: Net expected returns are 300-400 basis points higher than a similar rated (i.e. AAA) corporate bond
Monthly Interest Payouts: The payout of interest will be monthly, while the principal repayment will begin from the 7th month
Short Deal Tenure: The expected deal tenure for the investors is only 8 months
Diversified Pool With High CIBIL Score
Diversified Pool: The pool has 3,500+ invoices raised to 370+ borrowers, spread across 26 States and Union Territories
High Borrower’s CIBIL Score: Weighted average CIBIL score of the underlying borrowers is 758, with minimum CIBIL score for any borrower being 701
Low Outstanding Ticket Size Per Invoice: The pool comprises an average outstanding ticket size of ~INR 71k per invoice, and ~INR 670k per borrower. For an investment of INR 1,00,000, the average exposure per invoice is INR 30 only
Robust Security Cover
Pool Cover: The opportunity has a weighted average pool cover of 1.26x of the investment amount
Security Cover: Robust security package that includes 14.0% of over-collateralization, 7.0% of cash collateral, 1.46% of EIS
Originator Backed By High Quality Investors
Key Equity Investors: Originator is backed by high quality equity investors, such as Tiger Global, Sequoia, Google, Creation Investments, GrowX Ventures, Axis Capital Partners, etc.
About Progfin:
Progfin majorly provides supply chain and working capital finance to MSMEs (majorly dealers/sub-dealers) against approved invoices, using a technology enabled underwriting platform “Progcap”
The company is backed by well-known investors such as Tiger Global, Sequoia, Google, Creation Investments, GrowX Ventures, Axis Capital Partners, etc.
Leadership Background:
[Pallavi Shrivastava, Co-Founder](https://www.linkedin.com/in/pallavishrivastava/), has over 15 years of experience in SME financing, investing and consulting across India, South Asia and Africa. Prior to Progfin, she has worked with organisations like International Finance Corporation and The World Bank. She has also been recognized among the 50 Most Impactful Global Social Innovators.
[Himanshu Chandra, Co-Founder](https://www.linkedin.com/in/himanshu-chandra-138a8815/), has over 15 years of experience in the financial services industry in organisations like The Carlyle Group, Barclays and Standard Chartered Bank. Prior to founding Progfin, he also co-founded Nordusk Clean Tech, a clean technology company providing efficient energy and lighting solutions to Indian Corporates.
[Sushil Thaker, CFO](https://www.linkedin.com/in/sushilthaker/), has over 17 years of experience across fintech, insurtech, and consulting. He held leadership positions at reputed consulting firms and leading startups like Deloitte, KPMG, Acko General Insurance and Avanti. At Progfin, he is directly responsible for fund raise, financial models, business planning, and budgeting processes.
Portfolio and Financial Performance:
As of Jun’24, Progfin reported an AUM of INR 1,507 Cr
The Company reported GNPA/NNPA of 1.8%/1.1% as of Jun’24
In FY24, the NBFC reported revenue of INR 107.8 Cr, with profit after tax (PAT) of INR 3.0 Cr (i.e., 2.8% of revenue)
As of Jun’24, Progfin reported a debt-to-equity (D/E) ratio of 1.5x, and capital adequacy ratio of 39.4% against a minimum requirement of 15% as per RBI norms
_Source: Financial performance presented above are based on audited financial statements for FY23, and provisional statements for FY24 and YTD Jun’24_
Note(\): Opportunity consists of a replenishment period for the first 6 months, followed by the amortization period. Replenishment period refers to the period in which the collections from the pool will be utilised to purchase additional loans, and not used to pay principal to the investors. Replenishment will be done in accordance with pre-determined diversification criteria. From 7th month onwards, principal repayment will begin for the investors.
What is InvoiceX?
InvoiceX is an invoice discounting investment opportunity structured in the form of a Pass-through Certificate (PTC), which is a fixed-income instrument issued in accordance with an RBI framework. Grip through InvoiceX offers PTCs secured by a pool of trade receivables; these PTCs are rated by a credit rating agency. Investors/Subscribers are provided with fixed monthly payouts in the form of interest and/or principal. For risk mitigation, all cash flows are managed by a SEBI registered trust (with an escrow mechanism to ring-fence the receivables).
How is InvoiceX secured?
The InvoiceX (in PTC format) is an RBI compliant, and rated instrument, which is managed by an independent, SEBI-registered trustee. The returns in the InvoiceX originate from a pool of trade receivable invoices. The security package of InvoiceX consists of over-collateralization, cash collateral, and excess interest spread (EIS).
What is the tax applicable on my return?
Only the monthly interest payout is expected to be taxed at the marginal tax rate of the individual investor; no tax should be payable on the principal repayment. Appreciation (if any) of the price of the SDI, in case of sale prior to the full tenure, is expected to be considered as capital gain and taxed accordingly. Please do not consider this as tax advice. We urge you to speak with your independent tax advisor.
What is accrued interest?
Accrued interest is the amount of interest due on the SDI that has accumulated since the last time an interest payment was made. The interest has been earned by the existing holder, but because interest is only paid at set intervals the investor has not received the money yet. If the present holder sells his SDI, he should be entitled to get the interest until the date of the sale.
For example, assume you receive INR 1,000 as interest on the 30th of every month. On the 15th of the month, you decide to sell the SDI. Since you held the SDI for 15 days, an equivalent coupon amount, in this case INR 500 is earned by you but not yet received. Hence, when you sell the SDI, the INR 500 in accrued interest must be added to the sale price to fairly compensate you.
What is the difference between the clean price and dirty price of the SDI? (Purchase Price vs. Investment Amount)
The clean price is the price of an SDI not including any accrued interest. The clean price is typically calculated as the adjusted face value of the instrument closer to the nearest payout date, ceteris paribus. Dirty price is the price of an SDI that includes accrued interest between payout dates.
How is the Investment amount of a SDI calculated?
The investment amount is the sum of the face value of each SDI (“Clean Price”) and accrued interest.
Is it compulsory to do KYC for InvoiceX investment?
Yes, RBI has mandated KYC requirements for the purchase of the Pass-through Certificates (PTCs) to prevent money laundering activities
What level of credit evaluation and due diligence is done for InvoiceX transactions before bringing the opportunity on Grip’s platform?
Evaluation and filtering by the originator; the originator applies certain filtering criterias before extending a loan to any individual/group, like earnings analysis, credit bureau check, background verification, etc.
Internal evaluation by Grip, which involves; benchmarking of originator’s background and the management team with market standards; analysis of the originator's portfolio of loans to identify a pool that complies with RBI and SEBI regulations and has credit worthiness; and ensuring market standard risk-rewards are being incorporated in the transaction structure. Grip will, on a reasonable effort basis, attempt to carry out ongoing monitoring by obtaining necessary confirmations/ verifications from the originator. Typically, these pools are rated annually by credit rating agencies and downgrades in the pool quality entitle the invocation of early amortisation triggers.
External evaluation by a tier-1 credit rating agency, which involves; overall assessment of the pool of loans; evaluation of deal structure; assessing the sufficiency of credit enhancement to cover any potential shortfalls; and scenario analysis based on default rates, prepayments, etc.
Is there any recourse on the borrower for non-payment?
Originator as a lender generally builts in various kinds of recourse to respective borrowers. The recourse is legally established by suitable documents as per terms and conditions agreed with each borrower.
There is no recourse in InvoiceX opportunities beyond the credit enhancement available for the investors (except in opportunities wherein the underlying loans are asset/mortgage backed). Credit enhancement includes upfront cash collateral, over-collateralization, and excess interest spread (“EIS”); which will be available for investors and can be utilised in case of any shortfall in payments to investors.
What is NSE’s RFQ mechanism?
RFQ refers to the ‘Request for Quote’ platform of the stock exchange (NSE or BSE). This platform is meant for execution and settlement of transactions in debt securities (for example, corporate bonds, SDIs and other similar assets available on Grip’s platform). SEBI has mandated the use of this mechanism for carrying out transactions on online bond platforms (like Grip). Further, all transactions entered through the RFQ mechanism are also settled through BSE’s/ NSE’s clearing corporation, which is a highly secure way of transacting in Corporate Bonds and SDIs. The RFQ mechanism also provides various payment options such as UPI, Net Banking, NEFT and RTGS providing you with both convenience and payment security.
When would my returns start?
Your lease returns will start within 30 to 45 days of completion of 100% funding for an asset
In case, it takes us more than 7 days to complete 100% funding for the asset, your investment will additionally earn interest till the complete funding target is achieved. This additional interest will be paid out along with your first monthly return and be calculated at the fixed deposit rate for a 30 day FD from HDFC Bank
Is IRR different from ROI?
ROI and IRR are complementary metrics where the main difference between the two is the time value of money. ROI gives you the total return of an investment but doesn’t take into consideration the time value of money. For example, INR1,000 received today is more valuable than INR1,000 received after 3 months. IRR calculations take into consideration when the INR1,000 was received, while ROI does not.
IRR hence not only represents the amount of money earned but also how fast it was earned
What is the difference between pre-tax and post-tax returns?
For each transaction a Limited Liability Partnership, LLP is set up for the purchase and lease of the assets
Pre-tax returns are based on the lease income received by the LLP from partners. The LLP is liable to pay tax based on applicable accounting standards on this lease income. The post-tax returns are calculated after deducting such taxes as well as the management fees charged by Grip. Since there is no further tax on either the LLP or you on the distribution of these post-tax returns, these are the net returns received by you. You will have no further tax obligation or payments due to Grip from these returns.
What are the tax implications on my post-tax returns?
All payments that you receive are made post-tax and hence, there are no additional tax implications for you
Under the accounting standards applicable for LLPs, certain expenses such as depreciation reduce the effective tax rate and these benefits are already factored into your returns
How does my ITR filing process change?
As a partner to the LLP, you will need to additionally fill ITR form 3 when you submit your income tax returns
On behalf of the LLP, we will file ITR 5 and provide the same to you to make the process transparent and easy for you
Is there any repayment security and is there a contingency plan in case of non-payment by partners?
We have the ability to reclaim assets for selling or re-leasing. However, you must note that while we have these safeguards in place, it does not guarantee 100% returns in case the leasing partner defaults. In that case, Grip will take the suitable legal course
Who recovers assets in case of default?
Grip will take care of all the processes related to the reclaim of assets for selling or re-leasing
What is the process of investment?
Once the funding target is achieved, we would send you the agreement and consent letter for the LLP which would be the vehicle of investment for the deal
Parallelly, the LLP signs the agreement with the leasing partner so that the payment dates get locked
You start receiving returns within 30 days after the 100% funding is completed
All information provided in this document is based on publicly available information and disclosures made by the originator
Such investment does not guarantee that an investor will make money, avoid losing money, or indicate that the investment is risk-free.
The payment structure in this transaction is Timely Interest and Ultimate Principal (TIUP) (i.e., while the interest is promised on a monthly basis, principal is only expected)
Information provided in this document does not constitute advice relating to investing or otherwise dealing in securities and is not an offer or solicitation for the purchase or sale of any securities. Grip is not registered with SEBI or RBI in any capacity and does not advise, encourage, or discourage its users to invest or not invest in any securities. Grip is solely an execution-only platform and does not guarantee or assure any return on investments made by investors in any opportunities sourced by Grip and accepts no liability for consequences of any actions taken based on the information provided. However, Grip's subsidiary (Grip Broking Private Limited) is a SEBI-registered Stock Broker (INZ000312836). Any investment made by an investor is solely based on his/her judgement. Investments in debt securities are subject to risks. Read all the offer related documents carefully.
Limited liquidity and price risk: There is no assurance that a deep secondary market will develop for these instruments. This could limit the ability of the investor to resell them. Even if a secondary market develops and sales were to take place, these secondary transactions may be at a discount to the initial issue price due to changes in the interest rate structure.
Limited recourse, delinquency and credit risk: The credit enhancement stipulated represents a limited loss cover to the Investors. These Series A1 PTCs represent an undivided beneficial interest in the assets and do not represent an obligation of either the Trust or the originator, or the parent of the Trust and originator. No financial recourse is available to the investors against the Trustee. Any delinquencies and credit losses may cause depletion of the amount available for the monthly expected pay- outs to the Investors. Further, although the Series A1 PTCs represent an undivided beneficial interest in the assets. The instrument carries a loss of principal risk as there are chances that an investor may not get back the money he or she has invested or may lose the value or at least a portion of the original investment made.
Prepayment risk: There could be prepayments under any of the loan agreements. The investors are subject to the risk of changes in the average tenor of the respective loans on account of prepayments.
Bankruptcy of the Originator/Servicer: If the originator becomes subject to bankruptcy proceedings and the court or tribunal in the bankruptcy proceedings concludes that the sale from the originator to the Trust was not a valid and absolute true sale, then an investor could experience losses or delays in the payments. All possible care has been taken in structuring the transaction so as to minimise the risk of recharacterisation and for the sale to the Trust to be construed as confirming to the ‘True Sale’ criteria. The legal counsel to the trust has agreed to opine that the assignment of receivables to Trust in trust for and for the benefit of the beneficiaries, as envisaged herein, would constitute an absolute and valid sale.
Co-mingling risk: The servicer will deposit all payments received from the obligor into the servicer's bank account and thereafter into the collection and pay-out account of the trust. However, as long as the originator is also the servicer, there could be a time gap between collection by the servicer in the servicer account and depositing the same into the collection and pay-out account. Further, such amounts lying in the servicer account could be construed as the servicer's assets in the event of a bankruptcy.
Receivables and borrower’s risk: The investor payouts are dependent on the timely payments of the amounts due under the loan agreements and in the event the borrower defaults to make such payments, the investor payouts may get delayed or considerably reduced or become nil. In the event of any insolvency of the borrower or on the wilful default by the borrower, the credit strength of the pool would get diluted and therefore there is a risk attached to the SDIs.
Tax risk: The investor’s pay-outs may be reduced on account of tax levies on the income distributed by the issuer to the investors, depending on the status/category of the investor, which may result in a reduction in the respective investor’s net securitisation income, if any.
For opportunities where an information memorandum/ offer document is filed with any regulatory authority, a copy of such document will be made available to you. Your attention is invited to the statement of risk factors contained under “Special Considerations and Risk Factors” (see Chapter 8 of the Information Memorandum), in addition to those listed above. Please note that the risks mentioned above are not, and are not intended to be, a complete list of all risks and considerations relevant to any products/ opportunities being made available to you, or your decision to invest in such products/ opportunities.
Related Party Disclosure: The seller of this security is a related party of Grip Broking Private Limited (GBPL) and GBPL charges brokerage fees from this entity (based on the investment amount). Grip or its related parties might also earn an income on procuring or originating such securities/ transactions.
Issuer Name: InvoiceX 5 Trust
ISIN: INE17VL15016
Nature of Instrument: Unlisted
Seniority: Senior Tranche
Original Mode of Issue: Private Placement
Date of Issue: 30th September 2024
Rating of the Instrument: ‘A1+’ by CRISIL, dated 28th September 2024
Face Value: INR 1,17,526 per PTC
Clean Price and Dirty Price: Based on Calculator Above
Coupon Rate: 11.0% p.a.p.m
Date of Maturity/ Tenor: 20 May 2025/ ~8 months
Name of Debenture Trustee: Catalyst Trusteeship Limited
Yield to Maturity: Based on Calculator Above
Offer Documents: Information Memorandum
Electric Vehicles for Zypp (66.7%)
This investment opportunity involves leasing out electric two wheelers to Zypp.
Depreciation on the asset being leased is 40%
Subscription-Based Financing with ConvertCart (33.3%)
This investment opportunity involves subscription-based financing against the SaaS subscription contracts of ConvertCart
ConvertCart is a comprehensive and fully integrated Conversion Rate Optimization (CRO) suite for SMB e-commerce companies based in the US
The opportunity has been sourced, negotiated, and diligenced by Recur Club, a subscription-based financing platform facilitating the financing of high-quality tech companies with recurring revenue contracts by allowing them to trade their contracts as a tradeable asset on the Recur platform
ConvertCart has been a customer of Recur Club since Apr’22. Recur Club has raised INR 75 lakhs for ConvertCart through two investors. Recur Club has indicated that there has been no delay in repayments from ConvertCart till date
Grip, through its platform and investors, will be facilitating this investment for Recur
Zypp
Two year opportunity with fixed monthly returns
Total security deposit paid by the partner will be ~5% of the asset value
Title of none of the assets will be transferred to the Zypp and Grip will take physical possession of these assets in case of termination of the lease
Complete compensation in case of loss of the assets will be the responsibility of Zypp. Further, they will also be responsible for all repairs (whether routine or resulting from any damage or accident and maintenance costs of the assets)
ConvertCart
Eighteen-month opportunity with fixed monthly returns
Investors will pay 85.8% of ConvertCart’s expected revenue from specific contracts to ConvertCart (five contracts in consideration), and will purchase the right to receive the entire expected revenue under such specified contracts, pursuant to a purchase and sale agreement
ConvertCart’s specific contracts are expected to generate a revenue of INR 46.6 lakhs, which provides a cover of 1.16x on the investment amount
Additionally, to cover any shortfalls, investors will have access to ConvertCart’s 250+ buffer contracts, which are expected to generate a revenue of ~INR 20 Cr in one year (based on LTM revenue). All existing investors through Recur have a pari-passu access to these buffer contracts
All information provided in this document is based on publicly available information and disclosures made by Zypp and ConvertCart
For Zypp, there is no market data on the resale value of the assets being leased and in case of default by the lessee, the resale value may not be sufficient to compensate for the loss in rentals
For ConvertCart, investors in unsecured subscription-based financing transactions encounter a different set of risks from the ones involved in conventional leases. As Recur Club is an online platform for trading of such contracts, the investors have no recourse to Recur Club
Investments are repaid solely based on revenue from ConvertCart’s specified contracts. However, no direct recourse is available against the client of ConvertCart if such clients are unable to make payments under the specified contracts. Further, in case ConvertCart goes bankrupt, investors will have no recourse available against ConvertCart, other than under the applicable insolvency laws. In such a scenario, secured and unsecured creditors of ConvertCart may rank higher and may be eligible to receive their dues earlier than the investors
The revenue collected from the identified clients of ConvertCart under the specified contracts will be paid into the bank account of ConvertCart, before being transferred to the investors. Accordingly, there is a possibility of co-mingling of such revenue with other funds of ConvertCart, resulting in failure to recoup such revenue
Such investment does not guarantee that an investor will make money, avoid losing capital, or indicate that the investment is risk-free
Such investment does not guarantee that an investor will make money, avoid losing capital, or indicate that the investment is risk-free
Zypp : 1% fee to be charged by Grip on the monthly rental payments made by Zypp
ConvertCart : 2% fee to be charged by Recur Club and 1% by Grip, on the monthly payments made by ConvertCart