In today’s financial landscape, where investors constantly seek higher returns while protecting their capital, altGraaf offers a unique solution. It advocates for diversification through invoice discounting through structured debt investment instruments like altPack. Let’s delve into its unique features.  

What is altPack?

altPack is a structured debt investment that pools invoices securitised through pass-through certificates (PTCs) with escrow control and partial principal protection in some cases. These invoices act as collateral for the investment, and either altGraaf or an external trustee manages their repayment through an escrow account.

How Does altPack Work?

Let’s take you through the altPack structure.

1. A licensed NBFC factoring company could act as the originator of the investment opportunity. This company will source many seller companies and collect the invoices raised by the buyers. 
2. Then, they will sort those invoices into separate pools and provide the pools with a rating. For example, a pool with AAA-rated instruments will be the safest but with slightly lower returns. Similarly, another pool with a BBB- rating will have a higher risk and provide a higher interest rate, potentially leading to higher returns. So, the originator will be responsible for sourcing the invoices, pooling them, and rating them, making them a structured debt investment product, and offering individual investors a range of investment options.
3. There will be different pools of invoices with varying risks. Each pool will have different criteria, and all the invoices in that pool should meet those criteria. Then, the originator will assign those pools of invoices to an SPV (Special Purpose Vehicle). 
4. A SEBI-registered debenture Trustee manages the SPV. They convert the pool into units called Pass-Through Certificates (PTC) units and issue them to investors. One can keep PTCs like shares and bonds in the demat account.
5. The buyers’ repayments are received in the escrow account controlled by the trustee and then transferred to investors.

Risk Mitigants

• altPack is a structured debt investment product. It is already diversified since the individual investor invests in the invoices of more than one company. 
• One of the critical features of altPack is that in the event of payment default, the originator will bear part of the loss if the originator offers credit protection. It provides partial security to the instrument and a safety net for the investor. 
• The RBI-appointed trustee controls the escrow account, thus ensuring transparency in the funds transfer.  

Risks Involved

Like any investment, investing in altPack carries certain risks. Here are some of the potential risks of altPack: 

• Credit risk:  If the buyers of goods default on the invoice payments, investors may not receive the entire investment amount. 
• Concentration risk: Investing in a pool of invoices securitised through PTCs means the investment is concentrated in a single asset class. If the underlying asset’s performance is poor, the entire investment could be at risk.
• Interest rate risk: If interest rates rise, the value of PTCs may fall, resulting in a loss for investors who wish to sell their PTCs before maturity.

Conclusion

altPack is a structured debt investment product that provides a unique alternative investment opportunity to invest in a pool of discounted invoices. Thus letting investors diversify their portfolios. The probability of all buyers not paying is very limited, therefore reducing the extent of losses in worst-case scenarios.

However, it is essential to evaluate the quality of the invoice pool, the credit quality of the buyers to repay, and any credit protection provided by the originator before investing. altPack is a great option for someone interested in investing in invoice discounting and diversifying simultaneously.

You can also consider other altGraaf invoice-discounting products, such as altSmart, altArmour, altBlu, and altWings.

FAQs

1. What are PTCs?

PTCs are fixed-income instruments issued following an RBI-set framework. They are structured investment opportunities by multiple companies’ diversified pool of invoices. They are a secure pool of trade receivables often rated by credit rating agencies.

2. What is an SPV?

A special purpose vehicle (SPV) is a company created by a parent company to protect itself from financial risk. Its separate legal status ensures the obligations of the SPV are secure even in the parent company’s bankruptcy. It provides a safeguard against potential financial losses.

3. What is the minimum investment amount for altPack?

The minimum investment for altPack is ₹1,00,000 

4. What is investment tenure?

The Investment tenure is 6 – 9 months.