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December 31, 2017

Review of CRISIL-rated securitisation transactions

Executive Summary


CRISIL has analysed the collection performance of 75 asset-backed securities (ABS), 38 mortgage backed securities (MBS) and 2 commercial mortgage backed securities (CMBS), across 24 originators in the securitsation market. The ABS transactions are backed by commercial vehicle loans (CV), car loans, tractor loans, construction equipment (CE) loans, loans extended to small & medium enterprises (SME), two wheeler loans (TW), microfinance (MFI) loans, home loans (HL) and loans against property (LAP). Key observations as after September 2017 payouts are as below:


  • Stable monthly collection ratio of commercial vehicle pools. Recent vintages show better performance

    Monthly collection ratio (MCR) of CRISIL-rated CV pools remained stable during the quarter ended September 2017 in spite of the rolling out of Goods and Services Tax (GST) early in the quarter. The median collection ratio was in the range of 96-97%. Performance of 2017 vintage pools is superior compared to pools of other vintages. 3 month average collection efficiency posted by 2017 vintage pools is in the range of 95-98% compared to 90-96% and 93-96% for 2015 and 2016 vintage respectively.
  • Collection ratio of microfinance pools stabilizing at a new normal.

    With the exception of a few originators, collection ratio of CRISIL-rated microfinance pools with limited exposure to vulnerable states of Uttar Pradesh, Maharashtra, Madhya Pradesh and Karnataka is stabilizing in the range of 96% to 98%. Pools originated by certain MFIs continued to be under severe collection stress and subsequently defaulted in meeting investor payouts.

  • Prepayments in mortgage pools on a uptrend following bank base rate reductions

    With decline in interest rates and growing balance transfers, the prepayments in mortgage pools continued their uptrend. Overall collection performance of mortgage pools remain stable.

  • Other asset-backed pools exhibit stable performance

    Collections across other pools backed by receivables from asset classes such as SME, cars, CE, two wheelers and tractors remain stable in the range of 97-98%.

  • CMBS transactions continue to enjoy healthy interest coverage ratio

    For the two CMBS pools, DLF Emporio Limited and DLF Promenade Limited, CRISIL has received payout confirmations as of September 2017. The operating earnings before interest, depreciation, tax and amortization for both the transactions provide adequate cover to the rating category.

    So far (till December 31, 2017) in fiscal 2018, CRISIL has upgraded ratings on 32 instruments issued under securitisation transactions due to improving credit collateral cover on account robust collection performance and pool amortization. Ratings on 11 instruments baked by microfinance loan receivables have been either downgraded and/or placed on watch because of weak asset quality. Ratings on 15 instruments under 9 securitisation transactions that were earlier paced on negative watch (in March/June 2017) were removed from the watch due to no further deterioration in their performance and significant amortization resulting in improved cover for future investor payouts. Ratings on 4 instruments backed by microfinance loan receivables were downgraded to CRISIL D (SO) as collection from underlying contracts along with the credit enhancement was insufficient to meet investor payouts on due date.