Detailed Rationale CRISIL Ratings has assigned its ‘Provisional CRISIL AA (SO)’ rating to Series A1 pass-through certificates (PTCs), issued by ‘Airspeed 03 2024’ under a securitisation transaction originated by Spandana Sphoorty Financial Limited (‘SSFL’; rated ‘CRISIL A/Positive’).
This transaction is backed by a pool comprising microfinance loan receivables originated by SSFL. The ratings are based on credit quality of the underlying pool receivables, origination and servicing capabilities of SSFL, credit support available to the PTCs, payment mechanism for the transaction, and soundness of the transaction’s legal structure.
The transaction has a ‘Par with EIS’ structure. SSFL will assign the loan pool to ‘Airspeed 03 2024’, a trust settled by Axis Trustee Services Limited, which will issue Series A1 PTCs to investors in exchange for a purchase consideration equal to 87.5% of the pool principal outstanding as on the cut-off date (Feb 29, 2024).
Series A1 PTC holders are promised timely interest on a monthly basis and principal on ultimate basis on the maturity date of the PTCs. Investor payouts for PTCs are supported by cash collateral, overcollateralisation and subordination of excess interest spread (EIS).
Total credit support available in the transaction structure is as below:
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Key Rating Drivers & Detailed Description Strengths:
Weaknesses:
These aspects have been adequately factored in its rating analysis by CRISIL Ratings. |
Liquidity: Strong Liquidity is strong given that the credit enhancement available in the structure is sufficient to cover losses exceeding 1.5 times the currently estimated base shortfalls. |
Rating Sensitivity factors Upward factor:
Downward factors:
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About the Pool The transaction is backed by microfinance receivables originated by SSFL. The key pool characteristics are outlined below:
Counterparty details
Transaction waterfall mechanism Series A1 PTC holders are promised timely interest payment on a monthly basis and principal repayment on an ultimate basis on the maturity date of the PTCs. The collections from the pool, including the internal subordination through overcollateral as well as EIS, will be used to make promised interest payouts to PTC holders, followed by expected principal payouts as per the scheduled monthly principal collections.
However, in case of a collection shortfall, while the cash collateral can be used to make the promised interest payouts, any shortfall in expected principal collections will be carried forward as arrears. The cash collateral can be utilised to meet any outstanding principal arrears on the maturity date of the PTCs.
Any prepayments will be utilised for accelerated redemption of PTCs.
Additional disclosures for Provisional ratings: The provisional rating is contingent upon execution of the following documents:
The provisional rating shall be converted into a final rating after receipt of transaction documents duly executed within 90 days from the date of issuance of the instrument. The final rating assigned post conversion shall be consistent with the available documents. In case of non-receipt of the duly executed transaction documents within the above-mentioned timelines, the rating committee of CRISIL Ratings may grant an extension of up to another 90 days in line with its policy on provisional ratings.
Rating that would have been assigned in absence of the pending documentation: In the absence of documentation considered while assigning provisional rating as mentioned above, CRISIL Ratings would not have assigned any rating.
Risks associated with provisional nature of credit rating: A prefix of 'Provisional' to the rating symbol indicates that the rating is contingent upon execution of certain documents by the issuer, as applicable. In case the documents received deviate significantly from the expectations, CRISIL Ratings may take an appropriate action including placing the rating on watch or a rating change on a case-to-case basis. In the absence of the pending documentation, the rating on the instrument would either have been different or not assigned ab initio. |
About the Originator SSFL is a public limited company incorporated under the provisions of the Companies Act, 1956, on March 10, 2003. It was registered as a non-deposit accepting NBFC with the Reserve Bank of India and was classified as an NBFC-MFI effective April 13, 2015. The shares of SSFL were listed on the stock exchanges in India in August 2019 pursuant to the IPO of equity shares. SSFL, along with its subsidiaries, is engaged in lending, providing small-value unsecured loans to low-income customers in semi-urban and rural areas. The tenure of these loans is generally 1-2 years. While SSFL extends microfinance loans, its subsidiaries extend other services such as loans against property, gold loans, business loans and personal loans.
Key Financial Indicators
*annualised
Performance of past rated pools CRISIL Ratings has ratings outstanding on 6 other securitisation transactions originated by SSFL. The cumulative collection ratios in pools where payouts have commenced range from 96.8% to 99.1% and 90+ delinquencies (including overdues) have been below 2% as of January 2024 payouts.
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
^ISIN details for instruments yet to be received as of date, instruments are yet to be issued #Indicates legal final maturity date for the instruments. Actual maturity will depend on the level of collection shortfalls in the pool, the level of prepayments in the pool, and exercise of the clean-up call option. |
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
Criteria Details
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