Rating Rationale
October 10, 2019 | Mumbai
Vivriti Lehnsherr 06 2019
(Originator: Annapurna Finance Private Limited)
'CRISIL A (SO)' converted from provisional rating to final rating for Series A1 PTCs
 
Rating Action
Trust Name Details Amount Rated (Rs Crore) Outstanding Principal (Rs Crore)*  Original Tenure
(Months)		 Credit Collateral (Rs Crore) Ratings/ Credit Opinion Rating Action
Vivriti Lehnsherr 06 2019 Series A1 PTCs 67.68 59.74 21# 3.76 CRISIL A (SO)  Converted from Provisional Rating to Final Rating
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
*After August 2019 Payouts
# Indicates door to door tenure from pool cut-off date. Actual tenure will depend on the level of prepayments in the pool, and exercise of the clean-up call option
Detailed Rationale

CRISIL has converted its provisional rating assigned to 'Series A1 pass-through certificates (PTCs) issued by 'Vivriti Lehnsherr 06 2019' to final rating of 'CRISIL A (SO)'. The provisional rating was assigned on July 09, 2019. CRISIL has received the following final legal documents executed for this transaction. These executed documents are in line with terms of the transaction when provisional rating/credit opinion was assigned. Hence, CRISIL has converted the provisional rating to final rating.
 
As required, CRISIL has received the following documents. Accordingly, the 'provisional' ratings have been converted into 'final' ratings.
 
Legal Documents

  • Trust deed
  • Assignment Agreement
  • Servicing Agreeent
  • Accounts Agreement
  • Power of attorney

Other Documents

  • Information memorandum
  • Legal opinion
  • Trustee's awareness letter
  • Auditor's certificate
  • Originator's representations and warranties letter

Please click on the following link for detailed information on CRISIL's policy on provisional rating:
Revision in CRISIL policy for assigning 'provisional' ratings
 
The transaction is backed by microfinance loan receivables originated by Annapurna Finance Private Limited (AFPL; CRISIL A- / Stable). The rating is based on the credit support available to the PTCs, credit quality of underlying pool receivables, AFPL's origination and servicing capabilities, and soundness of the transaction's legal structure.
 
The transaction has a 'Par with monthly subordinated Excess Interest Spread' structure, wherein AFPL assigned the pool to 'Vivriti Lehnsherr 06 2019', settled by Catalyst Trusteeship Ltd. (CTL) which issueed Series A1 PTCs in exchange of a purchase consideration equal to 90.0% of the pool principal at the time of securitisation. Total credit support available in the transaction at the time of securitisation was as follows:

  • Internal credit support in the form of scheduled cash flow subordination, aggregating Rs 15.34 crore (20.4% of pool principal) for Series A1 PTCs   
  • External credit enhancement of Rs. 3.76 crore (5.00% of pool principal or 4.33% of pool cashflows) in the form of fixed deposit provides support to Series A1 PTCs.

Series A1 PTCs are entitled to monthly interest. The transaction envisages ultimate payment structure for principal payouts for Series A1 PTCs. CTL will continue as the trustee to monitor the transaction on behalf of the PTC holders. AFPL will continue to service the pool contracts as the servicing agent.

Key Rating Drivers & Detailed Description
Supporting Factors 
  • Credit support available in the structure at the time of securitisation
    • Credit collateral of Rs 3.76 (5.00% of the pool principal or 4.33% of the pool cash flow) provides credit support to Series A1 PTCs. The PTCs also benefit from scheduled cashflow subordination aggregating Rs 15.34 crore. 
       
  • Modest seasoning of contracts in the pool
    • The contracts in the pool have a weighted average seasoning of 5.1 months and amortisation of 27.4% as of the cut-off date.
    • All the contracts in the pool are current as of cut-off date
 Constraining Factors
  • Exposure to Odisha at the time of securitisation
    • Odisha account for 47.7% of the pool principal in the pool at the time of securitization, the coastal districts in Odisha were affected by the Fani Cyclone at the beginning of May 2019. Hence, there could be an impact on the collections in the coming months. However, the pool does not have contracts from high impact districts-Puri, Khurda and Cuttack.
  • Susceptibility to political and regulatory environment
    • The microfinance industry remains susceptible to risks arising out of socio-political issues and regulatory changes. Such events have the ability to disrupt loan repayments of underlying borrowers.
    • The unsecured nature of microfinance loans and inherent modest credit risk profile of the borrowers are considered
Liquidity:Strong
The credit cum liquidity enhancement available in the transaction is Rs 3.76 crore (5.00% of the pool principal) and is in the form of fixed. 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.
 
These aspects have been factored by CRISIL in its rating analysis.
 
About the pool
The pool securitised comprises of microfinance loan receivables. At the time of securitisation, the pool had weighted average net seasoning of 5.1 months. The pool was moderately concentrated with top state in the pool accounting for 47.5% of pool principal. Average ticket size was Rs.32,608 with weighted average interest rate of 21.9%. All the contracts in the pool were current as on pool cut-off date (June 10, 2019). CRISIL has adequately factored all these aspects in its rating analysis.

Rating Assumptions

To assess the base case shortfalls for the transaction, CRISIL has analysed the moving portfolio delinquency information on portfolio for performance from Jan-16 to Mar-19. 30+ dpd and 0+ dpd on the portfolio is 1.7% and 1.9% as of Mar-19 respectively. Post-demonetisation, the 60+ dpd and 0+ dpd peaks shot up to were 6.7% and 9.0% respectively, subsequently recovering.
 
CRISIL has also analysed the static pool performance of AFPL's originations since Apr-14 to Mar-19.
 
Based on these aspects, CRISIL has estimated base case shortfalls in the pool (before factoring in pool-specific concentration related adjustments) at 6.0% - 8.0% of cash flows. CRISIL has also assumed a monthly prepayment of 0.5% - 1% in its credit enhancement calculation.
 
CRISIL has analysed the cover available to PTC investors at various levels of shortfall in the pool.
 
Counterparty details

Capacity

Counterparty Name

Counterparty Rating/ Track record

Effect on credit ratings in
case of non-performance

Originator AFPL Rated 'CRISIL A- /Stable' No effect.
Servicer AFPL Rated 'CRISIL A- /Stable' Significant effect, because of change in servicing quality and replacement cost of servicer. However, currently CRISIL does not envisage the need for replacement. The Trust or investor has right to change the servicer with an intimation to CRISIL.
Collection and Payout Account Bank ICICI Bank Rated 'CRISIL AAA/CRISIL AA+/Stable' Negligible effect. Account bank can be changed without impacting the rating.
Collateral in the form of Fixed Deposit DCB Bank Rated 'CRISIL AA-/Stable/CRISIL A1+' Negligible effect. Bank with whom the fixed deposit is maintained can be changed without impacting the rating.
Trustee CTL Adequate past track record Negligible effect. Can be replaced at minimal cost.
 
Rating sensitivity factors
 
Upward
  • Credit enhancement  (based on both internal and external credit enhancements) available in the structure exceeding 2.25 times the estimated base case shortfalls on the residual cash flows of the pool.
Downward
  • Credit enhancement falling below 1.25 times the estimated base case shortfalls
  • A sharp downgrade in rating of the servicer/originator
  • Non-adherence to the key transaction terms envisaged at the time of the rating
About the Originator
AFPL, a Bhubaneshwar based NBFC-MFI, is promoted by People's Forum, a not-for-profit organisation engaged in social and developmental activities (including self-help group formation and microfinance lending) in Odisha since 1990s. It was initially set up as Mission Annapurna to carry out microfinance lending activities for People's Forum and was subsequently converted to a non-banking financial company in fiscal 2009.
 
Annapurna Finance predominantly follows the self-help group model wherein each group has anywhere between 10 to 20 members. New group formation process involves an observation period of three months whereby the group members are informed about the importance of savings, and are trained to maintain their own accounts and are inculcated with the habit of regular savings. The loans are given mainly for agricultural and allied activities, business activities and establishment and expansion of micro enterprise. The company had a network of 450+ branches spread across 192 districts and 14 states as on September 30, 2018, with a strong focus on rural and semi-urban areas.

Past rated pools
CRISIL has ratings outstanding on six PTC transactions originated by AFPL. CRISIL is receiving monhtly perforamnce reports pertaining to these transactions.
Key Financial Indicators
Particulars as on March 31, 2018 Unit 2018 2017
Assets under management Rs crore 1,920 1,239
Total income Rs crore 341 247
Profit after tax (PAT) Rs crore 10 19
Return on managed assets % 0.5 1.3
GNPA % 2.1 0.2
Adjusted gearing Times 8.9 9.3

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.
Annexure - Details of Instrument(s)
Type of Instrument Rated Amount
(Rs Cr.)		 Date of Allotment Maturity Date* Coupon Rate (%) Outstanding
Ratings		 Credit cum liquidity Enhancement (Rs Cr.)
Series A1 PTCs 67.68 10-Jul-19 17-Apr-21 9.60% (p.a.p.m.) CRISIL A (SO) 3.76&
*Indicates door to door tenure. Actual tenure will depend on the level of prepayments in the pool
& Additional credit support includes Rs.15.34 crore in form of scheduled cash flow subordination (assuming zero prepayments) - Includes overcollateralization of Rs. 7.52 crore (10.0% of pool principal)
Annexure - Rating History for last 3 Years
  Current 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Series A1 PTCs  LT  59.74 CRISIL A (SO) 09-07-19  Provisional CRISIL A (SO)              
All amounts are in Rs.Cr.
Links to related criteria
CRISILs rating methodology for ABS transactions
Evaluating risks in securitisation transactions - A primer
Legal analysis in structured finance transactions

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