Rating Rationale
April 22, 2019 | Mumbai
 
Vivriti Drake 12 2018
(Originator: Asirvad Microfinance Limited)
'CRISIL A (SO)' converted from provisional rating to final rating for Series A1 PTCs  
 
Rating Action
Trust Name Details Amount Rated (Rs Cr) Outstanding Amount*
(Rs Cr)		 Original Tenure (Months)# Credit Collateral (Rs Cr) Rating  Rating Action
Vivriti Drake 12 2018 Series A1 PTCs 35.00 26.07 21# 3.04 CRISIL A (SO) Converted from Provisional Rating to Final Rating
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
*After March 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 the provisional rating assigned to Series A1 pass-through certificates (PTCs), 'CRISIL A (SO)' issued by 'Vivriti Drake 12 2018'. The transaction is backed by microfinance loan receivables originated by Asirvad Microfinance Limited (Asirvad; rated CRISIL A+/Positive/CRISIL A1+). The ratings are based on the credit support available to the PTCs, credit quality of underlying pool receivables, Asirvad's origination and servicing capabilities, and soundness of the transaction's legal structure.

As required, CRISIL has received the following documents. The executed documents are in line with the transaction terms at the time of provisional rating. Hence, CRISIL has converted the provisional rating to final rating.
Legal Documents

  • Assignment Agreement     
  • Trust Deed     
  • Power of Attorney   
  • Servicing Agreement 
  • Accounts Agreement 

Other Documents

  • Auditor's CertificateLegal Opinion
  • Reps & Warranties from the Seller/Originator 
  • Letter from Trustee  
  • Information Memorandum         

Please click on the link below for detailed information on CRISIL's policy on provisional rating: Revision in CRISIL policy for assigning 'provisional' rating.
 
The transaction has a 'Par with monthly subordinated Excess Interest Spread (EIS)' structure, wherein Asirvad assigned the pool to 'Vivriti Drake 12 2018', settled by CTL Trusteeship Limited (CTL) which issued the PTCs in exchange of purchase consideration equal to 92.0 per cent of the pool principal at the time of securitisation to the investors. The PTCs are supported by the credit collateral ' in the form of fixed deposit - and excess interest spread.
 
The total credit support available in the transaction at the time of securitisation is as below:

  • External credit enhancement of Rs. 3.04 crore (8.00 per cent of pool principal or 6.95 per cent of pool cashflows).
  • Internal credit support in the form of subordination of cashflows (including overcollateralisation of Rs. 3.04 crore and EIS of Rs 3.64 crore, assuming zero prepayment) of Rs 6.69 crore (17.6 per cent of pool principal or 15.3 per cent of pool cashflows).

Series A1 PTC holders are entitled to receive timely interest and ultimate principal.

Key Rating Drivers & Detailed Description
Supporting Factors
  • Credit support available in the structure
    • At the time of securitization, credit collateral of Rs 3.04 crore (8.0% of the pool principal) provides credit support to Series A1 PTCs. The PTCs also benefit from scheduled cash flow subordination aggregating Rs 6.69 crore (including overcollateralisation of Rs. 3.04 crore and EIS of Rs 3.64 crore, assuming zero prepayment)
       
  • High seasoning of contracts in the pool
    • At the time of securitisation, the contracts in the pool have an amortization of 35.0% as of the cut-off date and all the contracts in the pool are current as of cut-off date
Constraining Factors
  • Susceptibility to political and regulatory environment
  • 49.9 per cent of the pool emanates from historically weak performing states of Madhya Pradesh, Jharkhand and Rajasthan. These states have exhibited high vulnerability to socio-political events in the past.
  • 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
 Limited track record of borrowers
  • 53.7 per cent of the contracts in the pool are from cycle 1 loans.
Liquidity Position
  • At the time of securitisation, the credit cum liquidity enhancement available in the transaction is Rs. 3.04 crore (8.0% of pool principal) which is in the form of fixed deposit placed with DCB Bank (Rated 'CRISIL AA-/Stable/CRISIL A1+'). The enhancement fully covers promised interest payouts for all months even with no collections from underlying receivables.
These aspects have been factored by CRISIL in its rating analysis.
 
About the Pool
The pool securitised comprises of microfinance loan receivables. The pool has weighted average net seasoning of 6.3 months. The pool is geographically concentrated with top three states in the pool accounting for 84.9 per cent of pool principal. Average ticket size is Rs.29,840 with weighted average interest rate of 22.1 per cent. All the contracts in the pool were current as on pool cut-off date (November 30, 2018). 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 May-12 to Oct-18.
 
60+ dpd and 0+ dpd on the portfolio is 1.7 per cent and 2.6 per cent as of Oct-18 respectively. Due to demonetisation, the 60+ dpd and 0+ dpd peaks observed were 9.1 per cent and 16.5 per cent respectively, but there have been recoveries from the peaks observed.
 
Based on these aspects, CRISIL has estimated base case shortfalls in the pool at 6.0-8.0 per cent of cash flows.
  • CRISIL has assumed a stressed monthly prepayment rate of 0.5 to 1.0 per cent in its analysis.
  • CRISIL does not envisage any risk arising on account of commingling of cash flows since CRISIL's short term rating on the servicer is 'CRISIL A1+'
  • CRISIL has adequately factored in the risks arising on account of counterparties (refer to counterparty details below)
  • CRISIL has run sensitivities based on various shortfall curves (front-ended, back-ended and normal) and has adequately factored the same in its analysis.

Counterparty details

Capacity

Counterparty Name

Counterparty Rating/ Track record

Effect on credit ratings in case of non-performance

Originator Asirvad Microfinance Ltd. Rated 'CRISIL A+/Positive/CRISIL A1+' No effect.
Servicer Asirvad Microfinance Ltd. Rated 'CRISIL A+/Positive/CRISIL A1+' 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 DCB Bank Rated 'CRISIL AA-/Stable/CRISIL A1+' 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.

About the Originator
Asirvad, a non-banking finance company microfinance institution, is a majority owned subsidiary of MAFIL. The company was set up by current managing director, Mr S V Raja Vaidyanathan, in 2007. MAFIL acquired stake in Asirvad in February 2015, which it subsequently increased to 92% in April 2018. Asirvad had 832 branches in 245 districts in 20 states as on March 31, 2018.

Asirvad incurred a net loss of Rs 32 crore on total income of Rs 468 crore during fiscal 2018. Loan portfolio outstanding increased to Rs 2,438 crore as on March 31, 2018, from Rs 1,796 crore as on March 31, 2017.

Past Rated Pools
CRISIL has ratings outstanding on ten transactions originated by AMLL. CRISIL is receiving monthly performance reports pertaining to all CRISIL-rated AML originated securitisation transactions.
Key Financial Indicators
As On/For The Period Ended March 31, Unit 2018 2017
Total Assets Rs. Crore 2,503 1,958
Total income Rs. Crore 468 362
Gross NPA % 2.34 4.66
Adjusted gearing  Times 8.4 6.3
Profit after tax Rs. Crore (32) 34
Return on assets % (1.3) 2.3

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 (%)
(p.a.p.m)		 Outstanding
Rating &		 Credit collateral
(Rs Cr)^
Series A1 PTCs 35.00 28-Dec-18 25-Sep-20 9.65% Provisional CRISIL A (SO) 3.04
#Indicates door to door tenure. Actual tenure will depend on the level of prepayments in the pool, and exercise of the clean-up call option
& Series A1 PTC holders are entitled to receive timely interest and ultimate principal
^ Additional credit support in the form of subordination of cashflows (including overcollateralisation of Rs. 3.04 crore and EIS of Rs 3.64 crore, assuming zero prepayment) of Rs 6.69 crore (17.6 per cent of pool principal or 15.3 per cent of pool cashflows)
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  26.07 CRISIL A (SO) 17-01-19 Provisional CRISIL A (SO)              
All amounts are in Rs.Cr.
Links to related criteria
CRISILs rating methodology for ABS transactions

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