Rating Rationale
April 21, 2017 | Mumbai
Platinum Trust March 2017 - Tranche IV
(Originator: Cholamandalam Investment and Finance Company Limited)
'Provisional CRISIL AAA (SO)' assigned to Series A1 PTCs, Series A2 PTCs and Series A3 PTCs and 'Provisional CRISIL BBB+ (SO)' assigned to Second Loss Facility  
 
Rating Action
Trust Name Details Amount Rated (Rs Crore) Pool Principal (Rs Crore)  Original Tenure (Months)# Credit Collateral (Rs Crore)* Ratings/ Credit Opinion Rating Action
Platinum Trust March 2017 - Tranche IV Series A1 PTCs 43.2 251.8 13 23.9^ Provisional CRISIL AAA (SO)@ Provisional Rating Assigned
Series A2 PTCs 29.5 13 Provisional CRISIL AAA (SO)@ Provisional Rating Assigned
Series A3 PTCs 179.1 53 Provisional CRISIL AAA (SO)@ Provisional Rating Assigned
Second Loss Facility 11.3 53 12.6 Provisional CRISIL BBB+ (SO) Equivalent @ Provisional Rating Assigned
1 crore = 10 million
# Indicates door-to-door tenure; actual tenure will depend on the level of prepayments in the pool, exercise of clean-up call option, and the extent of shortfalls
* Series A1 PTC holders are entitled to receive timely interest and timely principal, Series A2 PTCs and Series A3 PTCs are entitled to receive interest on a monthly basis. Series A2 PTC holders are entitled to receive timely principal from 7th month or after Series A1 are paid in full (whichever is earlier), Series A3 PTC holders are entitled to receive timely principal from 11th month or after series A2 PTCs are paid in full (whichever is earlier)
^ Additional credit support includes Rs.28.2 crore in the form of scheduled EIS (assuming zero prepayments)
@A prefix of 'Provisional' indicates that the rating centrally factors in the strength of specific structures, and will be supported by certain critical documentation by the issuer, without which the rating would either have been different or not assigned ab initio. This is in compliance with a May 6, 2015, Securities and Exchange Board of India (SEBI) directive, 'Standardising the term, rating symbol, and manner of disclosure with regard to conditional/ provisional/ in-principle ratings assigned by CRAs'.
Detailed Rationale

CRISIL has assigned its 'Provisional CRISIL AAA (SO)' rating to the pass-through certificates (PTCs) and credit opinion of 'Provisional CRISIL BBB+ (SO)' equivalent to the second loss facility issued by 'Platinum Trust March 2017 - Tranche IV'. The pool is backed by CV and MUV receivables originated by Cholamandalam Investment and Finance Company limited (CIFCL; rated CRISIL AA/Stable/CRISIL A1+). The ratings are based on the credit support available to the PTCs, credit quality of underlying pool receivables, CIFCL's origination and servicing capabilities, and soundness of the transaction's legal structure.
 
The transaction has a 'par' structure. CIFCL will assign the pool to 'Platinum Trust March 2017 ' Tranche IV', settled by IDBI Trusteeship Services Ltd, which will issue the PTCs to investors. The PTCs are supported by the credit collateral' and excess interest spread. The total credit support available in the transaction is as below:

  • Internal credit support in the form of scheduled Excess Interest Spread (EIS), aggregating Rs 28.2 crore (11.2% of pool principal)
  • External credit-cum-liquidity collateral of Rs. 23.9 crore (9.5% of pool principal) to be provided by CIFCL

Series A1 PTC holders are entitled to receive timely interest and timely principal, Series A2 PTCs and Series A3 PTCs are entitled to receive interest on a monthly basis. Series A2 PTC holders are entitled to receive timely principal from 7th month or after Series A1 are paid in full (whichever is earlier), Series A3 PTC holders are entitled to receive timely principal from 11th month or after series A2 PTCs are paid in full (whichever is earlier). CIFCL will continue to service the pool contracts as the servicing agent.
 
This is a 'provisional' rating and will be converted into a 'final' rating on receipt of the following documents:

  • Trust deed
  • Assignment agreement
  • Power of attorney
  • Information memorandum
  • Guarantee deed
  • Legal opinion
  • Trustee letter
  • Auditor's certificate
  • Representations and warranties letter

Additional documents, if any, executed for the transaction should also be provided. A rating rationale/report indicating the conversion of the 'provisional' rating to 'final' post the receipt of all the required final legal documents will be published on the CRISIL website. Please click on the link below for detailed information on CRISIL's policy on provisional rating: Revision in CRISIL policy for assigning 'provisional' rating.
 
Key Rating Drivers and Detailed Description
 
Supporting Factors

  • Credit support available in the structure
    • Credit collateral of Rs 23.9 crore (9.5% of the pool principal) provides credit support to Series A1, Series A2 PTCs and Series A3 PTCs. The PTCs also benefit from scheduled EIS aggregating Rs 28.2 crore (11.2% of pool principal).
  • Current nature of all contracts in the pool
    • All the contracts are current as of the cut-off date of February 28, 2017
  • Moderate seasoning of contracts in the pool
    • The contracts in the pool have a weighted average seasoning of 12.0 months, and amortization of 24.6% as of the cut-off date

Constraining Factors

  • Continuously evolving political and regulatory environment
    • The collection efficiency fell marginally post demonetization for CIFCL. The collections have since picked up.

About the Pool
The pool cash flow is securitised and comprises receivables from CV and MUV loans originated by CIFCL. The pool has a weighted average net seasoning of 12.0 months. The pool is geographically diversified with top 3 states accounting for 47.0% of the pool principal. Average ticket size of the pool is Rs 8.1 lakh with loan to value ratio of 89.1%. All contracts in the pool were current as on the cut-off date (February 28, 2017).
 
About the Originator
Cholamandalam Investment and Finance Company Limited, a part of Chennai-based Murugappa group, was incorporated in 1978. The company provides vehicle financing and LAP. It also provides housing loans and SME loans. Chola Finance had 637 branches across India, primarily in Tier-II and Tier-III cities, as on September 30, 2016.
 
For the first-half of fiscal 2017, Chola Finance reported a profit after tax (PAT) of Rs 330 crore on a total income (net of interest expense) of Rs 1150 crore, against a PAT of Rs 230 crore on a total income (net of interest expense) of Rs 990 crore for the first-half fiscal 2016.
 
For fiscal 2016, Chola Finance reported a PAT of Rs 570 crore on a total income (net of interest expense) of Rs 2100 crore, against a PAT of Rs 440 crore on a total income (net of interest expense) of Rs 1750 crore for fiscal 2015.
 
Past Rated Pools
CRISIL does not have outstanding rating on any transaction originated by CIFCL.

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 (%) (Annualised) Outstanding
Rating
Credit cum liquidity Enhancement (Rs Cr.)
Series A1 PTCs 43.2 23-Mar-17 18-April-18 6.59% Provisional CRISIL AAA (SO) 23.9^
Series A2 PTCs 29.5 18-April-18 6.59% Provisional CRISIL AAA (SO)
Series A3 PTCs 179.1 18-August-21 6.59% Provisional CRISIL AAA (SO)
Second Loss Facility 11.3 18-August-21 - Provisional CRISIL BBB+ (SO) Equivalent 12.6
*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
^Additional credit support includes Rs 28.2 crore in form of scheduled EIS (assuming zero prepayments)
Annexure - Rating History for last 3 Years
  Current 2017 (History) 2016  2015  2014  Start of 2014
Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Series A1 PTCs LT  43.2 Provisional CRISIL AAA (SO)    --   --   --   -- --
Series A2 PTCs LT  29.5 Provisional CRISIL AAA (SO)    --   --   --   -- --
Series A3 PTCs LT  179.1 Provisional CRISIL AAA (SO)    --   --   --   -- --
Second Loss Facility LT  11.3 Provisional CRISIL BBB+ (SO) Equivalent    --   --   --   -- --
Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release.
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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