Rating Rationale
December 20, 2019 | Mumbai
Nirmaan RMBS Trust - Series II - 2014
(Originator: Dewan Housing Finance Corporation Limited)
Rating downgraded to 'CRISIL B- (SO)' ; Continues on 'Watch Developing'   
Rating Action
Transaction Details Amount Rated (Rs Cr) Outstanding amount
(Rs Cr)*
Credit Collateral
(Rs Cr) 
Ratings/ Credit Opinions Rating Action
Nirmaan RMBS Trust - Series II - 2014 Series A1 PTCs 112.25 30.28 8.19 CRISIL B- (SO)/Watch Developing Downgraded from CRISIL B+ (SO); continues on watch developing implications 
Series A2 PTCs 4.68 1.26 CRISIL B- (SO)/Watch Developing
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
* After November 2019 payouts
Detailed Rationale

CRISIL has downgraded its ratings on Series A1 pass through certificates (PTCs) and Series A2 PTCs issued by 'Nirmaan RMBS Trust-Series II- 2014' to 'CRISIL B- (SO)' from 'CRISIL B+ (SO)'. The ratings continue on 'Rating Watch with Developing Implications'. The PTCs are backed by housing loan receivables originated by Dewan Housing Finance Corporation Ltd. (DHFL; rated CRISIL D).

The rating actions are in light of the initiation of insolvency proceedings against DHFL post which DHFL has informed the Trustees that until the Central Government notification related to 'dealing with third party assets' is issued, transfer / appropriation / enforcement of security or collateral will be in contravention of the Insolvency and Bankruptcy Code and the NCLT order. Consequently, the Trustee's ability to access the cash collateral, as required, stands compromised. Furthermore, DHFL has stopped depositing the collections from securitised assets into the collection and payout accounts.
CRISIL notes that the securitised contracts under this transaction are currently being serviced by the investor and DHFL is not actively involved in monthly collections of instalments from the borrowers. However, some borrowers continue to deposit funds at DHFL branches or into DHFL accounts and consequently, there continues to be dependence, although low, on DHFL for collections for making PTC payouts.

Until the Central Government notification is issued, the trustee's access to both cash collateral and the portion of collections with DHFL would remain restricted. Hence, the trustee's ability to make timely promised payments on the PTCs will depend purely on the collections available with the current servicer.

Key Rating Drivers & Detailed Description
Constraining Factors
  • Heightened legal risks
    • The Trustee's ability to access the cash collateral remains compromised post the initiation of insolvency proceedings against DHFL.

  • Subdued collection efficiency
  • 3 month average MCR as of November 2019 payouts was low at 95.0% potentially due to challenges arising out the change in servicer
Supporting Factors
  • Change in servicer from DHFL
    • Dependency on DHFL for the collections has been substantially reduced, although not completely eliminated
Liquidity: Poor
Liquidity is poor given that the Trustee's ability to consistently dip into credit enhancement in a timely manner is yet to be demonstrated.
CRISIL has adequately factored these aspects in its rating analysis.
Rating Sensitivity factors

  • The Central Government issuing a notification relating to 'dealing with third party assets' removing any restrictions on the Trustee to access the cash collateral and DHFL to transfer collected funds to the CPA
  • A payment default on the PTCs
About the Pool
The pool securitised comprises home loan receivables. As after November 2019 payouts, the pool has high seasoning as evidenced by its amortisation of 73.0%.

Asset class Home loan receivables
Structure Par with Excess Interest Spread
Months post securitisation 68
Amortisation 73.0%
Credit collateral as a percentage of future principal 26.0%
Credit collateral utilisation 0.0%
Cumulative collection ratio (CCR)! 99.4%
Last 3 months average MCR! 95.0%
Total overdues $ 0.3%
!CCR = {Total collections in the pool / (Total billings + opening overdues amounts at the time of securitisation)}
!MCR = Monthly collections in the pool / Monthly billings
$ Total overdues = (Total overdues plus loss on sale of repossessed assets in the pool expressed as a percentage of initial pool principal)

Key rating assumptions
CRISIL has analysed the performance of the securitised housing loan pool of DHFL as of November 2019 payouts as well as various risks associated with the transaction.
About the Originator
Incorporated in 1984, DHFL primarily provides housing finance to low- and lower-middle-income groups in tier-II and tier-III cities. The company also offers non-housing loans such as LAP, developer loans, and SME loans. In December 2010, it acquired Deutsche Post Bank Home Finance Ltd (DPBHFL) to enter the middle- and upper-middle-income segments in tier-I cities. DPBHFL was renamed First Blue Housing Finance Ltd and was merged with DHFL in March 2013. DHFL has a pan-India presence through 352 customer touch points as on December 31, 2018.

Profit after tax (PAT) and total income (net of interest expense) stood at Rs 1,172 crore and Rs 2,500 crore, respectively, during fiscal 2018, against PAT (including one-time gain from sale of investment) and total income (net of interest expense) of Rs 2,896 crore and Rs 4,173 crore, respectively, in fiscal 2017.
For the nine months ended December 31, 2018, PAT was Rs 1,187 crore and total income (net of interest expense) was Rs 2,407 crore.

Past Rated Pools
CRISIL has ratings outstanding on two transactions originated by DHFL. CRISIL is receiving monthly performance reports pertaining to the securitisation transactions.
Key Financial Indicators
As on/for the period ended Unit Dec 31, 2018
(9 months)
March 31, 2018 March 31, 2017
Total assets Rs cr 1,10,953 1,07,572 92,298
Total income Rs cr 8,922 10,465 10,827
Profit after tax Rs cr 1,187 1,172 2,896
Gross NPAs % 1.12 0.96 0.94
Gearing (excluding off-book) Times 9.3 10.5 10.2
Gearing (Including off-book) Times 12.1 12.7 11.7
Return on assets (reported) % 1.4* 1.2 1.2
*On an annualised basis

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
Ratings/credit opinions
Credit collateral
(Rs Cr)
Series A1 PTCs 112.25 12-Mar-14 24-May-44 Floating^ CRISIL B- (SO)/Watch Developing 8.19*
Series A2 PTCs 4.68 12-Mar-14 24-May-44 Floating@ CRISIL B- (SO)/Watch Developing
#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
^Linked to Base Rate of investor
@Linked to pool IRR
*Additionally scheduled excess interest spread (EIS) amounting to Rs. 9.37 crore (assuming zero prepayments) also provides credit support to PTCs (as after November 2019 payouts)
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  30.28 CRISIL B- (SO)/Watch Developing 22-11-19  CRISIL B+ (SO)/Watch Developing 13-07-18  CRISIL AAA (SO)  30-06-17 CRISIL AAA (SO) 05-07-16  CRISIL AAA (SO) CRISIL AAA (SO)
        18-11-19  CRISIL B+ (SO)/Watch Negative              
        10-06-19  CRISIL BB+ (SO)/Watch Negative              
        14-05-19  CRISIL BBB+ (SO)/Watch Negative              
Series A2 PTCs  LT  1.26 CRISIL B- (SO)/Watch Developing 22-11-19  CRISIL B+ (SO)/Watch Developing 13-07-18  CRISIL AA (SO)  30-06-17 CRISIL AA (SO)  05-07-16  CRISIL AA (SO)  CRISIL AA (SO) 
        18-11-19  CRISIL B+ (SO)/Watch Negative              
        10-06-19  CRISIL BB+ (SO)/Watch Negative              
        14-05-19  CRISIL BBB+ (SO)/Watch Negative              
All amounts are in Rs.Cr.
Links to related criteria
CRISILs rating methodology for RMBS transactions
Evaluating risks in securitisation transactions - A primer
Legal analysis in structured finance transactions

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