Rating Rationale
May 28, 2019 | Mumbai
Jasmine Trust 2018
(Originator: Fincare Small Finance Bank Limited)
'CRISIL A- (SO)' for Series A1 PTCs', converted from Provisional Rating to Final Rating   
 
Rating Action
Trust Name Details Amount Rated (Rs Cr) Outstanding Principal*
(Rs Cr)
 		 Original Tenure (Months) Credit Collateral (Rs Cr) Rating  Rating Action
Jasmine Trust 2018 Series A1 PTCs 53.19 44.35 21 5.82 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) issued by 'Jasmine Trust 2018' to final rating of 'CRISIL A- (SO)'. The transaction is backed by microfinance loan receivables originated by Fincare Small Finance Bank Limited (FSFBL). The ratings are based on the credit support available to the PTCs, credit quality of underlying pool receivables, FSFBL's origination and servicing capabilities, and soundness of the transaction's legal structure.
 
The transaction has a 'Par with monthly subordinated Excess Interest Spread (EIS)' structure, wherein FSFBL will assign the pool to 'Jasmine Trust 2018', settled by CTL Trusteeship Limited (CTL) which will issue the PTCs in exchange of purchase consideration equal to 96.0 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 guarantee by FSFBL - and excess interest spread.
 
The total credit support available at the time of seccuritisation in the transaction is as below:

  • External credit enhancement of Rs. 5.82 crore (10.50 per cent of pool principal or 8.69 per cent of pool cashflows).
  • Internal credit support in the form of subordination of cashflows (including overcollateralisation of Rs. 2.22 crore, assuming zero prepayment) of Rs 9.07 crore (16.4 per cent of pool principal or 13.6 per cent of pool cashflows).

For detailed information on CRISIL's policy on provisional ratings, click here: Revision in CRISIL policy for assigning 'provisional' ratings
 
As required, CRISIL has received the following final executed documents:
 
Legal Documents:

  • Trust deed
  • Assignment Agreement
  • Servicing Agreement
  • Accounts Agreement
  • FLCE Deed
  • Power of attorney

Other Documents:

  • Information memorandum
  • Legal opinion
  • Trustee's awareness letter
  • Auditor's certificate
  • Originator's representations and warranties letter
Key Rating Drivers & Detailed Description
Supporting Factors
  • Credit support available in the structure at the time of securitisation
    • Credit collateral of Rs 58,171,879 (10.50% of the pool principal or 8.69% of pool cashflows) provides credit support to Series A1 PTCs. The PTCs also benefit from scheduled cashflow subordination aggregating Rs 9.07 crore for Series A1 PTCs.
Constraining Factors
  • Susceptibility to political and regulatory environment at the time of securitisation
  • 65.8 per cent of the pool emanates from states of Tamil Nadu, Gujarat and Karnataka.
  • 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 at the time of securitisation
    • 99.6 per cent of the contracts in the pool are from cycle 1 loans.
Liquidity Position
  • The credit cum liquidity enhancement available in the transaction is Rs. 5.82 crore (10.50% of pool principal) which is in the form of fixed deposit & guarantee provided with/by Fincare Small Finance Bank Ltd. The credit enhancement fully covers interest payouts to Series A1 PTCs, which is promised on a monthly basis. The principal to Series A1 investors is promised on an ultimate basis.
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 5.6 months. The pool is geographically concentrated with top three states in the pool accounting for 65.8 per cent of pool principal. Average ticket size is Rs.27, 493 with weighted average interest rate of 24.7 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 Sep-16 to Sep-18.
 
0+ dpd and 30+ dpd on the portfolio was 1.8 per cent and 1.6 per cent as of Sep-18 respectively. Post-demonetisation, the 30+ dpd and 0+ dpd peaks shot up to were 14.6 per cent and 18.0 per cent respectively, subsequently recovering.
 
Based on these aspects, CRISIL has estimated base case shortfalls in the pool at 7.0-9.0 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 FSFBL Not rated by CRISIL No effect.
Servicer FSFBL Not rated by CRISIL 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 Federal Bank Ltd. 'CRISIL A1+' Negligible effect. Account bank can be changed without impacting the rating.
Collateral in the form of Fixed Deposit FSFBL Not rated by CRISIL 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
Fincare Small Finance Bank (Fincare SFB), erstwhile Disha Microfin Limited ('Disha Microfin'), was incorporated in fiscal 2017. Disha Microfin, an NBFC-MFI extending microfinance and small business loans to weaker sections of the society, was one among the 10 recipients of approval from the Reserve Bank of India ('RBI') to set up Small Finance Banks with the objective of enhancing financial inclusion. The bank commenced its banking operations in July 2017.

Past rated pools
This is the first securitisation transaction being originated by FSFBL and rated by CRISIL.
Key Financial Indicators
Particulars as on March 31, 2018 Unit 2018 2017
Assets under management Rs crore 2,583 1714
Total income Rs crore 342 186
Profit after tax (PAT) Rs crore -98 9
Return on managed assets % -4.5 0.6
GNPA % 1.4 1.9
Adjusted gearing Times 6.3 2.7

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 53.19 27-Dec-18 23-Sep-20 11.15% CRISIL A- (SO) 5.82
#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 includes Rs.9.07 crore in the form of scheduled cash flow subordination (assuming zero prepayments) - Includes overcollateralization of Rs. 2.22 crore (4.0% 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 44.35 CRISIL A- (SO) 16-01-19 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
Understanding CRISILs Ratings and Rating Scales

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