Ignite PTC OCT 2025

(Originator: Fusion Finance Limited)
'Crisil A (SO)' for Series A1 PTC Converted from Provisional Rating to Final Rating

 

Rating Action

Tranche Name	Amount Rated (Rs.Crore)	Outstanding Amount (Rs.Crore)	Balance Tenure	Credit Collateral (Rs.Crore)	Ratings/Credit Opinions	Rating Action
Series A1 PTC	36.85	34.38	82	2.05	Crisil A (SO)	Converted from Provisional Rating to Final Rating

Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.

1 crore = 10 million   

Refer to annexure for Details of Instruments & Bank Facilities

Detailed Rationale

Crisil Ratings has converted the provisional rating assigned to Series A1 Pass Through Certificate ('PTCs')  issued by ‘Ignite PTC OCT 2025’ to a final rating of 'Crisil A (SO)'. The PTCs were issued under a securitisation transaction backed by is backed by a pool comprising secured MSME loan receivables originated by Fusion Finance Limited (Fusion; rated 'Crisil A-/Stable/Crisil A1').

 

The ratings are based on credit support available to PTCs, credit quality of the underlying pool receivables, Fusion’s origination and servicing capabilities, and soundness of the transaction’s legal structure.

 

Crisil Ratings has now received the final legal/executed documents for this transaction. These executed documents are in line with terms of the transaction envisaged when provisional rating was assigned. Hence, Crisil Ratings has converted the provisional rating to a final rating.

 

Legal Documents

• Amended and restated Declaration of Trust
• Assignment Agreement
• Accounts Agreement
• Servicing Agreement
• Power of Attorney

 

Other Documents

• Information Memorandum
• Term Sheet
• Legal Opinion
• Auditors Certificates
• Originator’s Representation and Warranties Letter
• Trustee Awareness Letter

Payment structure

The transaction has a ‘Par with Excess Interest Spread (EIS)’ structure, with trigger turbo amortisation. Fusion has assigned the loan pool to ‘Ignite PTC OCT 2025’, a trust settled by Catalyst Trusteeship, which has issued instruments to investors in exchange for a purchase consideration equal to 90.0% of pool principal outstanding as on the cut-off date (September 30, 2025).

 

Transaction structure also includes trigger based turbo amortisation where 100% EIS would be utilized for amortization of Series A1 PTCs principal till the tranche maturity, if any of the following events take place – 1) The Cumulative Collection Efficiency from first payout month in respect of the Pool is less than 93% for any 2 consecutive payouts and/or; 2) The PAR>90 of the Pool is more than 7.00% of the Initial Principal Outstanding and/or; 3) Cash Collateral is drawn to make any payments to the Series A1 PTC holders and/or; 4) Occurrence of any of the Servicer Event of Default as per the Transaction Documents.

Series A1 PTC holders are promised timely interest on a monthly basis and principal on ultimate basis on the maturity date of the PTCs. Investor payouts for PTCs are supported by cash collateral, overcollateralization and subordination of excess interest spread (EIS).

 

Based on Crisil Ratings assessment, the total credit enhancement available in the transaction (internal – in the form of EIS and overcollateralisation; and external – in the form of cash collateral) provide loss absorption against stressed shortfalls in the pool, commensurate with the rating assigned to the PTCs.

Adequacy of credit enhancement

The investor payouts for PTCs are supported by cash collateral, subordination of subordination of over collateral principal and subordination of excess interest spread (EIS). On a monthly basis, the cash collateral can be used to make the promised interest payments in case of a shortfall in collections from the pool to Series A1 PTC. On the Series A1 PTC final maturity date, the cash collateral can also be used to make the promised principal repayment in case of a shortfall in collections from the pool.

 

Credit enhancement available in the transaction structure for Series A1 PTC is as below:

• Internal credit enhancement from subordination of over collateral principal amounting to INR 4.09 crore (10.0% of the initial pool principal) and subordination of scheduled EIS amounting to INR 12.67 crore (30.9% of the initial pool principal)
• External credit enhancement from a cash collateral amounting to INR INR 2.05 crore (5.0% of the initial pool principal.

 

Based on Crisil Ratings assessment, the total credit enhancement available in the transaction (internal – in the form of EIS and principal subordination; and external – in the form of cash collateral) provide loss absorption against stressed shortfalls in the pool, commensurate with the rating assigned to the PTCs.

Key Rating Drivers & Detailed Description

Strengths:

• Internal credit enhancement from subordination of over collateral principal amounting to INR 4.09 crore (10.0% of the initial pool principal)
• Subordination of scheduled EIS amounting to INR 12.67 crore (30.9% of the initial pool principal)
• All the contracts (number: 1,199) in the underlying pool are current as of the cut-off date (September 30, 2025). The pool is characterised by weighted average seasoning of 15.3 months[1] resulting in principal amortisation of 18.7%.

 

Weakness:

• Susceptibility to macroeconomic headwinds
  •                  Borrower cash flows in the SME segment are vulnerable to adverse impacts of challenging macroeconomic environment which may hamper pool collection ratios. Impact of other disruptions
• The pool is geographically concentrated with the share of top 3 states at 67.2% of pool principal and at district level pool is diversified with the share of top 3 districts at 12.5% of pool principal.

 

These aspects have been adequately factored in its rating analysis by Crisil Ratings.

Rating Sensitivity factors

Upward factors:

• Credit enhancement available in the structure adequately covering for 1.75 times the estimated adjusted base shortfalls on the residual cash flows of the pool due to sustained healthy collections from the pool.

 

Downward factors:

• Credit enhancement available for Series A1 PTCs failing to cover 1.6 times the estimated adjusted base shortfalls due to weaker than expected performance of the pool.
• A sharp downgrade in the rating of the servicer/originator.
• Non-adherence to the key transaction terms envisaged at the time of the rating.

Liquidity: Strong

Liquidity is strong given that the credit enhancement available in the structure is sufficient to cover losses exceeding 1.5 times the base case shortfalls in the pool

Quality of the asset pool and strength of cashflows

The transaction is backed by secured business loans originated by Fusion. The contracts in the pool have weighted average seasoning of 15.3 months, consequently, the pool is amortised by 18.7% as of the cut-off date. The pool is geographically concentrated with the top 3 state accounting for 67.2% of pool principal. The average ticket size for contracts in the pool is Rs 4,20,262. All the contracts in the underlying loan pool are current as of the cut-off date (September 30, 2025)

Rating assumptions

Background:

• PTC investors are taking a direct exposure on the repayment ability of the underlying borrowers in the pool. Credit risk in the transaction is factored through the base case shortfalls expected on the portfolio, which are further adjusted for pool specific characteristics.
• Crisil Ratings has also analysed the delinquency performance. As of June 2025, the 90+ delinquency for Fusion’s secured MSME loan portfolio was 4.1%. Base case shortfalls on the portfolio are adjusted based on pool characteristics – which includes seasoning profile and repayment track record, parameters such as original tenure, interest rate, geography, LTV etc.
• Prepayment is a form of market risk which will result in the reduction of excess interest spread in the transaction. Prepayment risk has been assessed based on historically observed levels of prepayments for similar pools.

 

Assumptions:

• After making the adjustments on the above factors, the base case shortfalls in the pool by maturity of the transaction is in the range of 8.0% to 10.0% of pool cashflows.
• Monthly prepayment rate of 0.5% to 1.0% has also been applied to the pool cashflows

 

Crisil Ratings has additionally factored risk arising from borrower & geographic concentration in the pool.

About the company- Originator/Servicer profile

Fusion was incorporated in 1994 as Ambience Fincap Pvt Ltd and later in 2009 was takeover by Mr. Devesh Sachdev and changed name to Fusion Microfinance, now renamed as Fusion Finance. Fusion started operations as a non-deposit-accepting non-banking financial company in 2010 and was converted into an MFI on January 28, 2014. The company provides financial services to poor women and predominantly follows the joint-liability group model, wherein each group has 5-7 members. The loans are provided mainly for agricultural and allied activities, business activities, and establishment and expansion of micro enterprises. As on March 31, 2025, the company had a network of 1466 MFI branches and 105 SME branches in over 497 districts across 22 states, with a strong focus on rural and semi-urban areas

Quality and experience of servicer

Fusion will continue to service loans assigned to this trust. Fusion has originated several securitisation transactions. Servicing has been done, and reports have been shared across all these transactions in a timely manner.

Risks and concerns for investors and mitigating factor: Based on Crisil Ratings’ assessment, the total credit enhancement available in the transaction (internal – in the form of EIS; and external – in the form of cash collateral) together can mitigate against shortfalls in collection from the pool even after stressing them commensurate with the rating assigned to the PTCs. Crisil Ratings has adequately factored key risks  in the transaction including Credit & Market (as highlighted in rating assumptions section), Counterparty and Legal risks. Legal risks are assessed based on detailed analysis of transaction documentation. Risk factored from counterparties are mentioned in the table below:

A summary of key terms of servicer contract

The key points on the role of the servicer covered as part of the transaction documents are as below:

 

• The Trustee acting for and on behalf of the investors shall appoint, the servicer for the purpose of collecting, receiving and managing payment of the Receivables into the Collection and Payment Account for the purpose of managing, collecting and receiving the receivables, holding the underlying security and carry out other roles and roles and responsibilities as specified under the transaction documents
• The servicer shall receive servicing fees which shall be paid by the trustee in accordance with the Waterfall Mechanism as per the transaction documents.
• The servicer shall collect the receivables from the underlying borrowers and deposit the collected amounts in the collection and payment account in a timely manner as per the terms of the transaction documents.
• The servicer shall submit to the trustee all the data and reports in the manner and as per the timelines as specified under the transaction documents.
• The occurrence of certain events as per the terms of the transaction documents shall be construed as a Servicer Event of Default.

Provision for appointment of back-up servicer: The Trustee (acting on the instructions of the investors) as per the terms of the Servicer Agreement and upon the occurrence of Servicer’s Event of default, shall retain the right to appoint an alternate servicer.

Performance of outstanding rated transactions: Crisil Ratings has 1 outstanding securitisation transactions as on date.

Any other information: Not applicable