India Standard Loan Trust LXXI (Originator: AU Small Finance Bank Limited) Ratings Reaffirmed
Rating Action
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 reaffirmed its rating of ‘Provisional CRISIL AAA (SO)’ on Series A Pass-Through Certificates (“PTCs”), credit opinion of ‘Provisional CRISIL AAA (SO) Equivalent’ on Liquidity Facility and ‘Provisional CRISIL BBB+ (SO) Equivalent’ on Second Loss Facility issued by ‘‘India Standard Loan Trust- LXXI’ and has extended the validity period for conversion of the provisional rating to final rating by 90 (ninety) days. Please see section on Additional disclosures for provisional ratings for more details.
This transaction is backed by a pool comprising of receivables from new and used vehicle, tractor and construction equipment (CE) loans originated by AU Small Finance Bank (AU SFB; rated ‘CRISIL AA/CRISIL AA+/Stable/CRISIL A1+’). The ratings are based on credit quality of the pool cash flow, origination, and servicing capabilities of AU SFB credit support available to the PTCs, payment mechanism for the transaction, and soundness of the transaction’s legal structure
The transaction has a ‘par with excess interest spread (EIS)’ structure. AU SFB has assignd the pool to ‘INDIA STANDARD LOAN TRUST LXXI’, which has issued the PTCs to investors. Series A PTC payouts are supported by credit collateral, EIS and Liquidity facility.
The total credit support available in the transaction is as below:
Additional support is provided by liquidity facility of Rs. 7.61 crore (1.0% of the initial pool principal) which will be in the form of bank guarantee. Liquidity facility would cover 1-90 dpd shortfalls only. In the event the credit collateral reaches 90% of the stipulated Credit Collateral, then the credit collateral shall act as credit-cum-liquidity enhancement; any amount previously paid out of liquidity facility will be repaid out of existing credit collateral.
Series A PTC holders are entitled to receive timely interest and timely principal payments on a monthly basis. |
Key Rating Drivers & Detailed Description Strengths:
Weakness:
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Liquidity: Strong Liquidity position is strong given that the credit enhancement (internal and external combined) in the structure is sufficient to cover losses exceeding 1.5 times the currently estimated base shortfalls.
CRISIL Ratings has adequately factored these aspects into its rating analysis. |
Rating Sensitivity factors Upward
Downward
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About the Pool The pool securitised comprises of car, tractor, construction equipment and commercial vehicle loans. The pool has weighted average seasoning of 12.7 months. The pool has moderate geographic concentration with top three states accounting for 55.7% of pool principal. Average ticket size is Rs 5.6 lakhs with weighted average interest rate of 13.8%. All the contracts in the pool were current as on pool cut-off date (November 30th, 2023). CRISIL Ratings has adequately factored all these aspects in its rating analysis.
Counterparty details
Additional disclosures for provisional ratings: CRISIL Ratings has received the following executed documents pertaining to the transaction:
Legal Documents
Other Documents
CRISIL Ratings is yet to receive the Deed of Assignment from the originator and understand that the same is in the process of being shared shortly.
In due consideration of the above, CRISIL Ratings has extended the validity period for conversion of the provisional rating to final rating by 90 (ninety) days.
The provisional rating shall be converted into final rating following receipt of transaction documents duly executed and/or confirmations on completion of pending steps within the 90 (ninety) days extended validity period.
The final rating assigned after the end or before 90 (ninety) days shall be consistent with the available documents or completed steps, as applicable.
Rating that would have been assigned in absence of pending steps/documentation: SEBI’s circular dated April 27, 2021, prescribes the requirement of specifying the rating that would have been assigned in absence of the pending steps/ documentation considered while assigning provisional rating. However, CRISIL Ratings believes that in this case, the absence of the pending steps/ documentation would not result in any rating being assigned.
Risks associated with provisional nature of the credit rating A prefix of ‘Provisional’ to the rating symbol indicates that the rating is contingent upon occurrence of certain steps or execution of certain documents by the issuer, as applicable. In case partial / complete documentation received and/or completion of steps deviates significantly from the expectations, the rating may be subject to rating actions, including placing the rating on watch or a rating/outlook change, depending on status of progress on a case to case basis. In the absence of the pending steps / documentation, the rating on the instrument would not have been assigned ab initio.
About the Originator AU SFB (formerly Au Financiers (India) Ltd) was incorporated in 1996 as an NBFC, promoted by Mr. Sanjay Agarwal, with 28+ years legacy of being a retail focused institution. AU SFB started its banking operations in April 2017 and listed its shares on Bombay Stock Exchange and National Stock Exchange in July 2017. AU SFB has an established market position in Rajasthan, and has expanded operations to Maharashtra, Gujarat, and other states over the years. AU SFB's main focus is retail asset-financing segment, primarily in the vehicle financing segment (around 32% of gross advances) alongside Small Business Loans to MSMEs (31%). Other segments include housing, gold loans, personal loans, overdraft, and commercial Banking Products. AU SFB’s liability product offerings include the entire gamut of current account, savings account, recurring and term deposits, transaction banking, bouquet of third-party mutual funds and insurance covers. As on March 31, 2023, AU SFB had established operations across 1027 banking touchpoints while serving 38.6 Lakh customers in 21 States & 3 Union Territories with an employee base of around 28,320, employees. |
Key Financial Indicators
Past rated pools This is the second PTC transaction rated by CRISIL Ratings post 2020. CRISIL Ratings had rated over 25 transactions from 2011 to 2014 and 2 transactions in 2019 originated by AU SFB and received performance reports on a monthly basis pertaining to those transactions. |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*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 61.52 crore for Series A PTCs in form of scheduled excess interest spread (EIS) (assuming zero prepayments) @Includes a second loss facility of Rs.33.48 crore |
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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