Rating Rationale
December 11, 2018 | Mumbai
Innovation Trust XXX Nov 2018
(Originator: Indiabulls Housing Finance Limited)
'Provisional CRISIL AAA (SO)' assigned to Series A PTCs
 
Rating Action
Transaction Details Amount Rated
(Rs Crore)
Pool
Principal
(Rs Crore)
Original Tenure (Months)# Credit Collateral (Rs Crore)* Ratings/ Credit Opinion@ Rating Action&
Innovation Trust XXX Nov 2018 Series A PTCs 89.23 89.23 359 16.04 Provisional CRISIL AAA (SO) Provisional Rating Assigned
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
#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 A PTC holders are entitled to receive timely interest and timely principal
*Additionally scheduled excess interest spread (EIS) amounting to Rs.6.22 crore (assuming zero prepayments) also provides credit support to PTCs
@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 Series A pass-through certificates (PTCs) issued by Innovation Trust XXX Nov 2018. The pool is backed by home loan (HL) receivables originated by Indiabulls Housing Finance Limited (IBHFL; 'CRISIL AAA/Stable/CRISIL A1+'). The rating on the PTCs is based on the credit quality of pool cash flow, IBFHL's origination and servicing capabilities, the transaction's credit enhancement, and payment mechanism and soundness of the transaction's legal structure.
 
The transaction has a 'par' structure. IBHFL will assign the pool to Innovation Trust XXX Nov 2018, settled by IDBI trusteeship services limited, which will issue the PTCs to investors. The PTCs are supported by the cash 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 6.22 crore (7.0% of pool principal)
  • External credit-cum-liquidity collateral of Rs. 16.04 crore (17.98% of pool principal) to be provided by IBHFL

This is a 'provisional' rating and will be converted into a 'final' rating based on receipt of the following documents:Trust deed

  • Power of attorney
  • Information memorandum
  • Assignment agreement
  • 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 & Detailed Description
Supporting Factors
  • Credit support available in the structure
    • Credit collateral of Rs 16.04 Cr (17.98% of the pool principal) provides credit support to Series A PTCs. The PTCs also benefit from scheduled excess interest spread (EIS) aggregating Rs 6.22 Cr (7.0% of pool principal). 
       
  • Seasoning profile
    • Contracts in the pool backing this transaction have a weighted average seasoning of 19.9 months and pool principal has been amortised by 16.9% prior to securitisation.
Constraining Factors
  • Granularity and borrower concentration
    • The transaction is backed by a pool of 470 loan contracts from 461 unique borrowers, 15 of which have principal outstanding amounting to ''¥1% (each) of the pool's pool principal. 
       
  • Basis Risk
    • There is basis risk in the transaction as pool yield is floating and linked to originator's prime lending rate whereas the investor yield is floating and linked to investor's MCLR
CRISIL has adequately factored these aspects in its rating analysis
 
Liquidity Position
The credit cum liquidity enhancement available in the transaction is 16.04 crore (17.98% of pool principal) which is in the form of fixed deposit placed with ICICI Bank (Rated 'CRISIL AAA/Stable'). The enhancement is sufficient to cover 12 months of principal and interest payouts promised to the investors even with no collections from underlying loan receivables
 
About the pool
The pool consists of Home Loan (HL) contracts with the underlying borrowers being majorly self-employed. The weighted average seasoning of the pool is 19.9 months, and the pool is geographically diverse, with the top three states accounting for 46.4% of the pool principal. However, the pool has high customer concentration with top 15 customers accounting for 41.3% of the pool principal. All the contracts in the pool are current on payments as on the pool cut-off date, with a weighted average loan-to-value ratio of 49.4% and average ticket size of Rs. 22.8 lakhs.
 

Key Rating Assumptions
To assess the base case collection shortfalls for the transaction, CRISIL has analysed the performance of static pools of Home Loans originated from April 2007 till June 2018 and their performance till June 2018. CRISIL has also analysed the portfolio and performance of rated securitisation transactions while arriving at base case loss scenario.
 
There is a basis risk in the transaction. The pool consists of loans at a floating rate of interest linked to prime lending rate of Indiabulls Housing Finance Limited and the investor yield is also floating but linked to MCLR of the investor. At present, there is a comfortable gap between the pool yield and the yield promised to the investor. However, during the tenure of the transaction, adverse movement in prime lending rate of the originator compared to the MCLR of the investor may compress the asset side cash flows in relation to the liability side cash flows, thus leading to basis risk. CRISIL has factored this aspect in its analysis by assuming various interest rate scenarios.
 
Borrower concentration is high in the pool and 15 borrowers (17 contracts) account for ''¥1% (each) of overall pool principal. CRISIL has adequately factored this concentration risk in its analysis. CRISIL's credit ratings/internal views on these entities were also considered in the analysis.
 
Based on the above analysis, past experience in rating similar pools, industry benchmarking, and factoring in the strengths and weaknesses of the pool, CRISIL has estimated the base case peak shortfalls to be in the range of 4 to 6 per cent of the pool principal. CRISIL has assumed a stressed monthly prepayment rate of 1.5 to 2.5 per cent in its analysis. 

Counterparty Details 

Capacity

Counterparty Name

Counterparty

Rating / Track record

Effect on credit ratings in case of non-performance

Originator and seller IBHFL Rated 'CRISIL AAA/Stable/CRISIL A1+' No effect. 
Servicer IBHFL Rated 'CRISIL AAA/Stable/CRISIL A1+' Significant effect, because of change in servicing quality and replacement cost of servicer (not factored in by CRISIL given CRISIL's rating on the servicer). However, CRISIL does not envisage the requirement for replacement.
Collection and Payout Account Bank ICICI Bank Rated 'CRISIL AAA/Stable' Negligible effect. Account bank can be changed without impacting the rating.
Credit Collateral in the form of Fixed Deposit ICICI Bank Rated 'CRISIL AAA/Stable' Negligible effect. Bank with whom the fixed deposit is maintained can be changed without impacting the rating.
Trustee ITSL Adequate track record Negligible effect. Can be replaced at minimal cost.
 
About the Originator
Indiabulls Financial Services Ltd, rated 'CRISIL AAA/Stable/CRISIL A1+' was reverse merged with IBHFL, effective from April 1, 2012; the process was completed on March 8, 2013, following the Delhi High Court's approval on December 12, 2012. Post the merger, IBHFL continues to operate as a housing finance company, registered with NHB. The company, along with its subsidiary, ICCL, will continue to focus on asset classes such as mortgages and commercial credit. As on March 31, 2017,the promoter group holds 23.6% stake in the company.

For the fiscal 2018, IBHFL had a profit after tax (PAT) of Rs 3,847 crore on a total income of Rs 14,640 crore as against a PAT of Rs 2,906 crore on a total income of Rs 11,702 crore for the previous fiscal.
 
Past Rated Pools
CRISIL has ratings outstanding on eight transactions originated by IBHFL. The collection efficiency for all the pools has remained robust till date. CRISIL is receiving monthly performance reports pertaining to all CRISIL-rated IBHFL originated securitisation transactions.
Key Financial Indicators
Particulars Unit 2018 2017
Total Assets Rs. Cr. 1,31,903 1,03,705
Total income Rs. Cr. 14,640 11,702
Profit After Tax Rs. Cr. 3,847 2,906
Gross NPA % 0.77 0.85
Return on average assets % 3.3 3.2

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 Crore)
Date of Allotment Maturity date# Coupon
Rate (%)
Outstanding
Rating
Credit cum liquidity Enhancement
(Rs Crore)&
Series A PTCs 89.23 30-Nov-18 15-Nov-48 9.70%* Provisional CRISIL AAA (SO) 16.04
*Floating - linked to investor's MCLR
#Indicative maturity date
&Additionally, scheduled excess interest spread, amounting to around Rs.6.22 crore (assuming zero prepayments) also provides credit support to the PTCs
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Series A PTCs LT  89.23  Provisional CRISIL AAA (SO)                  
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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