Rating Rationale
September 18, 2018 | Mumbai
Innovation Trust XXIV Sept 2016
(Originator: Indiabulls Housing Finance Limited)
Rating Reaffirmed
 
Rating Action
Transaction Details Amount Rated
(Rs Cr)
Outstanding amount
(Rs Cr)
Original Tenure (Months) # Balance Tenure (Months) # Credit Collateral (Rs Cr) Ratings/ Credit Opinions Rating Action
Innovation Trust XXIV Sept 2016 Series A PTCs 135.98 55.66 168 147 17.49 CRISIL AAA (SO) Rating Reaffirmed
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, and exercise of the clean-up call option
Detailed Rationale

CRISIL has reaffirmed its rating on Series A pass through certificates (PTCs) issued by 'Innovation Trust XXIV Sept 2016' at 'CRISIL AAA (SO)'. The transaction is backed by loan against property (LAP) receivables originated by Indiabulls Housing Finance Limited (IBHFL; 'CRISIL AAA/Stable/CRISIL A1+'). The rating is based on the credit support available to the PTCs, credit quality of underlying pool receivables, IBHFL's origination and servicing capabilities, and soundness of the transaction's legal structure.

 

The pool has exhibited strong collection performance as evidenced by a cumulative collection ratio of 99.5%. This has led to minimal delinquencies in the pool as reflected in 0+ overdues of 0.06%. The healthy collection performance coupled with high pool principal amortisation of 59.1% has led to an increase in the credit cover available to future PTC payouts from the cash collateral.

 

The pool is eligible for a reset of credit enhancement. CRISIL has evaluated the reset in line with the RBI guidelines. However, investor consent is yet to be received.

Key Rating Drivers & Detailed Description
Supporting Factors
  • High amortisation and Credit support available in the structure
    • Credit collateral of Rs 17.49 crore (31.4% of the outstanding pool principal after July 2018 payouts) provides credit support to Series A PTCs. The PTCs also benefit from scheduled EIS aggregating Rs 19.36 crore (34.8% of pool principal).
  • Healthy collection efficiency metrics
    • 21 months post securitisation, the lowest CCR observed was 99.2% and lowest 3-month average MCR observed was 98.7%
Constraining Factors
  • Basis risk in the transaction
    • There is basis risk in the transaction as both pool and investor yields are floating and linked to different benchmark rates
CRISIL has adequately factored these aspects in its rating analysis
 
About the Pool
The securitised pool comprises loan against property receivables. As of July 2018 payouts, the pool has high seasoning as evidenced by its weighted average net seasoning of 37.6 months. The top 3 states in the pool account for 67.3% of pool principal. Moderate loan to value ratio of 52.04% (LTV as of disbursed amount). The pool has weighted average interest rate of 12.4%. CRISIL has adequately factored all these aspects in its rating analysis.1


Pool Performance Summary
Parameters  
Asset class LAP receivables
Structure Par with EIS
Months post securitisation 21
Amortisation 59.1%
Credit collateral as a percentage of future principal 31.4%
Credit collateral utilisation 0.0%
Cumulative collection ratio (CCR)! 99.5%
Last 3 months average MCR! 99.1%
Total overdues $ 0.06%
!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)

Rating Assumptions
To assess the base case collection shortfalls for the transaction, CRISIL has analysed the performance of static pools of loan against property receivables originated by IBHFL from April 2006 till March 2017 and their performance till March 2018. CRISIL has also analysed the portfolio and performance of rated securitisation transactions while arriving at base case loss scenario. 90+ dpd and 180+ dpd for LAP portfolio of IBHFL was 0.52% and 0.35% respectively as of March 2018.
 
CRISIL has also factored in pool specific characteristics and estimated the base case peak shortfalls from contracts in current bucket in the pool in the range of 2 to 4 per cent of pool cash flows. Shortfalls and recoveries from overdue contracts have also been figured in.

  • The pool consists of loans at a floating rate of interest linked to base rate of Indiabulls Housing Finance Limited whereas the investor yield is also floating but is linked to investor's base rate. 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 base rate 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 assumed various interest rate scenarios to adequately factor in the basis risk of the transaction.
  • CRISIL has assumed a stressed monthly prepayment rate of 1.5 to 2.5 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 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 Ltd. Rated 'CRISIL AAA/Stable' Negligible effect. Account bank can be changed without impacting the rating.
Collateral in the form of Fixed Deposit ICICI Bank Ltd. Rated 'CRISIL AAA/Stable' Negligible effect. Bank with whom the fixed deposit is maintained can be changed without impacting the rating.
Trustee IDBI Trusteeship Services Limited Adequate track record Negligible effect. Can be replaced at minimal cost.

About the Originator
Indiabulls Financial Services Ltd 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.


1Weights being the principal outstanding as of July 2018 payouts
Key Financial Indicators
Particulars Unit 2018 2017
Total Assets Rs Cr 131903 1,03,705
Total income Rs Cr 14640 11,702
Profit After Tax Rs Cr 3847 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 Cr)
Date of Allotment Maturity Date# Coupon Rate (%) (p.a.p.m) Outstanding
Ratings/credit opinions
Credit collateral (Rs Cr) ^
Series A PTCs 135.98 30-Sep-16 18-Oct-30 Floating^ CRISIL AAA (SO)$ 17.49*
#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 MCLR
*Additionally, scheduled excess interest spread (EIS) amounting to Rs 19.36 Cr (assuming zero prepayments) also provides credit support to PTCs (as after July 2018 payouts)
$Series A PTC holders are entitled to receive timely interest and timely principal.
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  55.66 CRISIL AAA (SO) 13-07-18 CRISIL AAA (SO) 03-02-17 CRISIL AAA (SO) 07-10-16 Provisional CRISIL AAA (SO)      
        30-06-17 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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