Rating Rationale
September 18, 2017 | Mumbai
Innovation Trust III Dec 12
(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)  Credit Collateral post reset
(Rs Cr)
Ratings/ Credit Opinions
Innovation Trust III Dec 12 Series A PTCs 118.62 42.34 352 298 13.64 8.14 CRISIL AAA (SO)
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
$As after June 2017 payouts
Detailed Rationale

CRISIL has reaffirmed the rating on Series A pass through certificates (PTCs) issued by 'Innovation Trust III Dec 12' at 'CRISIL AAA (SO)'. Series A PTC holders are entitled to receive timely interest and timely principal. The ratings factor in the credit quality of underlying pool receivables, post-reset credit support available to the PTCs, IBHFL's origination and servicing capabilities, and soundness of the transaction's legal structure. The transaction is backed by housing loan receivables originated by Indiabulls Housing Finance Limited (IBHFL; 'CRISIL AA+/ Positive/CRISIL A1+').
On August 01, 2017, CRISIL upgraded its rating on Series A PTCs from CRISIL AA+ (SO) to CRISIL AAA(SO). The transaction was eligible for a credit collateral reset; however, investor consent (required under RBI regulations) was not received. IBHFL has now furnished investor consent for credit collateral reset. Following the reset, the revised cash collateral stands at Rs. 8.14 Cr. (19.2% of outstanding pool principal after June 2017 payouts). Given the healthy collection performance and high amortisation of around 64.3 per cent (as after June 2017 payouts), even after the reset, the credit cover available to the PTCs remains commensurate with the outstanding rating of CRISIL AAA (SO).
The cumulative collection ratio for the pool is robust at 99.9 per cent (as after June 2017 payouts). This has led to minimal delinquencies in the pool as reflected in the 30+ delinquencies of 0.16%.  

Key Rating Drivers & Detailed Description
Supporting Factors
  • High amortisation and credit support available in the structure
    • Credit collateral of Rs 8.14 crore (19.2% of the outstanding pool principal after June 2017 payouts) provides credit support to Series A PTCs. The PTCs also benefit from scheduled EIS aggregating Rs 8.13 crore (19.2% of outstanding pool principal).
  • Healthy collection efficiency metrics
    • CCR has remained above 99.8% and 3-month average MCR has remained above 98.9%  throughout the tenure of the transaction
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 pool securitised comprises home loan receivables. As of June 2017 payouts, the pool has high seasoning as evidenced by its weighted average net seasoning of 76.6 months. In terms of concentration, the top 3 states in the pool account for 50.2 per cent of outstanding pool principal. Average ticket size is Rs.17.8 lakhs with moderate loan to value ratio of 62.4% (LTV as of disbursed amount).The pool has weighted average interest rate of 11.5 per cent. Pool has high proportion of salaried individuals (82.5% including self-employed professionals). CRISIL has adequately factored all these aspects in its rating analysis1.

Pool Performance Summary (as after June 2017 payouts)
Parameters Innovation Trust III Dec 12
Asset class Housing Loan Receivables
Structure Par with EIS
Months post securitisation 54
Amortisation 64.3%
Credit collateral post reset as a percentage of future principal 19.2%
Credit collateral utilisation 0.0%
Cumulative collection ratio (CCR)! 99.9%
Last 3 months average MCR! 100.3%
Total overdues $ 0.02%
!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 portfolio performance of housing loans originated by IBHFL. CRISIL has also analysed the performance of rated securitisation transactions while arriving at base case loss scenario.
CRISIL has also factored in pool specific characteristics and overdue composition of the pool to estimate the base case peak shortfalls in the pool in the range of 2 to 4 per cent of pool cash flows.

  • The pool consists of loans at a floating rate of interest linked to prime lending rate of IBHFL whereas the floating investor yield is linked to investor's base rate. At present, there is adequate spread 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 in relation to IBHFL's prime lending rate may compress the asset side cash flows in relation to the liability side cash flows. 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


Counterparty Name

Counterparty Rating/ Track record

Effect on credit ratings in case of non-performance

Originator and seller IBHFL Rated 'CRISIL AA+/Positive/CRISIL A1+'  
No effect.
Servicer IBHFL Rated 'CRISIL AA+/Positive/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 YES Bank Not rated by CRISIL Negligible effect. Account bank can be changed without impacting the rating.
Collateral in the form of Fixed Deposit IDBI Bank Rated 'CRISIL A+/CRISIL A/CRISIL BBB+/Negative/CRISIL A1+'
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 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 24.0% stake in the company.
For the fiscal 2017, IBHFL had a profit after tax (PAT) of Rs 2,906 crore on a total income of Rs 11,702 crore as against a PAT of Rs 2,345 crore on a total income of Rs 9,264 crore for the previous fiscal.
Past rated pools
CRISIL has ratings outstanding on nine transactions originated by IBHFL. The collection efficiency for all the pools remains 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 June 2017 payouts
Key Financial Indicators
Particulars Unit 2017 2016
Total Assets Rs. Cr. 1,03,705 76,436
Total income Rs. Cr. 11,702 9,264
Profit After Tax  Rs. Cr. 2,906 2,345
Gross NPA % 0.85 0.84
Return on average assets % 3.2 3.5

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 118.62 31-Dec-12 20-Apr-42 Floating^ CRISIL AAA (SO)$ 8.14*
#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 Retail Prime Lending Rate (RPLR) of investor
*Additionally scheduled excess interest spread (EIS) amounting to Rs. 8.13 Cr (assuming zero prepayments) also provides credit support to PTCs (as after June 2017 payouts)
$Series A PTC holders are entitled to receive timely interest and timely principal.
Annexure - Rating History for last 3 Years
  Current 2017 (History) 2016  2015  2014  Start of 2014
Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Series A PTCs  LT  118.62  CRISIL AAA (SO)  01-08-17 CRISIL AAA (SO)    No Rating Change    No Rating Change    No Rating Change  CRISIL AA/Stable 
Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release.
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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