Detailed Rationale CRISIL Ratings has converted the provisional rating assigned to Senior Tranche A1(a) Pass-Through Certificates (PTCs) and Senior Tranche A1(b) PTCs issued by 'Indigo 009' to a final rating of 'CRISIL AAA (SO)' and 'CRISIL AA (SO)'. This is under a securitisation transaction originated by Veritas Finance Private Limited (not rated by CRISIL).
This securitisation transaction is backed by secured MSME receivables originated by Veritas. The rating is based on the credit support available to the PTCs, credit quality of underlying receivables, Veritas’s origination and servicing capabilities, the payment mechanism, 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 terms envisaged when provisional rating was assigned. Hence, CRISIL Ratings has converted the provisional rating to a final rating.
Legal Documents
Other Documents
The transaction has a ‘par 50% turbo amostrization structure, wherein the excess residual cashflow (up to 50%) will be used to accelarate Senior Tranche A1(a) or Senior Tranche A1(b) PTCs principal prepayments
Total credit support available in the transaction at the time of securitisation is as follows:
Senior Tranche A1(a) and Senior Tranche A1(b) PTC holders are entitled to receive timely interest on a monthly basis, while the principal payment is promised on an ultimate basis for Senior Tranche A1(a) and Senior Tranche A1(b) PTCs. However, principal payment to Senior Tranche A1(b) PTCs will start only after Senior Tranche A1(a) PTC holders are paid out in full. |
Key Rating Drivers & Detailed Description Supporting Factors
Constraining Factors
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Rating Sensitivity factors Upward For Senior Tranche A1(a) PTCs: None
For Senior Tranche A1(b) PTCs
Downward For Senior Tranche A1(a) PTCs
For Senior Tranche A1(b) PTCs
Liquidity: Strong
CRISIL Ratings has adequately factored these aspects into its rating analysis. |
About the Pool The pool securitised comprises secured MSME loan receivables. As of the cut-off date, the pool has weighted average net seasoning of 14.9 months (no of EMIs Paid). The pool is geographically concentrated with top three states accounting for 75.6% of initial pool principal. Average ticket size is Rs 3.95 lakhs with a weighted average interest rate of 23.3%. All the contracts in the pool were current as on pool cut-off date (Aug 31, 2022). CRISIL Ratings has adequately factored all these aspects in its rating analysis.
Counterparty details
The pool securitised comprises secured MSME loan receivables. As of the cut-off date, the pool has weighted average net seasoning of 14.9 months (no of EMIs Paid). The pool is geographically concentrated with top three states accounting for 75.6% of initial pool principal. Average ticket size is Rs 3.95 lakhs with a weighted average interest rate of 23.3%. All the contracts in the pool were current as on pool cut-off date (Aug 31, 2022). CRISIL Ratings has adequately factored all these aspects in its rating analysis.
About the Originator Veritas Finance Private Limited (Veritas Finance), incorporated in 2015, is a RBI registered non-deposit taking Systematically Important NBFC, with focus on lending to Small Business Entrepreneurs primarily in the rural and semi-urban areas. The company is promoted by Mr. D. Arulmany (25+ years of experience in financial services with Muruguppa group and an initial investor and ex-CEO of Aptus Value Housing that operates in the affordable housing finance space). Veritas Finance launched its operations in November 2015 and is on growth path with focus on portfolio quality with AUM growing to Rs.2,187.35 Crore as on March 31, 2022. It primarily lends to self-employed underbanked customers in rural and semi-urban areas with operations in Tamil Nadu (~39%), West Bengal (~21%), Telangana (~10%), Andhra Pradesh (~7%), Karnataka (~7%), Madhya Pradesh (~5%), Odisha (~5%), Jharkhand (~4%), Puducherry contributes (1%). As of March 31, 2022, Veritas Finance operates through 229 branches, with employee strength of 2,727. The company reported a profit after tax (PAT) of Rs 75.85 crore on total income of Rs 443.65 crore in fiscal 2022, as against a PAT of Rs 61.12 crore on total income of Rs 361.67 crore in fiscal 2021.
Past rated pools This is the first securitisation transaction originated by Veritas that is being rated by CRISIL Ratings.CRISIL Ratings is receiving monthly performance reports pertaining to these transactions. Key Financial Indicators
*IND-AS |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure 1 - Details of Instrument/Transaction
1 crore = 10 million ^Variable yield, linked to 6 month T-Bill rate (FBIL benchmark) &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 at the time of securitisation includes Rs. 28.15 crore (EIS - 19.77 cr, Series A1(b) PTC – 5.0 cr and Equity Tranche - 3.38 cr) for Series A1(a) PTCs in form of scheduled cash flow subordination (assuming zero prepayments) (50.1% of initial pool principal) **Additional credit support includes Rs. 21.40 crore (EIS - 18.02 cr & Equity Tranche - 3.38 cr) for Series A1(b) PTCs in form of scheduled cash flow subordination (assuming zero prepayments) (38.1% of initial pool principal) |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Criteria Details
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