Rating Rationale
April 01, 2022 | Mumbai

MFL Securitisation Trust XCVIII

(Originator: Poonawalla Fincorp Limited)

Ratings Reaffirmed

 

Rating Action

Trust Name

Details

Amount Rated (Rs Cr)

Outstanding Rated Amount $ (Rs Cr)

Original Tenure# (Months)

Residual Tenure# (Months)

Credit Collateral ^ (Rs Cr)

Ratings/ Credit Opinions&

Rating Action

MFL SECURITISATION TRUST XCVIII

Series A1 PTCs

89.70

39.64

53

41

9.98*

CRISIL AA+ (SO)

Reaffirmed

Series A2 PTCs@

6.75

2.98

53

41

9.98*

CRISIL AA+ (SO)

Reaffirmed

Second loss facility

7.09

7.09

53

41

2.89

CRISIL BBB (SO) Equivalent

Reaffirmed

$  After March 2022 payout

# 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.

^ Additionally scheduled excess interest spread after March 2022 payout (EIS) approximating to Rs. 5.56 crore (assuming zero prepayments and post servicer fee payment) also provides credit support

*Includes a second loss facility of Rs 7.09 Cr

&Series A1 PTC holders are entitled to receive timely interest and timely principal.

@Rating on Series A2 PTCs covers only the principal payments and not the interest payments as Series A2 PTC holders are proposed to receive a residual yield

Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL AA+ (SO)’ rating to Series A1 and Series A2 pass-through certificates (PTCs) issued by ‘MFL SECURITISATION TRUST XCVIII’ and credit opinion equivalent to ‘CRISIL BBB (SO)’ rating on second loss facility. The transaction is backed by car lease receivables originated by Poonawalla Fincorp Ltd (PFL; rated ‘CRISIL AA+/Stable/CRISIL A1+’; erstwhile Magma Fincorp Ltd.). The ratings are based on credit support available to PTCs, credit quality of the underlying pool receivables, PFL’s origination and servicing capabilities, and soundness of the transaction’s legal structure.

 

The pool has exhibited good collection performance evidenced by strong collection ratios. The cumulative collection ratio (CCR) for the pool is 100.0%. This has led to minimal delinquencies in the pool as reflected in 0+ overdue of 0.02%. The healthy collection performance coupled with moderate pool amortisation of around 55.8% has led to an increase in the credit cover available to future PTC payouts from the cash collateral.

 

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

Key Rating Drivers & Detailed Description

Strengths:

  • Credit quality of the lessees
    • The underlying lessees are of good credit quality, with more than 80.0% of receivables in the pool estimated to have a credit quality equivalent to investment grade credit rating
  • Credit support available in the structure
    • As after March 2022 payout, credit collateral covers 22.0% of the future PTC payouts, providing credit support to the PTCs. The PTCs also benefit from scheduled EIS amounting to 12.1% of future PTC payouts.
  • Healthy Collection Metrics
    • The CCR is 100.0%. As of March 2022 payout, the 3-month average monthly collection efficiency was 100.0%.

 

Weaknesses:

  • High borrower group concentration
    • The outstanding pool comprises 34 borrower groups with 60 individual entities. Top 5 groups account for 65% of the lease receivables. Technical issues could cause delay in payment from any group. In order to ensure promised investor payouts, the credit enhancement would have to be utilised.
  • Uncertainty regarding the economic impact of pandemic on future collections
    • In the medium term, collections in the underlying pool could come under pressure, and create asset quality concerns. Consequently, the extent of disruption to collections due to pandemic-related factors continue to remain a key monitorable.

Liquidity: Strong

Liquidity position is strong given that the credit enhancement (internal and external combined) in the structure is above 1.5 times the estimated base shortfalls on the residual pool cash flows.

Rating Sensitivity factors

Upward factors:

•      Performance of the assigned pool of receivables

  • Better than expected performance of the underlying contracts in the pool resulting in collateral cover(internal and external) exceeding 2.5 times the estimated base shortfalls of the assigned loan receivable for Series A1 PTCs and Series A2 PTCs
  • Better than expected performance of the underlying contracts in the pool resulting in collateral cover(internal and external) exceeding 1.4 times the estimated base shortfalls of the assigned loan receivable for Second loss facility

•      Upgrade in the rating of the servicer/originator

 

Downward factors:

•      Downgrade in the rating of the servicer/originator.

•      Performance of the assigned pool of receivables

  • Credit collateral (internal and external combined) falling below 1.6 times the estimated base shortfalls for Series A1 PTCs and Series A2 PTCs
  • Credit collateral (internal and external combined) falling below 1.2 times the estimated base shortfalls for Second loss facility

•      Material deviation of recovery from delinquent contracts as observed from the portfolio 

•      Non-adherence to the key transaction terms envisaged at the time of the rating

 

These aspects have been factored by CRISIL Ratings in its analysis.

About the pool

The transaction is backed by car lease receivables. At the time of initial rating, contracts in the pool had a good seasoning profile as evidenced by WA seasoning of 19.5 months and amortisation of 42.2% as of the pool cut-off date (February 28, 2021). Contracts in the pool were concentrated with top 5 groups accounting for 62.3% of lease receivables. The average ticket size was Rs 8.7 lakh for the pool. The weighted average interest rate for contracts in the pool was 13.4%. All contracts were current on payment as of the pool cut-off date (February 28, 2021). CRISIL Ratings has adequately factored all these aspects in its rating analysis.

 

Pool Performance Summary (as after March 2022 payouts) 

Parameters

MFL SECURITISATION TRUST XCVIII

Asset Class

Car lease receivables

Months Post Securitisation

12

Balance Tenure (Months)

41

Principal Amortisation

55.8%

Cumulative Collection Ratio (%)

100.0%

Average Monthly Collection Ratio over Past 3 Months

100.0%

Credit collateral (% of scheduled future payouts)

22.0%

0+OD (% of initial POS)

0.02%

90+ Delinquency (% of initial POS)

Nil

180+ Delinquency (% of initial POS)

Nil

Credit collateral utilisation

0.0%

 

Rating Assumptions

 

To assess the shortfalls for the transaction, CRISIL Ratings has analysed the moving portfolio delinquency information on portfolio. As of Dec-21, 0+ dpd and 30+ dpd on the portfolio was 0.4% and 0.03%, respectively. CRISIL Ratings has also analysed credit quality of the lessees in the pool as the pool is concentrated with top 5 groups accounting for 65% of pool principal.

 

CRISIL Ratings has adequately factored in the risks arising on account of the commingling of cashflows.

 

CRISIL Ratings has assumed correlation of 0.2 – 0.5 for entities in the pool.

 

CRISIL Ratings has assumed post default recovery rate of 30%-70% for contracts in the pool.

 

Counterparty details

Capacity

Counterparty Name

Counterparty Rating / Track record

Effect on credit ratings in case of non-performance

Originator and seller

PFL

Rated ‘CRISIL AA+/Stable/CRISIL A1+’

No effect.

Servicer

PFL

Rated ‘CRISIL AA+/ Stable/ CRISIL A1+’

Significant effect, because of change in servicing quality and replacement cost of servicer (not factored in by CRISIL Ratings). However, CRISIL Ratings does not envisage the requirement for replacement.

Collection and Payout Account Bank

Kotak Mahindra Bank Limited

'CRISIL AAA/CRISIL AA+/FAAA/Stable/ CRISIL A1+’

Negligible effect. Account bank can be changed without impacting the rating.

Second loss facility in the form of Bank guarantee

Union Bank of India

'CRISIL AA+/CRISIL AA/Stable'

Significant effect; however, the second loss facility agreement incorporates a rating trigger according to which if CRISIL Ratings’ rating of the guarantor or bank guarantee provider falls below ‘CRISIL AA’, the Originator (at its own cost) must arrange for another guarantor or bank guarantee (from an eligible Bank) or substitute the credit enhancement in the form of a fixed deposit as per CRISIL Ratings’ criteria

First loss facility in the form of Fixed Deposit

ICICI Bank Ltd.

Rated ‘CRISIL AAA/CRISIL AA+/Stable’

Negligible effect. Bank with whom the fixed deposit is maintained can be changed without impacting the rating.

CANARA Bank

'CRISIL AAA/CRISIL AA+/Stable/CRISIL A1+'

Trustee

IDBI Trusteeship Services Ltd.

Adequate track record

Negligible effect. Can be replaced at minimal cost.

 

About the Originator

Incorporated as Magma Leasing Ltd, the company commenced its operations in 1989. The company was renamed to Magma Fincorp Limited in 2008 and Poonawalla Fincorp Limited in 2021 post the acquisition by Rising Sun Holdings Private Limited (an entity owned and controlled by Mr Adar Poonawalla). The company has a diversified product offerings in consumer and business finance including personal loans, loans to professionals, business loans, SME LAP, pre-owned car loans, etc.

 

In February 2013, erstwhile Magma Fincorp acquired GE Money Housing Finance. Post-acquisition, the company was renamed Magma Housing Finance Ltd. Magma Housing Finance Limited was rebranded as Poonawalla Housing Finance Limited, post the acquisition by Rising Sun Holdings Private Limited. Poonawalla Housing Finance Limited product offerings include affordable home loans and affordable LAP.

 

Key Financial Indicators

As on / for the period ended

Unit

Sep-21**

Mar-21*

Mar-20*

Total assets

Rs. Cr.

14,984

13,212

15,240

Total income

Rs. Cr.

996

2,352

2,538

Profit after tax

Rs. Cr.

160

(559)

27

Gross Stage 3

%

4.1

3.7

6.4

Adjusted gearing

Times

1.7

5.5

5.0

Return on total managed assets #

%

2.1

(3.5)

0.2

*As per IndAS

**Annualised

#Profit after tax by total assets + securitisation (Assignment)

 

Past rated pools

CRISIL Ratings has ratings outstanding on seven transactions originated by PFL. CRISIL Ratings is receiving monthly performance reports pertaining to the transaction.

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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

Complexity

Level

Credit collateral

(Rs Cr)^

Series A1 PTCs

89.70

24-Mar-19

 

15-Aug-25

 

7.25%

CRISIL AA+ (SO)

Highly Complex

9.98

Series A2 PTCs

6.75

Residual

CRISIL AA+ (SO)

Second loss facility

7.09

Not applicable

CRISIL BBB (SO) equivalent

2.89

1 crore = 10 million

# 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

^ Scheduled excess interest spread (EIS) amounting to Rs 5.46 Cr (assuming zero prepayments) also provides credit support to PTCs

* Includes a second loss facility of Rs 7.09 Cr

$ Series A1 PTC holders are entitled to receive timely interest and timely principal payments on a monthly basis

& Series A2 PTC holders are entitled to receive timely principal payments on a monthly basis. The rating on Series A2 PTCs covers only the principal payments and not the interest payments as Series A2 PTC holders are eligible to receive a residual yield only

Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Series A1 PTCs LT 39.64 CRISIL AA+ (SO)   -- 31-12-21 CRISIL AA+ (SO)   --   -- --
      --   -- 08-06-21 CRISIL AA+ (SO)   --   -- --
      --   -- 19-03-21 Provisional CRISIL AA+ (SO)   --   -- --
Series A2 PTCs LT 2.98 CRISIL AA+ (SO)   -- 31-12-21 CRISIL AA+ (SO)   --   -- --
      --   -- 08-06-21 CRISIL AA+ (SO)   --   -- --
      --   -- 19-03-21 Provisional CRISIL AA+ (SO)   --   -- --
Second loss facility LT 7.09 CRISIL BBB (SO) Equivalent   -- 31-12-21 CRISIL BBB (SO) Equivalent   --   -- --
      --   -- 08-06-21 CRISIL BBB (SO) Equivalent   --   -- --
      --   -- 19-03-21 Provisional CRISIL BBB (SO) Equivalent   --   -- --
All amounts are in Rs.Cr.
Criteria Details
Links to related criteria
Evaluating risks in securitisation transactions - A primer
Legal analysis in structured finance transactions
CRISILs rating methodology for ABS transactions

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