Rating Rationale
July 11, 2018 | Mumbai
MM Trust September 2014
(Originator: Mahindra and Mahindra Financial Services Limited)
Rating upgraded to 'CRISIL AAA (SO)' 
 
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
MM Trust September 2014 Series A PTCs 319.5 8.5 53 9 29.6 CRISIL AAA (SO)
[Upgraded from CRISIL AA+ (SO)]
Rating Upgraded
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 April 2018 payouts
Detailed Rationale

CRISIL has upgraded its rating on Series A pass through certificates (PTCs) issued by 'MM Trust September 2014' to 'CRISIL AAA (SO)' from 'CRISIL AA+ (SO)'. The transaction is backed by tractor loan receivables originated by Mahindra & Mahindra Financial Services Limited (MMFSL; 'CRISIL AA+/Stable/CRISIL FAAA/Stable/CRISIL A1+'). The rating are based on the credit support available to the PTCs, credit quality of underlying pool receivables, MMFSL's origination and servicing capabilities, and soundness of the transaction's legal structure.

 

The pool has exhibited satisfactory collection performance. The cumulative collection ratio for the pool was 97.4%, and 0+ overdues were 2.8% after April 2018 payouts. The healthy collection performance coupled with high amortisation of around 97.4% has led to future PTC payouts being fully covered by cash collateral available.

Key Rating Drivers & Detailed Description
Supporting Factors
  • Amortisation and credit support available
    • Credit collateral of Rs 29.6 crore is sufficient to cover future payouts to Series A PTCs (after April 2018 payouts). The PTCs also benefit from trapped excess interest spread (EIS) in the structure.
  • Collection efficiency
    • CCR is healthy at 97.4% after 43 months since securitisation.
Constraining Factors
  • Delinquencies
    • Peak 90+ delinquency in the pool was 9.2% (as a percentage of initial principal outstanding) in October 2015, however, significant recoveries from contracts in arrears have been witnessed since, leading to 90+ delinquency of 3.1% after April 2018 payouts.
CRISIL has adequately factored these aspects in its rating analysis.

Pool Performance Summary (as after April 2018 payouts)
Parameters  
Asset class Tractor loan receivables
Structure Par with Trapped EIS
Months post securitisation 43
Amortisation 97.4%
Credit collateral as a percentage of future principal Fully covered
Credit collateral utilisation 0.0%
Cumulative collection ratio (CCR)! 97.4%
Last 3 months average MCR! 372.5%
Total overdues $ 2.8%
!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)

Counterparty details
Capacity
Counterparty Name
Counterparty Rating/ Track record
Effect on credit ratings in case of non-performance
Originator
and Seller
MMFSL Rated 'CRISIL AA+/Stable/FAAA/Stable/CRISIL A1+'  
No effect.
 
Servicer MMFSL Rated 'CRISIL AA+/Stable/FAAA/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 Yes Bank Not rated by CRISIL Negligible effect. Account bank can be changed without impacting the rating.
Cash collateral in form of fixed deposit Yes Bank Not rated by CRISIL 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
Mahindra Finance, a non-banking financial company (NBFC), was incorporated in 1991. M&M, the majority shareholder, held 51.2% in Mahindra Finance as on March 31, 2018. Mahindra Finance ranks among the larger NBFCs in India with total assets under management of Rs 55,101 crore as on March 31, 2018 (Rs 46,776 crore as on March 31, 2017). The company finances consumer purchases of UVs, LCVs, tractors, cars, and other assets. To leverage its extensive branch network and rural clientele, the company has entered the rural housing finance business through subsidiary, MRHFL. MIBL is the insurance broking arm of Mahindra Finance, providing insurance broking services both in the life and non-life segments.

Past Rated Pools
CRISIL has ratings outstanding on one securitisation transaction of MMFSL. CRISIL is receiving monthly performance reports pertaining to CRISIL-rated MMFSL securitisation transactions.
Key Financial Indicators
As on / for the period ended March 31   2018 2017
Total Assets Rs crore 54,368 45,837
Total income Rs crore 7,147 6,174
Profit after tax Rs crore 892 400
Gross NPA % 9.3 9.9
Overall capital adequacy ratio % 1.8 0.9
Return on assets % 4.3 5.5

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 319.5 30-Sep-14 27-Feb-19 6.00% CRISIL AAA (SO)$ 29.6
#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
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 8.5 CRISIL AAA (SO)     30-06-17 CRISIL AA+ (SO) 05-07-16 CRISIL AA+ (SO) 03-06-15 CRISIL AA+ (SO) CRISIL AA+ (SO)
All amounts are in Rs.Cr.
Links to related criteria
CRISILs rating methodology for ABS transactions
Evaluating risks in securitisation transactions - A primer
Legal analysis in structured finance transactions

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