Rating Rationale
December 12, 2019 | Mumbai
Marigold Trust 2019
(Originator: Piramal Capital and Housing Finance Limited)
'Provisional CRISIL AAA (SO)' assigned to Certificates
 
Rating Action
Trust Name Details Amount Rated (Rs Cr) Pool Principal
(Rs Cr)		 Original Tenure (Months) Credit Collateral (Rs Cr) Ratings/ Credit Opinions@ Rating Action
Marigold Trust 2019 Certificates 799.40 935.10 530 99.40 Provisional CRISIL AAA (SO) Provisional Rating Assigned
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
@A prefix of 'Provisional' indicates that the rating centrally factors in the strength of specific structures, and will be supported by certain critical documentation by the issuer, without which the rating would either have been different or not assigned ab initio. This is in compliance with a May 6, 2015, Securities and Exchange Board of India (SEBI) directive, 'Standardising the term, rating symbol, and manner of disclosure with regard to conditional/ provisional/ in-principle ratings assigned by CRAs'.
Detailed Rationale

CRISIL has assigned its 'Provisional CRISIL AAA (SO)' rating to Certificates issued by Marigold Trust 2019. The pool is backed by home loan and loan against property receivables originated by Piramal Capital and Housing Finance Limited (PCHFL; 'CRISIL A1+'). The ratings are based on the credit support available to the Certificates, credit quality of underlying pool receivables, PCHFL's origination and servicing capabilities, and soundness of the transaction's legal structure.
 
The transaction has a 'par with turbo amortisation' structure, wherein the trust will issue Certificates in exchange of a purchase consideration equal to 85.5% of the pool principal at the time of securitisation. Total credit support available in the transaction is as follows:

  • External credit-cum-liquidity collateral of Rs 99.40 crore (10.6% of initial pool principal) in the form of corporate deposits provides support to Certificates

The transaction envisages timely interest and ultimate principal payment structure for payouts to Certificates. Additionally, on a monthly basis, the excess of pool collections over the interest due to Certificate holders will be used to make principal repayments to the Certificate holders, i.e., the Certificate principal is turbo-amortising. Catalyst Trusteeship Limited will be appointed the trustee to monitor the transaction on behalf of the Certificate holders. PCHFL will continue to service the pool contracts as the servicing agent.
 
This is a 'provisional' rating and will be converted into a 'final' rating on receipt of the following documents: 

  • Trust Deed
  • Deed of assignment
  • Power of attorney
  • Information memorandum
  • Legal opinion
  • Trustee letter
  • Auditor's certificate
  • Representations and warranties letter

Additional documents, if any, executed for the transaction should also be provided. A rating rationale/report indicating the conversion of the 'provisional' rating to 'final' post the receipt of all the required final legal documents will be published on the CRISIL website. Please click on the link below for detailed information on CRISIL's policy on provisional rating: Revision in CRISIL policy for assigning 'provisional' rating.

Key Rating Drivers & Detailed Description
Supporting Factors
  • Credit support available in the structure
    • Credit collateral of Rs 99.40 crore (10.6% of initial pool principal) provides credit support to Certificates.
Constraining Factors     
  • Borrower concentration
    • The pool consists of 1197 unique borrowers, of which the 10 largest contribute to for 7.1% of the initial pool principal.
These aspects have been factored by CRISIL in its rating analysis.
 
Liquidity: Strong
Liquidity position is strong given that the credit enhancement (internal and external combined) in the structure is above 2 times the estimated base shortfalls on the residual pool cash flows.
 
Rating Sensitivities
Downward factors:
  • Credit enhancement (internal and external combined) falling below 3.50 times the estimated base shortfalls on the residual pool cash flows
  • Deterioration in the credit quality of the servicer/originator
  • Non-adherence to the key transaction terms envisaged at the time of the rating
About the pool
The pool cash flow is securitised and comprises receivables from home loan and loan against property receivables originated by PCHFL. The pool has a weighted average net seasoning of 7.7 months with Mumbai, Delhi, and Pune accounting for 78.2% of the pool principal outstanding. Average ticket size of the pool is Rs 57.9 lakhs. The current weighted average interest rate of pool contracts is 9.3%, and weighted average loan-to-value at disbursement (LTV) of pool contracts was 69.2%. All contracts in the pool were current as on the cut-off date (September 30, 2019). CRISIL has adequately factored all these aspects in its rating analysis.
 

Rating Assumptions

To assess the base case collection shortfalls for the transaction, CRISIL has analysed the performance of HL and LAP portfolio from September 2017 till June 2019. 90+ dpd for HL portfolio is 0.8% and 1.9% for LAP portfolio as of June-19.
 
Presently, there is no basis risk in the transaction. The pool consists of loans at a floating rate of interest linked to base rate of PCHFL. The investor yield is also floating and linked to the same reference rate as pool loans.
 
Borrower concentration is high in the pool and top 10 customer accounts for 7.1% of pool principal. CRISIL has adequately factored this concentration risk in its analysis. CRISIL's credit ratings/internal views on these entities were also considered in the analysis.
 
Based on the above analysis, past experience in rating similar pools, industry benchmarking, and factoring in the strengths and weaknesses of the pool, CRISIL has estimated the base case peak shortfalls to be in the range of 6.0% to 8.0% of the pool principal. CRISIL has assumed a stressed monthly prepayment rate of 1.5 to 2.5% in its analysis. 
  • Based on its assessment of PCHFL's short-term credit risk profile, CRISIL has factored in the risk arising out of commingling of cash flows.
  • 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 PCHFL Rated 'CRISIL A1+' No effect.
Servicer
 		 PCHFL Rated 'CRISIL A1+' Significant effect, because of change in servicing quality and replacement cost of servicer. However, currently CRISIL does not envisage the need for replacement. Under certain circumstances, the trust or investor has right to change the servicer with an intimation to CRISIL.
Collection and Payout Account Bank ICICI Bank Rated 'CRISIL AA+/CRISIL AAA/Stable' Negligible effect. Account bank can be changed without impacting the rating.
Credit collateral in the form of Inter-corporate Deposit Reliance Industries Ltd Rated 'CRISIL AAA/Stable/CRISIL A1+' Significant effect. Rating on the Certificates is directly linked to CRISIL's view on long term credit risk profile of deposit provider.
Trustee CTL Adequate past track record Negligible effect. Can be replaced at minimal cost.
    
About the originator
PCHFL was incorporated in February 2017. The entity was formed as a 100% subsidiary of Piramal Finance Ltd (PFL). PFL, itself, was a wholly-owned subsidiary of Piramal Enterprises Ltd. Till 2016, the financing portfolio was booked in PEL with limited operations in PFL. In fiscal 2017, following a business restructuring, Rs 13,706 crore of assets and Rs 12,575 crores of liabilities were transferred to PFL from PEL.
 
In August 2017, PCHFL received a certificate for commencement of housing finance business from National Housing Bank (NHB). Subsequently, the Board of Piramal Enterprises Ltd (PEL), the parent of PFL, approved a scheme of amalgamation of PFL and Piramal Capital Ltd (PCL) into PCHFL. PCL was a subsidiary of PEL and had limited operations. The merger process was completed in July 2018 with effect from 31st March 2018. Consequently, all outstanding assets and liabilities of Piramal Finance Ltd are being transferred to Piramal Capital and Housing Finance Ltd). Post the merger PCHFL has become wholly owned subsidiary of PEL.
 
PCHFL has 4 business verticals: (i) real estate financing- lending to real estate developers with established track record with increasing focus on providing loans for construction finance and lease rental discounting, (ii) CFG: which lends to corporate clients across sectors (including infrastructure, cement, renewables, auto, logistics, services and entertainment) with loan size greater than Rs 100 crore; (iii) Emerging Corporate Group: which provide finance to mid-tier companies with loan size of upto Rs 100 crores and (iv) Housing Finance.
 
Past rated pools
This is the second securitisation transactions originated by PCHFL and evaluated by CRISIL.
Key Financial Indicators
As on / for the year ended   31-Mar-19 31-Mar-18^^
Total assets Rs crore 52,122 44,727
Total income Rs crore 5,572 46.23*
Profit after tax Rs crore 1,443 Negative*
Gross NPA % 0.4 0.3
Gearing (Gross) Times 3.4 3.2
Return on assets % 3.0 Negative
^^ Figures post-merger of Piramal Finance with Piramal Capital and Housing Finance Ltd
*Piramal Finance Ltd. reported a total income of Rs 3739 crores and Profit after tax of Rs 983 crores till March 30, 2018

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 Crore)		 Date of Allotment Maturity Date# Coupon Rate (%)
(p.a.p.m.)		 Outstanding
Ratings		 Credit cum liquidity Collateral (Rs Crore)
Certificates 799.40 14-Oct-19 20-Dec-63 8.90%* Provisional CRISIL AAA (SO) 99.40
*Floating - linked to PCHFL's base rate
Certificate holders are entitled to receive timely interest payments on a monthly basis, and principal repayment by ultimate maturity
#Indicative maturity date
Annexure - Rating History for last 3 Years
  Current 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Certificates LT  799.4 Provisional 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
Understanding CRISILs Ratings and Rating Scales

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