Rating Rationale
January 02, 2018 | Mumbai
Sanada CV IFMR Capital 2016
(Originator: Muthoot Capital Services Limited)
Ratings upgraded to 'CRISIL AAA (SO)/CRISIL BBB+ (SO)'
 
Rating Action
Transaction Details Initial Amount Rated
(Rs. Cr.)
OutstandingAmount Rated
(Rs. Cr.)$
Outstanding pool principal (Rs. Cr.)$ Original Tenure (Months)# Balance Tenure (Months)$ Credit Collateral (Rs. Cr.) Ratings Rating Action
Sanada CV IFMR Capital 2016 Series A1 PTCs 99.70 0.50 13.81  41 26 7.36 CRISIL AAA (SO)
[Upgraded from CRISIL A- (SO)]
Rating upgraded
Series A2 PTCs 4.46 4.46 7.36 CRISIL BBB+ (SO)
[Upgraded from CRISIL BB+ (SO)]
Rating upgraded
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
$As after November 2017 payouts
#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
Detailed Rationale

CRISIL has upgraded its ratings on Series A1 and Series A2 pass through certificates (PTCs) issued by 'Sanada CV IFMR Capital 2016' to 'CRISIL AAA (SO)' from 'CRISIL A- (SO)' and 'CRISIL BBB+ (SO)' from 'CRISIL BB+ (SO)' respectively. The PTCs are backed by two-wheeler loan receivables originated by Muthoot Capital Services Limited ((MCSL; rated 'CRISIL A-/FA-/Stable/CRISIL A1'). The rating actions are driven by the improved credit cover available to PTC-holders on account of high amortisation.
 
The transaction is supported by credit enhancement partly in the form of Fixed deposit and partly in the form of Guarantee provided by MCSL. Out of a total credit enhancement of Rs. 7.36 Cr, Rs. 2.23 Cr is in the form of cash and Rs. 5.13 Cr. is in the form of guarantee.  
 
15 months post securitisation, the outstanding credit collateral in the form of cash is sufficient to fully cover the future Series A1 PTC payouts and covers 44.2% of total future investor payouts to Series A1 and Series A2 PTC-holders.
 
Overall, the credit cushion available (cash collateral along with the guarantee) in the transaction is adequate to fully cover the future PTC payouts. As a result, threshold collection ratio (TCR) stands negligible at 0.0% as after November 2017 payouts. The ratings also factor in the strength of the payment mechanism for the transaction and the soundness of the legal structure.
 
The transaction has a 'par' structure. Internal credit support in the form of scheduled Excess Interest Spread (EIS), aggregating Rs 1.25 Cr (24.8% of future payouts) is available in the transaction after November 2017 payouts.
 
Series A1 PTC holders are entitled to receive timely interest on a monthly basis, while the principal payment is promised on an ultimate basis. Series A2 PTC holders are entitled to receive timely interest on a monthly basis once Series A1 PTC holders are paid out in full. The principal payment to Series A2 PTC holders is promised on an ultimate basis.

Key Rating Drivers & Detailed Description
Supporting Factors
  • High amortisation and credit support available in the structure
    • After 15 months of securitisation, the pool is amortised by 87.6% which has led to an increase in credit cover available to the future investor payouts. Credit collateral available fully covers the future payouts to be made to Series A1 and Series A2 PTC investors
       
  • High collection efficiency in the pool
    • 3-months average monthly collection ratio (MCR) for the pool was high after November 2017 payouts standing at 98.9%.
    • Threshold collection efficiency to service future investor payouts for Series A1 and Series A2 PTCs stands negligible at 0.0% after November 2017 payouts (October 2017 collections). Threshold collection efficiency calculated based only on the credit enhancement available in the form of fixed deposit also stands low at 19.8%.
Constraining Factors
  • Moderate geographic concentration
    • 15 months post secuitisation, 71.8% of the pool principal is emanating from loans disbursed in Kerala
       
  • High risk profile of underlying asset class
    • The pool is backed by two-wheeler loans, an asset class which has historically exhibited higher deinquency
About the Pool
The pool cash flow securitised comprises receivables from two wheeler loan receivables originated by MCSL. After 15 months of securitisation, the pool has a weighted average net seasoning of 24.76 months. The pool is geographically concentrated with top 3 states accounting for 93.9% of the pool principal after November 2017 payouts. Average ticket size of the pool is low at Rs 45,980 with moderate loan to value ratio of 76.5%. The pool has moderate interest rate contracts with weighted average interest rate of 13.06%. After November 2017 payouts, around 75.9% of the pool principal are current on repayment. CRISIL has adequately factored all these aspects in its rating analysis.


Pool Performance Summary (as after November 2017 payouts)
Parameters Sanada CV IFMR Capital 2016
Asset class Two-wheeler loan receivables
Structure Par with EIS
Months post securitisation 15
Amortisation 87.6%
Credit collateral (including guarantee) as a percentage of future payouts Fully covered
Credit collateral (excluding guarantee) as a percentage of future payouts 44.1%
Credit collateral utilisation 0.0%
Cumulative collection ratio (CCR)! 98.4%
3 months average MCR! 98.9%
Threshold collection ratio (TCR)! (including guarantee) 0.0%
Threshold collection ratio (TCR)! (excluding guarantee) 19.8%
Total overdues $ 1.5%
!CCR = {Total collections in the pool / (Total billings + opening overdues amounts at the time of securitisation)}
!MCR = Monthly collections in the pool / Monthly billings
!TCR = The minimum cumulative collection ratio required on a pool's future cash flows, to be able to service the investor payouts on time.
 $ 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 shortfalls1 for the transaction, CRISIL has analysed the performance of static pool for two-wheeler loans originated by MCSL from January 2014 onwards and their performance till September 2017. CRISIL has also factored in the observed trends in the delinquencies and collection in the recent quarters.
  • CRISIL has adequately factored in the risks arising on account of geographic concentration
  • CRISIL does not envisage any risk arising on account of commingling of cash flows since CRISIL's short term rating of servicer is 'A1'
  • CRISIL has adequately factored in the risks arising on account of counterparties (refer to counterparty details below)
 

Capacity

Counterparty Name

Counterparty Rating/ Track record

Effect on credit ratings in case of non-performance

Originator and seller MCSL Rated 'CRISIL A-/FA-/Stable/CRISIL A1' No effect.
Servicer MCSL Rated 'CRISIL A-/FA-/Stable/CRISIL A1' Significant effect, because of change in servicing quality and replacement cost of servicer (not factored in by CRISIL). However, CRISIL does not envisage the requirement for replacement.
Collection and Payout Account Bank DCB Bank Limited Rated 'CRISIL A1+' Negligible effect. Account bank can be changed without impacting the credit rating.
Collateral in the form of fixed deposit Axis Bank Limited Rated 'CRISIL AAA/Stable/CRISIL A1+' Negligible effect. Bank with whom the fixed deposit is maintained can be changed without impacting the rating.
Collateral in the form of unfunded credit enhancement facility provided through a first loss credit enhancement deed MCSL Rated 'CRISIL A-/FA-/Stable/CRISIL A1' Significant effect. Rating on PTCs will be directly linked to the credit rating on long-term debt obligations of MCSL
Trustee CTL Adequate track record Negligible effect. Can be replaced at minimal cost.

About the Originator
Set up in 1994, MCSL is a deposit-taking, systemically important, non-banking financial company. It started with financing two-wheelers; later, it began offering business loans. In the late 1990s, on account of intense competition, the company exited these businesses and shifted to gold loans. Subsequently, as the group scaled up its gold financing business in MFL, MCSL entered the two-wheeler financing segment once again in fiscal 2008 and gradually exited the gold loan business. MCSL is listed on the Bombay Stock Exchange and the National Stock Exchange and is the only listed company in the group. As on September 30, 2017, its advances portfolio of Rs 1,550 crore comprised 90% two-wheeler loans and 10% other loans.

Past Rated Pools
CRISIL has ratings outstanding on three transactions originated by Muthoot Capital Services Limited. CRISIL is receiving monthly performance report pertaining to the CRISIL-rated MCSL originated securitisation transactions
Key Financial Indicators
As On/For The Period Ended March 31 Unit 2017 2016
Total Assets Rs. Cr. 1,257 1,060
Total Income Rs. Cr. 283 228
Profit after tax Rs. Cr.  30 23
Gross NPA % 5.2 5.2
Adjusted Gearing Times 6.9 5.9
Return On Managed Assets % 2.4 2.5

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)
Transaction Type of Instrument Rated Amount
(Rs. Cr.)
Date of Allotment Maturity date# Coupon Rate (%) (annualised) Outstanding
Ratings
Credit cum liquidity Enhancement (Rs. Cr.)^
Sanada CV IFMR Capital 2016 Series A1 PTCs 99.70 31-Aug-16 17-Jan-20 10.50% CRISIL AAA (SO)$ 7.36
Series A2 PTCs 4.46 15.00%   CRISIL BBB+ (SO)! 7.36
#Indicates door-to-door tenure between placement date and final maturity date. Actual tenure will depend on the level of prepayment in the pool and the extent of shortfall
$Series A1 PTC holders are entitled to receive timely interest on a monthly basis, while the principal payment is promised on an ultimate basis.
!Series A2 PTC holders are entitled to receive timely interest on a monthly basis once Series A1 PTC holders are paid out in full.
^Additionally, scheduled excess interest spread (EIS) amounting to around Rs.1.25 Cr (assuming zero prepayments) provides credit support to PTC payouts as after November 2017 payouts
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Series A1 PTCs LT 99.70 CRISIL AAA (SO)   No Rating Change  13-01-17  CRISIL A- (SO)    --    --  -- 
            09-09-16 Provisional CRISIL A- (SO)           
Series A2 PTCs LT 4.46 CRISIL BBB+ (SO)   No Rating Change   13-01-17  CRISIL BB+ (SO)   --    --  -- 
            09-09-16 Provisional CRISIL BB+(SO)           
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 ABS transactions
Evaluating risks in securitisation transactions - A primer
Legal analysis in structured finance transactions

For further information contact:
Media Relations
Analytical Contacts
Customer Service Helpdesk
Saman Khan
Media Relations
CRISIL Limited
D: +91 22 3342 3895
B: +91 22 3342 3000
saman.khan@crisil.com

Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000
naireen.ahmed@crisil.com

Jyoti Parmar
Media Relations
CRISIL Limited
D: +91 22 3342 1835
B: +91 22 3342 3000
 jyoti.parmar@crisil.com

Krishnan Sitaraman
Senior Director - CRISIL Ratings
CRISIL Limited
D:+91 22 3342 8070
krishnan.sitaraman@crisil.com


Rohit Inamdar
Senior Director - CRISIL Ratings
CRISIL Limited
B:+91 124 672 2200
Rohit.Inamdar@crisil.com


Apurva Sharma
Rating Analyst - CRISIL Ratings
CRISIL Limited
B:+91 22 3342 3000
Apurva.Sharma@crisil.com
Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com


 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL. However, CRISIL alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.


About CRISIL Limited

CRISIL is an agile and innovative, global analytics company driven by its mission of making markets function better. We are India’s foremost provider of ratings, data, research, analytics and solutions. A strong track record of growth, culture of innovation and global footprint sets us apart. We have delivered independent opinions, actionable insights, and efficient solutions to over 100,000 customers.

We are majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.

For more information, visit www.crisil.com 


Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK


About CRISIL Ratings
CRISIL Ratings is part of CRISIL Limited (“CRISIL”). We pioneered the concept of credit rating in India in 1987. CRISIL is registered in India as a credit rating agency with the Securities and Exchange Board of India (“SEBI”). With a tradition of independence, analytical rigour and innovation, CRISIL sets the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank loans, certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 24,500 large and mid-scale corporates and financial institutions. CRISIL has also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We also pioneered a globally unique rating service for Micro, Small and Medium Enterprises (MSMEs) and significantly extended the accessibility to rating services to a wider market. Over 1,10,000 MSMEs have been rated by us.


CRISIL PRIVACY NOTICE

CRISIL respects your privacy. We use your contact information, such as your name, address, and email id, to fulfil your request and service your account and to provide you with additional information from CRISIL and other parts of S&P Global Inc. and its subsidiaries (collectively, the “Company) you may find of interest.

For further information, or to let us know your preferences with respect to receiving marketing materials, please visit www.crisil.com/privacy. You can view the Company’s Customer Privacy at https://www.spglobal.com/privacy

Last updated: April 2016


DISCLAIMER

This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of doubt, the term “Report” includes the information, ratings and other content forming part of the Report. The Report is intended for the jurisdiction of India only. This Report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the Report is to be construed as CRISIL providing or intending to provide any services in jurisdictions where CRISIL does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this Report does not create a client relationship between CRISIL and the user.

We are not aware that any user intends to rely on the Report or of the manner in which a user intends to use the Report. In preparing our Report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the Report is not intended to and does not constitute an investment advice. The Report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind or otherwise enter into any deal or transaction with the entity to which the Report pertains. The Report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Rating are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities / instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its opinions and analysis. CRISIL rating contained in the Report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the Report should rely on their own judgment and take their own professional advice before acting on the Report in any way.

Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the accuracy, completeness or adequacy of the Report, and no CRISIL Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Report. EACH CRISIL PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. CRISIL’s public ratings and analysis as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any) are made available on its web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing conflict of interest. For details please refer to: http://www.crisil.com/ratings/highlightedpolicy.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (0091) 1800 267 1301.

This Report should not be reproduced or redistributed to any other person or in any form without a prior written consent of CRISIL.

All rights reserved @ CRISIL