Rating Rationale
June 07, 2017 | Mumbai
Starling CV IFMR Capital 2016
(Originator: Muthoot Capital Services Limited)
'CRISIL A- (SO)/CRISIL BBB (SO)' Converted from Provisional Rating to Final Rating for Series A1 and Series A2 PTCs
 
Rating Action
Transaction Details Amount Rated
(Rs. Cr.)

 
Outstanding Amount
(Rs. Cr.)$

 
Original Tenure (Months)# Balance Tenure (Months)# Credit Collateral
(Rs. Cr.)

 
Ratings/ Credit Opinion Rating Action
Starling CV IFMR Capital 2016 Series A1 PTCs 99.64 65.64 41 36 11.02& CRISIL A- (SO) Converted from Provisional Rating to Final Rating
 
Series A2 PTCs 2.21 2.21 11.02^ CRISIL BBB (SO)
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, exercise of clean-up call option, and the extent of shortfalls
* Series A1 PTC holders are entitled to timely interest on a monthly basis, while the principal payment is promised on an ultimate basis. Series A2 PTC holders are entitled to timely interest on a monthly basis once Series A1 PTC holders are paid in full. The principal payment to Series A2 PTC holders is promised on an ultimate basis.
&Additional credit support includes Rs 23.83 crore in the form of scheduled cash flow subordination (assuming zero prepayment) - Includes overcollateralization of Rs 11.07 crore (10.0% of pool principal) at the time of securitisation
^Additional credit support includes Rs 21.21 crore in the form of scheduled cash flow subordination (assuming zero prepayment) ' Includes overcollateralization of Rs 8.86 crore (8.0% of pool principal) at the time of securitisation
$Rated Instrument Principal Outstanding Amount-Data as of April 17 payouts
Detailed Rationale

CRISIL has converted the provisional ratings assigned to Series A1 PTCs and Series A2 PTCs to final ratings of 'CRISIL A- (SO)' and 'CRISIL BBB (SO)' respectively. The provisional ratings were assigned on January 12, 2017 to the PTCs issued by Starling CV IFMR Capital 2016. The pool is backed by two-wheeler loan receivables originated by Muthoot Capital Services Ltd (MCSL; 'CRISIL A-/ FA-/Stable/CRISIL A1'). The documents executed for the transaction are in line with the assumptions at the time of assigning the provisional rating. CRISIL has therefore converted the provisional rating to final rating.
 
For detailed information on CRISIL's policy on provisional ratings, click here: Revision in CRISIL policy for assigning 'provisional' ratings
 
As required, CRISIL has received the following final documents:
 
Legal Documents

  • Assignment Agreement
  • Trust Deed
  • Accounts Agreement
  • Servicing Agreement
  • Power of Attorney
  • Deed of Guarantee

Other Documents

  • Legal Opinion
  • Auditors' Certificate
  • Representations & Warranties from Originator
  • Trustee Awareness Letter
  • Information Memorandum 

The ratings are based on the credit support available to the PTCs, credit quality of the underlying pool receivables, MCSL's origination and servicing capabilities, and the soundness of the transaction's legal structure.
 
The transaction has a 'par with monthly subordinated excess interest spread (EIS)' structure, wherein the trust has issued Series A1 PTCs and Series A2 PTCs in exchange of a purchase consideration equal to 90.0% and 2.0%, respectively, of the pool principal at the time of securitisation. Total credit support available in the transaction at the time of securitisation is as follows:

  • Internal credit support in the form of scheduled cash flow subordination, aggregating Rs 23.83 crore and Rs 21.21 crore for Series A1 PTCs and Series A2 PTCs, respectively
  • External credit-cum-liquidity collateral of Rs 11.02 crore (10% of pool principal), of which 2% of pool principal is in the form of cash collateral and 8% of pool principal is a guarantee provided by MCSL

Series A1 PTCs are senior, and will have the first priority right on the trust property. These PTCs are entitled to monthly interest. Principal and interest payments for Series A2 PTCs are fully subordinated to payouts for Series A1 PTCs. The transaction envisages ultimate payment structure for principal payouts for both Series A1 and Series A2 PTCs. Series A2 PTCs are  entitled to monthly interest payment along with Series A1 PTCs and principal payment after Series A1 PTCs have been paid in full. Catalyst Trusteeship Ltd will be appointed the trustee to monitor the transaction on behalf of the PTC holders. MCSL will continue to service the pool contracts as the servicing agent.

Key Rating Drivers & Detailed Description
Supporting Factors
  • Credit support available in the structure
    • Credit collateral of Rs 11.02 crore (10% of the pool principal) provides credit support to Series A1 and Series A2 PTCs. The PTCs also benefit from scheduled cashflow subordination aggregating Rs 23.83 crore for Series A1 PTCs and Rs 21.21 crore for Series A2 PTCs
  • High seasoning of contracts in the pool
    • Contracts in the pool have a weighted average seasoning of 8.6 months, and consequently, the pool was highly amortized by 40.3% as of the cut-off date
  • Good performance of other two-wheeler pools originated by MCSL
    • CRISIL has outstanding ratings on three transactions originated by MCSL. The cumulative collection ratios of the transactions are robust around 98% as of April 2017 payouts
Constraining Factors
  • Moderate geographic concentration
    • More than 75% of the pool principal was originated in Kerala and Karnataka
  • Moderate presence of overdue contracts
    • The contracts in the pool were current as of the cut-off date. However, as on December 26, 2016, 1-month overdue contracts accounted for 8.5% of pool principal
  • High risk profile of underlying asset class
    • The pool is backed by two-wheeler loans, an asset class with substantial delinquency in the past
In the weeks following demonetisation, the collection efficiency was negatively impacted for MCSL, but has since improved significantly, and collections for December are in line with those before demonetisation.
CRISIL has adequately factored these aspects in its rating analysis
 
About the Pool
The pool cash flow is securitised and comprises receivables from two-wheeler loans originated by MCSL. The pool has a weighted average net seasoning of 8.6 months, with Kerala and Karnataka accounting for 55.5% and 21.4%, respectively, of the pool principal outstanding. Average ticket size of the pool is Rs 0.5 lakh. All contracts in the pool were current as on the cut-off date (November 30, 2016). As of December 26, 2016, 1-month overdue contracts accounted for 8.5% of pool principal
 
About the Originator
Muthoot Capital Services Ltd (MCSL; rated 'CRISIL A-/Stable/FA-/Stable/CRISIL A1'), set up in 1994, is a deposit-taking, systemically important, non-banking financial company. It started operations by financing purchase of two-wheelers. In the late 1990s, on account of intense competition, the company shifted to gold loans. It entered the two-wheeler financing segment once again in fiscal 2008, and gradually exited the gold loan business. MCSL offers business loans in addition to two-wheeler loans. The company is listed on the Bombay Stock Exchange and the National Stock Exchange and is the only listed company in the group.
 
Of its advances portfolio of Rs 1439.7 crore as on March 31, 2017, 87.3% comprised two-wheeler loans. Profit after tax (PAT) was Rs 30.1 crore on total income of Rs 284.2 crore in fiscal 2017 (Rs 22.9 crore and Rs 228.5 crore, respectively, in fiscal 2016). 
  
Past Rated Pools
CRISIL has outstanding ratings on three transactions originated by MCSL. CRISIL has received the legal documents for two transactions, and receives monthly performance reports pertaining to all CRISIL-rated MCSL originated securitisation transactions. The cumulative collection ratio of the transactions are robust around 98% as of April 2017 payouts.

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 (%) (Annualised) Outstanding
Rating
Credit cum liquidity Enhancement (Rs Cr.)
Series A1 PTCs 99.64 28-Dec-16 23-May-20 10.90% CRISIL A- (SO) 11.02&
Series A2 PTCs 2.21 28-Dec-16 23-May-20 15.00% CRISIL BBB (SO) 11.02^
*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 includes Rs 23.83 crore in form of scheduled cash flows subordination (assuming zero prepayments) - Includes overcollateralization of Rs 11.07 crore (10.0% of pool principal)
^Additional credit support includes Rs 21.21 crore in form of scheduled cash flow subordination (assuming zero prepayments) ' Includes overcollateralization of Rs 8.86 crore (8.0% of pool principal)
Annexure - Rating History for last 3 Years
  Current 2017 (History) 2016  2015  2014  Start of 2014
Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Series A1 PTCs  LT  99.64 CRISIL A- (SO) 12-01-17   Provisional CRISIL A- (SO)   --    --    --  -- 
Series A2 PTCs  LT  2.21 CRISIL BBB (SO) 12-01-17 Provisional CRISIL BBB (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

Tanuja Abhinandan
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000
tanuja.abhinandan@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


Ajit Velonie
Director - CRISIL Ratings
CRISIL Limited
D:+91 22 4097 8209
ajit.velonie@crisil.com


Thara Varghese
Rating Analyst - CRISIL Ratings
CRISIL Limited
B:+91 22 3342 3000
Thara.Varghese@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 a global, agile and innovative 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 95,000 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