Detailed Rationale CRISIL Ratings has assigned its ‘Provisional CRISIL AA (SO)’ rating to Series A1 pass-through certificates (PTCs) issued by ‘NIMBUS 2022 MFI Lagos’ under a securitisation transaction originated by Asirvad Micro Finance Limited (AMFL; rated ‘CRISIL AA-/CRISILPPMLD AA-/Stable/CRISIL A1+’).
This transaction is backed by a pool comprising microfinance loan receivables originated by AMFL. The ratings are based on credit quality of the underlying pool receivables, origination and servicing capabilities of AMFL, credit support available to the PTCs, payment mechanism for the transaction, and soundness of the transaction’s legal structure.
The transaction has a ‘Par with Excess Interest Spread (EIS)’ structure. AMFL will assign the loan pool to ‘NIMBUS 2022 MFI Lagos’, a trust settled by Catalyst Trusteeship Limited (CTL), which will issue Series A1 PTCs to investors in exchange for a purchase consideration equal to 86.0% of the pool principal outstanding as on the cut-off date (February 28, 2023). Investor payouts for Series A1 PTCs are supported by cash collateral and cashflow subordination.
Total credit support available in the transaction structure is as below:
Series A1 PTCs are promised timely monthly interest payments. Principal repayment, while expected on a monthly basis, is promised only on an ultimate basis by the instrument’s legal final maturity. AMFL will continue to service loan contracts in the pool as the servicing agent. |
Key Rating Drivers & Detailed Description Strengths:
Weakness:
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Liquidity: Strong Liquidity is strong given that the credit enhancement available in the structure is sufficient to cover losses exceeding 2.3 times the currently estimated base shortfalls. |
Rating Sensitivity factors
Downward
About the Pool The transaction is backed by microfinance receivables originated by AMFL. The pool contracts have a weighted average seasoning of 6.7 months, which has led to 24.0% of the disbursed principal being amortised as of the pool cut-off date. The pool is diversified in terms of geography with the top 3 states and top 3 districts accounting for 40.4% and 5.4% of the initial pool principal respectively. As of the pool cut-off date, the average ticket size for contracts in the pool was Rs 44,932, with a weighted average interest rate of 24.0% and a weighted average tenure of 23.6 months. All the contracts in the underlying loan pool were current on repayment as of the pool cut-off date (February 28, 2023). CRISIL Ratings has adequately factored all these aspects in its rating analysis.
Counterparty Details
Additional disclosures for the provisional rating The provisional rating is contingent upon execution of the following documents.
Additional documents, if any, executed for the transaction should also be provided along with the above documents. The provisional rating shall be converted into a final rating after receipt of transaction documents duly executed within 90 days from the date of issuance of the instrument. The final rating assigned post conversion shall be consistent with the available documents. In case of non-receipt of the duly executed transaction documents within the above-mentioned timelines, the rating committee of CRISIL Ratings may grant an extension of up to another 90 days in line with its policy on provisional ratings.
Rating that would have been assigned in the absence of the pending documentation In the absence of documentation considered while assigning provisional rating as mentioned above, CRISIL Ratings would not have assigned any rating.
Risks associated with the provisional rating: The 'Provisional' prefix indicates that the rating is contingent on occurrence of certain steps or execution of certain documents by the issuer, as applicable. If the documents received and/or completion of steps deviate significantly from the expectations, CRISIL Ratings may take an appropriate action, including placing the rating on watch or changing the rating/outlook, depending on the status of progress on a case to case basis. In the absence of the pending steps / documentation, the rating on the instrument would not have been assigned ab initio.
A rating rationale/report indicating the conversion of the ‘provisional’ rating into ‘final’ following 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 Ratings’ policy on provisional rating: CRISIL Ratings’ Policy on Provisional ratings.
About the Originator Asirvad, an NBFC microfinance institution, is a majority-owned subsidiary of MAFIL. Mr SV Raja Vaidyanathan, who was the managing director until June 30, 2021, set it up in 2007. Mr. B N Raveendra Babu is the current managing director of the company. MAFIL acquired a stake in Asirvad in February 2015, which increased to 97.5% as on June 30, 2022. Asirvad had 1655 branches across 377 districts in 22 states as on December 31, 2022.
Asirvad reported profit after tax of Rs 118 crore on total income of Rs 1223.5 crore in 9M fiscal 2023. Loan portfolio increased to Rs 8653 crore as on December 31, 2022, from Rs 6953.5 crore as on March 31, 2022. |
Key Financial Indicators
^includes off-book borrowings
Past rated pools CRISIL Ratings has ratings outstanding on one other PTC transaction originated by AMFL. CRISIL Ratings is receiving monthly servicer and payout reports from the trustee for the transaction. |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
#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 scheduled cashflow subordination (assuming zero prepayments) amounting to Rs 72.98 crore – including Rs 34.02 crore of overcollateralisation and Rs 2.62 crore of unrated equity tranche PTC principal. |
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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Criteria Details
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