Detailed Rationale CRISIL Ratings has assigned its ‘Provisional CRISIL BBB+ (SO)’ rating to Series A1 pass-through certificates (PTCs) issued by ‘Northern Arc 2021 SBL Frieza’ under a securitisation transaction originated by Riviera Investors Private Limited (Riviera; rated ‘CRISIL BBB-/Stable/CRISIL A3+’).
This transaction is backed by a pool of receivables from SME loan receivables originated by Riviera. The ratings are based on credit support available to instruments, credit quality of the underlying pool of receivables, Riviera’s origination and servicing capabilities, and soundness of the transaction’s legal structure.
The transaction has a ‘Par with Excess Interest Spread (EIS)’ structure. In exchange for a purchase consideration equal to 89.0% of future pool principal outstanding as on the cut-off date (June 30, 2021), Riviera will assign the loan pool to ‘Northern Arc 2021 SBL Frieza’, a trust settled by Catalyst Trusteeship Limited (CTL), which will issue instruments to investors. Investor payouts for Series A1 PTCs are supported by credit collateral and subordination of excess interest spread (EIS).
Total credit support available in the transaction structure is as below:
Series A1 PTCs are entitled to receive timely interest payments on a monthly basis while the principal is promised on an utlimate basis. Riviera will continue to service loan contracts in the pool as the servicing agent. |
Key Rating Drivers & Detailed Description Supporting factors:
Constraining factors:
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Liquidity: Adequate Liquidity is adequate given that the credit enhancement available in the structure is sufficient to cover losses exceeding 1.1 times the currently estimated base shortfalls.
These aspects have been factored by CRISIL Ratings in its rating analysis |
Rating Sensitivity factors Upward
Downward
About the Pool The transaction is backed by receivables from pool of SME loan contracts. Contracts in the pool have a good seasoning profile as evidenced by a weighted average net seasoning of 8.1 months. Contracts in the pool are mildly concentrated in terms of geography with the top 3 states accounting for 40.6% of the pool principal. The average ticket size for contracts in the pool was Rs 6.23 lakh, with a weighted average interest rate of 25.3%. All contracts were current on payment as of the pool cut-off date (June 30, 2021).
CRISIL Ratings has adequately factored all these aspects in its rating analysis.
Rating AssumptionsTo assess the base case shortfalls for the transaction, CRISIL Ratings has analysed Riviera’s moving portfolio delinquency information for SME loans from October 2018 to June 2021, along with static pool performance for SME loans made March 2017 onwards with performance up to June 2021. CRISIL Ratings has also analysed the portfolio cuts based on various parameters and compared the pool with the portfolio on these parameters. Riviera’s overall portfolio delinquency (90+ POS as % of total POS) was 3.5% (net of write-offs) as of June 2021.
Based on these aspects and other pool specific characteristics, CRISIL Ratings has estimated base case peak shortfalls in the pool at 10.0-12.0% of cash flows.
Counterparty details
Additional disclosures for Provisional ratings: The provisional rating is contingent upon execution of the following 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 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 provisional nature of credit rating: A prefix of 'Provisional' to the rating symbol indicates that the rating is contingent upon execution of certain documents by the issuer, as applicable. In case the documents received deviates significantly from the expectations, CRISIL Ratings may take an appropriate action including placing the rating on watch or a rating change on a case to case basis. In the absence of the pending documentation, the rating on the instrument would either have been different or not 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’s policy on provisional rating: Revision in CRISIL policy for assigning ‘provisional’ rating .
About the Originator Riviera is a wholly-owned NBFC of Indifi that was set up in 2015 as an online marketplace connecting (SMEs) with lenders. Indifi houses the proprietary lending model, evaluation from which leads to a lending decision. On the platform, the respective lenders who are affiliated with the company, have provided some additional parameters, which are looked at while deciding upon the eligibility criteria of the borrowers.
Indifi acquired Riviera in fiscal 2017. The NBFC sources its loans from the ‘Indifi platform’ and uses Indifi’s proprietary lending model for the evaluation of the credit profile of the customers. The lending principle is based on credit evaluation using a proprietary scoring model with minimum human interface and therefore, with a significantly faster turnaround time. The group is targeting the niche segment of low ticket size, shorter tenure unsecured loans.
For fiscal 2021, Riviera reported a profit after tax of Rs 0.17 crore on a total income of Rs 59.0 crore compared to Rs 0.6 crore and Rs 44.2 crore, respectively, in fiscal 2020. On a consolidated basis, the group reported a net loss of Rs 36.7 crore on a total income of Rs 66 crore in fiscal 2021.
Past rated pools CRISIL Ratings have ratings outstanding on five PTC transactions originated by Riviera. CRISIL Ratings is receiving monthly performance reports pertaining to these transactions. |
Key Financial Indicators
**on-book borrowings + off book (securitisation) divided by networth |
Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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)
# 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 2.94 crore in the form of scheduled cashflow subordination for Series A1 PTCs – including Rs 1.29 crore of principal overcollateralisation (assuming zero prepayments) |
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
Criteria Details
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