Detailed Rationale CRISIL Ratings has assigned its ‘Provisional CRISIL AAA (SO)’ rating to Series A pass-through certificates (PTCs) issued by the Trust ‘Peter CV Trust March 2024’. The PTCs are being issued under a securitisation transaction backed by a pool of vehicle loan receivables originated by IndoStar Capital Finance Limited (IndoStar; rated ‘CRISIL AA-/Negative/CRISIL A1+’).
The provisional ratings are based on the credit enhancement available to support promised PTC payouts, the expected credit quality of the underlying pool, IndoStar’s origination and servicing capabilities, and the expected soundness of the transaction’s legal structure and payment mechanism.
The transaction has a ‘Par with turbo amortisation’ structure. IndoStar will assign the loan pool to ‘Peter CV Trust March 2024’, a Trust settled by the transaction’s Trustee, i.e. Axis Trustee Services Limited (‘ATSL’) in exchange for a purchase consideration amounting to 90.0% of the initial pool principal as on the cut-off date. The Trust will issue Series A PTCs for an amount equal to 90.0% of the initial pool principal as on the cut-off date. The Trustee will appoint IndoStar as the Servicer, and collections from the pool will be transferred to the Collection and Payout Account (CPA) on a monthly basis to make investor payouts as per the transaction’s waterfall mechanism.
Series A PTC holders are promised timely interest payments on a monthly basis. Principal repayment, while expected on a monthly basis, is promised only on an ultimate basis by the Series A PTC’s final maturity date. On a monthly basis, the residual EIS will be utilised for accelerated redemption of the Series A PTCs. The investor payouts for Series A PTCs are supported by cash collateral, subordination of overcollateral, and subordination of excess interest spread (EIS). On a monthly basis, the cash collateral can be used to make the promised interest payments to Series A PTCs in case of a shortfall in collections from the pool. On the Series A PTC’s final maturity date, the cash collateral can also be used to make the promised principal repayment in case of a shortfall in collections from the pool. Prepayment collections will be utilised for accelerated redemption of the Series A PTCs.
Credit enhancement available in the transaction structure to support promised PTC payouts is as below:
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Key Rating Drivers & Detailed Description Strengths:
Weakness:
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Liquidity: Strong For Series A PTCs: Liquidity is strong given that the credit enhancement available in the structure is sufficient to cover losses exceeding 1.5 times the currently estimated base shortfalls. |
Rating Sensitivity factors Upward factors For Series A PTCs: None
Downward factors
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About the Pool The securitisation transaction is backed by a pool of receivables from used and new vehicle loans originated by IndoStar. As of the pool cut-off date (29-Feb-2024), the pool loans had a weighted average seasoning of 9.2 months, a weighted average interest rate of 17.9%, a weighted average LTV ratio of 71.3%, a weighted average original tenure of 40.7 months, and an average original loan amount of Rs 8.2 lakh. The top 3 states (West Bengal, Gujarat, and Tamil Nadu) contributed 33.6% of the initial pool principal. All the underlying pool loans were current on repayment as on the cut-off date.
Counterparty Setails
Additional disclosures for Provisional ratings: The provisional rating is contingent upon execution and receipt of the following documents:
Executed documents:
Other 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 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 deviate significantly from the expectations, CRISIL Ratings may take appropriate action including placing the rating on watch or a rating change, depending on status of progress on a case-to-case basis. In the absence of the pending documentation, the rating on the instrument would not have been assigned ab initio. |
About the Originator IndoStar, incorporated in July 2009, is registered with the Reserve Bank of India as a systemically important, non-deposit taking non-banking financial company. The company was founded and incorporated by private equity players (Everstone, Goldman Sachs, Baer Capital Partners, ACPI Investment managers, and CDIB International) with an initial capital of around Rs 900 crore. In May 2020, Brookfield invested Rs 1,225 crore and became the largest shareholder and co-promoter. As on date, Brookfield holds 56.20% stake, followed by the Everstone group) at 18.8%. Everstone Group have completed the sale of 14.21% of the total paid-up equity share capital of the Company through an Offer for Sale, to comply with the minimum public shareholding requirements as per SEBI. Pursuant to the same, Everstone Group’s holding stands at 18.8% and public shareholding in the company increased to 25% w.e.f. 05th May 2023.
IndoStar started business as a wholesale financier in fiscal 2011 and entered the SME finance (loans against property) segment in fiscal 2015. In fiscal 2018, the company started offering vehicle finance and housing finance (through wholly owned subsidiary, IndoStar Home Finance Pvt Ltd). In fiscal 2019, IndoStar acquired the CV finance business of IIFL Finance Ltd. The company plans to focus on used CV financing and affordable housing finance.
Key Financial Indicators
CRISIL Ratings has ratings outstanding on instruments issued under 4 securitisation transactions backed by IndoStar-originated loans. CRISIL Ratings is receiving monthly performance reports pertaining to these transactions. The cumulative collection efficiency in the underlying pools for these transactions range from ~97% to ~99% as of Jan-2024 payouts, with 90+ delinquency remaining at or below 2.5% of the initial pool principal.
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
#Indicates legal final maturity date for the instrument. Actual maturity date will depend on the level of collection shortfalls in the pool, the level of prepayments in the pool, and exercise of the clean-up call option. |
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
Criteria Details
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