Rating Rationale
January 24, 2018 | Mumbai
Indian Receivable Trust 3
(Originator: Reliance Capital Limited)
Rating reaffirmed 
 
Rating Action
Transaction Details Amount Rated (Rs Cr) Outstanding amount (Rs Cr) 1 Original Tenure (Months) # Balance Tenure (Months) #1 Credit Collateral (Rs Cr) ^ Ratings/ Credit Opinions @ Rating Action
Indian Receivable Trust 3 Series A PTCs 1000.00 89.67 238 178 115.00 CRISIL AAA (SO) Rating Reaffirmed
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, and exercise of the clean-up call option
^ Additionally scheduled excess interest spread (EIS) amounting to Rs 12.93 Cr (assuming zero prepayments) also provides credit support to PTCs
1 Data as of December 2017 pay-outs
Detailed Rationale

CRISIL has reaffirmed its rating on Series A pass through certificates (PTCs) issued by 'Indian Receivable Trust 3' at 'CRISIL AAA (SO)'. The transaction is backed by home loan (HL) & loan against property (LAP) receivables of Reliance Capital Limited (RCL). The ratings are based on the credit support available to the PTCs, credit quality of underlying pool receivables, RCL's origination and servicing capabilities, and soundness of the transaction's legal structure.

 

The pool has exhibited strong collection performance. 60 months post securitisation, the cumulative collection ratio for the pool is robust at 97.9%. This has led to delinquencies in the pool as reflected in 90+ delinquency of 2.7% of initial pool principal. Coupled with the high amortisation of 91.0%, there is a large increase in credit cover available to future PTC payouts from the cash collateral.

 

The pool is eligible for reset of credit enhancement, and CRISIL has evaluated the reset in line with the RBI guidelines. However, investor consent is yet to be received.

Analytical Approach

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Key Rating Drivers & Detailed Description
  • High amortisation and credit support available in the structure
    • Credit collateral of Rs 115.00 crore (128.3% of the future payouts after December 2017 payouts) provides credit support to Series A PTCs. The PTCs also benefit from scheduled EIS aggregating to Rs 12.93 crore.
  • Healthy collection efficiency metrics
    • CCR is robust at 97.9% after 60 months post securitisation and the 90+ delinquency is 2.7% of initial pool principal.
Constraining Factors
  • High Proportion of contracts with 365+ delinquency
    • 17.5% of the outstanding pool principal (as of December 2017 payouts) is from contracts which have been delinquent for 365+ days.
CRISIL has adequately factored these aspects in its rating analysis
 
Pool Characteristics
The pool securitised comprises home loan receivables & loan against property. As of December 2017 payouts, the pool has high seasoning as evidenced by its weighted average net seasoning of 91.8 months. Loan to value ratio of 48.2% (LTV as of initial disbursed amount). After December 2017 payouts current proportion of the contract in pool is 71.8%.  CRISIL has adequately factored all these aspects in its rating analysis.

Pool Performance Summary:
Parameters (as after dec 2017 payouts)
Asset class HL & LAP receivables
Structure Par with EIS
Months post securitisation 60
Amortisation 91.0%
Credit collateral pre reset as a percentage of future principal 128.3%
Credit collateral utilisation 0.0%
Cumulative collection ratio (CCR)! 97.9%
Last 3 months average MCR! 113.1%
Total overdues $ 1.1%
!CCR = {Total collections in the pool / (Total billings + opening overdues amounts at the time of securitisation)}
!MCR = Monthly collections in the pool / Monthly billings
$ 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 shortfalls for the transaction, CRISIL has analysed the performance of static pools of HL and LAP of RCL from April 2007 till December 2016 and their performance till March 2017. CRISIL has also analysed the portfolio and performance of rated securitisation transactions while arriving at base case loss scenario.
 
CRISIL has also factored in pool specific characteristics and estimated the base case peak shortfalls in the pool in the range of 3 to 4 per cent of initial pool principal.

  • CRISIL has assumed a stressed monthly prepayment rate of 2.0 per cent in its analysis.
  • CRISIL does not envisage any risk arising on account of commingling of cash flows.
  • CRISIL has adequately factored in the risks arising on account of counterparties (refer to counterparty details below)
  • CRISIL has run sensitivities based on various shortfall curves (front-ended, back-ended and normal) and has adequately factored the same in its analysis

Counterparty details

Capacity

Counterparty Name

Counterparty Rating/ Track record

Effect on credit ratings in case of non-performance

Originator and seller RCL Not rated by CRISIL  
No effect.
 
Servicer RCL Not rated by CRISIL Significant effect, because of change in servicing quality and replacement cost of servicer (not factored in by CRISIL given CRISIL's rating on the servicer). However, CRISIL does not envisage the requirement for replacement.
Collection and Payout Account Bank HDFC Bank CRISIL AAA/CRISIL AA+/Stable Negligible effect. Account bank can be changed without impacting the rating.
Collateral in the form of Fixed Deposit DBS Bank CRISIL A1+ Negligible effect. Bank with whom the fixed deposit is maintained can be changed without impacting the rating.
Yes Bank Not rated by CRISIL
Trustee IDBI Trusteeship Services Limited Adequate track record Negligible effect. Can be replaced at minimal cost.

About the Originator
Established in 1986, RCL is a systemically important non-deposit taking NBFC. The company is part of the Reliance group led by Mr Anil Dhirubhai Ambani. RCL currently operates as the holding company for the group's entities in the financial services sector.
 
The company, along with its subsidiaries and associates, has businesses across the financial services spectrum, such as asset management, commercial and mortgage finance, capital approvals. The subsidiary's name will also be changed to Reliance Commercial Finance Limited. markets, general insurance, and life insurance. CRISIL has ratings outstanding on three transactions originated by Reliance Capital Limited (RCL). Of the three transactions, two are fully backed by loans against property receivables (LAP); in the other pool, 27 per cent of the receivables arise from housing loans.
 
RCL in February 2016, announced its plan to demerge its commercial finance division into its wholly owned subsidiary Reliance Gilts Limited, subject to requisite approvals. The subsidiary's name will also be changed to Reliance Commercial Finance Limited.

Past Rated Pools
CRISIL has ratings outstanding on three transactions of RCL. The collection efficiency for the pool has remained robust till date. CRISIL is receiving monthly performance reports pertaining to CRISIL-rated RCL securitisation transactions.

1Weights being the principal outstanding as of December 2017 payouts
Outlook: -

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About the Company

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Key Financial Indicators
Particulars (Year ended march) Unit 2017 2016
Total Assets Rs. Cr. 16760 15160
Total income Rs. Cr. 1950 1840
Profit After Tax Rs. Cr. 295 250
Gross NPA % 3.7% 3.1%
Return on average assets % 2.2% 2.1%

Status of non cooperation with previous CRA: Not applicable

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 (%) (p.a.p.m) Outstanding
Ratings/credit opinions		 Credit collateral (Rs Cr)*
Series A PTCs 1000.00 12-Dec-12 10-Oct-32 9.48% CRISIL AAA (SO)$ 115.00
#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
*Additionally scheduled excess interest spread (EIS) amounting to Rs. 12.93 Cr (assuming zero prepayments) also provides credit support to PTCs (as after December 2017 payouts)
$Series A PTC holders are entitled to receive timely interest and timely principal.
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 A PTCs LT 89.67 CRISIL AAA (SO)   No Rating Change    No Rating Change    No Rating Change    No Rating Change  CRISIL AAA (SO)
Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Total 0 -- Total 0 --
Links to related criteria
CRISILs rating methodology for RMBS transactions
Evaluating risks in securitisation transactions - A primer
Legal analysis in structured finance transactions

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