Rating Rationale
March 08, 2018 | Mumbai
Vivriti Naboo 002 2018
(Originator: Satin Creditcare Network Limited)
'Provisional CRISIL A (SO)' assigned to Series A1 PTCs and 'Provisional CRISIL A- (SO)' assigned to Series A2 PTCs 
 
Rating Action
Trust Name Details Amount Rated (Rs Cr) Pool Principal (Rs Cr)  Original Tenure (Months)# Credit Collateral (Rs Cr) Rating@ Rating Action
Vivriti Naboo 002 2018 Series A1 PTCs 54.87 59.00 21# 5.31 Provisional CRISIL A (SO) Provisional Rating Assigned
Series A2 PTCs 0.59 Provisional CRISIL A- (SO) Provisional Rating Assigned
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
# Indicates door to door tenure from pool cut-off date. Actual tenure will depend on the level of prepayments in the pool, and exercise of the clean-up call option
@A prefix of 'Provisional' indicates that the rating centrally factors in the strength of specific structures, and will be supported by certain critical documentation by the issuer, without which the rating would either have been different or not assigned ab initio. This is in compliance with a May 6, 2015, Securities and Exchange Board of India (SEBI) directive, 'Standardising the term, rating symbol, and manner of disclosure with regard to conditional/ provisional/ in principle ratings assigned by CRAs
Detailed Rationale

CRISIL has assigned its 'Provisional CRISIL A (SO)' and 'Provisional CRISIL A- (SO)' ratings to Series A1 pass-through certificates (PTCs) and Series A2 PTCs, respectively, issued by 'Vivriti Naboo 002 2018'. The transaction is backed by microfinance loan receivables originated by Satin Creditcare Network Limited (Satin; not rated by CRISIL). The ratings are based on the credit support available to the PTCs, credit quality of underlying pool receivables, Satin's origination and servicing capabilities, and soundness of the transaction's legal structure.
 
The transaction has a 'Par with monthly subordinated Excess Interest Spread' structure, wherein Satin will assign the pool to 'Vivriti Naboo 002 2018', settled by CTL Trusteeship Limited (CTL) which will issue Series A1 PTCs and Series A2 PTCs in exchange of a purchase consideration equal to 93.0% and 1.0%, respectively, of the pool principal at the time of securitisation. Total credit support available in the transaction is as follows:

  • Internal credit support in the form of scheduled cash flow subordination, aggregating Rs 9.90 crore (16.8 per cent of pool principal) and Rs 9.19 crore (15.6 per cent of pool principal)  for Series A1 PTCs and Series A2 PTCs, respectively
  • External credit enhancement of Rs. 5.31 crore (9.0 per cent of pool principal or 7.8 per cent of of pool cashflows) in the form of fixed deposit provides support to Series A1 PTCs and Series A2 PTCs.

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. On maturity of Series A1 PTCs, Series A2 PTCs are entitled to monthly interest. Catalyst Trusteeship Ltd will be appointed the trustee to monitor the transaction on behalf of the PTC holders. SCNL will continue to service the pool contracts as the servicing agent.
 
This is a 'provisional' rating and will be converted into a 'final' rating on receipt of the following documents:

  • Trust Deed
  • Power of Attorney
  • Information memorandum
  • Legal opinion
  • Trustee letter
  • Representations and Warranties letter
  • Assignment Agreement
  • Accounts Agreement
  • Servicing Agreement

Additional documents, if any, executed for the transaction should also be provided. A rating rationale/report indicating the conversion of the 'provisional' rating to 'final' post the 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.

Key Rating Drivers & Detailed Description
Supporting Factors
  • Credit support available in the structure
    • Credit collateral of Rs 5.31 crore (9.0% of the pool principal) provides credit support to Series A1 and Series A2 PTCs. The PTCs also benefit from scheduled cash flow subordination aggregating Rs 9.90 crore (16.8 per cent of pool principal) and Rs 9.19 crore (15.6 per cent of pool principal)  for Series A1 PTCs and Series A2 PTCs, respectivel
       
  • High seasoning of contracts in the pool
    • The contracts in the pool have a weighted average seasoning of 7.8 months and amortization of 40.7% as of the cut-off date.
    • All the contracts in the pool are current as of cut off date
Constraining Factors
  • Susceptibility to political and regulatory environment
    • The microfinance industry remains susceptible to risks arising out of socio-political issues and regulatory changes. Such events have the ability to disrupt loan repayments of underlying borrowers.
    • The unsecured nature of microfinance loans and inherent modest credit risk profile of the borrowers are considered
About the Pool
The pool securitised comprises of microfinance loan receivables. The pool has weighted average net seasoning of 7.8 months. The pool is well diversified with top state in the pool accounting for 29.5 per cent of pool principal. Average ticket size is Rs.29,212 with weighted average interest rate of 23.2 per cent. All the contracts in the pool were current as on pool cut-off date (February 20, 2018). CRISIL has adequately factored all these aspects in its rating analysis.


Rating Assumptions
To assess the base case shortfalls for the transaction, CRISIL has analysed the moving portfolio delinquency information on portfolio for performance from May-08 to Dec-17.
 
60+ dpd and 0+ dpd on the portfolio is 10.6 per cent and 13.7 per cent as of Dec-17 respectively. Due to demonetisation, the 60+ dpd and 0+ dpd peaks observed were 22.1 per cent and 47.5 per cent respectively, but there have been recoveries from the peaks observed.
 
Based on these aspects, CRISIL has estimated base case shortfalls in the pool at 4.0-6.0 per cent of cash flows. 

  • CRISIL has assumed a stressed monthly prepayment rate of 0.5 to 1.0 per cent in its analysis.
  • 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 Satin Not rated by CRISIL No effect.
Servicer Satin Not rated by CRISIL Significant effect, because of change in servicing quality and replacement cost of servicer. However, currently CRISIL does not envisage the need for replacement. The Trust or investor has right to change the servicer with an intimation to CRISIL.
Collection and Payout Account Bank DCB Bank Limited Rated 'CRISIL A+/Stable/CRISIL A1+' Negligible effect. Account bank can be changed without impacting the rating.
Collateral in the form of Fixed Deposit DCB Bank Limited Rated 'CRISIL A+/Stable/CRISIL A1+' Negligible effect. Bank with whom the fixed deposit is maintained can be changed without impacting the rating.
Trustee CTL Adequate past track record Negligible effect. Can be replaced at minimal cost.

About the Originator
Incorporated in 1990, Satin commenced its microfinance operations in 2008. Satin offers loans to women borrowers organised into joint liability groups, following the Grameen Bank model. The company had a network of 709  branches in 266 districts spread across 18 states and union territories, aggregating to a portfolio outstanding of Rs.4304.4 crore as of Dec 2017. The company listed on the Bombay Stock Exchange in October 2015 and National Stock Exchange in August-2015.
 
Satin has its largest presence in the state of Uttar Pradesh, with around 35 per cent of the portfolio outstanding coming from this state as of December 2017. 63.4 per cent of the total portfolio outstanding for Satin as of December 31, 2017 comes from the three states of Uttar Pradesh, Bihar and Madhya Pradesh. Total disbursements for Satin for FY 2017 stood at Rs. 3543 crore and disbursement in the initial 9 months for FY 2018 is 3596 crore.

Past rated Pools
This is the second securitisation transaction being originated by Satin and rated by CRISIL.
Key Financial Indicators
As on / for the quarter ended March 30   2017 2016
Total Assets Rs crore 4688 3281
Total income (net of interest expenses) Rs crore 337.5 268.6
Profit after tax Rs crore 24.5 57.9
Gross NPA % 14.45% 0.17%
Return on managed assets (annualized) % 0.5% 1.7%
Adjusted Gearing Times 7.4 11.6

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 (%) Outstanding
Ratings
Credit cum liquidity Enhancement (Rs Cr.)
Series A1 PTCs 54.87 28-Feb-18 17-Dec-20 8.85% (p.a.p.m.) Provisional CRISIL A (SO) 5.31&
Series A2 PTCs 0.59 28-Feb-18 17-Dec-20 14.25% (annualised) Provisional CRISIL A- (SO) 5.31^
*Indicates door to door tenure. Actual tenure will depend on the level of prepayments in the pool
& Additional credit support includes Rs.9.90 crore in form of scheduled cash flows subordination (assuming zero prepayments) - Includes overcollateralization of Rs. 3.54 crore (6.0 per cent of pool principal) and Series A2 PTCs of 0.59 crore (1.0 per cent of pool principal)
^ Additional credit support includes Rs.9.19 crore in form of scheduled cash flow subordination (assuming zero prepayments) - Includes overcollateralization of Rs 3.54 crore (6.0 per cent of pool 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 A1 PTCs  LT  54.87 Provisional CRISIL A (SO)   --   --   --   -- --
Series A2 PTCs  LT  0.59 Provisional CRISIL A- (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

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