Detailed Rationale

Crisil Ratings has assigned its ‘Provisional Crisil AAA (SO)’ rating to Series A1 pass-through certificates (PTCs) and ‘Provisional Crisil AA (SO)’ rating to Series A2 PTCs issued by the Trust ‘Shanks 01 2025’ under a securitisation transaction backed by a pool of personal loan receivables originated by KrazyBee Services Private Limited (‘KrazyBee’; rated ‘Crisil A-/Stable/Crisil A1’).

 

The ratings are based on credit quality of the pool backing the transaction, the origination and servicing capabilities of KrazyBee’s, 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 turbo amortisation’ structure, wherein the trust settled by the transaction’s Trustee, i.e. Catalyst Trusteeship Limited (‘CTL’) which will issue Series A1 PTCs and Series A2 PTCs to investors in exchange for a purchase consideration amounting to 75.0% and 12.5% respectively of the initial pool principal outstanding as on the cut-off date. The Trustee will appoint KrazyBee 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.

 

While Series A1 PTCs are outstanding, Series A1 PTC holders are promised timely interest payments on a monthly basis. Principal repayment to Series A1 PTCs, while expected on a monthly basis, is promised only on an ultimate basis by the instrument’s final maturity date. Series A2 PTCs are completely subordinated to Series A1 PTCs. Post the redemption of Series A1 PTCs, Series A2 PTC holders are promised timely interest payments on a monthly basis. Principal repayment to Series A2 PTCs, while expected on a monthly basis post the redemption of Series A1 PTCs, is promised only on an ultimate basis by the instrument’s final maturity date post the redemption of Series A1 PTCs.

 

The investor payouts for both Series A1 PTCs and Series A2 PTCs are supported by cash collateral, subordination of equity tranche and over collateral principal and subordination of excess interest spread (EIS). Additionally, Series A1 PTC payouts are supported by subordination of Series A2 PTC payouts. On a monthly basis, the cash collateral can be used to make the promised interest payments in case of a shortfall in collections from the pool. On the instruments’ 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. Cash collateral utilisation for payouts to Series A2 PTCs is only possible post the redemption of Series A1 PTCs.

 

On a monthly basis, residual amounts after making payments of promised interest and expected principal to Series A1 PTCs and payments of expected interest to Series A2 PTCs will be used for accelerated redemption of Series A1 PTCs. Post the redemption of Series A1 PTCs, residual amounts after making payments of promised interest and expected to Series A2 PTCs shall be used for accelerated redemption of Series A2 PTCs. Monthly prepayment collections will be utilised for redemption of the Series A1 PTCs while the Series A1 PTCs are outstanding, and for the redemption of Series A2 PTCs post the redemption of Series A1 PTCs.

 

Credit enhancement available in the transaction structure to support PTC payouts are described below:

 

• Internal credit enhancement for Series A1 PTCs from principal subordination of Series A2 PTC principal and over collateral principal together aggregating to Rs 29.05 crore (25.0% of the initial pool principal), in addition to subordination of scheduled EIS
• Internal credit enhancement for Series A2 PTCs from principal subordination of over collateral principal aggregating to Rs 14.53 crore (12.5% of the initial pool principal), in addition to subordination of scheduled EIS.
   

External credit enhancement for both Series A1 and Series A2 PTCs from a cash collateral amounting to Rs 8.72 crore (7.5% of the initial pool principal) which is expected to be maintained as fixed deposits with a bank and lien-marked in favour of the Trustee.

Key Rating Drivers & Detailed Description

Strengths:

• Credit enhancement available in the structure:

• Internal credit enhancement for Series A1 PTCs from principal subordination of Series A2 PTC principal, equity tranche principal and over collateral principal together aggregating to Rs 29.05 crore (25.0% of the initial pool principal), in addition to subordination of scheduled EIS
• Internal credit enhancement for Series A2 PTCs from principal subordination of over collateral principal and equity tranche principal aggregating to Rs 14.53 crore (12.5% of the initial pool principal), in addition to subordination of scheduled EIS
• External credit enhancement for both Series A1 and Series A2 PTCs from a cash collateral amounting to Rs 8.72 crore (7.5% of the initial pool principal) which is expected to be maintained as fixed deposits with a bank and lien-marked in favour of the Trustee

• Repayment track record of pool borrowers:

• As of the cut-off date, the pool loans had a weighted average credit bureau score of 767.7, with no loan having a score lower than 701. While the weighted average seasoning for pool loans was limited at 7.9 monthly instalment repayments, around 71% of pool principal was contributed by repeat borrowers that had previously availed and repaid loans from Krazybee.

 

Weakness:

• Unsecured nature of loans and risk profile of underlying borrowers

• The pool comprises personal loans extended to salaried and self-employed borrowers. In a stressed environment, such loans are vulnerable to higher delinquencies. The pool loans had a weighted average monthly instalment amount of Rs 14,177 which represented 20.6% of the weighted average monthly declared income for pool borrowers. Given the unsecured nature of these loans, recovery prospects from delinquent borrowers are expected to be limited. The pool’s collection performance will remain susceptible to risks inherent in this asset class.

Crisil Ratings has adequately factored these aspects in its rating analysis.

Liquidity: Strong for Series A1 PTCs and Series A2 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 A1 PTCs: None
• For Series A2 PTCs: Credit enhancement available in the structure exceeding 3.0 times the estimated adjusted base shortfalls.

 

Downward factors:

• For Series A1 PTCs: Credit enhancement available in the structure failing to cover 4.0 times the estimated adjusted base shortfalls due to weaker than expected collection performance of the pool.
• For Series A2 PTCs: Credit enhancement available in the structure failing to cover 2.5 times the estimated adjusted base shortfalls due to weaker than expected collection performance of the pool.
• A sharp downgrade in the rating of the servicer/originator.
• Non-adherence to the key transaction terms envisaged at the time of assigning the rating.

About the Pool

The transaction is backed by receivables from a pool of unsecured personal loans originated by Krazybee. The pool’s key characteristics as of the cut-off date (31-Dec-2024) are outlined below:

• Pool loans have seen a weighted average seasoning of 7.9 monthly instalment repayments prior to securitisation, during which the total disbursed amount for pool loans has amortised by 25.5%.
• The top 10 cities contribute 35.7% of the initial pool principal, with the largest city (Bengaluru) contributing 11.5%.
• The average disbursement amount for pool loans was Rs 2.51 lakh, with a weighted average interest rate of 22.1% and a weighted average original tenure of 26.6 months.
• None of the pool loans had any overdues as of the cut-off date.

 

Rating assumptions   To assess the base case collection shortfalls for the transaction, Crisil Ratings has analysed the static pool 90+ delinquency, dynamic delinquency, and collection efficiency performance on Krazybee’s portfolio until Dec-2024. Crisil Ratings has also evaluated the disbursements and write-offs on Krazybee’s portfolio. As of Nov-2024, Krazybee’s platform-level AUM stood at Rs 8,947 crore with a 90+ delinquency of 1.8%. On a static pool basis, the peak 90+ delinquency for cohorts starting Apr-2022 has remained under 5% of the disbursed amounts.   Base case shortfalls on the portfolio are adjusted based on pool characteristics – which includes seasoning profile and repayment track record, parameters such as original tenure, interest rate, etc.    Crisil Ratings has additionally factored risk arising from borrower & geographic concentration in the pool.   Adjusted base case shortfalls in the pool by maturity of the transaction is in the range of 7.0% to 9.0% of pool cashflows. Monthly prepayment rate 2.0% to 4.0% has also been applied to the pool cashflows.

 

Counterparty details

Capacity	Counterparty	Rating	Effect on transaction rating in case of non-performance
Originator	Krazybee	'Crisil A-/Stable/Crisil A1'	No effect.
Servicer	Krazybee	'Crisil A-/Stable/Crisil A1'	Significant effect, because of change in servicing quality and replacement cost of the Servicer. However, Crisil Ratings does not currently envisage the need for replacement. The Trustee, on behalf of the investors, shall retain the right to appoint a replacement Servicer in the occurrence of a ‘Servicer Event of Default’ as per the terms of the transaction.
Collection and Payout Account (CPA) Bank	TBD	TBD	Negligible effect. As per the terms of the transaction, the Trustee, on behalf of the investors, has the right to change the CPA Bank.
Cash Collateral Bank	TBD	TBD	Negligible effect. As per the terms of the transaction, the Trustee, on behalf of the investors, has the right to change the Bank with which the Cash Collateral fixed deposits are maintained.
Trustee	TBD	TBD	Negligible effect. As per the terms of the transaction, the Trustee can be replaced by the investors holding majority interest.

 

Additional disclosures for Provisional ratings:

The provisional ratings are contingent upon execution and receipt of the following documents:

 

Executed documents:

• Trust Deed
• Assignment Agreement
• Servicing Agreement
• Accounts Agreement
• Power of Attorney

 

 Other documents:

• Information Memorandum
• Legal Opinion
• Auditor’s Certificate(s)
• Trustee’s Letter
• Originator’s Representations and Warranties Letter

 

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 ratings as mentioned above, Crisil Ratings would not have assigned any ratings.

 

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

KrazyBee Services (P) Limited is a systemically important, non-deposit taking, non-banking financial company (ND-NBFC). The company commenced operations in fiscal 2017 and is founded by Mr Madhusudan Ekambaram, Mr Vivek Veda and Mr Karthikeyan Krishnaswamy, who have prior experience in product portfolio management, sales, technology and finance. It is backed by strong PE investors such as Premji Invest, Advent International, MUFG Bank, TPG NewQuest Capital, Motilal Oswal Private Equity, ICICI Bank amongst others. The company focuses on providing unsecured personal loans to young professionals in India.
 

The company offers unsecured personal loans to young professionals, with ticket sizes varying up to Rs 4 lakh with average tenure of around nine months. It offers loans through its group company, Finnovation Tech Solutions Private Limited (FTSPL), which has a tech platform, ‘KreditBee’ and the platform originates loans for KrazyBee and several other partner-lenders.
 

The group has an in-house technological base with end-to-end integration for loan origination, risk assessment, collections, accounting. Owing to its digital origination method, the group has a sphere of lending across India.

 

Key Financial Indicators: (Consolidated)

As on / for the period ended	Unit	March 2024^	March 2023	March 2022
Total assets	Rs crore	5,671	3,433	1,591
Total income	Rs crore	1,948	1,268	642
Profit after tax (PAT)	Rs crore	285	93	(35)
90+ dpd	%	1.4	1.1	1.7
Gearing	Times	1.0	0.6	1.2
Return on managed assets	%	4.0	2.3	(1.8)

^Provisional numbers

Performance of previously rated transactions

This is the fifth PTC transaction backed by KrazyBee-originated loans to be rated by Crisil Ratings. The first PTC transaction was initially rated in Sep-2022 and the ratings were withdrawn in Jun-2023. The cumulative collection efficiency for the other two live transaction is in the rage of 97%- 98.0% as of December-24 payouts.

 

Any other information: Not Applicable