Rating Rationale
September 04, 2020 | Mumbai
Mobil Trust Series 09
(Originator: Shriram City Union Finance Limited)
Rating continues on 'Watch Negative'
 
Rating Action
Trust Name Details Amount Rated (Rs Crore) Outstanding Amount
(Rs Crore)*		 Pool Principal (Rs.Crore)  Original Tenure (Months)# Credit Collateral (Rs.Crore) Ratings/ Credit Opinion Rating Action
Mobil Trust Series 09 Series A PTCs 72.05 40.87 72.05 30 11.52 CRISIL AAA (SO)/Watch Negative Continues on 'Rating watch with Negative implications'
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
*Data as of August 20 payout
#Indicates door to door tenure until final maturity date as defined at the time of securitisation; actual tenure depends on the level of prepayment in the pool, extension due to moratorium and exercise of the clean-up call option.
Detailed Rationale

CRISIL's ratings on the Series A pass-through certificates (PTCs) issued by 'Mobil Trust Series 09' continue to be on 'Rating Watch with Negative Implications'. The pool is backed by two-wheeler loan receivables originated by Shriram City Union Finance Ltd (SCUFL; 'CRISIL AA/Negative/CRISIL A1+').
 
On May 28, 2020, CRISIL had placed its ratings on the PTCs on watch, due to the expected adverse impact on the collections in the underlying pools due to lockdowns on account of COVID-19 pandemic and the granting of moratorium to borrowers announced by the originator.
 
The phased withdrawal of the extended lockdown has enabled two wheeler borrowers to resume their economic activities. Consequently, there has been some improvement in collections in the pool, from as low collection as 39% witnessed in May 2020 to 65.2% in July 2020. However, it continues to be lower than the collection efficiencies estimated at the time of initial rating.
 
Additionally, despite withdrawal of restrictions, the broader economy as well as the operations of financiers are yet to return to normalcy. Until normalcy is restored, there is high probability of pressure building up on income generation of the borrowers that may contribute to plateauing of collection efficiencies and negatively impact the asset quality of the underlying two wheeler loans, including in the securitised pools.
 
In the past 8 months post securitisation, the PTC has been amortised by 43.3% after Aug'20 payout. The underlying credit collateral amounts to 26.2% of the future payouts. Collection efficiency, as per August payout, (on the pre-moratorium scheduled billing) was 65.2% in the pool. The investor has granted consent for offering moratorium to the underlying borrowers and extend the repayment schedule for both the underlying borrower and PTC payouts by six months. During the moratorium period, interest of the underlying borrowers in the pool is permitted to accrue and any other collections from the pool are to be passed on to the investor. CC utilisation is also suspended during the moratorium
 
Sustenance of improving collection efficiency trend in pool and portfolio, credit enhancement utilization and asset quality of the underlying loans remain key monitorables.

Key Rating Drivers & Detailed Description
Supporting Factors
  • Credit support available in the structure
    • Available credit collateral of Rs 11.52 Crore (26.2% of future investor payouts) provides credit support to Series A PTCs. The PTCs also benefit from scheduled subordination aggregating Rs 7.92 Crore (11.0% of initial pool principal).
Constraining Factors
  • Potential impact of the pandemic on post moratorium collections
    • In the medium term, there would be pressure on collections and asset quality of the pool of receivables backing the PTCs on account the Novel Coronavirus (Covid-19) pandemic and extent to which collection performance of the pool would be impacted post moratorium ends remains a key factor
Rating Sensitivities
Downward factors:
* Credit enhancement (internal and external combined) falling below 3 times the estimated base shortfalls on the residual pool cash flows
* Deterioration in the credit quality of the servicer/originator
* Non-adherence to the key transaction terms envisaged at the time of the rating
* Material impact on pool collections post moratorium

Liquidity: Strong
Liquidity position is strong given that the credit enhancement (internal and external combined) in the structure is above 1.5 times the estimated base shortfalls on the residual pool cash flows.

About the pool
The pool cash flow is securitised and comprises receivables from 2 wheeler loans originated by SCUFL.At the time of securitisation, the pool has a weighted average net seasoning of 10.5 months. The pool is moderately concentrated with top 3 states accounting for 66.8% of the pool principal. Average ticket size of the pool is Rs 0.50 lakh. All contracts in the pool were current as on the cut-off date (November 30, 2019). CRISIL has adequately factored all these aspects in its rating analysis
 
Pool Performance Summary (as after August 2020 payouts)
Parameters Mobil Trust Series 09
Asset class Two Wheeler Receivables
Structure Par with Excess Interest Spread
Months post securitisation 8
Balance tenure (months)@ 22
Amortisation 43.3%
Credit collateral as a percentage of future payouts 26.2%
Cash collateral utilisation Nil
Cumulative collection ratio (CCR)! 99.6%
3 months average MCR! 100.0%
Cumulative prepayments 2.5%
0+ OD# 0.2%
Threshold collection ratio (TCR)!  67.0%
!CCR = {Total collections in the pool / (Total billings + opening overdues amounts at the time of securitisation)}
!MCR = Monthly collections in the pool / Monthly billings (excluding contracts who have opted for moratorium)
!TCR = The minimum cumulative collection ratio required on a pool's future cash flows, to be able to service the investor payouts on time
#0+ OD is as a percent of Initial POS (Based on overdue profile pre-moratorium; April 20 payouts)
@ Actual tenure will depend on the extension of legal maturity date and moratorium policy of the investor
  
Key Rating Assumptions
CRISIL has analysed the collection and delinquency performance as well as moratorium policies of the investor for SCUFL-originated securitisation transactions until August 2020 payout for evaluating this transaction. CRISIL has also evaluated the performance reports of SCUFL's various securitisation transactions. For this pool, collection is gradually expected to increase in the post-moratorium phase. The base case peak shortfall is expected to be in the range of 6.0% to 8.0% of pool cash flows.
 
Counterparty details

Capacity

Counterparty Name

Counterparty Rating / Track record

Effect on credit ratings in case of non-performance

Originator and seller SCUFL Rated 'CRISIL AA/Negative/CRISIL A1+'  
No effect.
 
Servicer SCUFL Rated 'CRISIL AA/Negative/CRISIL A1+' 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 DCB Bank Rated 'CRISIL AA-/Stable/CRISIL A1+' Negligible effect. Account bank can be changed without impacting the rating.
First Loss Facility in the form of Fixed Deposit DCB Bank Rated 'CRISIL AA-/Stable/CRISIL A1+' Negligible effect. Bank with whom the fixed deposit is maintained can be changed without impacting the rating.
Trustee CTL Adequate track record Negligible effect. Can be replaced at minimal cost.
 
About the originator
Incorporated in 1986, Shriram City is a part of Shriram group of companies. It is registered with RBI as a systemically important, deposit taking, non-banking finance company (NBFC-SI-D). It predominantly operates in the retail financing segment with a focus on small enterprise loans (53% of consolidated AUM as on March 31, 2020), two wheeler financing (19%), gold loans (10%) and others (including housing, auto and personal loans) together forming 18% of AUM. Its assets under management (including housing portfolio) stood at Rs 31,389 crore as of March 31, 2020 of which the standalone AUM stood at Rs 29,085 crore, while the housing portfolio under Shriram Housing stood at Rs 2,304 crore. The company has pan India presence with 947 branches as on March 31, 2020, of which 57% are situated in South India.
 
Past rated pools
CRISIL has ratings outstanding on nine PTC transactions originated by SCUFL, and is receiving monthly performance reports pertaining to it.
Key Financial Indicators
As on/for the period ending/year ending Unit March 31, 2020 March 31, 2019
Total AUM Rs.Cr 29,085 29,582
Total income (net of interest expenses) Rs.Cr 3,747 3,801
Profit after tax Rs.Cr 1001 989
Gross NPA (ECL Stage-3) % 7.9 8.9
Gearing Times 3.2 3.5
Return on managed assets % 3.2 3.4

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments and are included (where applicable) in the Annexure -- Details of Instrument in this Rating Rationale. For more details on the CRISIL complexity levels, please visit www.crisil.com/complexity-levels.
Annexure - Details of Instrument(s)
Type of Instrument Rated Amount
(Rs Cr.)		 Date of Allotment Maturity Date* Coupon Rate (%) (p.a.p.m.) Complexity
levels		 Outstanding
Rating		 Credit cum liquidity Enhancement (Rs Cr.)
Series A PTCs 72.05 26-Dec-19 16-Jun-22 10.40% Highly complex CRISIL AAA (SO)/Watch Negative 11.52^
*Indicates door to door tenure. Actual tenure will depend on the level of prepayments in the pool, extension due to moratorium  and exercise of the clean-up call option
^At the time of securitization, additional credit support includes Rs 7.92 crore in form of scheduled EIS (assuming zero prepayments)
Annexure - Rating History for last 3 Years
  Current 2020 (History) 2019  2018  2017  Start of 2017
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Series A PTCs  LT  40.87 CRISIL AAA (SO)/Watch Negative  17-07-20  CRISIL AAA (SO)/Watch Negative               
        28-05-20  Provisional CRISIL AAA (SO)/Watch Negative               
        21-01-20 Provisional CRISIL AAA (SO)              
All amounts are in Rs.Cr.
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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