Rating Rationale
March 09, 2020 | Mumbai
Sansar Trust November 2019 III
(Originator: Shriram Transport Finance Company Limited)
'CRISIL AAA (SO)' for Series A PTCs and 'CRISIL BBB+ (SO) Equivalent' for Second loss facility converted from provisional ratings to final ratings 
 
Rating Action
Trust name Instrument
Details
Amount rated (Rs crore) Outstanding principal
(Rs crore)*
Original tenure (months) Credit collateral
(Rs crore)
Ratings/Credit opinion Rating action
Sansar Trust November 2019 III Series A PTCs 141.56 129.91 52 16.32 CRISIL AAA (SO) Converted from provisional rating to final rating
Second loss facility 9.24 9.24 7.08 CRISIL BBB+ (SO) Equivalent
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
*After February 2020 payouts 
Detailed Rationale

CRISIL has converted its provisional ratings assigned to Series A Pass-Through Certificates (PTCs) issued by 'Sansar Trust November 2019 III' under a securitisation transaction originated by Shriram Transport Finance Company Limited (STFCL; rated 'CRISIL AA+/CRISIL PP-MLD AA+r/FAAA/Stable/CRISIL A1+') to final rating of 'CRISIL AAA (SO). The provisional credit opinion for Second Loss Facility under this transaction has been converted to final credit opinion of 'CRISIL BBB+ (SO) Equivalent'.
 
CRISIL has received the final legal documents executed for this transaction. These executed documents are in line with terms of the transaction when provisional rating/credit opinion was assigned. Hence, CRISIL has converted the provisional rating/credit opinion to a final rating/credit opinion.
 
Please click on the following link for detailed information on CRISIL's policy on provisional rating:
Revision in CRISIL policy for assigning 'provisional' ratings
 
As required, CRISIL has received the following final executed legal documents and other documents relevant to the transaction:

Legal documnets

  • Trust deed
  • Deed of assignment
  • Power of attorney

Other documents

  • Information memorandum
  • Legal opinion
  • Trustee's awareness letter
  • Auditor's certificate
  • Originator's representations and warranties letter

This securitisation transaction is backed by receivables from new and used heavy commercial vehicles (HCV), light commercial vehicles (LCV), passenger vehicles (PV), construction equipment (CE), and small commercial vehicles, including 3-wheelers (SCV & 3W) loans originated by STFCL. The rating / credit opinion is based on the credit support available to the PTCs, credit quality of underlying receivables, STFCL's origination and servicing capabilities, and soundness of the transaction's legal structure.
 
The transaction has a 'Par with Excess Interest Spread' structure. STFCL assigned the pool to 'Sansar Trust November 2019 III', settled by a trustee which issued the PTCs to investors. The Series A PTC payouts are supported by credit collateral in the form of Fixed Deposits and Excess Interest Spread (EIS).
 
The total credit support available in the transaction is as below:

  • Internal credit support in the form of scheduled EIS assuming zero prepayments aggregating Rs 15.49 crore (10.9% of initial pool principal)
  • External credit enhancement of Rs 16.32 crore (11.5% of pool principal) of which second loss facility of Rs 9.24 crore (6.5% of pool principal) is in the form of a Fixed Deposit and first loss facility of Rs 7.08 crore (5.0% of pool principal) is also in the form of a Fixed Deposit

Series A PTC holders are entitled to receive timely interest and timely principal payments on a monthly basis.

Key Rating Drivers & Detailed Description
Supporting Factors
  • Credit support in the structure
    • Credit collateral of Rs 16.32 crore (11.5% of pool principal) provides credit support to Series A PTCs. The PTCs also benefit from scheduled EIS (assuming zero prepayment) aggregating Rs 15.49 crore (10.9% of pool principal).
  • Seasoning of contracts
  • The contracts in the pool have a weighted average seasoning of 10.2 months, resulting in 21.5% principal amortization prior to securitisation. All the pool contracts are current as of cut-off date.
 Constraining Factors
  • Proportion of high IRR loans
    • Weighted average IRR of loans in the pool is 17.9%. Relative to low IRR vehicle loans, higher IRR vehicle loans exhibit higher delinquency in STFCL's used vehicle loan portfolio
Liquidity Descriptor: Strong
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
  • For Series A PTCs: None. For second loss facility: credit enhancement (both internal and external credit enhancement) available in the structure exceeding 2 times the estimated base case shortfalls on the residual cash flows of the pool.
Downward
  • For Series A PTCs: Credit enhancement (based on both internal and external credit enhancements) falling below 2 times the estimated base case shortfalls. For second loss facility: Credit enhancement (based on both internal and external credit enhancements) falling below 1.5 times the estimated base case shortfalls.
  • A sharp downgrade in the rating of the servicer/originator
  • Non-adherence to the key transaction terms envisaged at the time of the rating. 

About the Pool
The transaction is backed by receivables from a pool of vehicle loans. The pool is well seasoned as evidenced by its weighted average net seasoning of 10.2 months. Contracts in the pool are slightly geographically concentrated with top 3 states accounting for 38.8% of pool principal. The average ticket size for contracts in the pool is Rs 2.8 lakh, with a weighted average loan-to-value (at disbursement) ratio of 68.7%. The weighted average interest rate of contracts in the pool is 17.9%. All contracts in the pool were current on payment as of cut-off date (November 30, 2019). 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 static pool information on new and used vehicles portfolio of STFCL for originations in the period FY2013 to Q4FY2018 (with performance data till September 2019). CRISIL has also analysed performance of rated securitisation transactions, and the performance of STFCL's portfolio. As of September 2019, 90+ dpd for the new and used portfolio are 7.7% and 3.4%, respectively.
 
CRISIL has also factored in pool-specific characteristics and estimated the base case peak shortfalls in the pool in the range of 5-7% of pool cash flows. 

  • CRISIL has assumed a stressed monthly prepayment rate of 0.3% to 0.8% in its analysis.
  • CRISIL does not envisage any risk arising on account of commingling of cash flows since CRISIL's short term rating on the servicer is 'CRISIL A1+'
  • CRISIL has adequately factored in the risks arising on account of counterparties (refer to counterparty details)
  • 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 STFCL Rated 'CRISIL AA+/CRISIL PP-MLD AA+r/FAAA/Stable/CRISIL A1+'  
No effect.
 
Servicer STFCL Rated 'CRISIL AA+/CRISIL PP-MLD AA+r/FAAA/Stable/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 Kotak Mahindra Rated 'CRISIL AAA/CRISIL AA+/FAAA/Stable/CRISIL A1+' Negligible effect. Account bank can be changed without impacting the rating.
Second loss facility in the form of Fixed Deposit Canara Bank Rated 'CRISIL AA/CRISIL AAA/Watch Developing/CRISIL A1+' Negligible effect. Bank with whom the fixed deposit is maintained can be changed without impacting the rating.
First loss facility in the form of Fixed Deposit Canara Bank Rated 'CRISIL AA/CRISIL AAA/Watch Developing/CRISIL A1+' Negligible effect. Bank with whom the fixed deposit is maintained can be changed without impacting the rating.
Trustee IDBI Trusteeship Services Ltd. Adequate Track Record Negligible effect. Can be replaced at minimal cost.

About the Originator
STFCL, incorporated in 1979, is the flagship company of the Shriram group. It is registered with RBI as a deposit-taking, asset-financing non-banking financial company. STFCL provides financing for vehicles such as CVs (both pre-owned and new), tractors, and passenger vehicles. It has pan-India presence, with about 1,545 branches and 838 rural centres as on March 31, 2019. In April 2018, STFCL completed the sale of its majority stake in wholly owned subsidiary Shriram Automall to MXC Solutions India Pvt Ltd (MXC, owner of CarTrade.com) for Rs 156.38 crore.

STFCL's reported total income (net of interest expense) and profit after tax (PAT) of Rs.7908 crore and Rs.2564 crore respectively, for fiscal 2019 against Rs. 7015 crore and Rs. 2461 crore, respectively, for fiscal 2018.

Past Rated Pools
CRISIL has ratings outstanding on 21 securitisation transactions originated by STFCL. CRISIL is receiving monthly performance reports pertaining to these transactions.
Key Financial Indicators
Particulars for the year ending March 31 Unit  2019 2018
Total Assets Rs Cr 1,05,292 97,245
Total income (net of interest expenses) Rs Cr 7,908 7,015
PAT Rs Cr 2,564 2,461
Gross NPA (per IGAAP) % 8.29 9.15
Overall Capital Adequacy Ratio % 20.27 17.38
Return on Managed Assets % 2.5 2.7

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 141.56 17-Dec-19 22-Apr-24 9.4773% CRISIL AAA (SO)$ 16.32*
Second loss facility 9.24 - CRISIL BBB+ (SO) Equivalent 7.08
#Indicates door to door tenure. Actual tenure will depend on the level of prepayments in the pool, and possible exercise of the clean-up call option
^In addition, scheduled Excess Interest Spread (EIS) amounting to Rs 15.49 Cr (assuming zero prepayments) also provides credit support to PTCs
*Includes a second loss facility of Rs 9.24 Cr
$Series A PTC holders are entitled to receive timely interest and timely principal payments on a monthly basis
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  129.91  CRISIL AAA (SO)      16-12-19  Provisional CRISIL AAA (SO)           
Second loss facility LT  9.24  CRISIL BBB+ (SO) Equivalent     16-12-19  Provisional CRISIL BBB+ (SO) Equivalent           
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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