Rating Rationale
May 07, 2019 | Mumbai
Sansar Trust Feb 2019 I
(Originator: Shriram Transport Finance Company Limited)
'Provisional CRISIL AAA (SO)' rating assigned to Series A PTCs
 
Rating Action
Trust Name Instrument
Details
Amount Rated (Rs Crore) Pool Principal
(Rs Cr)
Original Tenure (Months) Credit
Collateral
(Rs Cr)
Ratings/Credit Opinions@ Rating Action
Sansar Trust Feb 2019 I Series A PTCs 628.32 739.20 60 14.78 Provisional CRISIL AAA (SO) Provisional Rating Assigned
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
@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 1.
Detailed Rationale

CRISIL has assigned its 'Provisional CRISIL AAA (SO)' ratings to Series A Pass-Through Certificates (PTCs) issued by 'Sansar Trust Feb 2019 I' under a securitisation transaction originated by Shriram Transport Finance Company Limited (STFCL; rated 'CRISIL AA+/FAAA/Stable/CRISIL A1+').
 
This securitisation transaction is backed by receivables from a pool of new and used commercial vehicle, construction equipment, and passenger vehicle loans originated by STFCL. The rating 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 will assign the pool to 'Sansar Trust Feb 2019 I', a trust settled by Catalyst Trusteeship Limited (CTL), in exchange for a purchse consideration which is equal to 85.0% of the pool principal. The trust will issue Series A PTCs to investors for 85.0% of the pool principal, while 15.0% of the pool principal will act as overcollateralisation. The Series A PTC payouts are supported by subordination of opening overdues, scheduled unbilled cashflow subordination, and credit collateral in the form of Fixed Deposit.
 
The total credit support available in the transaction is as below:

  • Internal credit enhancement from both opening overdue subordination aggregating Rs 1.59 crore (0.2% of pool principal), and scheduled unbilled cashflow subordination (assuming zero prepayment) amounting to Rs 279.83 crore (37.9% of pool principal) ' including principal overcollateralization of Rs 110.88 crore (15.0% of pool principal).
  • External credit collateral of Rs 14.78 crore (2.0% of pool principal) in the form of a Fixed Deposit.

Series A PTC holders are entitled to receive timely interest payments on a monthly basis. Principal repayment is promised on an ultimate basis.
 
This is a 'Provisional' rating and will be converted into a 'Final' rating on receipt of the following documents:

  • Trust Deed
  • Deed of Assignment
  • Power of Attorney
  • Information Memorandum
  • Legal Opinion
  • Trustee Letter
  • Auditor's Certificate
  • Representations and Warranties Letter

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' rating post receipt of all the required final legal documentation 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
  • Structural features
    • The structure promises principal repayment to Series A PTC holders on an ultimate basis. However, subordinated cashflows, if available, will be used to fund additional principal payouts on a monthly basis such that: the PTC principal outstanding is an amount equal to the pool principal outstanding for contracts that are less than or equal to 90 days past due on payment, less the amount of initial pool principal acting as overcollateralisation.
  • Credit enhancement
    • The PTCs are supported by a high quantum of internal support in the form of scheduled unbilled cashflow subordination (37.9% of pool principal ' including principal overcollateralisation amounting to 15.0% of pool principal). An external credit collateral sized at 2.0% of pool principal also provides support to the PTC payouts, as does opening overdue subordination amounting to 0.2% of pool principal.
  • Large number of contracts
  • The pool consists of over 20,000 contracts, and hence benefits from borrower diversification.
Constraining Factors
  • High IRR contracts
    • Weighted average IRR of contracts in the pool was 18.4%; such contracts have exhibited higher delinquencies at the portfolio level.
Liquidity
The credit collateral available in the transaction is Rs 14.78 crore (2.0% of pool principal) which is in the form of a Fixed Deposit. The credit collateral fully covers 2 months of promised interest payouts to Series A PTC holders even with no collections from the underlying pool of receivables.
 
About the Pool
The transaction is backed by receivables from a pool of new and used commercial vehicle, construction equipment, and passenger vehicle loans. The pool is moderately seasoned as evidenced by its weighted average net seasoning of 9.5 months. Contracts in the pool are mildly geographically concentrated with top 3 states accounting for 42.0% of pool principal. The average ticket size for contracts in the pool is Rs 4.1 lakh, with a weighted average loan-to-value ratio (at disbursement) of 75.6%. The weighted average interest rate of contracts in the pool is 18.4%. 7.1% of the pool principal as of the cut-off date (20th April 2019), was from contracts up to one month past due on payment. 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 2018). CRISIL has also analysed performance of rated securitisation transactions, and the performance of STFCL's portfolio. As of December 2018, 90+ dpd for the used and new portfolio are 6.0% and 7.0%, respectively. CRISIL has also factored in pool-specific characteristics and estimated the base case peak shortfalls in the pool in a range of 6-8% of pool cashflows.

  • 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 cashflows 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+/FAAA/Stable/CRISIL A1+'  
No effect.
 
Servicer STFCL Rated 'CRISIL AA+/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 Credit Suisse AG Rated 'CRISIL A1+' Negligible effect. Account bank can be changed without impacting the rating.
Credit Collateral in the form of Fixed Deposit Axis Bank Rated 'CRISIL AA+/CRISIL AAA/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.
 
Past rated Pools
CRISIL has ratings outstanding on 17 securitisation transactions originated by STFCL. CRISIL is receiving monthly performance reports pertaining to these transactions.
 
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 1,301 branches and 864 rural centres as on September 30, 2018. STFCL is also engaged in the construction equipment (CEQ) financing business through its erstwhile wholly owned subsidiary, Shriram Equipment Finance Company that was merged with STFCL with effect from 1st April 2015. 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.6982 crore and Rs 1,568 crore respectively, for fiscal 2018 against Rs 5,597 crore and Rs 1,257 crore, respectively, for fiscal 2017. For the half year ending September 30, 2018, STFCL reported net profit of Rs 1182 crore on total income (net of interest expenses) of Rs 3887 crore as against net profit of Rs 957 crore on total income (net of interest expenses) of Rs 3188 crore reported in the corresponding period last year.
Key Financial Indicators
Particulars Unit  Sep 2018 Sep 2017
Total Assets Rs Cr 1,07,201.2 86,380.3
Total income (net of interest expenses) Rs Cr 3,887 3,188
PAT Rs Cr 1,182 957
Gross NPA (per IGAAP) % 8.77 8.06
Overall Capital Adequacy Ratio % 16.69 15.85
Return on Managed Assets % 2.08 2.02

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 628.32 08-May-19 22-May-24 9.00% Provisional CRISIL AAA (SO)$ 14.78
1 crore = 10 million
#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, Rs 1.59 crore of opening overdues and scheduled unbilled cashflow subordination amounting to Rs 279.83 crore (assuming zero prepayments) ' including Rs 110.88 crore of principal overcollateralisation also provide credit support to PTCs
$Series A PTC holders are entitled to receive timely interest payments on a monthly basis, principal repayment is promised on an ultimate basis
Annexure - Rating History for last 3 Years
  Current 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Series A PTCs LT 628.32 Provisional CRISIL AAA (SO)                  
All amounts are in Rs.Cr.
Table reflects instances where rating is changed or freshly assigned
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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