Rating Rationale
February 14, 2019 | Mumbai
 
Sansar Trust September 2018 IV
(Originator: Shriram Transport Finance Company Limited)
 'CRISIL AAA (SO)' and 'CRISIL BBB+ (SO) Equivalent' converted from provisional rating to final rating for Series A PTCs and Second loss facility
 
Rating Action
Trust Name Instrument
Details		 Amount Rated
(Rs Cr)		 Outstanding Amount
(Rs Cr)^		 Original Tenure (Months) Balance Tenure (Months)^ Credit Collateral (Rs Cr) Ratings / Credit Opinions Rating Action
Sansar Trust September 2018 IV Series A PTCs 517.46 479.48 54# 51 64.68 CRISIL AAA (SO) Converted from Provisional Rating to Final Rating
Second loss facility 38.81 38.81 25.87 CRISIL BBB+ (SO) Equivalent
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
^ Data as of January 2019 payout
# Door-to-door tenure from pool cut-off date is 56 months. Tenure as computed from the first payout date is 54 months. Actual tenure will depend on the level of prepayment in the pool, and possible exercise of the clean-up call option.
Detailed Rationale

CRISIL has converted the provisional rating/credit opinion assigned to the Series A pass-through certificates (PTCs) and Second Loss Facility issued by 'Sansar Trust September 2018 IV', to final rating/credit opinion of 'CRISIL AAA (SO)' and 'CRISIL BBB+ (SO) Equivalent', respectively. The provisional ratings were assigned on October 16, 2018. CRISIL has received the following final legal documents executed for the transaction. The executed documents are in line with the transaction terms at the time of the initial rating. Hence, CRISIL has converted the ratings/credit opinion to final ratings/credit opinion.
 
Legal documents

  • Trust Deed
  • Deed of Assignment
  • Power of Attorney
  • Collection and Processing Agent's Agreement

Other documents

  • Legal Opinion
  • Information Memorandum
  • Auditor's Certificate
  • Reps & Warranties from Originator
  • Trustee Awareness Letter

Please click on the link below for detailed information on CRISIL's policy on provisional rating: Revision in CRISIL policy for assigning 'provisional' ratings
 
This securitisation transaction is backed by receivables from new and used commercial vehicles, passenger vehicles, three-wheelers, tractors, and construction equipment loans originated by Shriram Transport Finance Company Ltd (STFCL, Rated 'CRISIL AA+/FAAA/Stable/CRISIL A1+'). The rating/credit opinion is based on the credit support available to the PTCs, the credit quality of the underlying receivables, STFCL's origination and servicing capability, and soundness of the transaction's legal structure.
 
The transaction has a 'par with excess interest spread (EIS)' structure. STFCL has assiged the pool to 'Sansar Trust September 2018 IV', settled by IDBI Trusteeship Services Ltd, which has issueed the PTCs to investors. The Series A PTC payouts are supported by credit collateral in the form of fixed deposits and EIS.
 
The total credit support available in the transaction at the time of securitisation is as below:

  • Internal credit support in the form of scheduled EIS assuming zero prepayment aggregating Rs 50.30 crore (9.7% of pool principal or 7.6% of pool cash flow)
  • External credit enhancement of Rs 64.68 crore (12.5% of pool principal or 9.8% of pool cash flow), of which, second loss facility of Rs 38.81 crore (7.5% of pool principal) is in the form of a fixed deposit and first loss facility of Rs 25.87 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 on a monthly basis.

Key Rating Drivers & Detailed Description
Supporting factors
  • Credit support available in the structure
    • At the time of securitisation, credit collateral of Rs 64.68 crore (12.5% of pool principal) provided credit support to Series A PTCs. The PTCs also benefit from scheduled EIS (assuming zero prepayment) aggregating Rs 50.30 crore (9.7% of pool principal).
  • Presence of contracts with low IRR in the pool
  • The contracts in the pool have a weighted average interest rate of 14.0%. At the portfolio level, low IRR contracts have performed better than contracts with higher IRR.
Constraining factors
  • Moderate presence of overdue contracts
    • At the time of securitisation, 0.81% of the pool principal comprised contracts where interest and principal payments were overdue up to one month.
Liquidity position
  • At the time of securitisation, the credit cum liquidity enhancement available in the transaction is Rs 64.68 crore (12.5% of pool principal) which is in the form of a fixed deposit with HSBC Bank (not rated by CRISIL). The enhancement fully covers 4 months of promised principal and interest payouts even with no collection from underlying receivables.
About the Pool
The securitised pool comprises underlying receivables from new and used commercial vehicles, passenger vehicles, three-wheelers, tractors, and construction equipment loans. At the time of securitisation, the pool had a moderate seasoning profile as evidenced by its weighted average net seasoning of 7.2 months. Contracts in the pool were geographically diversified with the top 3 states accounting for 39.8% of the pool principal. The average ticket size for contracts in the pool is Rs 8.3 lakh, with a moderate weighted average loan-to-value ratio of 81.6%. The weighted average interest rate of contracts in the pool is low at 14.0%. The pool had a small proportion of contracts overdue up to one month as of September 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 static pool performance for new and used vehicles provided by STFCL for originations from fiscals 2009 to the second quarter of fiscal 2018 (performance data up to March 2018). CRISIL has also analysed the performance of previously rated securitisation transactions and the performance of STFCL's loan portfolio. As of March 2018, 90+ dpd for the used and new portfolio were 5.9% and 5.8%, respectively.
 
CRISIL has also factored in pool-specific characteristics and estimated base-case peak shortfalls in the pool to be in the range of 5-7% of pool cash flow.
  • CRISIL has assumed a stressed monthly prepayment rate of 0.3-0.8% in its analysis.
  • CRISIL does not envisage any risk arising on account of commingling of cash flow as 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 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 and seller STFCL 'CRISIL AA+/FAAA/Stable/CRISIL A1+'  
No effect.
 
Servicer STFCL '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 ICICI Bank 'CRISIL AAA/Stable' Negligible effect. Account bank can be changed without impacting the rating.
Second loss facility in the form of a fixed deposit HSBC Bank Not rated Negligible effect. Bank with whom the fixed deposit is maintained can be changed without impacting the rating.
First loss facility in the form of a fixed deposit HSBC Bank Not rated Negligible effect. Bank with whom the fixed deposit is maintained can be changed without impacting the rating.
Trustee ITSL Adequate track record Negligible effect. Can be replaced at minimal cost.

About the originator
Incorporated in 1979, STFCL is the flagship company of the Shriram group. It is registered with the Reserve Bank of India 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 a pan-India presence, with about 1,301 branches and 864 rural centres as on September 30, 2018. STFCL is also into construction equipment (CEQ) financing through its erstwhile wholly owned subsidiary, Shriram Equipment Finance Company that was merged with STFCL with effect from April 1, 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 had total income (net of interest expense) and profit after tax (PAT) of Rs 6,982 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 ended September 30, 2018, STFCL reported net profit of Rs 1,182 crore and total income (net of interest expenses) of Rs 3,887 crore, against Rs 957 crore and Rs 3.188 crore, respectively, in the corresponding period of the previous fiscal.

Past Rated Pools
CRISIL has ratings outstanding on 20 securitisation transactions originated by STFCL. Compliance process has been completed for all transactions. CRISIL is receiving monthly performance reports pertaining to these transactions.
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
Profit after tax 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 517.46 28-Sep-18 18-Apr-23 8.65% CRISIL AAA (SO)$ 64.68*
Second loss facility 38.81 - CRISIL BBB+ (SO) Equivalent 25.87
#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 EIS amounting to Rs 50.30 crore (assuming zero prepayment) at the time of securitisation provides credit support to PTCs
*Includes a second loss facility of Rs 38.81 crore
$Series A PTC holders are entitled to receive timely interest and timely principal
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 479.48 CRISIL AAA (SO)     16-10-2018 Provisional CRISIL AAA (SO)          
Second loss facility LT 38.81 CRISIL BBB+ (SO) Equivalent     16-10-2018 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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