Rating Rationale
January 15, 2018 | Mumbai
Sansar Trust December 2017 IV
(Originator: Shriram Transport Finance Company Limited)
CRISIL assigns 'Provisional CRISIL AAA (SO)' to Series A PTCs and 'Provisional CRISIL BBB+ (SO) Equivalent' to Second loss facility 
 
Rating Action
Trust Name Details Amount Rated (Rs Cr) Pool Principal (Rs Cr)  Original Tenure (Months) Credit Collateral (Rs Cr) Ratings/ Credit Opinions@ Rating Action
Sansar Trust December 2017 IV
Series A PTCs
 
408.97 408.97 54# 41.46 Provisional CRISIL AAA (SO) Provisional Rating Assigned
Second loss facility 21.01 20.45 Provisional CRISIL BBB+ (SO) Equivalent
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
# Door to door tenure from pool cut-off date is 56 months. Tenure compu ted from first payout date is 54 months. Actual tenure will depend on the level of prepayments in the pool, and exercise of the clean-up call option
@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
Detailed Rationale

CRISIL has assigned its 'Provisional CRISIL AAA (SO)' to Series A pass-through certificates (PTCs) issued by 'Sansar Trust December 2017 IV'. The second loss facility under the transaction has been assigned credit opinion equivalent of 'Provisional CRISIL BBB+ (SO)'. The transaction is backed by receivables from new and used commercial vehicles, passenger vehicles, three wheeler vehicles, construction equipment and tractor loans originated by Shriram Transport Finance Company Limited (STFCL; rated 'CRISIL AA+/ FAAA/Stable/CRISIL A1+'). The ratings are based on the credit support available to the PTCs, credit quality of underlying pool 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 December 2017 IV', settled by IDBI Trusteeship Services Limited (ITSL) which will issue the PTCs to investors. The PTCs are supported by the credit collateral - in the form of fixed deposit and excess interest spread. The total credit support available in the transaction is as below:

  • Internal credit support in the form of scheduled Excess Interest Spread (EIS), aggregating Rs 58.15 crore (14.2% of pool principal or 11.0% of pool cashflows)
  • External credit enhancement of Rs. 41.46 crore (10.1% of pool principal or 7.8% of pool cashflows) of which second loss facility of Rs. 21.01 crore (5.1 of pool principal) is in the form of Fixed Deposit and first loss facility of Rs. 20.45 crore (5.0% of pool principal) is also in the form of fixed deposit

Series A PTCs are entitled to receive timely interest and timely principal on a monthly 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
  • Collection and Servicing Agency Agreement  
  • First Loss Credit Facility Agreement
  • First Loss Credit Facility Power of Attorney
  • Second Loss Credit Facility Agreement
  • Second Loss Credit Facility Power of Attorney

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' post the receipt of all the required final legal documents 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
  • Credit support available in the structure
    • Credit collateral of Rs 41.46 crore (10.1% of the pool principal) provides credit support to Series A PTCs. The PTCs also benefit from scheduled EIS aggregating Rs 58.15 crore (14.2% of pool principal).
  • Presence of contracts with low IRR in the pool
    • The contracts in the pool have a weighted average interest rate of 14.1%. At portfolio level, low IRR contracts have performed better than the contracts with higher IRR
Constraining Factors
  • Moderate presence of 1 month overdue contracts
o At the time of securitization (as on December 20, 2017), proportion of 1 month overdue contracts in the pool was 9.0% of principal

  • Low seasoning
    • Low seasoning as evidenced by weighted average seasoning of 7.3 months and pool amortisation of 10.7%
About the Pool
The pool securitised comprises receivables from new and used commercial vehicles, passenger vehicles, three wheeler vehicles, construction equipment and tractor loans. The pool has low seasoning profile as evidenced by its weighted average net seasoning of 7.3 months. The pool is geographically diversified with top 3 states in the pool accounting for 35.3% of pool principal. Average ticket size is Rs.6.7 lakhs with moderate loan to value ratio of 70.9%.The pool has low interest rate contracts with weighted average interest rate of 14.1%. Pool had moderate proportion of one-month overdue contracts as on pool cut-off date (December 20, 2017). 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 provided by STFCL for originations in the period FY2009 to FY2017-Q2 (with performance data till September 2017). CRISIL has also analysed performance of rated securitisation transactions, and the performance of STFCL's portfolio.
 
CRISIL has also factored in pool specific characteristics and estimated the base case peak shortfalls in the pool in the range of 5 to 7 per cent of pool cash flows.


  • CRISIL has assumed a stressed monthly prepayment rate of 0.2 to 0.5 per cent 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 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 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 ICICI Bank Rated 'CRISIL AAA/Stable' Negligible effect. Account bank can be changed without impacting the rating.
Second loss facility in the form of fixed deposit ICICI Bank Rated 'CRISIL AAA/Stable' 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 ICICI Bank Rated 'CRISIL AAA/Stable' 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
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 918 branches and 854 rural centers as on March 31, 2017. 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.

Past Rated Pools
CRISIL has ratings outstanding on 20 transactions originated by STFCL. CRISIL is receiving monthly performance reports pertaining to the CRISIL-rated STFCL originated securitisation transactions.
 
*Consolidated financials include the results of Shriram Equipment Finance Company Ltd that was merged with STFCL w.e.f 1st April 2015
Key Financial Indicators
As on / for the quarter ended June 30   2017 2016
Total Assets Rs crore 77,879.4 70,314.4
Total income (net of interest expenses) Rs crore 1588.0 1348.6
Profit after tax Rs crore 448.7 374.1
Capitalization % 16.26 17.37
Gross NPA % 8.03^ 6.38*
Return on assets (annualized) % 2.4 2.2
Adjusted Gearing Times 6.0 5.9
*As per 150 dpd
^As per 120 dpd

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 (%) (Annualised) Outstanding
Ratings/credit opinions
Credit collateral (Rs Cr)^
Series A PTCs 408.97 28-Dec-17 18-Jul-22 7.18% Provisional CRISIL AAA (SO)$ 41.46*
Second loss facility 21.01 - Provisional CRISIL BBB+ (SO) Equivalent 20.45
#Indicates door to door tenure. Actual tenure will depend on the level of prepayments in the pool, and exercise of the clean-up call option
^Scheduled excess interest spread (EIS) amounting to Rs. 58.15 Cr (assuming zero prepayments) also provides credit support to PTCs
*Includes a second loss facility of Rs.21.01 Cr
$Series A PTC holders are entitled to receive timely interest and timely principal.
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Series A PTCs LT 408.97 Provisional CRISIL AAA (SO)   --   --   --   -- --
Second loss facility LT  21.01 Provisional CRISIL BBB+ (SO) Equivalent   --   --       -- --
Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release.
 
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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