Rating Rationale
March 13, 2018 | Mumbai
Sansar Trust December 2017 IV
(Originator: Shriram Transport Finance Company Limited)
 'CRISIL AAA (SO)/CRISIL BBB+ (SO) Equivalent' converted from Provisional Credit Opinion to Final Credit Opinion for Series A PTCs and Second Loss Facility
 
Rating Action
Trust Name 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 December 2017 IV Series A PTCs 408.97 397.28 54# 53 41.46 CRISIL AAA (SO) Converted from Provisional Rating to Final Rating
Second loss facility 21.01 21.01 20.45 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 computed 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
*Data as of December 2017 payouts
@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 converted the provisional ratings assigned to Series A PTCs and credit opinion on second loss facility to final ratings of 'CRISIL AAA (SO)' and final credit opinion of 'CRISIL BBB+ (SO) Equivalent' respectively.

CRISIL had assigned its 'Provisional CRISIL AAA (SO)' and 'Provisional CRISIL BBB+ (SO) Equivalent' ratings, to the Series A pass-through certificates (PTCs) and second loss facility respectively on January 15, 2018 issued by 'Sansar Trust December 2017 IV', a trust settled by IDBI Trusteeship Services Ltd. (ITSL).
 
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 total credit support available in the transaction at the time of securitisation 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

CRISIL has received the final legal documents executed for the transaction. The executed documents are in line with the transaction terms at the time of provisional rating. Hence, CRISIL has converted the provisional rating to final rating.

Please click on the link below 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 documents:
 
Legal Documents

  • Trust Deed
  • Deed of Assignment
  • Collection and Processing Agents Agreement
  • First Loss Facility Agreement and Power of Attorney
  • Second Loss Facility Agreement and Power of Attorney
  • Power of Attorney

Other Documents

  • Legal Opinion
  • CA Certificate
  • Representations & Warranties from Originator
  • Trustee Awareness Letter
  • Information Memorandum
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 at the time of securitisation) provides credit support to Series A PTCs. The PTCs also benefit from scheduled EIS aggregating Rs 58.15 crore (14.2% of pool principal at the time of securitisation).
  • 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. At the time of securitisation, the pool had low seasoning profile as evidenced by its weighted average net seasoning of 7.3 months. The pool was geographically diversified with top 3 states in the pool accounting for 35.3% of pool principal. Average ticket size was Rs.6.7 lakhs with moderate loan to value ratio of 70.9%. The pool had 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 1,121 branches and 930 rural centers as on December 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. In January 2018, STFCL announced that it would sell majority stake in wholly owned subsidiary Shriram Automall to MXC Solutions India Pvt Ltd (MXC, owner of CarTrade.com) for Rs 156.38 crore. The transaction is expected to be completed by April 2018.
 
STFCL's reported total income (net of interest expense) and profit after tax (PAT) of Rs.5,597 crore and Rs.1,257 crore respectively, for fiscal 2017 against Rs. 5,197 crore  and Rs. 1,178 crore, respectively, for fiscal 2016. For nine months ending December 31, 2017, the company reported total income (net of interest expenses) and profit after tax (PAT) of Rs 5,003 crore and Rs 1,423 crore respectively as against Rs 4,164 crore and Rs 1,108  crore reported for the corresponding period previous year.

Past rated Pools
CRISIL has ratings outstanding on 21 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
Particulars Unit  2017 2016
Total Assets Rs. Cr. 83034.4 71533.6
Total income (net of interest expenses) Rs. Cr. 5003 4164
Profit After Tax Rs. Cr 1423 1108
Gross NPA % 7.98@ 6.62#
Overall capital adequacy ratio % 16.15 17.55
Return on managed assets % 2.0 1.8
@As per 120 dpd
# As per 150 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% CRISIL AAA (SO)$ 41.46*
Second loss facility 21.01 NA 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 at the time of securitisation) 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 CRISIL AAA (SO) 15-01-18 Provisional CRISIL AAA (SO)   --   --   -- --
Second loss facility LT  21.01 CRISIL BBB+ (SO) Equivalent 15-01-18 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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