Rating Rationale
August 28, 2019 | Mumbai
Indian Receivable Trust MAR19 B
(Originator: Tata Motors Finance 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 Cr)		 Outstanding Amount
(Rs Cr)^		 Original Tenure (Months) Balance Tenure (Months)^ Credit Collateral (Rs Cr) Ratings / Credit Opinions Rating Action
Indian Receivable Trust MAR19 B Series A PTCs 106.07 91.72 54 49 16.70 CRISIL AAA (SO) Converted from Provisional Rating to Final Rating
Second Loss Facility 9.04 9.04 7.66 CRISIL BBB+ (SO) Equivalent
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
^ Data as of August 2019 payout
Detailed Rationale

CRISIL has converted its provisional ratings assigned to Series A Pass-Through Certificates (PTCs) issued by 'INDIAN RECEIVABLE TRUST MAR19 B' to final ratings of 'CRISIL AAA (SO)' under a securitisation transaction originated by Tata Motors Finance Limited (TMFL; rated 'CRISIL A/CRISIL AA-/Negative/CRISIL A1+'). The provisional credit opinion assigned to Second Loss Facility (SLF) under this transaction has been converted to a 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
 
This transaction is backed by receivables from a pool of small commercial vehicle, medium-heavy commercial vehicle, and light commercial vehicle loans originated by TMFL. The rating / credit opinion is based on the credit support available to the PTCs, credit quality of the underlying receivables, TMFL's origination and servicing capabilities, and soundness of the transaction's legal structure.
 
The transaction has a 'Par with Excess Interest Spread' structure. In exchange for a purchase consideration amounting to 97.0% of future principal outstanding as on the pool cut-off date, TMFL has assigned the loan pool to 'INDIAN RECEIVABLE TRUST MAR19 B', a trust settled by IDBI Trusteeship Services Limited (ITSL), which will issued instruments to investors. Investor payouts for Series A PTCs are supported by credit collateral and cash flow subordination.
 
The total credit support available in the transaction at the time of securitisation is as below:

  • Internal credit support in the form of scheduled subordination assuming zero prepayments aggregating Rs 12.05 crore (11.0% of initial pool principal) ' including principal overcollateralisation of Rs 3.28 crore (3.0% of initial pool principal)
  • External credit enhancement of Rs 16.70 crore (15.3% of initial pool principal), of which First Loss Facility of Rs 7.66 crore (7.0% of initial pool principal) is in the form of a Fixed Deposit and Second Loss Facility of Rs 9.04 crore (8.3% of initial pool principal) is in the form of a Fixed Deposit or Bank Guarantee.

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

As required, CRISIL has received the following final executed legal documents and other documents relevant to the transaction:

  • Trust deed
  • Deed of assignment
  • Power of attorney
  • Information memorandum
  • Legal opinion
  • Trustee's awareness letter
  • Auditor's certificate
  • Originator's representations and warranties letter
Key Rating Drivers & Detailed Description
Supporting Factors
  • Internal and external credit enhancement at the time of securitisation
    • A credit collateral of Rs 16.70 crore (15.3% of initial pool principal) provides external credit support to Series A PTCs. The PTCs also enjoy internal credit support through scheduled subordination (assuming zero prepayment) aggregating Rs 12.05 crore (11.0% of initial pool principal) ' including principal overcollateralisation of Rs 3.28 crore (3.0% of initial pool principal)
  • Seasoning profile of contracts in the pool
  • Contracts in the pool had a weighted average net seasoning of 9.2 months at the time of securitisation. This has led to 20.3% of disbursed principal being amortised prior to securitisation. At the portfolio level, contracts which are current even after significant seasoning have been observed to have lower delinquencies
  • Coverage under credit guarantee scheme
  • 21.8% of the pool principal at the time of securitisation was from contracts covered under a credit guarantee scheme of CGTMSE, which could lead to reduction in ultimate losses from the pool
Constraining Factors
  • Delinquency profile of contracts in the pool
    • 10.0% of the pool principal at the time of securitisation is from contracts that are up to 30 days past due on payment
  • Loan-to-value ratio of contracts in the pool
    • 65.8% of the pool principal at the time of securitisation is from contracts whose loan-to-value at disbursement was greater than 90%. However, a borrower's propensity to default decreases with increasing amortisation and the resulting build-up of equity in their vehicle.
Liquidity: 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
* Credit enhancement (both internal and external credit enhancement) available in the structure exceeding 3.0 times the estimated base case shortfalls on the residual cash flows of the pool
 
Downward
* Credit enhancement falling below 2.0 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 pool of pickup truck/small commercial vehicle, medium-heavy commercial vehicle, and light commercial vehicle loan contracts. Contracts in the pool have a good seasoning profile as evidenced by a weighted average net seasoning of 9.2 months at the time of securitisation. Contracts in the pool are also geographically concentrated with the top 3 states accounting for 59.6% of pool principal at the time of securitisation. The average ticket size for contracts in the pool is Rs 5.6 lakh due to the high proportion of small and light commercial vehicle contracts, with a weighted average loan-to-value (at disbursement) ratio of 91.1% at the time of securitisation. The weighted average interest rate for contracts in the pool was 12.3% at the time of securitisation. 10.0% of the pool principal is from contracts that had outstanding payment dues as of the pool cut-off date (February 28, 2019). CRISIL has adequately factored all these aspects in its rating analysis.

Rating Assumptions
To assess the base case collection shortfalls for this ABS transaction CRISIL has analysed vintage-wise static pool performance of loans disbursed across asset classes, excluding the ones disbursed under subvention or loss cover schemes. This analysis has been done for originations by TMFL from FY2012 to FY2018 with performance up to March 2018. CRISIL has also considered contracts that have remained current on payment as of 6 months seasoning and one month overdue as of 6 months seasoning, as contracts in the securitised pool exhibit a similar repayment and seasoning profile. Performance of previously rated TMFL transactions, as well as the performance of TMFL's portfolio has also been considered. As of December 2018, 90+ delinquency (unamortised principal and overdues on contracts delinquent by more than 90 days as percentage of unamortised principal) for TMFL's overall vehicle loan portfolio was 4.5%.
 
CRISIL has also factored in pool-specific characteristics and estimated base-case peak shortfalls for this transaction to be in the range of 7 to 9 per cent of pool cash flows.
  • CRISIL has assumed a stressed monthly prepayment rate of 0.3 to 0.8 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 TMFL Rated 'CRISIL A/CRISIL AA-/Negative/CRISIL A1+'  
No effect.
 
Servicer TMFL Rated 'CRISIL A/CRISIL AA-/Negative/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 IDFC First Bank Not rated by CRISIL Negligible effect. Account bank can be changed without impacting the rating.
First Loss Facility in the form of Fixed Deposit IDFC First Bank Not rated by CRISIL Negligible effect. Bank with whom the fixed deposit is maintained can be changed without impacting the rating.
Second Loss Facility in the form of Fixed Deposit IDFC First Bank Not rated by CRISIL 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
The TMF group is a leading vehicle financier in India. TMFL is among the top five CV financiers with assets under management (AUM) of Rs 23,265 crore as on June 30, 2018 (Rs 21,035 crore as on March 31, 2018). As on the same date, TMFSL had a portfolio of Rs 4174 crore, primarily corporate lending (channel financing) and used vehicle financing. The consolidated AUM stood at Rs 27,439 crore. In March 2016, TMFHL acquired 100% stake in TMFL (earlier Sheba Properties Limited), a non-banking finance company registered with RBI, for Rs 405 crore from TML. As on March 31, 2016, TMFL (earlier Sheba Properties Limited) had total assets of Rs 205 crore, of which the investment portfolio constituted 94% of the assets or Rs 193 crore.
 
With the implementation of scheme of arrangement effective January 2017, the entire new vehicle finance business undertaking has been transferred from TMFHL to TMFL. Post transfer, TMFL is a non-deposit taking, systemically important, non-banking financial and asset financing company and will be one of the major financiers of CVs and cars for TML's customers and channel partners. For the six months ended September 30, 2018, the company reported (per Ind-AS) net profit of Rs 113 crore on total income (net of interest expenses) of Rs 550.8 crore as against net profit (per IGAAP)  of Rs 182.1 crore on total income (net of interest expenses) of Rs 631.54 crore for the corresponding period last year.
 
Liquidity Position
The credit collateral available in the transaction structure is Rs 16.70 crore (15.3% of initial pool principal) in the form of fixed deposits/bank guarantee. At the time of securitisation, the credit collateral fully covered 4 months of payout obligations even with no collections from the underlying loan pool.
 
Previously rated transactions
CRISIL has ratings outstanding on 6 securitisation transactions originated by TMFL. CRISIL is receiving monthly performance reports pertaining to these transactions.
Key Financial Indicators
As on /for the year ended March 31,   2019 2018
Total Assets Rs crore 32,917 22,809
Total income (net of interest expenses) Rs crore 1208 1,028
Profit after tax Rs crore 204 272
Capitalization % 15.25% 16.56
Gross NPA % 2.92 4.69
Net NPA % 1.52 3.27

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 106.07 27-Mar-19 15-Sep-23 7.90% CRISIL AAA (SO)$ 16.70*
Second loss facility 9.04 - CRISIL BBB+ (SO) Equivalent 7.66
# Indicates door to door tenure of 54 months from allotment date. Actual tenure of instruments will depend on the level of prepayments in the loan pool, and possible exercise of the clean-up call option.
^ In addition, scheduled subordination at the time of securitisation amounting to Rs 12.05 crore ' including principal overcollateralisation of Rs 3.28 crore also provides credit support to PTCs.
* Includes a second loss facility of Rs 9.04 Cr.
$ Series A PTC investors 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  91.72 CRISIL AAA (SO) 23-04-19  Provisional CRISIL AAA (SO)               
Second Loss Facility  LT  9.04 CRISIL BBB+ (SO) Equivalent 05-07-19  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

For further information contact:
Media Relations
 Analytical Contacts
 Customer Service Helpdesk
Saman Khan
Media Relations
CRISIL Limited
D: +91 22 3342 3895
B: +91 22 3342 3000
saman.khan@crisil.com

Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000
naireen.ahmed@crisil.com

Vinay Rajani
Media Relations
CRISIL Limited
D: +91 22 3342 1835
M: +91 91 676 42913
B: +91 22 3342 3000
vinay.rajani@ext-crisil.com

 Krishnan Sitaraman
Senior Director - CRISIL Ratings
CRISIL Limited
D:+91 22 3342 8070
krishnan.sitaraman@crisil.com

Rohit Inamdar
Senior Director - CRISIL Ratings
CRISIL Limited
B:+91 22 3342 3000
Rohit.Inamdar@crisil.com

Vikram Raj Iyer
Rating Analyst - CRISIL Ratings
CRISIL Limited
B:+91 22 3342 3000
Vikram.Iyer@crisil.com 		Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com

 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL. However, CRISIL alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.


About CRISIL Limited

CRISIL is a leading agile and innovative, global analytics company driven by its mission of making markets function better. We are India’s foremost provider of ratings, data, research, analytics and solutions. A strong track record of growth, culture of innovation and global footprint sets us apart. We have delivered independent opinions, actionable insights, and efficient solutions to over 1,00,000 customers.
 
We are majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.
 
For more information, visit www.crisil.com 

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK

About CRISIL Ratings
CRISIL Ratings is part of CRISIL Limited (“CRISIL”). We pioneered the concept of credit rating in India in 1987. CRISIL is registered in India as a credit rating agency with the Securities and Exchange Board of India (“SEBI”). With a tradition of independence, analytical rigour and innovation, CRISIL sets the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank loans, certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 24,500 large and mid-scale corporates and financial institutions. CRISIL has also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We also pioneered a globally unique rating service for Micro, Small and Medium Enterprises (MSMEs) and significantly extended the accessibility to rating services to a wider market. Over 1,10,000 MSMEs have been rated by us.

CRISIL PRIVACY
 
CRISIL respects your privacy. We may use your contact information, such as your name, address, and email id to fulfil your request and service your account and to provide you with additional information from CRISIL.For further information on CRISIL’s privacy policy please visit www.crisil.com.

DISCLAIMER

This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of doubt, the term “Report” includes the information, ratings and other content forming part of the Report. The Report is intended for the jurisdiction of India only. This Report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the Report is to be construed as CRISIL providing or intending to provide any services in jurisdictions where CRISIL does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this Report does not create a client relationship between CRISIL and the user.

We are not aware that any user intends to rely on the Report or of the manner in which a user intends to use the Report. In preparing our Report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the Report is not intended to and does not constitute an investment advice. The Report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind or otherwise enter into any deal or transaction with the entity to which the Report pertains. The Report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Rating are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities / instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its opinions and analysis. CRISIL rating contained in the Report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the Report should rely on their own judgment and take their own professional advice before acting on the Report in any way.CRISIL or its associates may have other commercial transactions with the company/entity.

Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the accuracy, completeness or adequacy of the Report, and no CRISIL Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Report. EACH CRISIL PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. CRISIL’s public ratings and analysis as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any) are made available on its web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (0091) 1800 267 1301.

This Report should not be reproduced or redistributed to any other person or in any form without a prior written consent of CRISIL.

All rights reserved @ CRISIL