Vivriti Capital Limited

‘Crisil AA+ (CE)/Stable’ for Rs 200 crore Non-Convertible Debentures converted from provisional rating to final rating; rating reaffirmed for remaining issue

 

Rating Action

Rs.200 Crore Non Convertible Debentures	Crisil AA+ (CE) /Stable (Converted from Provisional Rating to Final Rating)
Rs.50 Crore Non Convertible Debentures&	Provisional Crisil AA+ (CE) /Stable@ (Reaffirmed)

@A prefix of 'Provisional' indicates that the rating centrally factors in the strength of specific structures, and is contingent upon occurrence of certain steps or execution of certain documents by the issuer, as applicable, without which the rating would either have been different or not assigned ab initio. This is in compliance with a May 6, 2015 directive ‘Standardizing the term, rating symbol, and manner of disclosure with regards to conditional/ provisional/ in-principle ratings assigned by credit rating agencies' by Securities and Exchange Board of India (SEBI) and April 27, 2021 circular ‘Standardizing and Strengthening Policies on Provisional Rating by Credit Rating Agencies (CRAs) for Debt Instruments’ by SEBI

& Instrument yet to be issued

Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.

1 crore = 10 million   

Refer to annexure for Details of Instruments & Bank Facilities

Detailed Rationale

Crisil Ratings has converted its provisional rating of  'Provisional Crisil AA+ (CE) /Stable' to final rating of ‘Crisil AA+ (CE) /Stable’ for Rs. 200 crore of Non-Convertible Debentures (NCDs) issued by Vivriti Capital Limited (VCL; rated 'Crisil A+/Stable/Crisil A1+'), based on the receipt of final/executed documents for this issue. Ratings of ‘Provisional Crisil AA+ (CE) /Stable’ for the remaining Rs 50 crore of NCDs, which is expected to have the same structure, is reaffirmed.

 

Rs 200 crore of NCDs issued by VCL and Rs 50 crore of NCDs to be issued by VCL are backed by a partial credit guarantee extended by GuarantCo Ltd (GuarantCo) initially covering 65% of issuance size. The NCDs have monthly repayment of principal[1] and interest. The door-to-door tenure of the instrument is 70 months from issuance.

 

This guarantee is unconditional and irrevocable and legally enforceable. The guarantee amount is fixed till the value covers outstanding principal and 90 (ninety) day interest on outstanding principal. At that stage, the guarantee can be reset to this aforesaid value. Based on the scheduled repayments, guarantee can be reset post 26 months of payouts.

 

Collection and payout account (CPA) is opened by the debenture trustee for the purpose of receiving all payments from the issuer related to these NCDs. On or prior to the date of issuance, the issuer shall provide Debt Service Reserve Account (DSRA) in the form of fixed deposit (FD) with lien and set-off marked in favour of the debenture/ security trustee. This DSRA will be rolling; at the time of issuance will be equal to first month’s interest and principal payable to NCD holders and subsequently, on or prior to each payout date, will be equal to the following month’s interest and principal payable to the NCD holders. DSRA, to this available extent, will be shifted to the CPA within 5 business days of occurrence of defined Events of Non-Compliance (EONC; refer to EONC section under List of covenants). Hence, DSRA amount available in CPA account is expected to provide support to the NCD holders with limited linkage to the issuer in case of default. Additionally, upon occurrence of EONC, issuer shall top-up the DSRA with additional subsequent month’s principal and interest payment due to NCDs, in the form of FD with lien marked in favour of the debenture trustee.

 

NCDs are also secured by first ranking, exclusive floating charge over pool of specific loan receivables originated by the issuer identified from time to time that meets the defined eligibility criteria. Issuer has to maintain security cover of atleast 1.10 times of the outstanding principal of the NCDs and any amount invoked under the guarantee. Issuer will open an escrow account 30 (thirty) calendar days from date of issuance to route payments of security loan pool, this account will be operated by the security trustee. Cashflows routed through Escrow each month shall be higher of 1.20 times the sum of principal instalment due for the relevant month and utilised guarantee amount (if any) or 1.10 times the sum of principal and interest instalment due for the relevant month and utilised guarantee amount (if any). Additionally, the Security Trustee (acting for the benefit of the Debenture Trustee and the Guarantor) shall have a first ranking, exclusive, and continuing charge created in its favour upon the identified loan receivables, the DSRA, the escrow account.   

 

In case of occurrence of EONC, the cashflows in escrow account will get trapped and not flowback to the issuer even if all payouts are fully made till EONC is cured and confirmed as such by the Trustee and Guarantor. On a monthly basis, the cashflows in escrow and CPA account will be used to make all due payments to the NCDs holders pertaining to this and previous periods (if unpaid). It is clarified that the utilisation of such cashflows shall only be made for payments on the NCDs due for the period and not for any prepayment of the Debentures.

 

Post that the cashflows will be apportioned in the order of: replenishment of DSRA in CPA to extent utilised, replenishment of guarantee amount to extent utilised, replenishment of DSRA in form of FD to extent utilised and payment of guarantee fees/ or guarantee utilisation interest due but unpaid. Any replenishment of DSRA shall be without prejudice to and subject to provisions for release of DSRA upon EONC being cured as provided for under the Consequences of Events of Non-Compliance.

 

In case of Events of Default (EOD; refer to EOD section under List of covenants), all outstanding payments are expected to be made forthwith, however they are promised only 90 days from receipt of the acceleration notice by guarantor or EOD notice[2] (whichever is earlier), or prior to 1 day from original maturity date of the NCDs, whichever is earlier.

 

In the absence of the above structural features, the rating of the NCDs would have been the same as rating of the Issuer.

Crisil Ratings has received the final legal/executed documents (mentioned below) for the issue of Rs 200 crore. These executed documents are in line with terms of the transaction envisaged when provisional rating was assigned. The following executed legal documents and other documents have been received for this transaction.

 

Legal Documents

• Debenture Trustee Agreement
• Debenture Trust Deed
• Deed of Hypothecation
• Intercreditor and Security Trustee Agreement
• Recourse Deed, Power of attorney
• Escrow Agreement
• Guarantee Deed

 

Other Documents

• Information Memorandum
• Term Sheet
• Legal Opinion/s
• Originator’s Representation and Warranties Letter
• Trustee Awareness Letter

[1] Monthly amortisation of 1.428% for first 30 months of NCD tenure & 1.429% for the remaining 40 months

[2] Upon the occurrence of an Event of Default, the Debenture Trustee shall notify the guarantor immediately (and on the same day) [“EOD Notice”]. Pursuant to this, a notice is issued by the Debenture Trustee (acting on the instructions of Special Majority Debenture Holders) to the guarantor requiring them to make accelerated payment (the “Acceleration Notice”)

Key Rating Drivers & Detailed Description

Supporting Factors

•                            Total support available in the structure
  • In addition to the cashflows from the issuer i.e. VCL, the NCDs also benefit from the cashflows of underlying loan receivable which are routed through the escrow account. In case, VCL is not able to make the payments to NCD-holders from internal accruals, the amounts lying in the escrow account and DSRA will be transferred to CPA account and utilised to make the payments. Further, an unconditional and irrevocable partial guarantee  is also available to cover shortfalls (if any) for NCD payouts

•                            Credit profile of VCL

• Crisil Ratings’ view on the credit profile of VCL factors healthy capitalisation with demonstrated track record of raising capital at regular intervals, adequate risk management practices and  improving earnings profile

 

Constraining Factors 

• Limited track record
  • The amount raised through issue of these NCDs will be utilised towards lending to infrastructure opportunities space in which VCL has limited track record.

 

Analytical approach & Rating assumptions

For arriving at the rating, Crisil Ratings has analysed the credit quality of the issuer and structural features envisaged as part of the issuance. Consequently, in addition to the cashflows from the issuer (including recovery post default, if any), DSRA and unconditional and irrevocable partial guarantee provided by GuarantCo provide support to NCD payments.

 

These aspects have been factored by Crisil Ratings in its rating analysis.

 

Rating Sensitivity factors

Upward

• Timely servicing of scheduled payments to the issuer leading to guarantee fully covering future payouts

 

Downward

• Downgrade in the rating of the issuer
• Deterioration in the credit profile of the guarantor
• Non-adherence to the key terms envisaged at the time of this rating

Adequacy of credit enhancement structure

The partial guarantee provided by GuarantCo is unconditional and irrevocable. Trustee monitored payment mechanism is in place to ensure payment of interest and principal obligation on the rated debt. The payment mechanism provides adequate timeline for the guarantor to make full and timely payments in case of default by the issuer.

 

Crisil Ratings has considered multiple scenarios to test the adequacy of the support available in the structure. Crisil Ratings believes that the instrument will have very high degree of safety regarding timely servicing of financial obligations even in the most likely stress scenarios.

 

Liquidity: Strong

DSRA, equal to subsequent month’s principal and interest payment due to NCDs, and guarantee would provide liquidity support to the issuance. Guarantee would be 65% of issue size at the time of issuance and can be reset once it covers future principal and 90 day interest payment due to NCD holders (post 26 monthly payouts). Assuming no payment from the issuer from day 1, the available liquidity is sufficient to cover first 33 months of NCD payouts.

 

Outlook: Stable

The outlook is based on Crisil Ratings’ rating outlook on VCLs debt instruments and bank facilities

Unsupported ratings: Crisil A+

Crisil Ratings has introduced 'CE' suffix for instruments having explicit Credit Enhancement feature in compliance with SEBI's circular dated June 13, 2019.

Key drivers for unsupported ratings

The key rating drivers of the unsupported rating are detailed in Crisil Ratings’ latest rating rationale on debt instruments issued by VCL.

 

About the issuer 

VCL is an NBFC-ND-SI registered with the Reserve Bank of India. Founded by Mr Vineet Sukumar and Mr Gaurav Kumar, the company commenced lending operations in fiscal 2019. VCL offers institutional loans, supply chain financing, retail loans via co-lending, and has recently forayed into the leasing and factoring business. Of this, 52% comprised institutional lending to both financial sector and non-financial sector entities. The balance portfolio was deployed as retail lending through co-lending partnerships with NBFCs and supply chain financing – the share of which has increased from 5% in March 2019, to 48% as of December 31, 2024. Its subsidiary, VAML manages assets of alternate investment funds, operating in the mid-market enterprise space. Yubi, an associate of VCL, is a debt solutions platform catering to both, enterprise and retail customers.

 

As on December 31, 2024, VCL had an AUM of Rs 8,649 crore comprising term debt (~48%), working capital demand (~4%), supply chain financing (~5%), retail loans (~43%) and guarantees and off-book.

Key Financial Indicators

As on / for	Unit	December 31, 2024/9M FY2025	March 31, 2024 / FY2024	March 31, 2023 / FY2023
Total managed assets	Rs crore	9940	9,438	6,784
Total income (net of interest expense)	Rs crore	473	512	281
Profit after tax	Rs crore	160	191	129
Adjusted gearing	Times	3.4	3.7	3.2
Return on average managed assets	%	2.2	2.4^	2.2^

^including the one-time income realized from diluting stake in the associate company. Excluding the effect of this one-time income, the RoMA was 2.2% in FY2024 and 2.0% in FY2023

 

Additional disclosures for Provisional ratings (for remaining Rs 50 crore issue):

For assigning the provisional rating, CRISIL Ratings has considered the provisional rating to be contingent upon occurrence following steps or execution of following documents, as applicable:
 

• Debenture Trustee Agreement
• Debenture Trust Deed
• Deed of Hypothecation
• Security Trustee Agreement
• Recourse Deed
• Guarantee Deed
• Information Memorandum
• Term Sheet
• Legal opinion/s
• Trustee's awareness letter
• Representation and Warranties letter

 

Additional documents executed for the transaction, if any, should also be provided to CRISIL Ratings.

 

The provisional rating shall be converted into a final rating following receipt of transaction documents duly executed and/or confirmations on completion of pending steps within 90 days from the date of issuance of the instrument.

 

The final rating assigned after the end of 90 days (or following an extension of upto 90 days, if any, granted by the rating committee of CRISIL Ratings after considering case specific considerations) shall be consistent with the available documents or completed steps, as applicable.

 

Rating that would have been assigned in absence of the pending steps/ documentation: CRISIL A+

In compliance with SEBI’s Master circular dated May 16, 2024 (erstwhile SEBI’s Master circular dated July 03, 2023), CRISIL Ratings would have assigned a rating of ‘CRISIL A+’ in absence of pending steps/ documentation considered while assigning provisional rating as mentioned above.

Risks associated with provisional nature of credit rating:

A prefix of 'Provisional' to the rating symbol indicates that the rating is contingent upon occurrence of certain steps or execution of certain documents by the issuer, as applicable. In case partial / complete documentation received and/or completion of steps deviates significantly from the expectations, the rating may be subject to rating actions, including placing the rating on watch or a rating/outlook change, depending on status of progress on a case to case basis. In the absence of the pending steps / documentation, the rating on the instrument would have been CRISIL A+.

Non-exhaustive list of key covenants

Payment mechanism

Till the time there is no utilisation of DSRA

• The issuer shall make payments of interest and principal amounts due pertaining to the NCDs by 5 PM IST on [T-7] days
• In the event of a failure to pay by the issuer, the debenture trustee shall assess if the DSRA and such amounts lying to the credit of the escrow account as on [T-7] days are sufficient to meet the interest and principal amounts due on that Payout Date.
• In the event of a failure to pay by the issuer as in point 1 above and if the DSRA and amounts lying to the credit of the escrow account as specified in 2 above are found to be insufficient to meet payments of interest and principal due on that payout date, the debenture trustee shall invoke the guarantee to the extent of payment due on [T-6] days and send a notice of at least [5] days to the Guarantor.
• The guarantor shall make payment on T-1 (i.e. one day prior to the interest and / or principal due date).

 

In the event the DSRA is utilized even partially to make payment of principal and / or interest on the NCDs, then from the immediately succeeding payout date onwards, the repayment mechanism shall be altered to the following:

• The issuer shall make payments of interest and principal amounts due pertaining to the NCDs by 5 PM IST on [T-15] business days
• In the event of a failure to pay by the issuer, the debenture trustee shall assess if the DSRA and such amounts lying to the credit of the escrow account as on [T-15] business days are sufficient to meet the interest and principal amounts due on that payout date.
• In the event of a failure to pay by the issuer as in point 1 above and if the DSRA and amounts lying to the credit of the escrow account as specified in 2 above are found to be insufficient to meet payments of interest and principal due on that payout date, the debenture trustee shall invoke the guarantee to the extent of payment due on [T-14] business days and send a notice of at least [13] business days to the guarantor.
• The guarantor shall make payment on T-1 (i.e. one day prior to the interest and / or principal due date).

The due date(s) of payment of principal and / or interest of the NCDs shall be referred to as the payout dates.

 

Key Events of Non-Compliance (EONC)

 

• Guarantee being utilised and not replenished to the extent of the utilised amount
• Payment default by the issuer on any financial indebtedness other than this issuance (“External Payment Default”)             
• Security in jeopardy;
• Non-payment by the issuer;
• Cross default
• Downgrade of the credit rating of the issuance by the rating Agency to [AA- (CE)] or below
• Downgrade of the credit rating of the issuer to below BBB (“Issuer Rating Downgrade”)
• Capital Adequacy Ratio (CAR) falling below 17%
• DSRA is utilised and not replenished to the extent of utilisation within five business days

 

 

Consequences of EONC

 

Until the Event of Non-Compliance is cured (to be confirmed by debenture trustee/Guarantor in writing), the following consequences shall apply:

 

• The Issuer shall require the debenture trustee’s approval and the Guarantor’s approval for declaring any dividends, or making any other distributions to the holders of common equity
• The cashflows lying to the credit of the Escrow Account shall not be permitted to be received by the Issuer until the EONC is cured. Instead, the cashflows so accumulated shall be utilized in following order – payment of existing due amounts to NCDs (as per original payment schedule), replenish DSRA in CPA to extent utilised, replenish guarantee amount to extent utilised, replenish DSRA in FDs to extent utilised and payment of guarantee fees/ or guarantee utilisation interest due but unpaid
• The debenture/security trustee shall liquidate the DSRA fixed deposit and transfer the proceeds into the CPA, as per timelines specified in transaction documents.
• DSRA may be utilised to meet payment of principal and interest due to NCDs for the relevant period to the extent of shortfall if any, not for any prepayment of the NCDs
• Issuer shall top-up the DSRA with additional month of principal and interest payable to NCDs. Once EONC is cured, additional DSRA provided shall be refunded to the issuer
• Cashflows flowing in / lying to the credit of the Escrow Account may be utilized if necessary by the debenture trustee to meet the payment of principal and interest due on the NCDs for the relevant period, not for any prepayment of the NCDs

 

Key Event of default (EOD) declarable by NCD holders

 

Debenture trustee (upon instruction of the Special Majority debenture holders) have the option to declare EOD upon the occurrence of any of the following:

 

• Non-payment of principal or interest dues pertaining to issuance by issuer and guarantor
• Rating downgrade of the guarantor below India sovereign rating (currently rated S&P BBB-/Positive/A-3) on international scale that is not remedied in 180 days
• Continuation of EONC which is an external payment default or cross-default pertaining to the issuer’s financial indebtedness which is not remedied within 270 (two hundred and seventy) days of occurrence.

 

If any of the above conditions occur and at that point guarantee amount covers outstanding principal and interest payable for 90-days on such principal, then EOD is deemed to be declared automatically and the occurrence of EOD shall be intimated (EOD Notice) by Debenture Trustee to the NCD Holders, the Guarantor, the Security Trustee and the Company immediately (and on the same day as on the occurrence of the Event of Default). Once confirmed by Special Majority NCD holders with seven business days, consequences of EOD shall apply.  If confirmation is not provided within stipulated timeline, it is deemed provided. The 270-day curing period in the case of external payment default or cross-default will also not be applicable in this case.

 

Key EOD declarable by Guarantor - Guarantor may declare an EOD only upon the occurrence of any of the following conditions and not in any other circumstance

 

• The NCDs are rated ‘D’ by the rating agency
• Guarantee is fully utilised
• NCD holders have declared EOD
• If an event of default (howsoever defined) under any Transaction Documents has been declared  and the guarantee amount (cover) is equal to the sum of (1) the outstanding principal amount of the NCDs, (2) the interest payable for 90-days on such outstanding principal.

 

 

Consequences of EOD

 

In case of Events of Default (EOD; refer to EOD section under List of covenants), all outstanding payments are expected to be made forthwith, however they are promised only 90 days from receipt of the acceleration notice by guarantor or EOD notice[1] (whichever is earlier) or prior to 1 day from original maturity date of the NCDs, whichever is earlier.

[1] Upon the occurrence of an Event of Default, the Debenture Trustee shall notify the guarantor immediately (and on the same day) [“EOD Notice”]. Pursuant to this, a notice is issued by the Debenture Trustee (acting on the instructions of Special Majority Debenture Holders) to the guarantor requiring them to make accelerated payment (the “Acceleration Notice”)

 

Annexure - Details of Instrument(s)

ISIN	Name of the Instrument	Date of Allotment	Coupon rate (%) (annualised)	Maturity Date	Issue size (Rs.Crore)	Complexity level	Rating assigned with outlook
INE01HV07544	Non-convertible debenture&	24-Mar-25	9.10%	24-Jan-31	200.00	Highly complex	Crisil AA+ (CE)/ Stable
NA*	Non-convertible debenture&	NA	NA	NA	50.00	Highly complex	Provisional Crisil AA+ (CE)/ Stable

 *Instrument yet to be issued

& Proposed to be listed