Detailed Rationale

CRISIL Ratings has upgraded its ratings on Series A1 PTCs issued by ‘Vivriti Toronto 12 2019’ to ‘CRISIL AA+ (SO)’ from ‘CRISIL AA- (SO)’.

The transaction is backed by Education Loan (EL) receivables, originated by Avanse Financial Services Limited (AFSL). The rating action is driven by the improved credit cover available to PTC holders on account of high amortisation. The transaction is supported by external credit enhancement in the form of fixed deposit amounting to Rs. 3.23 crore (which covers 10.5% of future payouts, as after July 2022 payouts).

31 months post securitisation (after July 2022 payouts), the 3-month average collection ratio (MCR)1 of the pool was at 102.7%, while the cumulative collection ratio (CCR)2 was at 99.3%. The threshold collection ratio (TCR)3 of 43.2%, to service investor payouts as after July 2022 payouts, stood far lower than the observed cumulative collection efficiency of 99.3%.

The transaction has a 'par with turbo amortisation’ structure. Series A1 PTCs are entitled to monthly interest, while the principal payment is promised on an ultimate basis.

Key rating drivers and detailed description

Supporting Factors

• High amortisation and credit support available in the structure
  • 31 months post securitisation (after July 2022 payouts), the pool is amortised by 50.1%, which has led to an increase in credit cover available for the future investor payouts. The existing credit collateral of Rs 3.23 crore (Covers 10.5% of future investor payouts after July 2022 payouts) provides sufficient cushion to service future investor payouts as indicated by the low TCR

• Healthy collection efficiency metrics

• As after July 2022 payouts, the CCR stood at 99.3% and 3- month average MCR was 102.7%

Constraining Factors

• Basis risk in the transaction

• There is basis risk in the transaction as pool yield is floating and investor yield is fixed

• Uncertainty about the repaying ability of students

• Continuously evolving political and regulatory environment in the university countries could have impact on future earnings and repaying ability of borrowers

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 sensitivities

Upward factors:

• Sustained collection performance and consequent build up of credit enhancement
• A sharp upgrade in the rating of the servicer/ originator

Downward factors

• Deterioration in the credit quality of the servicers /originators
• Non-adherence to the key transaction terms envisaged at the time of the rating

CRISIL Ratings has adequately factored all these aspects in its rating analysis

About the pool

The pool securitised comprises education loan receivables. The pool, at the time of securitization, had a weighted average net seasoning of 21.5 months. Average ticket size of the contracts in the pool is Rs 18.83 lakh. Majority of the loans in the pool were availed for post-graduate courses. Top 3 geographies for which contracts in the pool have availed education loan are USA, India, New Zealand and it contributes to 56.8% of pool principal. The weighted average Fixed Obligation to Income Ratio (FOIR) of co-obligors / borrowers in the pool is 46.3%. The maximum FOIR in the pool is 77%. All contracts in the pool were current as on the cut-off date (November 30, 2019).

Pool Performance Summary (as after July 2022 payout)

!CCR = {Total collections in the pool/(Total billings + opening overdues at the time of securitisation)}
^MCR = Monthly collections in the pool / Monthly billings

*TCR = The minimum cumulative collection ratio required on a pool’s future cash flows, to be able to service the investor payouts on time
 

Counterparty details

About the originator

Avanse provides education loans to students pursuing higher studies in India and abroad, and to educational institutes in India. Incorporated in August 1992 as Abhivruddhi Holdings Pvt Ltd, the company was acquired by DHFL and its promoter group companies in July 2012. Subsequently, the name was changed to the current one in December 2012. Warburg Pincus (WP), a leading global Private Equity firm with over $65 billion in private equity assets under management, has completed acquisition of controlling stake in the Company on July 30, 2019 through its affiliate Olive Vine Investment Ltd. As a result, WP has become 80% shareholder in Avanse and balance 20% continues to remain with International Finance Corporation (IFC), an arm of World Bank.

Avanse is registered as a non-deposit-taking NBFC with the Reserve Bank of India. As on September 30, 2021, it had presence in 16 locations in India. Apart from the educational loans that are retail in nature, the company lends to educational institutions such as schools and colleges, which accounted for about 25% of the loan book as on September 30, 2021. To further diversify the loan book, it began lending to financial sector entities and MSME loans from the third quarter of fiscal 2018 but the same have been discontinued and company is currently focusing on Education Sector lending only.

Profit after tax (PAT) was Rs 38 crore and total income (net of interest expenses) Rs 183 crore in fiscal 2021, against PAT of Rs 22 crore and total income (net of interest expenses) of Rs 185 crore in fiscal 2020 (IndAS). In the six months ended September 2021, PAT was Rs 31 crore and total income (net of interest expense) Rs 119 crore.

Past rated pools

CRISIL Ratings has ratings outstanding on five other transactions originated by AFSL. CRISIL Ratings is receiving monthly performance reports pertaining to these transactions.

Key Financial Indicators

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