April 04, 2007
 
CRISIL assigns highest ratings to HDFC Ltd’s mortgage backed securitisation programme

MBS 2007 Series II Trust
 
PTC Yield terms Issue size (Rs.mn) Tenure# (Months) Provisional Rating1 Credit cum Liquidity enhancement
(Rs. mn)
Series A1 Floating^ 8186.3 251 AAA (so) 663.13
Series A2 - 0.4 251 AAA (so)
^ Floating linked to 1 year INBMK, with a cap
# Tenure assuming no prepayments. The actual tenure will depend on the level of prepayments in the pool
 
Analytical Contacts:
D Thyagarajan
Tel: +91-22-6691 3109
E-mail: dthyagarajan@crisil.com
Prasad Koparkar
Tel: +91-22-6691 3137
E-mail: pkoparkar@crisil.com

CRISIL Rating Desk:
Tel: +91-22-6691 3047 / 6691 3064
Email: CRISILratingdesk@crisil.com

Note

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The provisional ratings are based on the credit quality of the pool cash flows, HDFC Limited’s origination and servicing capabilities, the transaction’s credit enhancement facility, payment mechanism and the soundness of the legal structure.

The transaction is structured at Par. There are two series of PTC’s, Series A1 and Series A2 which are pari passu to each other and have a sequential pay structure. The yield payable to Series A1 PTCs is linked to 1-year INBMK (1-year INBMK + spread). The yield is also subject to a cap of pool yield plus a spread of 50 basis points. The interest rate on PTCs will be reset annually. In case, the interest payable to Series A1 PTCs is higher than the interest generated by the pool, then the cash collateral will be utilized to make good the shortfalls. The yield payable to Series A2 PTCs is the residual interest generated by the pool after payment of interest to Series A1 PTCs. In any month, if the yield payable to Series A1 PTCs is higher than the pool yield, Series A2 PTC will not be eligible to receive any interest payment for that month. It should be noted that CRISIL’s rating for Series A2 only addresses principal payouts and shortfalls due to collection delays / credit events. Specifically, the rating does not address shortfalls arising out of fluctuations in pool and /or PTC yields.

The pool consists of contracts with the average seasoning of 22.9 months and a minimum seasoning of 4 months. The loans have a maximum ticket size of Rs 1.5 million. The pool has high proportion of contracts (approximately 68 per cent) with properties located in Maharashtra. The pool comprise of high proportion (90.2 per cent) of salaried individuals which is similar to HDFC Limited’s portfolio. Around 85 per cent contracts in the pool are current and no contract has overdues for more than two months.

In the past, CRISIL has rated four mortgage backed securitisation transactions of HDFC Limited and all of them have shown strong performance. HDFC’s cumulative disbursements till September 30, 2006 amounted to Rs.1044 billion. HDFC reported a profit after tax (PAT) of Rs.12.6 billion in 2005-06 (Rs.10.36 billion in 2004-05) with a return on net worth of 30.1 per cent (28.5 per cent in 2004-05). Its total assets as on March 31, 2006, were Rs.534.3 billion (Rs.424.9 billion as on March 31, 2005). For the six months ended September 30, 2006, HDFC reported a net profit of Rs.6.65 billion, compared to Rs.5.46 billion for the corresponding period of the previous year.

1 The ratings assigned are provisional and will become valid once the transaction documents are executed to CRISIL’s satisfaction.

 

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