Performance update on CRISIL Ratings rated securitization transactions

CRISIL Ratings has analyzed the  performance of asset-backed securities (ABS) and mortgage-backed securities (MBS) under its surveillance based on monthly payouts to the investors until Mar 2022.

The rated transactions pertain to the receivables from loans backed by commercial vehicle (CV), passenger vehicle (PV), tractor, construction equipment (CE), two-wheeler, IT equipment, furniture, plant and machinery, health-care equipment, and gold. Moreover, some of the ABS/MBS transactions are also backed by education loans (EL); loans extended to small & medium enterprises (SME); lease rentals; auto lease; microfinance (MFI) loans; home loans (HL); and loans against property (LAP).

Limited fall followed by rapid recovery in collection ratios during second wave as compared to drastic decline and gradual improvement during first wave of COVID

During the second wave of the pandemic (April to June 2021); collection ratios declined, owing to the re-introduction of restrictions on movement of goods and people. However, with the decline in incidence of infections, these administrative controls were lifted, boosting business activity. Consequently, borrower cash flows improved, collection ratios picked pace and stayed the trajectory.

Mortgage pools witnessed a fall in median collection ratios (MCR) to 96.4% in Jun 2021 payouts, followed by subsequent improvement to ~100% by Sep 2021 payouts. These further rose to their highest levels in the 12-month period at 100.6% in Mar 2022 payouts.

Similarly, for pools backed by CV and two-wheeler loans, MCRs fell to 85.7% and 94.2% in Jun 21 payouts respectively; followed by a recovery and subsequently peaked at 102.7% and 100% in Mar 22 payouts respectively. For SME pools, the lowest MCRs were during the Jun 21 payouts at 80.7% that climbed to 98.6% in Oct 21 payouts and remained at 96.4% in Mar 22 payouts.

Collection continued to be stable despite third wave induced disruptions

During the period Dec 21 to Feb 22, some administrative curbs were introduced to combat the increasing rate of pandemic-related infections. The localized nature of the restrictions muted the impact of disruptions on borrowers’ workflows, due to which their cash flows stayed largely intact and supported timely loan repayment in securitised pools, resulting in no significant utilization of external credit enhancement.

Small and medium enterprise (SME) loan pools saw MCRs at 96.2% in Feb 2022 payouts. On the other hand, CV and mortgage pools saw collection ratios of over 99.5% in Feb 2022 payouts.

Performance of CRISIL Ratings-rated portfolio remains stable, in line with expectations 

CRISIL Ratings have reaffirmed its credit rating/opinion on 133 ABS & MBS transactions as of Mar 2022 payout. The performance witnessed in the transactions has been satisfactory, and, at par with expectations. All payouts to investors were made in timely manner owing to satisfactory recoveries from underlying borrowers. Further, due to build-up of adequate credit cover for meeting future payouts, outstanding ratings/ credit opinions on all instruments have been reaffirmed. 

Pool collections have shown tremendous resilience during bouts of high infections, especially at the time of second and third waves of the pandemic. Despite elevated stress in collections during these episodes, ratings have remained stable due to satisfactory recoveries from underlying loans and adequate credit enhancement to meet future obligations. During second wave of the pandemic, external credit enhancement utilisation in CRISIL rated pools was in the average range of 8-10%. In most of these cases, the depleted credit collaterals  were replenished on the back of sharp recoveries in pool collections during subsequent months and the credit collateral utilisation dropped to 1-2% as of Mar 2022 payouts, thereby augmenting credit protection to future payouts

However, in terms of the near- and medium-term outlook, borrower cash flows, and correspondingly, pool collections, could be adversely impacted by several macro-economic events such as increase in fuel costs, moderation in demand on account of inflation, and increasing interest rate scenario, amid geo-political uncertainties. For pools under review, sufficiency of internal and external credit enhancement as per the transaction structures will be an additional input for rating actions. While past performance is a crucial input, CRISIL Ratings will continue to closely monitor the performance of the contracts in all its rated ABS & MBS transactions. CRISIL Ratings disseminates the ratings/credit opinions through its quarterly publications and press releases in a timely manner. 

The ratings/credit opinions represent CRISIL Ratings’ view on the transactions as on June 17, 2022.