Aditya Birla Sun Life Money Manager Fund

(AMC: Aditya Birla Sun Life AMC Limited)

CRISIL Ratings assigns credit opinion of ‘CRISIL AA+ (SO) Equivalent' to capital protection available to Class A and Class B unit-holders in Aditya Birla Sun Life Money Manager Fund

 

Rating Action

Rs.2295 Crore* Aditya Birla Sun Life Money Manager Fund – Class A and Class B&

CRISIL AA+ (SO) Equivalent (Assigned)

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

*Indicates maximum possible commitment from Class A and Class B unit-holders. The actual size of these classes is yet to be finalised.

&Class A and Class B can be further divided into sub-units Class A1 and Class A2 and Class B1 and Class B2, respectively

 

Detailed Rationale

CRISIL Ratings has assigned its credit opinion of ‘CRISIL AA+ (SO) Equivalent' to capital protection available to Class A and Class B unit-holders, in the ‘Aditya Birla Sun Life Money Manager Fund’ scheme of Aditya Birla Sun Life AIF Trust – II, a category II Alternative Investment Fund (AIF).

 

This is a close-ended fund with term of 4 years and 6 months from the date of Initial Closing. Final closing of fund shall be within 12 months of Initial Closing (extendable by 6 months at Investment Manager’s discretion). The Commitment Period[1] shall be till 24 months from Final Closing, extendable by additional 12 months at sole discretion of investment manager. During the commitment period, the investment manager may reinvest up to 100% of cost (principal) of any realised portfolio investment. Returns from investments including interest, dividends and gains from sale will not be reinvested and will be distributed to the unit-holder as and when realised.

 

The credit opinion indicates the degree of certainty regarding timely repayment, by the final maturity[2] of the scheme, of the total capital contribution made to the scheme by Class A and Class B unit-holders and our analysis indicates that the capital protection available to Class A and Class B unit-holders are commensurate with credit quality of CRISIL AA+ (SO) rated instruments.

 

All distributions, gross of taxes, made to the Class A and Class B unit-holders till the final maturity2 of the scheme, i.e. the Distribution Proceeds[3] at or prior to the maturity of the scheme have been considered as capital repayment for the purpose of this evaluation. Further, the investors should note that any tax incidence has not been factored in our analysis. The rating/credit opinion is not a comment on either the scheme’s net asset value at the time of maturity or returns achievable by the unit-holders.

 

CRISIL Ratings' evaluation of capital protection for Class A and Class B unit-holders in this scheme are based on CRISIL Ratings’ expectation of the credit quality of the underlying investments by the scheme, portfolio composition of the scheme in terms of maturity profile, yield and concentration, structural features and credit support available to the unit-holders. CRISIL Ratings will review the portfolio periodically to re-evaluate the capital protection available to the unit-holders.

[1]Commitment Period is the period during which Capital Commitments can be drawn down by the investment manager and deployed in portfolio investments

[2]Cashflows received from the underlying investments by the scheme maturity considered in CRISIL Ratings’ analysis. Payouts to investors will happen as per timelines in line with the scheme terms

[3]Proceeds from underlying investments, as reduced by amounts attributable to fund expenses and management fees

Key Rating Drivers & Detailed Description

Supporting factors

1.                 Support available to Class A and Class B unit-holders
   •                  Class A and Class B unit-holders benefit from support provided by Class C2 unit-holders in case of any default in the underlying investments i.e. distribution to Class C2 unit-holders will become subordinated in case of any default.  If the default is cured or the capital contribution made by Class A, Class B and Class C1[4] unit-holders has been paid back, then the distributions are pro-rate based on retained interest.
   •                  The investments made by the Investment Manager are expected to earn healthy yields during the term of the scheme, providing additional support to the capital contribution of the unit-holders
2.                 Credit quality of the investments
   •                  The scheme is expected to invest a minimum of 80% in entities rated A or higher
   •                  Exposure to real estate sector will be in entities rated A or higher
3.                 Matching investment tenures

•                  The scheme is not expected to invest in instruments with maturities later than the maturity date of the scheme

 

Constraining Factors

• Concentration of investments
  • There is concentration risk in the structure with maximum exposure to any entity allowed at 10% for issuers rated A or higher and at 5.0% for issuers rated BBB or lower. Maximum sector exposure limit for the fund is 40.0%, limit for exposure to real estate is 25.0%. However, the fund will have minimum of 14 investments at the time of full deployment.
• Limited time for recovery
  • Fund terms allow reinvestment of the cost(principal) of portfolio investments till the end of the Commitment Period. Residual tenure post end of Commitment Period is 2 years and 6 months. Expected amortisation schedule over the last 3 years of the fund tenure is 20:20:60 meaning majority of the principal will be collected in the last year. Hence, in case of any event which affects the performance of the investments and results in default, there will be limited time for recovery because of the shorter remaining tenure of the scheme

 

Liquidity: Strong

The credit opinion indicates the degree of certainty regarding repayment of the total capital contribution made to the scheme by Class A and Class B unit-holders by the maturity date of the scheme. Therefore, the capital protection available to the unit-holders would not be materially impacted by temporary liquidity challenges.

 

Rating Sensitivity factors

Upward factors:

• Substantially better than expected performance of the investments
• Substantially better than currently anticipated recovery post default from the underlying investments, both in terms of time to recovery and amount recovered

 

Downward factors:

• Substantially worse than expected performance of the investments
• Substantially worse than currently anticipated recovery post default from the underlying investments, both in terms of time to recovery and amount recovered

 

Rating Assumptions

To assess the total payouts to Class A and Class B unit-holders, CRISIL Ratings has factored in the following:

 

• CRISIL Ratings has assumed default correlation of 0.1 – 0.4 between entities
• Expected post default recovery rate has been considered for different industries

Based on the potential investment universe and assumptions based on correlation, timeline of deployment of funds and yields, multiple scenarios were considered for portfolio construction. Portfolio quality in each of the scenario was assessed using Monte Carlo simulations incorporating default probabilities, cash flows, correlations and recovery rate assumptions. With sufficiently large number of trials, portfolio shortfall distribution was generated under each scenario and these were evaluated to arrive at the final credit opinion.

 

Other key parameters factored

• The fund will be sector agnostic. However, the fund will have preference for sectors with tangible/ intangible assets & will avoid sectors like EPC, Services, Trading & Gems & Jewellery. Tentatively the fund may look at trades in manufacturing, infrastructure, financial services, hospitality among others.
• Minimum proportion of contribution by Class C2 unit-holders to be 8.0% of the total contribution made.
• Operating expenses (excluding GST) at actuals with cap of 0.25% p.a. of the total aggregate outstanding capital contributions.
• Upfront management fees, for different classes and corresponding capital contribution, payable to the investment manager
• The scheme is expected to invest a minimum of 80% in entities rated ‘A’ or higher.
• The scheme is expected to invest a maximum of 20% in entities rated ‘BBB’ or in unrated exposures. For such investments, the maximum exposure will be 5% and will not be towards NBFC and real estate sectors.
• The fund will have minimum of 14 investments at the time of full deployment.
  • Minimum 3 investments will each have weight of 10% or lower in A rated or higher issuers.
  • Minimum 7 investments will have weight of 7% or lower in A rated or higher issuers.
• The remaining 4 investments will have up to 5% each in BBB or unrated issuers
• Maximum exposure to group entities will be 25%
• The maximum sector exposure for NBFCs is 40%, 25% for real estate and 30% for other sectors. The exposure to real estate will be in entities rated ‘A’ or higher.

 

Waterfall Mechanism

Proceeds from underlying investments, as reduced by amounts attributable to fund expenses and management fees are termed “Distribution Proceeds”. The Distribution Proceeds with respect to each portfolio investment shall be referred to as “Portfolio Distribution Proceeds”. The Portfolio Distribution Proceeds will be paid out in the following order of priority:

 

1.                 Till the time there is no default for any Portfolio Investment
   1.                 Distribution to Class A, Class B and Class C unit-holders on a pro rata basis according to their respective Percentage Interest
2.                 In case there is a default in any Portfolio Investment
   1.                 Till the time amount distributed to Class A, Class B and Class C1 unit-holders is less than 100% of their Capital Contribution
      1. Distribution to Class A, Class B and Class C1 unit-holders on a pro rata basis according to their respective Percentage Interest till the amount distributed to these unit-holders equals 100% of their respective Capital Contributions
      2. After the distribution proceeds have been distributed as per clause 2.a.i mentioned above, balance distribution proceeds will be distributed to Class C2 unit-holders till the amount distributed to these unit-holders equals 100% of their respective Capital Contributions
   2.                 Once amount distributed to Class A, Class B and Class C unit-holders is equal to or more than 100% of their Capital Contribution
      1. Distribution to Class A, Class B and Class C unit-holders on a pro rata basis according to their respective Percentage Interest

 

Distributions made to Class C1 unitholders may be held back in the fund if the Continuing Commitment regulation for the Fund is not met, only those in excess will be passed on to C1 unit-holders (sponsor).

[4]Class C1 will be towards Continuing Commitment by the investment manager towards the fund, i.e., atleast lower of Rs 5 crore or 2.5% of Capital Commitments received, as per regulation.

About the sponsor and AMC

Aditya Birla Capital Limited (“ABCL”) is the holding company for the financial services businesses of the Aditya Birla Group. Through its subsidiaries/JVs, ABCL provides a comprehensive suite of financial solutions across Loans, Investments, Insurance, and Payments to serve the diverse needs of customers across their lifecycle. Powered by over 50,000 employees, the businesses of ABCL have a nationwide reach with over 1,505 branches and more than 200,000 agents/channel partners along with several bank partners

 

The investment manager has managed 5 category II AIFs in the past their details are as follows –

1. India Income Opportunities Fund: A close-ended scheme of Aditya Birla Sun Life AIF Trust – II. The scheme has now been wound up in accordance with the regulations, size of the fund was Rs 100 Cr.
2. India Small and Mid Cap Gems Fund: A matured, close-ended scheme of Aditya Birla Sun Life AIF Trust I, size of the fund was Rs 633.75 Cr
3. Aditya Birla Real Estate Debt Fund: Category-II closed-ended fund with a fund size of 123.17 Cr.
4. Aditya Birla Real Estate Special Opportunities Fund: An ongoing, close-ended scheme of Aditya Birla Sun Life AIF Trust – II, the size of the fund is 370Cr.              

 

Aditya Birla Real Estate Credit Opportunities Fund: a scheme of Aditya Birla Sun Life AIF Trust - II, which is a Category II AIF, size of the fund 180 Cr

 

About the AMC

Aditya Birla Sun Life AMC Limited (ABSLAMC) is one of India's leading Asset Management Companies (AMCs) with an illustrious track record spanning three decades. Aditya Birla Capital Limited and Sun Life (India) AMC Investments Inc. are the promoters and major shareholders of the Company. ABSLAMC manages assets across a diverse range of product offerings that include Mutual Funds, Portfolio Management Services, Alternative Investment Funds, as well as Offshore and Real Estate offerings. The company also has international presence in Dubai, Singapore and Mauritius.

Key Financial Indicators

ABCL: Consolidated

As on / for the year end	Unit	June-24	2024	2023
Total income	Rs crore	8,881	34,561	30,201
PAT	Rs crore	759	3,335	4,796*
Total assets	Rs crore	NA	2,32,102	1,80,754
Gross Stage 3 (ABFL)	%	2.5	2.5	3.1
Gross Stage 3 (ABHFL)	%	1.6	1.8	3.2
Return on assets	%	NA	1.7&	3.0*
Gearing	Times	NA	3.8	3.9

&including one time gain of Rs 433 crore from stake sale of AMC business

*including one time gain of Rs 2,739 crore from stake sale of health insurance business

The ratios mentioned in the rationale have been calculated using CRISIL Rating’s standard methodology

 

ABSLAMC: Standalone

Parameter	Unit	2024	2023	2022	2021	2020
AUM	Rs. Crore	3,31,709	2,75,204	2,95,805	2,69,278	2,47,522
Income	Rs. Crore	1,616	1,331	1,379	1,178	1,215
PAT	Rs. Crore	774	591	660	516	486
RoA	%	24.7	22.7	29.8	28.7	31.7
Total revenue/ Avg Assets	%	51.6	51.1	62.2	65.6	79.4

The ratios mentioned in the rationale have been calculated using CRISIL Rating’s standard methodology

Any other information: Not Applicable

Annexure - Details of Instrument(s)

ISIN	Name of Instrument	Date of Allotment	Coupon Rate (%)	Maturity Date	Issue Size (Rs.Cr)	Complexity Level	Rating Assigned
NA	Aditya Birla Sun Life Money Manager Fund – Class A and Class B units	NA*	NA	NA&	2295.00%	Highly Complex	CRISIL AA+ (SO) Equivalent

*Investment manager is yet to hold First Closing for the fund

&Term of the scheme shall be a period of 4 years 6 months from the date of the First Closing, which may be extended by the investment manager by up to 2 years with prior consent of two-third majority of contributors with the approval of two-third majority of the contributors.

%The actual size of Class A and Class B will be known after drawdown and deployment of the capital commitment raised.