Detailed Rationale

Crisil Ratings has assigned its ‘Provisional Crisil A+ (SO)’ rating to Series A1 Securitisation Notes (SNs) issued by ‘Canna 2W 2024’ under a securitisation transaction originated by Manba Finance Limited, backed by a pool of 2-wheeler loan receivables.

 

The ratings are based on the credit support available to the SNs, the credit quality of the underlying pool receivables, Manba’s origination and servicing capabilities, and soundness of the transaction’s legal structure.

 

The transaction has a ‘Par with Excess Interest Spread (EIS) with trigger-based turbo’ structure. The excess interest spread will be utilised to accelerate the principal redemption of Series A1 SNs(till they are outstanding), if the PAR 90+ of the Pool exceeds 5.0% of the initial Pool Principal.

 

Payment structure: The transaction has a ‘par with monthly subordinated excess interest spread (EIS)’ structure. The trust settled by the transaction’s Trustee Ltd, will issue Series A1 SNs in exchange for a purchase consideration equal to 93.0% of the pool principal at the time of securitisation. Series A1 SN holders are promised timely interest payments on a monthly basis. Principal repayment, while expected on a monthly basis, is promised only on an ultimate basis by the instrument’s final maturity date.

Adequacy of credit enhancement: The investor payouts for Series A1 SNs are supported by cash collateral and subordination of excess interest spread (EIS). On a monthly basis, the cash collateral can be used to make the promised interest payments to Series A1 SNs in case of a shortfall in collections from the pool. On the Series A1 SN’s final maturity date, the cash collateral shall be used to make the promised principal repayment in case of a shortfall in collections from the pool. All prepayment collections will be utilised for accelerated redemption of the Series A1 SNs.

Credit enhancement available in the transaction structure to support promised SN payouts is as below:

 

• External credit enhancement from a cash collateral amounting to Rs. 3.26 crore (10.0% of securitised pool principal) which is expected to be maintained as fixed deposits with a bank and lien-marked in favour of the Trustee.
• Scheduled cashflow subordination aggregating to Rs5.52 crore (16.9% of pool principal, assuming zero prepayments) for Series A1 SNs – including subordination of Over collateralisation SN principal of Rs 2.28 crore (7.0% of pool principal)

 

Based on Crisil Ratings assessment, the total credit enhancement available in the transaction (internal – in the form of EIS and overcollateral; and external – in the form of cash collateral) provide loss absorption against stressed shortfalls in the pool, commensurate with the rating assigned to the SNs.

Key Rating Drivers & Detailed Description

Strengths:

• Credit support available in the structure
  •                  External credit enhancement from a cash collateral amounting to Rs. 3.26 crore (10.0% of securitised pool principal) which is expected to be maintained as fixed deposits with a bank and lien-marked in favour of the Trustee.
  •                  Scheduled cashflow subordination aggregating to Rs5.52 crore (16.9% of pool principal, assuming zero prepayments) for Series A1 SNs – including subordination of Over collateralisation SN principal of Rs 2.28 crore (7.0% of pool principal)
• Seasoning profile of contracts in the pool
  •                  The pool has a weighted average seasoning of 5.9 months and pre-securitisation amortisation of 19.1%.
  •                  All of the 4,770 contracts in the underlying loan pool are current as of the cut-off date (March 05, 2025).

 

Weaknesses:

• High risk profile of underlying asset class
  •                  The pool is backed by new two-wheeler loans, an asset class which has historically exhibited higher delinquency.
• Geographical Concentration
  •                  56.0% of the pool principal comprises contracts originated from Maharashtra, with Mumbai being the top district.

Liquidity: Strong

Liquidity is strong given that the credit enhancement (internal and external combined) in the structure is sufficient to cover losses exceeding 1.5 times the currently estimated base shortfalls.

Rating Sensitivity factors

Upward factors

• Credit enhancement (based on both internal and external credit enhancements) available in the structure exceeding 1.9 times the estimated base case shortfalls on the residual cash flows of the pool.

 

Downward factors

• Credit collateral (internal and external combined) falling below 1.7 times the estimated base case loss
• A sharp downgrade in the rating of the servicer/originator.
• Non-adherence to the key transaction terms envisaged at the time of the rating.

Quality of the asset pool and strength of cashflows

The pool cash flow is securitised and comprises receivables from new two-wheeler loans originated by Manba. The pool has a weighted average net seasoning of 5.9 months, weighted average LTV of 80.2%, weighted avg. interest rate of 20.2% and top state Maharashtra accounting for 56.0% of pool principal. Average ticket size of the pool is Rs 84,538. All contracts in the pool are current as on the cut-off date.

 

Rating Assumptions   Background: To assess the base case shortfalls for the transaction, Crisil Ratings has analysed moving portfolio delinquency and collection efficiency for two-wheeler loan portfolio provided by Manba till Dec 2024. 90+dpd and 0+dpd on the portfolio are 3.3 per cent and 9.9 per cent as of Dec-24 respectively. Crisil Ratings has also factored in pool specific characteristics and estimated the base case shortfalls in the pool by the maturity of the transaction in the range of 8.0% to 10.0% of cashflows. Crisil Ratings has also factored the following assumptions, basis the typical industry characteristics of the asset class and its criteria for rating asset backed securitisations.                  Crisil Ratings has assumed a monthly prepayment of 0.5%-1.5% in its analysis.                  Based on its assessment of Manba’s short-term credit risk profile, Crisil Ratings has factored in the risk arising out of commingling of cash flows.                  Crisil Ratings has run sensitivities based on various shortfall curves (front-ended, back-ended and normal) and has adequately factored the same in its analysis.                  Crisil Ratings has adequately factored in the risks arising on account of counterparties.   Assumptions:                  After making the adjustments on the above factors, the base case shortfalls in the pool by maturity of the transaction is in the range of 8.0% to 10.0% of pool cashflows.                  Monthly prepayment rate of 0.5% to 1.5% has also been applied to the pool cashflows.

 

Additional disclosures for Provisional ratings:

The provisional rating is contingent upon execution of the following documents:

 

• Trust deed
• Assignment agreement
• Power of attorney
• Information memorandum
• Legal opinion
• Trustee letter
• Auditor’s certificate
• Representations and warranties letter

 

Additional documents executed for the transaction, if any, should also be provided. The provisional rating shall be converted into a final rating after receipt of transaction documents duly executed within 90 days from the date of issuance of the instrument.

 

The final rating assigned post conversion shall be consistent with the available documents. In case of non-receipt of the duly executed transaction documents within the above-mentioned timelines, the rating committee of Crisil Ratings may grant an extension of up to another 90 days.

 

Rating that would have been assigned in absence of the pending documentation: In the absence of pending documentation considered while assigning provisional rating as mentioned above, Crisil Ratings would not have assigned any rating.

 

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 the documents received and/or completion of steps deviates significantly from the expectations, Crisil Ratings may take an appropriate action 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 not have been assigned ab initio.

About the Originator

Manba Finance Ltd based in Mumbai is an RBI registered NBFC which provides two-wheeler finance. The company started operations in 1996 as a DSA for ICICI Bank for two-wheeler loans till 2008, post which they started their own book. Manba came out with an IPO and is now a listed entity, its shares got listed on September 30, 2024

 

Manba has presence in five states: Maharashtra, Gujarat, Rajasthan, Chhattisgarh and Madhya Pradesh.  Over the due course of operations, the company has also acquired the preferred financier tag for Suzuki, Yamaha, TVS, Piaggio and Hero MotoCorp in its operating region.

Key financial indicators

As On/For the Period Ended	Unit	Mar-2024	Mar-2023	Mar-2022	Mar-2021
Assets under management	Rs crore	798.8	633.7	495.8	531.1
Total income	Rs crore	191.6	133.8	107.0	108.5
Gross NPA	%	3.9%	3.7%	4.9%	2.5%
Adjusted Gearing	Times	3.75	4.3	2.9	2.8
Profit after tax	Rs crore	31.2	15.2	9.5	11.4
Return on managed assets	%	4.4%	2.7%	1.9%	2.1%

 

Quality and experience of servicer:

Manba will continue to service loans assigned to this trust. Manba has originated several securitisation transactions. Servicing has been done, and reports have been shared across all these transactions in a timely manner.

 

Risks and concerns for investors and mitigating factors: Based on Crisil Ratings’ assessment, the total credit enhancement available in the transaction (internal – in the form of EIS; and external – in the form of cash collateral) together can mitigate against shortfalls in collection from the pool even after stressing them commensurate with the rating assigned to the PTCs. Crisil Ratings has adequately factored key risks  in the transaction including Credit & Market (as highlighted in rating assumptions section), Counterparty and Legal risks. Legal risks are assessed based on detailed analysis of transaction documentation. Risk factored from counterparties are mentioned in the table below:

 

Counterparty details

Capacity	Counterparty Name	Counterparty Rating	Effect on credit ratings in case of non-performance
Originator	Manba	Not rated by Crisil	No effect.
Servicer	Manba	Not rated by Crisil	Significant effect, because of change in servicing quality and replacement cost of the Servicer. However, Crisil Ratings does not currently envisage the need for replacement. The Trustee, on behalf of the investors, shall retain the right to appoint a replacement Servicer in the occurrence of a ‘Servicer Event of Default’ as per the terms of the transaction. Since there is time lag between pool collections and investor payouts. In the interim, the money collected lies with the servicer and may commingle with its own cash flow. As monthly pool collections are commingled only for a short period of time, the short-term credit quality of the servicer determines the commingling risk.
Collection and Payout Account Bank	ICICI Bank Limited	'Crisil AAA/Crisil AA+/Stable'	Negligible effect. As per the terms of the transaction, the Trustee, on behalf of the investors, has the right to change the CPA Bank.
Collateral in the form of Fixed Deposit	ICICI Bank Limited	'Crisil AAA/Crisil AA+/Stable'	Negligible effect. As per the terms of the transaction, the Trustee, on behalf of the investors, has the right to change the Bank with which the Cash Collateral fixed deposits are maintained.
Trustee	Catalyst Trusteeship Limited	Not rated by Crisil Ratings	Negligible effect. As per the terms of the transaction, the Trustee can be replaced by the investors holding majority interest.

 

A summary of key terms of servicer contract

As per indicative transaction terms, the key points on the role of the servicer to be covered as part of the transaction documents are as below:

 

• The Trustee acting for and on behalf of the investors shall appoint, the servicer for the purpose of collecting, receiving and managing payment of the Receivables into the Collection and Payment Account for the purpose of managing, collecting and receiving the receivables, holding the underlying security and carry out other roles and roles and responsibilities as specified under the transaction documents
• The servicer shall receive servicing fees which shall be paid by the trustee in accordance with the Waterfall Mechanism as per the transaction documents.
• The servicer shall collect the receivables from the underlying borrowers and deposit the collected amounts in the collection and payment account in a timely manner as per the terms of the transaction documents.
• The servicer shall submit to the trustee all the data and reports in the manner and as per the timelines as specified under the transaction documents.
• The occurrence of certain events as per the terms of the transaction documents shall be construed as a Servicer Event of Default.

 

Provision for appointment of back-up servicer: The Trustee (acting on the instructions of the investors) as per the terms of the Servicer Agreement and upon the occurrence of Servicer’s Event of default, shall retain the right to appoint an alternate servicer

 

Performance of outstanding rated transactions

Crisil Ratings has ratings outstanding on instruments issued under several securitisation transactions backed by 2-wheeler receivables originated by Manba. The cumulative collection efficiency in the underlying pools for these transactions range of 97.5%-99.0% as of February-2025 payouts, with 90+ delinquency ranging between 0.5%-2.5% of the initial pool principal.

 

Any other information: Not Applicable

Annexure - Details of Instrument(s)

ISIN	Name of the security	Date of issuance	Coupon rate (%)	Maturity date*	Size of the issue (Rs.Crore)	Complexity level	Rating assigned	Cash collateral (Rs.Crore)
NA$	Series A1 SNs	28-Mar-25	10.80	17-Sept-28	30.32	Highly Complex	Provisional Crisil A+ (SO)	3.26#

$ISIN yet to be issued

*Indicates door to door tenure. Actual tenure will depend on the level of prepayments in the pool, and exercise of the clean-up call option

#For Series A1 SNs Additional credit support includes Rs 6.62 crore in form of scheduled cash flow subordination (including EIS and over-collateralisation).