Rating Rationale
February 04, 2021 | Mumbai
IBHFL HL PCG Dec 20 - NPSL
(Originator: Indiabulls Housing Finance Limited)
'Provisional CRISIL AA (SO) Equivalent ' assigned to Acquirer Payouts
 
Rating Action
Tranche NameAmount Rated (Rs in Crores)Outstanding AmountBalance TenureCredit Collateral (Rs.)Ratings/Credit OpinionsRating Action
Acquirer Payouts45.0645.063339.24Provisional CRISIL AA (SO) Assigned &
& A prefix of 'Provisional' indicates that the rating centrally factors in the strength of specific structures, and will be supported by certain critical documentation by the issuer, without which the rating would either have been different or not assigned ab initio. This is in compliance with a May 6, 2015, Securities and Exchange Board of India (SEBI) directive, “Standardising the term, rating symbol, and manner of disclosure with regard to conditional/ provisional/ in-principle ratings assigned by CRAs”
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has assigned its credit opinion equivalent of ‘Provisional CRISIL AA (SO) Equivalent’ to the Acquirer payouts issued by Indiabulls Housing Finance Ltd (IBHFL). This securitisation transaction is backed by home loan (HL) receivables originated by Indiabulls Housing Finance Limited (IBHFL; ‘CRISIL AA/Negative/CRISIL A1+’). The credit opinion on the acquirer payouts is based on the credit quality of pool cash flow, IBHFL’s origination and servicing capabilities, the transaction’s credit enhancement, and payment mechanism and soundness of the transaction’s legal structure

 

The transaction has been evaluated as part of Partial Credit Guarantee (PCG) scheme offered by Government of India to Public Sector Banks (PSBs) for purchase of pooled assets from NBCFs/HFCs through DA route. The credit opinion does not factor in the partial credit guarantee that is expected to be provided by the Government of India to the transaction and is purely based on the credit collateral as provided by the originator in the structure.

 

The transaction has a ‘Par with Excess Interest Spread’ structure. The acquirer payouts are supported by credit collateral in the form of Fixed Deposits and Excess Interest Spread (EIS).

 

The total credit support available in the transaction is as below:

  • Internal credit support in the form of scheduled EIS assuming zero prepayments aggregating Rs 7.27 crore (16.1% of initial pool principal)
  • External credit enhancement of Rs 9.24 crore (20.5% of pool principal) is in the form of a corporate guarantee by IBHFL

 

The acquirer payouts are entitled to receive timely interest and timely principal payments on a monthly basis. IBHFL will appoint IDBI Trusteeship Services Limited (ITSL) to monitor the overall transaction on behalf of the acquirers

 

This is a ‘Provisional’ rating and will be converted into a ‘Final’ rating on receipt of the following documents:

  • Power of attorney
  • Assignment agreement
  • Servicing agreement
  • Corporate guarantee agreement
  • Legal opinion
  • Auditor’s Certificate
  • Representations and warranties letter from the originator

 

Additional documents, if any, executed for the transaction should also be provided. A rating rationale/report indicating the conversion of the ‘Provisional’ rating to ‘Final’ rating post receipt of all the required final legal documentation will be published on the CRISIL website. Please click on the link below for detailed information on CRISIL’s policy on provisional rating: CRISIL’s Policy on provisional ratings.

Key Rating Drivers & Detailed Description

Strengths:

  • Credit support in the structure
    • Credit collateral of Rs 9.24 crore (20.5% of pool principal) provides credit support to Acquirer Payouts. The Acquirer Payouts also benefit from scheduled EIS (assuming zero prepayment) aggregating Rs 7.27 crore (16.1% of pool principal).
  • Seasoning of contracts
    • The contracts in the pool have a weighted average seasoning of 12.0 months, resulting in 14.8% principal amortization prior to securitisation. The contracts in the pool are current as of cut-off date (21st  December 2020)

 

Weakness:

  • Borrower concentration
    • Top 10 borrowers account for 20.0% of principal outstanding as of cut-off date
  • Basis risk
    • There is basis risk in the transaction as pool yield is floating and linked to originator’s prime lending rate whereas the acquirer’s yield is floating and linked to acquirer’s MCLR
  • Potential impact of the pandemic on collections
    • In case of subsequent peaks of the Novel Coronavirus (Covid-19) pandemic, there could be pressure on collections and asset quality of the pool of receivables backing the PTCs

Liquidity: Strong

The credit enhancement available in the transaction is Rs 9.24 Cr (20.5% of pool principal) which is in the form of fixed deposit with Central Bank of India (Rated ‘CRISIL A+/CRISIL A/Stable’). The enhancement is sufficient to cover 18 months of principal and interest payouts promised to the investors even with no collections from underlying loan receivables.

Rating Sensitivity factors

Upward

  • Credit enhancement (based on both internal and external credit enhancements) available in the structure exceeding 3.0 times the estimated base case shortfalls on the residual cash flows of the pool.
  • A sharp upgrade in the rating of the servicer/originator

Downward

  • Credit enhancement falling below 2.0 times the estimated base case shortfalls
  • A sharp downgrade in the rating of the servicer/originator
  • Non-adherence to the key transaction terms envisaged at the time of the rating

About the Pool

The transaction is backed by receivables from a pool of vehicle loans. The pool is well seasoned as evidenced by its weighted average net seasoning of 12.0 months. Contracts in the pool are geographically concentrated with top 3 states accounting for 65.6% of pool principal. The average ticket size for contracts in the pool is Rs 36.5 lakh, with a weighted average loan-to-value (at disbursement) ratio of 66.7%. The weighted average interest rate at disbursement of contracts in the pool is 9.4%. All the contracts are current as of December 21, 2020. CRISIL Ratings has adequately factored all these aspects in its rating analysis.

 

Rating Assumptions

CRISIL Ratings has relied on the portfolio performance and static pool analysis of originations from FY 2007 to H2 FY 2020. The performance of the portfolio has been analysed up to March 2020.

CRISIL Ratings has also factored in pool-specific characteristics and estimated the base case peak shortfalls in the pool in the range of 3.5% to 4.5% of pool principal.

 

  • CRISIL Ratings has assumed a stressed monthly prepayment rate of 1.5% to 2.5% in its analysis.
  • CRISIL Ratings does not envisage any risk arising on account of commingling of cash flows since CRISIL’s short term rating on the servicer is ‘CRISIL A1+’
  • CRISIL Ratings has adequately factored in the risks arising on account of counterparties (refer to counterparty details)
  • 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.

 

Counterparty details

Capacity

Counterparty Name

Counterparty

Rating / Track record

Effect on credit ratings in case of non-performance

Originator and seller

IBHFL

‘CRISIL AA/Negative/CRISIL A1+'

 No effect

Servicer

IBHFL

‘CRISIL AA/Negative/CRISIL A1+'

Significant effect, because of change in servicing quality and replacement cost of servicer (not factored in by CRISIL Ratings). However, CRISIL Ratings does not envisage the requirement for replacement.

Acquirer

Central Bank of India

‘CRISIL A+/CRISIL A/Stable '

No effect

Credit collateral

Central Bank of India

‘CRISIL A+/CRISIL A/Stable '

Negligible effect. Bank with whom the fixed deposit is maintained can be changed without impacting the opinion.

Acquirer’s representative

ITSL

Adequate track record

Negligible effect. Can be replaced at minimal cost.

 

About the Originator

IBHFL is one of the larger housing financing companies in India. In its current legal form, its origins date back to April 1, 2012 when Indiabulls Financial Services Ltd was reverse-merged with it. The process was completed on March 8, 2013, following the Delhi High Court's approval on December 12, 2012. After the merger, IBHFL continues to operate as a housing finance company registered with the National Housing Bank. The company, along with its subsidiary Indiabulls Commercial Credit Ltd (ICCL) focuses on asset classes such as mortgages and commercial real estate. As on December 31, 2019, the promoter group held 21.72% stake in the company.

 

For fiscal 2019, IBHFL had a profit after tax (PAT) of Rs 4,091 crore on a total income of Rs 17,027 crore, compared with a PAT of Rs 3,895 crore and total income of Rs 14,959 crore in the previous fiscal. During nine months ended December 31, 2019, IBHFL reported PAT of Rs 2,063 crore on a total income of Rs 10,393 crore, compared with a PAT of Rs 3,084 crore and total income of Rs 12,817 crore during same period previous fiscal.

 

Past rated pools

CRISIL Ratings has ratings outstanding on 12 securitisation transactions originated by IBHFL. CRISIL Ratings is receiving monthly performance reports pertaining to these transactions

Key Financial Indicators

As on/for the nine months ended December 31

Unit

2019

2018

Total assets

Rs cr

1,04,558

1,28,750

Total income

Rs cr

10,393

12,817

Profit after tax

Rs cr

2,063

3,084

Gross NPA

%

1.94

0.79

Return on average assets (annualized)

%

2.3

3.1

 

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

Type of Instrument

Rated Amount

(Rs Cr)

Date of Allotment

Maturity

Date #

Coupon Rate (%) (p.a.p.m.) *

Complexity Level

Outstanding

Ratings/credit opinions$

Credit collateral (Rs Cr) ^

Acquirer Payouts

45.06

28-Dec-20

10-Oct-48

8.45%

Highly Complex

Provisional CRISIL AA (SO) Equivalent

9.24

1 crore = 10 million

# Indicates door to door tenure. Actual tenure will depend on the level of prepayments in the pool, and exercise of the repurchase option

^ In addition, scheduled Excess Interest Spread (EIS) amounting to Rs 7.27 Cr (assuming zero prepayments) also provides credit support to Acquirer Payouts

$ Acquirer Payouts are entitled to receive timely interest and timely principal payments on a monthly basis

* Floating – linked to acquirer’s MCLR

Annexure - Rating History for last 3 Years
  Current 2021 (History) 2020  2019  2018  Start of 2018
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Acquirer Payouts LT 45.06 Provisional CRISIL AA (SO) Equivalent   --   --   --   -- --
All amounts are in Rs.Cr.
 
 
Links to related criteria
CRISILs rating methodology for RMBS transactions
Evaluating risks in securitisation transactions - A primer
Legal analysis in structured finance transactions

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