Detailed Rationale CRISIL Ratings has assigned its ‘Provisional CRISIL AAA (SO)’ ratings to series A pass-through certificates (PTCs) issued by ‘INDIA STANDARD LOAN TRUST LXXIV’ under a securitisation transaction originated by AU Small Finance Bank (AU SFB; rated ‘CRISIL AA+/Stable/CRISIL AA/Stable/CRISIL A1+’). The second loss facility under this transaction has been assigned a credit opinion of ‘Provisional CRISIL A (SO) Equivalent’.
This securitisation transaction is backed by receivables from new and used vehicle and tractor loans originated by AU SFB. The rating/ credit opinion is based on the credit support available to the PTCs, credit quality of underlying receivables, AU SFB’s origination and servicing capabilities, the payment mechanism, and soundness of the transaction’s legal structure.
The transaction has a ‘par with excess interest spread (EIS)’ structure. AU SFB will assign the pool to ‘INDIA STANDARD LOAN TRUST LXXIV’, which will issue the PTCs to investors. Series A PTC payouts are supported by credit collateral and EIS.
The total credit support available in the transaction is as below:
Series A PTC holders are entitled to receive timely interest and ultimate principal payments on a monthly basis. |
Key Rating Drivers & Detailed Description Strengths:
Weaknesses:
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Liquidity: Strong Liquidity position 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:
Downward factors:
CRISIL Ratings has adequately factored these aspects into its rating analysis. |
About the Pool The pool securitised comprises of Tractor, MUV, SUV, construction equipment and commercial vehicle loans. The pool has weighted average seasoning of 17.4 months. The pool has moderate geographic concentration with top three states accounting for 70.6% of pool principal. Average ticket size is Rs 6.2 lakhs with weighted average interest rate of 13.8%. All the contracts in the pool were current as on pool cut-off date (May 31st, 2024). CRISIL Ratings has adequately factored all these aspects in its rating analysis.
Additional disclosures for Provisional ratings: The provisional rating is contingent upon execution of the following documents, as applicable:
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 in line with its policy on provisional ratings.
Rating that would have been assigned in absence of the pending documentation: In the absence of 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 execution of certain documents by the issuer, as applicable. In case the documents received deviates significantly from the expectations, CRISIL Ratings may take an appropriate action including placing the rating on watch or a rating change on a case-to-case basis. In the absence of the pending documentation, the rating on the instrument would either have been different or not assigned ab initio.
About the originator AU SFB (formerly Au Financiers (India) Ltd) was incorporated in 1996 as an NBFC, promoted by Mr. Sanjay Agarwal, with 28+ years legacy of being a retail focused institution. AU SFB started its banking operations in April 2017 and listed its shares on Bombay Stock Exchange and National Stock Exchange in July 2017. AU SFB has an established market position in Rajasthan, and has expanded operations to Maharashtra, Gujarat, and other states over the years. AU SFB's main focus is retail asset-financing segment, primarily in the vehicle financing segment (around 32% of gross advances) alongside Small Business Loans to MSMEs (31%). Other segments include housing, gold loans, personal loans, overdraft, and commercial Banking Products.
AU SFB’s liability product offerings include the entire gamut of current account, savings account, recurring and term deposits, transaction banking, bouquet of third-party mutual funds and insurance covers.
As on March 31, 2024, AU SFB had established operations across 1074 banking touchpoints while serving ~49.4 Lakh customers in 21 States & 3 Union Territories with an employee base of around 29,738, employees. |
Key Financial Indicators
Past rated pools This is the forth PTC transaction rated by CRISIL Ratings post 2020. CRISIL Ratings had rated over 25 transactions from 2011 to 2014 and 2 transactions in 2019 originated by AU SFB and received performance reports on a monthly basis pertaining to those transactions. |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*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 #Additional credit support includes Rs 48.77 crore for Series A PTCs in form of scheduled excess interest spread (EIS) (assuming zero prepayments) @Includes a second loss facility of Rs.10.62 crore %ISIN yet to be issued |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Criteria Details
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