Detailed Rationale CRISIL Ratings has assigned its ‘Provisional CRISIL AAA (SO)’ rating to Series A1, Series A2 and Series A3 pass-through certificates (PTCs), issued by ‘India Universal Trust AL2’ under a securitisation transaction originated by HDFC Bank Limited (HDFC Bank: rated 'CRISIL AAA/Stable/CRISIL AA+/Stable/CRISIL A1+'), backed by a pool of new car loan receivables. The second loss facility under this transaction has been assigned a credit opinion of ‘Provisional CRISIL BBB+ (SO) Equivalent’.
The ratings are based on credit quality of the pool backing the transaction, the origination and servicing capabilities of HDFC Bank, credit support available to the PTCs, payment mechanism for the transaction, and soundness of the transaction’s legal structure.
The transaction has a ‘par with flow-back excess interest spread (EIS)’ structure, wherein the trust settled by a trustee will issue Series A1 PTCs, Series A2 PTCs and Series A3 PTCs in exchange for a purchase consideration equal to 36.37%, 32.33% and 31.30% of the pool principal at the time of securitisation, respectively. The PTC holders are promised timely interest and timely principal payments on a monthly basis. Interest payments to PTC tranches are paid on pari-passu basis, at their respective yields.
Till Series A1 PTCs are outstanding, the scheduled principal amortisation of the pool along with principal prepayments for the month shall be split between the Series A1 PTCs, Series A2 PTCs and Series A3 PTCs in the proportion of 70%:25%:5%, respectively. On the date when Series A1 PTCs are fully redeemed, the remaining principal after redeeming Series A1 PTCs (which would have otherwise been utilised for payment of scheduled Series A1 Principal), is split in the proportion 90%:10% among Series A2 PTCs and Series A3 PTCs, respectively.
Once Series A1 PTCs is paid in full and until Series A2 PTCs and Series A3 PTCs are outstanding, the scheduled principal amortisation of the pool along with principal prepayments for the month shall be split between Series A2 PTCs and Series A3 PTCs in the proportion of 90%:10%, respectively. Once Series A1 PTCs and Series A2 PTCs are repaid in full, the pool principal amortisation amount along with prepayments for the month (100%) shall be paid with respect to Series A3 PTCs.
Investor payouts for PTCs are supported by cash collateral and subordination of excess interest spread (EIS). HDFC Bank will continue to service loan contracts in the pool as the servicing agent.
The total credit enhancement available in the transaction (internal – in the form of EIS; and external – in the form of cash collateral) provide loss absorption against stressed shortfalls in the pool, is commensurate with the rating assigned to the PTCs. |
Key Rating Drivers & Detailed Description Strengths:
Weaknesses:
These aspects have been adequately factored in its rating analysis by CRISIL Ratings. |
Liquidity: Strong Liquidity is strong given that the credit enhancement available in the structure is sufficient to cover losses exceeding 1.5 times the base case shortfalls in the pool. |
Rating Sensitivity factors Upward factors:
Downward factors:
About the pool The pool securitised comprises new car loan receivables. The pool has weighted average net seasoning of 17.5 (number of instalments paid). The pool has moderate geographic concentration with top three states accounting for 42.7% of pool principal. Average ticket size is Rs 9.32 lakh with weighted average interest rate of 8.9%. All the contracts in the pool were current as on pool cut-off date (October 31st, 2024). CRISIL Ratings has adequately factored all these aspects in its rating analysis.
Additional disclosures for Provisional ratings: For assigning the provisional rating, CRISIL Ratings has considered the provisional rating to be contingent upon execution of following documents:
Executed documents:
Other documents:
Additional documents, if any, executed for a transaction shall also be provided along with the above said documents.
The provisional rating shall be converted into a final rating following receipt of transaction documents duly executed and/or confirmations on completion of pending steps within 90 days from the date of issuance of the instrument. The final rating assigned after the end of 90 days (or following an extension of upto 90 days, if any, granted by the rating committee of CRISIL Ratings after considering case specific considerations) shall be consistent with the available documents.
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 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 Incorporated in 1995, HDFC Bank offers a wide range of banking services, including commercial and transactional banking in the wholesale segment, and branch banking in the retail segment, with focus on mortgage loans, car finance, business banking loans, commercial vehicle finance, credit cards, and personal loans. The bank acquired Centurion Bank of Punjab in May 2008. It has four overseas branches, one each in Bahrain, Kenya, Qatar and UAE, as well as three representative offices, one each in the Dubai, London and Singapore. Further, the bank also has an Offshore Banking Unit at International Financial Service Centre (IFSC), at GIFT City, Gandhinagar in Gujarat.
Key Financial Indicators
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
**Instrument yet to 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 *Additional credit support includes Rs. 229.41 crore in form of scheduled cash flow subordination (assuming zero prepayments) |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Criteria Details
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