Detailed Rationale CRISIL Ratings has assigned its ‘Provisional CRISIL AAA (SO)’ ratings to series A pass-through certificates (PTCs) issued by ‘Liquid Gold Series 7’ under a securitisation transaction originated by IIFL Finance Limited (IIFL; rated ‘CRISIL AA/CRISIL PPMLD AA/Stable/CRISIL A1+’).
This securitisation transaction is backed by receivables from gold loans originated by IIFL. The ratings are based on the credit support available to the PTCs, the credit quality of the underlying pool receivables, IIFL Finance’s origination and servicing capabilities, and soundness of the transaction’s legal structure
The transaction has a ‘par with turbo amortisation’ structure, wherein the trust settled by Catalyst Trusteeship Limited (CTL), the trust will issue Series A PTCs in exchange of a purchase consideration equal to 92.5%, of the pool principal at the time of securitisation.
Total credit support available in the transaction is as follows:
Series A PTC holders are entitled to receive ultimate interest and ultimate principal. There is a monthly payout schedule for interest and principal. However, non-payment of the expected payments does NOT constitute a default on the PTCs. CTL will be appointed as trustee to monitor the transaction on behalf of the PTC holders. IIFL will continue to service the pool contracts as the servicing agent. |
Key Rating Drivers & Detailed Description Supporting Factors
Rating Sensitivity factors Downward
Liquidity: Strong The credit collateral available in the transaction is Rs 23.33 crore (7.0% of pool principal). The credit enhancement is sufficient to cover 11 months of scheduled interest payouts even with no collections from underlying receivables.
CRISIL Ratings has adequately factored these aspects into its rating analysis. |
About the pool The pool cash flow is securitised and comprises receivables from gold loans originated by IIFL Finance. The pool has a weighted average holding period (number of months from CERSAI date) of 3.04 months, with Gujarat, Telangana and Maharashtra accounting for 40.9% of the pool principal outstanding. Average ticket size of the pool is Rs 1,42,938. All contracts in the pool were current as on the cut-off date (May 18, 2023).
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. |
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Counterparty details
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About the Originator IIFL Finance is the listed holding company of the IIFL Finance group and is registered as a systemically important non-deposit-taking, non-banking financial company. The group offers various retail lending products, including gold loans, home loans, LAP, business loans and microfinance loans which are the core segments and form 93% of the AUM while the rest comprises capital market-based lending (margin funding and loans against shares) and construction and developer finance. On a consolidated basis, IIFL Finance had total income (net of interest expenses) and profit after tax (PAT) of Rs 4,015 crore and Rs 1,188 crore, respectively, in fiscal 2022 against Rs 3,364 crore and Rs 761 crore in the previous fiscal. During the first half of fiscal 2023, it reported total income (net of interest expense) and PAT of Rs 2,475 crore and Rs 727 crore, respectively. On a standalone alone basis, IIFL Finance reported total income (net of interest expenses) and PAT of Rs 2,474 crore and Rs 745 crore, respectively, in fiscal 2022 against Rs 1,881 crore and Rs 343 crore in the previous fiscal. During first half of fiscal 2023, it reported total income (net of interest expenses) and PAT of Rs 1,289 crore and Rs 377 crore, respectively. On a standalone alone basis, IIFL Home reported total income (net of interest expenses) and PAT of Rs 1,159 crore and Rs 578 crore, respectively, in fiscal 2022 against Rs 1,014 crore and Rs 401 crore in the previous fiscal. During the first half of fiscal 2023, it reported total income (net of interest expense) and PAT of Rs 741 crore and Rs 359 crore, respectively.
Key Financial Indicators IIFL Finance (consolidated; CRISIL Ratings adjusted numbers)
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
@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 &Series A PTC holders are entitled to receive ultimate interest and ultimate principal. Excess cashflows on a monthly basis will be utilised to prepay principal to the investors. *Additionally, credit support includes Rs 85.48 crore in the form of scheduled cash flows subordination (assuming zero prepayments) – includes overcollateralization of Rs. 25.00 Crore |
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
Criteria Details
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