Rating Rationale
September 04, 2020 | Mumbai
Vivriti Patroclus 10 2019
(Originator: Muthoot Capital Services Limited)
Rating continues on 'Watch Negative'
 
Rating Action
Trust Name Details Amount Rated (Rs Crore) Outstanding Principal (Rs Crore)*  Original Tenure
(Months)#		 Credit Collateral (Rs Crore) Ratings/ Credit Opinion Rating Action
Vivriti Patroclus 10 2019 Series A1 PTCs 73.34 44.13 30 5.81 CRISIL AA+ (SO)/Watch Negative Continues on 'Rating Watch with Negative  Implications'
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
*After August 2020 payouts (not adjusted for moratorium)
#Indicates door to door tenure until final maturity date as defined at the time of securitisation; actual tenure depends on the level of prepayment in the pool, extension due to maturity and exercise of the clean-up call option
Detailed Rationale

CRISIL's ratings on the Series A1 pass-through certificates (PTCs) issued by 'Vivriti Patroclus 10 2019' continue to be on 'Rating Watch with Negative Implications'. The pool is backed by two-wheeler loan receivables originated by Muthoot Capital Services Ltd (MCSL; 'CRISIL A/ FA+/Stable/CRISIL A1').
 
On May 28, 2020, CRISIL had placed its ratings on the PTCs on watch, due to the expected adverse impact on the collections in the underlying pools due to lockdowns on account of COVID-19 pandemic and the granting of moratorium to borrowers announced by the originator.
 
The phased withdrawal of the extended lockdown has enabled two wheeler borrowers to resume their economic activities. Consequently, there has been some improvement in collections in the pool, from collection as low as 56.6% witnessed in April 2020 to 81.1% in July 2020. However, it continues to be lower than the collection efficiencies estimated at the time of initial rating.
 
Additionally, despite withdrawal of restrictions, the broader economy as well as the operations of financiers are yet to return to normalcy. Until normalcy is restored, there is high probability of pressure building up on income generation of the borrowers that may contribute to plateauing of collection efficiencies and negatively impact the asset quality of the underlying two wheeler loans, including in the securitised pools.
 
In the past 9 months post securitisation, the PTC has amortised by 46.8% after Aug'20 payout. The underlying credit collateral amounts to 17.0% of the future payout. Collection efficiency, as per August payout, (on the pre-moratorium scheduled billing) was 81.1% in the pool, The investor has granted consent for offering moratorium to the underlying borrowers and extend the repayment schedule for both the underlying borrower and PTC repayment schedule. During the moratorium period, interest of the underlying borrowers in the pool are permitted to accrue and any other collections from the pool are to be passed to the investor. CC shall be utilized for payment of scheduled interest and principal to the extent of those contracts which have not opted for moratorium.
 
Sustenance of improving collection efficiency trend in pool and portfolio, credit enhancement utilization and asset quality of the underlying loans remain key monitorables.

Key Rating Drivers & Detailed Description
Strengths:
Supporting Factors
  • Credit support available in the structure
    • Available credit collateral of Rs 5.81 Crore (17.0% of future investor payouts) provides credit support to Series A PTCs. The PTCs also benefit from future scheduled subordination aggregating Rs 14.8 Crore (43.3% of future investor payouts).
Constraining Factors
  • Potential impact of the pandemic on post moratorium collections
    • In the medium term, there would be pressure on collections and asset quality of the pool of receivables backing the PTCs on account the Novel Coronavirus (Covid-19) pandemic and extent to which collection performance of the pool would be impacted post moratorium ends remain a key factor.
Liquidity: Strong
The credit collateral available in this transaction is Rs 5.81 Crore (7.0% of initial pool principal, 17.0% of future investor payouts) which is in the form of fixed deposit placed with ICICI bank..
 
Rating Sensitivity factors

Upward
  • Credit enhancement  (based on both internal and external credit enhancements) available in the structure exceeding 3.5 times the estimated base case shortfalls on the residual cash flows of the pool.
  • Sharp improvement in the credit quality of the servicer / originator
Downward
  • Credit enhancement falling below 2.2 times the estimated base case shortfalls
  • A sharp downgrade in the rating of the servicer/originator
  • Material impact in pool collections post moratorium
About the pool
The pool cash flow is securitised and comprises receivables from two-wheeler loans originated by MCSL. The pool has a weighted average net seasoning of 15.8 months, with Karnataka, Kerala, and Andhra Pradesh accounting for 52.6, of the pool principal outstanding.
 
Pool Performance Summary (as after August 2020 payouts)
Parameters Vivriti Patroclus 10 2019
Asset class Two Wheeler Receivables
Structure Par with Excess Interest Spread
Months post securitisation 9
Balance tenure (months) @ 21
Amortisation 46.8%
Credit collateral as a percentage of future payouts 17.0%
Cash collateral utilisation Nil
Cumulative collection ratio (CCR)! 99.4%
3 months average MCR! 101.3%
Cumulative prepayments 1.4%
0+ DPD# 0.3%
Threshold collection ratio (TCR)!  68.2%
CCR = {Total collections in the pool / (Total billings + opening overdues amounts at the time of securitisation)}
!MCR = Monthly collections in the pool / Monthly billings (excluding contracts who have opted for moratorium)
!TCR = The minimum cumulative collection ratio required on a pool's future cash flows, to be able to service the investor payouts on time
@Actual tenure will depend on extension due to moratorium
#0+ OD is as a percent of Initial POS
 
Key Rating Assumptions
CRISIL has analysed the collection and delinquency performance as well as moratorium policies of the investor for MCSL-originated securitisation transactions until August 2020 payout for evaluating this transaction. CRISIL has also evaluated the performance reports of MCSL's various securitisation transactions. For this pool, collection is gradually expected to increase in the post-moratorium phase. The base case peak shortfall is expected to be in the range of 6.0% to 8.0% of pool cash flows
 
Counterparty details

Capacity

Counterparty Name

Counterparty Rating/ Track record

Effect on credit ratings in case of non-performance

Originator MCSL Rated 'CRISIL A/FA+/Stable/CRISIL A1' No effect.
Servicer
 		 MCSL Rated 'CRISIL A/FA+/Stable/CRISIL A1' Significant effect, because of change in servicing quality and replacement cost of servicer. However, currently CRISIL does not envisage the need for replacement. Under certain circumstances, the trust or investor has the right to change the servicer by providing an intimation to CRISIL.
Collection and Payout Account Bank ICICI Bank Limited Rated 'CRISIL AAA/CRISIL AA+/Stable' Negligible effect. Account bank can be changed without impacting the rating.
Collateral in the form of Fixed Deposit ICICI Bank Limited Rated 'CRISIL AAA/CRISIL AA+/Stable' Negligible effect. Bank with whom the fixed deposit is maintained can be changed without impacting the rating.
Trustee ITSL Adequate track record Negligible effect. Can be replaced at minimal cost.
 
About the originator
Set up in 1994, MCSL is a deposit-taking, systemically important NBFC. Though the Company started its operations in 1995, it started its lending activities in 1998 after acquiring an NBFC license. Though initially the Company was doing some amount of Gold Loans, subsequently, as the group scaled up its gold financing business in Muthoot Fincorp Limited (MFL), MCSL entered the two-wheeler financing segment again in fiscal 2008 and gradually exited the gold loan business. MCSL is listed on Bombay Stock Exchange and National Stock Exchange, and is the only listed company of Muthoot Pappachan Group (MPG). As on December 31, 2019, its advances portfolio of Rs 2,751 crore comprised 89% two-wheeler loans and 11% corporate loans.
 
Past rated pools
CRISIL has outstanding ratings on 14 transactions originated by MCSL. CRISIL is receiving monthly payout reports pertaining to these transactions.
Key Financial Indicators
Particulars Unit March 31 , 2020* March 31, 2019 March 31, 2018
Total Assets Rs crore 2,913 2,261 1,978
Total Income Rs crore 587 535 398
Profit After Tax Rs crore 60 82 54
Gross NPA % 6.7 5.4 4.6
Adjusted Gearing Times 4.7 4.7 4.5
Return On Managed Assets % 2.0 3.2 2.9
*As per IND AS

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments and are included (where applicable) in the Annexure -- Details of Instrument in this Rating Rationale. For more details on the CRISIL complexity levels, please visit www.crisil.com/complexity-levels.
Annexure - Details of Instrument(s)
Type of Instrument Rated Amount
(Rs crore)		 Date of Allotment Maturity Date* Coupon
Rate (%)		 Outstanding
Rating		 Complexity Credit cum liquidity Enhancement (Rs crore)
Series A1 PTCs 73.34 27-Nov-19 13-Apr-22 10.40% CRISIL AA+ (SO)/Watch Negative Highly Complex 5.81
*Indicates door to door tenure. Actual tenure will depend on the level of prepayments in the pool, extension due to moratorium and exercise of the clean-up call option 
Annexure - Rating History for last 3 Years
  Current 2020 (History) 2019  2018  2017  Start of 2017
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Series A1 PTCs  LT  32.94 CRISIL AA+ (SO)/Watch Negative 28-05-20 CRISIL AA+ (SO)/Watch Negative 06-12-19 Provisional CRISIL AA+ (SO)          
        07-02-20 CRISIL AA+ (SO)              
All amounts are in Rs.Cr.
Links to related criteria
CRISILs rating methodology for ABS transactions
Evaluating risks in securitisation transactions - A primer
Legal analysis in structured finance transactions

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