Rating Rationale
December 02, 2019 | Mumbai
Vivriti Medusa 07 2019
(Originator: Muthoot Fincorp Limited)
'CRISIL A1+ (SO)' converted from Provisional rating to final rating for Series A1 PTCs 
 
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 Medusa 07 2019 Series A1 PTCs 76.49 43.76 11 5.70 CRISIL A1+ (SO)  Converted from Provisional Rating to Final Rating
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
*After November 2019 payouts 
Detailed Rationale

CRISIL has converted its provisional rating assigned to Series A1 pass-through certificates (PTCs), issued by 'Vivriti Medusa 07 2019' to final rating of 'CRISIL A1+ (SO)'.
 
CRISIL has received the final legal documents executed for this transaction. These executed documents are in line with terms of the transaction when provisional rating/credit opinion was assigned. Hence, CRISIL has converted the provisional rating/credit opinion to a final rating/credit opinion.
 
Please click on the following link for detailed information on CRISIL's policy on provisional rating:
Revision in CRISIL policy for assigning 'provisional' ratings
 
As required, CRISIL has received the following final executed legal documents and other documents relevant to the transaction:
Legal documents-

  • Trust deed
  • Assignment Agreement
  • Power of attorney
  • Servicing agreement
  • Accounts agreement

Other documnts-

  • Information memorandum
  • Legal opinion
  • Trustee's awareness letter
  • Auditor's certificate
  • Originator's representations and warranties letter

The pool is backed by gold loan receivables originated by Muthoot Fincorp Ltd (MFL; 'CRISIL A/CRISIL BBB+/Stable/CRISIL A1'). The ratings are based on the credit support available to the PTCs, the credit quality of the underlying pool receivables, MFL'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) issued Series A1 PTCs in exchange of a purchase consideration equal to 94.0%, of the pool principal at the time of securitisation. Total credit support available in the transaction at the time of securitization was as follows:

  • Internal credit support in the form of scheduled cash flow subordination, aggregating Rs 8.30 (10.2% of pool principal) crore for Series A1 PTCs
  • External credit-cum-liquidity collateral of Rs 5.70 crore (7.0% of pool principal) also provides support to Series A1 PTCs

Series A1 PTC holders are entitled to receive timely interest and ultimate principal, excess cashflows on a monthly basis will be utilised to prepay principal to the investors. A trustee has been appointed to monitor the transaction on behalf of the PTC holders. MFL will continue to service the pool contracts as the servicing agent.

Key Rating Drivers & Detailed Description
Supporting Factors
  • Credit support available in the structure at the time of securitization
    • Credit collateral of Rs 5.70 crore (7.0% of the pool principal) provides credit support to Series A1 PTCs. The PTCs also benefit from scheduled cashflow subordination aggregating Rs 8.30 crore for Series A1 PTCs.
  • Current nature of all contracts in the pool
    • All the contracts in the pool are current as of the cut-off date (June 30, 2019)
  • Low LTV of contracts in the pool
    • Weighted average LTV of contracts in the pool is 64.9% (gold price used as of June 30, 2019)
Constraining Factors
  • Moderate geographic concentration
    • 43.0% of the outstanding pool principal is from Karnataka, Tamil Nadu and Kerala.
CRISIL has adequately factored these aspects in its rating analysis.
 
About the Pool
The pool cash flow is securitised and comprises receivables from gold loans originated by MFL. The pool has a weighted average net seasoning of 3.9 months, with Karnataka, Tamil Nadu and Kerala accounting for 43.0% of the pool principal outstanding. Average ticket size of the pool is Rs 0.37 lakh. All contracts in the pool were current as on the cut-off date (June 30, 2019).

Rating Assumptions
To assess the base case shortfalls for the transaction, CRISIL has analysed moving portfolio delinquency and static pool information (0+ overdues) for gold loan portfolio provided by MFL for originations in the period FY 2016 to March 2019 (with performance data till March 2019). The 90+ dpd for the gold loan portfolio of MFL is 2.4% as of June 2019

CRISIL has also factored in pool specific characteristics and estimated the base case shortfalls in the pool by the maturity of the transaction in the range of 7.0% to 9.0 % of pool principal.
  • Based on its assessment of MFL's short-term credit risk profile, CRISIL has factored in the risk arising out of commingling of cash flows.
  • CRISIL has adequately factored in the risks arising on account of counterparties (refer to counterparty details below)
  • CRISIL 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 MFL Rated 'CRISIL A/CRISIL BBB+/Stable/CRISIL A1' No effect.
Servicer MFL Rated 'CRISIL A/CRISIL BBB+/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 right to change the servicer with an intimation to CRISIL.
Collection and Payout Account Bank DCB Bank Limited 'CRISIL AA-/Stable/CRISIL A1+' Negligible effect. Account bank can be changed without impacting the rating.
Collateral in the form of Fixed Deposit DCB Bank Limited 'CRISIL AA-/Stable/CRISIL A1+' Negligible effect. Bank with whom the fixed deposit is maintained can be changed without impacting the rating.
Trustee CTL Adequate track record Negligible effect. Can be replaced at minimal cost.

About the Originator
MFL, set up in 1997, is a non-deposit-taking, systemically-important NBFC, engaged in lending against gold jewellery. It is the flagship company of the MPG, which has diverse business interests such as hospitality, real estate, and power generation. The company also distributes mutual funds, and general and life insurance products, and operates in the money-transfer segment.
 
MFL had advances of Rs 13,153 crore, net worth of Rs 2,842 crore, gearing of 4.5 times, and 3551branches, as on June 30, 2019. MML had AUM of Rs 4,328 crore, MCSL (Rs 2,760 crore), and Muthoot Housing (Rs 1069 crore) as on June 30, 2019.
 
For fiscal 2019, MFL reported a profit after tax (PAT) of Rs 155 crore on a total income of Rs 2,485 crore, vis-a-vis Rs 126 crore and Rs 2,187 crore, respectively, for fiscal 2018. For the quarter ended June 30, 2019, the company reported PAT of Rs 40 crore on total income of Rs 657 crore.
 
For fiscal 2019, the MPG reported a PAT of Rs 464 crore on a total income of Rs 3,915 crore, as against Rs 175 crore and Rs 3,206 crore, respectively, for fiscal 2018.

Liquidity Strong
Liquidity is strong given that the credit enhancement available in the structure is sufficient to cover losses exceeding 1.5 times the currently estimated base shortfalls.
 
Rating Sensitivity factors
Upward
. For Series A1 PTCs - Credit enhancement (both internal and external credit enhancement) available in the structure exceeding 2.25 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
. For Series A1 PTCs - Credit enhancement (both internal and external credit enhancements) falling below 1.75 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
  
Past Rated Pools
CRISIL has ratings outstanding on four PTC transactions originated by MFL.
Key Financial Indicators
As on/for the period ended March 31   Q1/June 2019 2019 2018
Total managed assets# Rs crore 17,722 17,267 15,645
Total income Rs crore 657 2,485 2,187
Profit after tax Rs crore 40 155 126
Gross NPA % 2.5 2.6 1.7
Gearing# Times 4.5 4.8 4.6
Return on managed assets# % 0.9* 1.0 1.0
#Including off balance sheet assets
*Annualised
 
Key Financial Indicators  (For MFG)
As on/ for the period ended March 31   2019 2018
Total managed assets# Rs crore 21,569 17,618
Total income Rs crore 3,915 3,206
Profit after tax Rs crore 464 175
Gross NPA % 2.9 2.6
Gearing# Times 6.7 7.5
Return on managed assets# % 2.0 1.9
#Including off balance sheet assets
 

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 (%) Outstanding
Rating		 Credit cum liquidity Enhancement
(Rs Cr.)
Series A1 PTCs 76.49 26-July-19 17-July-20 9.90% CRISIL A1+ (SO) 5.70&
*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 8.30 crore in form of scheduled cash flows subordination (assuming zero prepayments) - Includes overcollateralization of Rs 4.88 crore (6.0% of pool principal)
Annexure - Rating History for last 3 Years
  Current 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Series A1 PTCs  ST  43.76 CRISIL A1+ (SO) 05-08-19  Provisional CRISIL A1+ (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
CRISILs Criteria for rating short term debt

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