Navya Trust May 2024 (Originator: Piramal Capital & Housing Finance Limited) 'Provisional CRISIL AAA (SO)' assigned to Series A1 PTCs
Rating Action
Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. 1 crore = 10 million @ A prefix of 'Provisional' indicates that the rating centrally factors in the strength of specific structures and is contingent upon occurrence of certain steps or execution of certain documents by the issuer, as applicable, without which the rating would either have been different or not assigned ab initio. This is in compliance with a May 6, 2015 directive ‘Standardizing the term, rating symbol, and manner of disclosure with regards to conditional/ provisional/ in-principle ratings assigned by credit rating agencies' by Securities and Exchange Board of India (SEBI) and April 27, 2021 circular ‘Standardizing and Strengthening Policies on Provisional Rating by Credit Rating Agencies (CRAs) for Debt Instruments’ by SEBI. |
Detailed Rationale CRISIL Ratings has assigned its ‘Provisional CRISIL AAA (SO)’ rating to Series A1 Pass-through-certificates (PTCs), issued by ‘Navya Trust May 2024’ under a securitisation transaction originated by Piramal Capital & Housing Finance Limited (PCHFL; rated ‘CRISIL A1+’), backed by a pool of housing loan receivables.
The ratings are based on credit quality of the pool backing the transaction, the origination and servicing capabilities of PCHFL, 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 EIS structure’. Series A1 PTC holders are promised interest and principal payouts (promised to the extent of 95% of the monthly billed principal) on a monthly basis. Investor payouts for PTCs are supported by cash collateral, overcollaterlisation, and subordination of excess interest spread (EIS). PCHFL 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 over collateral and EIS; and external – in the form of cash collateral) provide loss absorption against stressed shortfalls in the pool, commensurate with the rating assigned to the PTCs. |
Key Rating Drivers & Detailed Description Strengths:
− External cash collateral in the structure amounting to Rs 2.67 crore (7.0% of pool principal) and subordination of overcollatersalisation and EIS aggregating to Rs. 1.90 crore (5.0% of pool principal) and Rs. 11.52 crore (30.3% of pool principal) respectively.
The underlying borrowers have a weighted average bureau score of 769. The pool has weighted average seasoning of 17.4 months and all the contracts in the pool have been ever-current since origination. The pool has moderate weighted average LTV of 42.1%.
The legal structure envisaged for the transaction entails bankruptcy remoteness of the receivables and credit enhancement from the originator, and adherence to prevailing regulations on securitisations. These shall be certified through an independent legal opinion from an external legal counsel.
Weakness:
The pool is moderately concentrated with top 10 borrowers accounting for 12.3% of the pool principal. However, these top borrowers have a weighted average seasoning of 17.5 months with no delinquencies since origination and have a weighted average LTV of 47.5% and CIBIL score of 764 indicating favourable performance track record and underwriting quality.
There is interest rate risk in the transaction as the contracts in the pool have floating interest rates, linked to the internal benchmark rate of the originator, while the PTC yield is fixed. The internal credit enhancement through EIS could therefore be affected in case of a falling interest rate scenario. |
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
Downward
These aspects have been factored in by CRISIL Ratings in its rating analysis. |
About the Pool The weighted average seasoning (instalments paid) of the pool is 17.4 months. The top three states in the pool account for 76.4% of the pool principal, and the top 10 borrowers account for 12.3%. The pool has weighted average current interest rate of 11.5%, average ticket size of Rs 11.0 lakh, weighted average LTV of 42.1% and CIBIL score of 769.
Counterparty Details
Additional disclosures for provisional ratings: The provisional ratings are contingent upon execution and receipt of the following documents:
Executed documents:
Other documents:
Additional documents, if any, executed for the transaction should also be provided along with the above documents. 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 ratings as mentioned above, CRISIL Ratings would not have assigned any ratings.
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 deviate significantly from the expectations, CRISIL Ratings may take appropriate action including placing the rating on watch or a rating change, depending on status of progress on a case-to-case basis. In the absence of the pending documentation, the rating on the instrument would not have been assigned ab initio. |
About the Originator PCHFL was incorporated in February 2017. The entity was formed as a 100% subsidiary of Piramal Finance Ltd (PFL). PFL, itself, was a wholly-owned subsidiary of Piramal Enterprises Ltd. Till 2016, the financing portfolio was booked in PEL with limited operations in PFL. In fiscal 2017, following a business restructuring, Rs 13,706 crore of assets and Rs 12,575 crores of liabilities were transferred to PFL from PEL.
In August 2017, PCHFL received a certificate for commencement of housing finance business from National Housing Bank (NHB). Subsequently, the Board of Piramal Enterprises Ltd (PEL), the parent of PFL, approved a scheme of amalgamation of PFL and Piramal Capital Ltd (PCL) into PCHFL. PCL was a subsidiary of PEL and had limited operations. The merger process was completed in July 2018 with effect from March 31, 2018. Post the merger PCHFL became a wholly owned subsidiary of PEL.
Furthermore, on May 08, 2024, the board of Piramal Enterprises Limited (PEL) approved the composite scheme of arrangement for merger of PEL with PCHFL; and renaming PCHFL as Piramal Finance Limited (PFL).
About the PEL group Founded by Mr Ajay Piramal, PEL is engaged in the financial services business through its subsidiaries. The company also holds a substantial stake in the Shriram group companies.
In the financial services business, the company has four verticals: (i) real estate financing - lending to developers with established track record, with greater focus on providing loans for construction finance and lease rental discounting; (ii) corporate finance group, which lends to corporate clients across sectors (infrastructure, cement, renewables, automotive, logistics, services and entertainment); (iii) emerging corporate group that provides finance to mid-tier companies; and (iv) housing finance and other retail loans.
Key Financial Indicators
Piramal Capital & Housing Finance Limited - Consolidated
( ): Negative; *calculated as PAT over average total assets |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
^ ISIN yet to be issued $intruments yet to be issued #PTC Tenure will vary on the basis of prepayments, interest rate movement in the pool and exercise of the clean-up call option. |
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
Criteria Details
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