Newport 03 2025 (Originator: Muthoot Capital Services Limited)
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.a 1 crore = 10 million Refer to annexure for Details of Instruments & Bank Facilities #Indicates final maturity date for the instrument in number of monthly payouts. Actual maturity date will depend on the level of collection shortfalls in the pool, the level of prepayments in the pool, and exercise of the clean-up call option. *Equity Tranche investors are expected to receive residual yield on a monthly basis, however, the rating on Equity Tranche only addresses the likelihood of principal repayment, and not the payment of residual yield @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 AA (SO)’ rating to Series A1 SN and ‘Provisional Crisil A+ (SO)’ rating to Equity Tranche issued by ‘Newport 03 2025’ under a securitisation transaction originated by Muthoot Capital Services Private Limited (MCSL; ‘Crisil A+/Crisil PPMLD A+/Stable/Crisil A1+’), backed by a pool of two-wheeler loan receivables.
The ratings are based on credit support available to PTCs, credit quality of the underlying pool receivables, Muthoot Capital’s origination and servicing capabilities, and soundness of the transaction’s legal structure
Payment Structure: The transaction has a ‘par with monthly subordinated excess interest spread (EIS)’ structure, however in case of an pre defined EIS trigger event, residual cashflows will be used to repay Series A1 SN principal till its fully paid, post which 100% of the EIS will be applied to principal payments for the Equity Tranche investors until all Equity Tranche are fully paid. The trust settled by the transaction’s Trustee, i.e. Catalyst Trustee Limited will issue Series A1 SN for 91.0% of the pool principal and Equity Tranche for 3.0% of the pool principal
Series A1 SN holders are promised timely interest and timely principal payments on a monthly basis to the extent of 91.0% of the scheduled principal on a monthly basis. Equity tranche is fully subordinated to Series A1 SN.
Post redemption of Series A1 SN, cashflows shall be used to repay principal to Equity tranche investors and residual amount, if any, shall be paid as residual yield. However, the rating on Equity tranche only addresses the likelihood of principal repayment, and not the payment of residual yield amounts.
Adequacy of credit enhancement The investor payouts for SNs are supported by cash collateral, subordination of junior tranche principal/ over collateral principal, and subordination of excess interest spread (EIS). On a monthly basis, the cash collateral can be used to make the promised interest & principal payments in case of a shortfall in collections from the pool to Series A1 SN. Once the Series A1 SN is fully paid, the cash collateral can also be used to make the promised principal repayment for Equity tranche in case of a shortfall in collections from the pool.
Credit enhancement available in the transaction for Series A1 SN is as below:
Based on Crisil Ratings assessment, the total credit enhancement available in the transaction (internal – in the form of EIS and principal subordination; 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:
Weakness:
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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.
These aspects have been adequately factored in its rating analysis by Crisil Ratings. |
Rating Sensitivity factors Upward factors
Downward factors
These aspects have been adequately factored in its rating analysis by Crisil Ratings.
Quality of the asset pool and strength of cashflows The transaction is backed by receivables from a pool of two-wheeler loans originated by MCSL. The pool’s key characteristics as of the cut-off date (6-March-2025) are outlined below:
Assuming no prepayments, scheduled cash flow subordination amounting to INR 15.69 crore – for Series A1 SN & INR 13.50 crore – for Equity tranche. The portfolio performance of MCSL has been highlighted in the Rating assumptions section below. Based on Crisil Ratings assessment, the total credit enhancement available in the transaction (internal – in the form of EIS and principal subordination; 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.
Additional disclosures for Provisional ratings: The provisional rating is 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 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 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 company- Originator/Servicer profile Incorporated in 1994, MCSL is a deposit-taking, systemically important non-banking financial company (NBFC). Though the company started operations in 1995, it commenced lending activities in 1998 after acquiring an NBFC license. Initially, it provided gold loans, but subsequently, as the group scaled up its gold financing business in MFL, MCSL entered the two-wheeler financing segment in fiscal 1998 and gradually exited the gold loan business. MCSL is listed on the Bombay Stock Exchange and the National Stock Exchange and is one of the listed companies of MPG. As on September 30, 2024, its AUM was Rs 2380 crore. Around 88% of the total portfolio was two-wheeler loans. |
Key Financial Indicators
Quality and experience of servicer: MCSL: rated ‘Crisil A+/Crisil PPMLD A+/Stable/Crisil A1+ will continue to service loans assigned to this trust. MCSL has originated several securitisation transactions. Servicing has been done, and reports have been shared across all these transactions in a timely manner
Risks and concerns for investors and mitigating factors: Based on Crisil Ratings’ assessment, the total credit enhancement available in the transaction (internal – in the form of EIS; and external – in the form of cash collateral) together can mitigate against shortfalls in collection from the pool even after stressing them commensurate with the rating assigned to the PTCs. Crisil Ratings has adequately factored key risks in the transaction including Credit & Market (as highlighted in rating assumptions section), Counterparty and Legal risks. Legal risks are assessed based on detailed analysis of transaction documentation. Risk factored from counterparties are mentioned in the table below:
Counterparty Details
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A summary of key terms of servicer contract As per indicative transaction terms, the key points on the role of the servicer to be covered as part of the transaction documents are as below:
Provision for appointment of back-up servicer: The Trustee (acting on the instructions of the investors) as per the terms of the Servicer Agreement and upon the occurrence of Servicer’s Event of default, shall retain the right to appoint an alternate servicer
Performance of outstanding rated transactions Crisil Ratings has ratings 7 outstanding securitisation transactions backed by MCSL -originated loans. The cumulative collection efficiency in the underlying pools for these transactions range of 97.0% - 98.0% as of February-2025 payouts |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
^ISIN yet to be issued. #Indicates legal final maturity date for the instrument. Actual maturity date will depend on the level of collection shortfalls in the pool, the level of prepayments 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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