Detailed Rationale CRISIL Ratings has converted the provisional rating assigned to Series A Securitisation Note (“SNs”) issued by ‘Nirvana Trust April 2024’ to a final rating of 'CRISIL AAA (SO)'. The SNs were issued under a securitisation transaction backed by a pool comprising housing loan receivables originated by originated by Piramal Capital & Housing Finance Limited (PCHFL; rated ‘CRISIL A1+’)
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 SNs, payment mechanism for the transaction, and soundness of the transaction’s legal structure.
CRISIL Ratings has now received the final legal/executed documents for this transaction. These executed documents are in line with terms of the transaction envisaged when provisional rating was assigned. Hence, CRISIL Ratings has converted the provisional rating to a final rating.
Legal Documents
Other Documents
The transaction has a ‘Par with Excess Interest Spread (EIS) structure’ with trigger-based turbo amortisation. If PAR 90[1] of the pool exceeds 3%, then EIS will be utilised to amortise series A SNs till it is fully paid.
Series A SN holders are promised interest and principal payouts on a monthly basis. Investor payouts for SNs are supported by cash collateral and subordination of excess interest spread (EIS). PCHFL will continue to service loan contracts in the pool as the servicing agent.
CRISIL Ratings has estimated base case shortfalls in the pool at 3.5%-4.5% of pool principal. These adjusted shortfalls are further stressed to arrive at the rating of SNs.
The total credit enhancement available in the transaction (internal – in the form of EIS; and external – in the form of cash collateral) provides loss absorption against stressed shortfalls in the pool, commensurate with the rating assigned to the SNs. [1] PAR 90 = (principal outstanding of 90+ DPD cases + total overdue amount of 90+ DPD cases) / (total initial principal outstanding of the pool) |
Key Rating Drivers & Detailed Description Strengths:
These shall be certified through an independent legal opinion from an external legal counsel.
Weaknesses:
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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 currently estimated base shortfalls. Cash collateral of 10.85% of the initial pool principal will be able to meet 10 months of promised payouts to investor in a nil collection efficiency scenario
CRISIL Ratings has adequately factored these aspects into its rating analysis. |
Rating Sensitivity factors Upward factors:
Downward factors:
These aspects have been factored in by CRISIL Ratings in its rating analysis. |
About the Pool As of the pool cut off date, the weighted average seasoning (instalments paid) of the pool was 8.1 months. The top three states in the pool accounted for 57.6% of the initial pool principal. Almost 96% of the pool principal had not witnessed any delinquency since origination. The pool had weighted average loan-to-value ratio of 63.2%, weighted average current interest rate of 11.3% and an average ticket size of Rs 16.8 lakh as of the cut off date.
Counterparty Details
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About the Originator 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: (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)
*variable yield; linked to investor’s MCLR to be reset on semi-annual basis #SN Tenure 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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