Detailed Rationale CRISIL Ratings has assigned its ‘Provisional CRISIL AAA (SO)’ rating to Series A securitisation notes (SNs), issued by ‘Nirvana Trust April 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 SNs, payment mechanism for the transaction, and soundness of the transaction’s legal structure.
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.
1PAR 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:
- External cash collateral in the structure amounting to Rs 24.17 crore (10.85% of pool principal) and benefit from EIS aggregating Rs. 55.74 crore (25.0% of pool principal).
- The underlying borrowers have a weighted average bureau score of 757 with more than 94% of pool having credit bureau scores greater than 700. - 99.5% of the pool POS has not been more than one month delinquent since origination.
- 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.
Weaknesses:
- There is basis risk in the transaction as both pool (linked originator’s base rate) and SN yields (linked to investor’s MCLR) are floating. |
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 pool principal will be able to meet 10 months of promised payouts to investor in a nil collection efficiency scenario. |
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 8.1 months. The top three states in the pool account for 57.6% of the pool principal. Almost 96% of the pool principal has not witnessed any delinquency since origination. The pool has 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.
Counterparty Details
Additional disclosures for provisional ratings: CRISIL Ratings is yet to receive the following documents and understands from the originator that the same are in the process of being shared shortly.
Legal Documents
Other Documents
In due consideration of the above, CRISIL Ratings has extended the validity period for conversion of the provisional rating to final rating by 90 days.
The provisional rating shall be converted into final rating following receipt of transaction documents duly executed and/or confirmations on completion of pending steps within the 90 days extended validity period.
The final rating assigned after end of 90 days shall be consistent with the available documents or completed steps, as applicable.
Rating that would have been assigned in absence of pending steps/documentation: SEBI’s circular dated April 27, 2021 prescribes the requirement of specifying the rating that would have been assigned in absence of the pending steps/ documentation considered while assigning provisional rating. However, CRISIL Ratings believes that in this case, the absence of the pending steps/ documentation would not result in any rating being assigned.
Risks associated with provisional nature of the credit rating A prefix of ‘Provisional’ to the rating symbol indicates that the rating is contingent upon occurrence of certain steps or execution of certain documents by the issuer, as applicable. In case partial / complete documentation received and/or completion of steps deviates significantly from the expectations, the rating may be subject to rating actions, including placing the rating on watch or a rating/outlook change, depending on status of progress on a case to case basis. In the absence of the pending steps / 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.
Further, as per the resolution plan approved by the NCLT, the existing liabilities of DHFL were discharged by erstwhile PCHFL and a consideration of Rs. 34,250 crores (comprising upfront cash of Rs. 14,700 crore and issuance of debt instruments of Rs. 19,550 crore) was paid to DHFL’s creditors. The erstwhile PCHFL was reverse merged with DHFL with effect from September 30, 2021, and the amalgamated entity (DHFL) was renamed as PCHFL.
In 2022, the group had undergone restructuring with the pharma business within PEL being carved out into a new entity Piramal Pharma Ltd (PPL). Further PHL Fininvest Ltd got merged into PEL, thus PEL is now an NBFC with PCHFL as its 100% subsidiary.
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 - Standalone
*annualized; (): Negative
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
^ISIN yet to be issued *variable yield; linked to investor’s MCLR to be reset on semi-annual basis #SN 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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