Niveda Trust PTC 2024 (Originator: Piramal Enterprises Limited) 'Provisional CRISIL AA+ (SO)' assigned to Series A PTC
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 Refer to Annexure for Details of Instruments & Bank Facilities @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 A Pass-through-certificates (PTCs), issued by ‘Niveda Trust PTC 2024’ under a securitisation transaction backed by a pool of unsecured business loans (UBL) initially originated, underwritten & serviced by Piramal Capital & Housing Finance Limited (PCHFL; rated ‘CRISIL A1+’) and later on sold to PEL under a direct assignment transaction.
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.
Investor payouts for PTCs are supported by cash collateral, overcollateralization, 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 9.43 crore (10.0% of pool principal) and subordination in the form of overcollateralization and EIS aggregating to Rs. 9.43 crore (10.0% of pool principal) and Rs. 11.99 crore (12.7% of pool principal) respectively.
− The underlying borrowers have a weighted average bureau score of 759. − The pool has weighted average seasoning of around 19 months and all the contracts in the pool have been ever current 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.
Weakness:
− Limited portfolio performance track record for the unsecured business loan book of PCHFL. Major disbursements have happened in the previous two fiscals and are yet to witness complete performance cycle.
− There is interest rate risk in the transaction as the contracts in the pool have fixed interest rates, while the PTC yield is floating, linked to a benchmark rate. The internal credit enhancement through EIS could therefore be affected in case of a rising interest rate scenario. This is however, to an extent, mitigated by the cap specified on the investor yield in the terms of the transaction.
These aspects have been adequately factored in its rating analysis by CRISIL Ratings. |
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 factors
Downward factors
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About the Pool The transaction is backed by unsecured business loan receivables loans initially originated, underwritten & serviced by PCHFL later on sold to PEL under a direct assignment transaction. The key pool characteristics are outlined below:
Counterparty details
Transaction waterfall mechanism Series A PTC holders are promised timely interest on a monthly basis and principal on ultimate basis on the maturity date of the PTCs. The collections from the pool, including the internal subordination through overcollateral, will be used to make promised interest payouts to PTC holders, followed by expected principal payouts as per the scheduled monthly principal collections.
However, in case of a collection shortfall, while the cash collateral can be used to make the promised interest payouts, any shortfall in expected principal collections will be carried forward as arrears. The cash collateral can be utilised to meet any outstanding principal arrears on the maturity date of the PTCs.
Any prepayments will be utilised for accelerated redemption of PTCs.
The EIS would normally flow back to the originator after meeting the promised interest payouts and expected principal payouts to PTCs.
Additionally, transaction is also supported by trigger based turbo amortisation clause wherein, 100% EIS shall be utilized to make principal payments to the Series A investors till Series A PTC are live, if PAR 60 of the pool exceeds 5% of intial pool principal or/and rating of series A PTC falls below AA+.
Additional disclosures for Provisional ratings: The provisional rating is contingent upon execution of the following 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 deviates significantly from the expectations, CRISIL Ratings may take an appropriate action including placing the rating on watch or a rating change on a case-to-case basis. In the absence of the pending documentation, the rating on the instrument would either have been different or not 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
*annualised
Performance of past rated pools This is first securitisation transaction originated by PCHFL backed by UBL pool evaluated by CRISIL Ratings. |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instruments
$instruments yet to be issued. |
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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Criteria Details
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