PIRG SDI 2 Trust

(Originator: Vriksh Advisors Private Limited)

'Provisional CRISIL BB (SO)' assigned to Series 1 Senior Tranche

 

Rating Action 

Trust Name	Details	Amount Rated (Rs Crore)	Original Tenure (Months)	Credit Collateral (Rs Crore)	Ratings/ Credit Opinion&	Rating Action
PIRG SDI 2 Trust	Series 1 Senior Tranche	6.88	36	1.26	Provisional CRISIL BB (SO)	Provisional Rating Assigned

& 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.

1 crore = 10 million   

Refer to annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has assigned its ‘Provisional CRISIL BB (SO)’ rating to Series 1 Senior Tranche (PTCs) to be issued by ‘PIRG SDI 2 Trust’ under a securitisation transaction to be originated by Vriksh Advisors Private Limited (Vriksh; not rated by CRISIL).

 

The PTCs are backed by operating lease contracts of Furniture & Electronic appliance, E-Scooter and Lithium Batteries for E-scooters, to be leased by Vriksh Advisors Private Limited (Vriksh) to 4 lessee companies. The rating is based on the credit support available to the instrument, credit quality of the underlying receivables, Vriksh’s origination and servicing capabilities and soundness of the transaction’s legal structure.

 

The transaction has a ‘Par with trapped internal support’ structure. Vriksh will assign the rental receivables (including GST net of TDS) of Rs 9.16 crores to ‘PIRG SDI 2 Trust ', a trust settled by Beacon Trusteeship Limited in exchange for a purchase consideration of Rs 6.88 crores. Vriksh will continue to service the pool contracts as the servicing agent. The investors are entitled to receive timely interest and principal on a monthly basis. Default on the PTCs is defined as non-payment of interest and/or principal promised on each payout date.

 

The total credit support available in the transaction is as below:

• Internal credit support with trapped feature in the form of scheduled subordination aggregating Rs. 0.06 crores (0.9 % of PTC principal).

• External credit support of Rs. 1.26 crs (18.3% of PTC principal) in the form of a Bank Guarantee, including 10.0% of PTC principal provided by Grip Invest Advisors (Grip; Not Rated by CRISIL) through designated bank (IDFC First Bank Limited) and balance by Vriksh for amount equivalent to the security deposit for the lease agreements

Key Rating Drivers & Detailed Description

Strengths:

• Credit support available in the structure

• Internal credit support in the form of scheduled subordination aggregating Rs. 0.06 crores (0.9 % of PTC principal).
• External credit support of Rs. 1.26 crs (18.3% of PTC principal) in the form of a Bank Guarantee, including 10.0% of PTC principal provided by Grip and balance by Vriksh Advisors (Vriksh; Not Rated by CRISIL) through designated bank (IDFC First Bank Limited)

• Track record of payment by the lessees

• Lessees, part of the pool, have been regular and made all the expected payments under lease agreements made through Grip. There have been few delays in payments, but the entire amount due has been recovered

 

Weaknesses:

• Borrower concentration

• The pool is highly concentrated and comprises of only 4 lessee companies, with top concentration of 35.2%

 

• Interest and principal payouts are promised on monthly basis

• Shortfalls in collections and non-payment of promised principal and interest payouts to Series 1 Senior Tranche PTCs results in default. In the case of short-term operational delays and resulting shortfalls, there will be credit enhancement utilization to make the promised payouts.

Liquidity: Adequate

Credit enhancement available in the structure is sufficient to cover 4-5 months of payouts to the investor. Hence, liquidity is adequate to make payouts, in case of any short-term operational delays in receiving the monthly payments from the lessees

Rating Sensitivity factors

Upward factors:

• Upgrade in the rating of the servicer/originator.
• Better than expected performance of the underlying contracts in the pool resulting in build-up of collateral cover (internal and external)

 

Downward factors:

• Downgrade in the rating of the servicer/originator
• Weaker than expected performance of the underlying contracts in the pool resulting in decrease in collateral cover (internal and external)
• Non-adherence to the key transaction terms envisaged at the time of the rating

 

Additional disclosures for Provisional ratings:

The provisional rating is contingent upon execution of the following documents:

• Trust deed
• Deed of assignment
• Servicer agreement
• Information memorandum
• Legal opinion
• Trustee’s awareness letter
• Auditor’s certificate
• Originator’s representations and warranties letter

 

Additional documents executed for the transaction, if any, should also be provided. 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.

 

Rating that would have been assigned in absence of the pending steps/ documentation: In the absence of pending documentation considered while assigning provisional rating as mentioned above, CRISIL Ratings would not have assigned any rating.

 

Please click on link below for detailed information on CRISIL Ratings’ policy on provisional rating: Revision in CRISIL Ratings’ policy for assigning ‘provisional’ rating

 

Risks associated with provisional nature of 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 the documents received and/or completion of steps deviates significantly from the expectations, CRISIL Ratings may take an appropriate action 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 Pool

The pool securitised comprises Furniture/ Electronic appliances/ Electric scooters/ Lithium-ion battery/ Kitchen equipment for operating lease rentals to only 4 lessee companies amounting to Rs 9.16 crores with a door-to-door tenure of 36 months. CRISIL Ratings has adequately factored all these aspects in its rating analysis.

 

Rating Assumptions

To assess the total cashflows available for payouts to PTC investors, CRISIL Ratings has factored in the following in its analysis:

• Credit quality of the underlying assets: - The performance of the pool is dependent on the underlying obligors’ capacity to pay the lease rentals i.e. the credit quality of the underlying obligors.

 

• Post default recovery from the underlying assets: These are operating lease contracts, hence there will not be any recovery from the assets. Expected post default recovery rate has been considered for different industries

  

• Correlation between assets: CRISIL Ratings has assumed correlation in the range of 0.2 – 0.4 for the entities. Higher correlation among entities in the same industry than among entities in different industry.

 

Asset side cashflows were assessed using Monte Carlo simulations incorporating default probabilities, correlations and recovery rate assumptions. With sufficiently large number of trials, cashflow distribution was generated.

 

Counterparty details

Capacity	Counterparty Name	Counterparty Rating/ Track record	Effect on credit ratings in case of non-performance
Originator / Servicer	Vriksh Advisors Private Limited	Not Rated by CRISIL Ratings	Significant effect; Servicer’s ability to service the securitised contracts is a key input to the rating of PTCs
Collection and Payout Account Bank	ICICI Bank Limited	CRISIL AAA/CRISIL AA+/Stable	Negligible effect. Account bank can be changed without impacting the rating.
First Loss Facility in the form of Bank Guarantee	IDFC First Bank	CRISIL AA/Stable/ CRISIL A1+	Negligible effect. Bank with whom the fixed deposit is maintained can be changed without impacting the rating.
Trustee	Beacon Trusteeship Limited	-	Negligible effect. Can be replaced at minimal cost.

 

About the originator and the group

Grip Invest Advisors Private Limited ("Grip") is a digital platform to discover alternate investment options and offers its users access to various asset-backed, fixed-income asset classes. Asset-backed leasing is the primary asset class offered to its users. Grip has enabled 16,800 investors to invest INR 395 Cr since its launch 2.25 years ago. Grip's business development team led by Ankit Goyal (ex-HSBC, SMBC, Yes Bank) is responsible for identifying leasing opportunities. Siddharth Sangal (ex-Morgan Stanley, Proprium Capital) is the Chief Investment Officer and manages the credit evaluation of leasing opportunities. Vivek Gulati (ex-Chalo, OYO) is the Chief Operating Officer and oversees asset management and payment performance.

 

Grip has enabled leasing to 100+ companies with a focus on mobility, warehousing, and furniture. INR 132 Cr has been returned to investors as per repayment schedules. Grip is capitalized with INR 45 Cr in equity capital from leading institutional investors Venture Highway, Endiya Partners, AdvantEdge, and Anicut Capital. Grip has also signed documents to raise an additional INR 25 Cr in capital from investors such as Nueva Capital and Multiply Ventures.

 

Vriksh Advisors Private Limited, (“Vriksh”) is currently engaged in the consultancy business. In furtherance of the new business activities, Vriksh has originated and successfully listed India’s first SDI transaction on the NSE. Going forward, Vriksh will engage in the business of acquiring and dealing in the unguaranteed residuary interest (hereinafter referred to as “Unguaranteed RV”) arising out of various movable assets which will be leased/ rented by Vriksh to its identified customers. Such movable assets will be leased by Vriksh to its customers on an operating lease basis for a mutually agreed period. Concurrently (or in a continuous and as early as possible sequence) with the lease of assets, Vriksh will assign all or a significant portion of the lease rent receivable from its customers on a non-recourse basis to third parties who are willing to purchase such lease rent receivables.

Nikhil Aggarwal and Aashish Jindal are common directors, and Nikhil Aggarwal is a significant minority shareholder in both the Company and Vriksh Advisors Private Limited. Grip will leverage its experience in identifying and managing leasing transactions entered into between Vriksh and various lessees.

 

Key Financial Indicators: Vriksh Advisors

As on / for the period ended March 31		2022	2021
Networth	Rs crore	1.63	1.66
Operating income	Rs crore	0.05	0.05
Reported Profit after tax (PAT)	Rs crore	(0.03)	0.02
Interest Coverage^	Times	-	-

^ No external debt

 

Past rated pools

This is the second transaction to be originated by Vriksh Advisors Private Limited and rated by CRISIL Ratings. CRISIL Ratings shall receive monthly performance report for the transactions.

Any other information: Not applicable

Annexure - Details of Instrument(s)

Type of Instrument	Rated Amount (Rs Cr.)	Date of Allotment	Tenure# (months)	Coupon Rate (%) (p.a.p.m)	Complexity Level	Outstanding Rating	Credit cum liquidity Enhancement (Rs Cr.)
Series 1 Senior Tranche&	6.88	TBD	36	18.39%	Highly Complex	Provisional CRISIL BB (SO)	1.26*

1 crore = 10 million

&PTC-holders are entitled to receive timely interest and timely principal on a monthly basis. Default on the PTCs is defined as non-payment of interest or principal on each monthly payout date

* Additionally, credit support includes Rs.0.06 crores in form of scheduled cash flow subordination (assuming timely collections and zero prepayments). This will be held in trust till all expected payouts to Series 1 Senior Tranche PTC holders are made.

#Indicates door to door tenure. Actual tenure will depend on the level of prepayments in the pool, and exercise of the clean-up call option