Peter CV Trust July 2024 (Originator: IndoStar Capital Finance Limited) 'Provisional CRISIL AAA (SO)' assigned to Series A1 PTC; 'Provisional CRISIL A+ (SO)' assigned to Series A2 PTC; 'Provisional CRISIL A (SO)' assigned to Equity tranche
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 .@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. ^Additionally, internal credit support in the form of scheduled cash flow assuming zero prepayments aggregating Rs 32.87 crore (29.0% of pool principal) for Series A1 PTCs and scheduled cash flow of Rs 25.55 crore (22.54% of pool principal, assuming zero prepayments) for Series A2 PTCs and scheduled cash flow of Rs 19.89 crore (17.54% of pool principal, assuming zero prepayments) for Equity Tranche &PTC investors are entitled to receive timely interest payment on a monthly basis and principal repayment on ultimate basis
Detailed Rationale CRISIL Ratings has assigned its ‘Provisional CRISIL AAA (SO)’ rating to Series A1 PTC, ‘Provisional CRISIL A+ (SO)’ rating to Series A2 PTC and ‘Provisional CRISIL A (SO)’ rating to Equity Tranche issued by ‘Peter CV Trust July 2024’ under a securitisation transaction backed by receivables from loans originated by IndoStar Capital Finance Limited (IndoStar; rated ‘CRISIL AA-/Negative/CRISIL A1+’).
The ratings are based on credit enhancement available to the PTC, the expected credit quality of underlying receivables, IndoStar’s origination and servicing capabilities, the transaction’s payment mechanism, and soundness of the transaction’s legal structure.
The transaction has a ‘Par with turbo amortisation’ structure. IndoStar will assign the pool to ‘Peter CV Trust July 2024’, a trust settled by Axis Trustee Services Limited, which will in turn issue Series A1 PTCs, Series A2 PTCs and Equity Tranche to investors in exchange for a purchase consideration amounting to 90.0%, 5.0% and 5.0% of the initial pool principal respectively. IndoStar will continue to service the underlying loan pool.
Series A1 PTCs are promised monthly interest payments on a timely basis. Principal repayment, while expected on a monthly basis, is promised only on an ultimate basis by the instrument’s legal final maturity. The residual cashflows after making expected interest payout to Series A2 PTC shall be utilised to make additional principal repayment to Series A1 PTCs on a monthly basis. Series A2 PTCs are fully subordinated to Series A1 PTCs
Post redemption of Series A1 PTCs, Series A2 PTC investors are promised monthly interest payments on a timely basis. Principal repayment, while expected on a monthly basis, is promised only on an ultimate basis by the instrument’s legal final maturity. The residual cashflows shall be utilised to make additional principal repayment to Series A2 PTCs on a monthly basis. Equity tranche is fully subordinated to Series A1 PTCs and Series A2 PTCs.
Post redemption of Series A1 PTCs and Series A2 PTCs, Equity Tranche investors are also expected to receive residual yield amounts on a monthly basis, however, the rating on Equity Tranche only addresses the likelihood of principal repayment, and not the payment of residual yield amounts..
CRISIL Ratings has estimated base case shortfalls in the pool at 6.0%-8.0% of cash flows. These shortfalls are further stressed to evaluate the adequacy of credit enhancement and arrive at the rating of PTCs. The total credit enhancement available in the transaction (internal – in the form of principal subordination 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.
Credit enhancement available in the transaction structure
|
Key Rating Drivers & Detailed Description Strengths:
Weaknesses:
CRISIL Ratings has adequately factored these aspects in its rating analysis.
Rating sensitivity factors Upward factors
Downward factors
|
Liquidity: Strong for Series A1 PTCs, Series A2 PTCs and Equity Tranche Liquidity position is strong given that the credit enhancement (internal and external combined) in the structure is above 1.5 times the estimated base shortfalls on the residual pool cash flows.
About the pool The securitisation transaction is backed by a pool of receivables from used and new vehicle loans originated by IndoStar. As of the pool cut-off date (30-June-2024), the pool loans had a weighted average seasoning of 8.5 months, a weighted average interest rate of 16.8%, a weighted average LTV ratio of 82.1%, a weighted average original tenure of 44.8 months, and an average original loan amount of Rs 12.02 lakh. The top 3 states (West Bengal, Gujarat & Tamil Nadu) contributed 32.7% of the initial pool principal. All the underlying pool loans were current on repayment as on the cut-off date.
Counterparty details
|
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 Originator IndoStar, incorporated in July 2009, is registered with the Reserve Bank of India as a systemically important, non-deposit taking non-banking financial company. The company was founded and incorporated by private equity players (Everstone, Goldman Sachs, Baer Capital Partners, ACPI Investment managers, and CDIB International) with an initial capital of around Rs 900 crore. In May 2020, Brookfield invested Rs 1,225 crore and became the largest shareholder and co-promoter. As on date, Brookfield holds 56.20% stake, followed by the Everstone group) at 18.8%. Everstone Group have completed the sale of 14.21% of the total paid-up equity share capital of the Company through an Offer for Sale, to comply with the minimum public shareholding requirements as per SEBI. Pursuant to the same, Everstone Group’s holding stands at 18.8% and public shareholding in the company increased to 25% w.e.f. 05th May 2023.
IndoStar started business as a wholesale financier in fiscal 2011 and entered the SME finance (loans against property) segment in fiscal 2015. In fiscal 2018, the company started offering vehicle finance and housing finance (through wholly owned subsidiary, IndoStar Home Finance Pvt Ltd). In fiscal 2019, IndoStar acquired the CV finance business of IIFL Finance Ltd. The company plans to focus on used CV financing and affordable housing finance.
Key Financial Indicators
|
Performance of previously rated transactions CRISIL Ratings has ratings outstanding on instruments issued under 6 securitisation transactions backed by IndoStar-originated loans. CRISIL Ratings is receiving monthly performance reports pertaining to these transactions. The cumulative collection efficiency in the underlying pools for transactions where payouts had commenced range from ~97% to ~99% as of June-2024 payouts, with 90+ delinquency below 2.5% of the initial pool principal |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instruments
^ISIN details for instruments were not available as of date. |
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Criteria Details
|