Rating Rationale
February 05, 2020 | Mumbai
Powerplus PTC Series I
(Originator: Piramal Capital and Housing Finance Limited)
'CRISIL AAA (SO)' converted from provisional rating to final rating for Series A PTCs  
 
Rating Action
Trust Name Details Amount Rated
(Rs Crore)		 Outstanding Amount
(Rs Crore)*		 Pool Principal (Rs Crore)  Original Tenure (Months) Balance Tenure (Months) Credit Collateral (Rs Crore) Ratings/ Credit Opinion Rating Action
Powerplus PTC Series I  Series A PTCs 274.01 228.55 274.01 268 265 52.06 CRISIL AAA (SO) Converted from Provisional Rating to Final Rating
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
* After Dec 19 payouts
Detailed Rationale

CRISIL has converted its provisional rating assigned to Series A pass-through certificates (PTCs) issued by 'Powerplus PTC Series I' to final rating of 'CRISIL AAA (SO)'.
 
CRISIL has received the final legal documents executed for this transaction. These executed documents are in line with terms of the transaction when provisional rating/credit opinion was assigned. Hence, CRISIL has converted the provisional rating/credit opinion to a final rating/credit opinion.
 
Please click on the following link for detailed information on CRISIL's policy on provisional rating: Revision in CRISIL policy for assigning 'provisional' ratings
 
The pool is backed by home loan and loan against property receivables originated by Piramal Capital Housing Finance Ltd (PCHFL; 'CRISIL A1+'). The ratings are based on the credit support available to the PTCs, credit quality of underlying pool receivables, PCHFL's origination and servicing capabilities, and soundness of the transaction's legal structure.
 
The transaction has a 'par structure, wherein the trust issued Series A PTCs in exchange of a purchase consideration equal to 100.0% of the pool principal at the time of securitisation. Total credit support available in the transaction is as follows:

  • At the time of securitisation, the internal credit support in the form of scheduled excess interest spread, aggregating Rs 18.51 crore (6.8 per cent of pool principal) as of today for Series A PTCs, this is subject to basis risk during the life of the instrument.
  • External credit-cum-liquidity collateral of Rs 52.06 crore (19.00% of pool principal) in the form of fixed deposit provides support to Series A PTCs

The transaction envisages timely interest and timely principal payment structure for monthly payouts to Series A PTCs. Excess interest spread in the transaction on monthly basis shall be utilized to make principal payments to Series A PTCs. IDBI Trusteeship Services Limited will be appointed the trustee to monitor the transaction on behalf of the PTC holders. PCHFL will continue to service the pool contracts as the servicing agent.

As required, CRISIL has received the following final executed legal documents and other documents relevant to the transaction:

  • Trust Deed
  • Deed of assignment
  • Power of attorney
  • Information memorandum
  • Legal opinion
  • Trustee letter
  • Auditor's certificate
  • Representations and warranties letter
Key Rating Drivers & Detailed Description
Supporting Factors
  • Credit support available in the structure
    • At the time of securitisation, credit collateral of Rs 52.06 crore (19.00% of the pool principal) provides credit support to Series A PTCs. The PTCs also benefit from scheduled excess interest spread aggregating Rs 18.51 crore for Series A PTCs
Constraining Factors     
  • Granularity and Borrower concentration
    • The pool is backed by 361 loan proposals and top 10 customer accounts for 14.4% of pool principal.
  • Basis Risk
    • There is basis risk in the transaction as pool yield is floating and linked to originator's prime lending rate whereas the investor yield is floating and linked to investor's MCLR
These aspects have been factored by CRISIL in its rating analysis.
 
Liquidity: Strong 
  • Liquidity position is strong given that the credit enhancement (internal and external combined) in the structure is above 2 times the estimated base shortfalls on the residual pool cash flows.
Rating Sensitivitity Factors
Downward factors:
  • Credit enhancement (internal and external combined) falling below 3.50 times the estimated base shortfalls on the residual pool cash flows
  • Deterioration in the credit quality of the servicer/originator
  • Non-adherence to the key transaction terms envisaged at the time of the rating
About the pool (at the time of securitisation)
The pool cash flow is securitised and comprises receivables from home loan and loan against property receivables originated by PCHFL. The pool has a weighted average net seasoning of 10.9 months, with Mumbai, Delhi and Thane accounting for 71.4% of the pool principal outstanding. Average ticket size of the pool is Rs 84.9 lakhs. All contracts in the pool were current as on the cut-off date (July 31, 2019). CRISIL has adequately factored all these aspects in its rating analysis.
 

Rating Assumptions

To assess the base case collection shortfalls for the transaction, CRISIL has analysed the performance of HL and LAP portfolio from September 2017 till June 2019. 90+ dpds for HL and LAP portfolio of PCHFL are  0.05% and 0.00% as of June-19.
 
There is a basis risk in the transaction. The pool consists of loans at a floating rate of interest linked to base rate of PCHFL and the investor yield is also floating but linked to MCLR of Kotak Mahindra Bank. At present, there is a comfortable gap between the pool yield and the yield promised to the investor. However, during the tenure of the transaction, adverse movement in base rate of the originator compared to the MCLR of the investor may compress the asset side cash flows in relation to the liability side cash flows, thus leading to basis risk. CRISIL has factored this aspect in its analysis by assuming various interest rate scenarios.
 
Borrower concentration is high in the pool and top 10 customer accounts for 14.4% of pool principal. CRISIL has adequately factored this concentration risk in its analysis. CRISIL's credit ratings/internal views on these entities were also considered in the analysis.
 
Based on the above analysis, past experience in rating similar pools, industry benchmarking, and factoring in the strengths and weaknesses of the pool, CRISIL has estimated the base case peak shortfalls to be in the range of 5.0% to 7.0% of the pool principal. CRISIL has assumed a stressed monthly prepayment rate of 1.5 to 2.5% in its analysis.  
  • Based on its assessment of PCHFL's short-term credit risk profile, CRISIL has factored in the risk arising out of commingling of cash flows.
  • CRISIL has adequately factored in the risks arising on account of counterparties (refer to counterparty details below)
  • CRISIL has run sensitivities based on various shortfall curves (front-ended, back-ended and normal) and has adequately factored the same in its analysis.
 
Counterparty details

Capacity

Counterparty Name

Counterparty Rating/ Track record

Effect on credit ratings in case of non-performance

Originator PCHFL Rated 'CRISIL A1+' No effect.
Servicer
 		 PCHFL Rated 'CRISIL A1+' Significant effect, because of change in servicing quality and replacement cost of servicer. However, currently CRISIL does not envisage the need for replacement. Under certain circumstances, the trust or investor has right to change the servicer with an intimation to CRISIL.
Collection and Payout Account Bank Kotak Mahindra Bank Ltd. Rated 'CRISIL AAA/CRISIL AA+/FAAA/Stable/CRISIL A1+' Negligible effect. Account bank can be changed without impacting the rating.
Collateral in the form of Fixed Deposit Kotak Mahindra Bank Ltd. Rated 'CRISIL AAA/CRISIL AA+/FAAA/Stable/CRISIL A1+' Negligible effect. Bank with whom the fixed deposit is maintained can be changed without impacting the rating.
Trustee IDBI Trusteeship Services Ltd. Adequate past track record Negligible effect. Can be replaced at minimal cost.
    
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 31st March 2018. Consequently, all outstanding assets and liabilities of Piramal Finance Ltd are being transferred to Piramal Capital and Housing Finance Ltd). Post the merger PCHFL has become wholly owned subsidiary of PEL.
 
PCHFL has 4 business verticals: (i) real estate financing- lending to real estate developers with established track record with increasing focus on providing loans for construction finance and lease rental discounting, (ii) CFG: which lends to corporate clients across sectors (including infrastructure, cement, renewables, auto, logistics, services and entertainment) with loan size greater than Rs 100 crore; (iii) Emerging Corporate Group: which provide finance to mid-tier companies with loan size of upto Rs 100 crores and (iv) Housing Finance..
.
Past rated pools
This is the first securitisation transactions originated by PCHFL and evaluated by CRISIL. CRISIL is receiving monthly performance reports pertaining to this transaction.
Key Financial Indicators
As on / for the year ended   31-Mar-19 31-Mar-18^^
Total assets Rs crore 52,122 44,727
Total income Rs crore 5,572 46.23*
Profit after tax Rs crore  1,443 Negative*
Gross NPA % 0.4 0.3
Gearing (Gross) Times 3.4 3.2
Return on assets % 3.0 Negative
^^Figures post-merger of Piramal Finance with Piramal Capital and Housing Finance Ltd
*Piramal Finance Ltd. reported a total income of Rs 3739 crores and Profit after tax of Rs 983 crores till March 30, 2018

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.
Annexure - Details of Instrument(s)
Type of Instrument Rated Amount
(Rs Cr.)		 Date of
Allotment		 Maturity
Date#		 Coupon Rate (%)
(p.a.p.m.)		 Outstanding
Ratings		 Credit cum liquidity Enhancement (Rs Cr.)
Series A PTCs 274.01 26-Sep-19 11-Jan-42 8.70%* CRISIL AAA (SO) 52.06&
*Floating - linked to investor's MCLR
#Indicative maturity date
& Additional credit support includes Rs.18.51 crore in form of scheduled cash flows subordination (assuming zero prepayments and no basis risk)
Annexure - Rating History for last 3 Years
  Current 2020 (History) 2019 2018 2017 Start of 2017
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Series A PTCs LT  228.55 CRISIL AAA (SO)      23-09-19  Provisional CRISIL AAA (SO)           
All amounts are in Rs.Cr.
Links to related criteria
CRISILs Rating criteria for Real Estate SPVs
CRISILs criteria for expected loss ratings for infrastructure projects
CRISILs rating methodology for CDO transactions
Evaluating risks in securitisation transactions - A primer
Legal analysis in structured finance transactions

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