Rating Rationale

Rating Rationale

November 14, 2024 | Mumbai

SANSAR TRUST DEC 2022 VI

(Originator: Shriram Finance Limited)

Series A1 PTCs rating upgraded to 'CRISIL AAA (SO)’ and Series A2 PTCs rating upgraded to 'CRISIL A+ (SO)'

Rating Action

Tranche Name	Instrument details	Amount Rated (Rs.Crore)	Outstanding Rated Amount$ (Rs.Crore)	Original Tenure^#(Months)	Residual Tenure^# (Months)	Credit Collateral (Rs.Crore)	Ratings/Credit Opinions^&	Rating Action
SANSAR TRUST DEC 2022 VI	Series A1 PTCs	645.65	273.53	60	40	33.98	CRISIL AAA (SO)	CRISIL AAA (SO) [Upgraded from 'CRISIL AA+ (SO)']
SANSAR TRUST DEC 2022 VI	Series A2 PTCs	33.98	33.98	60	40	33.98	CRISIL A+ (SO)	CRISIL A+ (SO) [Upgraded from ‘CRISIL A- (SO)’]

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
^$After Sept 2024 payout
^#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
^&Series A1 PTC holders are entitled to receive timely interest and ultimate principal

Detailed Rationale
CRISIL Ratings has upgraded its rating for pass-through-certificates (PTCs) issued by ‘SANSAR TRUST DEC 2022 VI’ to ‘CRISIL AAA (SO)’ from ‘CRISIL AA+ (SO)’ for Series A1 and to ‘CRISIL A+ (SO)’ from ‘CRISIL A- (SO)’ for Series A2 PTCs. The transaction is originated by Shriram Finance Limited (SFL; rated ‘CRISIL AA+/CRISIL PPMLD AA+/Stable/ CRISIL A1+’).

This securitization transaction is backed by receivables from loans originated by SFL; including used and new commercial vehicles (CV), passenger vehicles (PV), tractors and construction equipment (CE). The rating is based on the credit support available to the PTCs, credit quality of underlying receivables, SFL’s origination and servicing capabilities, the payment mechanism, and soundness of the transaction’s legal structure.

The pool has exhibited good collection performance as seen by strong collections ratios. The cumulative collection ratio for the pool is robust at 97.1%. This has led to minimal delinquencies in the pool as reflected in 90+ DPD of 1.8%. The healthy collection performance coupled with amortization of around 54.8% has led to an increase in the credit cover available to future PTC payouts from the cash collateral.

Key Rating Drivers & Detailed Description

Strengths:

Credit support available in the structure
- As after September 2024 payout, credit collateral of Rs 33.98 crore (11.6% of future PTC payouts) provides credit support to Series A1 PTCs. The PTCs also benefit from scheduled EIS, approximating Rs 60.60 crore (20.7% of the future PTC payouts) provides sufficient cushion to service future investor payouts
Healthy Collection Metrics.
- As of September 2024 payout, the CCR of the transaction is 97.1%.

Weaknesses:

Potential effect of macro-economic headwinds
- Borrowers in the underlying pool could come under pressure due to a challenging macroeconomic environment. Headwinds such as increased fuel costs, an increasing interest rate scenario, and moderation in demand on account of inflation and geo-political uncertainties. These factors may hamper pool collection ratios.

Liquidity: Strong

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.

Rating Sensitivity factors

Upward factors:

For Series A PTC: None
For Series A2 PTCs: Credit enhancement (both internal and external combined) available in the structure exceeding 1.7 times the estimated base shortfalls on the residual pool cash flows of the pool.

Downward factors:

For Series A1 PTCs: Credit enhancement (based on both internal and external combined) falling below 2.5 times the estimated base shortfalls on the residual pool cash flows.
For Series A2 PTCs: Credit enhancement (based on both internal and external combined) falling below 1.5 times the estimated base shortfalls on the residual pool cash flows.
A sharp down grade in the ratings of the servicer/originator
Non-adherence to the key transaction terms envisaged at the time of the rating

These aspects have been factored by CRISIL in its rating analysis.

About the initial pool

The pool cash flow is securitised and comprises receivables from vehicle loans originated by SFL. The pool had a weighted average net seasoning of 11.8 months (as of the pool cut off date), with top 3 states (Rajasthan, Maharashtra and Telangana) cumulatively accounting for 32.7% of the initial pool principal. Average ticket size of the pool was Rs 5.2 lakh. All the contracts were current as on the cut-off date (i.e. December 20, 2022).

Pool Performance Summary (as after September 2024 payouts)

Parameters	SANSAR TRUST DEC 2022 VI
Asset Class	Used and new PV, CV and CE loan receivables
Months Post Securitisation	20
Balance Tenure (Months)	40
Principal Amortisation	54.8%
Cumulative Collection Ratio (%)	97.1%
Credit collateral (% of scheduled future payouts)	11.6%
90+ Delinquency (% of initial POS)	1.8%
180+ Delinquency (% of initial POS)	1.0%
Credit collateral utilisation	0.0%

Rating Assumptions

To assess the base case shortfalls in the securitised pools, CRISIL Ratings has analysed the collection performance of the pools since securitisation, pool specific characteristics and the portfolio delinquency performance of the originator. CRISIL has also considered the performance of rated securitisation transactions of SFL.

CRISIL Ratings has also factored in pool-specific characteristics and estimated the base case shortfalls in the pool in the range of 5.0-7.0% of pool cash flows. The base shortfall estimate is for the current contracts in the pool. CRISIL Ratings has additionally factored in overdues in the pool, and applied stresses commensurate with the rating level to arrive at the rating of the transaction.

CRISIL Ratings has assumed a stressed monthly prepayment rate of 0.3 to 1.3% in its analysis.
CRISIL Ratings does not envisage any risk arising on account of commingling of cash flows since CRISIL Ratings' short-term rating on the servicer is 'CRISIL A1+'
CRISIL Ratings has adequately factored in the risks arising on account of counterparties (refer to counterparty details below)
CRISIL Ratings 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 and seller	SFL	Rated ‘CRISIL AA+/CRISIL PPMLD AA+/Stable/CRISIL A1+’	No effect.
Servicer	SFL	Rated ‘CRISIL AA+/CRISIL PPMLD AA+/Stable/CRISIL A1+’	Significant effect, because of change in servicing quality and replacement cost of servicer (not factored in by CRISIL Ratings, given its rating on servicer). However, CRISIL Ratings does not envisage the requirement for replacement.
Collection & Payout Account	The Hongkong and Shanghai Banking Corporation Ltd	Not rated by CRISIL	Negligible effect. Account bank can be changed without impacting the rating.
Cash collateral facility in the form of Fixed Deposit	The Hongkong and Shanghai Banking Corporation Ltd	Not rated by CRISIL	Negligible effect. Bank with whom the fixed deposit is maintained can be changed without impacting the rating.
Trustee	CTL	Adequate track record	Negligible effect. Can be replaced at minimal cost.

About the Originator

Following the consummation of the merger of SCUF and demerged undertaking of Shriram Capital Limited with SFL (erstwhile STFCL), the company has been renamed to Shriram Finance Ltd (SFL). Shriram Housing Finance Ltd (SHFL) continues to operate as a subsidiary of SFL which holds around 83.78% stake in the former. Pursuant to the consummation of the transaction, Shriram Capital and SCUF ceased to exist.

SFL, incorporated in 1979, was registered with RBI as a deposit-taking, asset-financing non-banking financial company and predominantly provides financing for vehicles such as CVs (both pre-owned and new), tractors, and passenger vehicles. Erstwhile SCUF (now merged into SFL) was incorporated in 1986 and operated in the retail financing segment with a focus on small enterprise loans, two-wheeler financing, gold loans, housing loans and others (auto and personal loans).

Key Financial Indicators: SFL consolidated

As on/for year ending	Unit	Jun-24	Mar-24	Mar-23	Mar-22^
Assets under Management (AUM)	Rs. Cr.	2,47.841	2,38,624	1,93,730	1,27,041
Total income (net of interest expenses)	Rs. Cr.	5,481	20,891	17,577	9,540
Profit after tax	Rs. Cr.	2,031	7,399	6,020	2,721
Gross NPA (Gross Stage-3)*	%	5.2	5.2	6.0	7.0
On-book gearing	Times	3.8	3.9	3.8	4.4
Return on managed assets	%	3.2**	3.1	3.0	2.0

*Gross Stage-3 estimated on combined basis for SFL and SHFL

^Pre-merger

**annualised

Key Financial Indicators: SFL Standalone

As on/for year ending	Unit	Mar-24	Mar-23	Mar-22^
Assets under Management (AUM)	Rs crore	221,668	185,683	127,041
Total income (net of interest expenses)	Rs crore	20,191	17,257	9,540
Profit after tax	Rs crore	7,190	5,979	2,708
On-book gearing	Times	3.8	3.6	4.4
Return on managed assets	%	3.2	3.4	2.0

^Pre-merger

Past rated pools

CRISIL Ratings has ratings outstanding on 18 securitisation transactions backed by SFL-originated loans. CRISIL Ratings is receiving monthly performance reports pertaining to these transactions. The cumulative collection efficiency in the underlying pools for these transactions range from ~96% to ~100% as of September-2024 payouts, with 90+ delinquency remaining at or below 3.0% of the initial pool principal.

Any other information: Not Applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN	Type of Instrument	Rated Amount (Rs.Crore)	Date of Allotment	Maturity Date*	Coupon Rate (%)	Complexity level	Cash Collateral (Rs.Crore)	Outstanding Rating
INE0ORR15019	Series A1 PTCs	645.65	27-Jan-23	18-Jan-28	7.95	Highly Complex	33.98	CRISIL AAA (SO)
INE0ORR15027	Series A2 PTCs	33.98	27-Jan-23	18-Jan-28	Variable^&	Highly Complex	33.98	CRISIL A+ (SO)

*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

^&No promised yield for Series A2 PTCs; any residual cashflows post payment to Series A1 PTCs are passed on to Series A2 PTCs

Annexure - Rating History for last 3 Years

	Current			2024 (History)		2023		2022		2021		Start of 2021
Instrument	Type	Outstanding Amount	Rating	Date	Rating	Date	Rating	Date	Rating	Date	Rating	Rating
Series A1 PTCs	LT	273.53	CRISIL AAA (SO)	31-05-24	CRISIL AA+ (SO)	30-11-23	CRISIL AA+ (SO)		--		--	--
			--		--	26-10-23	CRISIL AA+ (SO)		--		--	--
			--		--	24-04-23	CRISIL AA+ (SO)		--		--	--
			--		--	01-02-23	Provisional CRISIL AA+ (SO)		--		--	--
Series A2 PTCs	LT	33.98	CRISIL A+ (SO)	31-05-24	CRISIL A- (SO)	30-11-23	CRISIL A- (SO)		--		--	--
			--		--	26-10-23	CRISIL A- (SO)		--		--	--
			--		--	24-04-23	CRISIL A- (SO)		--		--	--
			--		--	01-02-23	Provisional CRISIL A- (SO)		--		--	--

All amounts are in Rs.Cr.

Criteria Details

Links to related criteria

CRISILs rating methodology for ABS transactions

Evaluating risks in securitisation transactions - A primer

Meaning and applicability of SO and CE symbol

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