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Detailed Rationale Crisil Ratings has assigned its ‘Provisional Crisil AAA (SO)’ rating to Series A pass-through certificates (PTCs) issued by ‘SHRI Trust BI 2025’. The transaction is backed by receivables from new and used medium and heavy commercial vehicles (MHCV), intermediate, light, and small commercial vehicles (ILSCV), construction equipment and material handling equipment (CE & MHE), and Machinery loans originated by Sundaram Finance Ltd (SFL; rated ‘Crisil AAA/Stable/Crisil A1+’). The ratings are based on credit support available to PTCs, credit quality of the underlying pool receivables, SFL’s origination and servicing capabilities, and soundness of the transaction’s legal structure.
The transaction has a ‘Par with EIS’ structure. SFL will assign the loan pool to ‘SHRI Trust BI 2025’, a Trust settled by the transaction’s Trustee, in exchange for a purchase consideration amounting to 100.0% of the initial pool principal as on the cut-off date. The Trust will issue the PTCs to investors, where scheduled payouts to investors have been arrived at assuming a staggered basis of transfer of collections by the servicer, i.e. of all receivables comprising the principal amount due in a particular month (say, month M), 80% of the said principal amount shall be credited to the collection and payout account on the ascertained date of month M+1, and 20% of the said principal amount shall be deposited in the collection and payout account on the ascertained date of month M+2.
Series A PTC holders are promised timely interest payments on a monthly basis. Principal repayment, while expected on a monthly basis, is promised only on an ultimate basis by the Series A PTC’s final maturity date. The investor payouts for Series A PTCs are supported by cash collateral and subordination of excess interest spread (EIS). On a monthly basis, the cash collateral can be used to make the promised interest payments to Series A PTCs in case of a shortfall in collections from the pool. On the Series A PTC’s final maturity date, the cash collateral can also be used to make the promised principal repayment in case of a shortfall in collections from the pool. All prepayment collections will be utilised for accelerated redemption of the Series A PTCs.
Credit enhancement available in the transaction structure to support promised PTC payouts is as below:
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Key Rating Drivers & Detailed Description Strengths:
Weaknesses:
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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 securitisation transaction is backed by a pool of receivables from MHCV, ILSCV, Machinery, and CE (including material handling equipment) loans of 21.3%, 10.9%, 22.6% and 45.2% of securitised pool principal respectively originated by SFL. As of the pool cut-off date (31-Dec-2024), the pool loans had a weighted average seasoning of 12.0 months, a weighted average interest rate of 10.7%, a weighted average LTV ratio of 81.4%, a weighted average original tenure of 49.3 months, and an average original loan amount of Rs 43.91 lakh. The top 3 states (Tamil Nadu, Maharashtra, and Karnataka) contributed 53.6% 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 Sundaram Finance, the flagship company of the TSF group, commenced operations in 1954, as a wholly owned subsidiary of Madras Motor and General Insurance Company Ltd, a member of the TVS group of companies. The company was listed in 1972, when TVS sold its stake and is registered with the RBI as a deposit-taking NBFC and is classified by the RBI as Investment and Credit company.
The company had a nationwide network of 709 branches and 7460 employees (including off-roll employees) as on September 30, 2024. SFL’s AUM primarily consisted of commercial vehicles (45.5%), car loans (23.8%), construction equipment (10.4%), tractors (7.2%) and other loans (13.1%) as on September 30, 2024.
The group also has presence in housing finance, asset management, and non-life insurance segments. The housing finance business was conducted through a joint venture (JV) with BNP Paribas (49.9% equity stake; through BNP Paribas Personal Finance, a wholly-owned subsidiary). Post-acquisition of 49.9% stake from BNP Paribas Personal Finance in Sundaram Home, the HFC became a wholly-owned subsidiary in September 2019. The asset management business is conducted through Sundaram Asset Management Company Ltd, a wholly-owned subsidiary of Sundaram Finance. Insurance business is carried through a 50% stake in Royal Sundaram General Insurance Company Ltd (RSGI), with the other large shareholder being a Ageas International NV which holds a 40% stake.
For fiscal 2024, Sundaram Finance reported total income and net profit of Rs 5,494 crore and Rs 1,454 crore, respectively, against Rs 4,110 crore and Rs.1,088 crore, respectively, for the previous fiscal.
Further, for the first half ended September 30, 2024, it reported total income and net profit of Rs 3,088 crore and Rs. 648 crore, respectively, against Rs 2,572 crore and Rs 648 crore, respectively, for the corresponding period of the previous fiscal.
The group reported total income and net profit of Rs 7,285 crore and Rs 1,422 crore, respectively, for the fiscal 2024, against Rs 5,544 crore and Rs 1,282 crore, respectively, for the corresponding period of previous fiscal.
Key Financial Indicators (Standalone)
Performance of previously rated transactions Crisil Ratings has ratings outstanding on instruments issued under 3 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 99.3% to 99.6% as of September-2024 payouts, with 90+ delinquency remaining at or below 1.0% of the initial pool principal.
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
#Indicates legal final maturity date for the instrument. Actual maturity date will depend on the level of collection shortfalls in the pool, the level of prepayments in the pool, and exercise of the clean-up call option. *ISIN yet to be issued. |
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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Criteria Details
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