Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL AAA (SO)’ rating to Series A pass-through certificates (PTCs) issued by ‘SHRI TRUST AI 2022’. The transaction is backed by receivables from new and used medium and heavy commercial vehicles (MHCV), intermediate, light, and small commercial vehicles (LSCV), tractors and farm equipment, and construction equipment (CE) loan originated by Sundaram Finance Limited (SFL; rated ‘CRISIL AAA/FAAA/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 pool has exhibited good collection performance as seen by strong collections ratios. The cumulative collection ratio for the pool is robust at 98.5%. This has led to minimal delinquencies in the pool as reflected in 0+ overdue of 0.9% of initial pool principal. The healthy collection performance coupled with high pool amortisation (% of initial principal securitised) of 54.3% has led to an increase in the credit cover available to future PTC payouts from the cash collateral.
The pool is eligible for reset of credit enhancement, CRISIL Ratings has evaluated the reset in line with the RBI guidelines. However, investor consent is yet to be received. |
Key Rating Drivers & Detailed Description Strengths:
Weakness:
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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:
Downward factors:
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About the Pool The securitised pool comprises receivables from new and used medium and heavy commercial vehicles (MHCV), intermediate, light, and small commercial vehicles (LSCV), tractors and farm equipment, and construction equipment (CE). The contracts live in the pool as after May’23 payouts are highly amortised at 60.6%. At the time of securitisation, average ticket size was moderate at Rs 16.8 lakh, with moderate loan to value ratio of 82.7% and with a weighted average interest rate of 11.0% and moderate geographic concentration top three states accounting for 40.7% of the pool principal.
Pool Performance Summary (as after May 2023 payouts)
CCR = {Total collections in the pool/(Total billings + opening overdues at the time of securitisation)} ^MCR = Monthly collections in the pool / Monthly billings
Counterparty Details
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About the Originator Sundaram Finance, the flagship company of the T.S.Santhanam 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 Reserve Bank of India (RBI) as a deposit-taking NBFC, and is classified by the RBI as Investment and Credit company. The company had a nationwide network of 652 branches and 4656 employees as on December 31, 2022. SFL’s AUM primarily consisted of commercial vehicles (46.3%), car loans (26.3%), construction equipment (10.8%), tractors (8%) and other loans (8.6%) as on December 31, 2022. Further, SFL’s disbursements increased by 63.7%year-on-year (y-o-y) to Rs 15,587 crore in 9MFY23 from Rs 9,524 crore in the corresponding period in the previous fiscal.
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. 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 2022, Sundaram Finance reported total income and net profit of Rs 3,890 crore and Rs 903 crore, respectively, against Rs 4014 crore and Rs.809 crore, respectively, for the previous fiscal.
Further, for the nine months ended December 31, 2022, it reported total income and net profit of Rs 3005 crore and Rs 772 crore, respectively, against Rs 2942 crore and Rs 605 crore.
The group reported total income and net profit of Rs. 5146 crore and Rs. 1296 crore, respectively, for fiscal 2022, against Rs. 5317 crore and Rs. 1,223 crore, respectively, for the previous fiscal.
Key Financial Indicators (Consolidated)
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
#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 ^Scheduled subordination approximating Rs. 12.3 Cr (assuming zero prepayments) also provides credit support to PTCs $Series A PTC holders are entitled to receive timely interest and ultimate principal. |
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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