Rating Rationale
April 25, 2025 | Mumbai
 
Sansar Jan 2025 Trust
(Originator: Shriram Finance Limited)
‘Crisil AAA (SO)’ for Series A1 PTCs and ‘Crisil BBB+ (SO)’ for Equity Tranche PTCs converted from provisional ratings to final ratings
 
Rating Action
Tranche Name Amount Rated
(Rs.Crore)		 Outstanding Amount
(Rs.Crore)		 Balance Tenure Credit Collateral
(Rs.Crore)		 Ratings Rating Action
Series A1 PTCs 1465.91 1465.91 72 137.43 Crisil AAA (SO) Converted from Provisional Rating to Final Rating
Equity Tranche PTCs 61.08 61.08 72 137.43 Crisil BBB+ (SO) Converted from Provisional Rating to Final Rating
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

 

Detailed Rationale

Crisil Ratings has converted its provisional ratings assigned to Series A1 Pass-Through Certificates (PTCs)  issued by ‘Sansar Jan 2025 Trust’ to final ratings of 'Crisil AAA (SO)' and ‘Crisil BBB+ (SO)’ for Equity Tranche PTCs under a securitization transaction originated by Shriram Finance Limited (SFL; rated ‘Crisil AA+/Crisil PPMLD AA+/Stable/Crisil A1+’).

 

The name of instruments as per executed documents are Series A1 Pass-Through Certificate (“PTCs”) and Equity Tranche PTCs as against are Series A PTCs and Series B PTCs communicated at the time of provisional rating. This is a change in the instrument name and does not have any impact on the credit profile of the instrument.This securitisation transaction is backed by receivables from commercial and passenger vehicle loans originated by SFL. The ratings are based on the expected credit quality of the pool backing the transaction, the origination and servicing capabilities of SFL, credit enhancement available to the PTCs, the transaction’s payment mechanism, and soundness of the transaction’s legal structure.       

 

Crisil Ratings has now received the final legal/executed documents for this transaction. These executed documents are in line with terms of the transaction envisaged when provisional rating was assigned. Hence, Crisil Ratings has converted the provisional ratings to final ratings.

 

Legal Documents

  • Amended and restated declaration of trust
  • Deed of Assignment of Receivables in the process of Securitisation
  • Power of Attorney

 

Other Documents

  • Information Memorandum
  • Legal Opinion
  • Auditors Certificate
  • Representation and Warranties Letter
  • Trustee Awareness Letter
     
  • Payment Structure: The PTCs are issued under a replenishment structure with door-to-door tenure of 72 months. Of this, the first 9 months serve as the replenishment period followed by the amortisation period of 63 months. During the replenishment period, monthly interest payments are promised to PTC investors. Residual cashflows including monthly principal collections (including prepayments) from the pool during this period will be used to replenish the pool with fresh loan assets that meet pre-defined eligibility criteria. During this period, there will be no flowback to the originator.
     

During the amortisation period, PTC investors are promised timely interest and principal (to the extent of 96% of monthly billed principal) on a monthly basis to the PTCs. The cash collateral can be utilised for making the promised interest and prinicipal payments during the replenishment and amortisation period.

 

The transaction structure provides for certain trigger events, defined at the time of issuance of PTCs. Should any of the pre-defined trigger events occur during the replenishment period, the replenishment would stop and the amortisation period will come into effect.

 

Investor payouts for PTCs are supported by cash collateral and subordination of excess interest spread (EIS). SFL will continue to service loans in the pool as the servicing agent.

 

  • Adequacy of credit enhancement: The investor payouts for PTCs are supported by cash collateral, subordination of equity tranche principal, and subordination of excess interest spread (EIS). On a monthly basis, the cash collateral can be used to make the promised interest payments in case of a shortfall in collections from the pool to Series A PTC. On the Series A PTC 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. Post full repayment of Series A1 PTCs, cash collateral can be used to make the promised principal repayment to Series B PTCs in case of a shortfall in collections from the pool on the final maturity date. Series B PTC investors are expected to receive residual EIS amounts on a monthly basis, however, the rating on Series Bs PTCs only addresses the likelihood of principal repayment by the legal final maturity date, and not the payment of residual EIS amounts.

 

  • Credit enhancement available in the transaction structure is as below: Internal credit enhancement from subordination of equity tranche principal amounting to INR 61.08 crore (4.0% of the initial pool principal), subordination of scheduled EIS, assuming amortisation from first payout, amounting to INR 212.00 crore (13.9% of the initial pool principal).
     

External credit enhancement from a cash collateral amounting to INR 137.43 crore (9.0% of the initial pool principal) which is expected to be maintained as fixed deposits with a bank and lien-marked in favour of the Trustee.

 

Based on Crisil Ratings assessment, the total credit enhancement available in the transaction (internal – in the form of EIS and principal subordination; 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.

Key Rating Drivers & Detailed Description

Strengths:

Credit enhancement available in the transaction structure

  • Cash collateral of Rs 137.43 crore (9.0% of initial pool principal)
  • Subordination of excess interest spread (EIS). For the initial pool, assuming PTC amortisation from the first month, the scheduled EIS, assuming amortisation from first payout amounts to Rs 212.00 crore (13.9% of the initial pool principal).
  • Borrower diversification and credit profile
  • The initial pool had 26,990 loans and is therefore, fairly diversified; top 10 borrowers contributed to only 0.3% of the initial pool principal. 
  • All contracts in the initial pool were current as of pool cut-off date i.e., March 20, 2025. Additionally, none of the contracts in the initial pool, have been delinquent in the last six months.
  • Legal soundness of the transaction structure
  • The legal structure envisaged for the transaction entails bankruptcy remoteness of the pool of receivables and credit enhancement from the originator, and adherence to prevailing regulations on securitisations.
  • These are certified through an independent legal opinion from an external legal counsel.

 

Weaknesses:

Pool composition

  • Pool comprises contracts having high ticket size and high interest rates that have exhibited higher delinquencies in the used-asset segment at the portfolio level.
  • Potential changes in the pool during replenishment period; however, these changes are controlled within certain boundary conditions established through well-defined eligibility criteria for new loans added to the pool and replenishment termination events to prevent excessive build-up of risks in the pool.

 

Effect of potential macro-economic headwinds

  • The pool’s collection performance could be hampered in a challenging macroeconomic environment and would remain susceptible to factors like increasing fuel costs, increasing interest rates, and demand moderation owing to inflation and geo-political uncertainties.

 

These aspects have been adequately factored by Crisil Ratings in its rating analysis.

Liquidity:Strong for Series A1 PTCs and adequate for Equity tranche PTCs

For Series A1 PTCs: The cash collateral available in the transaction structure is Rs 137.43 crore (9.0% of the initial pool principal) which is in the form of a fixed deposit. Liquidity is strong given that the credit enhancement (internal and external combined) in the structure is sufficient to cover losses exceeding 1.5 times the currently estimated base shortfalls.

 

For Equity tranche PTCs: Liquidity is adequate given that the credit enhancement (internal and external combined) in the structure is sufficient to cover losses exceeding 1.1 times the currently estimated base shortfalls.

Rating Sensitivity factors

Upward factors:

  • For Series A1 PTCs: None.
  • For Equity Tranche PTCs: Credit enhancement (based on both internal and external credit enhancements) exceeding 1.4 times the estimated base case shortfalls on the residual cash flows of the pool due to sustained healthy collections from the pool.
     

Downward factors:

  • For Series A1 PTCs: Credit enhancement (based on both internal and external credit enhancements) falling below 2.5 times the estimated base case shortfalls due to weaker than expected performance of the pool..
  • For Equity tranche PTCs: Credit enhancement (based on both internal and external credit enhancements) falling below 1.3 times the estimated base case shortfalls. due to weaker than expected performance of the pool.
     

Downgrade in the credit rating of the servicer/originator

 

Non-adherence to the key transaction terms envisaged at the time of the rating.

Quality of the asset pool and strength of cashflows

The securitisation transaction is backed by a replenishing pool of receivables from passenger vehicle, commercial vehicle and construction equipment loans (43.2%, 49.4% and 7.3%, respectively, of the initial pool principal) originated by SFL. As of the pool cut-off date (20-March-2025), the initial pool loans had a weighted average seasoning of 10.1 months, a weighted average interest rate of 16.4%, a weighted average LTV ratio of 77.1%, a weighted average original tenure of 48.0 months, and an average original loan amount of Rs 6.9 lakh. The top 3 states (Karnataka, Tamil Nadu and Andhra Pradesh) contributed 36.7% of the initial pool principal.
 

Eligibility criteria for the pool loans to be added in monthly replenishments are listed below:

Parameter

Criteria

Nature of loans

Vehicles (CVs) registered and located in India
Replenishment from CV loans only

Asset class-wise maximum proportion

Passenger vehicle (PV, 60%), heavy commercial vehicle (HCV, 40%), light commercial vehicle (LCV, 20%) and construction equipment (CE, 7.5%)

Delinquency

No principal or interest is overdue by more than 1 month and no other event of default for any loan contract

Maturity

Pool maturity shall not be more than 71 months from the date of assignment of loans (replenishment period of 9 months + amortisation period of 65 months).

 

Other eligibility criteria

Current CV pool characteristics

Seasoning

At least 8 months

10.1 months

Tenure (months)

Max 60 months

48.0 months

Wt. Avg. Loan to value (LTV)

Max 80%

77.1%

Avg ticket size on cut-off date

Rs 6.25 lakh

Rs 5.7 lakh average POS,
Rs 6.9 lakh average original disbursement

Wt. Avg. IRR

Max 18.5%

16.4%

Maximum original tenure

10 years

97 months

Pool loan IRR

In the range of 12% - 25%

Geographical concentration

<16% of the loans from a single state (% of POS)

<18% of the loans from a single state (% of no. of individual loans outstanding)

 

Replenishment termination events:

Parameter

Criteria

Servicer rating

Downgrade in the rating of the servicer by 1 notch: (i) below ‘AA+’ by any SEBI accredited rating agency; or (ii) below ‘BB+’ by S&P Global Ratings or (iii) below ‘BB’ by FITCH Ratings; or (iv) below ‘Ba1’ by Moody’s Ratings

Asset quality

Gross and Net Stage 3 assets of the Originator exceed 10% and 5% respectively

Pool performance

30 days overdue exceeds 4% at the end of the first 3 months or 8.5% anytime after that, or 60 days overdue exceeds 2% at the end of the first 3 months or 4% anytime after that

Repayments

Cumulative repayments on the underlying loans exceeds 40% of the original pool

PTC Event of Default

Any scheduled principal or interest payout on the PTCs is not made on scheduled payout date

Backup servicer trigger event
  • insolvency of the Servicer
  • voluntary winding up of the Servicer or an order for winding up of the Servicer is made by any competent Court;
  • the Servicer is prevented by any competent regulatory agency from carrying on its business;
  • breach of obligations under the collection and servicing agency agreement;
  • breach of any representations or warranties made by the Servicer;
  • reorganisation, liquidation or dissolution of the Servicer;
  • appointment of a resolution professional, receiver or liquidator;
  • if the moneys held in trust by the Servicer are jeopardised for any reason whatsoever;
  • attachment, restraint on the assets of the Servicer or certificate proceedings against the Servicer; and
  • any event which would in the opinion of the Trustee (acting on the instructions of the investor in the PTCs) preclude the Servicer from performance of its obligations under the collection and servicing agency agreement obligations of the Servicer being or becoming void, voidable, unenforceable or ineffective.
  • Downgrade in the rating of the Servicer by 2 notches: (i) below ‘AA+’ by any SEBI accredited rating agency; or (ii) below ‘BB+’ by S&P Global Ratings or (iii) below ‘BB’ by FITCH Ratings; or (iv) below ‘Ba1’ by Moody’s Ratings

 

 

Rating assumptions

Background:

  • PTC investors are taking a direct exposure on the repayment ability of the underlying borrowers in the pool. Credit risk in the transaction is factored through the base case shortfalls expected on the portfolio, which are further adjusted for pool specific characteristics.
  • To assess the base case shortfalls for the portfolio, Crisil Ratings has analysed the commercial vehicle, passenger vehicle, farm equipment and construction equipment asset class static pool performance (with information on 90+ delinquencies) of loans originated by Shriram Finance limited during the period FY15 to Q3FY2025 (with performance data till December 2024). Crisil Ratings has also analysed the dynamic portfolio delinquencies of Shriram Finance farm equipment loan book. As of December 2024, the 90+ delinquency for CV, PV, FE and CE was 3.4%, 2,9%, 3.7% and 4.4% respectively. Base case shortfalls on the portfolio are adjusted based on pool characteristics – which includes seasoning profile and repayment track record, parameters such as original tenure, interest rate, loan-to-value, etc. Crisil Ratings has additionally factored risk arising from borrower & geographic concentration in the pool.
  • Prepayment is a form of market risk which will result in the reduction of excess interest spread in the transaction. Prepayment risk has been assessed based on historically observed levels of prepayments for similar pools.
     

Assumptions:

  • After making the adjustments on the above factors, the base case shortfalls in the pool by maturity of the transaction is in the range of 6.0% to 8.0% of pool cashflows.

Monthly prepayment rate of 0.5% to 1.5% has also been applied to the pool cashflows.

 

About the company- Originator/Servicer profile
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 84.2% stake in the former. Pursuant to the consummation of the transaction, Shriram Capital and SCUF cease 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

As on/for year ending

Unit

Dec-24

Mar-24

Mar-23

Assets under Management (AUM)

Rs. Cr.

2,58,279

2,38,624

1,93,730

Total income (net of interest expenses)

Rs. Cr.

17,169

20,891

17,577

Profit after tax

Rs. Cr.

7,433

7,399

6,020

Gross NPA (Gross Stage-3)

%

5.38^^

5.2*

6.0*

On-book gearing

Times

4.1

3.9

3.8

Return on managed assets

%

3.2&**

3.2

3.0

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

^^Gross stage -3 of SFL post demerger of SHFL

**annualized

&adjusted for exceptional gain

 

Key Financial Indicators: SFL Standalone

As on/for year ending

Unit

Dec-24

Sept-24

Mar-24

Mar-23

Assets under Management (AUM)

Rs. Cr.

2,54,469

243,043

224,862

185,683

Total income (net of interest expenses)

Rs. Cr.

17181

11,227

20,191

17,257

Profit after tax

Rs. Cr.

7622

4052

7,190

5,979

Gross NPA (Gross Stage-3)

%

5.38

5.32

5.5

6.2

On-book gearing

Times

4.1

4.0

3.8

3.6

Return on managed assets

%

3.2&

3.2**

3.2

3.4

**annualised

&adjusted for exceptional gain
 

Quality and experience of servicer:

SFL will continue to service loans assigned to this trust. SFL has originated several securitisation transactions. Servicing has been done, and reports have been shared across all these transactions in a timely manner.

 

Risks and concerns for investors and mitigating factors: Based on Crisil Ratings’ assessment, the total credit enhancement available in the transaction (internal – in the form of EIS and equity tranche; and external – in the form of cash collateral) together can mitigate against shortfalls in collection from the pool even after stressing them commensurate with the rating assigned to the PTCs. Crisil Ratings has adequately factored key risks in the transaction including Credit & Market (as highlighted in rating assumptions section), Counterparty and Legal risks. Legal risks are assessed based on detailed analysis of transaction documentation. Risk factored from counterparties are mentioned in the table below:

 

Counterparty details 

Capacity

Counterparty

Rating

Effect on transaction rating in case of non-performance

Originator

SFL

'Crisil AA+/PPMLD AA+/Stable/Crisil A1+'

No effect.

Servicer

SFL

'Crisil AA+/PPMLD AA+/Stable/Crisil A1+'

Significant effect, because of change in servicing quality and replacement cost of the Servicer. However, Crisil Ratings does not currently envisage the need for replacement. The Trustee, on behalf of the investors, shall retain the right to appoint a replacement Servicer in the occurrence of a ‘Servicer Event of Default’ as per the terms of the transaction.

Collection and Payout Account (CPA) Bank

Barclays Bank PLC

Not rated by Crisil Ratings

Negligible effect. As per the terms of the transaction, the Trustee, on behalf of the investors, has the right to change the CPA Bank.

Cash Collateral Bank

Barclays Bank PLC

Not rated by Crisil Ratings

Negligible effect. As per the terms of the transaction, the Trustee, on behalf of the investors, has the right to change the Bank with which the Cash Collateral fixed deposits are maintained.

Trustee

Catalyst Trusteeship Limited

 

Not rated by Crisil Ratings

Negligible effect. As per the terms of the transaction, the Trustee can be replaced by the investors holding majority interest.

 

A summary of key terms of servicer contract

 

The key points on the role of the servicer covered as part of the transaction documents are as below:

 

  •                   The Trustee acting for and on behalf of the investors shall appoint, the servicer for the purpose of collecting, receiving and managing payment of the Receivables into the Collection and Payment Account for the purpose of managing, collecting and receiving the receivables, holding the underlying security and carry out other roles and roles and responsibilities as specified under the transaction document.
  •                   The servicer shall receive servicing fees which shall be paid by the trustee in accordance with the Waterfall Mechanism as per the transaction documents.
  •                   The servicer shall collect the receivables from the underlying borrowers and deposit the collected amounts in the collection and payment account in a timely manner as per the terms of the transaction documents.
  •                   The servicer shall submit to the trustee all the data and reports in the manner and as per the timelines as specified under the transaction documents.
  •                   The occurrence of certain events as per the terms of the transaction documents shall be construed as a Servicer Event of Default.

 

Provision for appointment of back-up servicer: The Trustee (acting on the instructions of the investors) as per the terms of the Servicer Agreement and upon the occurrence of Servicer’s Event of default, shall retain the right to appoint an alternate servicer

 

Performance of outstanding rated transactions

Crisil Ratings has ratings outstanding on instruments issued under 20+ 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 Feb-2025 payouts, with 90+ delinquency remaining at or below 5.0% 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

Name of the Instrument

Date of Allotment

Coupon Rate
(%)

Maturity

Date#

Size of the Issue (Rs.Crore)

Complexity level

Rating
Assigned@

Cash collateral (Rs.Crore)

INE1WMT15017

Series A1 PTCs

24-Apr-25

8.60 p.a.p.m.

25-Apr-31

1465.91

Highly complex

Crisil AAA (SO)

137.43

INE1WMT15025

Equity Tranche PTCs

24-Apr-25

Residual yield

25-Apr-31

61.08

Highly complex

Crisil BBB+ (SO)

137.43

# 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.

@ The rating on Equity tranche PTCs only addresses the likelihood of principal repayment by the legal final maturity date, and not the payment of residual EIS amounts.

Annexure - Rating History for last 3 Years
  Current 2025 (History) 2024  2023  2022  Start of 2022
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Series A1 PTCs LT 1465.91 Crisil AAA (SO) 23-04-25 Provisional Crisil AAA (SO)   --   --   -- --
Equity Tranche PTCs LT 61.08 Crisil BBB+ (SO) 23-04-25 Provisional Crisil BBB+ (SO)   --   --   -- --
All amounts are in Rs.Cr.
Criteria Details
Links to related criteria
Criteria for securitisation transactions
Basics of Ratings (including default recognition, assessing information adequacy)

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Crisil Ratings uses the prefix 'PP-MLD' for the ratings of principal-protected market-linked debentures (PPMLD) with effect from November 1, 2011, to comply with the SEBI circular, "Guidelines for Issue and Listing of Structured Products/Market Linked Debentures". The revision in rating symbols for PPMLDs should not be construed as a change in the rating of the subject instrument. For details on Crisil Ratings' use of 'PP-MLD' please refer to the notes to Rating scale for Debt Instruments and Structured Finance Instruments at the following link: https://www.crisilratings.com/en/home/our-business/ratings/credit-ratings-scale.html