Sansar Trust July 2023 II (Originator: Shriram Finance Limited) 'Provisional CRISIL AAA (SO)' assigned to Series A1 PTCs
Rating Action
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 @ A prefix of 'Provisional' indicates that the rating centrally factors in the strength of specific structures, and is contingent upon occurrence of certain steps or execution of certain documents by the issuer, as applicable, without which the rating would either have been different or not assigned ab initio. This is in compliance with a May 6, 2015 directive ‘Standardizing the term, rating symbol, and manner of disclosure with regards to conditional/ provisional/ in-principle ratings assigned by credit rating agencies' by Securities and Exchange Board of India (SEBI) and April 27, 2021 circular ‘Standardizing and Strengthening Policies on Provisional Rating by Credit Rating Agencies (CRAs) for Debt Instruments’ by SEBI. |
Detailed Rationale CRISIL Ratings has assigned its ‘Provisional CRISIL AAA (SO)’ ratings to Series A1 Pass Through Certificates (PTCs) issued by ‘SANSAR TRUST JULY 2023 II’ under a securitisation transaction originated by Shriram Finance Limited (SFL; rated ‘CRISIL AA+/CRISIL PPMLD AA+/Stable/CRISIL A1+’).
This securitisation transaction is backed by receivables from loans originated by SFL; including used and new commercial vehicles (CV), passenger vehicles (PV), 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 transaction has a ‘Par with excess interest spread (EIS)’ structure. SFL will assign the pool to ‘SANSAR TRUST JULY 2023 II’, a trust settled by Catalyst Trusteeship Limited (CTL) which will issue the Series A1 PTCs and Equity Tranche PTCs to investors. CTL payouts are supported by cash collateral in the form of fixed deposits; and subordination of cashflows.
The total credit support available in the transaction is as below:
Interest payments to Series A1 PTC holders are expected and promised on a monthly basis; principal repayment is expected on a monthly basis but promised on an ultimate basis by the instrument’s final maturity date. |
Key Rating Drivers & Detailed Description Supporting Factors
Constraining Factors
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Liquidity: Strong The cash collateral available in the transaction is Rs. 30.30 crore (3.5% of the pool principal) which is in the form of 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. |
Rating Sensitivity factors Downward
CRISIL Ratings has adequately factored these aspects into its rating analysis. |
About the Pool The securitisation transaction is backed by a pool of receivables from vehicle loans originated by SFL. The pool has a weighted average net seasoning of 10.3 months, with top 3 states (Karnataka, Tamil Nadu and Andhra Pradesh) cumulatively accounting for 40.0% of the pool principal. Average loan amount for pool loans was Rs 6.4 lakh. All the contracts were current on repayment as on the cut-off date (i.e. July 20, 2023) will no delinquencies since origination.
Counterparty details
Additional disclosures for Provisional ratings: The provisional rating is contingent upon execution of the following documents:
Additional documents executed for the transaction, if any, should also be provided. 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.
Rating that would have been assigned in absence of the pending steps/ documentation: In the absence of pending 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 occurrence of certain steps or execution of certain documents by the issuer, as applicable. In case the documents received and/or completion of steps deviates significantly from the expectations, CRISIL Ratings may take an appropriate action including placing the rating on watch or a rating/outlook change, depending on status of progress on a case-to-case basis. In the absence of the pending steps / documentation, the rating on the instrument would not have been assigned ab initio. |
About the originator Following the consummation of the merger of Shriram City Union Finance (SCUF) and demerged undertaking of Shriram Capital Limited with 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 85.02% stake in the same. Pursuant to the consummation of the transaction, Shriram Capital and SCUF cease to exist.
STFCL, incorporated in 1979, was registered with RBI as a deposit-taking, asset-financing non-banking financial company. STFCL provides financing for vehicles such as CVs (both pre-owned and new), tractors, and passenger vehicles
SCUF, was incorporated in 1986 and predominantly operates 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 – STFCL Standalone
Key Financial Indicators: SCUF Consolidated
Key Financial Indicators – SFL Consolidated (CRISIL Ratings estimates)
*Gross Stage-3 estimated on combined basis for SFL and SHFL
Past rated pools CRISIL Ratings has ratings outstanding on 24 securitisation transactions originated by SFL. CRISIL is receiving monthly performance reports pertaining to these transactions. |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
1 crore = 10 million *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 |
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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Criteria Details
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