Rating Rationale
June 11, 2019 | Mumbai
Privilege Trust Series 14
(Originator: Shriram City Union Finance Limited)
'CRISIL AAA (SO)'  converted from provisional rating to final rating for Series A PTCs
 
Rating Action
Trust Name Instrument
Details		 Amount Rated
(Rs Cr)		 Outstanding  Principal*
(Rs Crore)		 Original Tenure (Months)# Balance Tenure
(Months)#		 Credit Collateral (Rs Crore) Ratings/ Credit Opinion Rating Action
Privilege Trust Series 14 Series A PTCs
 		 438.48
 		 339.02 71 67 50.30 CRISIL AAA (SO) Converted from Provisional Rating to Final Rating
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
#Indicates door to door tenure from pool cut-off date. Actual tenure will depend on the level of prepayments in the pool, and exercise of the clean-up call option
*Data as of May 2019 payouts
Detailed Rationale

CRISIL has converted the provisional rating assigned to Series A pass-through certificates (PTCs), issued by 'Privilege Trust Series 14' to final rating of 'CRISIL AAA (SO)'. The pool is backed by SME loan receivables originated by Shriram City Union Finance Ltd (SCUFL; 'CRISIL AA/Stable'). The ratings are based on the credit support available to the PTCs, credit quality of underlying pool receivables, SCUFL's origination and servicing capabilities, and soundness of the transaction's legal structure.

The transaction has a 'par' structure. SCUFL has assigned the pool to 'Privilege Trust Series 14', a trust settled by IDBI Trusteeship Services Ltd. The PTCs are supported by the credit collateral ' in the form of fixed deposit' and excess interest spread.

The total credit support available in the transaction at the time of securitisation is as below:
* Internal credit support in the form of scheduled Excess Interest Spread (EIS), aggregating Rs 53.17 crore (12.1% of pool principal)
* External credit-cum-liquidity collateral of Rs. 50.30 crore (11.5% of pool principal) of which is in form of Fixed Deposit.

Series A PTCs are entitled to receive timely interest and timely principal on a monthly basis. SCUFL will continue to service the pool contracts as the servicing agent.

For detailed information on CRISIL's policy on provisional ratings, click here: Revision in CRISIL policy for assigning 'provisional' ratings

As required, CRISIL has received the following final executed documents:

Legal Documents:
* Deed of Assignment   
* Trust Deed
* Agreement to Assign
* Collection and Processing Agent's Agreement 
* Cash Collateral Agreement 
* Cash collateral Power of Attorney  
* Power of Attorney

Other Documents:
* Information memorandum
* Legal opinion
* Trustee's awareness letter
* Auditor's certificate
* Originator's representations and warranties letter

Key Rating Drivers & Detailed Description
Supporting Factors
  • Credit support available in the structure at the time of securitisation
    • Credit collateral of Rs 50.30 crore (11.5% of the pool principal) provides credit support to Series A PTCs. The PTCs also benefit from scheduled EIS aggregating Rs 53.17 crore (12.1% of pool principal).
  • Current nature of all contracts in the pool
    • All the contracts were current as of the cut-off date of December 15, 2018
  • Moderate seasoning of contracts in the pool
    • The contracts in the pool had a weighted average seasoning of 16.5 months, and amortization of 35.6% as of the cut-off date
Constraining Factors
  • Geographical concentration
The pool is geographically concentrated with Tamil Nadu accounting for 49.8% of pool principal as of cut-off date (December 15, 2018).

Liquidity Position
* The credit cum liquidity enhancement available in the transaction is Rs. 50.30 crore (11.5% of pool principal) is in the form of fixed deposit placed with ICICI bank (Rated 'CRISIL AAA/Stable'). At the time of securitisation, the enhancement fully covered two months of promised principal and interest payouts even with no collections from underlying receivables.

About the Pool
The pool cash flow is securitised and comprises receivables from SME loans originated by SCUFL. At the time of securitisation, the pool had a weighted average net seasoning of 16.5 months. The pool is geographically concentrated with top state accounting for 49.8% of the pool principal. Average ticket size of the pool is Rs 7.5 lakh. All contracts in the pool were current as on the cut-off date (December 15, 2018). CRISIL has adequately factored all these aspects in its rating analysis.

Key Rating Assumptions

To assess the base case shortfalls for the transaction, CRISIL has analysed the moving portfolio delinquency information on SME asset class for performance from Apr-12 to Sep-18. CRISIL has also analysed the portfolio cuts based on Tenure, Ticket Size, State, etc. and compared the pool with the portfolio on these parameters. 30+ dpd is 12.6% of POS as of Sep-18 which has come down from peak of 14.8% as of Mar-16.
 
CRISIL has also factored in pool-specific characteristics and estimated base-case peak shortfalls for this transaction to be in the range of 5% to 7% of pool cash flows. 
  • CRISIL has assumed a stressed monthly prepayment rate of 0.5% to 1.5% in its analysis.
  • CRISIL does not envisage any risk arising on account of commingling of cash flows
  • CRISIL has adequately factored in the risks arising on account of counterparties (refer to counterparty details below).
  • CRISIL 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 SCUFL Rated 'CRISIL AA/Stable'  
No effect.
 
Servicer SCUFL Rated 'CRISIL AA/Stable' Significant effect, because of change in servicing quality and replacement cost of servicer (not factored in by CRISIL given CRISIL's rating on the servicer). However, CRISIL does not envisage the requirement for replacement.
Collection and Payout Account Bank ICICI Bank Rated 'CRISIL AAA/CRISIL AA+/Stable' Negligible effect. Account bank can be changed without impacting the rating.
First Loss Facility in the form of Fixed Deposit ICICI Bank Rated 'CRISIL AAA/CRISIL AA+/Stable' Negligible effect. Bank with whom the fixed deposit is maintained can be changed without impacting the rating.
Trustee ITSL Adequate track record Negligible effect. Can be replaced at minimal cost.

About the Originator
Incorporated in 1986, Shriram City is a part of Shriram group of companies. It is registered with RBI as a systemically important, deposit taking, non-banking finance company (NBFC-SI-D). It predominantly operates in the retail financing segment with a focus on small enterprise loans (54% of consolidated AUM as on September 30, 2018), two wheeler financing (17%), gold loans (10%) and others (including housing, auto and personal loans) together forming 18% of AUM. Its assets under management (including housing portfolio) stood at Rs 31,688 crore,. The standalone AUM stood at Rs 29748 crore, up 18% Y-o-Y while the housing portfolio under Shriram Housing stood at Rs 1940 crore and grew by 20.04% Y-o-Y. The company has pan India presence with 969 branches as on September 30, 2018, of which 61% are situated in South India.

In fiscal 2018, on a standalone basis, Shriram City reported net profit of Rs 665 crore on total income (net of interest expenses) of Rs 3434  crore as against net profit of Rs 556 crore on total income (net of interest expenses) of Rs 2900 crore last year. For the half year ended September 30, 2018, the company ( (on a standalone basis and as per Ind AS) reported net profit of Rs 479 crore on total income (net of interest expenses) of Rs 1957 crore as against net profit of Rs 435 crore on total income (net of interest expenses) of Rs 1704 crore for the corresponding period last year.

Past Rated Pools
CRISIL does not have rating outstanding on any transaction originated by SCUFL.
Key Financial Indicators - Shriram City (standalone and as per Ind-AS)
As on/for the half year ending Sept 30 Unit 2018 2017
Total AUM Rs. Cr. 29,748 25,127
Total income (net of interest expenses) Rs. Cr. 1,957 1,704
Profit after tax Rs. Cr.  479 435
Gross NPA % 10.01 9.85
Adjusted Gearing Times 3.9 3.4*
Return on assets (annualized)  % 3.1 3.0*
*Per IGAAP

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.
Annexure - Details of Instrument(s)
Type of Instrument Rated Amount
(Rs Cr.)		 Date of Allotment Maturity Date* Coupon Rate (%) (p.a.p.m.) Outstanding
Rating		 Credit cum liquidity Enhancement (Rs Cr.)
Series A PTCs 438.48 31-Dec-18 23-Dec-24 10.30% CRISIL AAA (SO) 50.30^
*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
^At the time of securitisation, additional credit support included Rs 53.17 crore in form of scheduled EIS (assuming zero prepayments)
Annexure - Rating History for last 3 Years
  Current 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Series A PTCs LT  339.02 CRISIL AAA (SO)  14-01-19  Provisional CRISIL AAA (SO)               
All amounts are in Rs.Cr.
Links to related criteria
CRISILs rating methodology for ABS transactions
Evaluating risks in securitisation transactions - A primer
Legal analysis in structured finance transactions

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