Rating Rationale
May 28, 2020 | Mumbai
Mobil Trust Series 09
(Originator: Shriram City Union Finance Limited)
Rating placed on 'Watch with Negative'
 
Rating Action
Trust Name Details Amount Rated (Rs Crore) Outstanding Amount
(Rs Crore)*		 Original Tenure (Months) Balance Tenure (Months)& Outstanding Credit Collateral (Rs Crore) Ratings/ Credit Opinion
Mobil Trust Series 09 Series A PTCs 72.05 50.32 30 28 11.53 Provisional CRISIL AAA (SO)
(Placed on 'Rating Watch with Negative Implications')
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
*As after May 2020 payout
&Considering the extension of legal maturity owing to moratorium policy of the investor
Detailed Rationale

CRISIL has placed its 'Provisional CRISIL AAA (SO)' rating on Series A pass-through certificates (PTCs), issued by 'Mobil Trust Series - 09' on 'Rating Watch with Negative Implications'. The pool is backed by 2 wheeler loan receivables originated by Shriram City Union Finance Ltd (SCUFL; 'CRISIL AA/Negative'). The rating action is driven by potential medium-term pressure on collections and asset quality of the pool of receivables backing the PTCs on account the Novel Coronavirus (Covid-19) pandemic and the ongoing nationwide lockdown. The rating also factors in the credit support available to the PTCs, SCUFL's origination and servicing capabilities, and soundness of the transaction's legal structure.
 
The nationwide lockdown (originally till April 14, 2020) declared by the Government of India to contain the spread of Covid-19 is expected to affect the collections of the pool in the medium term. The lockdown is now extended till May 31, 2020 and there is high likelihood that the eventual lifting of restrictions will be in a phased manner. Until normalcy returns, collections would remain lower than historically observed levels. Additionally, any change in the behaviour of borrowers on payment discipline can affect delinquency levels.
 
At present, the performance of the pool remains satisfactory. Furthermore, the investor has provided consent for extending moratorium to the underlying borrowers in the pool and amended the terms from April 2020 to June 2020 payments on the PTCs. During the three months, all the collections would be passed on to pay the interest accrued and to prepay the PTC principal. Utilization of cash collateral (CC) is suspended to cover the shortfalls during this period. Status of moratorium on PTC payments post June 2020 is currently unclear.
 
As of April 2020 collections, 54.4% of the borrowers in the pool have opted for moratorium and the monthly collection ratio (MCR) on the contracts that have not opted for moratorium was 100.0%. CC utilization in the transactions after May 2020 payouts was 0.0% of the initial CC available in the structure.
 
Collection efficiencies in the pool post-May 2020, once the moratorium period expires, is a key rating monitorable. CRISIL will resolve the rating watch based on the underlying pool's collection and delinquency performance going forward.

Key Rating Drivers & Detailed Description
Supporting Factors
  • Credit support available in the structure
    • Credit collateral of Rs 11.53 crore (16.0% of the pool principal) provides credit support to Series A PTCs. The PTCs also benefit from scheduled EIS aggregating Rs 7.92 crore (11.0% of pool principal).
Constraining Factors
  • Potential impact of the pandemic on collections
    • In the medium term, there would be pressure on collections and asset quality of the pool of receivables backing the PTCs on account the Novel Coronavirus (Covid-19) pandemic and the ongoing nationwide lockdown.
Rating Sensitivities
Downward factors:
* Credit enhancement (internal and external combined) falling below 3 times the estimated base shortfalls on the residual pool cash flows
* Deterioration in the credit quality of the servicer/originator
* Non-adherence to the key transaction terms envisaged at the time of the rating
* Material impact in pool collections post Moratorium
 
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.

About the pool
The pool cash flow is securitised and comprises receivables from 2 wheeler loans originated by SCUFL. At the time of initial rating, the pool has a weighted average net seasoning of 10.5 months. The pool is moderately concentrated with top 3 states accounting for 66.8% of the pool principal. Average ticket size of the pool is Rs 0.50 lakh. All contracts in the pool were current as on the cut-off date (November 30, 2019). CRISIL has adequately factored all these aspects in its rating analysis.

Pool Performance Summary (as after May 2020 payout)
Parameters Mobil Trust Series - 09
Asset class 2 Wheeler loan receivables
Months post securitisation 5
Balance tenure (months)& 28
Principal amortisation as % of initial pool principal 33.6%
Cumulative Collection Ratio (CCR) 99.5%
Average Monthly Collection Ratio (MCR) over past 3 months 99.3%
Credit collateral as % of initial pool principal 16.0%
Cumulative prepayments as % of initial pool principal 1.6%
90+ delinquency as % of initial pool principal 0.0%
180+ delinquency as % of initial pool principal 0.0%
Credit collateral utilisation as % of stipulated credit collateral 0.0%
&Considering the extension of legal maturity owing to moratorium policy of the investor

Key Rating Assumptions
CRISIL has analysed the collection and delinquency performance as well as moratorium policies of the investor for SCUF originated securitisation transactions until May 2020 payout. The estimated base case peak shortfalls in the pool is in the range of 6.0 to 8.0% of pool cash flows.

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/Negative/CRISIL A1+' No effect.
Servicer SCUFL Rated 'CRISIL AA/Negative/CRISIL A1+' 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 DCB Bank Rated 'CRISIL AA-/Stable/CRISIL A1+' Negligible effect. Account bank can be changed without impacting the rating.
First Loss Facility in the form of Fixed Deposit DCB Bank Rated 'CRISIL AA-/Stable/CRISIL A1+' Negligible effect. Bank with whom the fixed deposit is maintained can be changed without impacting the rating.
Trustee CTL 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 (53% of consolidated AUM as on December 31, 2019), two wheeler financing (20%), gold loans (9%) and others (including housing, auto and personal loans) together forming 18% of AUM. Its assets under management (including housing portfolio) stood at Rs 31,646 crore as of December 31, 2019 of which the standalone AUM stood at Rs 29,546 crore, while the housing portfolio under Shriram Housing stood at Rs 2100 crore. The company has pan India presence with 947 branches as on December 31, 2019, of which 56% are situated in South India.

Past rated pools
CRISIL has ratings outstanding on nine PTC transactions originated by SCUFL.
Key Financial Indicators
As on/for the period ending/year ending Unit December 30, 2019 March 31, 2019 March 31, 2018*
Total AUM Rs. Cr. 29,546 29,582 27,582
Total income (net of interest expenses) Rs. Cr. 2,854 3,801 3,495
Profit after tax Rs. Cr.  847 989 711
Gross NPA (ECL Stage-3) % 8.5 8.9 9.4
Gearing Times 3.1 3.5 3.8
Return on managed assets % 3.7 3.2 2.6
*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 aturity Date* Coupon Rate (%) (p.a.p.m.) Outstanding
Rating		 Credit cum liquidity Enhancement (Rs Cr.)
Series A PTCs 72.05 26-Dec-19 16-Sep-22 10.40% Provisional CRISIL AAA (SO)/Watch Negative 11.53^
*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
^Additional credit support includes Rs 7.92 crore in form of scheduled EIS (assuming zero prepayments)
Annexure - Rating History for last 3 Years
  Current 2020 (History) 2019  2018  2017  Start of 2017
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Series A PTCs LT  50.32 Provisional CRISIL AAA (SO)/ 'Watch Negative' 21-01-20 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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