Rating Rationale
November 13, 2019 | Mumbai
Sansar Trust June 2019 IV
(Originator: Shriram Transport Finance Company 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)		 Original Tenure (Months) Credit Collateral
(Rs Cr)		 Ratings / Credit Opinions Rating Action
Sansar Trust June 2019 IV Series A PTCs 337.54 60 33.75 CRISIL AAA (SO) Converted from Provisional Rating to Final Rating
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has converted its provisional rating assigned to Series A Pass-Through Certificates (PTCs) issued by 'Sansar Trust June 2019 IV' under a securitisation transaction originated by Shriram Transport Finance Company Limited (STFCL; rated 'CRISIL AA+/CRISIL PP-MLD AA+r/FAAA/Stable/CRISIL A1+') to 'CRISIL AAA (SO)'.
 
CRISIL has received the final legal documents executed for this transaction. These executed documents are in line with terms of the transaction when provisional rating/credit opinion was assigned. Hence, CRISIL has converted the provisional rating/credit opinion to a final rating/credit opinion.
 
Please click on the following link for detailed information on CRISIL's policy on provisional rating: Revision in CRISIL policy for assigning 'provisional' ratings
 
As required, CRISIL has received the following final executed legal documents and other documents relevant to the transaction:

Legal documents

  • Trust deed
  • Deed of assignment
  • Power of attorney

Other Documments

  • Information memorandum
  • Legal opinion
  • Trustee's awareness letter
  • Auditor's certificate
  • Originator's representations and warranties letter

This securitisation transaction is backed by receivables from a pool of new and pre-owned heavy commercial vehicle, light commercial vehicle, passenger vehicle, and small commercial vehicle (including 3-wheelers) loans originated by STFCL. The rating is based on the credit support available to the PTCs, credit quality of underlying receivables, STFCL's origination and servicing capabilities, and soundness of the transaction's legal structure.
 
The transaction has a 'Par with Excess Interest Spread' structure. STFCL assigned the pool to 'Sansar Trust June 2019 IV', a trust settled by Catalyst Trusteeship Limited (CTL), which issued the PTCs to investors. The Series A PTC payouts are supported by credit collateral in the form of Fixed Deposit and Excess Interest Spread (EIS).
 
The total credit support available in the transaction at the time of securitization is as below:

  • Internal credit support from subordination of scheduled EIS at the time of securitisation assuming zero prepayments aggregating to Rs 36.85 crore (10.9% of initial pool principal)
  • External credit collateral of Rs 33.75 crore (10.0% of initial pool principal) in the form of a Fixed Deposit.

Series A PTC holders are entitled to receive timely interest and timely principal on a monthly basis.

Key Rating Drivers & Detailed Description
Supporting Factors
  • Credit Enhancement
    • Credit collateral of Rs 33.75 crore (10.0% of initial pool principal) provides credit support to Series A PTCs. The PTCs also benefit from scheduled EIS (at the time of securitisation, assuming zero prepayment) aggregating to Rs 36.85 crore (10.9% of initial pool principal).
  • Presence of contracts with low LTV and IRR
    • As of cut-off date, contracts in the loan pool have a low weighted average IRR and weighted average LTV of 14.0% and 73.0% respectively.
  • No delinquent contracts in the pool
  • All contracts were current on repayment as of cut-off date (June 20, 2019).
Constraining Factors
  • Proportion of new vehicle loans
    • As of cut-off date, loan contracts for new vehicles contributed to 30.2% of the pool principal. Relative to pre-owned vehicle loans, new vehicle loans exhibit higher delinquency at STFCL's portfolio level.
Liquidity Strong
Liquidity is strong given that the credit enhancement available in the structure is sufficient to cover losses exceeding 1.5 times the currently estimated base shortfalls.
 
Rating Sensitivity factors
Downward
* Credit enhancement (both internal and external credit enhancement) falling below 2 times the estimated base case shortfalls
* A sharp downgrade in the rating of the servicer/originator
* Non-adherence to the key transaction terms envisaged at the time of the rating

About the pool
The transaction is backed by receivables from a pool of new and used heavy commercial vehicle, light commercial vehicle, passenger vehicle and small commercial vehicle (including 3-wheelers) loan contracts. The pool is well seasoned as evidenced by its weighted average net seasoning of 13.6 months as of cut-off date. Contracts in the pool are geographically diversified with top 3 states accounting for 24.3% of pool principal as of cut-off date. The average ticket size for contracts in the pool is Rs 7.1 lakh, with a weighted average loan-to-value ratio (at disbursement) of 73.0% as of cut-off date. The weighted average interest rate of contracts in the pool is 14.0% as of cut-off date. All contracts in the pool were current on repayment as of cut-off date (June 20, 2019). CRISIL has adequately factored all these aspects in its rating analysis.

Rating Assumptions

To assess the base case shortfalls for the transaction, CRISIL analysed static pool information on new and used vehicles portfolio of STFCL for originations in the period FY 2009 to Q4 FY2018 (with performance data till Sep 2018). CRISIL also analysed performance of rated securitisation transactions, and the performance of STFCL's portfolio. As of Mar 2019, 90+ dpd for the used and new portfolio are 4.9% and 5.7%, respectively.
 
CRISIL has also factored in pool-specific characteristics and estimated the base case peak shortfalls in the pool in the range of 4% to 6% of pool cashflow. 
  • CRISIL has assumed a stressed monthly prepayment rate of 0.3 to 0.8% in its analysis.
  • CRISIL does not envisage any risk arising on account of commingling of cash flows since CRISIL's short term rating on the servicer is 'CRISIL A1+'.
  • CRISIL has adequately factored in the risks arising on account of counterparties (refer to counterparty details).
  • 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 STFCL Rated 'CRISIL AA+/CRISIL PP-MLD AA+r/FAAA/Stable/CRISIL A1+'  
No effect.
 
Servicer STFCL Rated 'CRISIL AA+/CRISIL PP-MLD AA+r/FAAA/Stable/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 ICICI Bank Rated 'CRISIL AA+/CRISIL AAA/Stable' Negligible effect. Account bank can be changed without impacting the credit rating.
Credit collateral in the form of Fixed Deposit ICICI Bank Rated 'CRISIL AA+/CRISIL AAA/Stable' 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.
 
Past rated pools
CRISIL has ratings outstanding on 20 securitisation transactions originated by STFCL. CRISIL is receiving monthly performance reports pertaining to these transactions.
 
About the Originator
STFCL, incorporated in 1979, is the flagship company of the Shriram group. It is 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. It has pan-India presence, with about 1,545 branches and 838 rural centres as on March 31, 2019. In April 2018, STFCL completed the sale of its majority stake in wholly owned subsidiary Shriram Automall to MXC Solutions India Pvt Ltd (MXC, owner of CarTrade.com) for Rs 156.38 crore.
 
STFCL's reported total income (net of interest expense) and profit after tax (PAT) of Rs.7908 crore and Rs.2564 crore respectively, for fiscal 2019 against Rs. 7015 crore and Rs. 2461 crore, respectively, for fiscal 2018.
Key Financial Indicators
Particulars Unit  Mar 2019 Mar 2018
Total Assets Rs Cr 1,05,292 97,245
Total income (net of interest expenses) Rs Cr 7,908 7,015
Profit after tax Rs Cr 2,564 2,461
Gross NPA (per IGAAP) % 8.29 9.15
Overall Capital Adequacy Ratio % 20.27 17.38
Return on Managed Assets % 2.5 2.7

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
Ratings/credit opinions		 Credit collateral
(Rs Cr) ^
Series A PTCs 337.54 27-Jun-19 15-Jul-24 8.30% CRISIL AAA (SO) $ 33.75
# Indicates door to door tenure. Actual tenure will depend on the level of prepayments in the pool, and possible exercise of the clean-up call option
^ Additionally scheduled excess interest spread (EIS) at the time of securitisation amounting to Rs 36.85 crore (assuming zero prepayments) also provides credit support to PTCs
$ Series A PTC holders are entitled to receive timely interest and timely principal payments on a monthly basis
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  337.54 CRISIL AAA (SO)   16-07-19  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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