TANJIRO CV TRUST MAY 2024 (Originator: IndoStar Capital Finance Limited) 'Provisional CRISIL AAA (SO)' assigned to Series A1 SNs; 'Provisional CRISIL A+ (SO)' assigned to Series A2 SNs
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. &The rating on Series A2 SNs only addresses the likelihood of principal repayment by the legal final maturity date, and not the payment of residual EIS amounts
Detailed Rationale CRISIL Ratings has assigned its ‘Provisional CRISIL AAA (SO)’ rating to Series A1 securitisation notes (SNs) and ‘Provisional CRISIL A+ (SO)’ rating to Series A2 SNs issued by ‘Tanjiro CV Trust May 2024’ under a securitisation transaction backed by receivables from loans originated by IndoStar Capital Finance Limited (‘IndoStar’; rated ‘CRISIL AA-/Negative/CRISIL A1+’).
The provisional ratings are based on the credit enhancement available to support promised PTC payouts, the expected credit quality of the underlying pool, IndoStar’s origination and servicing capabilities, and the expected soundness of the transaction’s legal structure and payment mechanism.
The transaction has a ‘Par with EIS’ structure. IndoStar will assign the pool to ‘Tanjiro CV Trust May 2024’, a Trust settled by the transaction’s Trustee, i.e. IDBI Trusteeship Services Limited (ITSL), in exchange for a purchase consideration amounting to 100.0% of the initial pool principal as on the cut-off date. The Trust will issue Series A1 SNs and Series A2 SNs for amounts equalling 96.0% and 4.0%, respectively, of the initial pool principal as on the cut-off date. The Trustee will appoint IndoStar as the Servicer, and collections from the pool will be transferred to the Collection and Payout Account (CPA) on a monthly basis to make investor payouts as per the transaction’s waterfall mechanism.
Interest payments to Series A1 SNs are promised on a monthly basis. While Series A1 SNs are outstanding, 96% of the monthly pool principal billing and the entire prepayment collections are promised as monthly principal repayment to Series A1 SNs, while 4% of the monthly pool principal billing is expected but not promised as monthly principal repayment to Series A1 SNs. The cash collateral would be used to meet shortfalls in monthly promised interest and principal payouts to Series A1 SNs as set out in the waterfall mechanism.
Post redemption of Series A1 SNs, the entire monthly pool principal billing and prepayment collections are promised as monthly principal repayment to Series A2 SNs. Post redemption of Series A1 SNs, outstanding principal on the Series A2 SNs, if any, is also promised as principal repayment on the Series A2 SN’s legal final maturity date. Post redemption of the Series A1 SNs, the cash collateral would be available to meet shortfalls in the principal repayment of Series A2 SNs as set out in the waterfall mechanism. Series A2 SN investors are also expected to receive residual EIS amounts on a monthly basis, however, the rating on Series A2 SNs only addresses the likelihood of principal repayment, and not the payment of residual EIS amounts.
Credit enhancement available in the transaction structure to support promised SN payouts is as below:
Subordination of scheduled excess interest spread of Rs 27.54 crore (14.7% of pool principal, assuming zero prepayments) for the principal repayment of Series A2 SNs |
Key Rating Drivers & Detailed Description Strengths:
Weakness:
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Liquidity: Strong for Series A1 SNs and Series A2 SNs 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. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Pool The securitisation transaction is backed by a pool of receivables from used and new vehicle loans originated by IndoStar. As of the pool cut-off date (30-April-2024), the pool loans had a weighted average seasoning of 8.6 months, a weighted average interest rate of 18.3%, a weighted average LTV ratio of 74.3%, a weighted average original tenure of 41.3 months, and an average original loan amount of Rs 6.4 lakh. The top 3 states (Tamil Nadu, Madhya Pradesh and West Bengal) contributed 34.8% of the initial pool principal. All the underlying pool loans were current on repayment as on the cut-off date.
Counterparty details
Additional disclosures for Provisional ratings: The provisional rating is contingent upon execution and receipt of the following documents:
Executed documents:
Other documents:
Additional documents, if any, executed for the transaction should also be provided along with the above documents. 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 in line with its policy on provisional ratings.
Rating that would have been assigned in absence of the pending documentation: In the absence of 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 execution of certain documents by the issuer, as applicable. In case the documents received deviate significantly from the expectations, CRISIL Ratings may take appropriate action including placing the rating on watch or a rating change, depending on status of progress on a case-to-case basis. In the absence of the pending documentation, the rating on the instrument would not have been assigned ab initio.
About the Originator IndoStar, incorporated in July 2009, is registered with the Reserve Bank of India as a systemically important, non-deposit taking non-banking financial company. The company was founded and incorporated by private equity players (Everstone, Goldman Sachs, Baer Capital Partners, ACPI Investment managers, and CDIB International) with an initial capital of around Rs 900 crore. In May 2020, Brookfield invested Rs 1,225 crore and became the largest shareholder and co-promoter. As on date, Brookfield holds 56.20% stake, followed by the Everstone group) at 18.8%. Everstone Group have completed the sale of 14.21% of the total paid-up equity share capital of the Company through an Offer for Sale, to comply with the minimum public shareholding requirements as per SEBI. Pursuant to the same, Everstone Group’s holding stands at 18.8% and public shareholding in the company increased to 25% w.e.f. 05th May 2023.
IndoStar started business as a wholesale financier in fiscal 2011 and entered the SME finance (loans against property) segment in fiscal 2015. In fiscal 2018, the company started offering vehicle finance and housing finance (through wholly owned subsidiary, IndoStar Home Finance Pvt Ltd). In fiscal 2019, IndoStar acquired the CV finance business of IIFL Finance Ltd. The company plans to focus on used CV financing and affordable housing finance. |
Key Financial Indicators
Performance of previously rated transactions CRISIL Ratings has ratings outstanding on instruments issued under 5 securitisation transactions backed by IndoStar-originated loans. CRISIL Ratings is receiving monthly performance reports pertaining to these transactions. The cumulative collection efficiency in the underlying pools for transactions where payouts had commenced range from ~97% to ~99% as of Mar-2024 payouts, with 90+ delinquency below 2.5% of the initial pool principal.
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
^ISIN details for instruments were not available as of date. #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 Series A2 SNs 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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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