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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Pass Through Certificates (PTCs) | 32.55 | ACUITE A- | SO | Assigned | Provisional To Final | - |
| Total Outstanding | 32.55 | - | - |
| Total Withdrawn | 0.00 | - | - |
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Rating Rationale |
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Acuité has assigned and converted from provisional to final the long term rating of ‘ACUITE A-(SO)’ (read as ACUITE A minus (Structured Obligation)) to the Pass Through Certificates (PTCs) of Rs. 32.55 Cr. issued by STAR 2 (Trust) under a securitisation transaction originated by ART HOUSING FINANCE INDIA LIMITED (AHFIL) (The Originator). The PTCs are backed by a pool of secured housing loans with principal outstanding of Rs. 36.18 Cr.
The rating addresses the timely payment of interest and principal on monthly payment dates in accordance with the transaction documentation. The transaction is structured at par. The rating is based on the strength of cash flows from the selected pool of contracts; the credit enhancement is available in the form of (i) Overcollateralization of 10.00 percent of the pool principal; (ii) Cash collateral of 1.00 percent of the pool principal; and (iii) Excess Interest Spread of 33.08 percent of the pool principal. The final rating is assigned as Acuite has received following final documents: 1. Trust Deed 2. Deed of Assignment 3. Servicing Agreement 4. Legal Opinion 5. Final Term Sheet 6. Information Memorandum 7. Power of Attorney |
| About the Originator |
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Delhi based, Art Housing Finance (India) Limited was incorporated in 2013. Mr. Atul Hasmukhrai Mehta, Mr. Rahul Kumar Pandey, Mr. Shrenik Suresh Shah, Mrs. Ritika Bhatia, Mr. Vipin Jain are directors of the company. |
| Standalone Rating of the Originator (if rated by Acuite) |
| Acuite does not rate the originator |
| Assessment of the Pool |
| AHFIL had Assets under management of Rs. 539.08 Cr. as on March 31, 2025. The current pool being securitised comprises approximately 7 percent of the total AUM. The underlying pool in the current Pass Through Certificate (PTC) transaction comprises of housing loans extended towards 386 borrowers, with an average ticket size of Rs. 12.38 lakhs, minimum ticket size of Rs. 3.05 lakhs and maximum of Rs. 48.01 lakhs, indicating high granularity. The current average outstanding per borrower stands at Rs. 9.37 lakhs. The weighted average original tenure for the pool is 215 months. The pool has weighted average seasoning of 57.23 months (minimum 13 months seasoning and maximum of 103 months seasoning). Hence, the pool is moderately seasoned. All the loans under the pool are current as on pool cut-off date. The top 10 borrowers of pool constitute 8.44 percent of the pool principal o/s. |
| Transaction Structure |
| The rating addresses the timely payment of interest and principal on monthly payment dates in accordance with the transaction documentation. The transaction is structured at par. |
| Brief Methodology |
| Parameters considered are seasoning of the pool, pool vs portfolio, portfolio cuts, amortisation of the pool, internal cash flow modeling, pool characteristics, static pool, dynamic DPDs to assign rating. |
| Legal Assessment |
| The final rating is assigned based on the fulfilment of the structure, terms and covenants detailed in the executed trust deed, servicing agreement, legal opinion, accounts agreement, assignment agreement and other documents relevant to the transaction. |
| Key Risks |
| Counter Party Risks |
| The pool has average ticket size of Rs. 9.37 lakhs, minimum ticket size of Rs. 3.05 lakhs and maximum of Rs. 48.01 lakhs. Considering the vulnerable credit profile of the borrowers, the risk of delinquencies/defaults are elevated. These risks of delinquencies are partly mitigated, considering the efficacy of the originator’s origination and monitoring procedures.
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| Concentration Risks |
| The pool is moderately granular, i.e. underlying assets in the pool are in nature of secured home loans extended towards 386 individual borrowers, hence the risk is moderately mitigated. The top 10 borrowers of pool constitute 8.44 percent of the pool principal O/s |
| Servicing Risks |
| There is limited track record of servicing PTCs, since this one of the initial PTC transactions for the originator. Also, the vintage of the originator in this portfolio is low. Therefore, the servicing risk for the transaction remains high. |
| Regulatory Risks |
| In the event of a regulatory stipulation impacting the bankruptcy remoteness of the structure, the payouts to the PTC holders may be impacted. |
| Prepayment Risks |
| The pool is subject to prepayment risks since rate of interest is significantly high and borrowers may be inclined to shift to low cost options (based on availability). Further, the asset class being housing loans, the risk of prepayment remains high. In case of significant prepayments, the PTC holders will be exposed to interest rate risks, since the cash flows from prepayment will have to be deployed at lower interest rates.
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| Commingling Risk |
| The transaction is subject to commingling risk since there is a time gap between last collection date and transfer to payout account. |
| Credit Enhancements (CE) |
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The rating is based on the strength of cash flows from the selected pool of contracts; the credit enhancement is available in the form of (i) Overcollateralization of 10.00 percent of the pool principal; (ii) Cash collateral of 1.00 percent of the pool principal; and (iii) Excess Interest Spread of 33.08 percent of the pool principal. |
| Rating Sensitivity |
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| All Covenants |
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UNDERTAKINGS AND COVENANTS OF THE SELLER as per the Deed of Assignment:
1 The Seller hereby makes, gives and provides the following covenants and undertakings: (a) it will bear all the costs, levies and duties including stamp duty expenses and all fees (including legal and tax counsel fees, fees of the Approved Bank, fees of the Collection Bank, fees of the Rating Agency, fees of the Trustee, structuring fee, and monitoring fee), "know your customer" related costs, asset audit costs, and due diligence costs, and any other expenses incurred/to be incurred with respect to and prior to the assignment of the Assigned Assets; (b) it will bear all such imposts, duties and taxes which may be levied, with respect to ? period prior to the Commencement Date, by any Governmental Authority, pertaining to or in respect of the Receivables or the assignment/transfer of the Assigned Assets. All rights thereunder with the understanding that all such duties and taxes which may be levied, with respect to a period after the Commencement Date will be borne by and be to the account of the Trust; (c) it will, if so required by the Trustee or the Investors lend its name as plaintiff or coplaintiff to any proceedings that the Trustee or the Investors may institute with respect to the Receivables; (d) it shall make available to the Trustee, on its request and free of charpe, all evidence required by the Trustee and as may be in the possession ttie Seller in any proceedings and will use its best endeavours to procure the attendance at any hearing of such witnesses as the Trustee may require; (e) as required by Applicable Law (including the Securitisation Directions) and accounting principles, it will make proper disclosures (including in its books of account regarding the assignment of the Assigned Assets and the Trustees rights and claims therein. Further, it will, in case of other assignment of receivables transactios: where the assignee has recourse against it, make proper disclosuces in its book of accounts regarding the assignment of such Assigned Assets; (f) it will instruct the Due Diligence Auditor to submit all future audit reports directly to the Truste?; (g) it will be bound by and will perform all or any of its obligations under the Underlying Documents or imposed by Applicable Law with respect to the Assigned Assets and will not take or omit to take any action that causes or could cause a breach in terms of such Underlying Documents or Applicable Law; (h) it will preserve and maintain its corporate existence, rights and qualifications to do business; (i) it will (A) execute and deliver a power of attorney to the Trustee in a form and manner acceptable to the Trustee, inter alia, authorising the Trustee to do all such acts, deeds and things as may be required to effectively vest in the Trustee full legal title to the Assigned Assets including but not limited to do all such acts, deeds and things in its capacity as the legal titleholder of the Assigned Assets, and (B) from time to time execute and deliver such further documents and perform such further acts, as the Trustee may reasonably request, at its own expense in order to fully effect the purposes of this Agreement and to perfect, protect and more fully evidence the Trust's title over the Assigned Assets; (j) it will not have any claim or exercise any right of deduction, any lien (general or specific), set off or any other right that it is entitled to in law or otherwise against any Obligor which may prejudice the collection of the Receivables with respect to such an Obligor, including in respect of any Receivables, amounts, writings or things held by it or continued to be held by it or coming within its power or possession pursuant to or in connection with this Agreement, and shall as soon as may be possible hand over the same to the Trustee, if so instructed by the Trustee; (k) it will hold all documents, writings, agreements, amounts, Underlying Documents, and Receivables coming to its power or possession pursuant to or in connection with this Agreement in trust and as agent for the Trustee (on behalf of the Trust and for the benefit of the Beneficiaries); (l) it will immediately hand over all the documents, writings, agreements, amounts, Underlying Documents, and Receivables held by it (whether in its capacity as the Seller or as the Servicer) to the Trustee on a demand being made for any of them; (m) it shall not provide any additional loan to the Obligors (or any other person) against the security of any of the Secured Assets for so long as the relevant Facility comprising the Pool is outstanding. However, the Seller shall be at liberty to extend loan/facility to any of the Obligors on any other security interest; (n) it shall not suffer or omit to take any steps that are inconsistent wth its obligations under the Securitisation Documents or which would jeopardize the the recovery of the Receivables in full or in part; (o) it will incur all costs (including all legal costs andd stamp/duty) payable or incurred in connection with the preparation, negotiation and exetution of this Agreement and any of thhe Securitisation Documents and all costs of the issuance of the PTCS; (p) the Seller has complied with the minimum holding period requirements and the MRR prescribed in the Securitisation Directions; (q) it will comply on an ongoing basis with the requirements under the Securitisation Directions (including the MRR), wherein (including for the purposes of Clauses 16 and 17 of the Securitisation Directions): (i) the MRR shall be maintained in the manner set out in Clause 6.1(z); (ii) the MRR shall not be reduced either through hedging of credit risk or selling or encumbering the MRR; (iii) MRR shall be maintained by the Seller itself and not by/through any of its group entities; and (iv) the form of MRR shall not change until the Legal Final Maturity Date, and the MRR as a percentage of unamortised principal shall be maintained on an ongoing basis except for reduction of retained exposure due to repayment or through the absorption of losses; (r) for the purposes of ensuring compliance with Cläuse 114 of the Securitisation Directions, on September 30 and March 31 of each calendar year, it shall provide such disclosures and confirmations that may be required in the format prescribed in the Securitisation Directions confirming that it is in compliance with the minimum holding period and the MRR prescribed in the Securitisation Directions; (s) for the purposes of ensuring compliance with Clause 118 of the Securitisation Directions, it shall report the securitisation transactions undertaken by it (including the details of the PTCs) to the RBI in such format as may be prescribed in the Securitisation Directions, on a quarterly basis or such other periodicity as may be prescribed by the RBI; (t) for the purposes of Clause 24 of the Securitisation Directions, in the event the actions of any of the counterparties or institutional intermediaries associated with the transactions contemplated under the Securitisation Documents (including without limitation, the Seller, the Trustee and/or the Trust, the Servicer, and the providers of any credit enhancement), result in, at any point, a material alteration of the risk profile of the PTCs, the Seller shall ensure that adequate details about such occurrence are provided to the PTC Holders, the Rating Agency and any other service providers, promptly, and in no case later than within 14 (fourteen) calendar days of occurrence; (u) it shall, make available, a copy of the Trust Deed, if any, and the accounts and statement of affairs of the Trust to the RBI, if required to do so; (v) it shall, promptly, inform the Trustee and the Investors of the occurrence of any events causing or leading to, or receipt of any notices in relation to, the winding up liquidation or insolvency of the Seller or the occurrence of any action in relation to the commencement/initiation of winding up, liquidation or insovency of the Seller, and shall promptly provide such other information relating to the Seller as may be requested by the Trustee or the Investors; and (w) it will make (and/or ensure and procure the making of all relevant filing or notings with the relevant Governmental Authorities (including without limitation, CERSAI, and the jurisdictional sub-registrar of assurances), as may he required under Applicable Law in relation to any Underlying Security and the transacions contemplated under the Transaction Documents, and as and when required by the Trustee. 2. The Seller hereby irrevocably agrees and undertakes that it will provide the Cash Collateral on the Execution Date with the Approved Bank and in a form and manner acceptable to the Rating Agency and Trustee. 3. Save and except as specifically provided in Clauses 7.1 and 7.2 of the mentioned Agreement, the Seller does not provide any specific undertaking and covenant. |
| All Assumptions |
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Acuité has arrived at a base case delinquency estimate basis its analysis of the company's historical static pool and further applied appropriate stress factors to the base loss figures to arrive at the final loss estimates. The final loss estimate is estimated between 1.5-1.85 percent .The loss estimate also consider the risk profile of the particular asset class, the borrower strata, economic risks, collection efficiency over the past several months as well as the credit quality of the originator. Acuité also has simulated the potential losses to an extent by applying sensitivity analysis.
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| Liquidity Position |
| Adequate |
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The rating is based on the strength of cash flows from the selected pool of contracts; the credit enhancement is available in the form of (i) Overcollateralization of 10.00 percent of the outstanding pool principal; (ii) Cash collateral of 1.00 percent of the pool principal; and (iii) Excess Interest Spread of 33.08 percent of the outstanding pool principal. |
| Outlook: Not Applicable |
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| Key Financials - Originator | ||||||||||||||||||||||||||||||||||||||||
** Total Assets are adjusted for deferred tax assets |
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| Status of disclosure of all relevant information about the Obligation being Rated |
| Non-public information |
| Any Other Information |
| None |
| Note on complexity levels of the rated instrument |
| Applicable Criteria |
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• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Explicit Credit Enhancements: https://www.acuite.in/view-rating-criteria-49.htm • Non-Banking Financing Entities: https://www.acuite.in/view-rating-criteria-44.htm • Securitized Transactions: https://www.acuite.in/view-rating-criteria-48.htm |
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| Rating History - Originator (if applicable): |
| Acuite does not rate the originator |
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