|
|
| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Securitised Debt Instruments (SDIs) | 4.33 | ACUITE BBB- | SO | Reaffirmed | - |
| Total Outstanding | 4.33 | - | - |
| Total Withdrawn | 0.00 | - | - |
|
Rating Rationale |
|
Acuité has reaffirmed the long term rating of ‘ACUITE BBB- (SO)’ (read as ACUITE triple B minus (Structured Obligation)) to the Securitised Debt Instruments (SDIs) of Rs. 4.33 Cr. issued by PROSPERITY ASSET 5 (Trust) under a securitisation transaction originated by CONNECT RESIDUARY PRIVATE LIMITED (The Originator/Lessor). The rating continues to factor the credit profile of Cherise India Private Limited (CIPL) (lessee/obligor) which posted a growth in the operating income from Rs. 36.67 Cr. during FY23 to Rs. 89.80 Cr. during FY24 resulting in an increase in PAT from Rs. 2.94 Cr to Rs. 7.50 Cr. for the respective years. Acuite takes cognisance of the equity infusion of Rs. 25 Cr. during FY25 which further enhances the liquidity profile of the CIPL. The SDIs are backed by lease receivables from CIPL for assets comprising Tea Vending Machines leased by Connect Residuary Private Limited (lessor). The rating addresses the timely payment of principal and interest on expected monthly payment dates, however the same are promised on the ultimate final maturity date, in accordance with the transaction documentation. The transaction is structured at par. The rating is based on the strength of cash flows from lease receivables from the lessee, credit quality of the lessee as well as soundness of the transaction’s legal structure. The credit enhancement is available in the form of:
|
| About the Originator |
|
Connect Residuary Private Limited is Mumbai based company incorporated in 2011. Mr. Ankush Bhan, Mr. Rohit Kakkar are directors of the company. It is engaged in the business of acquiring and dealing in the unguaranteed residuary interest in assets rented to customers. The Company rents assets to customers for a mutually agreed period. Their primary business entails asset renting. As an asset lifecycle management company, they engage with corporates to cater to their asset-based needs for expansion, and offer integrated asset tracking solutions, for clients to manage the rented assets across the organization. They offer varied solutions for their prospective clients like new equipment rental, sale and rent back, refresh plan, short term rentals, and provide value added services like asset disposable services and strategic & advisory services.
|
| Standalone Rating of the Originator (if rated by Acuite) |
| Acuite does not rate the originator |
| About the Obligor - Cherise India Private Limited |
| Incorporated in December 2018, Cherise India Private Limited (CIPL) is based out of Maharashtra and engaged in manufacturing and distribution of tea and coffee premixes and deployment of vending machines under the brand name ‘Cherise’. CIPL is promoted by Mr. Parimal Shah in 2018 who is a tea sommelier and an alumnus of IIM Ahmedabad. The company is also promoted by M K Jokai Agri Plantations private limited, a tea estate based in North east India which manufactures orthodox Assam tea. M K Jokai Agri Plantations private limited is a part of Mr. Parimal Shah’s family business. CIPL generates its revenue through sale of the premixes through two channels i.e. FMCG sales and Vending Machines. Under the FMCG sales, the company currently has a network of 67 distributors through whom it sells its products on online e-commerce websites and physical stores. The company started manufacturing tea and coffee vending machines in 2020. As on date the company has manufactured ~1012 vending machines which have been installed at various corporates, hospitals, Malls, Schools and colleges for free. The company does not earn any income from sale of such vending machines. These vending machines are designed to accept only premixes of Cherise, thus making these vending machines a source for sale at the point of consumption. |
| Assessment of the Pool |
| The receivables are not in the form of a pool. Hence, this section remains not applicable. |
| Credit Enhancements (CE) |
The credit enhancement is available in the form of:
|
| Transaction Structure |
| The rating addresses the timely payment of principal and interest on expected monthly payment dates, however the same are promised on the final maturity date, in accordance with the transaction documentation. The transaction is structured at par. |
| Brief Methodology |
|
Acuite takes into consideration the credit profile CIPL and the soundness of the legal structure. Accordingly, Acuite has arrived at a standalone rating of CIPL and has provided the Credit enhancement on account of cash collateral in the form of fixed deposit issued by the lessor in favour of the trust equivalent to 31.18 percent of the outstanding value of SDIs issued. Acuite also considers the timely payment of principal and interest on expected monthly payment dates, however the same are promised on the final maturity date, in accordance with the transaction documentation. |
| 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, assignment agreement and other documents relevant to the transaction. |
| Key Risks |
| Counter Party Risks |
| The payments to the SDI holders arise from a single obligor. Considering the minimal track record of operations of Cherise India Private Limited, any adverse impact on the overall business risk profile will have a bearing on the servicing ability of the company. |
| Concentration Risks |
| The rating remains exposed to high concentration risks as the lease receivables i.e cashflow source are from a single obligor. |
| Servicing Risks |
| There is limited track record of servicing SDIs, since this one of the initial SDI transactions for the originator and the lessee. 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 SDI holders may be impacted. |
| Prepayment Risks |
| The risk remains negligible on account of non-permissibility of prepayment of rentals. In an event of default by the obligor on the lease payments, the Receivables due from the obligor will be discounted at a rate as agreed between the originator and the obligor but will be paid to the Investors at the promised Series 1 Yield. |
| Commingling Risk |
| While there is a time gap between the expected payout date and the due date for transfer to the payout account, this risk is mitigated by the existence of the trust with a designated escrow account overseen by the trustee. The trust will pass through the rentals to the holders of the SDIs; there will be no involvement/ intervention by the originator in such payments. |
| Rating Sensitivity |
|
| All Covenants |
| The following covenant is included in the transaction structure: The amounts must be deposited in the Collection and Pay-out Account prior to the Expected Pay Out Date. The amounts deposited will be exclusive of GST and TDS deduction (if any), will be in accordance with the provisions of the Income Tax Act, 1961. The amounts drawn upon utilization of the Credit Enhancement, shall be deposited into the Collection and Pay-out Account from which payments to the Beneficiaries shall be made in accordance with the terms of the issue. |
| All Assumptions |
| Acuité has considered a default rate as base case to arrive at the expected loss for the receivables being securitised. Acuite has further applied appropriate stress factors to the base figures to arrive at the final estimates and consequently the extent of credit enhancement required. The final estimates also consider the risk profile of the lessee and further factored in economic risks. The SDI payouts will also be supported by credit enhancement in the form of cash collateral (fixed deposit) issued by the lessor in favor of the trust (31.18 percent of the outstanding value of SDIs issued). |
| Liquidity Position |
| Adequate |
| As per the transaction structure, both the interest and the principal amount is promised to the SDI holders only on the final maturity date of the transaction. Hence, providing adequate liquidity cushion for repayments. Further, the structure has a credit enhancement as a support in the form of cash collateral (fixed deposit) issued by the lessor in favor of the trust equivalent to 31.18 percent of the outstanding value of SDIs issued. |
| Outlook: Not applicable |
| |
| Terms of the Servicer Contract |
|
The following terms are fundamental and essential terms: (a) that the obligor shall pay all rental installments on time; (b) that the obligor shall keep the Equipment insured as set out in the contract; (c) that the obligor do not cease or threaten to cease carrying on the business; (d) that the obligor do not become Insolvent or commit an act of insolvency as defined in the Insolvency and Bankruptcy Code, 2016 as applicable; and (e) that the obligor do not attempt to sell, dispose of, encumber, or part with possession of the Equipment in any way without the originator’s written consent. |
| Provision for Appointment of Back-Up Servicer, if any |
| As per the servicer agreement, on the occurrence of a servicer’s event of default, the trust may appoint a bank, non-banking finance company or body corporate as the servicer (the “Alternate Servicer”). |
| Key Financials - Cherise India Private Limited (lessee) | ||||||||||||||||||||||||
|
||||||||||||||||||||||||
| Key Financials - Connect Residuary Private Limited | ||||||||||||||||||||||||
|
||||||||||||||||||||||||
| Interaction with Audit Committee anytime in the last 12 months (applicable for rated-listed / proposed to be listed debt securities being reviewed by Acuite) |
| Not applicable |
| Any Other Information |
| None |
| Status of disclosure of all relevant information about the Obligation being Rated |
| Public information |
| |
| Note on complexity levels of the rated instrument |
| Applicable Criteria |
|
• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Non-Banking Financing Entities: https://www.acuite.in/view-rating-criteria-44.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Securitized Transactions: https://www.acuite.in/view-rating-criteria-48.htm |
|
| |
| Rating History - Originator (if applicable): |
| Acuite does not rate the originator |
|
|
||||||||||||||||||
|
| |
|
Contacts |
About Acuité Ratings & Research |
