Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Pass Through Certificates (PTCs) 5.53 ACUITE BBB+ | SO | Assigned | Provisional To Final -
Total Outstanding 5.53 - -
Total Withdrawn 0.00 - -
 
Rating Rationale

­Acuité has assigned and converted from Provisional to Final long-term rating of ‘ACUITE  BBB+ (SO)’ (read as ACUITE triple B plus (Structured Obligation)) to the Rs. 5.53 Cr. Pass Through Certificate (PTC) issued by ALOHA 09 2024  (The Trust) under a securitisation transaction originated by K M Global Credit Private Limited (The Originator). The series A1 PTCs is backed by a pool of loans consisting of Upskilling Edtech loans (Unsecured) and Rooftop Solar Loans ( Secured) which comprises a principal outstanding of Rs. 6.32 Cr. 

The final rating has been assigned as the following documents have been received:
1. Trust Deed
2. Deed of Assignment
3. Servicing Agreement
4. Legal Opinion
5. Final Term Sheet
6. Other relevant documents: ( Account Agreement, Power of Attorney, Asset Audit report, KYC Audit report, Information Memorandum)

The rating is converted from provisional to final based on the adherence to the structure, terms and covenants detailed in the executed trust deed, servicing agreement, legal opinion, assignment agreement, final term sheet and other documents relevant to the transaction.

About the Originator
­K M Global Credit Private Limited (KMGCPL) is a B2B2C NBFC lending focused fintech based out of Mumbai which offers lending solutions and unsecured loan options at the point of sale to businesses and consumers. KM Global Credit Private Limited was founded by Aditya Damani (CEO) in 2018. KMGCPL majorly disburses loans in the education, solar/green energy segment and home decor.
 
Assessment of the Pool
­­K M Global Credit Private Limited (KMGCPL) has Asset Under Management of Rs. 253.16 Cr. as on Mar 31, 2024. The underlying pool of Rs. 6.32 Cr. in the current Pass Through Certificate (PTC) transaction comprises of Upskilling Edtech loans (Unsecured) consisting of 13.81% and Solar and Rooftop Loans (Secured) 86.19%  which have been extended towards 271 borrowers, with an average ticket size of Rs. 3,00,600 , minimum ticket size of Rs. 41,500 and maximum of Rs. 16,56,928. The current average outstanding per borrower stands at Rs. 2,33,365. The pool has a healthy weighted average seasoning of 11.12 months (minimum 4 months seasoning and maximum of 32 months seasoning). Furthermore, none of the loans in the pool had gone into the Non-CURRENT bucket since origination, which are healthy signs. 26.36% of the borrowers are concentrated in Uttar Pradesh followed by Maharashtra having 12.51% of the pool principle outstanding and Madhya Pradesh 8.88 % of the Principal outstanding. The top 10 borrowers of pool constitute 14.90% (i.e. Rs.94.25 lakhs) of the pool principal O/s.
 
Transaction Structure
The rating of Series A1 PTCs addresses the timely payment of the interest on each payout dates and ultimate payment of principal on final maturity date to the series A1 pass-through certificates (PTCs) investors, in accordance with the transaction documentation. Certificates in the nature of pass-through certificates representing an undivided beneficial interest in the trust property of the SPV will be issued to the subscribers in One series, namely the Series A1 PTCs (being the senior tranche). Receivables of the Seller is proposed to be securitised by way of assignment for Purchase Consideration out of the issue proceeds of the PTCs.
In the event that the collections received in the Collection Period preceding a Payout Date are insufficient to meet the payment of yield to the Series A1 PTCs on the given Payout Date as per the expected payout schedule, then drawdowns may be made upon the External Credit Enhancement on that Payout Date to make whole such insufficiency, to the extent of External Credit Enhancement available. 
Also, subject to applicable law, at any time after the residual value i.e., value of outstanding principal of the Facilities comprising the Receivables, falls below 10% of the aggregate principal of the Facilities comprising the Receivables on the Cut Off Date , the Seller will have the option to buy fully performing Facilities underlying the Receivables, exercisable by the Seller in its sole discretion (Clean Up Call Option). This option may be exercised only if, at the time of exercise of the Clean Up Call Option by the Seller, the amount available under the Credit Enhancement is greater than the principal balance of non-performing Facilities comprising the Receivables.
 
Brief Methodology
­Parameters considered are seasoning of the pool, pool vs portfolio comparison, portfolio cuts, amortisation of the pool, internal cash flow modeling, pool characteristics, static pool, dynamic DPDs to assign the rating.
 
Legal Assessment
The final rating is assigned based on the adherence to the structure, terms and covenants detailed in the executed trust deed, servicing agreement, legal opinion, assignment agreement, final term sheet and other documents relevant to the transaction.
 
Key Risks

Counter Party Risks
­The ­average ticket size of the pool is Rs. 3,00,600, minimum ticket size of Rs. 41,500. and maximum of Rs. 16,56,928. Considering the 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.
Concentration Risks
­The underlying pool of Rs. 6.32 Cr. in the current Pass Through Certificate (PTC) transaction comprises of Upskilling Edtech loans (Unsecured) consisting of 13.81% and Solar and Rooftop Loans (Secured) 86.19% have been extended towards 271 borrowers. The top 10 borrowers of pool constitute 14.90% (i.e. Rs. 94.25 lakhs) of the pool principal O/s.
Servicing Risks
­There is limited track record of servicing PTCs, since this is the first PTC transactions for the originator rated by Acuité.
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). Prepayment risks are partially mitigated by prepayment penalty levied by the company for pre-closures. 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.
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)
­The rating is based on the strength of cash flows from the selected pool of contracts; the credit enhancement is available to the Series A1 PTCs in the form of:
i. Over collateralisation of 12.50% of the pool principal
ii. Excess Interest Spread of 11.66% of the pool principal
iii. Cash Collateral of 6.00% of the pool principal
 
Rating Sensitivity
­
  • Collection performance of the underlying pool
  • Credit quality of the underlying borrowers
  • Decrease in cover available for PTC payouts from the credit enhancement
  • Adherence to terms and conditions, as stipulated in the Transaction Documents
 
All Covenants
­PORTFOLIO AND RECEIVABLES CRITERIA
Top State concentration to be not more than 30% of the Pool Principal
Receivables comprising the Receivables shall be identified on the basis of criteria specified below:
  • Minimum Holding Period (MHP) of the Receivables should meet the criteria set under the Securitization Guidelines;
  • Balance Tenor of the underlying loans to be more than 365 days
  • Loans are existing at the time of selection, and have not been terminated or prepaid;
  • Compliance with "know your customer" norms specified by the RBI;
  • Loans are not overdue and are current as of cutoff date;
The Loans should not have been rescheduled or restructured by the Seller up to the Cut-off Date save and except for moratorium availed by certain Obligors from March 2020 to August 2020 pursuant to the RBI notification no. RBI/2019-20/244 dated May 23, 2020 read with RBI notification no. RBI/2019-20/186 dated March 27, 2020 and RBI Notification dated April 17, 2020 Compliance with "know your customer" norms specified by the RBI.
Chartered Accountants shall carry out a sample audit of contracts included in the Receivables to determine their existence, whether they meet with the selection criteria and whether they have adequate documentation. The portfolio audit certificates will be available with the Trustee for inspection.
Additionally, In case of happening of any of the following events during the tenure of the PTCs:
•            The Cumulative Collection Efficiency in respect of the Pool is less than 95% for any 2 consecutive payouts and/or;
•            The PAR>90 of the Pool is more than 5.00% of the Initial Principal Outstanding.
then, 100% EIS shall be utilized to make principal payments to the Series A1 investors as long as the Series A1 PTCs are live.
Further, the Servicer Event of Default as per the term sheet will include, inter alia:
  • Insolvency and insolvency analogous event.
  • Breach of terms of any Transaction Documents that has a material adverse effect on its ability to continue to perform its obligations under the Transaction Documents or is likely to be prejudicial to the Receivables to the Trustee under the Assignment Agreement in any way, including the collection of the Receivables and/or commencement of enforcement proceedings in respect of Receivables
  • Failure of two successive discretionary audits testing the ability of the Servicer to meet the standards with respect to collection standards, management, governance, internal systems and processes, and data integrity, as may be required by the Trustee. The Trustee may authorise an independent agency to conduct such discretionary audits on the Servicer on its behalf.
 
All Assumptions
­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 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.
 
Liquidity Position
Adequate
­The liquidity position in the transaction is adequate. The cash collateral available in the transaction amounts to 6.00 percent of the pool principal. The PTC payouts will also be supported by an internal credit enhancement in the form of Overcollateral (12.50 percent of pool principal) and excess interest spread (11.66 percent of pool principal)­
 
Outlook: Not Applicable
­
 
Key Financials - Originator
­
Particulars Unit FY24 (Actual) FY23 (Actual)
Total Assets** Rs. Cr. 208.61 114.51
Total Income* Rs. Cr. 17.10 13.13
PAT Rs. Cr. (2.57) 0.50
Net Worth Rs. Cr. 48.96 37.37
Return on Average Assets (RoAA) (%) (1.59) 0.52
Return on Average Net Worth (RoNW) (%) (5.95) 2.02
Debt/Equity Times 2.99 1.80
Gross NPA (%) 1.45 0.86
Net NPA (%) 1.19 0.62
 *Total income equals to Net Interest Income plus other income.
**Total assets adjusted to Deferred Tax liabilty
 
Any Other Information
­None
 
Status of disclosure of all relevant information about the Obligation being Rated
Non-public information
Note on complexity levels of the rated instrument
Applicable Criteria
• 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

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook
14 Nov 2024 Pass Through Certificate Long Term 5.53 ACUITE Provisional BBB+ (SO ) (Assigned)
­

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum
(Rs. Cr.)		 Complexity Level Rating
Not Applicable Not avl. / Not appl. Pass Through Certificate 24 Oct 2024 12.50 28 Feb 2029 5.53 Highly Complex ACUITE BBB+ | SO | Assigned | Provisional To Final

Contacts

About Acuité Ratings & Research
© Acuité Ratings & Research Limited. All Rights Reserved.www.acuite.in