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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Pass Through Certificates (PTCs) | 0.37 | ACUITE BBB | SO | Withdrawn | - |
| Total Outstanding Quantum (Rs. Cr) | 0.00 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 0.37 | - | - |
| Rating Rationale |
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Acuité has withdrawn the rating of ‘ACUITE BBB(SO)’ (read as ACUITE triple B (Structured Obligation)) to the Pass Through Certificates (PTCs) of Rs. 0.37 Cr. (as of July 2022 payout) issued by Northern Arc 2021 SBL Stresemann under a securitisation transaction originated by Moneyboxx Finance Limited (MFL) (The Originator). The PTCs are backed by a pool unsecured business loans with principal outstanding of Rs. 1.18 Cr (including Rs. 0.82 Cr of over collateralisation).
The transaction has been paid in full. It has also been redeemed and all the contractual obligations and pay-outs to the investors have been duly completed. Hence, the rating is being withdrawn. The rating withdrawal is in accordance with Acuité's policy on withdrawal of rating and pursuant to a request received from the company in this regard. The rating addressed the timely payment of interest on monthly payment dates and the ultimate payment of principal by the final maturity date, in accordance with the transaction documentation. The transaction was 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. Over collateralisation of 10.0% of the pool principal; ii. Cash collateral of 8.00% of the pool principal; and iii. Excess Interest Spread of Rs. 0.80 Cr. i.e. 10.27 % of the pool principal |
| About the Originator |
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MoneyBoxx Finance Limited (MFL) is a BSE Listed NBFC providing small ticket loans to micro and small enterprises. It commenced its operations in February 2019 and is promoted by Mr Deepak Aggarwal and Mr Mayur Modi. As on August 31, 2022, it operates in 5 states, i.e., Rajasthan, Haryana, Madhya Pradesh, Punjab and Uttar Pradesh through its branch network of 39 branches. The company is registered with RBI as Non-systematically Important NBFC engaged in lending and allied activities. The entity focuses on small ticket unsecured business loans to individual borrowers and has also started extending secured business loans since Q1FY23. As on June 30, 2022, MFL has 393 employees and 12,975 active borrowers with cumulative disbursements of Rs. ~270 Cr. till August, 2022.
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| Assessment of the Pool |
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As per the initial rating, the pool in the current Pass Through Certificate (PTC) transaction comprised of unsecured business loans extended towards 893 borrowers, with an average ticket size of Rs. 1.25 lakhs, minimum ticket size of Rs. 50,000 and maximum of Rs. 2.5 lakhs. The average outstanding per borrower stood at Rs. 92,384. The weighted average original tenure for pool was 18.33 months (minimum 3 months & maximum 36 months). The pool had a weighted average seasoning of 7.44 months (minimum 6 months seasoning and maximum of 19 months seasoning). 98.5% of the pool under consideration was not under moratorium and all the loans were current as on pool cut-off date, May 31, 2021. Furthermore, all the loans had remained current as per the intial rating. The pool was concentrated in Rajasthan (35.8%), followed by Madhya Pradesh (34.7%), Haryana (18.2%) and Punjab (11.35%). The loans belonged to the categories of livestock (71.4%), trading (16.7%), kirana (6.3%), manufacturing (5.2%) and services (0.5%).
MFL has Asset Under Management of Rs. 120.99 Cr as on March 31, 2022. As of July 2022, the pool comprises of 497 borrowers, with a pool principal outstanding of 1.18 Cr. The pool has amortized significantly by 85.65% with no utilization of credit enhancement, which is a healthy sign. The cash collateral, which was 7.93% of the POS during initial rating, has increased considerably to 52.28% of the current POS. The 90+dpd as a % of Original POS stood at 0.19%, with the 180+dpd at 0.07%, which are well within the initial assumptions. |
| Credit Enhancements (CE) |
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The transaction is supported in the form of
i. Over collateralisation of Rs. 0.82 Cr. ii. Cash collateral of Rs. 0.62 Cr. and iii. Excess Interest Spread of Rs. 0.09 Cr. The rating addresses the timely payment of interest on monthly payment dates and the ultimate payment of principal by the final maturity date, in accordance with transaction documentation. |
| Transaction Structure |
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The transaction is structured at par. Collections of a particular month will be utilized to make promised interest and expected principal payouts to Series A1 PTCs and expected interest payment to Series A1 PTCs.
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| Assessment of Adequacy of Credit Enhancement |
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Acuité has arrived at a base case delinquency estimate of 1.4% – 2.5% in respect of the loan assets being securitised. Acuite has further has applied appropriate stress factors to the base loss figures to arrive at the final loss estimates and consequently the extent of credit enhancement required. The final loss estimates also consider the risk profile of the particular asset class i.e. unsecured loans, the borrower strata, economic risks and the demonstrated collection efficiency over the past few months. Acuité has also considered the track record of operations of the originator and certain pool parameters while arriving at the final loss estimate.
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| Legal Assessment |
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The conversion of rating from provisional to final, has taken into account, besides other documents, the legal opinion to the satisfaction of Acuité. The legal opinion shall cover, adherence to RBI guidelines, true sale, constitution of the trust, bankruptcy remoteness and other related aspects.
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Key Risks
| Counter Party Risks |
| The current pool has an average ticket size of Rs. 1.21 lakhs, minimum ticket size of Rs. 50,000 and maximum of Rs. 2.5 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 |
| Since the pool is less granular, i.e. underlying assets in the current pool are in nature of unsecured business loans to 497 borrowers, hence the concentration risk remains to a medium degree. However, there is state-wise geographical concentration in the pool, since the current pool is concentrated in Madhya Pradesh (40.07%), followed by Rajasthan (34.08%) which is partially mitigated as the pool is spread across 13 branches.
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| Servicing Risks |
| The servicing risk level is medium, since the track record of the orginator is moderate in servicing PTCs.
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| 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.
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| 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.
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| Rating Sensitivity |
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| Material Covenants |
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The following covenant is included in the transaction structure: The purchase consideration to be paid by the issuer to the originator for purchasing the pool is equal to Series A1 issue price.
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| Liquidity Position |
| Adequate |
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The liquidity position in the transaction is adequate. The cash collateral available in the transaction amounts to Rs. 0.62 Cr. The PTC payouts will also be supported by internal credit enhancements in the form of over collateralisation (Rs. 0.82 Cr.) and excess interest spread (Rs. 0.09 Cr.).
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| Outlook : |
| Not Applicable |
| Key Financials - Originator | ||||||||||||||||||||||||||||||||||||||||
*Total income equals to Net Interest Income plus other income.
Status of Non Cooperation with previous CRA None |
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| Any Other Information |
| None |
| 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 • Securitized Transactions: https://www.acuite.in/view-rating-criteria-48.htm |
| Note on Complexity Levels of the Rated Instrument |
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In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in.
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