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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Pass Through Certificates (PTCs) | 12.39 | ACUITE AA+ | SO | Upgraded | - |
| Total Outstanding Quantum (Rs. Cr) | 12.39 | - | - |
| Rating Rationale |
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Acuité has upgraded the long term rating to ‘ACUITE AA+(SO)’ (Read as ACUITE double A plus (Structured Obligation)) from 'ACUITE AA SO' (Read as ACUITE double A (Structured Obligation)) to the Pass Through Certificates (PTCs) of Rs. 12.39 Cr. (as per September 2023 payout) issued by CONSILIENCE BL – 2206 (Trust) under a securitisation transaction originated by Protium Finance Limited (PFL).
The PTCs are backed by a pool of loans provided to borrowers of unsecured business loans. 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 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. Over collateralisation of Rs. 3.86 Cr. ii. EIS of Rs. 0.99 Cr. iii. Cash collateral of Rs. 3.92 Cr.; and iv. A subordinated equity tranche of Rs. 0.78 Cr., in the form of investment from PFL. Reasons for rating upgrade:
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| About the Originator |
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Incorporated in 2019, Protium Finance Limited (PFL) erstwhile Growth Source Financial Technologies Private Limited (GFSTPL) is a Mumbai based NBFC engaged in lending secured and unsecured loans to SME, MSME and Consumer finance segments. The company is promoted by Consilience Capital Management and led by Mr. Peeyush Misra (Partner & Director) who has over 2 decades of experience in risk management and running global businesses. PFL operates through a network of 85 branches spread across 69 districts/cities and having a presence over 15 states.
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| Assessment of the Pool |
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The underlying pool of Rs 39.17 Cr. in the current Pass Through Certificate (PTC) transaction comprises of unsecured business loans extended towards 291 borrowers, displaying moderate granularity, with an average ticket size of Rs. 18.3 lakhs, minimum ticket size of Rs. 3.0 lakhs. and maximum of Rs. 35.0 lakhs. The current average outstanding per borrower stands at Rs.13.46 lakhs. The weighted average original tenure for the pool is 31.26 months (minimum 18 months & maximum 36 months). The pool has a healthy weighted average seasoning of 9.48 months (minimum 6 months seasoning and maximum of 23 months seasoning). None of the loans in the pool availed moratorium. Furthermore, none of the loans in the pool went into the non-current bucket since origination, which speaks of the proven repayment track record of the borrowers. The borrowers have a significant average business vintage of 11.4 years (minimum 3 years and maximum 101 years). Also, the average CIBIL score for the borrowers in the pool is 762.82, which indicates a healthy credit profile of the underlying customers. All the customers in the selected pool are current as of the cut-off date. While 48.16% of the customers in the pool belongs to the Sole Proprietorship category, 37.31% belong to the Private Limited Company and 14.52% to the Partnership Firm categories. 4.5% of the borrrowers belong to the Textiles, Textile Products, Leather and Footwear industries, followed by FMCG (4.2%), and the remaining from other industries. 17.99% of these borrowers are concentrated in Maharashtra followed by 17.12% in Tamil Nadu and 16.48% in Delhi. The top 10 borrowers of pool constitute 6.8% of the pool principal outstanding. Thus the geographical and the top 10 concentrations in the pool are moderate as per the asset class.
As per the payout report for September 2023, there are 202 live borrowers in the transaction, with average outstanding of Rs 6.13 lakhs per borrower. Hence, the pool granularity has become better than that initially. Since the initial rating, the transaction has highly amortised by 68.37%, without any CE utilisation, which prove that the pool experienced healthy collections. As a result, the CC has built up significantly to 31.61% of the pool principal outstanding. Furthermore, the 90+dpd in the transaction stood at 1.25% of the original pool principal outstanding, which is well within the initial assumptions. |
| Credit Enhancements (CE) |
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The credit enhancement is available in the form of
i. Over collateralisation of Rs. 3.86 Cr. ii. EIS of Rs. 0.99 Cr. iii. Cash collateral of Rs. 3.92 Cr.; and iv. A subordinated equity tranche of Rs. 0.78 Cr., in the form of investment from PFL. |
| 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, till the Series A1 PTCs are outstanding. On payment of Series A1 PTCs in full and till such time the Equity Tranche PTCs/Series A2 PTCs are outstanding, the collections will be utilized for the payment of expected Series A2 principal including any unpaid expected principal payouts to Series A2 PTCs from earlier collection periods.
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. |
| Assessment of Adequacy of Credit Enhancement |
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Acuité has arrived at a base case delinquency estimate of 1.7% – 3.0% in respect of the loan assets being securitised. Acuite has further 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, the borrower strata, economic risks and the demonstrated collection efficiency over the past several months. Acuité has also considered the track record of operations of the originator and certain pool parameters while arriving at the final loss estimate. Acuité has accounted for the probable impact of COVID19 in the transaction for its analysis. The PTC payouts will also be supported by internal credit enhancement in the form of overcollateralisation, excess interest spread and a subordinated equity tranche provided by PFL.
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| Legal Assessment |
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The final rating is assigned based on the fulfilment of the structure, terms and covenants detailed in the executed trust deed, legal opinion, trust deed and other documents relevant to the transaction.
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Key Risks
| Counter Party Risks |
| The pool has average ticket size of Rs. 18.3 lakhs, minimum ticket size of Rs. 3.0 lakhs. and maximum of Rs. 35.0 lakhs . Considering their credit profile of the borrowers, the risk of delinquencies/defaults are moderately 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 comprises of unsecured business loans extended towards 291 borrowers, displaying moderate granularity, hence the risk is partially mitigated. 17.99% of these borrowers are concentrated in Maharashtra followed by 17.12% in Tamil Nadu and 16.48% in Delhi. The top 10 borrowers of pool constitute 6.8% of the pool principal outstanding.
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| Servicing Risks |
| There is moderate track record of 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 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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| Commingling Risk |
| The transaction is subject to commingling risk since there is a time gap between last collection date and transfer to payout account.
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| Rating Sensitivity |
Even if the base case default is increased by 5%, the transaction’s rating will not change.
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| All 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 10.00% of the pool principal. The PTC payouts will also be supported by internal credit enhancement in the form of over collateralisation, excess interest spread and a subordinated equity tranche provided by PFL.
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| Outlook: Not Applicable |
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| Key Financials - Originator | ||||||||||||||||||||||||||||||||||||||||
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| Any Other Information |
| None |
| Status of disclosure of all relevant information about the Obligation being Rated |
| Non-public information |
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| 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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| Applicable Criteria |
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• Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Securitized Transactions: https://www.acuite.in/view-rating-criteria-48.htm |
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