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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Pass Through Certificates (PTCs) | 11.25 | ACUITE BBB | SO | Withdrawn | - |
| Total Outstanding Quantum (Rs. Cr) | 0.00 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 11.25 | - | - |
| 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Acuité has withdrawn the rating of ‘ACUITE BBB (SO)’ (read as ACUITE triple B (Structured Obligation)) to the Pass Through Certificates (PTCs) of Rs. 11.25 Cr. issued by THEO 11 2021 under a securitisation transaction originated by SUBHLAKSHMI FINANCE PRIVATE LIMITED (The Originator). The PTCs are backed by a pool unsecured business loans with principal outstanding of Rs. 13.08 Cr (including Rs. 1.83 Cr of over collateralisation). |
| About the Originator |
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Subhlakshmi Finance Private Limited (SFPL) was originally incorporated in 1996 as Pepsu Capital Services Private Limited. In 2016, the promoters acquired Pepsu Capital Services Private Limited and renamed it to SFPL which commenced operation in January 2017 and is engaged in extending credit to micro enterprises, small enterprises along with business loans to individuals. SFPL is promoted by Mr. Sanjeev Yadav (CEO and Executive Director) and Mr. Bipin Sharma (CFO and Executive Director) who have over two decades of experience in the in the financial services industry and have been associated with leading player in the microfinance industry. SFPL has presence in the northern States of India having presence in seven states namely Haryana, Delhi, Punjab, Uttar Pradesh, etc. The company operates through a network of 50 branches as on March 31, 2021. The promoters intend to increase its branch network in the state of Rajasthan & Madhya Pradesh in FY2022. The company is engaged in financing of Micro Enterprise Loans, SME, Business Loan, LAP and Insured Cattle Loan. The company’s AUM has decreased to Rs. 144.75 Cr as on March 31, 2021 from Rs. 157.86 Cr as on March 31, 2020. It has further decreased to Rs. 132.12 as on August 31, 2021, due to the impact of the second wave of the pandemic. SFPL’s GNPA stood at 0.77% as on March 31, 2021 as against 0.27% as on March 31, 2020, and the company’s NNPA was 0.69% as on March 31, 2021 as compared to 0.25% as on March 31, 2020. The company’s reported PAT of Rs. 1.08 Cr as on March 31, 2021 as compared to Rs. 3.32 Cr as on March 31, 2020
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| Assessment of the Pool |
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SFPL has unsecured MSME Asset Under Management of Rs. 129.38 Cr as on August 31, 2021. The current pool being securitised comprises 8.56% of the unsecured MSME AUM. The underlying pool in the current Pass Through Certificate (PTC) transaction comprises of unsecured business loans extended towards 5,069 borrowers, with an average ticket size of Rs. 38,585, minimum ticket size of Rs. 25,000 and maximum of Rs. 60,000, indicating significant granularity. The current average outstanding per borrower stands at Rs. 21,856. The weighted average original tenure for pool is of 17.22 months (minimum 12 months & maximum 24 months). The pool has weighted average seasoning of 7.35 months (minimum 4 months seasoning and maximum of 21 months seasoning). Hence, the pool is fairly seasoned. The pool under consideration was not under moratorium and all the loans are current as on pool cut-off date, August 31, 2021. Furthermore, all the loans have remained current since origination. The pool’s geographical concentration is moderate. 36.83% of the borrowers are concentrated in Haryana followed by 31.05% in Bihar and 24.39% in Uttar Pradesh. The loans belong to the categories of micro-enterprise loans (65.66%), small enterprise loans (33.52%), and insured cattle loans (0.82%). The top 10 borrowers of pool constitute 0.42% of the pool principal outstanding
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| Credit Enhancements (CE) |
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The transaction is supported in the form of (i) Over collateralisation of 10.0% of the pool principal; (ii) Cash collateral of 9.00% of the pool principal; and (iii) Excess Interest Spread of 9.15 % of the pool principal |
| Transaction Structure |
| The transaction is structured at par. 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 1.5% – 3.0 % 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 Acuité Ratings & Research Limited www.acuite.in 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.
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| 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. 39,050, minimum ticket size of Rs. 25,000 and maximum of Rs. 60,000. 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 considerably granular, i.e. underlying assets in the pool are in nature of unsecured business loans to 5,633 borrowers, hence the risk is significantly mitigated. However, there is moderate geographical concentration in the pool, since 39.50% of the borrowers are concentrated in Haryana followed by 29.95% in Punjab and 25.29% in Uttar Pradesh, which is partially mitigated as the pool is spread across 31 branches.
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| Servicing Risks |
| There is limited track record of servicing PTCs, since this one of the initial PTC transactions for the originator |
| 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.
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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. |
| Rating Sensitivity |
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- Collection performance of the underlying pool -Credit quality of the underlying borrowers -Decrease in cover available for PTC payouts from the credit enhancement |
| Material Covenants |
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The following covenant is included in the transaction structure:
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| Liquidity Position |
| Adequate |
| The liquidity position in the transaction is adequate. The cash collateral available in the transaction amounts to 9.0% of the pool principal. The PTC payouts will also be supported by an internal credit enhancement in the form of over collateralisation (10.00 % of pool principal) and excess interest spread (9.15 % of pool principal). |
| Outlook |
| Not applicable |
| Key Financials - Originator | ||||||||||||||||||||||||||||||||||||||||
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Status of Non Cooperation with Other 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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