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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Pass Through Certificates (PTCs) | 9.47 | ACUITE A- | SO | Assigned | Provisional To Final | - |
| Pass Through Certificates (PTCs) | 1.58 | ACUITE BBB+ | SO | Assigned | Provisional To Final | - |
| Total Outstanding | 11.05 | - | - |
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Rating Rationale |
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Acuité has converted from provisional to final long term rating of ‘ACUITE A-(SO)’ (read as ACUITE A minus (Structured Obligation)) to the Rs. 9.47 Cr. Series A1 (a) Pass Through Certificates (PTCs). Acuité has also converted from provisional to final long term rating of ‘ACUITE BBB+ (SO)’ (read as ACUITE triple B plus (Structured Obligation)) to the Rs. 1.58 Cr. Series A1 (b) PTCs issued by Vega 02 2024 (The Trust) under a securitisation transaction originated by UP MONEY LIMITED (The Originator). The PTCs are backed by a pool of loans provided to individuals as Unsecured Business Loans with principal outstanding of Rs. 12.63 Cr. (including Rs. 1.58 Cr. of over collateralisation). 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. |
| About the Originator |
| UP Money Ltd. (UPL) started operations in November 2014 following the acquisition of Sukhjit Finance Ltd, a company incorporated on February 6, 1995 under the Companies Act, 1956. The company’s name was changed to UP Money Ltd w.e.f. March 2, 2015. The company is promoted by Mr. Ajit Singh Chawla and Mr. Sumel Singh Chawla. UPL offers affordable financing for two-wheeler loans and micro, small & medium enterprises (MSMEs), mainly for rural livelihood advancement, with the aim to provide finance for income generating activities, socio-economic development and financial inclusion. |
| Assessment of the Pool |
| UpMoney has Asset Under Management of Rs. 605.34 Cr as on Dec 31, 2023. The underlying pool of Rs. 12.63 Cr in current Pass Through Certificate (PTC) transaction comprises of Unsecured Business loans has been extended towards 3,052 borrowers, displaying significant granularity, with an average ticket size of Rs. 53,365, minimum ticket size of Rs. 30,000 and maximum of Rs. 70,000. The current average outstanding per borrower stands at Rs. 41,373. The pool has a healthy weighted average seasoning of 6.70 months (minimum 4 months seasoning and maximum of 12 months seasoning). Furthermore, none of the loans in the pool had gone into the Non-CURRENT bucket since origination, which are healthy signs. 92.15% of the borrowers are concentrated in Punjab followed by 4.96% in Haryana and 2.89 in Rajasthan displaying high geographical concentration. The top 10 borrowers of pool constitute 0.49% (i.e. Rs.6.18 lakhs) of the pool principal O/s. |
| Credit Enhancements (CE) |
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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 (a) PTCs in the form of: i. Cash collateral of 5.00% of the pool principal; and ii. Over collateralisation of 12.50% of the pool principal iii. Excess Interest Spread of 26.37% of the pool principal iv. Subordinated Series A1 (b) PTC tranche of 12.50% of the pool principal The credit enhancement is available to the Series A1 (b) PTCs in the form of: i. Cash collateral of 5.00% of the pool principal; and ii. Over collateralisation of 12.50% of the pool principal iii. Excess Interest Spread of 26.37% of the pool principal |
| Transaction Structure |
| The rating for Series A1 (a) 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 principal portion of Series A1 (b) PTCs is subordinated to Series A1 (a) PTCs. The transaction is structured at par |
| Brief Methodology |
| Parameters considered are seasoning of the pool, pool vs portfolio, portfolio cuts, amortisation of the pool, internal cash flow modeling, legal opinion and various other documents to be verified at the time of conversion from provisional rating to final rating. |
| 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. 53,365, minimum ticket size of Rs. 30,000 and maximum of Rs. 70,000. 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 significantly granular, i.e. underlying assets in the pool are in nature of Unsecured business loans to 3,052 individual borrowers, hence the risk is significantly mitigated. The top 10 borrowers of pool constitute 0.49% (i.e. Rs. 6.18 lakhs) of the pool principal O/s. |
| Servicing Risks |
| There is limited track record of servicing PTCs, since this is one of the first few 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. |
| Rating Sensitivity |
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| All Covenants (Applicable only for CE & SO Ratings) |
The following covenant is included in the transaction structure:
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| 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 5.00% of the pool principal. The Series A1 (a) PTC payouts will also be supported by subordinated Series A1 (b) PTC tranche of 12.50% of the pool principal, over collateralisation of 12.50% of the pool principal and excess interest spread (26.37% of pool principal). The Series A1 (b) PTC payouts will be supported by overcollateralisation of 12.50% of the pool principal and excess interest spread (26.37% of pool principal). |
| Outlook: Not Applicable |
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| Key Financials - Originator | ||||||||||||||||||||||||||||||||||||||||
*Total income equals to Total Income net off interest expense |
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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 |
| 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. |
| 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 • Explicit Credit Enhancements: https://www.acuite.in/view-rating-criteria-49.htm • Securitized Transactions: https://www.acuite.in/view-rating-criteria-48.htm |
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