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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Pass Through Certificates (PTCs) | 7.49 | ACUITE BBB+ | SO | Assigned | Provisional To Final | - |
| Total Outstanding | 7.49 | - | - |
| Total Withdrawn | 0.00 | - | - |
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Rating Rationale |
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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. 7.49 Cr. Securitization Note (SN) in the form of Pass Through Certificate(PTC) issued by SOCIAL IMPACT TRUST 01 2025 (The Trust) under a securitisation transaction originated by VELICHAM FINANCE PRIVATE LIMITED (The Originator). The series A1 SN is backed by a pool of loans consisting of unsecured MSME and Agri and allied loans which comprise a principal outstanding of Rs. 8.14 Cr. The final rating of the SNs has been assigned as the following documents have been received: documents: 1. Trust Deed 2. Deed of Assignment 3. Servicing Agreement 4. Legal Opinion 5. Final Term Sheet 6.Other relevant documents : (Account Agreement and Power of Attorney) 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 |
| Chennai based Velicham Finance Private Limited (VFPL) is an NBFC engaged in extending secured and unsecured loans towards MSME borrowers and income generation loans. Velicham Finance Private Limited (VFPL) has its genesis with Bharathi Women Development Centre (BWDC), which was established in December 1987 as a Society by Mr. Nagarajan Muthukrishnan, who is the Managing Director of Velicham Finance Private Limited (VFPL). The company operates in Tamil Nadu, Puducherry and Kerala with a network of 47 branches as on December 31, 2024. |
| Standalone Rating of the Originator ((if rated by Acuite) |
| Acuite BBB-/Stable |
| Assessment of the Pool |
| VFPL had Assets under management of Rs. 220.01 Cr. as on December 31, 2024. The current pool being securitised comprises 3.70 percent of the total AUM. The underlying pool in the current Securitization Note in the form of Pass Through Certificate (PTC) transaction comprises of unsecured MSME, Agri and allied loans extended towards 432 borrowers, with an average ticket size of Rs. 2.38 lakhs, minimum ticket size of Rs. 0.10 lakhs and maximum of Rs. 5 lakhs. The current average outstanding per borrower stands at Rs. 1.88 lakhs. The weighted average original tenure for the pool is 27.20 months. The pool has weighted average seasoning of 7.44 months (minimum 4 months seasoning and maximum of 22 months seasoning). All the loans under the pool are current as on pool cut-off date. The pool’s geographical concentration is high. About 74.24 percent of the borrowers are concentrated in Tamil Nadu based on the principal outstanding followed by Kerela with a concentration of 24.14%. The top 10 borrowers of pool constitute 5.10 percent of the pool principal o/s. |
| Transaction Structure |
| The rating of Series A1 SNs addresses the timely payment of the interest on each payout dates and ultimate payment of principal on final maturity date to the series A1 SN investors, in accordance with the transaction documentation. |
| Brief Methodology |
| Parameters considered are seasoning of the pool, pool vs portfolio, portfolio cuts, amortisation of the pool, internal cash flow modeling, pool characteristics, static pool, dynamic DPDs to assign 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. 2.38 lakhs, minimum ticket size of Rs. 0.10 lakhs and maximum of Rs. 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. |
| Concentration Risks |
| The underlying pool of Rs.8.14 Cr. in the current Securitization Note (in the form of PTC) transaction comprises of 100 percent unsecured MSME, Agri and Allied loans extended towards 432 individual borrowers.The top 10 borrowers constitute 5.10 percent of the pool principal O/s. |
| Servicing Risks |
| There is limited track record of servicing SNs /PTCs, since, this is the fourth securitisation transactions for the originator rated by Acuite. |
| Regulatory Risks |
| In the event of a regulatory stipulation impacting the bankruptcy remoteness of the structure, the payouts to the SN 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). Further, the asset classes being Agri & Allied and MSME loans, the risk of prepayment remains high. In case of significant prepayments, the SN 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) |
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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 in the form of (i) Subordinated equity tranche of 8.00 percent of the pool principal; (ii)Cash collateral of 5.00 percent of the pool principal; and (iii) Excess Interest Spread of 13.29 percent of the pool principal. |
| Rating Sensitivity |
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| All Covenants |
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The originator has confirmed that there are no covenants. However, the “Receivable eligibility criteria” as captured in the term sheet are as under: A.Pool Selection Criteria 1. All loans shall have been disbursed to individual borrowers only. 2. All loans should have been sourced by Velicham in the normal course of business in line with the board approved credit policy of Velicham. 3. All loans should have complied with the KYC AML norms prescribed by RBI. 4. None of the loans should be overdue as on the cut off date. 5. None of the loans should have been restructured. 6. None of the borrowers should have been classified as wilful defaulter or fraud. 7. The pool distribution by state should be representative of the overall portfolio of Velicham. In case of any portfolio concentrations, specific approval should be taken prior to finalization of pool. 8. Maximum exposure per borrower should not exceed INR 5 lakhs. 9. For all loans offered in the pool a credit bureau scrub should be obtained and the ki scoreTM should be checked and approved. 10. None of the borrowers should be a director on the board of Velicham, Kaleidofin Capital or Kaleidofin Private Limited. 11. All loans should comply with MHP and MRR norms stipulated by RBI in extant guidelines related to Securitisation of standard assets. 12. Any other selection criteria as may be updated post scrutiny of pool depending on the pool characteristics. 13. No branch has 0+ >8%. 14. No branch with 90+ >3.5%. B. Following accounts shall not be included in pool: 1. Securitization exposures 2. Loans with bullet repayments of both principal & interest 3. Assets purchased from other entities 4. Revolving credit facilities 5. Loan with other than monthly repayments. 6. Securities with other facilities. 7. Restructured Accounts/ rescheduled (except rescheduling owing to prepayments and change in rate of interest |
| All Assumptions |
| Acuité has arrived at a base case delinquency estimate basis its analysis of the company's historical delinquencies 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 percent of the pool principal. The SN payouts will also be supported by a credit enhancement in the form of subordinated equity tranche (8.00 percent of pool principal) and excess interest spread (13.29 percent of pool principal) |
| Outlook: Not Applicable |
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| Key Financials - Originator | ||||||||||||||||||||||||||||||||||||||||
* Total income equals to Net interest income plus other income |
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| Status of disclosure of all relevant information about the Obligation being Rated |
| Non-public information |
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| Any Other Factor Affecting Rating |
| None |
| Interaction with Audit Committee anytime in the last 12 months (applicable for rated-listed / proposed to be listed debt securities being reviewed by Acuite) |
| Not applicable |
| Note on complexity levels of the rated instrument |
| 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 • Non-Banking Financing Entities: https://www.acuite.in/view-rating-criteria-44.htm • Securitized Transactions: https://www.acuite.in/view-rating-criteria-48.htm |
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