Rating Rationale Indian Receivable Trust 2019 Series 5 (Originator: Reliance Home Finance Limited) 11 March 2019 The Ratings of BWR AAA (SO) for the Senior PTCs, issued by Indian Receivable Trust 2019 Series 5, backed by loan receivables pertaining to Home Loans and Loan Against Property, originated by Reliance Home Finance Limited (RHFL) have been converted from Provisional Rating to Final Rating. Particulars Transaction Instrument Amount Rated (Rs in Crs) Payout Maturity Date Rating* Indian Receivable Trust 2019 Series 5 Series A1 PTCs 175.07 9 April 2027 Series A2 PTCs 245.10 8 Jan 2044 Total 420.17 * Please refer to BWR website www.brickworkratings.com/ for definition of the ratings BWR AAA (SO) (Pronounced as BWR Triple A [Structured Obligation]) Converted from Provisional Rating to Final Rating INR Four Hundred Twenty Crores and Seventeen Lakhs Only BWR has converted the provisional ratings assigned to Series A1 PTCs and Series A2 PTCs (pass-through certificates) issued by 'Indian Receivable Trust 2019 Series 5' to final ratings of BWR AAA (SO) (). The provisional ratings were assigned on Feb 28, 2019. BWR has received the final executed transaction documents and the same are in line with the transaction terms at the time of provisional ratings. Hence BWR has converted the provisional rating to final rating. The ratings are based on the strength of cash flows of the underlying pool, credit enhancement available in the form of over collateralisation of loan receivables, Excess Interest Spread (EIS) and First Loss Credit Facility (FLCF) available in the form of fixed deposits, RHFL s servicing capabilities and soundness of the transaction's legal structure. Catalyst Trusteeship Limited (CTL) is appointed as a Trustee to monitor the transaction on behalf of the PTC holders. 1 11 March 2019
Transaction Structure According to the transaction structure, the loan receivables are transferred at par to a Special Purpose Vehicle (SPV) and the Trust has issued Series A1 PTCs and Series A2 PTCs to the investors. All payment of monthly scheduled Principal to Series A1, Series A2 PTC holder and Principal subordination / over collateral provider will be in the proportion of 70%, 26% and 4% respectively till the time Series A1 is repaid fully, provided that in case of any shortfalls, the principal component payable towards over-collateralisation will be used to meet such shortfall in payouts towards Series A1 PTCs and Series A2 PTCs. Thereafter, payment of monthly scheduled Principal to Series A2 PTC holder and Principal subordination / over collateral provider will be in the proportion of 96% and 4% respectively. All the prepayment (including foreclosure) will be mandatorily paid only to Series A1 & Series A2 investors in the proportion of 72.92% and 27.08% respectively till the time Series A1 is repaid fully and thereafter 100% of such prepayment proceeds will be made to Series A2 only. Pool Characteristics The selected pool (Rs 437.67 Crs) consists of loan receivables pertaining to Home Loans (43.47%), Affordable Housing Loans (5.29%) and Loan Against Property (LAP) (51.24%). The underlying loans have monthly repayment frequency and service the interest on monthly basis. The average ticket size of loans under home loan category is Rs 0.65 Crs, under affordable housing loans is Rs 0.09 Crs and under LAP is Rs 0.99 Crs. Key Rating Drivers Credit Strengths Credit enhancement available in the form of over collateralisation of loan receivables (4% of pool principal), Excess Interest Spread (EIS) (5% of pool principal) and First Loss Credit Facility (FLCF) available in the form of fixed deposits (13% of pool principal) The contracts in the pool have a weighted average seasoning of ~ 19 months and the pool has been amortized ~10% prior to securitization Pool has no delinquent contracts as on the pool cut-off date The contracts in the pool have a weighted average LTV of ~ 54% Credit Weakness High geographical concentration in Maharashtra, which accounts for ~ 45% of total pool principal Moderate concentration of loans with top 20 loans in the pool accounting for ~20% of overall pool principal Approximately 83% of the total pool principal is constituted of self employed borrowers which are considered riskier as compared to salaried class borrowers Liquidity Position The credit cum liquidity enhancement available in the transaction is ~ Rs 56.90 Crs (13% of pool principal) which is in the form of fixed deposit. The credit collateral fully covers ten months of promised 2 11 March 2019
principal and interest payouts to Series A1 and Series A2 PTCs holders even with no collections from underlying receivables. Key Rating Assumptions To assess the collection shortfalls and gross default rates for this transaction, BWR has analysed the pool characteristics vis-a-vis the overall portfolio of the company, the performance of static pool of RHFL s loan portfolio and the current operating environment that could impact the performance of the underlying pool contracts, the recovery rate and prepayment rate. BWR expects the base case peak shortfall in the pool to be between 2.5-3.5% of the pool principal. BWR expects the prepayments in the range of 1.00% to 1.50% per month in the LAP portfolio and 1.50% to 2.00% in the home loan portfolio. About Originator Reliance Home Finance Limited (RHFL) is a subsidiary of Reliance Capital Limited (Rcap). The company is registered with National Housing Bank as a Housing Finance Company. RHFL provides home loans, including affordable housing loans, loans against property and construction finance loans. The company has a strong distribution network with approx. 140 locations, through a hub and spoke model, across the country, serving ~ 45000 clients. It has full fledged independent branches in 59 locations. The company is listed on BSE and NSE. Rcap currently holds 47.91% in RHFL as on Dec 31, 2018. Key Financials: Key Financial Indicators Unit FY17 Audited FY18 Audited Total Income from Operations Rs in Crs 1073.28 1603.02 Total Income (Net of interest expenses) Rs in Crs 396.15 633.43 PAT Rs in Crs 172.59 180.58 Net Worth Rs in Crs 1129.6 1929.13 Gearing Times 8.56 6.80 CRAR % 19.24 19.83 Gross NPA % 0.8 0.8 RHFL s AUM stood at Rs 18290 Crs as on Dec 31, 2018 and GNPA stood at 0.9%. RHFL has reported total income (net of interest expenses) of Rs 460 Crs and net profit of Rs 178 Crs during first 9 months of FY19 (unaudited). The company CRAR stood at 18.8% as on Dec 31, 2018. Analytical Approach The rating is based on the analysis of the past performance of RHFL s portfolio, key characteristics and composition of the current pool, performance expected over the balance tenure of the pool and the credit enhancement available in the transaction. Hyperlinks/ Reference to applicable criteria: 3 11 March 2019
Rating Criteria for Securitisation Transactions Rating History: Sl. No. Instrument / Facility Current Rating (March 2019) Rating History Type Amount (Rs Crs) Rating 28 Feb 2019 2018 2017 2016 1) Series A1 PTCs 2) Series A2 PTCs Long Term Long Term 175.07 Total 420.17 BWR AAA (SO) Converted from Provisional Rating to Final Rating Status of non-cooperation with previous CRA : NA Any Other Comments: NA Provisional BWR AAA (SO) NA NA NA 245.10 NA NA NA INR Four Hundred Twenty Crores and Seventeen Lakhs Only Complexity level of the rated instrument: Highly Complex Brickwork Ratings has classified various instruments based on their complexity as "Simple", "Complex" and "Highly Complex". The classification of instruments according to their complexity levels is available on the website Complexity Level of the Rated Instruments Analytical Contacts Nirav Shah Senior Analyst - Ratings +91 22 6745 6623 Nirav.s@brickworkratings.com Rajat Bahl Chief Analytical Officer & Head - Financial Institutions +91 22 6745 6634 Rajat.b@brickworkratings.com Media & Investor Contact investordesk@brickworkratings.com +91 77388 75550 Relationship Contact bd@brickworkratings.com Email: analyst@brickworkratings.com Phone: 1-860-425-2742 For print and digital media 4 11 March 2019
The Rating Rationale is sent to you for the sole purpose of dissemination through your print, digital or electronic media. While it may be used by you acknowledging credit to BWR, please do not change the wordings in the rationale to avoid conveying a meaning different from what was intended by BWR. BWR alone has the sole right of sharing (both direct and indirect) its rationales for consideration or otherwise through any print or electronic or digital media. Note on complexity levels of the rated instrument: BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com/download/complexitylevels.pdf Investors queries can be sent to info@brickworkratings.com. About Brickwork Ratings Brickwork Ratings (BWR), a SEBI registered Credit Rating Agency, accredited by RBI and empaneled by NSIC, offers Bank Loan, NCD, Commercial Paper, MSME ratings and grading services. NABARD has empaneled Brickwork for MFI and NGO grading. BWR is accredited by IREDA & the Ministry of New and Renewable Energy (MNRE), Government of India. Brickwork Ratings has Canara Bank, a leading public sector bank, as its promoter and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations. DISCLAIMER Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other reliable sources, which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented as is without any express or implied warranty of any kind. BWR does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by BWR should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses incurred by users from any use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at any time for any reasons. 5 11 March 2019