December 30, 2020

Vistaar Financial Services Pvt Ltd: Ratings upgraded/reaffirmed for PTCs issued under four
small business loan securitisation transactions

Summary of rating action

Rate Amount O/s Current
S. Transaction Amount (Rs. after Last Rated
Instrument* Rating Action
No. Name crore) Surveillance Amount
(Rs. crore) (Rs. crore)
49.17 19.04 1.58 [ICRA]AA+(SO); Upgraded from
Northern Arc PTC Series A1
1 [ICRA]AA(SO)
2018 SBL Senna
3.69 3.69 3.69 [ICRA]AA-(SO); Upgraded from
PTC Series A2
[ICRA]A+(SO)

Northern Arc 45.56 25.71 3.57 [ICRA]AA+(SO); Upgraded from

PTC Series A1
2 2019 SBL [ICRA]AA(SO)
Orpheum 3.42 3.42 3.42 [ICRA]AA-(SO); Upgraded from
PTC Series A2
[ICRA]A+(SO)
Northern Arc PTC Series A1 37.64 NA 20.09 [ICRA]A+(SO); Reaffirmed
3
2019 SBL Apostle 2.27 NA 2.27
PTC Series A2 [ICRA]BBB+(SO); Reaffirmed
Northern Arc 29.14 NA 11.11
PTC Series A1 [ICRA]AA(SO); Reaffirmed
4 2019 SBL
Verrochio PTC Series A2 1.30 NA 1.30 [ICRA]A-(SO); Reaffirmed
*Instrument details are provided in Annexure-1

Rationale
The pass-through certificates (PTCs) originated by Vistaar Financial Services Pvt Ltd (VFSPL) are backed by small business
loan (SBL) receivables. The ratings upgrade/reaffirmation is on account of the moderate to high amortisation in the
transactions, which has led to the build-up of the credit enhancement cover over the future PTC payouts. The breakeven
collection efficiency is also comfortable compared to the actual collection levels observed in the pools.

Key rating drivers

Credit strengths
• Moderate to high amortisation of PTCs resulting in build-up of cash collateral (CC), subordination and excess
interest spread (EIS) cover available for the balance PTCs
• Healthy collection efficiency exhibited by the pools
Credit challenges
• High state-level concentration in the balance pools
• Moderate share of higher ticket size contracts in the balance pools
• Performance of the pools would be exposed to any prolonged economic slowdown caused by the Covid-19
pandemic

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 A summary of the performance of the pools after the November 2020 payouts has been provided below.
Northern Arc Northern Arc 2019 Northern Arc 2019 Northern Arc 2019
Parameter 2018 SBL Senna SBL Orpheum SBL Apostle SBL Verrochio

Months post securitisation 23 18 12 11

Pool amortisation (%) 73.21% 68.99% 32.93% 50.02%
Cumulative collection efficiency 90.72% 88.12% 87.98% 92.25%
(%)1
Cumulative prepayment rate 26.68% 21.12% 14.08% 9.95%
Average monthly prepayment 0.74% 1.31% 1.26% 0.95%
rate
Loss-cum-30+ (% of initial pool 2.86% 4.77% 4.09% 5.25%
principal)2
Loss-cum-90+ (% of initial pool 1.43% 1.86% 0.63% 0.53%
principal)3
Breakeven collection efficiency
(%)4 <0% 9.26% 50.01% 38.69%
PTC A1 17.43% 26.22% 56.90% 46.44%
PTCA2
Cumulative CC utilisation 0.0% 0.0% 0.0% 0.0%
CC available (as % of initial 12.00% 3.00% 3.00% 3.00%
pool)
CC available (as % of balance 11.20% 9.68% 4.47% 25.28%
pool)
Subordination (as % of balance
pool) 90.38% 79.78% 33.94% 30.63%
PTC A1 67.99% 60.43% 26.48% 22.54%
PTC A2
EIS over balance tenure (as %
of balance pool) 24.09% 20.43% 30.01% 20.05%
PTC A1 23.36% 19.29% 31.98% 18..53%
PTC A2

Description of key rating drivers highlighted above

The amortisation in the Senna and Orpheum pools is high (~90% and ~86%, respectively) while it is moderate in the
Apostle and Verrocchio pools (~44% and ~60%, respectively) after the November 2020 payouts. Thus, the CC (as a
percentage of the balance pool principal – refer to table above) has built up in these transactions. The cumulative
collection efficiency reported as of the November 2020 payout month has been healthy (between 88% and 93% for all
the pools). The pools have high geographical concentration with Tamil Nadu holding the highest share in all four pools.
The pools consist of longer-tenure loans with a balance tenure of 4-5 years at the time of securitisation. There has not
been any instance of shortfall in the collections to meet the promised payouts in these transactions. Thus, there has not
been any CC utilisation in these transactions till date. Overall, the credit enhancement available for meeting the balance

1
Cumulative collections / (Cumulative billings + opening overdue at the time of securitisation)
2
POS on contracts aged 30+ dpd / POS on the pool at the time of securitisation
3
POS on contracts aged 90+ dpd / POS on the pool at the time of securitisation
4
Breakeven collection efficiency = Balance PTC cash flows - Cash collateral available / Balance pool cash flows
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payouts to the investors is sufficient to upgrade/reaffirm the ratings for these transactions. ICRA will continue to monitor
the performance of these transactions. Any further rating action will be based on the performance of the pools and the
availability of credit enhancement relative to ICRA’s expectations.

Performance of past rated pools: ICRA has thus far rated 11 pools backed by SBL receivables originated by VFSPL and has
ratings outstanding on 8 pools as on date. The performance of the outstanding pools, which have completed at least
three months post securitisation, is characterised by moderate cumulative collection ratios of around 80-90%. However,
no CC has been used till date.

Key rating assumptions

ICRA’s cash flow modelling for rating asset-backed securitisation (ABS) transactions involves the simulation of potential
delinquencies, losses and prepayments in the pool. The assumptions for the mean shortfall and coefficient of variation
(CoV) are arrived at on the basis of the values observed in the analysis of the originator’s loan portfolio. Additionally, the
assumptions may be adjusted to account for the prevalent macroeconomic situation as well as any industry-specific
factors that ICRA believes could impact the performance of the underlying pool contracts.

After making these adjustments, the expected loss and prepayments during the balance tenure of the pools are provided
in the table below.

S. Expected Loss (% of
No. Transaction Name initial pool principal) Prepayment

1 Northern Arc 2018 SBL Senna 1.5%-2.5% 12%-18% p.a.

2 Vistaar BOM DA Pool Oct 2019 (PCG) 2.0%-3.0% 12%-18% p.a.
3 Northern Arc 2019 SBL Orpheum 3.5%-4.5% 12%-18% p.a.
4 Vistaar BOB DA Pool Dec 2019 (PCG) 2.5%-3.5% 12%-18% p.a.
Liquidity position
PTC Series A1: Strong
As per the transaction structure, only the interest amount is promised to the PTC holders on a monthly basis while the
principal amount is promised on the scheduled maturity date of the transaction for the Senna, Orpheum and Apostle
pools. Meanwhile, both the principal and the interest are promised on a monthly basis for the Verrochio pool. The cash
flows from the pools and the available credit enhancement are expected to be comfortable to meet the promised
payouts to the PTC Series A1 investors.
PTC Series A2: Strong for Senna, Orpheum and Verrocchio pools and adequate for Apostle pool
As per the transaction structure, after PTC Series A1 is fully paid, the interest amount is promised to the PTC Series A2
holders on a monthly basis and the principal amount is promised on the scheduled maturity date of the transaction. The
cash flows from the pools and the available credit enhancement are expected to be adequate to meet the promised
payouts to PTC Series A2 investors.
Rating sensitivities
Positive triggers – The ratings may be upgraded on the sustained strong collection performance of the underlying pool
contracts (>95%), leading to lower-than-expected delinquency levels, and on an increase in the cover available for future
investor payouts from the credit enhancement.

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Negative triggers – The ratings may be downgraded on the sustained weak collection performance of the underlying
pool (monthly collection efficiency <90%), leading to higher-than-expected delinquency levels and credit enhancement
utilisation levels.
Analytical approach
The rating action is based on the analysis of the performance of VFSPL’s portfolio till September 2020, key characteristics
and composition of the current pool, performance expected over the balance tenure of the pool, and the credit
enhancement cover available in the transaction.
Analytical Approach Comments
Applicable Rating Methodologies Rating Methodology for Securitisation Transactions
Parent/Group Support Not applicable
Consolidation/Standalone Not applicable

About the company

VFSPL is a Bangalore-based non-banking financial company (NBFC) catering to small businesses. It commenced
operations in 2010 with a focus on microfinance (MF) loans. However, it shifted its focus to providing loans to micro,
small and medium enterprises (MSMEs) in rural and semi-urban areas from April 2011 and stopped disbursing new MF
loans from August 2011. The company mainly provides small business mortgage loans (SBMLs). Small businesses funded
by VFSPL include kirana/general stores/shops, power/auto/handlooms, dairy and allied products and small
manufacturing units.
VFSPL is promoted by Mr. Brahmanand Hegde and Mr. Ramakrishna Nishtala, who have prior experience in the retail
lending business. The company received capital of Rs. 25 crore from two private equity (PE) investors till March 2012.
Subsequently, it raised additional capital of Rs. 40 crore as compulsorily convertible preference shares (CCPS) in FY2013
and Rs. 160 crore in Q1 FY2015. In FY2016, VFSPL received additional capital of about Rs. 250 crore from the existing
investors. The company operates through 216 branches in 14 states/Union Territories including Tamil Nadu, Karnataka,
Maharashtra, Gujarat, Madhya Pradesh, Chhattisgarh, Rajasthan, Odisha, Uttar Pradesh, Andhra Pradesh, Telangana,
Haryana, Delhi and Uttarakhand as of March 2020.
The company reported a net profit of Rs. 45.0 crore on a total managed asset base of Rs. 2,104.3 crore in FY2020. As on
March 31, 2020, its net worth was Rs. 640.2 crore with a managed gearing of 2.1 times.
Key financial indicators
FY2019 FY2020
Total Income (Rs. crore) 308.6 368.4
Profit after Tax (Rs. crore) 33.7 45.0
Net Worth (Rs. crore) 594.8 640.2
Gross NPA (%)^ 3.4% 3.7%
Net NPA (%)^ 2.7% 2.5%
Source: Company and ICRA research; ^ On-book basis

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Status of non-cooperation with previous CRA: Not applicable

Any other information: Not applicable

Rating history for last three years

Rating History for the Past 3 Years
Current Rating (FY2021)

Instrumen FY201
t Amoun Amount Rating FY2020 FY2019
8
Type t Rated Outstandin
g Dec-17- Mar-05- Jan-3-2019
Dec-30-2020 -
2019 2019
PTC Provisional
[ICRA]AA+(SO [ICRA]AA(SO [ICRA]AA(SO
Northern Serie 49.17 1.58 [ICRA]AA(SO -
) ) )
Arc 2018 s A1 )
1
SBL Senna PTC Provisional
[ICRA]AA- [ICRA]A+(SO [ICRA]A+(SO
Serie 3.69 3.69 [ICRA]A+(SO -
(SO) ) )
s A2 )
*Initial rating assigned; Amount in Rs. crore

Rating History for the Past 3 Years

Current Rating (FY2021)

Instrumen FY201
t Amoun Amount Rating FY2020 FY2019
8
Type t Rated Outstandin
g Dec-17- May-31-
Dec-30-2020 Sep-17-2019 -
2019 2019
PTC Provisional
Northern [ICRA]AA+(SO [ICRA]AA(SO [ICRA]AA(SO
Serie 45.56 3.57 [ICRA]AA(SO -
Arc 2019 ) ) )
s A1 )
2 SBL
PTC Provisional
Orpheum [ICRA]AA- [ICRA]A+(SO [ICRA]A+(SO
Serie 3.42 3.42 [ICRA]A+(SO -
(SO) ) )
s A2 )
*Initial rating assigned; Amount in Rs. Crore

Current Rating (FY2021) Rating History for the Past 3

Years
Instrumen
t Amoun Amount FY201 FY201
Rating FY2020
Type t Rated Outstandin 9 8
g
Dec-30-2020 May-28-2020 Dec-06-2019 - -
PTC
Provisional
Northern Serie 29.14 20.09 [ICRA]A+(SO) [ICRA]A+(SO) - -
[ICRA]A+(SO)
Arc 2019 s A1
3
SBL PTC Provisional
[ICRA]BBB+(SO [ICRA]BBB+(SO
Apostle Serie 1.30 2.27 [ICRA]BBB+(SO - -
) )
s A2 )
*Initial rating assigned; Amount in Rs. crore
5
 Instrument Current Rating (FY2021) Rating History for the Past 3
Years
Type Amount Amount Rating FY2020 FY2019 FY2018
Rated Outstanding

Dec-30-2020 May-28-2020 Dec-26-2019 - -

4 Northern PTC 29.14 11.11 [ICRA]AA(SO) [ICRA]AA(SO) Provisional - -
Arc 2019 Series [ICRA]AA(SO)
SBL A1
Verrochio PTC 1.30 1.30 [ICRA]A-(SO) [ICRA]A-(SO) Provisional - -
Series [ICRA]A-(SO)
A2
*Initial rating assigned; Amount in Rs. crore

Complexity level of the rated instrument

ICRA 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 www.icra.in

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Annexure-1: Instrument details
Scheduled Amount
Instrument Date of Coupon
S. No. Trust Name Maturity Rated Current Rating
Name Issuance Rate
Date* (Rs. crore)
Northern Arc PTC Series A1 10.60% 1.58 [ICRA]AA+(SO)
December
1 2018 SBL July 2023
PTC Series A2 2018 13.25% 3.69 [ICRA]AA-(SO)
Senna
Northern Arc PTC Series A1 10.45% 3.57 [ICRA]AA+(SO)
November
2 2019 SBL May 2019
PTC Series A2 13.25% 2022 3.42 [ICRA]AA-(SO)
Orpheum
Northern Arc PTC Series A1 11.25% 20.09 [ICRA]A+(SO)
November
3 2019 SBL January 2024
PTC Series A2 2019 14.09% 2.27 [ICRA]BBB+(SO)
Apostle
Northern Arc PTC Series A1 10.00% 11.11 [ICRA]AA(SO)
December April 2024
4 2019 SBL
1.30
Verrochio PTC Series A2 2019 14.75% [ICRA]A-(SO)
* The actual tenure is likely to be shorter owing to prepayments and accelerated amortisation

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+91 22 6114 3431 +91 22 6114 3409
gaurav.mashalkar@icraindia.com ritu.rita@icraindia.com

Relationship Contact
L Shivakumar
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shivakumar@icraindia.com

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