ICRA : Rating upgraded/reaffirmed for pass through certificates (PTCs) issued under micro Loan Pool securitization transactions originated by Multiple Originators, arranged by IFMR Capital Finance Pvt. Ltd.

June 07, 2017

IFMR Capital Finance Pvt. Ltd.

Summary of Rated Instruments

Sl .	Trust Name	Originators	Instrument*	Initial Amount (Rs. crore1)	Amount O/s after Apr- 17 Payout (Rs. crore)	Rating action
1	IFMR Capital Mosec Vulcan 2015	Intrepid, FFSL, Saija, Suryoday	PTC Series A2	2.76	0.01	Upgraded to [ICRA]BBB(SO) from [ICRA]B+(SO)
2	IFMR Capital Mosec Enigm a 2016	Intrepid, Pahal, Samasta, Sambandh, SMILE, Svasti, SVCL	PTC Series A1	106.83	29.99	Upgraded to [ICRA]A+(SO) from [ICRA]A-(SO)
		PTC Series A2	5.62	5.62	Upgraded to [ICRA]B+(SO) from [ICRA]C+(SO)
3	IFMR Capital Mosec Alicor n 2016	Disha, FFSL	PTC Series A1	65.72	35.88	Reaffirmed at [ICRA]A- (SO)
4	IFMR Capital Mosec Lorenzo 2016	MPower, Saija, SMILE, SVCL	PTC Series A1	52.61	17.85	Reaffirmed at [ICRA]A(SO)
		PTC Series A2	5.20	5.20	Reaffirmed at [ICRA]C+(SO)

*Instrument details are provided in Annexure I

Rating Action

ICRA has upgraded the ratings for PTCs issued under 2 micro loan securitisation transactions and reaffirmed the ratings for PTCs issued under 2 micro loan securitisation transactions, originated by Multiple Originators and arranged by IFMR Capital Finance Pvt. Ltd., as tabulated above.

Rationale

The transactions involved assignment of the pool of receivables by the multiple Originator to an SPV at a premium, which issued PTCs backed by the assigned receivables. The promised cashflow schedule for PTC A1 in case of all transactions except IFMR Capital Mosec Alicorn 2016 will comprise interest (at the pre-determined yield) on the outstanding principal on each payout date and the entire principal on the final maturity date. The promised cashflow schedule for PTC A1 in case of IFMR Capital Mosec Alicorn 2016 will comprise of both interest (at the pre-determined yield) on the outstanding principal and principal on each payout date. In all the aforementioned transactions, the excess collections in a month will be used to amortize the principal payout to PTC A1. This is done till all payment has been made to PTC A1, post which the collections are passed to PTC A2 (in case of all transactions except IFMR Capital Mosec Alicorn 2016), towards its principal repayment and later by way of residual cashflows such that a specified yield is achieved (this is not promised).

1 100 lakh = 1 crore = 10 million

A summary of the performance of the pool till March 2017 collection month has been tabulated below.

Table 1: Pool Performance Summary (till March 2017 collection month)

Parameter	Vulcan	Enigma	Alicorn	Lorenzo
Months post securitization	18	9	10	7
Pool Amortization	99.8%	68.6%	39.0%	56.5%
PTC Amortization PTC A1 PTC A2	100.0% 96.5%	71.9% 0.0%	45.4% NA	66.1% 0.0%
Monthly Collection Efficiency2for Jan-17	82.30%	92.41%	80.23%	>100%
Monthly Collection Efficiency for Feb-17	>100%	92.15%	82.01%	84.83%
Monthly Collection Efficiency for Mar-17	39.82%	>100%	84.33%	97.05%
Cumulative Collection Efficiency3	101.9%	100.2%	90.8%	99.8%
Final Maturity Month for PTCs	Jul-17	Apr-18	Apr-18	Jul-18
Cumulative Cash Collateral Utilization4	0.0%	0.0%	18.0%	0.0%
Breakeven Collection Efficiency5 PTC A1 PTC A2	NA 0.0%	33.1% 48.6%	69.9% NA	61.1% 81.7%
First Loss Facility (% of Balance Pool)	>100%	38.2%	12.3%	11.8%
Second Loss Facility (% of Balance Pool)	NA	20.7%	2.1%	26.1%
Subordination of Cashlows (% of Balance Pool) for PTC A1	NA	15.8%	0.0%	30.5%

Key rating drivers

Credit Strengths

• No cash collateral utilisation in all pools except IFMR Capital Mosec Alicorn 2016 till date owing to strong collection performance

• Significant amortization of the pools leading to lower uncertainty around performance of the balance pool contracts;

• Significant Cash Collateral (CC) cover available for the balance PTC payouts.

  Credit Weaknesses

• Moderate to high delinquency level in the pools;

• Significant CC utilization in IFMR Capital Mosec Alicorn 2016 owing to weak performance of the underlying entities in the past few months

Description of key rating drivers highlighted above:

2 (Total Current and Overdue collections for the month as a % of Total Billing for the month)

3 (Cumulative Current and Overdue Collections till date)/(Cumulative Billing till date + Opening Overdues at the start of the transaction)

4 Including First Loss Facility and Second Loss Facility

5 (Balance Cashflows payable to investor- Cash collateral available)/ Balance Pool Cashflows

For all the transactions except IFMR Capital Mosec Alicorn 2016, the cumulative collection efficiency has been good till March 2017 collection month. There has not been any shortfall in the collections to meet the promised interest payouts in these transactions and thus, there has not been any CC utilisation in these transactions till date. The pools have amortised considerably (between 56% to 99%) after the April 2017 payouts. Thus, CC (as % of balance PTC payouts) has built up significantly in these transactions.

In case of IFMR Capital Mosec Alicorn 2016, the performance of the pool was good till the collection month of October 2016, with the cumulative collection efficiencies in the range of 97% - 99%. However, post the unexpected demonitisation event, the monthly collection efficiency levels declined significantly to around 80-82%. Due to the shortfall in collections to meet the promised interest and principal payouts, First Loss Facility has been utilized in this transaction in the last few months. Though the collection have been weak in the recent months, the senior PTCs have amortised moderately resulting in some build up in credit enhancement (which includes both First Loss Facility and Second Loss Facility) for the balance tenure of the PTC payouts. However, the future performance of these transactions is also dependent on the recovery from overdue contracts and control on further slippages of contracts in the various delinquency buckets.

Overall, the credit enhancement available for meeting balance payouts to the investors is sufficient to upgrade/reaffirm the ratings in the 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.

Analytical approach:

The rating actions are based on the performance of the pool till March 2017 (collection month), the present delinquency profile of the pool contracts, performance expected over the balance pool tenure, and the credit enhancement available in the transactions.

Links to applicable Criteria

ICRA's Rating Methodology for Securitisation Transactions http://www.icra.in/Files/Articles/Securitisation%20Tran%20%20Methodology%20Dec%202016.pdf

About the Originators:

Disha Microfin Private Limited (Disha)

Disha Microfin Private Limited (formerly known as Banas Finlease Private Limited) is a Microfinance institution and a Non-deposit accepting NBFC registered with Reserve Bank of India in the state of Gujarat. The company is in existence since 1996 in Gujarat and received RBI license in 1999. As on Mar-17, the consolidated portfolio of Disha stands at Rs. 1,227 crore with 30+ dpd at 18.08%. ICRA has assigned ratings of [ICRA]A-(Stable) to the bank loan facilities of Disha Microfin Private Limited.

Intrepid Finance and Leasing Private Limited (Intrepid)

Intrepid Leasing and Finance Private Limited is a Microfinance institution and a Non-deposit accepting NBFC registered with Reserve Bank of India. ILFPL was acquired by FINO PayTech (FINO) in 2010 to originate microfinance loans on the books of the NBFC. Intrepid is currently operational in the states of Maharashtra, UP, MP, Bihar and Karnataka, with a portfolio size of Rs. 297 crore as on Jan-17. As on Jan-17, the 30+ dpd level was moderate at 26.77%.

MPower Microfinance Private Limited (MPower)

MPower Microfinance Private Limited (MPower) was incorporated in Nov-09 and received its NBFC license in Apr-10. The company started its operation in May-10 with its registered office in Mumbai and corporate office in Vadodara. As on March 2017, MPower had a portfolio of Rs. 112.87 crore. As on March 2017, the 30+ delinquency level for overall the portfolio of MPower was moderate at 11.88%.

Pahal Financial Services Private Limited (Pahal)

Pahal Financial Services Private Limited (Pahal) started its operations in February 2011 after the present promoters of the company acquired Kelkar Leasing Company Pvt. Ltd., a NBFC which was idle since its formation in 1994. As on Nov-16, Pahal is operational in 61 branches spread over 33 districts in the state of Gujarat, Madhya Pradesh and Maharashtra with a portfolio size of Rs. 148 crore as on December 2016. ICRA has assigned a grading of M2 to Pahal in December 2016. As on December 2016, the 30+ delinquency level for the overall portfolio of Pahal was 1.59%.

Samasta Microfinance Limited (Samasta)

Samasta Microfinance Limited is a NBFC-MFI registered with the RBI and began operations in March 2008. Samasta is currently operational in the states of Karnataka, Tamil Nadu, Goa and Maharashtra, with an overall portfolio size of Rs. 206 crore as on Feb-17. The portfolio of Samasta is primarily concentrated in the states of Tamil Nadu and Karnataka. As on Feb-17, the 30+ dpd level was moderate at 8.42%.

Sambandh Finserve Private Limited (Sambandh)

Sambandh Finserve Private Limited is a NBFC- MFI registered with Reserve Bank of India. Sambandh was started as an NGO in 2006 initially and was later converted to a NBFC-MFI in 2009. Sambandh is currently operational in the states of Bihar, Madhya Pradesh, Odisha, Chattisgarh and Jharkhand, with an overall portfolio size of Rs. 105 crore as on Mar-17. As on Mar-17, the 30+ dpd level was low at 0.38%.

Saija Finance Private Limited (Saija)

Saija Finance Private Limited was formed in April 2008 and was granted the NBFC-MFI license in December 2013 by RBI. As of January 2017, Saija had a portfolio of Rs. 181 crore. The portfolio of Saija is concentrated in the states of Bihar, Jharkhand and Uttar Pradesh. As on January 2017, the 30+ delinquency level for the overall portfolio of Saija was 11.80%. ICRA has a rating outstanding of [ICRA]BBB-(stable) on the long term debt of the company and has assigned a grading of M2.

S.M.I.L.E Microfinance Limited (SMILE)

SMILE (rated [ICRA]BBB-(Stable) for its long term debt programs and assigned a microfinance grading of M2 in April 2017), was incorporated in the year 2004 to provide credit services to the urban / rural poor. SMILE was set up as a private limited company in April 2004 and later converted to a public limited company in November 2005 and registered as a non-deposit taking Non Banking Finance Company in January 2006. SMILE is engaged in providing credit to economically backward women through the Joint Liability Group (JLG) mechanism. As on February 2017, SMILE had a portfolio size of Rs. 300 crore across 26 districts of Tamil Nadu and the Union Territory of Puducherry. The 30+ delinquency level for the overall portfolio of SMILE was low at 0.09% as on February 2017.

Suryoday Micro Finance Limited (Suryoday)

Suryoday was set up in October 2008 as an NBFC, but commenced its full-fledged operations from May 2009. As on December 2016, Suryoday has a total portfolio size of Rs. 1000 crore spread across Tamilnadu, Odisha, Maharashtra, Gujarat, Madhya Pradesh, and Puducherry. The company has completely exited Andhra Pradesh. As of December 2016, 30+ delinquency for overall the portfolio of