OREANDA-NEWS. Fitch Ratings has affirmed the ratings on pass-through certificates (PTCs) from four Indian ABS transactions with Stable Outlooks. All of the transactions are securitisations of auto loans in India originated by Shriram Transport Finance Company Limited (STFCL), which also acts as the servicer for the transactions.

The rating actions are as follows:

Sansar Trust August 2014

INR1,239.4m Series A PTCs affirmed at 'BBB-sf'; Outlook Stable

Sansar Trust Jan 2015

INR1,433.6m Series A PTCs affirmed at 'BBB-sf'; Outlook Stable

STFCL CV Trust Sep 2013

INR477.5m Series A PTCs affirmed at 'BBB-sf'; Outlook Stable

STFCL CV Trust Jan 2014

INR525.7m Series A PTCs affirmed at 'BBB-sf'; Outlook Stable

KEY RATING DRIVERS

The affirmations reflect satisfactory asset performance and sufficient credit enhancement (CE) for the rated notes. For each transaction, CE has increased steadily from the closing dates, driven by the pass-through, sequential amortisation structure of the notes. As of July 2016, the CE was 65.2%, 46.7%, 183.4% and 117.1% of the outstanding pool balance of Sansar Trust August 2014, Sansar Trust Jan 2015, STFCL CV Trust Sep 2013, and STFCL CV Trust Jan 2014 respectively. The portfolios remain diversified by geography and vehicle type.

For the more seasoned Sansar Trust August 2014, STFCL CV Trust Sep 2013 and STFCL CV Trust Jan 2014, the delinquency ratios of loans overdue by 90+days (90+dpd) as a percentage of the original principal balance have shown declining trend in recent months, and were reported at 3.58%, 2.34% and 3.29% as of July 2016, respectively. The delinquency ratio for the less seasoned Sansar Trust Jan 2015 has also been stabilising and declined in the most recent month to 2.85%.

The CE for all four transactions comprises a first-loss credit facility (FLCF) and a second-loss credit facility (SLCF). Since the last rating actions, there have been changes to the account banks for the transactions. For Sansar Trust August 2014, STFCL CV Trust Sep 2013 and STFCL CV Trust Jan 2014, the CE takes the form of FLCFs with Canara Bank (BBB-/Stable/F3) and IDBI Bank Ltd. (BBB-/Stable/F3), and an SLCF with ICICI Bank Ltd.(BBB-/Stable/F3). For Sansar Trust Jan 2015, the FLCF is with Axis Bank Limited (BBB-/Stable/F3) and Canara Bank, while the SLCF is with ICICI Bank Ltd. For all four transactions, the FLCF is in the form of a fixed deposit in the name of the originator with a lien marked in favour of the trustee, while the SLCF is either a fixed deposit or a bank guarantee.

The FLCF for each transaction has been drawn on occasion as excess spread has been insufficient to absorb shortfalls in certain periods. However, the SLCF has never been drawn by the transactions given the adequacy of FLCF in all periods. The CE is also deemed sufficient for covering commingling risks of the servicer and the liquidity needed for the timely payment of the PTCs.

Fitch affirmed India's Long-Term Foreign - and Local-Currency Issuer Default Ratings at 'BBB-' in July 2016. Fitch expects India's real GDP growth to pick up to 7.7% in the financial year ending 31 March 2017 (FY17) and 7.9% in FY18.

The default performance of the underlying pools has been low and the ABS cash flow model was not re-run for this rating action.

RATING SENSITIVITIES

Fitch evaluated the rating sensitivities of the transaction under an increased default rate scenario and a decreased recovery rate scenario.

Fitch may consider a downgrade of the rated notes if the initial base-case default rate increases 4.2x for Sansar Trust August 2014 and 2.9x for Sansar Trust Jan 2015. For STFCL CV Trust Sep 2013 and STFCL CV Trust Jan 2014, the ratings will not be impacted by base-case default rate increases, as the CE can provide 100% protection to both transactions. All the transactions can withstand zero recoveries at the 'BBB-sf' modelled default rates without affecting their ratings. The sensitivity analysis assumes that the CE and other factors remain constant.

The ratings may be upgraded if the ratings of the credit collateral banks holding the fixed deposits and the banks providing guarantees are upgraded to above 'BBB-' and the portfolio performance remains sound, with adequate CE that can withstand stress at above a 'BBB-sf' rating scenario.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY

Fitch conducted a file review of 20 sample loan files focusing on the underwriting procedures conducted by STFCL compared with STFCL's credit policy at the time of underwriting. Fitch has checked the consistency and plausibility of the information and no material discrepancies were noted that would impact Fitch's rating analysis.

A comparison of the transactions' representations, warranties and enforcement mechanisms (RW&Es) to those of typical RW&Es for this asset class is available by accessing the reports and/or links given under Related Research below.