OREANDA-NEWS. Fitch Ratings has assigned final ratings to pass-through certificates (PTCs) from Shri Trust L 2016. The issuance consists of notes backed by commercial-vehicle and tractor loans originated by Sundaram Finance Limited (SFL), which also acts as the servicer for the transaction. The ratings are as follows:

Shri Trust L 2016

INR2.03bn Series A PTCs due October 2020: 'BBB-sf'; Stable Outlook

The rating addresses timely payment of interest and principal in accordance with the payout schedules in the transaction documents. The scheduled payouts will be net of distribution taxes on the income distributed by the trust to the PTC holders.

KEY RATING DRIVERS

The rating and Outlook reflect adequate external credit enhancement (CE) of 9.80% of the initial principal balance, and SFL's origination practices, servicing experience and expertise in collection and recovery of commercial-vehicle and tractor loans in India. The transaction is supported by a sound legal and financial structure.

The credit enhancement (CE) comprises a first-loss credit facility which is in the form of fixed deposits with Axis Bank Ltd. (BBB-/Stable/F3) in the name of the originator with a lien marked in favour of the trustee.

The CE is deemed sufficient to cover the servicer's commingling risks, payment-interruption risks, and the liquidity for 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.

Fitch has factored this macroeconomic outlook into its analysis and its base-case default-rate assumptions. The default rate, default timing, prepayment rate, recovery rate and time to recovery, together with the portfolio's weighted-average yield, were stressed in Fitch's ABS cash flow model to assess the sufficiency of cash flow for timely payment at the current rating level.

No interest-rate or foreign-currency risks exist in the transaction, since both the assets and the PTCs are fixed-rate and are denominated in rupees.

The transaction comprises a seasoned portfolio, with loans from 15 Indian states. The collateral pool will be assigned to the trust at par, and it had an aggregate outstanding principal balance of INR2.03bn and consisted of 2,777 loans to 2,580 obligors as of 29 February 2016. The collateral pool had a weighted average (WA) original loan-to-value ratio of 81.0%, a WA seasoning of 9.3 months and a WA yield of 12.2%. As of the cut-off date, loans in the securitised pool were mostly current, with no loans more than 60 days past due. Fitch gave some credit to WA seasoning of 9.3 months of the underlying loans.

RATING SENSITIVITIES

Based on Fitch's sensitivity analysis, Fitch may consider downgrading the rating on the transaction to 'BB+sf' if the base-case default rate increases by 30%, or to 'BB+sf' if the base-case recovery rate declines by 30%. The sensitivity analysis assumes that the CE and other factors remain constant.

The rating may be upgraded if the rating of the credit collateral bank holding the first-loss credit facility deposits is upgraded to above 'BBB-' and the portfolio performance remains sound, with adequate CE that can withstand stress at above a 'BBB-sf' rating scenario.

At closing, SFL assigned commercial-vehicle and tractor loans to the issuer, which in turn issued the PTCs. The PTC proceeds were used to fund the purchase of the underlying loans.

USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10

Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.

REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS

A description of the transaction's representations, warranties and enforcement mechanisms ("RW&Es") that are disclosed in the offering document and which relate to the underlying asset pool is available by accessing the appendix referenced under Related Research below. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions, dated 31 May 2016.

DATA ADEQUACY

Fitch conducted a file review of 20 sample loan files focusing on the underwriting procedures conducted by SFL compared with SFL'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.