OREANDA-NEWS. Fitch Ratings has assigned final ratings to four series of pass through certificates (PTCs) from Shri Trust F 2015 and Shri Trust G 2015. The issuances consist of notes backed by commercial-vehicle and tractor loans originated by Sundaram Finance Company Limited (SFL), which also acts as the servicer for the transactions. The ratings are as follows:

Shri Trust F 2015
INR2.742bn Series A1 PTCs due March 2017: 'BBB-sf'; Stable Outlook
INR603.7m Series A2 PTCs due August 2019: 'BBB-sf'; Stable Outlook

Shri Trust G 2015
INR1.936bn Series A1 PTCs due March 2017: 'BBB-sf'; Stable Outlook
INR717.3m Series A2 PTCs due August 2019: 'BBB-sf'; Stable Outlook

The ratings address 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 ratings and outlooks reflect adequate external credit enhancement (CE), and SFL's origination practices, servicing experience and expertise in collection and recovery of commercial-vehicle and tractor loans in India. The transactions are supported by sound legal and financial structures.

For each transaction, the CE comprises a first-loss credit facility (FLCF). The FLCF is in the form of fixed deposits with Canara Bank (BBB-/Stable/F3) in the name of the originator with a lien marked in favour of the trustee.

The credit enhancement is deemed sufficient to cover the commingling risks of the servicer and the liquidity for the timely payment of the PTCs. As of May 2015, Shri Trust F 2015 and Shri Trust G 2015 had current CE of 10.34% and 9.80% of the outstanding pool balance respectively.

Taking the revised data from India's Central Statistical Office as the new reference, Fitch forecasts India's GDP growth to accelerate to 8.0% in the financial year ending 31 March 2016 (FY16) and 8.3% in FY17. While plenty of policy initiatives will likely have a positive effect on real GDP growth, including structural reforms and some fiscal and monetary policy loosening, it will take time for such measures to have an impact on growth. The government continues to roll out reforms that are likely to support the investment climate in the longer run. The central government's budget, presented on 28 February 2015, showed a continuation of this process and included efforts to reduce infrastructure bottlenecks.

The agency 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 Asia-Pacific Consumer 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.

Each transaction comprises a static seasoned portfolio of commercial-vehicle and tractor loans. For more information about the underlying portfolio of each transaction, please refer to the individual rating action commentaries for the assignment of expected ratings.

RATING SENSITIVITIES
Based on Fitch's sensitivity analysis, Fitch may consider downgrading the note ratings in Shri Trust F 2015 to 'BBsf' if the base-case default rate increases by 30% or 'BB+sf" if the base-case recovery rate declines by 30%. For Shri Trust G 2015, Fitch may consider downgrading the ratings to 'BB+sf' if either the base-case default rate increases by 30% or the base-case recovery rate declines by 30%. The sensitivity analysis assumes that the CE and other factors remain constant.

The note ratings may be upgraded if the rating of the credit collateral bank holding the FLCF 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 Shri Trust F 2015 and Shri Trust G 2015, which in turn issued the PTCs. The PTC proceeds were used to fund the purchase of the underlying loans in each transaction.

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 SFL compared to 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.

Fitch reviewed the results of the agreed-upon procedures (AUPs) conducted on the portfolios. The AUPs reported no material errors that would impact Fitch's rating analysis.