OREANDA-NEWS.  Fitch Ratings has assigned final ratings to Shri Trust H 2015's pass-through certificates (PTCs). The issuance consists of notes backed by commercial-vehicle loans originated by Sundaram Finance Company Limited (SFL), which also acts as the servicer for the transactions. The ratings are as follows (original balance is shown below):

INR1.51bn Series A PTCs due August 2019: '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), and SFL's origination practices, servicing experience and expertise in collection and recovery of commercial-vehicle loans in India. The transaction is supported by sound legal and financial structures.

For this 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) and Axis Bank Ltd. (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 June 2015, Shri Trust H 2015 had current CE of 9.76% of the outstanding pool balance.

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. Plenty of policy initiatives are likely to have a positive effect on real GDP growth, including structural reforms and some fiscal and monetary policy loosening, while it will take time for such measures to have an impact on growth. 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 denominated in Indian rupee.

The transaction comprises a seasoned portfolio, with geographical diversification in 18 Indian states. The collateral pool will be assigned to the trust at par, and had an aggregate outstanding principal balance of INR1.51bn and consisted of 2,939 loans to 2,778 obligors as of 28 February 2015. The collateral pool had a weighted average (WA) original loan-to-value ratio of 80.1%, a WA seasoning of 11.4 months, and a WA yield of 13.15 %. As of the cut-off date, loans in the securitised pool were mostly current, with 6.8% of the pool classified as 1-30 days past due.

The pool was also diversified at the obligor level, with the largest obligor by outstanding loan representing 0.51% of the total pool. The pool comprised loans secured by heavy commercial vehicles (HCV) at 38.0%; light commercial vehicles (LCV) at 36.2%; medium commercial vehicles (MCV) at 16.3%; and small commercial vehicles (SCV) at 9.5%. Each asset type was also divided further into new and used vehicles, except SCV, which comprised new vehicles only.

RATING SENSITIVITIES
Based on Fitch's sensitivity analysis, Fitch may consider downgrading the note ratings in Shri Trust H 2015 to 'BBsf' if the base-case default rate increases by 30%, or 'BB+sf' if 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 loans to Shri Trust H 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 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 have an impact on 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 affect Fitch's rating analysis.