OREANDA-NEWS. November 03, 2015. Fitch Ratings has affirmed three pass-through certificates (PTCs) from three Indian ABS transactions. These transactions are backed by commercial-vehicle loans originated by Shriram Transport Finance Company Limited (STFCL), which also acts as a servicer for the transactions.

A full list of rating actions follows at the end of this ratings action commentary.

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 September 2015, the CE was 30.4%, 24.6%, and 99.0% of the outstanding pool balance of Sansar Trust August 2014, Sansar Trust Jan 2015, and Small Operators Trust II 2013 respectively. The portfolios remain diversified by geography and vehicle type, while the high number of obligors in each transaction ensures sufficient granularity in the portfolios.

For Small Operators Trust II 2013, the delinquency ratio of loans overdue by 90+days (90+dpd) as a percentage of the original principal balance has been declining and was reported at 2.88% as of September 2015. The delinquency ratios for other two less seasoned transactions continued to rise, and as of September 2015, 90+dpd ratio was 2.90% for Sansar Trust August 2014 and 1.03% for Sansar Trust Jan 2015.

Since the last rating actions, there have been changes to the account banks for the transactions. For Sansar Trust August 2014, the first-loss credit facility (FLCF) is in the form of fixed deposits with Canara Bank (Canara; BBB-/Stable/F3) and IDBI Bank Ltd. (IDBI, BBB-/Stable/F3), while the second-loss credit facility (SLCF) is a bank guarantee from ICICI Bank Ltd. (ICICI; BBB-/Stable/F3). For Sansar Trust Jan 2015, the FLCF is in the form of a fixed deposit with Canara, and the SLCF is a bank guarantee from ICICI. For Small Operators Trust II 2013, the FLCF comprises fixed deposits with ICICI and IDBI, and the SLCF is a bank guarantee from Axis Bank Ltd. (Axis; BBB-/Stable/F3). Where CE takes the form of a fixed deposit, the deposit is in the name of the originator with a lien marked in favour of the trustee.

The FLCF for Sansar Trust August 2014 and Small Operators Trust II 2013 have been drawn on occasion as excess spread has been insufficient to absorb shortfalls in certain periods. However, the SLCF for these two transactions have never been drawn given the adequacy of FLCF in all periods. For Sansar Trust Jan 2015, the CE has never been drawn to date. The CE is also deemed sufficient for covering commingling risks of the servicer and the liquidity for the timely payment of the PTCs.

RATING SENSITIVITIES
Based on Fitch's sensitivity analysis, Fitch may consider downgrading the ratings to 'BB+sf' if the base-case default rate increases by 89% for Sansar Trust August 2014, and by 64% for Sansar Trust Jan 2015. Sensitivity tests on base-case default rates did not impact the PTC rating of the more seasoned Small Operators Trust II 2013, while sensitivity tests on base-case recovery rates did not impact the PTC ratings for all three transactions. The sensitivity analysis assumes that the CE and other factors remain constant.

The ratings of the PTCs may be changed if the ratings of the banks holding the fixed deposits and the banks providing guarantees were to be changed.

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

DATA ADEQUACY
Fitch has checked the consistency and plausibility of the information and no material discrepancies were noted that would impact Fitch's rating analysis. Fitch has not reviewed the results of any third-party assessment of the underlying pool information or conducted a review of loan origination files as part of its ongoing monitoring.

The rating actions are as follows:
Sansar Trust August 2014
INR2.7bn Series A PTCs due February 2019: affirmed at 'BBB-sf'; Outlook Stable

Sansar Trust Jan 2015
INR2.8bn Series A PTCs due July 2019: affirmed at 'BBB-sf'; Outlook Stable

Small Operators Trust II 2013
INR385.5m Series A3 PTCs due August 2017: affirmed at 'BBB-sf'; Outlook Stable
Series A2 was paid in full on 15 March 2015