Structured Finance www.indiaratings.co.in 3 January 2013 ABS ABS Performance Report - Q312 Special Report Asset Performance - A Mixed Bag: In Q312, the performance of all India Ratings-rated ABS transactions was stable. While the performance of loans varied across asset classes, it remained within India Ratings’ base case expectations. The performance of tractor loans and small business loans remained robust, whereas that of construction equipment loans remained stressed. Commercial vehicle (CV) loans showed some improvement with servicer efforts translating into the movement of loans into less delinquent buckets. CV Arrears Moderate: CV loan delinquencies (90+ dpd) have started showing signs of stabilisation across nearly all vintages. Even the stressed post-2009 vintage transactions, which followed a steep upward trajectory in first 15-18 months, have shown significant moderation. This moderation in 90+ dpd delinquencies coupled with a continuous decline in India Ratings’ Early Delinquency Index (EDI) for CV loans (please see Appendix B) indicates that recovery is underway with the arrest of short-term delinquencies and movement of loans to less delinquent buckets. Construction Equipment Loans Stressed: Construction equipment loans remained stressed in Q312, with 90+dpd delinquencies standing close to peak levels for nearly all vintages. The last two months in the third quarter saw positive yoy growth in the mining index and some improvement in the infrastructure index, which may result in some moderation in the delinquency rates of these loans in the next quarter. Tractor Loans Stable: Tractor loans’ performance remained broadly in line with the long-term trend in Q312, with the 2011 vintage continuing to perform better than earlier vintages. The stable 180+dpd delinquency trend continued along with the decline in short-term delinquency, as reflected in India Ratings’ Tractor Loan EDI. The EDI stood at 8% in September 2012, down from 11% a year ago. No Negative Rating Actions: Since July 2012, India Ratings has upgraded two tranches and affirmed nine, with no negative rating action being taken. This is largely on account of structural features, like the presence of excess interest spread (EIS), and the pro-active loan servicing practices followed by originators to prevent defaults from crystallising as a result of the overall slowdown in the economy. Analysts Mithilendu Jha +91 22 4000 1744 [email protected]Jatin Nanaware +91 22 4000 1761 [email protected]Arvind Rana +91 22 4000 1719 [email protected]Amit More +91 22 4000 1703 [email protected]Purav Shah +91 22 4000 1764 [email protected]Neeta Laud Sandeep Singh +91 22 4000 1735 [email protected]
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Structured Finance
www.indiaratings.co.in 3 January 2013
ABS
ABS Performance Report - Q312 Special Report
Asset Performance - A Mixed Bag: In Q312, the performance of all India Ratings-rated ABS
transactions was stable. While the performance of loans varied across asset classes, it
remained within India Ratings’ base case expectations. The performance of tractor loans and
small business loans remained robust, whereas that of construction equipment loans remained
stressed. Commercial vehicle (CV) loans showed some improvement with servicer efforts
translating into the movement of loans into less delinquent buckets.
CV Arrears Moderate: CV loan delinquencies (90+ dpd) have started showing signs of
stabilisation across nearly all vintages. Even the stressed post-2009 vintage transactions,
which followed a steep upward trajectory in first 15-18 months, have shown significant
moderation. This moderation in 90+ dpd delinquencies coupled with a continuous decline in
India Ratings’ Early Delinquency Index (EDI) for CV loans (please see Appendix B) indicates
that recovery is underway with the arrest of short-term delinquencies and movement of loans to
less delinquent buckets.
Construction Equipment Loans Stressed: Construction equipment loans remained stressed
in Q312, with 90+dpd delinquencies standing close to peak levels for nearly all vintages. The
last two months in the third quarter saw positive yoy growth in the mining index and some
improvement in the infrastructure index, which may result in some moderation in the
delinquency rates of these loans in the next quarter.
Tractor Loans Stable: Tractor loans’ performance remained broadly in line with the long-term
trend in Q312, with the 2011 vintage continuing to perform better than earlier vintages. The
stable 180+dpd delinquency trend continued along with the decline in short-term delinquency,
as reflected in India Ratings’ Tractor Loan EDI. The EDI stood at 8% in September 2012, down
from 11% a year ago.
No Negative Rating Actions: Since July 2012, India Ratings has upgraded two tranches and
affirmed nine, with no negative rating action being taken. This is largely on account of structural
features, like the presence of excess interest spread (EIS), and the pro-active loan servicing
practices followed by originators to prevent defaults from crystallising as a result of the overall
Rating Upgrades Transaction name Class Asset class Previous rating Current rating
DA Program Oct09-I SLCF CV IND A(SO) IND AAA(SO) STFCL DA Mar 2011-03 SLCF CV IND BBB(SO) IND A+(SO)
Source: India Ratings
Rating Affirmation Transaction name Class Asset class Previous rating Current rating
SREI - Direct Assignment Dec 10-I
Purchaser payouts CE IND AAA(SO) IND AAA(SO)
SREI - Direct Assignment Dec 10-II
Purchaser payouts CE IND AAA(SO) IND AAA(SO)
STFCL DA Mar 2011-03 Purchaser payouts CV IND AAA(SO) IND AAA(SO) DA Program Oct09-I Purchaser payouts CV IND AAA(SO) IND AAA(SO) DA Program-Sept09-3 Purchaser payouts CV IND AAA(SO) IND AAA(SO) DA Program-Sept09-3 SLCF CV IND AAA(SO) IND AAA(SO) STFCL's New CV - Dec 08 Assignment
Purchaser payouts CV IND AAA(SO) IND AAA(SO)
MMFSL DA June 2010 - 1 Purchaser payouts Tractor IND AA+(SO) IND AA+(SO) MMFSL DA Sept 2009 - 1 Purchaser payouts Tractor IND AA+(SO) IND AA+(SO)
Indicates inability to arrest short-term delinquencies and imminent movement of loans to 90+dpd delinquency bucket
Rising Rising Asset deterioration in progress
Indicates inability to arrest short-term delinquencies and movement of loans to 90+dpd delinquency bucket
Falling Flat Recovery in progress
Indicates arrest of short-term delinquencies and recovery in progress, with loans no longer moving to deeper buckets
Falling Falling Recovery in progress
Indicates arrest of short-term delinquencies and imminent recovery, with loans moving to less delinquent buckets
Source: India Ratings
The movement of loans in different delinquency buckets across vintages is shown in the charts
below. Rising level of 30+dpd delinquencies is an early indicator of loans moving into the
90+dpd delinquency bucket. Similarly, a fall in 30+dpd rates suggests an easing of stress,
resulting in a fall or stabilisation in 90+dpd delinquencies.
Figure 17 Figure 18
0.0
2.0
4.0
6.0
8.0
10.0
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46
(Months since issuance)
30+dpd 60+dpd 90+dpd 180+dpd(%)
CV Delinquency % of Original POS - Vintage 2008
Source: India Ratings
0.0
2.0
4.0
6.0
8.0
10.0
1 4 7 10 13 16 19 22 25 28 31 34 37
(Months since issuance)
30+dpd 60+dpd 90+dpd 180+dpd(%)
CV Delinquency % of Original POS - Vintage 2009
Source: India Ratings
Figure 19 Figure 20
0.0
2.0
4.0
6.0
8.0
10.0
1 4 7 10 13 16 19 22 25 28 31
(Months since issuance)
30+dpd 60+dpd 90+dpd 180+dpd(%)
CV Delinquency % of Original POS - Vintage 2010
Source: India Ratings
0.0
2.0
4.0
6.0
8.0
10.0
1 4 7 10 13 16 19
(Months since issuance)
30+dpd 60+dpd 90+dpd 180+dpd(%)
CV Delinquency % of Original POS - Vintage 2011
Source: India Ratings
Structured Finance
ABS Performance Report - Q312
January 2013 88
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