OREANDA-NEWS. Fitch Ratings has assigned expected ratings to pass-through certificates (PTCs) from Shri Trust M 2017. 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 M 2017
INR7.5bn Series A notes due March 2021: 'BBB-(EXP)sf'; Stable Outlook

The ratings and Outlook reflect adequate external credit enhancement (CE) of 9.5% of the initial principal balance as well as 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 rating addresses timely payment of interest and principal in accordance with the payout schedules in the transaction documents. The scheduled payouts will be net tax deducted at source on the income distributed by the trust to the PTC holders. The final rating is contingent upon the receipt of final documents conforming to information already received.

The CE will be in the form of fixed-deposits with a bank rated 'BBB-/F3' by Fitch 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 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 (WA) 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 PTCs are fixed-rate and denominated in rupees.