Secure Trust April 2020 -PTC Series A - IIFL
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Secure Trust April 2020 - PTC Series A
Traditional short term investment options
Investment Option Average Returns (Pre Tax)
Arbitrage Funds 5.5%-6.5%
Bank FDs 5.5%-6.5%
Liquid / Ultra Short Term Funds 5%-7%
Short Term Funds 6%-8%
Traditional investment options offer low to medium returns with medium to high level of safety.
What if investors have an option to get higher returns along with high level of safety?
Introducing GOLD Pass Through Certificates (PTCs) - which offer
higher return potential with highest short term credit rating !!!Gold PTC – An attractive short term investment opportunity
Key Features
High rate of interest of 10% p.a. on outstanding principal amount
Short term investment tenure of ~8-12 months
Secured by highly liquid collateral (Gold Jewellery) of value close to 1.6x
Highest short term investment rating - Provisional CRISIL A1+ (SO)
PTC Holders are entitled to receive actual Interest and Principal collections. (In case total
collection is not able to meet total accrued interest amount in a particular month, same will
be carried forward till the PTCs’ ultimate maturity date i.e., 18 April 2021)
• There is a monthly expected payout schedule for principal and interest which is subject to actual collection. Any short fall
in interest payout will be accrued and paid in subsequent months and ultimately settled on maturity date.What is Gold PTC?
What is Securitization?
Gold
It is homogenous pooling of various types of debt Gold Loan 1
Loan 2
(asset class) such as home loan, residential
mortgages, auto loans, credit card debt obligations, Gold
gold loans etc. Loan 3
Selling said consolidated debt through issue
of pass-through certificates representing interest in
the pool. Securitization of Loans
What is Pass Through Certificate (PTC)?
Issue of Gold PTCs
These are fixed income instruments issued on
securitised pool of loans.
Receivables
A PTC holder gets receivable (interest + principle)
of the securitised pooled loans in its favour. • Monthly Interest
• Loan maturity in the pool
• Prepayments of loans
Gold PTC is securitization of gold loans from a selected pool of borrowers and
creation of a fixed income instrument on underlying gold loan receivablesWhy should you invest in this product?
Earn 10% pre tax interest compared to other short term options with average returns of 5%
- 8%
Highly secured as it is collateralized against physical gold jewellery of value close to 1.6x
(including overcollateralization) i.e. for Rs.1 Cr loan in the pool, collateral of gold taken of ~
Rs.1.60 Cr
Possibility of regular income with expected interim payment of interest & part payment of
principal
Low credit risk – Risk gets diversified across multiple borrowers:
o Highly diversified borrowers (pool of 25.4k borrowers) across India
o Borrowers with average 4.5 months of payment history with no default
High credit support to enhance credit quality of securitized pool:
o In case of unlikely event of default and/or fall in gold prices by more than 30% in value
at pool level, servicer to take first 10% loss
o Servicer also provides 5% additional corporate guarantee enhancing the security coverWho should invest in this product? Investors with a short term investment horizon of upto a year who are looking for an excellent short term, high yielding, low risk fixed income investment avenue Corporate treasuries looking to invest in a high quality fixed income investment option Investors looking for regular income with interim payment of interest & part payment of principal Equity investors who want to invest in the equity markets in a phased manner due to the current volatility. Lumpsum money can be parked in this product and interim payouts can be reinvested into equity markets at regular intervals.
Product terms: Gold securitization – Series A
Terms of Investment Key Transaction Details
Parameter Description Trust Name Secure Trust April 2020
Pass through Certificate (PTC)
Instrument Servicer IIFL Finance Ltd.
Series A
Trust Name Secure Trust April 2020 Trustee Catalyst Trusteeship Ltd
PTC Rating (for Series
CRISIL A1 + (SO) Principal, interest and all other amounts
A) Underlying Receivables
receivable on 25,410 loan contracts
Face Value of PTC INR 10,000
Pool cut-off date 31st March 2020
Minimum Investment INR 5,00,000 (50 units)
Transaction
30th April 2020
Coupon 10% per annum Commencement
First coupon date 18th May 2020 Pricing Structure Par
Issue Open / Close
30th April 2020
date 18th of every month till maturity and if
PTC Payout Date such day is not a business day, the
Legal final maturity 18th April 2021 immediately succeeding business dayPool characteristics – PTC Series A
Key Pool Characteristics Geographical Concentration
Parameter Values State Exposure
No. of contracts 25,410 Gujarat 20.6%
Principal outstanding (Rs. crore) 166.66 Rajasthan 13.5%
Avg. Ticket size (Rs. ‘000) 69,436 Delhi 11.1%
st
Cut-off date 31 March 2020 Madhya Pradesh 9.3%
Avg. Current LTV 60.7% Haryana 9.1%
Avg. seasoning (months) 4.42 Others 36.4%
Tenure (6m: 9m: 11m) 0.1:1.5:98.4 Grand Total 100%
Seasoning Profile Loan to Value Ratio
Installments Paid Principal O/S LTV % Principal O/S
3 25.3% < 40% 1.7%
4 52.6% 40% - 50% 3.6%
50% - 60% 23.7%
5 5.4%
60% - 70% 71.0%
6 0.1%
Grand Total 100%
7 7.6%
8 6.7%
9 2.4%
Grand Total 100%Gold price history – past 10 years
Price Movement in INR (per 10 gms)
40,000
35,220
35,000 31,438
31,050 29,600 29,668
30,000 28,007 28,624
26,400 26,344
25,000
18,500
20,000
14,500
15,000
10,000
5,000
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Price (24 Carat Gold in Rs. per 10 grams) taken for calculation is the average price of Gold for each financial year as per data available in the public domain.
IIFL Finance in history of last 10 years, has not made any principle
loss of more than 1%, even during the volatile periodClient level expected cash flow – Illustration
Total Pool 1,50,00,00,000
Client Investment 10,00,000
% age of Pool 0.066%
Scenario for explanation only
Expected Expected Expected Cash Actual Actual
Collection
Payout Date Principal O/S Principle Interest flow (Excluding Closing O/S Principle Interest Actual payout Closing O/S
Month
Payout Payout TDS) Payout Payout
30-Apr-20 -10,00,000 10,00,000 -10,00,000 10,00,000
Apr-20 18-May-20 10,00,000 2,241 4,932 7,173 9,97,759 0 4,932 4,932 10,00,000
May-20 18-Jun-20 9,97,759 10,428 8,474 18,902 9,87,331 5,500 8,493 13,993 9,94,500
Jun-20 18-Jul-20 9,87,331 42,301 8,115 50,416 9,45,030 0 3,000 3,000 9,99,674
Jul-20 18-Aug-20 9,45,030 86,888 8,026 94,914 8,58,142 25,000 5,000 30,000 9,78,164
Aug-20 18-Sep-20 8,58,142 88,802 7,288 96,090 7,69,340 0 0 0 9,86,472
Sep-20 18-Oct-20 7,69,340 23,666 6,323 29,989 7,45,674 1,23,666 8,108 1,31,774 8,62,806
Oct-20 18-Nov-20 7,45,674 1,80,021 6,333 1,86,354 5,65,653 80,000 2,000 82,000 7,88,134
Nov-20 18-Dec-20 5,65,653 5,65,653 4,649 5,70,302 0 0 0 0 7,94,612
Dec-20 18-Jan-21 0 0 0 0 0 0 6,749 6,749 7,94,612
Jan-21 18-Feb-21 0 0 0 0 0 2,00,000 6,749 2,06,749 5,94,612
Feb-21 18-Mar-21 0 0 0 0 0 3,25,000 4,561 3,29,561 2,69,612
Mar-21 18-Apr-21 0 0 0 0 0 2,69,612 2,290 2,71,902 0
10,00,000 54,141 10,54,141 10.47% 10,28,778 51,881 10,80,659 10.47%
There is a monthly expected payout schedule for principal and interest. However, non-payment of the expected,
monthly principal and interest payments does NOT constitute a default on the PTCs. Excess cashflows on a monthly
basis will be utilized to prepay interest & principal to the investors. Principal repayment is subject to loan maturity in the
pool or prepayment in the particular month. Please read the Termsheet and IM carefully before investingCredit support to enhance credit rating
% of Pool
Source Description
Principal
Against a pool, PTC Series A of INR 150cr are issued to
investors. The additional principal of INR 16.66cr (10% of the
Overcollateralization 10%
pool) is subordinated to the PTC payouts and acts as a source
of credit enhancement in the transaction.
Difference between Pool Interest and PTC Interest. After the
Excess Interest promised interest payout (10% p.a.) to the PTCs, the excess
5.95%
Spread (EIS) collection would be utilized to accelerate the amortization of the
PTCs.
The credit collateral will be in the form of an unconditional and
irrevocable corporate guarantee from IIFL to the extent of INR
Credit Collateral 5.00%
8.34cr which constitutes 5% (Five Percent) of the outstanding
principal amount of the Loans securitized as on the Cut-off Date
In case of the shortfalls pertaining to overdue contracts, shortfall will be first met from the EIS
in the transaction. Overcollateralization amounting to 10% of the pool principal amount is also
subordinated to PTC payouts and acts as another source of credit enhancement in the
transactionTaxation*
Income of securitization trust shall be exempt and any income from securitization trust would
be taxable in the hands of investors.
The income accrued or received from the securitization trust shall be taxable in the
hands of investor in the same and like manner as if the investor had made investment in
the underlying assets directly.
TDS would be deducted under section 194LBC by the securitization trust on the amount paid
or credited as under:
o To resident investors being individuals or HUF - @ 25%
o Others - @ 30%
* Subject to taxation rules applicable at the time of maturity. Investors are advised to consult their
tax advisors for taxation related mattersKey product risks Reinvestment Risk – In case there is prepayment of loan by borrowers, higher principal amount will be repaid before designated time, which may not be invested at same interest rate Collateral Risk - Investor may lose money if gold price falls (by more than 37%) and average LTV of underline loan pool cross 100% coupled with borrowers not wiling/able to repay the amount owed. Default Risk – Obligor might default on the loan in product tenure thereby affecting the timing and amount of cash flow to be received by investor
Key risk disclosure and disclaimer
Please note that specific risk factors are as below and you must go through the detailed
disclosure & risk factors in relevant documents before making the investment decision.
Product is NOT SUITABLE for
Product features / Key Risks
you if
Investment Short term – the maturity of the PTC is within 8-12 Your investment horizon does not
Horizon months and usual maturity of 7-9 months. match the life of the product
Product features / Key Risks Product is NOT SUITABLE for you if
Investment Partial – the product offers partial capital horizon
Your investment protection in You
does not match the lifeneed
of full capital protection
PrincipalShort term – the maturity of the PTC is 8 to 12 months
Horizon the debentures
the form of credit enhancement and through inbuilt during the entire tenure of the
Protection
Principal Not Available – the product doesn’t offer capital protection You need capital protection during the entire tenure
Protection
overcollateralization.
as a feature of the product
product
The
The product product
is only is only
partially-liquid partially-liquid
for a premature exit -
Youfor a wish
do not premature exit - toYou
to hold the investment do/ not wish to hold
maturity the
Liquidity though the instrument is proposed to be listed on an
Liquidityexchange,though the
availability of buyersinstrument
is not assured is proposed to be listed on an investment to maturity /
need assured intermittent liquidity need
exchange – BSE.
Like any other debt instrument, the PTC is exposed to the
assured intermittent liquidity
credit risk of the issuer and runs the risk of the issuer You are not comfortable with the credit risk of the
Credit risk
defaulting Like any other
on commitment debtinvested
to return instrument, the PTC is exposed to
amount issuer
and/or return on same
the credit risk of the issuer to the extent of guarantee You are not comfortable with the
Credit risk
provided and runs the risk of the issuer defaulting on credit risk of the issuer
commitment on same.Key risk disclosure and disclaimer
1. The information provided is not intended to be used by investors as the sole basis for investment decisions, who must
make their own investment decisions, based on their own investment objectives, financial positions and needs of specific
investor. The information provided may not be taken in substitution for the exercise of independent judgment by any
investor. The investor should independently evaluate the investment risks and make independent judgment with regard
suitability, profitability, and fitness of any product or service offered herein above.
2. Some of the products described hereinabove may be developed and offered by third parties ('third party products'),
which IIFL Securities may be making available to you. IIFL Securities does not endorse or guarantee these third party
products in any manner and will not be liable for their performance or otherwise. The products described in this document
may not be protected against sovereign risk including risks arising from any changes in applicable Indian or other relevant
laws, represent speculative investments and may involve a high degree of risk. Investors' capital may not be guaranteed
in any respect and they could lose all or substantial portion of their investment.
3. Please familiarize yourself with all the terms and conditions pertaining to the specific products and services prior to
availing of it. IIFL Securities is not acting as your advisor or in a fiduciary capacity in respect of the products and services
referred to in this document, and accepts no liability nor responsibility whatsoever with respect to the use of the
information provided hereinabove.
4. Investors to exercise their own independent judgment in using any of the information and documents – Termsheet,
Presentation and Information Memorandum provided by IIFL Finance Ltd. and conduct separate research into the
suitability of the product for a particular financial situation, circumstances, attitudes, motivations and preferences.
Investors should consult their financial advisers for the suitability of the product and advise on investments.
5. IIFLSec or any of its director/s or principal officer/employees and associate companies do not assure/give guarantee
for the performance of returns on your investments.Key risk disclosure and disclaimer 6. Please note that Investments are subject to multiple risk factor. Read the Information memorandum for full understanding and detail carefully before investing. The investor should independently evaluate the investment risks before making the investment decision. 7. IIFLSec as part of their services might be distributing their products to clients or prospective investors. IIFLSec or its associates may or may not hold the above referred securities being distributed as part of their own investments. 8. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment of its original date of publication by IIFL and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. 9. The Report is purely for information purposes and does not construe to be investment recommendation/advice or an offer or solicitation of an offer to buy/sell any securities. 10. Investors should not solely rely on the information contained in this Report and must make investment decisions based on their own investment objectives, judgment, risk profile and financial position. The recipients of this Report may take professional advice before acting on this information.
Thank You
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