Rationale

 The rating of Provisional PP-MLD [ICRA]AAA(CE) (Stable) assigned to the Rs 150 crore non-convertible debentures (NCDs) of Five-Star Business Finance Limited (FSBFL/Issuer) is based on the strength of the presence of a cover pool (25% overcollateralisation as a percentage of the NCD outstanding and accrued interest) and a cash collateral (CC; Rs. 4.5 crore, i.e. 3% of the NCD outstanding amount and accrued interest) to support the servicing of the NCDs in the event of non-payment by FSBFL. FSBFL shall execute an assignment agreement and a power of attorney wherein it would agree to assign the cover pool assets to Dhruva XI 01 2021 Trust (Trust) on the occurrence of a predefined trigger event (details given in the salient covenants of the rated facility section) during the tenure of the rated facility. On the occurrence of a trigger event, there would not be any requirement of any further deed or action for the assignment by FSBFL. Post assignment, the Trust shall become the legal owner of the assigned receivables (i.e. the cover pool assets shall be bankruptcy remote from the other creditors of FSBFL). In turn, the Trust will provide an unconditional and irrevocable guarantee to the debenture trustee of the rated NCDs and would transfer all collections from the cover pool to the designated account1 under its guarantee obligation. Further, the CC would be available for the benefit of the debenture holders. The legal final maturity date of the transaction is 27 months and one day. However, as per terms of the transaction, upon occurrence of trigger event, legal final maturity date will be extended to 84 months from the deemed date of allotment. All payments on the NCDs (both principal and interest) are promised only on legal final maturity date. The rating assigned by ICRA addresses the timely payment of the dues to the investors by the legal final maturity date (i.e., a default to the Investor shall be defined as non-receipt of payment from the cover pool by legal final maturity date post occurrence of trigger event, as per the terms of the transaction). However, the facility has a call option after 27 months and one day from the Deemed Date of Allotment. Failure on the part of FSFBL to exercise the call option would be a trigger event.