/raid1/www/Hosts/bankrupt/TCRAP

/raid1/www/Hosts/bankrupt/TCRAP_Public/170303.mbx T R O U B L E D C O M P A N Y R E P O R T E R A S I A P A C I F I C Friday, March 3, 2017, Vol. 20, No. 45 Headlines A U S T R A L I A BRANDPOINT DISTRIBUTORS: First Creditors' Meeting Set March 14 COMTEX CORPORATE: First Creditors' Meeting Set for March 10 HOVAN PTY: First Creditors' Meeting Set for March 10 STOCKLAND ROCKHAMPTON: Forced Into Involuntary Administration WSH GROUP: First Creditors' Meeting Scheduled for March 10 C H I N A CHINA SCE: Moody's Revises Outlook to Stable; Affirms B1 CFR GOME ELECTRICAL: S&P Assigns 'BB' CCR; Outlook Stable XINHU (BVI): Fitch Assigns 'B' Rating to USD700MM Sr. Notes XINYUAN REAL: Fitch Assigns 'B' Rating to USD300MM Sr. Notes YINGDE GASES: Air Products Vows to Continue with Buyout Bid * Chinese Auto ABS Delinquencies Decline in Q4 2016, Moody's Says H O N G K O N G CHINA SOUTH: Fitch Assigns 'B(EXP)' Rating to Proposed USD Notes CLSA LTD: To Close US Equities Business; 90 Jobs Affected I N D I A ANG LIFE: CRISIL Downgrades Rating on INR7MM Cash Loan to 'D' BALLARPUR INDUSTRIES: Ind-Ra Lowers Rating on INR2.47 CP to 'D' DNH PROJECTS: ICRA Reaffirms 'C' Rating on INR12cr Loan G.D. METSTEEL: ICRA Reaffirms 'B' Rating on INR18cr LT Loan GENESYS BIOLOGICS: CRISIL Assigns B+ Rating to INR60MM LT Loan GMR INFRASTRUCTURE: Unit Allots Shares to Lenders Under SDR HALDIA NIRMAN: Ind-Ra Assigns 'BB-' Long-Term Issuer Rating HALLMARK AQUAEQUIPMENT: CRISIL Reaffirms B+ INR6.6MM Loan Rating HANUMAN IMPEX: Ind-Ra Assigns 'BB' Long-Term Issuer Rating HEMRAJ DEVKARANDAS: CRISIL Assigns B+ Rating to INR10MM Loan HILLWOOD FURNITURE: CRISIL Lowers Rating on INR3MM Loan to 'B' HILLWOOD IMPORTS: CRISIL Lowers Rating on INR1MM Cash Loan to B HIMALAYAN ROAD: Ind-Ra Assigns 'BB' Long-Term Issuer Rating ICOMM TELE: ICRA Reaffirms 'D' Rating on INR793.96cr Loan JANARDHAN PLYBOARD: CRISIL Cuts Rating on INR4.5MM Loan to 'D' K P BUILDCON: ICRA Reaffirms B+ Rating on INR15.55cr LT Loan KAIZEN INDUSTRIES: Ind-Ra Assigns 'B+' Long-Term Issuer Rating KISHORE G: CRISIL Reaffirms B+ Rating on INR5.5MM Cash Loan LILY REALTY: CRISIL Lowers Rating on INR310MM Term Loan to D LIVINGSTONES: ICRA Reaffirms 'B+' Rating on INR48cr LT Loan MAC STEEL: CRISIL Assigns 'B+' Rating to INR4.5MM Cash Loan MAHITECHS: Ind-Ra Affirms 'B+' Long-Term Issuer Rating MANDOVI MINERALS: CRISIL Reaffirms 'B' Rating on INR12.31MM Loan MEGAMILES BEARING: CRISIL Upgrades Rating on INR5MM Loan to BB- MONNET ISPAT: JSW Steel Offers to Buy Controlling Stake NATRAJ HOME: CRISIL Assigns B+ Rating to INR5MM Foreign Loan PILOT 2 WHEELERS: Ind-Ra Assigns 'BB+' Long-Term Issuer Rating PRAGATI SPINNERS: Ind-Ra Assigns 'BB+' Long-Term Issuer Rating RAGHUNATH LAXMINARAYAN: CRISIL Cuts Rating on INR10MM Loan to D RAJEEV KUMAR: CRISIL Assigns B+ Rating to INR0.2MM LT Loan S.B. SYSCON: CRISIL Reaffirms B+ Rating on INR10.5MM Cash Loan SAFE-TRONICS AUTOMATION: ICRA Reaffirms B+ Rating INR4cr Loan SAI INFRACONSTRUCTIONS: Ind-Ra Assigns 'BB-' LT Issuer Rating SHIV MAHIMA: CRISIL Reaffirms 'B' Rating on INR6.0MM Cash Loan SHRILEKHA TRADING: CRISIL Lowers Rating on INR10MM Loan to 'C' SIDDHI GANESH: CRISIL Reaffirms B+ Rating on INR20MM Loan SONI GINNING: Ind-Ra Assigns 'B+' Long-Term Issuer Rating SOUTHERN COOLING: CRISIL Reaffirms B- Rating on INR12MM Loan SRC LABORATORIES: CRISIL Upgrades Rating on INR9.75MM Loan to B SRI SRINIVASA: CRISIL Raises Rating on INR6MM Cash Loan to B+ STATE BANK: Moody's Rates MTN Capital Securities Component (P)B1 SUBHKARAN AND SONS: CRISIL Cuts Rating on INR50MM Loan to 'D' SUBRAHMANYESWARA SWAMY: CRISIL Puts B- Rating on INR5.79MM Loan SUPERWAYS ENTERPRISES: CRISIL Cuts Rating on INR100MM Loan to D T C COMMUNICATION: Ind-Ra Assigns 'B+' Long-Term Issuer Rating TERRA ENERGY: ICRA Raises Rating on INR20.16cr Loan to B+ THIRU AROORAN: ICRA Assigns B+ Rating to INR235.03cr Loan TRUWOODS PRIVATE: ICRA Reaffirms B+ Rating on INR7.0cr Loan UJALA MINERALS: Ind-Ra Assigns 'BB-' Long-Term Issuer Rating VAKRANGEE FOUNDATION: Ind-Ra Affirms 'B+' Rating on INR35.3M Loan VIKAS TRANSPORT: CRISIL Reaffirms B+ Rating on INR3.8MM Loan VIRAJ SYNTEX: CRISIL Reaffirms B+ Rating on INR4.15MM Loan J A P A N TOSHIBA CORP: Seeks Advise on Potential US Unit Bankruptcy Cost TOSHIBA CORP: Foxconn Confirms Plan to Buy Chip Business S I N G A P O R E EMAS CHIYODA: Case Summary & 30 Largest Unsecured Creditors EMAS CHIYODA: Will Implement Revised Business Plan Thru Ch. 11 - - - - - ================= A U S T R A L I A ================= BRANDPOINT DISTRIBUTORS: First Creditors' Meeting Set March 14 -------------------------------------------------------------- A first meeting of the creditors in the proceedings of BrandPoint Distributors Pty Ltd will be held at the offices of FTI Consulting, 22 Marketing Street, in Brisbane, Queensland, on March 14, 2017, at 1:30 p.m. John Park and Kelly-Anne Trenfield of FTI Consulting were appointed as administrators of BrandPoint Distributors on March 2, 2017. COMTEX CORPORATE: First Creditors' Meeting Set for March 10 ----------------------------------------------------------- A first meeting of the creditors in the proceedings of Comtex Corporate Services Pty Limited will be held at the offices of BPS Recovery, Level 18, 201 Kent Street, in Sydney, on March 10, 2017, at 11:00 a.m. Mitchell Ball of BPS Recovery was appointed as administrator of Comtex Corporate on Feb. 28, 2017. HOVAN PTY: First Creditors' Meeting Set for March 10 ---------------------------------------------------- A first meeting of the creditors in the proceedings of Hovan Pty Ltd, trading as Grandma Moses Bakery and Deli, will be held at Level 2, 151 Macquarie Street, in Sydney, NSW, on March 10, 2017, at 11:30 a.m. Antony Resnick and David Solomons of de Vries Tayeh were appointed as administrators of Hovan Pty on Feb. 3, 2017. STOCKLAND ROCKHAMPTON: Forced Into Involuntary Administration ------------------------------------------------------------- Chloe Lyons at The Morning Bulletin reports that creditors met to discuss debts owed by former mayoral candidate Michael McMillan's business. Mr. McMillan, who is now working in North Queensland in public relations, purchased the Stockland Rockhampton Coffee Club franchise back in 2009, but sold late last year, according to The Morning Bulletin. The creditors met with liquidators Deloitte in Brisbane on February 28. Deloitte's lead partner for restructuring services, Richard Hughes, said the business was forced into involuntary administration due to unpaid taxes, the report relays. "The company was wound up by the Australian Taxation Office (ATO), on the petition of the ATO in court so, it wasn't voluntary," the report quoted Mr. Hughes as saying. "There was a debt owing, the debts owing under GST hadn't been paid and PAYG hadn't been paid. "As part of the normal ATO debt collection practices they pursued the debt and ended up in a winding up and we were contacted." The report notes Mr. Hughes said in spite of the "difficult situation", a positive outcome was achieved. "Ultimately I think it's a good outcome. We were able to sell the business as a going concern, staff were able to retain their jobs," Mr. Hughes said. "The creditors are going to receive, or at least the bank involved, is going to receive some recompense for the debt they had in there," Mr. Hughes added. The report discloses Mr. McMillan said he was in negotiations with the ATO for six months before the liquidation was triggered by a technicality and not a lot of money was owed to about eight creditors who would be at next week's meeting. Mr. McMillan also said he chose to leave the business and he and his family had moved on since the sale, but endeavoured to look after their financial commitments in a timely manner, the report ntoes. "It was probably time to move it on to someone who was in a better position to take the business moving forward, so that's what we endeavoured to do - we sold the business," Mr. McMillan said. "It's not that we had high debt at all." The report says the business was sold as a going concern and continued to trade throughout the process. The report discloses the amount owing has not been disclosed. WSH GROUP: First Creditors' Meeting Scheduled for March 10 ---------------------------------------------------------- A first meeting of the creditors in the proceedings of WSH Group Pty Ltd, formerly trading as Watersun Homes, will be held at 'Chartered Accountants of Australia and New Zealand', Level 18, 600 Bourke Street, in Melbourne, Victoria, on March 10, 2017, at 10:00 a.m. Mathew Terence Gollant and Neil Stewart Mclean of Rodgers Reidy were appointed as administrators WSH Group on Feb. 28, 2017. ========= C H I N A ========= CHINA SCE: Moody's Revises Outlook to Stable; Affirms B1 CFR ------------------------------------------------------------ Moody's Investors Service has revised the ratings outlook on China SCE Property Holdings Limited to stable from negative. Moody's has also affirmed China SCE's B1 corporate family rating and the B2 senior unsecured ratings for the bonds issued by the company. RATINGS RATIONALE "The change in China SCE's ratings outlook to stable from negative reflects Moody's expectations that the company will show a sustained improvement in its credit metrics, supported by strong revenue growth, improved gross profit margins, as well as prudent land acquisitions and debt management over the next 12-18 months," says Franco Leung, a Moody's Vice President and Senior Credit Officer, and who is also the International Lead Analyst for China SCE. "The company's robust liquidity position also supports its stable ratings outlook," says Cindy Yang, a Moody's Assistant Vice President and Analyst, and who is also the Local Market Analyst for China SCE. Moody's expects that China SCE's revenue will grow 20%-25% year- on-year over the next 12-18 months, supported by the company's strong contracted sales of RMB23.5 billion in 2016, including contributions from joint ventures and associates. The result in 2016 represented a 62% year-on-year growth. At end-2016, the company indicated that it had locked in around 70% of the target revenue in 2017. China SCE is increasing its focus on Tier 1 and major Tier 2 cities in China, where its projects represented 37% of its total land bank at end-2016 from 23% at 30 June 2016. Its quality land bank will support the company's contracted sales growth momentum over the next 1-2 years. Moody's expects that around 60%-70% of China SCE's total sales in 2017 will come from Shanghai, Beijing and Tianjin. Moody's therefore estimates that the company's contracted sales will grow 10%-15% in 2017. Moody's notes that China SCE's average selling price in terms of its contracted sales grew 22% year-on-year to RMB14,172 per square meters in 2016. This situation will result in better gross profit margins when the presold properties in Shenzhen, Shanghai and around Beijing are delivered over the next two years. Moody's also expects that China SCE's gross profit margins will improve to around 28% in 2017 compared with 25% in 2016. The aforementioned positive developments will result in turn in improved credit metrics that support the company's B1 corporate family rating. Specifically, Moody's expects that China SCE's interest coverage - as measured by adjusted EBIT/interest - will rise to around 3.0x over the next 12-18 months compared to 2.7x for 2016. Its debt leverage - as measured by adjusted revenue/debt - will likely rise to around 65%-70% from 63% at end-2016. The above credit metrics are also based on Moody's expectation that China SCE will continue to exercise prudence in its land acquisitions and debt management. In particular, Moody's assumes that the company will not invest more than 50% of its total contracted sales in land acquisitions, and will control debt growth within 10%-20% year-on-year over the next 12-18 months. China SCE's liquidity position is strong, as evidenced by its cash to short-term debt rising to around 2.5x at end-2016 from around 1.6x at 30 June 2016. The increase was driven mainly by improved cash collections from contracted sales. China SCE's B1 corporate family rating reflects its track record and strong market position in Quanzhou, Fujian, growing operating scale, good liquidity position, and recovering strong profit margins from its expansion in Tier 1 and Tier 2 cities outside Fujian Province. On the other hand, its corporate family rating is constrained by the company's moderate debt leverage and execution risk associated with its expansion. China SCE's ratings could be under upgrade pressure, if the company: (1) demonstrates stable sales growth and grows its scale; (2) maintains its prudent approach to land acquisitions; and (3) maintains EBIT/interest coverage in excess of 3.0x and adjusted revenue/gross debt in excess of 75%-80% on a sustained basis. On the other hand, the company's ratings could come under downward pressure if China SCE: (1) generates weak contracted sales; (2) suffers from a material decline in its profit margins; (3) experiences an impairment of its liquidity position, such that cash/short-term debt falls below 1.0x; and/or (4) materially increases its debt leverage. Credit metrics indicative of a ratings downgrade include EBIT/interest coverage below 2.0x, and/or adjusted revenue/debt below 65% on a sustained basis. The principal methodology used in these ratings was Homebuilding And Property Development Industry published in April 2015. Founded in 1996, China SCE Property Holdings Limited is a leading property developer in Fujian Province. The company listed on the Hong Kong Stock Exchange in February 2010, and is 57.6% owned by its chairman, Mr. Wong Chiu Yeung. The company has also expanded to first- and second-tier Chinese cities, including Shanghai, Shenzhen, Beijing, Tianjin, Xiamen, Nanchang, Hangzhou, Nanjing and Suzhou, but still around one third of its land bank comprise plots in Quanzhou in Fujian Province at end 2016. GOME ELECTRICAL: S&P Assigns 'BB' CCR; Outlook Stable ----------------------------------------------------- S&P Global Ratings said it assigned its 'BB' long-term corporate credit rating and 'cnBBB-' long-term Greater China regional scale rating to GOME Electrical Appliances Holdings Ltd. The outlook is stable. At the same time, S&P assigned its 'BB-' long-term issue rating and 'cnBB+' long-term Greater China regional scale issue rating to the company's proposed U.S. dollar-denominated senior unsecured notes. The issue ratings are subject to S&P's review of the final issuance documentation. GOME is a leading electrical appliance and consumer electronics retailer based in China. "The ratings on GOME reflect the company's operations in the highly competitive electronics and appliance retail industry in China and its moderate product differentiation, which has resulted in weak profitability. The company's satisfactory market position, strong brand name, and extensive distribution network temper these weaknesses," said S&P Global Ratings credit analyst Shalynn Teo. Intense competition from Internet-based retailers and other specialty retailers will weigh on GOME's profitability, in S&P's view. An increasing contribution of lower-margin online sales may also constrain overall profitability. The company's gross margin for online sales was about 3.0% in the first half ended June 30, 2016, against 18.3% for offline sales, and the overall consolidated gross profit margin was 16.4%. S&P expects GOME's plan to upgrade its stores to "lifestyle experience centers" over 2016-2018 to drive revenue gains over the longer term, despite volatility in sales and gross margins over the next 12 months. S&P also expects the contribution of lower-margin online sales to increase to 15%-20% over the next two years compared with 10% in 2015. As a result, S&P expects EBITDA margins to drop to 5.7%-6.1% over the next 12 months, tempered by better merchandising in addition to continued prudent cost control. In S&P's view, GOME's effective merchandizing strategy can partially alleviate its exposure to largely standardized and homogenous products, where it encounters challenges in pricing power. S&P expects the company to continue to increase the contribution of higher-margin differentiated products, which should support overall margins. These differentiated products include original design manufacturer (ODM) and original equipment manufacturer (OEM) products, exclusive products, and a guaranteed lowest price for 3C (computing, communication, and consumer) and small appliances. Differentiated products accounted for 38% of sales in the first half of 2016, up from about 20.0% in 2012. S&P anticipates the acquisition of Artway Development Ltd., which was completed in March 2016, will further enhance GOME's scale and competitive positioning, and increase the store network in lower-tier cities in China. After consolidating Artway's stores, GOME has the largest store network in China's electronics and appliance retail sector. Total stores under operation increased to 1,727, and the company has a presence in 428 cities in China as of June 30, 2016, from 1,049 (247 cities) in 2012. In addition, S&P expects GOME to benefit from higher growth prospects and stronger pricing power from Artway's stores in lower-tier cities, where penetration of household appliances is lower and competition is less intensive. The company has 45.5% of stores in lower-tier cities as of the first half of 2016, up from 36.9% in 2012, while revenue contribution continued to rise to 24.5% from 18.3% over the same period. The gross margin for Artway alone was about 19.0%, compared with GOME's 16.4% in the first half of 2016. In S&P's view, GOME's competitiveness and scale in online retailing remain limited and a more aggressive expansion in online revenues than S&P's expectation could weigh on the company's overall margins. As of end 2015, GOME's share of online direct sales market by gross merchandise value (GMV) was 4.1%, lagging JD.com Inc. (57.0%) and Suning Appliance Co. Ltd. (9.9%). This is despite GOME growing its GMV at a compound annual rate of 100% over 2013-2015. S&P expects GOME to increase the GMV of its online segment by 70%-100% over the next one to two years, given strong customer demand online, and the company's offline-to-online integration. S&P expects GOME's debt-to-EBITDA ratio to increase to 3.4x-3.8x over the next 12 months, from S&P's estimate of 3.2x in 2016 and 1.4x in 2015, reflecting the company's increasingly aggressive debt-funded expansion appetite and near-term margin pressures. GOME is likely to continue to incur significant capital expenditures for store upgrades and for opening new stores, which its operating cash flows are unlikely to fully offset. Nevertheless, S&P expects the company to maintain disciplined financial management and not pursue material acquisitions or shareholder-friendly capital investments. The issue rating is one notch lower than the long-term corporate rating on GOME to reflect structural subordination risk. The ratings on the notes are subject to S&P's review of the final issuance documentation. GOME intends to use the proceeds from the proposed bond to expand the company's business operations overseas and for other general corporate purposes. The stable outlook reflects S&P's expectation that GOME will sustain its good market position, modest sales growth, stable margins, and disciplined capital management over the next 12 months, despite intense competition in China. S&P expects the company's profitability to stay low and that it will raise more debt to fund its store investment plans. S&P could lower the rating if GOME's debt-to-EBITDA ratio increases above 4.0x. This may happen if the company: (1) takes on more aggressive debt-funded expansion than S&P expects; (2) pursues shareholder-friendly investments; or (3) has difficulty executing its expansion strategy or faces more severe competition than S&P expects, resulting in a significant deterioration in its profitability. S&P may raise the rating if GOME can maintain a debt-to-EBITDA ratio of below 3.0x and FFO-to-debt ratio of above 30% on a sustained basis. This could happen if the company can: (1) improve profitability through successful product differentiation or good cost control despite intense market competition and a slowing economy; and (2) implement disciplined financial management to control debt-funded expansion. XINHU (BVI): Fitch Assigns 'B' Rating to USD700MM Sr. Notes ----------------------------------------------------------- Fitch Ratings has assigned Xinhu (BVI) Holding Company Limited's proposed USD700m 6% senior notes due 2020 a final rating of 'B' and a Recovery Rating of 'RR4'. Xinhu (BVI) is a fully owned subsidiary of Xinhu Zhongbao Co., Ltd., which will unconditionally and irrevocably guarantee the notes. The notes are rated at the same level as Xinhu Zhongbao's senior unsecured rating because they constitute the company's direct and senior unsecured obligations. The assignment of the final rating follows the receipt of documents conforming to information already received. The final rating is in line with the expected rating assigned on 17 February 2017. KEY RATING DRIVERS High Leverage Constrains Ratings: Xinhu Zhongbao has reported persistently high leverage of 60%-70%, as measured by net debt/adjusted inventory, if including financial joint venture investments. However, the high leverage is due to its 'primary land development and secondary property development' business model, which helps keep land costs low. This gives the company room to deleverage by lowering pressure for new land acquisitions or by introducing partners to its existing Shanghai projects. Furthermore, Xinhu Zhongbao's significant investment in financial institutions means its leverage is higher than most other homebuilders that solely focus on the property development business. Slower Turnover than Peers: Xinhu Zhongbao's project churn of 0.3x in 2015, as measured by contracted sales/net inventory, is low compared with the 0.6x average of 'B' rated peers. Fitch expects most of the primary land development costs to occur in the next year or two, which will push up inventory levels, while contracted sales will kick in and cover property development costs from late 2018. Quality Land Bank: The majority of the land Xinhu Zhongbao has for secondary developments are in key cities around the Yangtze River Delta, with 25% of its sellable resources by value located within the Shanghai inner-ring that benefits from limited supply. This supports an increase of Xinhu Zhongbao's future average selling prices (ASP) by more than 50% when the Shanghai projects are launched in 2018 or 2019, from CNY11,061 per square metre in 2015. Sales Growth and Margin Improvement: Fitch expects Xinhu Zhongbao's high land quality to support robust contracted sales growth and higher margins. Fitch forecasts increase in ASP will drive the company's gross profit margin above 30% when the Shanghai project sales are recognised in 2019, from its 2015 EBITDA margin of 23%. However, Fitch foresee a lower EBITDA margin for 2016 and 2017 due to higher construction, land and selling, general and administrative expenses, as the economies of scale arising from increased sales from its better-quality projects will not kick in until 2018. Financial Investments Given Credit: Xinhu Zhongbao has been building up its portfolio of long-term equity investments in financial institutions, mainly in Xiangcai Securities Co., Ltd., Shengjing Bank, Bank of Wenzhou Co Ltd and China CITIC Bank Corporation Limited (BBB/Stable). Fitch has included these long- term investments into Fitch leverages calculation as part of adjusted inventories. Fitch also adjusted Xinhu Zhongbao's net debt to include a cash credit from its marketable equity investments. The company has consistently made large marketable equity investments in the Chinese and Hong Kong equity markets. DERIVATION SUMMARY Xinhu Zhongbao's ratings are supported by its high land quality, which will drive robust contracted sales growth and higher margins. Its ratings are mainly constrained by high leverage. Xinhu Zhongbao has a similar business model and contracted sales scale to Oceanwide Holdings Co. Ltd. (B/Stable). Both companies have slow churn as measured by contracted sales/total debt. Xinhu Zhongbao has lower leverage, while Oceanwide has a stronger EBITDA margin and higher equity investment in financial intuitions. Xinhu Zhongbao has a larger and better-quality land bank compared with Chinese property peers rated at 'B-', such as Jingrui Holdings Limited (B-/Negative) and Sunshine 100 China Holdings Ltd (B-/Negative). KEY ASSUMPTIONS Fitch's key assumptions within Fitch ratings case for the issuer include: - No new land acquisitions in 2017 or 2018 and limited new land acquisition thereafter. - Contracted sales in terms of gross floor area increasing by 20% in 2016-2017, then slowing once sales from the new Shanghai projects begin in 2018-2019. - A mild increase in ASPs in 2016-2017, then sharp increase in 2018-2019 as the contribution of contracted sales from Shanghai increases. - A 90% cash collection ratio for property contracted sales. - A lower EBITDA margin in 2016-2017 due to higher construction and land costs, followed by a margin rebound in 2018 when better-quality projects are recognised. RATING SENSITIVITIES Negative: Developments that may, individually or collectively, lead to negative rating action include: - contracted sales/net inventory sustained below 0.3x or contracted sales sustained below CNY10bn and failing to support property business expansion and lower debt repayment capacity; and - EBITDA margin sustained below 20%. Positive: Developments that may, individually or collectively, lead to positive rating action include: - net debt/adjusted inventory, including financial joint venture assets, sustained below 50%; - contracted sales/net inventory sustained above 0.5x; and - EBITDA margin sustained above 30%. LIQUIDITY Xinhu Zhongbao has tight liquidity, but Fitch do not foresee a liquidity shortage in 2017. The company's cash and marketable securities totalled CNY20bn in 1H16 after Fitch's took a 60% haircut to its CNY9bn marketable equity investments based on the agency's rating methodology. Xinhu Zhongbao can cover short-term debt of around CNY22bn plus the CNY6bn negative FCF forecast, with support from the CNY9bn available from an undrawn bank facility. In addition, the company's high quality and sufficient land reserve provides an adequate pledge for financing if necessary. XINYUAN REAL: Fitch Assigns 'B' Rating to USD300MM Sr. Notes ------------------------------------------------------------ Fitch Ratings has assigned Xinyuan Real Estate Co., Ltd.'s (Xinyuan; B/Stable) USD300m 7.75% senior notes due 2021 a final rating of 'B' and a Recovery Rating of 'RR4'. The notes are rated at the same level as Xinyuan's senior unsecured rating because they constitute the company's direct and senior unsecured obligations of the company. The assignment of the final rating follows the receipt of documents conforming to information already received. The final rating is in line with the expected rating assigned on 15 February 2017. KEY RATING DRIVERS Solid Contracted Sales: Xinyuan's contracted sales increased by 35% to CNY12bn in 2016, following a 35% increase in 2015. The strong growth was driven by robust market sentiment in its core Tier 2 cities as well as satellite cities surrounding Tier 1 cities, namely Zhengzhou, Jinan, Suzhou and Kunshan. Tier 2 cities contributed 61% of contracted sales in 1H16 (2015: 62%). Small Land Bank Constrains Ratings: Xinyuan's total sellable gross floor area decreased to 2.2 million square metres (sqm) at end-2016, from 2.3 million sqm at end-2015. Its land bank will last for two years - based on 2016 sales - which is low compared with 'B' rated peers. Xinyuan pays advance deposits to local government and industry partners to secure a large part of its land bank, excluding normal public auctions. This acquisition strategy creates uncertainty about its land bank, as it constrains scale and sales. Land Replenishment Pressures Leverage: Xinyuan has accelerated acquisitions after not purchasing any new land in 2015. It announced acquisitions of CNY3.6bn in China and the US in 2016, with cash outlay of around CNY2.6bn after considering returned land deposits and prepayments for certain land parcels. With its low land bank and fast asset-churn model, Xinyuan's high land replenishment needs will continue to pressure leverage, which Fitch expects to hover at around 45%-50% in 2016-2017. This is made worse by surging land prices in higher-tier cities amid fierce competition and a moderate acquisition pace with cash- land-premium-paid/contracted-sales at 40%-45%. Margin Recovery Sustainable: Fitch expects Xinyuan's gross margin to continue improving in 2017, with a rising average selling price (ASP) trend for most of its top-10 projects on sale in 2016. Xinyuan's contracted sales ASP of USD1,564 per sqm in 2016 was also higher than the aggregate price of USD1,387 per sqm recognised in its 2016 revenue. The higher ASPs in core cities and recognition of the Oosten project in the US helped the homebuilder's gross margin recover in 2H16. This follows a slight fall to 27% in 1H16 after adding back capitalised interest, from 28% in 2015 when the homebuilder recognised its low-margin projects in Suzhou, Jinan and Kunshan. However, this improvement may reverse for projects it will be acquiring in 2017 if land acquisition costs sprint ahead of the rising ASP. The homebuilder's EBITDA margin will likely improve faster than the gross margin, as the 6% increase in selling, general and administration costs lagged the compared with the 35% increase in contracted sales, which suggests operational costs are under control. Xinyuan's selling, general and administration costs will also be spread over a wider base and boost its EBITDA margin, as its 2016 revenue of USD1.6bn catches up to its contracted sales of USD1.8bn. DERIVATION SUMMARY Xinyuan's rating is supported by its solid sales and constrained by its tight liquidity and low land bank. Xinyuan has a larger scale measured by EBITDA, higher contract sales and greater leverage compared with 'B' rated Chinese property peers, such as Redco Properties Group Ltd (B/Stable). Furthermore, Xinyuan has more stable profitability and lower leverage than 'B-' peers, such as Jingrui Holdings Limited (B-/Negative). KEY ASSUMPTIONS Fitch's key assumptions within Fitch ratings case for the issuer include: - Contracted sales in terms of gross floor area to increase by 40%-50% in 2016 and 5% in 2017-2018 due to improved churn in Tier 1 and 2 cities. - Contracted sales ASP to increase by around 5% between 2016 and 2018 due to price increases in Tier 1 and 2 cities. - Moderate acquisition pace with cash-land-premium- paid/contracted-sales at 40%-45% in 2016-2018. - Construction cost per sqm declining to around USD650-700 in 2016-2018, due to cheaper construction costs in Tier 2 cities. - Selling, general and administrative costs as a percentage of contracted sales to gradually decrease to between 12%-13%, as Xinyuan plans to cut internal costs. RATING SENSITIVITIES Developments that may, individually or collectively, lead to negative rating action include: - Net debt/adjusted inventory rising above 60% on a sustained basis (2015: 45%). - Contracted sales/total debt falling below 0.6x on a sustained basis (last 12 months to June 2016: 0.8x). - EBITDA margin falling below 15% on a sustained basis. Developments that may, individually or collectively, lead to positive rating action include: - Significant increase in scale, as reflected by contracted sales exceeding CNY15bn. - Net debt/adjusted inventory sustained below 40%. - Contracted sales/total debt improving to above 1.0x on a sustained basis. - EBITDA margin improving to above 20% on a sustained basis. LIQUIDITY Tight but Sustainable Liquidity: The company's liquidity position is stable, with a ratio of cash/short-term debt of 90% at end- June 2016 (end-2015: 92%). Xinyuan's total cash of USD931m and undrawn credit facilities of USD306m are insufficient to cover its short-term borrowings of USD1.036bn and acquisition costs, although active fundraising in the onshore bond market has alleviated refinancing pressure. The company issued two five-year bonds of USD107m and USD77m at 7.47% and 7.09%, respectively, in 2016. These issuances brought down Xinyuan's average borrowing cost to 8.5% at end-June 2016, from 9.5% at end-2015. YINGDE GASES: Air Products Vows to Continue with Buyout Bid ----------------------------------------------------------- South China Morning Post reports that US-based Air Products & Chemicals insists it will continue to fight for control of embattled Yingde Gases Group after its non-binding offer was matched on March 1 by PAG Asia Capital, one of Asia's largest buyout funds. "Air Products is aware of the latest developments," the company said in an emailed statement obtained by SCMP. "Air Products plans to continue to participate in the sale process being conducted by Yingde. We believe that the combination of Yingde and Air Products makes significant strategic and financial sense and would be of great benefit to investors, customers and employees of both companies." PAG Asia Capital offered HK$6 per share to Yingde's three founding shareholders who have a combined 41.9% stake in the business, on the condition that it can eventually own more than 50% of the gas company, according to SCMP. SCMP says the offer price is at the top end of the HK$5.50 to HK$6 price range offered on January 20 by Air Products, in what could potentially have been the largest US takeover of a Chinese company in a decade. Both Yingde and Air Products supply oxygen and other industrial gases to steel mills and chemical plants, the report notes. About Yingde Gases Yingde Gases Group Company Limited -- http://www.yingdegases.com/html/index.php-- is principally engaged in the production and sales of industrial gases in the People's Republic of China (the PRC). The Company engages in the sales of industrial gases to on-site customers and merchant customers. The products include Oxygen, Nitrogen, Argon and some specialty gases. The Company's customers are mainly from iron and steel, chemical, non-ferrous metals, electronics and energy industries. As reported in the Troubled Company Reporter-Asia Pacific on Jan. 3, 2017, S&P Global Ratings lowered its long-term corporate credit rating on Yingde Gases Group Co. Ltd. to 'CCC-' from 'B-'. S&P also lowered the issue rating on the outstanding senior unsecured notes that Yingde guarantees to 'CC' from 'CCC+'. In addition, S&P lowered its long-term Greater China regional scale rating on Yingde to 'cnCCC-' from 'cnB-', and on the notes to 'cnCC' from 'cnCCC+'. All the ratings remain on CreditWatch, where they were first placed with negative implications on Dec. 15, 2016. The downgrade reflects S&P's view of an increased likelihood that Yingde will not make a timely payment of its Hong Kong dollar (HK$) 820 million offshore bank loan due Jan. 3, 2017, if it fails to secure new funding alternatives. The TCR-AP reported on Jan. 9, 2017, Fitch Ratings has affirmed Yingde Gases Group Company Limited's Long-Term Foreign-Currency Issuer Default Rating at 'B+' and removed it from Rating Watch Negative (RWN), on which it was placed on Dec. 15, 2016. The Outlook is Negative. The rating actions follow the company's refinancing of its HKD820 mil. offshore loan due on Jan. 3, 2017, with a new one- year loan. Fitch do not foresee similar refinancing risk for both its onshore and offshore loans in the next 6-12 months. The Negative Outlook reflects Fitch's view that the ongoing shareholder dispute may have adverse impact on the company's business and financial profile. * Chinese Auto ABS Delinquencies Decline in Q4 2016, Moody's Says ----------------------------------------------------------------- Moody's Investors Service says that delinquency rates for Chinese auto loan asset-backed securities (ABS) declined slightly in Q4 2016, and will remain low through 2017, reflecting the generally supportive economic backdrop in China. "The cumulative default rates of most individual auto ABS transactions increased moderately in Q4 2016 and at a rate similar to prior quarters," says Kan Leung, a Moody's Assistant Vice President and Analyst. Leung was speaking on the release of Moody's quarterly update on the performance of auto ABS in China, titled "Auto ABS -- China: Delinquencies Will Remain Low Through 2017 After Declining in Q4 2016." "Although Moody's forecast that China's economic growth will decelerate to 6.3% in 2017, Moody's believes this level of growth will continue to support auto loan performance," adds Leung. Moody's report notes that the average 30-day+ and 60-day+ delinquency rates of China's outstanding auto loan ABS transactions were low at 0.14% and 0.06%, respectively, as of end-December 2016. The average constant prepayment rate of outstanding Chinese auto ABS transactions was 7.4% at end-Q4 2016, up slightly from the previous quarter. Although prepayments increased slightly over Q4 2016, they remained broadly steady for most of 2016, reflecting the stable interest rate environment in China. Moody's expects the prepayment rate to decline in Q1 2017, owing to the effects of the Chinese New Year in January. In addition, Q4 2016 was the most active quarter for Chinese auto ABS issuance on record. Seven auto ABS transactions with portfolios worth a total of RMB24.5 billion were issued in the quarter. Subscribers can access the report at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_1060687 For PRC only: Neither MCO nor any of its majority-owned affiliates is a qualified credit rating agency within the PRC. Any rating assigned by MCO or any of its majority-owned affiliates: (1) does not constitute a rating as required under any relevant PRC laws or regulations; and (2) cannot be used within the PRC for any regulatory purpose or for any other purpose which is not permitted under relevant PRC laws or regulations. For the purposes of this disclaimer, "PRC" refers to the mainland of the People's Republic of China, excluding Hong Kong, Macau and Taiwan. ================ H O N G K O N G ================ CHINA SOUTH: Fitch Assigns 'B(EXP)' Rating to Proposed USD Notes ---------------------------------------------------------------- Fitch Ratings has assigned China South City Holdings Limited's (CSC; B/Stable) proposed US dollar senior notes a 'B(EXP)' expected rating and a Recovery Rating of 'RR4'. The notes are rated at the same level as CSC's senior unsecured rating because they constitute its direct and senior unsecured obligations. The final rating is subject to the receipt of final documentation conforming to information already received. CSC's ratings are supported by well-located projects, growing non-development income, close collaboration with local governments, a long record in integrated trade centre development and sufficient liquidity. The ratings are constrained by CSC's rising leverage and weak industry outlook. KEY RATING DRIVERS Rising Non-Development Income: Income from CSC's non-development business increased by 22% yoy in the first half of the financial year ending March 2017 (FY17) to HKD736m, driven by growth across the rental, property management, logistics and warehousing segments as well as the outlets and e-commerce businesses. Fitch believes CSC's diversification will enhance internal cash flow and smooth sales volatility, and expects non-development income/interest coverage to exceed 1.0x in the next year or two (last 12 months (LTM) to 1H17: 0.8x). Higher Leverage: CSC's leverage, measured by net debt/adjusted inventory, rose to 48% at end-September 2016, from 38% at end- March 2015, due to increasing construction activities for saleable residential products and investment properties. The company has 15.4 million square metres (sq m) of properties under development and unsold completed properties, including investment properties, as at end-September 2016, compared with 13.3 million sq m a year earlier. Fitch expects leverage to be around 50% in FY17 then remain between 50%-60% for the next two to three years if CSC continues with capex of HKD8.5bn-9bn a year in Fitch estimates, taking into consideration the construction expenditure to build up saleable residential resources and the company's strong emphasis on the recurring business segment. Fitch believes the developer's rising leverage is mitigated by its growing recurring income. However, CSC's ratings will come under pressure if the non-development segment fails to grow despite continued investment. Residential Sales Support Performance: Contracted sales rose 32% yoy to HKD6.7bn in the first nine months of FY17, buoyed by strong sales in three Tier 2 cities - Nanchang, Hefei and Nanning. Residential sales accounted for more than 70% of total contracted value. Average selling prices decreased by 12% over the same period in FY16, to HKD7,800 per sq m, due to product-mix changes. Fitch expects contracted sales to reach HKD7.5bn-8.0bn in FY17 as residential markets in the above-mentioned three cities remain strong and the company had 4.5 million sq m of saleable resources as at end-September 2016. Weak Demand for Trade Centres: Demand in the trade and logistics centre sector has been weak since late 2014 as small and medium- sized enterprises withhold investment amid weaker economic growth, while relocation demand has slowed, local governments delay completing transportation networks and investor appetite has declined. Fitch does not see any signs of recovery in demand for trade centre space in the next 12-18 months. Sustained EBITDA Margin: CSC's EBITDA margin remained satisfactory at 33.6% in the last 12 months to September 2016, given low weighted-average land costs of CNY301 (HKD350) per sq m in 1HFY17, increasing government grants due to the market downturn, which totalled HKD741m (FY16: HKD1bn), and larger recurring EBITDA from the non-development segment. CSC also has the flexibility of cutting selling, general and administrative expenses to maintain a healthy margin. Fitch expects CSC's EBITDA margin to remain above 30% in the next year or two, providing a buffer to absorb average selling price volatility. DERIVATION SUMMARY CSC's projects are located in Tier 1 and 2 cities in China, which are better located than those of the other two Fitch-rated trade centre developers - Hydoo International Holding Limited (B- /Stable) and Wuzhou International Holdings Limited (CCC), whose projects are mainly in Tier 3 and 4 cities. This translates into larger scale and better EBITDA margins for CSC compared with its peers in the same industry. CSC's leverage is higher than that of Hydoo and Wuzhou, given part of its cash is tied up in the construction of investment properties. Fitch expects its diversification into the non-development segment to generate stable operational cash flow for the company. KEY ASSUMPTIONS Fitch's key assumptions within the rating case for CSC include: - Contracted sales to remain weak, at HKD7.5bn-8.0bn each year in FY17-FY19. - Non-development income to increase to HKD1.8bn in FY17 and HKD2bn in FY18. - Capital expenditure at HKD8.5bn-9.0bn per year in FY17-FY19. - Land replenishment ratio (land acquired/gross floor area presold) at 2x in FY17-FY19 (FY16: 2.2x). RATING SENSITIVITIES Developments that may, individually or collectively, lead to negative rating action include: - EBITDA margin sustained below 20% (FY16: 32.5%; LTM1H17: 33.6%); - net debt/adjusted inventory sustained above 50% (FY16: 48.3%; 1HFY17: 48%) if non-development income/interest is below 1.0x (FY16: 0.8x; LTM1HFY17: 0.8x); and - net debt/adjusted inventory sustained above 60% if non- development income/interest is above 1.0x. No positive rating action is expected in the next 12-18 months given persistent weak demand for trade and logistic centres. LIQUIDITY CSC had cash and cash equivalents, including restricted cash, of around HKD8.3bn and unutilised banking facilities of HKD5.4bn as at end-September 2016, covering short-term debt of HKD7.3bn. CSC's successful issuance in the onshore bond market has also alleviated refinancing pressure and lowered its average borrowing cost to 6.2% at end-September 2016, from 6.8% at FYE15. CLSA LTD: To Close US Equities Business; 90 Jobs Affected --------------------------------------------------------- The Financial Times reports that CLSA has pulled down the shutters on its US equities business, becoming one of the highest-profile victims of a big squeeze on research. FT relates that the Hong Kong-based brokerage, wholly owned by China's Citic Securities, on March 1 said it would cut more than half of its staff in the US. About 90 positions are to go from US equity research, sales and trading, corporate access and associated support functions, while the remainder - about 85 - will continue to focus on offering Asian stocks to American clients. CLSA said it was still "fully committed" to its equity business in Asia, where it consistently tops polls of investors, and noted that it continues to offer the biggest dedicated Asia-markets sales desk in North America, FT relays. According to the report, Rick Gould, chief executive of CLSA's Americas business, said that while the company had succeeded in providing "differentiated insights" on US stocks, "the economics of providing US equity research [had] become increasingly challenged. Our focus now is to continue to provide our clients access to liquidity and best execution". FT says profits in the research business have been falling pretty steadily since the dotcom bust, when allegations of biased recommendations led to tighter use on the rules around using analysts to drum up investment-banking mandates. Then, after the financial crisis, newly cost-conscious banks started cutting economists, strategists and stock pickers because they made little direct contribution to earnings. The number of analysts working at the world's 12 biggest investment banks fell to 5,981 last year, according to numbers prepared for the Financial Times by Coalition, a data provider on the industry. That is down from 6,282 at the end of 2015, and 6,634 at the end of 2012, when Coalition began to collect the numbers. CLSA planted a flag in the US in 1986, when the young business - newly started by a couple of former journalists - opened an office to serve fund managers investing into Asia, the FT recalls. In 2009, in the wake of the crisis, it saw an opportunity to bulk up in US equities, picking up big names including Mike Mayo, perhaps the best known of all analysts covering big banks on Wall Street. But in recent years the business had been struggling through lack of name recognition in a "highly competitive" market, said a person familiar with the business, the FT relates. Staff learnt their fate at a town-hall meeting at the brokerage's Sixth Avenue headquarters on March 1, according to the FT. According to the FT, Shenzhen-based Citic bought CLSA from France's Credit Agricole for $1.25bn in 2012, in the first big acquisition by a Chinese broker of a foreign competitor. Citic's parent company was established in 1979 at the behest of Deng Xiaoping and was a pioneer in China's experiments with capitalism. Its businesses now span banking to real estate and mining, and the group reports directly to China's cabinet, the FT notes. Headquartered in Hong Kong, CLSA Ltd. is a brokerage and investment firm focused on institutional brokerage, investment banking and asset management for corporate and institutional clients. ========= I N D I A ========= ANG LIFE: CRISIL Downgrades Rating on INR7MM Cash Loan to 'D' ------------------------------------------------------------- CRISIL has downgraded its ratings on the bank facilities of ANG Life Sciences India Private Limited to 'CRISIL D/CRISIL D' from 'CRISIL B-/Stable/CRISIL A4'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Bank Guarantee 2 CRISIL D (Downgraded from 'CRISIL B-/Stable') Cash Credit 7 CRISIL D (Downgraded from 'CRISIL A4') Letter of Credit 4 CRISIL D (Downgraded from 'CRISIL B-/Stable') Proposed Long Term 1.4 CRISIL D (Downgraded from Bank Loan Facility 'CRISIL B-/Stable') Term Loan 3.6 CRISIL D (Downgraded from 'CRISIL B-/Stable') The downgrade reflect instances of delay in servicing its debt due to stretched liquidity because of delay in receipts from customers. Key Rating Drivers & Detailed Description Weaknesses * Weak financial risk profile: This is driven by high total outside liabilities to tangible networth ratio, however, supported by comfortable debt protection metrics. The financial risk profile will remain weak over the medium term owing to large working capital borrowing. * Large working capital requirement: This is because of a longer cycle for collection from the customers and high stocking. Though part of the working requirement is met by negotiating with suppliers for longer credit periods, the working capital requirement will remain dependent on external debt over the medium term. Strength * Extensive experience of promoters: The promoters have been in the formulations industry for over a decade and developed deep understanding of the dynamics of the industry and local market over the years. Owing to the promoters' expertise, ANG has established relationship with various corporates in the pharmaceutical industry which in turn has helped scale up operations. Benefits from the promoters' experience will continue to support the business. Incorporated in 2006, ANG manufactures dry powder injectables at its plant in Baddi, Himachal Pradesh. Its operations are currently being managed by Mr Rajesh Gupta. Profit after tax and net sales stood at INR1.58 crore and INR54.78 crore, respectively, for fiscal 2016, as against INR34 lakhs and INR36.82 crore, respectively, for the previous fiscal. BALLARPUR INDUSTRIES: Ind-Ra Lowers Rating on INR2.47 CP to 'D' --------------------------------------------------------------- India Ratings and Research (Ind-Ra) has downgraded Ballarpur Industries Limited's (BILT) commercial paper (CP) as: -- INR2.47* bil. CP rating lowered to 'IND D' * Outstanding amount is INR1.100 billion KEY RATING DRIVERS The downgrade reflects delays in debt servicing by the company. BILT continues to face delays in the necessary deleveraging, as efforts to monetize its assets have not fructified within planned timelines. The company has also been unable to refinance its debt or elongate the maturity profile of its near-term debt obligations fully. Cash flows inadequacy has reduced BILT's ability to fund debt obligations through internal accruals, creating an immediate need for refinancing. In 9MFY17, BILT reported consolidated revenue of INR16.9 billion (down 44.8% yoy) and consolidated EBITDA losses of INR744 million (INR5.6 billion) with net loss of INR9,037 million (negative INR781 million). BILT reported EBIT margin of negative 12.1% in 9MFY17 in the key paper segment (9MFY16: 16.1%). According to the management, BILT raised working capital limits of INR500 million in January 2017, due to which capacity utilization has improved at its existing facilities. However, it will require significant deleveraging through asset sales to improve the credit profile. At FYE16, BILT had a consolidated balance sheet debt of around INR72.3 billion (excluding perpetual bonds). According to the management, it is in the advanced stages of raising more working capital lines for operations as well as equity and debt infusion through asset sales. In FY16, BILT reported consolidated revenue of INR42.7 billion (FY15: INR32.4 billion; FY14: INR52.8 billion) and EBITDA margin of 16.6% (21%; 17.8%). The company has classified its subsidiary Sabah Forest Industries as discontinued operations for FY15 and FY16, which resulted in lower revenue and higher EBITDA margins for these years when compared with FY14 financials. Ind-Ra continues to take a consolidated view of BILT's business and financial profiles for the ratings. BILT Graphic Paper Products Limited ('IND D') has strong operational and strategic linkages with its ultimate parent, BILT, due to their similar business profiles, common treasury and management team. RATING SENSITIVITIES Positive: Timely debt servicing for at least three consecutive months could result in a positive rating action. Negative: Delay in servicing of NCD obligations would lead to a negative rating action on the instruments. COMPANY PROFILE BILT, on a consolidated basis, has one production facility in Malaysia and six production facilities across India, of which Ballarpur, Bhigwan, Sewa and Ashti units are under BILT Graphic Paper Products, while Kamplapuram and Shree Gopal units are under BILT. Overall, the company has a paper capacity of around 1 million MT and a pulp capacity of around 0.8 million MT (including rayon grade pulp capacity). DNH PROJECTS: ICRA Reaffirms 'C' Rating on INR12cr Loan ------------------------------------------------------- ICRA has re-affirmed the long-term rating of [ICRA]C assigned to the INR12.00 crore fund based bank limit of DNH Projects Limited. ICRA has also re-affirmed the short-term rating of [ICRA]A4 for the INR6.00 crore non-fund based limit of the company. ICRA has also re-affirmed the [ICRA]C and [ICRA]A4 ratings for the INR10.00 crore unallocated limits of the company. Amount Facilities (INR crore) Ratings ---------- ----------- ------- Fund Based Limit 12.00 [ICRA]C; re-affirmed Non-Fund Based Limit 6.00 [ICRA]A4; re-affirmed Unallocated Limits 10.00 [ICRA]C/[ICRA]A4; re-affirmed Rationale The ratings re-affirmation factors in DNH's financial profile, which is characterised by the modest scale of operations, highly leveraged capital structure and weak debt coverage indicators. The company has witnessed delays in executing its projects for certain Government entities since the past few years and has also been penalised for the same. Moreover, DNH has not been awarded any new contracts in the recent past by third parties and its current orders largely consist of projects to be executed for group companies. The ratings are further constrained by the company's stretched liquidity position arising from the high inventory holdings and delayed collections from customers, which has necessitated high reliance on external borrowings. Furthermore, the ratings continue to factor in the high competitive intensity in the construction space resulting in pressure on profitability margins. ICRA notes the geographical concentration risks due to the concentration of most ongoing and future projects in Silvassa, and the vulnerability of profits to raw material price variations in the absence of price variation clauses in most orders. The ratings, however, continue to favourably factor in the established experience of the directors in the construction industry. The company's clientele mainly consists of Government and semi-Government bodies leading to limited counter-party risks. Key rating drivers Credit Strengths * Experience of over two decades in the construction and real estate sector * Clientele of Government and semi-Government bodies leads to limited counter-party credit risks. Credit Weakness * Financial profile characterised by modest scale of operations, highly leveraged capital structure and weak debt coverage indicators. * Execution delays have resulted in penalties; no new orders received in recent past and current orders mainly from group companies. * Stretched liquidity position on account of high inventory holdings and delayed collection from customers * High geographical concentration risk as the company undertakes projects largely in Silvassa (Dadra and Nagar Haveli) * Profitability margins remain vulnerable to steel and cement price fluctuation risks, because of absence of price variation clause in most orders. * Highly competitive business environment, characterised by the presence of a large number of players and a tender-based contract award system, both of which keep profitability under check. Description of key rating drivers highlighted: DNH has been facing delays in the execution of projects for certain Government entities since FY2014. The company has not received any new orders during FY2016 and H1 FY2017 from third parties and ~74% of its outstanding orders comprise projects to be executed for group companies. Thus, the delays in project execution, coupled with the lack of new orders have suppressed DNH's operating income, resulting in a modest scale of operations. The projects of the company are largely concentrated in Silvassa, leading to geographic concentration risks. The company has been penalised for the delayed execution, and its inventory levels also remain high due to the work continuing to remain in progress. The high inventory levels, coupled with the slow collection from customers have stretched its liquidity position, necessitating high reliance on external borrowings for funding the working capital requirements. This has resulted in a highly leveraged capital structure as depicted by a gearing of 2.57 times as on March 31, 2016. Furthermore, on account of the low profitability, the company's debt coverage indicators remain weak. Owing to the long duration of the projects and delays in execution, coupled with the fixed price nature of contracts, DNH's profitability remains vulnerable to fluctuations in the prices of the key inputs as depicted by a decline in the profitability in FY2015 and FY2016. Moreover, since the projects are largely being executed for Government entities where contracts are awarded to the lowest bidder, the company's pricing flexibility is limited further. Nevertheless, the promoters of the company have an experience of over two decades in the industry, which coupled with limited counter-party credit risk arising from the company's reputed clientele, lend some comfort. DNH Projects Ltd. (DNH) was initially incorporated as a private limited company - Nagar Haveli Real Estate Private Limited - engaged in real estate development in 1996. It was subsequently renamed and converted to a closely held public limited company in 2009. The operations of the company are collectively managed by Mr. Vijay and Mr. Ajay Desai who have an experience of over two decades in the construction industry. The company is registered as a 'AA' Class contractor (valid till December 31, 2018) with the Roads & Buildings division of the State Government of Gujarat and undertakes the construction of industrial units, factories, corporate and institutional buildings. DNH has two group companies- Morai Infrastructure Pvt. Ltd. and Drexel Pharma Pvt. Ltd. Mr. Vijay and Mr. Ajay Desai are the common directors for all the three firms. Morai Infrastructure is currently developing an industrial park in Gujarat, while Drexel Pharma is developing industrial galas for sale. Both these projects have been awarded to DNH by the group companies. DNH reported a net profit after tax and depreciation of INR0.01 crore on an operating income of INR17.79 crore for the period ended March 31, 2016. G.D. METSTEEL: ICRA Reaffirms 'B' Rating on INR18cr LT Loan ----------------------------------------------------------- ICRA has reaffirmed the long term rating of [ICRA]B for the INR15.00 crore cash credit facility, INR3.00 crore term loan and INR5.00 crore unallocated limits of G.D. Metsteel Private Limited. The outlook on the long term rating is 'Stable'. Amount Facilities (INR crore) Ratings ---------- ----------- ------- Long term: Fund based limits 18.0 [ICRA]B (stable)/reaffirmed Unallocated Limits 5.0 [ICRA]B (stable)/ reaffirmed Rationale The rating reaffirmation takes into account the continued healthy capacity utilisations in current fiscal as in FY'2016 along with the financial support extended by the promoters through infusion of interest free unsecured loans. Further, ICRA continues to take comfort from the long standing experience of the promoters in the steel industry. The ratings however remained constrained by the stretched financial position of the company as indicated by leveraged capital structure, weak accruals and high working capital intensity. Further, given the suppressed demand and subdued finished products realisations, operating income also has demonstrated a y-o-y limited growth in the current fiscal. The operating margins of the company also remain vulnerable to the movement in raw material prices (billets). Going forward, managing raw material prices which have a material impact in the profitability of the company as well as debtor and inventory management will remain the key rating sensitivities. Further, maintaining current healthy capacity utilisations will remain crucial to support the volume growth of the company. Key rating drivers Credit Strengths * Long standing experience of the promoters in the steel industry * Healthy capacity utilisations in the 9M'2017 and FY'2016 as compared to past fiscals. * Promoter support in the form of ~ INR2.58 crore interest free unsecured loans. Credit Weakness * Stretched financial profile marked by leveraged capital structure, weak accruals and high working capital intensity. * Limited growth in operating income in the current fiscal primarily due to weak demand coupled with subdued finished product realisations. * Profitability levels vulnerable to movement in raw material prices, thin operating margins due to limited value addition. * Competition from organised and unorganised sector, especially given the commoditised nature of the products manufactured. Description of key rating drivers highlighted: The company in the past fiscals has focussed on volume based growth in a subdued finished products realization scenario. The capacity utilization has increased to > 75 % in FY'2016 and 9MFY'2017 as compared to 66% in FY'2015 and 46% in FY'2014. The volume sold increased by ~25% y-o-y in FY'2016 however given the weak demand scenario, the volume growth has remained subdued in the current fiscal (on a pro rata basis). Corresponding to the subdued demand, the finished product realizations also have remained low in the current fiscal as compared to FY'2016.Going forward, the company intends to continue its emphasis on volume backed growth with addition of new clientele. The company procures majority of its raw requirement- steel billets from group company, Sohn Steel Private Limited. Steel prices being volatile given the cyclical nature of the industry, the company margins remain vulnerable to fluctuation in raw material prices OI remained at INR109.58 crore in FY'2016 as compared to INR103.70 crore in FY'2015.The y-o-y growth in FY'2016 remained guided by volume growth over realization growth. Whereas the volume growth y-o-y in FY'2016 remained at 25%, the average realizations dipped ~17% in FY'2016 to ~Rs.35000/ton. .Continued weak demand scenario has suppressed the volume growth and realizations in the current fiscal. The realizations are likely to remain range bound in the near term on weak demand from the end user industries. The company in 9M'FY2017 has recorded a revenue of INR68.26 crore and intends to close the fiscal at a top line of ~ INR100.00 crore. Operating Profit Margins remained almost in line with the past at 3.50 % given the low additive nature of operations and commoditized nature of the products manufactured. High interest costs chiefly working capital interest resulted in thin net margins in FY'2016 as in the past. The net margins remained at around 0.6% in FY'2015 and FY'2016. The debt profile remained dominated by working capital loans and term loans in FY'2016 and H1FY'2017 in line with FY'2015. The inter corporate deposits from the promoter family members are interest free and do not have a specified timeline for withdrawal. Capital structure continued to be leveraged in FY'2016 as in past mainly due to low net worth base and almost full utilization of working limits. Gearing remained at 8.64 times in FY'2016 as compared to the projected 7.55 times in FY'2016. Coverage indicators continued to remain weak on back of low cash accruals and higher debt levels. OPBIDTA/Interest remained at 1.54 times in FY'2016 as compared to 1.40 times in FY'2015.Total Debt/OPBIDTA remained at 6.06 times in FY'2016 as compared to 5.88 times in FY'2015. Working Capital intensity continued to remain moderately high in FY'2016 as in the past. Inventory days remained at 57 days in FY'2016 almost in line with 59 days FY'2015. Given the continued challenging operating environment in the end user industries, the receivables also remained slow with the same at 42 days in FY'2016 as compared to 37 days in FY'2015. Incorporated in 1984, G.D. Metsteel Private Limited (GDM) is engaged in the manufacturing of rolled steel products like angles, channels, flat and beams which find end usage in auto, electrical manufacturing and construction companies. The company has an installed capacity of 42,000 TPA for the manufacturing of rolled products. The promoters of the company have over two decades of experience in the steel industry. GENESYS BIOLOGICS: CRISIL Assigns B+ Rating to INR60MM LT Loan -------------------------------------------------------------- CRISIL has assigned its 'CRISIL B+/Stable' on the long term bank loan facility of Genesys Biologics Private Limited. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Proposed Long Term Bank Loan Facility 60 CRISIL B+/Stable The rating reflects the susceptibility of GBPL to risks associated with development and commercialization of generic insulin Biosimilars, and regulatory uncertainties related to the biopharma in the domestic market. These ratings weaknesses are partially offset by the benefits derived from the extensive experience of its promoters, need based fund support from promoters and the strong growth prospects in Biosimilars industry for players with proven track record of research and development. Key Rating Drivers & Detailed Description Weaknesses * Risks associated with development and commercialization of its generic insulin bio similar: The Company is focused on Research, Deployment and Commercial Manufacture Insulin Biosimilars. Approvals for biosimilars have a long gestation period relative to chemical generics. Any larger than expected delay in receipt of regulatory approvals would adversely impact the credit risk profile. *Regulatory uncertainties related to the biopharmaceutical in the domestic and global market: GBPL is exposed to the regulatory changes in the Indian as well as in the global market by regulatory authorities. Strengths * Extensive industry experience of the promoters: Relevant biotech education, vast industry experiences in US, Singapore and India-cumulatively GBPL management possesses cumulative 100 years of biotech industry experience. * Need based fund support from promoters: The promoters have already brought-in equity of INR22.61 Cr (As on Jan 16, 2017) and the balance portion of equity will be brought-in by March 2017 thus ensuring the timely completion of capex. * Biosimilars provide huge Opportunity to players with proven track record research and development: The growing biosimilars market offers huge potential for companies involved in manufacturing, research and development Outlook: Stable CRISIL believes the GBPL will remain exposed to timely completion of development of molecules under R&D and receipt of approvals from relevant authorities. It is also exposed to project-related risks, including cost and time overruns, during implementation. The rating may be upgraded in case of timely completion of development of molecules and successful stabilisation of operations leading to improvement in business risk profile. Conversely, the rating outlook may be downgraded if there are delays in project implementation leading to a cost overrun and necessitating additional debt funding, or if the offtake from the new capacity is lower than expected thereby adversely affecting liquidity. GeneSys Biologics Private Limited was incorporated in November 2014 at Hyderabad. The company is promoted by Rajender Rao, Venkat Reddy, Krishna Rao and Tulasi Ramu. The Company is focused on R&D and Commercial Manufacture of Insulin Biosimilars. GBPL is currently setting-up a 1 Kilo Litre (KL) manufacturing facility in Biotech Park, Lalgadimalakpet Panchayat, R.R.District, Telangana. The facility is expected to commence operations from July 2017. GMR INFRASTRUCTURE: Unit Allots Shares to Lenders Under SDR ----------------------------------------------------------- GMR Infrastructure on Feb. 24 said its subsidiary GMR Chhattisgarh Energy Ltd has completed strategic debt restructuring plan (SDR) by allotting shares to all the lenders in question. "GMR Chhattisgarh Energy Ltd (GCEL), a subsidiary of GMR Infrastructure Ltd (GIL), has announced that the consortium of lenders of GCEL has adopted strategic debt restructuring plan (SDR), as provided under the scheme permitted by the RBI," GMR Infrastructure said in a BSE filing. Elaborating, GMR said, "Accordingly, GCEL has allotted shares to all the lenders. As per the SDR scheme, out of the total outstanding debt (including accrued interest) of Rs8,800 crore, debt to the extent of Rs2,992 crore have been converted into equity by which the consortium lenders would have 52.4% shareholding and the balance 47.6% would be held by GMR." Post conversion, the balance project debt stands at INR5,800 crore with INR2,992 crore equity held by lenders and INR2,721 crore equity held by the GMR Group, resulting in the debt-to- equity ratio of 1.0x. "The lower debt levels would result in improving the long-term viability of the project," the company added. The stock of GMR Infrastructure was trading 4.91% higher at Rs15.61 on BSE. GMR Chhattisgarh (100% held by GMR Energy Limited) is developing a 1370 MW (2 X 685 MW) supercritical unit at Raipur District, Chhattisgarh, for which the land has been acquired and most major approvals are in place. The GMR Group is an infrastructure developer active in the power, roads and airports segments. HALDIA NIRMAN: Ind-Ra Assigns 'BB-' Long-Term Issuer Rating ----------------------------------------------------------- India Ratings and Research (Ind-Ra) has assigned Haldia Nirman Projects Private Limited (HNPPL) a Long-Term Issuer Rating of 'IND BB-'. The Outlook is Stable. The instrument-wise rating actions are: -- INR56.5 mil. Fund-based limit assigned with IND BB-/Stable rating; and -- INR20 mil. Non-fund-based Limit assigned with IND A4+ rating KEY RATING DRIVERS The ratings reflect HNPPL's small scale of operations along with moderate credit metrics as reflected in its revenue of INR127 million in FY16 (FY15: INR58 million), gross interest coverage (EBITDA/interest) of 1.8x (1.3x) and net leverage (net debt/EBITDA) of 6.7x (9.2x). The operating EBITDA margin has been fluctuating for the past three years (FY16: 10.7%, FY15: 17.2%, FY14: 10.3%) mainly on account of fluctuation in the raw materials costs. The ratings are constrained by the weak liquidity profile of the company as evidenced by the 97% average utilization of its working capital limits during the 12 months ended January 2017. The ratings, however, derive support from more than a decade of experience of the company's directors in the engineering industry. RATING SENSITIVITIES Positive: An improvement in the scale of operations along with improvement in the credit metrics could be positive for the ratings Negative: Deterioration of the credit metrics could be negative for the ratings. COMPANY PROFILE HNPPL, incorporated in 2004, is a small-sized West Bengal-based company engaged in providing different types of construction services which include construction of buildings, pipelines, electrical works, etc, for both private and government entities. The company is involved in different engineering activities such as fabrication and erection of equipment, electrical and civil works. It is managed by Mr Saroj Kumar Bera. HALLMARK AQUAEQUIPMENT: CRISIL Reaffirms B+ INR6.6MM Loan Rating ---------------------------------------------------------------- CRISIL has reaffirmed 'CRISIL B+/Stable/CRISIL A4' ratings on the bank facilities of Hallmark Aquaequipment Private Limited. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Bank Guarantee 1 CRISIL A4 (Reaffirmed) Cash Credit 6.6 CRISIL B+/Stable (Reaffirmed) Letter of Credit 2 CRISIL A4 (Reaffirmed) Proposed Short Term Bank Loan Facility 0.11 CRISIL A4 (Reaffirmed) Term Loan 0.51 CRISIL B+/Stable (Reaffirmed) The ratings continue to reflect the modest scale of operations and low operating profitability and moderate return on capital employed (RoCE). The weakness gets offset by the extensive experience of promoters in the pipe and pipe fittings business and diversified clientele. Key Rating Drivers & Detailed Description Weaknesses * Modest scale of operations: HAPL's scale of operations continues to remain modest as reflected in revenue of INR42.58 crore in fiscal 2016. The Indian pipe industry is fragmented with the presence of a number of small and medium sized companies. The company remains exposed to stiff competition from large players such as Jain Irrigation Systems Ltd, Finolex Industries Ltd, and Supreme Industries Ltd; as well as from players manufacturing steel pipes. Modest scale of operations along with intense competition restricts the pricing flexibility of HAPL resulting in low operating margin at 4.8-7.3% over the three years through fiscal 2016. The modest scale of operations amid intense competition should constrain HAPL's pricing and bargaining power over the medium term. * Low operating profitability and moderate return on capital employed (RoCE): On account of intense competition and low bargaining power with customers, the operating margin has remained low. Further operating profitability declined to 4.8% in fiscal 2016 from 6.1% in fiscal 2015, on account of considerable increase in wages and selling expense due to higher incentive to channel partners for improving market share. Operating profitability should remain low over the medium term. Despite low profitability, RoCE has been moderate at 12.2-14.7% over the three years through fiscal 2016. RoCE is expected to remain moderate over the medium term. Strengths * Extensive experience of promoters: Backed by the three-decade long experience of the promoters, HAPL has been able to set-up a distributorship network for HDPE (high density poly ethylene) pipes in India, from which HAPL generates 60% of its total revenue. The promoters have also diversified into project-based sales of pipes to large corporates wherein orders are obtained from them regularly; and sales of drip irrigation systems and rainwater harvesting projects. Products are sold under the 'Hallmark' brand, which is a renowned name in HDPE pipe and fittings. Benefits from the experience of promoters should continue to support business risk profile. * Diversified clientele: The products cater to varied industries comprising steel, mining, cement, tea, and coffee and a large and diversified clientele, with large players such as Tata Iron and Steel Co Ltd, Lafarge India Pvt Ltd and Steel Authority of India Ltd. It also has a large retail network spread across India. HAPL's business risk profile is expected to remain supported by varied application of its products and diversified clientele, over the medium term. Outlook: Stable CRISIL believes HAPL will continue to benefit from the extensive experience of its promoters. The outlook may be revised to 'Positive' if increase in scale of operations and accrual along with efficient working capital management improves financial risk profile. The outlook may be revised to 'Negative' if increasing working capital requirement, low operating income and accrual or any large, debt-funded capital expenditure plans weakens liquidity. Incorporated in 1993, HAPL manufactures HDPE pipes and pipe fittings. The products are sold to large corporates directly and through its retail network. Mr Pranab Ghosh and Mrs Nandinee Ghosh are the directors. Profit after tax was INR23 lakh on revenue of INR42.58 crore in fiscal 2016, against INR62 lakh and INR37.95 crore in fiscal 2015. HANUMAN IMPEX: Ind-Ra Assigns 'BB' Long-Term Issuer Rating ---------------------------------------------------------- India Ratings and Research (Ind-Ra) has assigned Hanuman Impex (HI) a Long-Term Issuer Rating of 'IND BB'. The Outlook is Stable. Instrument-wise rating action is: -- INR99 mil. Fund-based working capital limit assigned with IND BB/Stable rating KEY RATING DRIVERS The ratings reflect HI's moderate scale of operations, low EBITDA margins and moderate credit metrics. Revenue was INR853 million in FY16, (FY15: INR938 million), EBITDA margins were 2.7% (1.8%), net leverage (total Ind-Ra adjusted net debt/operating EBITDAR) was 0.4x (4.5x) and interest cover (operating EBITDA/gross interest expense) was 2.2x (1.4x). The improvement in the net leverage resulted from low utilization of fund-based limits. The ratings are also constrained by the firm's moderate liquidity position as reflected by 82.6% average utilization of fund-based limits during the 12 months ended January 2017. The ratings, however, are supported by HI's strong relationship with customers and suppliers, and the promoter's more than two decades of experience in the animal feed industry. RATING SENSITIVITIES Positive: An increase in the scale of operations, along with a sustained improvement in the credit metrics will be positive for the ratings. Negative: Any decline in revenue or the EBITDA margins leading to deterioration in the credit metrics will be negative for the ratings. COMPANY PROFILE HI is a proprietorship firm incorporated in 2004. The firm sells animal feed products such as soya bean de-oiled cakes and maize to farmers and other users in Bihar, Uttar Pradesh and Jharkhand, and exports to Nepal. It mainly purchases soya bean from Madhya Pradesh and Rajasthan, and maize from Bihar and Maharashtra. Mr. Rajeev Gupta is the proprietor of the firm. HEMRAJ DEVKARANDAS: CRISIL Assigns B+ Rating to INR10MM Loan ------------------------------------------------------------ CRISIL has assigned its 'CRISIL B+/Stable/CRISIL A4' ratings to the bank facilities of Hemraj Devkarandas Metals And Minerals Limited. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Proposed Long Term Bank Loan Facility 2 CRISIL B+/Stable Cash Credit 10 CRISIL B+/Stable Letter of Credit 8 CRISIL A4 The rating reflects Hemraj's modest financial risk profile marked by high gearing and modest debt protection metrics. This rating weakness is partially offset by promoter's extensive expertise in the steel trading industry. Key Rating Drivers & Detailed Description Weakness * Modest financial risk profile marked by low net worth and high gearing: The financial risk profile of the company is modest as reflected in its low net worth of INR 4 crores in fiscal 2016 and high TOL/ TNW of 3.5 times. However, due to retention of future profits and no major debt funded capex plans the capital structure of the firm is expected to improve. Strengths * Extensive experience of the promoters: The promoters have extensive experience of more than one decade in the steel industry which is expected to benefit the business risk profile of the firm over the medium term. * Established relation with the customers and suppliers: Over the years the firm has established a healthy relation with its customers and suppliers thereby enabling it to report healthy revenues in a short span of time. However, sustainability of profitability margins will remain a key rating sensitivity factor. Outlook: Stable CRISIL believes that the company will benefit over the medium term from the extensive experience of the promoter and established relations with the customers and suppliers. The outlook may be revised to 'Positive' if the company reports more than expected profitability margins and cash accruals leading to improvement in the financial risk profile of the company. The outlook may be revised to 'Negative' if the company reports lower than expected cash accruals deteriorating its working capital management or undertakes significant debt funded capex plans leading to weakening of its financial risk profile. Established in 2012 as a closely held public limited company, Hemraj is into trading of iron and steel products such as HR and CR coils, sheets, plates, and various customised steel products. Hemraj reported a profit after tax (PAT) of INR64 lacs on net sales of INR 44 Crores for fiscal 2016, vis-a -vis INR 25 lacs and INR 68.9 crores, respectively in fiscal 2015. HILLWOOD FURNITURE: CRISIL Lowers Rating on INR3MM Loan to 'B' -------------------------------------------------------------- CRISIL has downgraded its rating on the long-term bank facility of Hillwood Furniture Private Limited (HFPL; part of the Hillwood group) to 'CRISIL B/Stable' from 'CRISIL B+/Stable', and reaffirmed its 'CRISIL A4' rating on the short-term bank facility. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Bank Guarantee 0.5 CRISIL A4 (Reaffirmed) Cash Credit 3.0 CRISIL B/Stable (Downgraded from 'CRISIL B+/Stable') Letter of Credit 35.0 CRISIL A4 (Reaffirmed) The downgrade reflects the 17% fall in the group's revenue in fiscal 2016 over the previous fiscal, to INR87.39 crore. The revenue is likely to decline 40% to INR52 crore in fiscal 2017. The downgrade also factors in stretched liquidity, reflected in fully utilised cash credit facility because of large working capital requirement and negative cash accrual. The debt servicing was supported by unsecured loans of INR5.04 crore from its promoter in fiscal 2016. The ratings reflect the group's below-average capital structure because of high gearing on account of fully utilised working capital limit, modest scale of operations, and exposure to intense competition in the timber industry. These weaknesses are partially offset by its promoter's extensive industry experience. Analytical Approach For arriving at its ratings, CRISIL has combined the business and financial risk profiles of HFPL and Hillwood Imports and Exports Pvt Ltd (HIEPL) as both the companies, together referred to as the Hillwood group, are in similar businesses, share a common management team, and have fungible cash flow. Key Rating Drivers & Detailed Description Weaknesses * Below-average financial risk profile: The Hillwood group's operating margin fluctuated from 0.9 to 9.5% in the four fiscals through 2016. Gearing was high, at 3.15 times as on March 31, 2016. Debt protection metrics were weak, with interest coverage and net cash accrual to total debt ratios at 1.29 times and 0.05 time, respectively, in fiscal 2016. The financial risk profile will improve, but will remain weak, over the medium term. * Modest scale of operations and exposure to intense competition in the timber industry: The Hillwood group's small scale in the fragmented and competitive timber industry constrains its profitability. Strengths * Promoter's extensive experience and established position in timber trading: The promoter's experience of over 25 years in the plywood and timber industry, and established relationships with customers, have resulted in repeat orders from clients Outlook: Stable CRISIL believes the Hillwood group will continue to benefit from its promoter's industry experience. The outlook may be revised to 'Positive' if its financial risk profile improves significantly, supported by increase in revenue and operating margin. The outlook may be revised to 'Negative' if the financial risk profile, particularly liquidity, weakens because of large, debt- funded capital expenditure, or decline in operating margin, or increase in working capital requirement. HFPL and HIEPL, based in Kerala, were incorporated in fiscal 2002 and process timber logs. HFPL also manufactures building materials such as windows, doors, and kitchen frames. HFPL primarily deals in teakwood, while HIEPL deals mostly in hardwood. Hillwood group had a book losses of INR0.75 crore on sales of INR87.4 crore in fiscal 2016, against profit of INR1.08 crore and INR105.29 crore, respectively, in fiscal 2015. HILLWOOD IMPORTS: CRISIL Lowers Rating on INR1MM Cash Loan to B --------------------------------------------------------------- CRISIL has downgraded its rating on the long-term bank facility of Hillwood Imports and Exports Private Limited (HIEPL; part of the Hillwood group) to 'CRISIL B/Stable' from 'CRISIL B+/Stable', and reaffirmed its 'CRISIL A4' rating on the short-term bank facility. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 1 CRISIL B/Stable (Downgraded from 'CRISIL B+/Stable') Letter of Credit 20 CRISIL A4 (Downgraded from 'CRISIL B+/Stable') The downgrade reflects the 17% fall in the group's revenue in fiscal 2016 over the previous fiscal, to INR87.39 crore. The revenue is likely to decline 40% to INR52 crore in fiscal 2017. The downgrade also factors in stretched liquidity, reflected in fully utilised cash credit facility because of large working capital requirement and negative cash accrual. The debt servicing was supported by unsecured loans of INR5.04 crore from its promoter in fiscal 2016. The ratings reflect the group's below-average capital structure because of high gearing on account of fully utilised working capital limit, modest scale of operations, and exposure to intense competition in the timber industry. These weaknesses are partially offset by its promoter's extensive industry experience. Analytical Approach For arriving at its ratings, CRISIL has combined the business and financial risk profiles of HIEPL and Hillwood Furniture Pvt Ltd (HFPL) as both the companies, together referred to as the Hillwood group, are in similar businesses, share a common management team, and have fungible cash flow. Key Rating Drivers & Detailed Description Weaknesses * Below-average financial risk profile: The Hillwood group's operating margin fluctuated from 0.9 to 9.5% in the four fiscals through 2016. Gearing was high, at 3.15 times as on March 31, 2016. Debt protection metrics were weak, with interest coverage and net cash accrual to total debt ratios at 1.29 times and 0.05 time, respectively, in fiscal 2016. The financial risk profile will improve, but will remain weak, over the medium term. * Modest scale of operations and exposure to intense competition in the timber industry: The Hillwood group's small scale in the fragmented and competitive timber industry constrains its profitability. Strengths * Promoter's extensive experience and established position in timber trading: The promoter's experience of over 25 years in the plywood and timber industry, and established relationships with customers, have resulted in repeat orders from clients Outlook: Stable CRISIL believes the Hillwood group will continue to benefit from its promoter's industry experience. The outlook may be revised to 'Positive' if its financial risk profile improves significantly, supported by increase in revenue and operating margin. The outlook may be revised to 'Negative' if the financial risk profile, particularly liquidity, weakens because of large, debt- funded capital expenditure, or decline in operating margin, or increase in working capital requirement. HFPL and HIEPL, based in Kerala, were incorporated in fiscal 2002 and process timber logs. HFPL also manufactures building materials such as windows, doors, and kitchen frames. HFPL primarily deals in teakwood, while HIEPL deals mostly in hardwood. Hillwood group had a book losses of INR0.75 crore on sales of INR87.4 crore in fiscal 2016, against profit of INR1.08 crore and INR105.29 crore, respectively, in fiscal 2015. HIMALAYAN ROAD: Ind-Ra Assigns 'BB' Long-Term Issuer Rating ----------------------------------------------------------- India Ratings and Research (Ind-Ra) has assigned Himalayan Road Construction Private Limited (HRCPL) a Long-Term Issuer Rating of 'IND BB'. The Outlook is Stable. The instrument-wise rating actions are: -- INR60 mil. Fund-based limit assigned with IND BB/Stable/IND A4+ rating -- INR170 mil. Non- fund-based limit assigned with IND A4+ rating KEY RATING DRIVERS The ratings reflect HRCPL's small scale of operations and moderate profitability. Its revenue was INR308 million in FY16 (FY15: INR212 million) and operating margin was 8.6% (10%); the operating margin declined due increase in the raw material expenses The ratings are constrained by the high geographical concentration risk since the company executes contracts in West Bengal. HRCPL has, however, strong liquidity position as reflected in its 26.46% average utilization of its working capital limits during the 12 months ended January 2017. The ratings benefit from HRCPL's strong credit metrics with net leverage (total adjusted net debt/ operating EBITDAR) of 0.6x in FY16 (FY15: 0.1x) and interest coverage (operating EBITDA/ gross interest expense) of 6.6X (3.2x). RATING SENSITIVITIES Positive: Increase in revenue along with maintenance of the credit metrics could be positive for the ratings. Negative: Further decline in profitability leading to deterioration in the credit metrics could be negative for the ratings. COMPANY PROFILE HRCPL is based in Siliguri, West Bengal. It is engaged in the construction, improvement, and widening of roads. It was formed as a partnership firm in 1992 which was converted into a private limited company in 2009. HRCPL executes only government contracts in West Bengal. HRCPL entered into a joint venture in 2013 with Sunil Kumar Agarwal for the electrification work of villages under Darjeeling Pulbazar Rabgli. ICOMM TELE: ICRA Reaffirms 'D' Rating on INR793.96cr Loan --------------------------------------------------------- ICRA has reaffirmed the long term rating assigned to the INR452.50 crore (revised from INR277.00 crore) term loan and INR347.17 crore (revised from INR190.60 crore) fund based limits of Icomm Tele Limited at [ICRA]D. ICRA has also reaffirmed the short term rating assigned to the INR963.53 crore(revised from 1305.65 crore) non-fund based facilities of ITL at [ICRA]D. ICRA has also reaffirmed the rating of [ICRA]D assigned to INR627.44 crore unallocated limits of ITL. Amount Facilities (INR crore) Ratings ---------- ----------- ------- Term Loan 452.50 [ICRA]D reaffirmed Cash Credit 347.17 [ICRA]D reaffirmed Bank Guarantee 169.57 [ICRA]D reaffirmed Letter of Credit 793.96 [ICRA]D reaffirmed Unallocated Limits 627.44 [ICRA]D reaffirmed Rationale The reaffirmation of ratings factors in continued delays in debt servicing by ITL towards working capital and term debt obligations. Stretched liquidity position owing to delay in realization of receivables in the telecom and rural electrification distribution projects and inability to secure additional funding for the same coupled with delays in receipt of retention money led to irregularities in debt servicing by the company in the past. ICRA notes that strategic debt restructuring is under-way for the company and that it is in discussion with the lenders for approval for bifurcation into two new entities for the transmission towers and defence divisions. The ratings continue to factor in the track record of ITL as an EPC (Engineering, Procurement & Construction) contractor in the telecommunications and power transmission & distribution sectors; its reputed client base and diversified operations as well as its status as a PGCIL approved vendor. Key rating drivers Credit Strengths * Long standing presence as an EPC contractor in the telecommunications and power transmission & distribution sectors * Diversified operational profile with a reputed client base Credit Weakness * On-going delays in debt servicing towards existing working capital and term debt obligations Description of key rating drivers highlighted: ITL is an EPC company catering to telecommunications and power transmission & distribution segments. In the past, the company was faced with liquidity pressures owing to built up of receivables and negative free cash flows as a result of high finance costs thus leading to continued delays with respect to servicing of debt repayment obligations. Currently, the company is undergoing strategic debt restructuring (SDR) with a reference date of January 28, 2016. Going forward, the company is expected to be carved out into two successor entities - for power transmission towers and defence units respectively. The company's ability to repay its debt obligations in a timely manner, by improving its overall operational and financial risk profiles through securing a healthy order book and timely realization of receivables remains a key rating sensitivity going forward. Further, progress on the carve-out of the company into two successor entities will also remain a key rating monitorable. Analytical approach: Rating action is based on standalone fundamentals. ICOMM Tele Limited is primarily an EPC company providing infrastructure solutions in power transmission & distribution, telecom, defense, solar and water and waste water sectors. The company has one of the largest manufacturing plants for power transmission towers with a production capacity of 250,000 metric tons per annum. The plants are located at Hyderabad, Andhra Pradesh and Yanam, Pondicherry. In addition to towers, the company also manufactures products for transmission conductors & distribution products, telecommunications equipments, solar modules, defense communications equipment and defense shelters. JANARDHAN PLYBOARD: CRISIL Cuts Rating on INR4.5MM Loan to 'D' -------------------------------------------------------------- CRISIL has downgraded its rating on the long-term bank facilities of Janardhan Plyboard Industries Limited to 'CRISIL D' from 'CRISIL B-/Stable'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 4.5 CRISIL D (Downgraded from 'CRISIL B-/Stable') Proposed Fund- Based Bank Limits 1.35 CRISIL D (Downgraded from 'CRISIL B-/Stable') Term Loan 0.80 CRISIL D (Downgraded from 'CRISIL B-/Stable') The downgrade reflects the company's irregularity in meeting obligation on term loan and interest on cash credit facility, due to stretched liquidity. JPIL has a modest scale of operations in a fragmented industry, and constrained financial flexibility due to large, though smaller-than-before, working capital requirement, and weak debt protection metrics. However, it benefits from its promoters' experience in the wood panel industry. Key Rating Drivers & Detailed Description Weakness * Working capital-intensive operations, resulting in stretched liquidity Liquidity was constrained by large working capital requirement on account of substantial receivables and inventory, and reduced demand which lowered cash generation. Consequently, the company delayed servicing its term loan and in meeting interest obligation on its cash credit facility. * Vulnerability to changes in regulations on timber export: Prices of main raw material, soft wood, are influenced by policies of both the Indian government and those of exporting countries. In 1996, the Supreme Court of India banned cutting and felling of tress in North-East India. With increasing environmental consciousness, non-governmental organisations are raising concerns over the fast-depleting green cover. Supply of wood is also affected by constrains in a particular region. For instance, reduced supply from Uttar Pradesh due to depleting wood cover and long gestation required to grow wood impacted sales in 2013-14. Strength Promoters' extensive experience in the wood panel industry: Before acquiring JPIL, the promoters traded in wood panels for six years. The company has been operating in the wood panel industry for more than two decades, and has established relationships with suppliers and customers. JPIL, incorporated in 1987 by Mr Anil Goel, manufactures and trades different grades of plyboard. It was taken over by Mr Gaurav Singhal, Mr Vijender Shah, Mr Sanjay Taneja, and Mr Deepak Sudheja in 2011. Its manufacturing facility is in Dehradun, Uttarakhand. The company's profit after tax was INR0.11 crore on net sales of INR21.70 crore in fiscal 2015. K P BUILDCON: ICRA Reaffirms B+ Rating on INR15.55cr LT Loan ------------------------------------------------------------ ICRA has reaffirmed the long-term rating of [ICRA]B+ assigned to the INR15.551-crore fund-based limits and the short-term rating of [ICRA]A4 assigned to the INR1.50-crore non-fund based limit of K P Buildcon Private Limited. The outlook on the long-term rating is Stable. ICRA has also assigned the [ICRA]B+/A4 ratings to unallocated limits of KPBPL. Amount Facilities (INR crore) Ratings ---------- ----------- ------- Long-term fund- based Limit 15.55 [ICRA]B+ (Stable); Reaffirmed Short-term Non- fund Based Limit 1.50 [ICRA]A4; Reaffirmed Unallocated 0.20 [ICRA]B+ (Stable)/A4; Assigned Rationale The ratings reaffirmation takes into account the stretched liquidity position of K P Buildcon Private Limited owing to stretched receivables, resulting in elongated utilisation of working capital borrowings in the last two fiscals. The ratings also continues to be constrained by KPBPL's weak financial profile, characterised by low profitability, leveraged capital structure and modest coverage indicators, along with the company's modest order book profile (the pending order book/OI ratio was 0.36 times as on February 2017). While reaffirming the ratings, ICRA also takes note of KPBPL's limited bargaining power with its reputed customers, forcing it to extend longer credit period. The ratings, however, positively consider the vast experience of the promoters in the tower fabrication business. The company continues to benefit from the favourable demand outlook for solar and wind farm projects, driven by the increasing Government spending on solar projects. Going forward, the profitability of the company would remain vulnerable to fluctuations in raw material prices as the manufacturing contracts are fixed-value contracts. The ability of the company to scale up operation while maintaining profitability and manage working capital requirements efficiently would remain important from the credit perspective. Availability of fund-based limits to scale up operations would remain a key concern. Key rating drivers Credit strengths * Long experience of the promoters in the tower fabrication Business * Favourable demand outlook of the company's products from solar and wind farm projects Credit weaknesses * Significant stretch on liquidity because of high receivable as evident from consistently full utilisation of working capital limits over the last one year * Modest revenue visibility; the Order book/Operating Income ratio in FY2016 was 0.36 times * Weak financial profile characterised by low profitability levels, leveraged capital structure and modest coverage indicators * Limited bargaining power with its customers Description of key rating drivers highlighted: The revenue of the company reduced by ~28% in 2015 to INR51.98 crore (Rs.72.19 crore in FY2013-14) because of lower revenue from telecom tower business due to passive sharing by telecom companies, thereby forcing the company to rely on windmill tower business and solar power projects. However, again the OI reported growth of 4.74% in FY2016 fromFY2015 with successful execution of various orders in different fields. KPBPL's capital structure improved in FY2016 as reflected in the reduced gearing of 1.76 times as on FY2016 end compared to 2.00 times as on FY2015 end. Low profitability coupled with high debt levels has resulted in weak coverage indicators, with net cash accruals/total debt of 5% and OPBIDTA/Interest charges of 1.42 times in FY2016. The debtor days increased in 2016, resulting in high working capital intensity, which stood at 44% in FY2016. KPBPL is a registered approved vendor of GETCO- Gujarat Energy Transmission Corporation Limited for supply and manufacture of GI substation structures up to 66 KV and transmission line towers up to 66 kv in September 2016. KPBPL has a long and healthy relationship with all its customers, resulting in repeat orders from its customers. However, the company has limited bargaining power with most of its customers, resulting in the need to extend longer credit period. The manufacturing contracts executed by the company are fixed-value contracts, resulting in vulnerability of the company's profitability to adverse fluctuation in raw material prices. Incorporated in 2001, K P Buildcon Pvt. Ltd. (KPBPL) is involved in fabrication and galvanising for erection of various towers such as telecom towers, wind mill towers, transmission tower and metal structures used in solar power projects on which solar panels are mounted. The erection of telecom towers includes assembling galvanised plates, making required concrete base and generator room. The company is also engaged in fault rectification, patrolling of optical fiber cables, road and site clearance work. KPBPL is part of the KP Group of companies that was established in 1994 by Mr. Faruk Patel. It is an infrastructure focused group and operates in Gujarat and has interests in businesses of utility scale renewable energy projects in wind and solar sector, construction projects, telecom infrastructure, fabrication, galvanizing. The other entities in the group are K.P.I. Global Infrastructure Pvt. Ltd. and K.P. Energy Ltd. KAIZEN INDUSTRIES: Ind-Ra Assigns 'B+' Long-Term Issuer Rating -------------------------------------------------------------- India Ratings and Research (Ind-Ra) has assigned Kaizen Industries a Long-Term Issuer Rating of 'IND B+'. The Outlook is Stable. Instrument-wise rating actions are: -- INR45 mil. Fund-based limits assigned with IND B+/Stable rating; and -- INR25 mil. Non-fund-based limits assigned with IND A4 rating KEY RATING DRIVERS The ratings reflect Kaizen's small scale of operations and weak credit metrics. Revenue was INR234.19 million in FY16 (FY15: INR181.24 million), gross interest coverage (operating EBITDA/gross interest expense) was 1.38x (1.39x) and net leverage (total adjusted net debt/operating EBITDAR) was 5.20x (5.69x). The ratings are also constrained by the firm's tight liquidity position as reflected by nearly full utilization of working capital limits during the 12 months ended October 2016. However, the ratings benefit from the partners' decade-long experience in the manufacturing of prefabricated steel structures. RATING SENSITIVITIES Positive: An improvement in the overall credit metrics will be positive for the ratings. Negative: Deterioration in the overall credit metrics, along with the liquidity profile will be negative for the ratings. COMPANY PROFILE Kaizen was incorporated in 2004 as a partnership firm in Kolkata. It is engaged in manufacturing and installation of prefabricated and pre-engineered steel structures for buildings and shelters. KISHORE G: CRISIL Reaffirms B+ Rating on INR5.5MM Cash Loan ----------------------------------------------------------- CRISIL's ratings on the bank facilities of Kishore G Lund continue to reflect KGL's exposure to risks related to saleability of its ongoing projects and its susceptibility to risks inherent in the real estate industry. These rating weaknesses are partially offset by its promoters' extensive experience in the real estate development business and proven project-execution capabilities. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 5.5 CRISIL B+/Stable (Reaffirmed) Key Rating Drivers & Detailed Description Weakness * Susceptibility to risks related to demand and saleability of on-going project: Srivari group remains susceptible to inherent risks related to demand and the saleability of its on-going projects. Any significant delay in the saleability and realisations of Srivari group's projects could affect the group's credit risk profile over the medium term. Strengths * Promoters' extensive experience in real estate development: Srivari group benefits from the extensive experience of its promoters in real estate development; the promoters have been engaged in this segment for close to 30 years. The group has an established presence in the Coimbatore (Tamil Nadu) real estate market and has executed over 20 projects in the region backed by strong domain experience and an established operational team. The group is currently executing three projects in Coimbatore in various stages of completion. The projects are named Ananya, Saarang and Vaibhav. Outlook: Stable CRISIL believes that KGL will benefit over the medium term from its promoters' extensive experience in the real estate development business. The outlook may be revised to 'Positive' if the projects are completed without any significant cost or time overruns and registers more than expected sales realizations from ongoing projects leading to larger-than-expected cash flows. Conversely, the outlook may be revised to 'Negative' if there are delays in the execution of the project or in the receipt of advances from customers, or if the firm undertakes any large, debt-funded project, impacting its financial risk profile. Set up as a proprietorship firm by Mr. Kishore G Lund, KGL operates a commercial complex in Coimbatore and derives rental income from the same. KGL is part of the Srivari group of companies which is engaged in residential real estate development in Coimbatore. The firm has availed bank facilities for onward lending to group companies for development of the Srivari Ananyaa, Srivari Saarang and Srivari Vaibhav projects. PAT was INR0.41 crore on total revenue of INR0.55 crore in fiscal 2016, against INR0.44 crore and INR0.45 crore, respectively, in fiscal 2015. LILY REALTY: CRISIL Lowers Rating on INR310MM Term Loan to D ------------------------------------------------------------ CRISIL has downgraded its rating on the long-term bank facilities of Lily Realty Private Limited to 'CRISIL D' from 'CRISIL BBB- (SO)/Stable'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Overdraft 20 CRISIL D (Downgraded from 'CRISIL BBB-(SO)/Stable') Term Loan 310 CRISIL D (Downgraded from 'CRISIL BBB-(SO)/Stable') The downgrade reflects delays in debt servicing due to weak liquidity following lower-than-expected sales in its residential project. Slowdown in sales was mainly on account of reduced demand faced by Bengaluru's residential real estate market given weak consumer sentiment and demonetisation. The company's credit risk profile was also affected as promoter support was not extended in a timely manner to meet debt obligation. Analytical Approach For arriving at its rating, CRISIL has taken a standalone view on Lily Realty as there is tight escrow mechanism with ring-fencing of the project's cash flow, which restricts financial fungibility with other companies of the Pashmina group. Key Rating Drivers & Detailed Description Weaknesses * Delays in debt servicing due to weak sales Lily Realty witnessed delays in servicing its debt obligation following muted sales of its residential real estate project. Sales velocity declined to under 5 units a month in fiscal 2017 from over 10 units in fiscal 2016 because of slowdown in Bengaluru's residential real estate market and weak consumer sentiment following demonetization. Consequently, the cash generation ability of the project was impacted and promoter funds were used to support debt servicing. While outstanding dues have been cleared as on date, the support was not extended in a timely manner in the past. * Exposure to project implementation risk and receipt of approvals Phase I of the project is in advanced stages of completion, with structural work for all buildings complete as on December 31, 2016. The company plans to start handing over possession from July 2017. However, Lily Realty remains exposed to project implementation risks given the nascent stage of construction of Phase II of its Pashmina Waterfront project. The company is yet to receive requisite approvals for Phase II of the project. Although the project is being executed in phases, it remains exposed to risks related to timely receipt of approvals, and time and cost overruns. However, Lily Realty's association with a reputed EPC contractor partially offsets the project implementation risks. * Susceptibility of sales to cyclicality inherent in the real estate sector Although the project is being partly funded through bank borrowings, Lily Realty is expected to be highly dependent on customer advances to fund the remaining cost of Phase II. Consequently, the company is susceptible to cyclicality inherent in the real estate sector, whereby any volatility in realisations and saleability could result in fluctuations in customer advances. Strength * Tie-up with reputed project associates The project benefits from association with experienced engineering, procurement and construction contractor, Shapoorji Pallonji & Co. Ltd, to ensure quality construction. Furthermore, Lily Realty uses the advanced Mivan technology (reinforced cement concrete structure using aluminium forms) to ensure better quality and speedy construction of towers. Incorporated in March 2007 and promoted by Mr. Asit Koticha (founder of ASK Investment Holdings Pvt Ltd), Lily Realty is a special-purpose vehicle set up by the Pashmina group to develop a premium residential project, Pashmina Waterfront, with a total saleable area of around 3.0 million square feet. The property is being developed in two phases with four towers each. Total project cost is INR1450 Crore. Phase I of the project was launched in November 2011 and is in advanced stages of completion. Phase II of the project is still in early stages and the company is awaiting approvals to commence construction. LIVINGSTONES: ICRA Reaffirms 'B+' Rating on INR48cr LT Loan ----------------------------------------------------------- ICRA has reaffirmed the long term rating outstanding on the INR48.00 crore fund based limits and INR0.82 crore unallocated limits of Livingstones at [ICRA]B+. The long term rating carries a stable outlook. Amount Facilities (INR crore) Ratings ---------- ----------- ------- Long term: fund based limits 48.00 [ICRA]B+ (Stable)/reaffirmed Long term: Unallocated 0.82 [ICRA]B+ (Stable)/reaffirmed Rationale The rating reaffirmation takes into account the promoters' experience and operating track record in the Cut & Polished Diamonds (CPD) business spanning over four decades, leading to established relationships with its clients and suppliers; and benefits accruing from forward integration into jewellery through its group concern, Livingstones Jewellery Private Limited (LJPL). The rating however, is constrained by the firm's modest financial profile as reflected by its leveraged capital structure, weak coverage indicators, and tight liquidity position arising out of stretched receivables and high inventory levels. The rating also factors in the high customer and supplier concentration with majority of sales and purchases coming from a single entity, high competitive intensity in the industry, and vulnerability of the firm's profitability to volatility in prices of cut & diamonds and exposure to fluctuations in foreign exchange rates. Further, the ratings also take into account the risk of withdrawals owing to the partnership nature of the entity. The firm's operating profits remain vulnerable to adverse movements in prices of rough diamonds and demand conditions in the industry. The ability to scale up its operations while managing its working capital intensity would remain the key rating sensitivities, going forward. Key rating drivers Credit Strengths * Promoters' experience and operating track record of more than four decades in the gems and jewellery business * Advantages derived from integrated operations with presence across the value chain, through group concern Credit Weakness * Modest financial profile as reflected by leveraged capital structure and weak coverage indicators * CPD business characterised by high competitive pressures, inherently low value addition and correspondingly modest margins * Concentration of sales on a single buyer who is also major supplier of rough diamonds * Stretched receivables and high inventory levels resulting in weak liquidity position as reflected by high utilization of working capital limits * Vulnerability of profitability to adverse movements in foreign exchange rates and volatility in prices of cut and polished diamonds * Risk of withdrawals from the capital account on account of the entity being in the nature of a partnership firm Sensitivities * Improvement in working capital cycle through reduction in debtors and inventory levels * Scaling up of revenues while maintaining profitability margins Description of key rating drivers highlighted: Traditionally, the revenues of LS have been dominated by exports to Belgium which accounted for nearly 62% of the total revenues for FY2016 (67% in FY2015). Majority of its sales in Belgium are to Diamstones BVBA, which remains its primary customer. The firm has an ongoing sales arrangement with the entity whereby they procure the raw material from them, process it and sell to them. The sales to USA and UAE have also remained in line with the previous year and account for 10% and 4% of the total sales respectively in FY2016. The firm has also started exports to several new export destinations like Italy, Japan, New Zealand in the current year. In the domestic market, the sales are primarily made to its group concern, Livingstones Jewellery Private Limited, which is engaged in the manufacture and retail of diamond studded jewellery. Local sales accounted for 14% of the total revenue of the firm in FY2016 as compared to 16% in FY2015. Livingstone's debt profile is mainly short term in nature for the purpose of meeting its high working capital requirements. The total debt of the firm stood at INR49.67 crore as on March 31, 2016 as against INR47.50 crore as on March 31, 2015; and comprised of 95% of working capital borrowing and 5% of unsecured loans from partners. The outstanding unsecured loan is a 12% interest bearing promoter loan and is subordinate to bank debt and does not have a fixed repayment schedule. In the backdrop of the high working capital intensity and modest accruals, the gearing of the firm remained high at 1.83 times as on March 31, 2016 as against 1.82 times as on March 31, 2015. Overall the coverage indicators with NCA/Debt of 3%, TD/OPBDITA of 7.61 times and OPBDITA/I&F of 1.36 times as on March 31, 2016 continued to remain weak. Analytical approach: To arrive at the ratings ICRA has taken into account the standalone financials of the firm along with key operational developments in the recent past. The firm has a group company; Livingstones Jewellery Private Limited rated [ICRA]B as on September 2016. Livingstones was established as a proprietary concern by Mr. Pankaj N. Kothari in 1976 and was subsequently converted into a partnership firm in 1982 with the admission of Mr. Sandip Kothari and other family members. In April 2006, with the retirement of its key promoters, Mr. Pankaj Kothari and his wife, Mrs. Shilpa Kothari; Mr. Sanket Kothari, the son of Mr. Sandip Kothari, was inducted into the business as a partner. LS deals in diamonds of mainly round brilliant cut in whites and extra whites, ranging from 2 cents to 20 cents. It specializes in low carat diamonds, i.e., in USD 50-250. It has two manufacturing units, one each in Mumbai and Surat. The LS group also has two showrooms in Juhu and Opera House in Mumbai operated though the group company Livingstones Jewellery Private Limited. MAC STEEL: CRISIL Assigns 'B+' Rating to INR4.5MM Cash Loan ----------------------------------------------------------- CRISIL has assigned its 'CRISIL B+/Stable' rating to the long- term bank facilities of Mac Steel Pvt Ltd. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Term Loan 1.4 CRISIL B+/Stable Cash Credit 4.5 CRISIL B+/Stable Proposed Long Term Bank Loan Facility 0.6 CRISIL B+/Stable The rating reflects the company's modest scale of operations, below-average financial risk profile, and stretched working capital cycle. These weaknesses are partially offset by the extensive experience of its promoters and established relationship with customers. Key Rating Drivers & Detailed Description Weakness * Modest scale of operations: Despite presence of over 20 years, scale of operations remains small, reflected in turnover of INR15 crore in fiscal 2016. Though expected to improve, scale will remain subdued over the medium term. * Below-average financial risk profile: Networth is likely to be small at INR1.3-1.7 crore as on March 31, 2017, and gearing high at above 2 times. Debt protection metrics are expected to be average, with an interest coverage ratio of 1.7-1.8 times for fiscal 2017. * Large working capital cycle: Gross current assets have remained in the 140-170 days range since 2015 due to stretched receivables and sizeable inventory. Strengths * Extensive experience of promoters: Presence of more than two decades has enabled the promoters to establish strong relationship with large clients such as Mahindra & Mahindra (M&M) ('CRISIL AAA/Stable/CRISIL A1+') and Larsen and Toubro Ltd (CRISIL AAA/FAAA/Stable/CRISIL A1+). * Strong relationship with customers: The company has been supplying its products to M&M for over 20 years and will continue to benefit from healthy client relationship. Outlook: Stable CRISIL believes MSPL will continue to benefit over the medium term from the extensive experience of its promoters, sound technical knowledge, and established relationship with customers. The outlook may be revised to 'Positive' if sustained growth in revenue and profitability and reduction in customer concentration lead to better-than-expected cash accrual and hence financial risk profile. The outlook may be revised to 'Negative' if decline in cash accrual, stretched working capital cycle, or large, debt- funded capital expenditure further weakens financial risk profile. Incorporated in 1997 and promoted by Nashik-based Rajput family, MSPL manufactures sheet metal pressed and tubular components used across the automotive and electrical industries. Facility is in Nashik. For 2015-16, MSPL reported a net loss of INR0.08 crore on total income of INR14.7 crore, against a net loss of INR0.04 crore on total income of INR17.3 crore for 2014-15. MAHITECHS: Ind-Ra Affirms 'B+' Long-Term Issuer Rating ------------------------------------------------------ India Ratings and Research (Ind-Ra) has affirmed Mahitechs' Long- Term Issuer Rating at 'IND B+'. The Outlook is Stable. The instrument-wise rating actions are: -- INR27.5 mil. Fund-based working capital affirmed with IND B+/Stable rating; -- INR70 mil. Non-fund-based working capital affirmed with IND A4 rating KEY RATING DRIVERS The affirmation reflects Mahitechs' continued small scale of operations and moderate credit metrics. Revenue remained stable at INR82 million in FY16 (FY15: INR84 million), while EBITDA margin improved to 15% (11.3%) because of a fall in subcontractor's expenses to 39% of revenue (52%). The firm has indicated revenue of INR70 million for 10MFY17. It has an outstanding order book of INR70 million, which will be executed by 9MFY18. Net leverage deteriorated to 3.7x in FY16 (FY15: 2.6x) on account of an increase in the dependence on both fund-based facilities to INR22 million (INR12.21 million) and unsecured loan to INR30.76 million (INR12.21 million). EBITDA interest coverage (operating EBITDA/gross interest expense) also deteriorated to 1.8x in FY16 (FY15: 2.4x) due to an increase in interest expenses. The ratings factor in Mahitechs' proprietorship form of business. The ratings, however, are supported by the company's founder's around two decades of experience in the engineering, procurement, construction segment. The ratings also reflect Mahitechs' comfortable liquidity, with the average maximum cash credit utilization during the 12 months ended January 2017 being 32.5%. RATING SENSITIVITIES Positive: Substantial growth in the top line and margins leading to an improvement in the credit metrics could lead to a positive rating action. Negative: A negative rating action could result from lower visibility of growth underpinned by a weak order book position or a decline in the margins resulting in deterioration in the credit metrics. COMPANY PROFILE Established in 2010, Mahitechs is a Mumbai-based firm, engaged in the execution of civil construction work for semi-government authority and non-government authorities. The firm also takes job work as sub-contractor. MANDOVI MINERALS: CRISIL Reaffirms 'B' Rating on INR12.31MM Loan ---------------------------------------------------------------- CRISIL has reaffirmed its rating on the long-term bank facilities of Mandovi Minerals Private Limited at 'CRISIL B-/Stable Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 2 CRISIL B/Stable (Reaffirmed) Proposed Long Term Bank Loan Facility 2.69 CRISIL B/Stable (Reaffirmed) Term Loan 12.31 CRISIL B/Stable (Reaffirmed) The ratings continue to reflect the group's above-average financial risk profile, marked by low gearing, moderate networth and adequate debt protection metrics. The ratings also factor in the extensive experience of promoters. These strengths are partially offset by exposure to risks related to intense competition in the highly regulated and fragmented industrial sands market. Analytical Approach For arriving at its ratings, CRISIL has combined the business and financial risk profiles of Mangalore Minerals Pvt Ltd (MMPL) and Mandovi Minerals, together referred to as the MMPL group. This is because both these entities are in similar line of business, have a common management, and fungible cash flows. Key Rating Drivers & Detailed Description Strengths * Extensive experience of promoters: The group is managed by Mr Shivaji Mendon, who has over five decades of experience in the silica industry. This has helped the group to establish relationship with key customers mostly original equipment manufacturers (OEMs) and set up facilities in strategic locations with proximity to silica supply'unwashed silica sand available at low prices. * Above-average financial risk profile Financial risk profile is above-average marked by moderate gearing, healthy networth, and comfortable debt protection metrics. The gearing and networth were at 0.68 times and INR62 crore as on March 31, 2016. Financial risk profile should remain above-average over the medium term. Weakness * Exposure to risks related to intense competition in the highly regulated and fragmented industrial sands market There have been a number of restrictions on sand mining, especially in Karnataka and Maharashtra, in the recent past because of environmental issues resulting in an increase in unwashed silica prices. Sand miners in Mangalore have been severely affected after the Government of Karnataka passed the Uniform Sand Mining Policy in April 2011, which does not allow sand mining in Coastal Regulation Zones and prohibits the use of machinery to mine sand from rivers. Consequently, the price of sand in Mangalore has increased by over four times. However, this risk is mitigated by the group's presence in different geographies. Furthermore, the group has passed on increases in raw material costs to customers, as reflected in healthy operating margin of 30% over the past three years. Though operating margin has not been affected by intensifying competition, the working capital cycle remains stretched. Intensifying competition and the economic slowdown have led to delays in realisation of payments from customers recently. Thus business risk profile should remain exposed to political and regulatory risks. Outlook: Stable CRISIL believes MMPL group's business risk profile will continue to be supported by the extensive experience of its promoters. The outlook may be revised to 'Positive' if working capital management is efficient or if increase in scale of operations improves business risk profile. The outlook may be revised to 'Negative' if stretch in working capital cycle or large, debt- funded capital expenditure weakens financial risk profile or if adverse regulatory changes affect business volumes. The MMPL group, promoted by Mr Shivaji Mendon and Mrs Rama Mendon, is headquartered in Mangalore. Incorporated in 1987, MMPL, the flagship entity of the group, produces industrial sands. Mandovi Minerals is also promoted by the Mendons. Incorporated in 2004, it manufactures washed and dry silica sand. In fiscal 2016, MMPL group reported net sales of INR82 crore and profit after tax of INR13 crore against net sales and profit after tax of Rs98 crore and INR10 crore, respectively, for fiscal 2015. MEGAMILES BEARING: CRISIL Upgrades Rating on INR5MM Loan to BB- --------------------------------------------------------------- CRISIL has upgraded its ratings on the bank facilities of Megamiles Bearing Cups Pvt. Ltd to 'CRISIL BB-/Stable/CRISIL A4+' from 'CRISIL B+/Stable/CRISIL A4'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 5 CRISIL BB-/Stable (Upgraded from 'CRISIL B+/Stable') Letter of Credit 1.5 CRISIL A4+ (Upgraded from 'CRISIL A4') The upgrade was driven by sustained improvement in MBCPL business risk profile reflected in continuous growth in topline followed by addition of new customers in the export market and stable operating margin resulting in high cash accrual. The ratings continue to reflect the extensive industry experience of its promoter, average financial risk profile marked by moderate capital structure and comfortable debt protection metrics. However, the rating has been constrained by customer concentration in revenue profile and working capital intensive operations. Key Rating Drivers & Detailed Description Strengths * Extensive experience of promoters: The promoters have technical expertise and two decades of experience in the auto component industry. This has helped in establishing long-standing relationships with customers and key suppliers. Weakness * Working-capital-intensive operations: Operations are working capital intensive as reflected in gross current assets of 160 days primarily due to high debtor and inventory levels owing to long process time as most of the inventory is work in progress. However, working capital requirements are supported by a credit period of 180 days from its suppliers, as most of the raw materials are procured under letters of credit. The bank limits have been optimally utilised at 84% during the 12 months through November, 2016. * Exposure to volatility in foreign exchange rates: Exports account for 50% of revenue, and hence margins are vulnerable to any sharp appreciation in the rupee against the US dollar. Outlook: Stable CRISIL believes MBCPL will continue to benefit from the extensive experience of its promoters. The outlook may be revised to 'Positive' if scale and cash accrual increase, or if equity infusion improves capital structure. The outlook may be revised to 'Negative' if decline in profitability, lowers accrual, or working capital cycle lengthens, or sizeable debt-funded capital expenditure is incurred. MBCPL, incorporated in 1990 and promoted by Mr Y S Mahadev, Mr S Rudra Prasad, and Mr B S Divakar, manufactures cold forged and computer numerical control (CNC) machined components for automotive applications. In fiscal 2016, MBCPL reported net sales of INR22.72 crore and profit after tax of INR0.61 crore against INR20.7 crore and INR0.23 crore, respectively, for fiscal 2015. MONNET ISPAT: JSW Steel Offers to Buy Controlling Stake ------------------------------------------------------- LiveMint reports that JSW Steel has made an offer to buy a controlling stake in Monnet Ispat and Energy Ltd through the strategic debt restructuring (SDR) route. According to LiveMint, the firm is undergoing SDR and lenders, who own a 51% stake, are exploring the option of handing over its control and management to outside investors. LiveMint relates that a person close to the development said, "JSW Steel has put in final bid and the bankers are considering the offer submitted by JSW Steel. It is the only firm which submitted the final bid. The bid was submitted on February 22." Queries sent to the companies remained unanswered, LiveMint notes. The company had earlier said talks with the investor are confined to lenders and the management is not involved at this stage, says LiveMint. Monnet Ispat & Energy Limited engages in the production and sale of sponge iron, structural steel, and ferro alloys. The company also engages in the generation and sale of power; and provides consultancy services in the fields of exploration, exploitation, and beneficiation coal and other minerals. NATRAJ HOME: CRISIL Assigns B+ Rating to INR5MM Foreign Loan ------------------------------------------------------------ CRISIL has assigned its 'CRISIL B+/Stable/CRISIL A4' ratings to the bank facilities of Natraj Home Furnishings Pvt Ltd. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Packing Credit 3 CRISIL A4 Foreign Bill Discounting 5 CRISIL B+/Stable Foreign Exchange Forward 0.5 CRISIL A4 The ratings reflect the company's small scale of operations, geographic and customer concentration in its revenue, and its weak financial risk profile because of high gearing. These weaknesses are partially offset by its promoters' extensive experience in the textile industry and their funding support, and its established customer relationships. Analytical Approach CRISIL has treated unsecured loans extended to NHFPL by its promoters as neither debt nor equity because these loans will continue to remain in the business for a long-term and are in personal capacity of the promoters. Key Rating Drivers & Detailed Description Weakness *Small scale of operations in a fragmented industry: Intense competition in a fragmented industry because of low entry barriers has kept the company's scale of operations small, indicated by net sales at INR36.3 crore in fiscal 2016. *Weak financial risk profile: The company has a weak capital structure, reflected in high gearing of 4.77 times as on March 31, 2016, because of expansion done in the past 2-3 years. Strengths *Extensive industry experience of the promoters: The promoters' experience of more than four decades in the textiles and home furnishing segment through other firm has helped NHFPL establish strong relationships with customers abroad. *Funding support from promoters: The promoters have extended unsecured loans-Rs 2.76 crore as on March 31, 2016, against INR0.7 crore a year earlier-to support working capital management and expansion, and will continue to do so. Outlook: Stable CRISIL believes NHFPL will continue to benefit from its promoters' extensive industry experience. The outlook may be revised to 'Positive' if the company scales up operations and generates higher-than-expected cash accrual, or if its capital structure improves supported by equity infusion. The outlook may be revised to 'Negative' if financial risk profile weakens on account of decline in revenue and profitability, or larger-than- expected, debt-funded capital expenditure. NHFPL, incorporated in 2004, manufactures and exports home furnishing items, such as curtains, cushions, and table cloth. The company was set up as a proprietorship firm, Natraj Exports, by Wadhwani family in 2000, and was reconstituted as a private limited company in 2004. It has four manufacturing units, at Barhi in Jharkhand and at Kundli in Haryana, with weaving, dyeing, and printing capabilities. NHFPL's net profit was INR0.38 crore on operating income of INR36.29 crore for fiscal 2016, against a net profit of INR0.33 crore on operating income of INR32.84 crore for fiscal 2015. Status of non-cooperation with previous CRA: NHFPL has not cooperated with ICRA Ltd, which suspended its ratings vide release dated April 12, 2016. Reason provided by ICRA Ltd was non-furnishing of information by NHFPL for monitoring ratings. PILOT 2 WHEELERS: Ind-Ra Assigns 'BB+' Long-Term Issuer Rating -------------------------------------------------------------- India Ratings and Research (Ind-Ra) has assigned Pilot 2 Wheelers Private Limited a Long-Term Issuer Rating of 'IND BB+'. The Outlook is Stable. Instrument-wise rating actions are: -- INR200 mil. Fund-based working capital assigned with IND BB+/Stable/IND A4+ rating -- INR50 mil. Proposed fund-based working capital* assigned with Provisional IND BB+/Stable/Provisional IND A4+ rating * The ratings are provisional and the final ratings will be assigned subject to execution of sanction letter for the above facilities to the satisfaction of Ind-Ra. KEY RATING DRIVERS The ratings reflect a steady improvement in top line with a CAGR of 20.53% over FY13-FY16 (FY16: INR1,054.47 million, FY15: INR873.46 million). Vehicle sale volumes increased 22% yoy to around 22,000 in FY16, driven largely by the sale of Honda Activa series (Honda Active 3G, Honda Activa 125 and Honda Activa i). Management expects revenue growth to continue over the medium term on account of increased contribution from a third dealership outlet, opened in Byculla, Mumbai, in August 2015 and its recent contract with the Canteen Stores Department to sell vehicles in Mumbai until November 2017. Management expects to sell 2,000- 2,500 (10% of FY16 volume) vehicles under the contract. Pilot 2 Wheelers reported revenue of INR989 million in 10MFY17. The ratings also factor in the company's moderate credit metrics as indicated by interest coverage (operating EBITDA/gross interest expense) of 1.7x in FY16 (FY15: 1.8x) and net leverage (total debt net of cash/operating EBITDA) of 5.8x (4.8x). The deterioration in the credit metrics was due to an increase in short-term debt to INR196 million at FYE16 (FYE15: INR117 million), given increased inventory requirement arising from the opening of its third showroom. EBITDA margin was volatile and remained in the range of 3.1%-4.1% over FY13-FY16 (FY16: 3.75x, FY15: 3.95x), attributed to highly competitive two-wheeler market with the presence of four other Honda two-wheeler dealerships in Mumbai. Ind-Ra expects EBITDA margins to improve over the medium term on account of an increase in direct sales to customers, leading to an increase in spare part sales and vehicle servicing. The ratings are constrained by Pilot 2 Wheelers tight liquidity position with 97.5% of average peak utilization of working capital facilities during the 12 months ended January 2017. However, the ratings draw support from the promoters' combined experience of more than five decades in automotive dealership. RATING SENSITIVITIES Positive: A significant increase in the scale of operations and profitability margins, leading to an improvement in the credit metrics will be positive for the ratings. Negative: Any deterioration in EBITDA margins and the credit metrics will be negative for the ratings. COMPANY PROFILE Established in 2001, Pilot 2 Wheelers is an authorized dealer of Honda Motorcycle and Scooter India Private Limited. The company is engaged in the sale of new vehicles and spare parts, as well as servicing of vehicles. It has three showrooms and service centres in and around Mumbai. PRAGATI SPINNERS: Ind-Ra Assigns 'BB+' Long-Term Issuer Rating -------------------------------------------------------------- India Ratings and Research (Ind-Ra) has assigned Pragati Spinners Private Limited (PSPL) a Long-Term Issuer Rating of 'IND BB+'. The Outlook is Stable. The instrument-wise rating actions are: -- INR237.828 mil. term loans assigned with IND BB+/Stable rating; -- INR180 mil. Fund-based facilities - cash credit assigned with IND BB+/Stable/IND A4+ rating -- INR6 mil. Non-fund-based facilities assigned with IND A4+ rating KEY RATING DRIVERS The ratings reflect Ind-Ra's expectations of a substantial improvement in PSPL's credit profile by FYE18, on the economies of scale as it strives to achieve optimum capacity utilization. The revenue grew at a CAGR of 45.60% over FY13-FY16 to INR764 million (FY15: INR669 million) while EBITDA margin improved 140bp yoy to 8.7%, on account of an increase in the receipt of orders from longstanding customers. The company achieved revenue of INR546.42 million and EBITDA margin of around 10.7% during 9MFY17, and has a current order book of INR70 million which is to be executed by February 2017. PSPL interest coverage (operating EBITDA/gross interest expense) was 1.1x in FY16 (FY15: 0.8x) and net financial leverage (total adjusted net debt/operating EBITDA) was 7.2x (10.5x). Revenue growth is likely to moderate over the next few years as the capacity utilization reaches its optimum levels and existing relationships increase business. The company generates more than 90% of its revenue from the top five customers with whom the company has more than six years of relationships. Ind-Ra expects PSPL to end FY18 with interest coverage of 2.3x and net leverage of 3.9x in FY18. Scheduled repayment of term loans and margin expansion are likely to aid the credit metric improvement. The ratings also factor in PSPL's moderate liquidity profile with the working capital limits being utilized at an average of 90.3% during the 12 months ended January 2017. Net working capital cycle improved to 125 days in FY16 and 141 days in FY15 from 165 days in FY14. The ratings are supported by the company's promoters' six years of experience in producing cotton yarn. RATING SENSITIVITIES Positive: A significant increase in the top line and profitability margins leading to a sustained improvement in the credit metrics would be positive for the ratings. Negative: A decline in the revenue and operating profitability margins resulting in significant deterioration in the credit metrics will be negative for the ratings. COMPANY PROFILE PSPL was incorporated in October 2010 as a private limited company in Andhra Pradesh. The company started its commercial operations in August 2012. PSPL processes cotton lint to produce cotton yarn of various counts. The company mainly sells cotton yarn to merchant exporters. About 95% its revenue is generated through merchant exports. Domestic customers are mainly located in Telangana. RAGHUNATH LAXMINARAYAN: CRISIL Cuts Rating on INR10MM Loan to D --------------------------------------------------------------- CRISIL has downgraded its rating on the long-term bank facility of Raghunath Laxminarayan Spices Private Limited (RLN; part of the RL Masala group) to 'CRISIL D' from 'CRISILB+/Stable'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 10 CRISIL D (Downgraded from 'CRISIL B+/Stable') The downgrade reflects instances of delay in interest payment on working capital borrowing. These delays were due to weak liquidity driven by high bank limit utilisation, low cash accrual because of lower-than-anticipated turnover, and higher-than- expected debt because of increased working capital requirement. This also led to marginal increase in the gearing to 2.5 times as on March 31, 2016. Improvement in turnover, and hence in cash accrual, will a remain key rating sensitivity factor. The rating reflects the group's below-average financial risk profile because of weak liquidity, high gearing, and weak debt protection metrics, low operating margin, and working capital- intensive operations. These rating weaknesses are mitigated by a moderate scale of operations and diversified product and customer profiles. The rating also factors in the extensive experience of the promoters in the spice trading and manufacturing business, and their funding support. Analytical Approach For arriving at the rating, CRISIL has combined the business and financial risk profiles of RLN and Kumar Audyogik Vikas Private Limited (KAV). This is because both the two companies, together referred to as the RL Masala group, are owned and managed by the same promoter family and deal in similar products. Key Rating Drivers & Detailed Description Weaknesses * Delay in serving of debt: The company has been delaying interest payment on its working capital limit. This is mainly on account of weak liquidity. * Below-average financial risk profile: The gearing of the group was high at 2.33 times as on March 31, 2016. Debt protection metrics remained subdued, with interest coverage ratio at 1.44 times in fiscal 2016, owing to low profitability. * Working capital-intensive operations: Gross current assets were at 129 days as on March 31, 2016, with receivables of 30 days and inventory of 68 days. * Low operating margin: Group's operating margin was 3 times in fiscal 2016. Strengths * Moderate scale of operations: Revenue grew at a healthy pace over the three fiscals through 2015. However, revenue growth in fiscal 2016 has remained stagnant on account of subdued demand. * Diversified product and customer profiles: The customer base is diversified across both wholesale and retail segments. The group has established its RL Masala brand in semi-urban and rural areas through a network of 1800 distributors in North India spread across Uttar Pradesh, Bihar, West Bengal, Jharkhand, Assam, and Madhya Pradesh; and 600 distributors in Andhra Pradesh, Tamil Nadu, Maharashtra, and Karnataka. * Extensive experience of the promoters in the spice trading and manufacturing business: The promoters, members of the Maheshwari family, have been trading in spices and dry fruits since 1965. The business was started by Mr Raghunath Laxminarayan, and is currently being handled by his sons, Mr Omkar Nath Maheshwari and Mr Krishna Gopal Maheshwari, and his grandsons. * Funding support from the promoters: The promoters extended unsecured loans (Rs 9.66 crore as of March 2016) and infused equity (Rs 2 crore) to fund working capital requirement. About the Group RLN, set up in 1994, is a wholesale trader in dry fruits and spices. Its operations are based at Sangli in Maharashtra, and Varanasi in Uttar Pradesh. The company is owned and managed by the Varanasi-based Maheshwari family. The Maheshwari family acquired KAV in 2002, and this company started spice manufacturing in Varanasi in 2008 under its own brand, RL Masala. RLN reported net profit of INR0.42 Crores on net sales of INR178.62 crores in FY 2015-16 against net profit of INR0.36 crores on net sales of INR173 crores in FY 2014-15 RAJEEV KUMAR: CRISIL Assigns B+ Rating to INR0.2MM LT Loan ---------------------------------------------------------- CRISIL has assigned its 'CRISIL B+/Stable/CRISIL A4' ratings to the bank loan facilities of Rajeev Kumar - Patna (RKP). Amount Facilities (INR Mln) Ratings ---------- --------- ------- Proposed Long Term Bank Loan Facility 0.2 CRISIL B+/Stable Bank Guarantee 5.0 CRISIL A4 Overdraft 0.8 CRISIL A4 The ratings reflect the firm's small scale of operations in a fragmented industry, with intense competition exerting pressure on revenue visibility and profitability, and large working capital requirement. These weaknesses are partially offset by the extensive experience of the firm's promoter in the civil construction industry, and its above-average financial risk profile because of low total outside liabilities to adjusted networth (TOLANW) ratio and healthy debt protection metrics, despite small networth. Key Rating Drivers & Detailed Description Weaknesses * Small scale of operations in a fragmented industry, with intense competition exerting pressure on revenue visibility and profitability: RKP operates in a tender-based business, and faces competition from companies in Jharkhand and Bihar, and from large pan-India players. Small scale of operations restricts ability to bid for large orders. Also, large number of companies bidding for small tenders leads to pressure on revenue and profitability. * Large working capital requirement: The firm had gross current assets of 176 days as on March 31 2016, primarily on account of security deposits, retention money, and other deposits that it has to maintain with customers. Strengths * Extensive experience of promoter in civil construction: The firm is promoted by Bihar-based Mr Rajeev Kumar, who has been in the civil construction business for over a decade. RKP has executed a large number of projects for state and central government bodies. * Above-average financial risk profile: The financial risk profile is supported by low TOLANW ratio of 1.6 times as on March 31, 2016, and healthy interest coverage ratio of 7.75 times for fiscal 2016. Networth was small, at INR5.06 crore, as on March 31, 2016. Outlook: Stable CRISIL believes RKP will continue to benefit from its promoter's extensive experience in the civil construction industry. The outlook may be revised to 'Positive' if there is a significant increase in revenue and operating profitability, leading to higher-than expected cash accrual. The outlook maybe revised to 'Negative' if operating margin and revenue decline, or if the financial risk profile weakens because of a stretch in working capital cycle, leading to pressure on liquidity. Set up in 2005 as a proprietary firm and based in Patna, RKP undertakes civil construction, mainly related to roads, for the governments of Bihar and Jharkhand. The firm is managed by Mr Rajeev Kumar, who has been in civil construction business for over a decade. For fiscal 2016, RKP's profit after tax (PAT) was INR1.09 crore on net sales of INR23.68 crore, against a PAT of INR0.15 crore on net sales of INR14.61 crore for fiscal 2015. Status of non-cooperation with previous CRA:RKP has not cooperated with CARE Ratings which was suspended its rating vide release dated March 28, 2016. The reason provided by CARE Ratings is non-furnishing of information required for monitoring of ratings. S.B. SYSCON: CRISIL Reaffirms B+ Rating on INR10.5MM Cash Loan -------------------------------------------------------------- CRISIL has reaffirmed its rating on the long-term bank facilities of S.B. Syscon Private Limited at 'CRISIL B+/Stable'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 10.5 CRISIL B+/Stable (Reaffirmed) Proposed Long Term Bank Loan Facility 2.0 CRISIL B+/Stable (Reaffirmed) The rating continues to reflect a small scale of operations in the highly fragmented electrical equipment industry, and weak financial risk profile because of a high total outside liabilities to tangible networth (TOLTNW) ratio and low cash accrual. These rating weaknesses are partially offset by the extensive experience of the promoter in the trading business and the funding support received from him. Key Rating Drivers & Detailed Description Weaknesses * Modest scale of operations in a highly fragmented industry:- Revenue was INR38 crore in fiscal 2016, and INR30 crore in the nine months through December 2016. The company is an authorised dealer of switchgears, motors and cables for reputed companies such as Siemens, GE, Legrand, finolex and socomec. However, the market is highly fragmented. A modest scale of operations restricts the bargaining power with suppliers and can have an adverse impact on operations and profitability. Furthermore, operations are exposed to economic cycles as the company caters to contractors, and engineering, procurement and construction players. * Weak Financial Risk Profile: The total outside liabilities to tangible networth (TOLTNW) ratio was about 5 times as on fiscal 2016. That's due to a modest networth and large working capital requirement. The capital structure is expected to improve gradually over the medium term in the absence of significant debt-funded capital expenditure (capex) plans and modest accretion to reserves. Strength * Extensive industry experience of the promoter The promoter, Mr R P Pandey, has been trading in power distribution equipment since 1992 through a proprietorship firm, SB Electricals. In 2008, the business were transferred to SBSPL. Over the years, the promoter has established strong relationship with suppliers and customers as reflected in a regular clientele and extended credit period by the principals. The promoter's experience has helped him gain an understanding of the market and identify potential untapped markets and segments. Furthermore, the experience has helped the company establish its presence in North India, thus facilitating addition of new customers and forging a strong relationship with prominent customers. The company has been associated with some of its prominent customers for over a decade, enabling it to grow in scale. Outlook: Stable CRISIL believes SBSPL will continue to benefit from the extensive industry experience of its promoter. The outlook may be revised to 'Positive' in case of significant improvement in the financial risk profile, most likely on account of better-than-expected cash accrual or equity infusion, along with efficient working capital management. The outlook may be revised to 'Negative' if liquidity weakens due to lower-than-expected cash accrual or a substantial increase in working capital requirement or debt funded capex. SBSPL was originally established as a proprietorship concern by Mr R Pandey; the firm was reconstituted as a private limited company in 2008. The company is a distributor of switchgears, motors, conductors, and cables for reputed companies such as Siemens, GE, Pierlite, and others. It has offices at Faridabad in Haryana, and Mumbai. SBSPL reported a profit after tax (PAT) of INR0.25 Crores on net sales of INR37.53 Crores for fiscal 2016, vis-a -vis INR0.18 Crores and INR30.16 Crores, respectively in fiscal 2015, on a standalone basis. SAFE-TRONICS AUTOMATION: ICRA Reaffirms B+ Rating INR4cr Loan ------------------------------------------------------------- ICRA has re-affirmed the long-term rating assigned to the INR4.00 crore fund based bank limits of Safe-tronics Automation Private Limited. ICRA re-affirmed the short-term rating of [ICRA]A4 for the INR9.00 crore non-fund based limits of the company. Amount Facilities (INR crore) Ratings ---------- ----------- ------- Fund Based Limits 4.00 [ICRA]B+ (Stable); re-affirmed Non-Fund Based Limits 9.00 [ICRA]A4; re-affirmed Unallocated Limits 1.00 [ICRA]B+ (Stable)/[ICRA]A4; re-affirmed ICRA has also re-affirmed the [ICRA]B+ and [ICRA]A4 ratings for the INR1.00 crore unallocated limits of the company. The outlook on the long-term rating is 'Stable'. Rationale The ratings re-affirmation factors in the modest scale of SAPL's operations. Furthermore, as the company caters largely to the oil and gas industry, its operations remain dependent on the investments in the industry. Evidently, the operating income of the company had registered de-growth of 28% during FY2016 following a decline in the capital investments in the oil and gas sector. The rating further factors the absence of price escalation clauses in majority of the company's contracts, which exposes SAPL's profitability to variation in raw material and labour costs. The company's pricing flexibility is also impacted by the tender-based competitive bidding process for the contracts of Public Sector Units (PSUs) where contracts are awarded to the lowest bidder (L1). Furthermore, with more than 50% of the procurement being met through imports, SAPL's profitability remains vulnerable to any adverse fluctuations in foreign exchange in the absence of any hedging undertaken by the company. The ratings, however, continue to favourably factor the long experience of SAPL's promoters in the execution of turnkey projects for the installation of F&G detection equipments for the oil and gas industry. Moreover, the company's exclusive supply arrangement with Detector Electronics Corporation, USA, which has a leading position in F&G detection systems, provides comfort. Key rating drivers Credit Strengths * Long experience of promoters in execution of turnkey projects related to F&G detection system for the oil and gas industry * Exclusive supply arrangement with Detector Electronics Corporation (Det-Tronics), USA, which is an established manufacturer of F&G detection systems. Credit Weakness * Modest scale of operation * Order book position largely dependent on investment in oil and gas industry, exposing the company to revenue volatility risk. * Absence of price escalation clause in majority of the contracts exposes the profitability to variation in raw material and labour costs; competitive bidding for contracts limits the pricing flexibility further. * Susceptibility of margins to foreign exchange fluctuations, given the significant dependence on imports. Description of key rating drivers highlighted: The operations of SAPL are modest with the company registering revenues of INR15.61 crore in FY2016 and INR15.98 crore in 9M FY2017. Although the company has orders-in-hand of INR17.60 crore as on December 30, 2016, which are to be completed by FY2018 the scale of operations is expected to continue to remain modest. Moreover, the orders are mainly from the oil and gas industry, and thus the company's operations remain contingent to the cyclicality and capital investments in the industry. Furthermore, the company also caters to various PSUs where the contracts are awarded to the lowest bidder (L1). Thus, the company has to competitively bid for these tenders which impacts its pricing flexibility. These contracts generally do not have price escalation clauses, which further expose the company's profitability to any adverse fluctuations in the raw material and labour costs. Being the exclusive distributor of 'Det-Tronics' in India and due to its collaborations with international companies for the supply of components, imports form a significant portion of the company's procurement. Imports contributed to ~54% and ~62% of the total procurement in FY2016 and H1 FY2017, respectively. With sales being made entirely in the domestic markets, the margins of the company, thus remain vulnerable to any adverse fluctuations in the foreign currency in the absence of any hedging undertaken. Nevertheless, the promoters of the company have an experience of over a decade in the industry, which coupled with its exclusive supply arrangement with Det-Tronics lend some comfort. Analytical approach: ICRA has assigned the ratings following a detailed evaluation of the issuer's business and financial risks. Incorporated in 2007, Safe-Tronics Automation Private Limited provides turnkey solutions for Fire & Gas (F&G) detection systems mainly for the oil and gas industry. The company is headed by Mr. Avinash Pol who has an experience of over a decade in the industry. SAPL is an exclusive representative for products of Detector Electronics Corporation (part of United Technologies Corporation, USA) in India. SAPL also has supply arrangements with entities like Norriseal (part of Dover Corporation, USA) for control valves, Rockwell Automation for supply of control systems and with MEDC (UK) for supply of hooters, alarms, beacons, etc. During FY2017, SAPL collaborated with GE, USA, for the exclusive distribution of their oil-on-water detection systems in India. SAPL reported a net profit after tax and depreciation of INR0.95 crore and INR0.70 crore on an operating income of INR21.61 crore and INR12.12 crore for the period ended March 31, 2016 and September 30, 2016, respectively. SAI INFRACONSTRUCTIONS: Ind-Ra Assigns 'BB-' LT Issuer Rating ------------------------------------------------------------- India Ratings and Research (Ind-Ra) has assigned Sai Infraconstructions Private Limited (SICPL) a Long-Term Issuer Rating of 'IND BB-'. The Outlook is Stable. The instrument-wise rating actions are: -- INR65 mil. Fund-based working capital limits assigned with IND BB-/Stable/IND A4+ rating; -- INR70 mil. Non-fund-based limits assigned with IND A4+ rating KEY RATING DRIVERS The ratings reflect SICPL's small scale of operations. In FY16, revenue was INR197.12 million (FY15: INR245.98 million). The ratings further reflect tight liquidity position of the company with overutilization (average 101.49%) of its working capital facilities during the 12 months ended December 2016 The ratings factor in SICPL's moderate credit metrics with gross interest coverage (operating EBITDA/gross interest expense) of 2.04x in FY16 (FY15: 2.85x) and net financial leverage (total adjusted net debt/ operating EBITDAR) of 3.55x (2.26x). The ratings, however, are supported by a decade-long experience of SICPL's promoters in the construction business, the company's strong relationship with its customers and suppliers, and strong and improved operating EBITDA margins of 14.30% in FY16 (FY15: 11.29%) due to execution of profitable projects.. The ratings are further supported by SICPL's moderate order book of around INR500 million for FY17, providing revenue visibility in the short-term. The company has indicated revenue of INR290 million in 9MFY17. RATING SENSITIVITIES Positive: A significant improvement in the scale of operations, along with improvement in the liquidity profile of the company could be positive for the ratings. Negative: Any further deterioration in the liquidity profile of the company could be negative for the ratings. COMPANY PROFILE SICPL was incorporated in 2009. It is engaged in EPC works and undertakes contracts for construction of roads, highways and bridges for various government departments. SHIV MAHIMA: CRISIL Reaffirms 'B' Rating on INR6.0MM Cash Loan -------------------------------------------------------------- CRISIL has reaffirmed its 'CRISIL B/Stable' rating on long-term bank facilities of Shiv Mahima Milk Products Private Limited. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 6.0 CRISIL B/Stable (Reaffirmed) Long Term Loan 6.6 CRISIL B/Stable (Reaffirmed) The rating reflects an early stage of operations with exposure to offtake risks, and susceptibility to volatility in raw material prices. These weaknesses are mitigated by the extensive experience of the promoters in the wheat processing industry. Key Rating Drivers & Detailed Description Weaknesses * Early stage of operations with exposure to offtake risks: Commercial operations commenced in November 2015, with a capacity to process 63,000 tonnes per annum (tpa) of wheat and gram flour, at Shahapur, Rajasthan. Hence, revenue was modest in fiscal 2016. * Susceptibility to volatility in raw material prices: The operating profitability will remain highly susceptible to fluctuations in raw material prices and to changes in government policies, over the medium term. Strength * Extensive industry experience of the promoters: The promoters have been engaged in the agriculture-based industry for over two decades through their other group concern. Outlook: Stable CRISIL believes SMPL will continue to benefit from the extensive industry experience of its promoters. The outlook may be revised to 'Positive' if the financial risk profile improves, driven by equity infusion, or increase in operating income and margin resulting in a substantial rise in cash accrual. The outlook may be revised to 'Negative' if the financial risk profile; particularly liquidity weakens due to lower-than-expected revenue or profitability or stretch in working capital or debt funded capex. SMPL was incorporated in 2013 in Jaipur, promoted by the Mittal family. The company set-up a wheat-processing unit with a grinding capacity of 63,000 tpa at Shahapur to manufacture maida, wheat, and bran. The key promoter, Mr Bharat Mittal manages operations along with his wife, Ms Mukta Mittal. There was a net loss on net sales of INR3.9 crore or fiscal 2016. SHRILEKHA TRADING: CRISIL Lowers Rating on INR10MM Loan to 'C' -------------------------------------------------------------- CRISIL has downgraded its ratings on the bank facilities of Shrilekha Trading Private Limited to 'CRISIL C/CRISIL A4' from 'CRISIL BB/Stable/CRISIL A4+'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Letter of Credit 120 CRISIL A4 (Downgraded from 'CRISIL BB/Stable') Letter of Credit 10 CRISIL C (Downgraded from 'CRISIL A4+') The downgrade reflects weakening of the company's financial risk profile, because of stretched receivables due to weak market conditions. CRISIL expects the liquidity to remain stretched over the medium term. Furthermore, on account of revised analytical approach to standalone basis, the company is expected to generate modest cash accrual, which will provide a weak cushion of 0.07 time against debt. Bank limit utilisation was high at 98.4% in the 12 months ended October 2016. Analytical Approach For arriving at the ratings, CRISIL has now rated STPL on a standalone basis, against the previously consolidated approach. The revision in analytical approach is because of track record of no financial fungibility with the associates, despite common promoters. Key Rating Drivers & Detailed Description Weaknesses * Large working capital requirement: Average receivables are expected to be stretched against previous average level of 100 days till fiscal 2016. Inventory continues to be intraday. Though liquidity is backed by letter of credit (LC) availed of 180 days, any delay in realisations can lead to crystallisation of LC debt as the company has low unencumbered cash against debt obligation. * Modest operating margin: Profitability was 0.09% for fiscal 2016 and will remain low over medium term on account of trading nature of operations. * Weak financial risk profile: Due to large working capital requirement and expected stretch in realisation of receivables, liquidity is expected to be weak over medium term. Debt protection metrics were also weak, with expected interest coverage ratio of 1.2 times over the medium term. Strength * Large scale of operations: Turnover was INR513 crore in fiscal 2016 against INR508 crore in fiscal 2015. Promoters have experience of over two decades and established relationship with key buyers and suppliers. Incorporated in 2002 and promoted by Mr. Vinod Jatia and his family members, STPL primarily trades in iron and steel products such as hot- and cold-rolled coils, sheets, and plates, sponge iron lumps, and fines. Profit after tax was INR2.44 crore on trading income of INR513.49 crore in fiscal 2016, against INR3.64 crore and INR512.31 crore, respectively, for fiscal 2015. SIDDHI GANESH: CRISIL Reaffirms B+ Rating on INR20MM Loan --------------------------------------------------------- CRISIL has reaffirmed its rating on the INR17 crore long-term bank loan facilities of Siddhi Ganesh Metal Private Limited to 'CRISIL B+/Stable'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 5 CRISIL B+/Stable (Reaffirmed) Electronic Dealer Financing Scheme (e-DFS) 20 CRISIL B+/Stable (Reaffirmed) The rating reflects below average financial risk profile, exposure to intense competition in the industry, resulting in low profitability margin.These weaknesses are mitigated by the to the extensive experience of promoters in the steel trading industry and their established relations with suppliers. CRISIL had downgraded its rating on the INR17 crore long-term bank loan facilities of Siddhi Ganesh Metal Pvt Ltd (SGMPL) to 'CRISIL B+/Stable' from 'CRISIL BB-/Stable' on January 13,2017. Key Rating Drivers & Detailed Description Weaknesses * Exposure to intense competition, resulting in low profitability: Profitability continues to be constrained by intense competition among steel traders due to low value addition involved in trading. * Below-average financial risk profile The financial risk profile is weak, with modest networth of INR7.8 crore, high total outside liabilities to tangible networth (TOLTNW) ratio of 4.5 times, and average debt protection metrics as reflected in interest coverage and net cash accrual to total debt (NCATD) ratios at around 1.3 times and 2% in fiscal 2016. Strength * Extensive experience of the promoters in the steel trading industry Benefits from the promoters' experience of more than a decade, and their established relationships with key customers and suppliers, especially with principal, Jindal Stainless Ltd (JSL), should continue to support business risk profile. Outlook: Stable CRISIL believes SGMPL will continue to benefit over the medium term from the extensive industry experience of promoters and their established relations with customers. The outlook may be revised to 'Positive' in case of a substantial and sustained improvement in revenue and profitability margin, efficient working capital management, or sizeable equity infusion by the promoters. Conversely, the outlook may be revised to 'Negative' in case of a steep decline in profitability margin, or significant deterioration in capital structure caused most likely by a stretched working capital cycle. SGMPL was set up in 2003 as a partnership between Mr Sudhershan Singh Rathore and his family; it was reconstituted as a private limited company in 2006. The company trades in stainless steel products in the form of sheets, plates, and coils. It is based in Secunderabad, Telangana. Profit after tax (PAT) stood at INR0.6 crore on net sales of INR 101.1 crore for fiscal 2016, vis-a-vis INR 0.6 crore and INR 97.9 crore, respectively, for fiscal 2015. SONI GINNING: Ind-Ra Assigns 'B+' Long-Term Issuer Rating --------------------------------------------------------- India Ratings and Research (Ind-Ra) has assigned Soni Ginning Factory (SGF) a Long-Term Issuer Rating of 'IND B+'. The Outlook is Stable. The agency has taken this rating action on its fund- based limits: -- INR60 mil. Fund based working capital limit assigned with IND B+/Stable rating KEY RATING DRIVERS The ratings reflect SGF's small scale of operations and weak credit metrics. Revenue reported by the company in FY16 was INR147 million (FY15: INR233 million). EBITDA margin was 2.8% in FY16 (FY15: 4.4%), gross interest coverage (EBITDA/interest) was 1.4x (1.4x) and net leverage (net debt/EBITDA) was 7.4x (7.5x). The liquidity of the company, however, was comfortable with the average utilization of its fund-based limits being around 15% during the six months ended December 2016. The ratings benefit from its founders' experience of more than three decades in the cotton ginning business. RATING SENSITIVITIES Positive: A positive rating action may result from substantial improvement in the scale of operations along with improvement in the credit metrics of the company. Negative: A negative rating action may result from deterioration in the credit metrics. COMPANY PROFILE SGF is a Sendhwa-based cotton ginning factory, manufacturing raw cotton seeds and lint with a daily production capacity of 200 bales. SOUTHERN COOLING: CRISIL Reaffirms B- Rating on INR12MM Loan ------------------------------------------------------------ CRISIL has reaffirmed its 'CRISIL B-/Stable/CRISIL A4' ratings on the bank facilities of Southern Cooling Towers Private Limited. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Bank Guarantee 13 CRISIL A4 (Reaffirmed) Cash Credit 12 CRISIL B-/Stable (Reaffirmed) Long Term Loan 0.9 CRISIL B-/Stable (Reaffirmed) Proposed Long Term Bank Loan Facility 4.1 CRISIL B-/Stable (Reaffirmed) The ratings continue to reflect the company's stretched liquidity and large working capital requirement. These weaknesses are partially offset by its established presence and its promoter's extensive experience in the cooling tower industry. Key Rating Drivers & Detailed Description Weaknesses * Working capital-intensive operations: SCTPL had gross current assets of 417 days as on March 31, 2016. Low bargaining power with major customers leads to stretched payments. However, a part of the working capital requirement was funded through payables, at 201 days as on March 31, 2016. The company imports PVC (polyvinyl chloride) and other plastic products directly from Malaysia and Indonesia against usance letters of credit (LCs). It had substantial inventory of 180 days as on March 31, 2016 as it has to stock a variety of products, such as fan assembly, drive shafts, gear boxes, nozzles, grids, and neoprene rubber inserts, to assist customers during emergency. * Stretched liquidity: On account of elongated collection period the, bank limits of the company remained almost fully utilised with instances of overutilization, which is generally regularised in 7-10 days. The company was unable to take up contracts in fiscal 2016 because of stretched liquidity, resulting in a drop in revenue to INR27.54 crore in from INR32.67 crore in fiscal 2015. Strength * Established presence and promoter's extensive experience in the cooling tower industry: SCTPL, incorporated in 1982, is the first Indian multinational cooling tower company having an overseas manufacturing unit (in Thailand). Its chairman Mr S K Mitra has industry experience of 42 years and worked with Marley-USA for 14 years, which has helped the company obtain contracts from established public sector undertakings such as National Thermal Power Corporation (NTPC), Hindustan Petroleum Corporation Ltd (HPCL), Bharat Petroleum Corporation Ltd (BPCL), Indian Oil Corporation Ltd (IOCL), Indian Oxygen Ltd (IOL), and Hindalco Industries Ltd. The company also has a large number of mid-sized and small customers. SCTPL designs its products with the help of MRL software approved by Cooling Technology Institute ' Texas, USA, and has start-of-the-art CAD facilities. The company has a wide geographical reach with six marketing offices in India, and overseas associates. It has two manufacturing units in Kolkata, one in Vadodara, Gujarat, and one in Bangkok. Its strong presence in the Asia Pacific, the Middle East, and Africa keeps it ahead of many competitors. Outlook: Stable CRISIL believes SCTPL will benefit from its established presence in the cooling tower industry. The outlook may be revised to 'Positive' if there is more than expected increase in revenue and profitability, or better working capital management, leading to an improvement in liquidity. The outlook may be revised to 'Negative' if the financial risk profile weakens because of low revenue and profitability, or sizeable, debt-funded capital expenditure. SCTPL, incorporated in 1982, is India's first ISO 9001:2008 certified company in cooling towers. It manufactures and sells a variety of wet industrial cooling towers and spare parts. It is promoted by the Mr S K Mitra (chairman), who has industry experience of 42 years. Profit after tax (PAT) was INR34 lakh on revenue of INR27.54 crore in fiscal 2016, against a PAT of INR41 lakh on revenue of INR32.67 crore in fiscal 2015. Status of non-cooperation with previous CRA: SCTPL has not cooperated with ICRA Ratings which was suspended its rating vide release dated May 09, 2016. The reason provided by ICRA Ratings is non-furnishing of information required for monitoring of ratings. SRC LABORATORIES: CRISIL Upgrades Rating on INR9.75MM Loan to B --------------------------------------------------------------- CRISIL has upgraded its rating to 'CRISIL B/Stable' from 'CRISIL B-/Stable' rating to the long-term bank facilities of SRC Laboratories Private Limited. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Proposed Long Term 2.4 CRISIL B/Stable (Upgraded Bank Loan Facility from 'CRISIL B-/Stable') Term Loan 9.75 CRISIL B/Stable (Upgraded from 'CRISIL B-/Stable') The rating upgrade reflects improvement in the scale of operations of the company backed by ramp up in its scale of operations on account of healthy orders from its customers. The rating upgrade also reflects SLPL's exposure to risks related to initial stages of operations for the company and to intense competition in the API manufacturing segment. These rating weaknesses are partially offset by the extensive industry experience of the promoters. Key Rating Drivers & Detailed Description Weakness * Intense competition in the API manufacturing segment: SLPL, as an API supplier for the generics industry, is exposed to intense competition, price erosion, and commoditisation in regulated markets. Rapid growth in the global generics markets, coupled with a focus on cost-containment by healthcare authorities in individual countries, has attracted numerous pharmaceutical players to the market. The revenue growth in the global generics market is, however, constrained by several factors, such as intense competition, especially related to blockbuster drugs going off-patent, and aggressive defence tactics by innovator companies through the introduction of authorised generics. In addition, players in the regulated generics markets in the US and Europe are vulnerable to pricing pressures because of the entry of several cost-competitive Indian players. CRISIL believes that SLPL continues to remain exposed to intense competition in the API manufacturing segment. Strength Promoter's experience in the pharmaceutical segment: SLPL was incorporated by its managing director, Dr. R C Reddy Yeluri, who holds a doctorate degree from S K University (Anantapur). At a very young age he started SRC Labs with all modern equipment, satisfying all industry norms. Prior to that, he had a long career in Mylan Laboratories Ltd and in Dr. Reddys Laboratories Ltd.'s research and development division. Based on the extensive experience he gained while working in these organisations, Mr.Reddy started the company. Dr. RC Reddy Yeluri started SLPL in 2009 and was into manufacturing of fine and specialty chemicals used for R&D, for pharma companies like Biocon and Adventium on trial run basis to gain expertise in manufacturing of chemicals for the pharma industry. Subsequently, he started the API manufacturing unit in Raichur. SLPL is expected to benefit over the medium term from the promoter's extensive industry experience. Outlook: Stable CRISIL believes that SLPL will continue to benefit from the promoter's extensive experience in the fine chemicals and bulk drugs manufacturing segment. The outlook may be revised to 'Positive', in case of better than expected accrual on the back of earlier-than-expected project stabilisation. Conversely, the outlook may be revised to 'Negative' if there is a sizeable cost overrun in the project or delays in stabilising the project, impacting the company's financial risk profile. SLPL was established by Dr. R C Reddy Yeluri in 2009 with a research and development facility in Hyderabad. It was engaged in manufacturing of fine and specialty chemicals until 2015. The company stopped manufacture of fine chemicals during 2014-15 and has set up an API manufacturing unit, which has commenced commercial production from February 2016. During 2015-16 (refers to financial year April 1 to March 31), SLPL reported revenues of INR1.82 crore with negative PAT. SRI SRINIVASA: CRISIL Raises Rating on INR6MM Cash Loan to B+ ------------------------------------------------------------- CRISIL has upgraded its ratings on the bank facilities of Sri Srinivasa Agro Products to 'CRISIL B+/Stable' from 'CRISIL B/Stable'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 6 CRISIL B+/Stable (Upgraded from 'CRISIL B/Stable') Proposed Long Term 1 CRISIL B+/Stable (Upgraded Bank Loan Facility from 'CRISIL B/Stable') The rating upgrade reflects improvement in the company's liquidity, backed by its increasing cash accruals and cushion in the bank lines. SSAP is expected to generate net cash accrual of INR 47 lacs in FY 2016-17 against which there is no fixed debt repayment obligation. The bank lines was moderately used at 51 per cent for the trailing 10 months ending January 2017. The rating reflects SSAP's modest scale of operations, exposure to customer concentration risk, and below-average financial risk profile because of high gearing. These weaknesses are partially offset by promoters' extensive experience in the rice industry. Key Rating Drivers & Detailed Description Weaknesses * Modest scale of operations and intense competition SSAP has a modest scale of operations with expected revenues of around INR36 cr.in 2016-17 (refers to financial year, April 1 to March 31). Though the firm has been in existence for more than 20 years, the size has remained modest. * Customer concentration risk: About 50.0 percent of the rice is sold to Metro cash and Carry. The firm has no formal contract for the same, and in case of any future dissolvement of the relationship with the customer, the revenues would be impacted. Hence customer concentration risk in the modest scale of operations remains a key rating sensitive factor. * Below-average financial risk profile: SSAP's financial risk profile is marked by high gearing and low net worth. The firm's net worth is low expected at around INR 60 lakhs as on March 31, 2017. Strength * Extensive experience of promoter SSAP is promoted by Mr. Shekar who has been in the trading of rice since 1991. The promoter started a rice trading firm in 1991 on a small scale and subsequently went on to establish a rice milling firm. Outlook: Stable CRISIL believes SSAP will benefit over the medium term from its promoters' extensive industry experience. The outlook may be revised to 'Positive' if financial risk profile improves because of higher-than-expected cash accruals or significant capital infusion resulting in a better capital structure. Conversely, the outlook may be revised to 'Negative' in case of aggressive, debt- funded expansion, or steep decline in revenue and profitability, or substantial capital withdrawal, leading to deterioration in financial risk profile. SSAP was set up in 1991 as a proprietorship firm by Mr. S. Shekar and was reconstituted as a partnership firm in 2015. The firm is into trading and processing of non-basmati 'Kolam' rice. It sells its products under various brands, including S, Keerti, Colours, and Sky. For fiscal 2016, the SSAP reported a profit after tax of INR 13.22 lakhs on net sales of INR31.29 crore, as against a profit after tax of INR 13.29 lakhs on net sales of INR30.83 cr for fiscal 2015. STATE BANK: Moody's Rates MTN Capital Securities Component (P)B1 ---------------------------------------------------------------- Moody's Investors Service announced that on September 6, 2016, it assigned a (P)B1 rating to the perpetual capital securities component of the existing USD10 billion Medium Term Note (MTN) program of State Bank of India (SBI, deposits Baa3 positive, BCA ba1). Prior to September 2016, Moody's had assigned a (P)Baa3 rating to the senior unsecured component, a (P)Ba1 rating to the subordinated component, a (P)Ba2 rating to the junior subordinated component, and a (P)Prime-3 rating to the short-term component of the MTN programme. The terms and conditions of the capital securities incorporate Basel III-compliant non-viability language in accordance with Reserve Bank of India (RBI) guidelines, and will qualify as regulatory Additional Tier 1 (AT1) capital securities. The securities can be issued by SBI directly, or by any of its branches outside India. RATINGS RATIONALE The rating is positioned three notches below the bank's adjusted baseline credit assessment (BCA) of ba1, in accordance with Moody's standard notching guidance for contractual non-viability preferred securities with an optional, non-cumulative distribution-skip mechanism. The three-notch difference from the adjusted BCA reflects the probability of impairment associated with non-cumulative coupon suspension, as well as the likelihood of high loss severity when the bank reaches the point of non-viability. Under the terms and conditions, the principal and any accrued but unpaid distributions on these capital securities would be written down, partially or in full, when SBI's group or solo common equity tier 1 (CET1) ratio is at or below the 5.5% prior to March 31, 2019, and 6.125% from and including March 31, 2019. In such a scenario, the write-off may be temporary and the amount written-off could be reinstated subject to RBI's conditions. While the CET1 trigger event threshold is higher than the global standard, Moody's does not consider these securities to be 'high trigger' contingent capital securities, as the broad principle of loss absorption is at the point of non-viability and not in advance of a bank failure. In this regard, the ratings of the AT1 securities are notched from SBI's adjusted BCA. Loss absorption will also be triggered in the event that the RBI notifies the bank that without such write-off, the bank would become non-viable, or if the RBI decides to make a public sector capital injection without which the bank would become nonviable. Additionally, such loss absorption will be triggered if RBI or any other relevant authority decides to reconstitute or amalgamate the bank with another bank. In such scenarios, the write-down will be permanent. Furthermore, SBI, as a going concern, may choose not to pay interest on these securities on a non-cumulative basis. As such, the distributions on these capital securities are fully discretionary. However, a common share dividend stopper applies if a distribution is missed. These securities are senior to common shareholders and perpetual non-cumulative preference shareholders, but junior to all depositors, general creditors, and holders of subordinated debt of SBI, other than any subordinated debt that qualifies as Additional Tier 1 capital. These securities rank pari passu with any other debt instruments classified as Additional Tier 1 Capital under the RBI Guidelines and with any subordinated obligation that was eligible for inclusion in hybrid Tier 1 capital under the then prevailing Basel II guidelines. While SBI is majority-owned by the Indian government (Baa3 Positive), Moody's do not assume that AT1 securities will receive extraordinary government support, as these are designed to absorb losses at the point of non-viability. WHAT COULD CHANGE THE RATINGS UP/DOWN The ratings of the AT1 securities are notched from SBI's adjusted BCA. As such, the ratings of the securities will be upgraded or downgraded if SBI's BCA is revised upwards or downwards. SBI's BCA is unlikely to be revised upwards in the next 12-18 months, because asset quality deterioration in recent years has put pressure on its credit profile. SBI's BCA could face downward pressure if: (1) its NPL ratio increases substantially from current levels; and/or (2) if its core earnings fall, impacting its ability to support an increase in credit costs. SBI's deposit ratings and ratings of senior unsecured debt could be upgraded if India's sovereign rating of Baa3 is upgraded. Additionally, any indications that support from the Government of India (Baa3 positive) has diminished or that additional capital requirements may arise beyond the government's budgeted amount could put the bank's ratings under pressure. Any downward changes in the sovereign's ceilings could also affect the bank's ratings. The principal methodology used in this rating was Banks published in January 2016. State Bank of India, headquartered in Mumbai, held total assets of INR22.7 trillion at end-June 2016. SUBHKARAN AND SONS: CRISIL Cuts Rating on INR50MM Loan to 'D' ------------------------------------------------------------- CRISIL has downgraded its rating on the short-term bank facility of Subhkaran and Sons to 'CRISIL D' from 'CRISIL A4+'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Letter of Credit 50 CRISIL D (Downgraded from 'CRISIL A4+') The downgrade reflects recent instances of letter of credit devolvement due to cash flow mismatches, leading to stretched liquidity. Analytical Approach For arriving at the rating, CRISIL has now rated SAS on standalone basis against previous approach to rate on consolidation with its associates. The revision in approach is following track record of no funds fungibility within the associates, despite common promoters. Key Rating Drivers & Detailed Description Weakness * Weak financial risk profile: Due to significant stretch in realisation of payments from key customers, liquidity has stretched. Furthermore, the operating margin dipped to 0.98% in fiscal 2016 from 1.1% in fiscal 2015 and 2.5% in fiscal 2014. Thus, weakening the debt protection metrics. Strength * Moderate scale of operations: The company has moderate scale of operations, reflected in revenue INR106 crore in fiscal 2016. Its promoters' have experience of over two decades in the steel industry, and have established relationships with key buyers and suppliers. Incorporated in 1981 by Mr Vinod Jatia and Mr Prateek Jatia, SAS trades in iron and steel products such as hot- and cold-rolled coils, sheets, and plates, sponge iron lumps, and fines. Profit after tax was INR0.43 crore on trading income of INR106.18 crore in fiscal 2016, vis-a-vis INR1.91 crore and INR107.74 crore, respectively, in fiscal 2015. SUBRAHMANYESWARA SWAMY: CRISIL Puts B- Rating on INR5.79MM Loan --------------------------------------------------------------- CRISIL has assigned its 'CRISIL B-/Stable' rating to the long- term bank facilities of Subrahmanyeswara Swamy Rice Mill (SSRM). Amount Facilities (INR Mln) Ratings ---------- --------- ------- Proposed Long Term Bank Loan Facility 3.21 CRISIL B-/Stable Cash Credit 1.00 CRISIL B-/Stable Long Term Loan 5.79 CRISIL B-/Stable The rating reflects a small scale of operations in the intensely competitive rice-milling industry, and susceptibility to changes in government regulations and to volatility in raw material prices. The rating also factors in a weak financial risk profile because of a small networth, high gearing, and low debt protection metrics. These weaknesses are mitigated by the extensive industry experience of the promoters, and an established relationship with customers and suppliers. Key Rating Drivers & Detailed Description Weaknesses * Small scale of operations in an intensely competitive industry: Revenue was INR3.85 crore in fiscal 2016; the small scale of operations constrains the bargaining power of the firm and exposes it to pricing pressure. * Susceptibility to changes in regulations and to volatility in raw material prices: For a rice-milling company, raw material accounts for 90% of the total revenue, which exposes the firm to risks relating to volatility in raw material prices. Moreover, the domestic rice industry is highly regulated in terms of paddy prices, export/import policies, and rice release mechanism, which affects the credit quality of players. * Below-average financial risk profile: The networth was low at INR0.2 crore as on March 31, 2016. The debt protection metrics were weak with interest coverage ratio of 1.4 times for fiscal 2016. Strength * Extensive industry experience of the promoters: The promoters have an experience of more than three decades in the rice-milling industry. This has enabled the firm to establish a strong relationship with customers and suppliers. Outlook: Stable CRISIL believes SSRM will continue to benefit from the extensive industry experience of its promoters. The outlook may be revised to 'Positive' if substantial increase in revenue and profitability or significant infusion of capital leads to a stronger financial risk profile, particularly capital structure. The outlook may be revised to 'Negative' if any large debt-funded capital expenditure or withdrawal of capital by the promoters weakens the financial risk profile. SSRM was established in 1983, promoted by Mr V Peddanna , Mr V Rajendra Prasad, and their family members. The firm mills and processes paddy into rice, rice bran, broken rice, and husk. It has an installed paddy milling capacity of 4 tonne per hour (tph) at its mill in Guntur, Andhra Pradesh. Profit after tax was INR0.1 crore on revenue of INR3.9 crore in fiscal 2016, vis-a-vis INR0.1 crore and INR5.1 crore, respectively, in fiscal 2015. SUPERWAYS ENTERPRISES: CRISIL Cuts Rating on INR100MM Loan to D --------------------------------------------------------------- CRISIL has downgraded its rating on the short-term bank facilities of Superways Enterprises Private Limited to 'CRISIL D' from 'CRISIL A4+'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Letter of Credit 100 CRISIL D (Downgraded from 'CRISIL A4+') The downgrade reflects recent instances of letter of credit devolvement due to cash flow mismatches; leading to stretched liquidity. Analytical Approach For arriving at rating, CRISIL has now rated SEPL on standalone basis against previous approach to rate on consolidation with its associates. The revision in approach is following track record of no funds fungibility within the associates, despite common promoters. Key Rating Drivers & Detailed Description Weakness * Weak financial risk profile: Due to significant stretch in realisation of payments from key customers, liquidity has stretched. Furthermore, the operating margin declined to 0.3% in fiscal 2016 from 1.4% in fiscal 2015 and 1.8% in fiscal 2014. Thus, weakening the debt protection metrics. Strength * Moderate scale of operations: Revenue increased to INR251 crore in fiscal 2016 from INR226 crore in fiscal 2015, reflecting moderate scale of operations. Its promoters' have experience of over two decades in the steel industry, and have established relationships with key buyers and suppliers. Incorporated in 1989 by Mr Vinod Jatia and his family, SEPL trades in iron and steel products such as hot- and cold-rolled coils, sheets, and plates, sponge iron lumps, and fines. Profit after tax was INR1.09 crore on trading income of INR251.53 crore in fiscal 2016, vis-a-vis INR1.63 crore and INR226.37 crore, respectively, in fiscal 2015. T C COMMUNICATION: Ind-Ra Assigns 'B+' Long-Term Issuer Rating -------------------------------------------------------------- India Ratings and Research (Ind-Ra) has assigned T C Communication Private Limited (TCCPL) a Long-Term Issuer Rating of 'IND B+'. The Outlook is Stable. The instrument-wise rating actions are: -- INR120 mil. Fund-based limit assigned with IND B+/Stable/IND A4 rating; and -- INR30 mil. Non-fund-based limit assigned with IND A4 rating KEY RATING DRIVERS The ratings reflect TCCPL's moderate scale of operations and weak credit metrics. Revenue was INR392.57 million in FY16 (FY15: INR415.64 million; FY14: INR362.07 million). The decline in FY16 revenue was largely due to a slowdown in the power and infrastructure sectors. In FY16, net leverage (total adjusted net debt/operating EBITDAR) was 6.87x (FY15: 6.42x; FY14: 7.55x) and interest coverage (operating EBITDA/gross interest expense) was 1.41x (FY15: 1.36x; FY14: 1.48x). The ratings also reflect the working capital intensive nature of its business and competitive intensity in the wire and cable industry. TCCPL's working capital cycle was elongated at 173 days in FY16 (FY15: 150 days, FY14: 161 days), mainly due to elevated inventory levels and high debtor days. However, its liquidity position was comfortable, indicated by a working capital utilization of 81.92% during the 12 months ended January 2017, as it has unsecured loans from directors and related parties. The ratings, however, are supported by a satisfactory EBITDA margin of 6.57% (FY15: 6.53%; FY14: 6.39%), its promoters' more than 15 years of experience in cable and wire manufacturing, and an established client base. RATING SENSITIVITIES Negative: Any decline in revenue or deterioration in EBITDA margin/working capital cycle leading to a sustained deterioration in credit metrics will be negative for the ratings. Positive: Substantial revenue growth, along with an improvement in EBITDA margin, leading to a sustained improvement in credit metrics will lead to a positive rating action. COMPANY PROFILE Established in 2000, TCCPL manufactures a wide range of wires and cables. It provides power, control, instrumentation, compensating and extension, telephone and elastomer cables. TCCPL is an ISO 9001: 2008 certified company. Its manufacturing plant is in Ghaziabad. The plant has a production capacity of 7.5 million metres per annum and a utilization level of 58.66%. TERRA ENERGY: ICRA Raises Rating on INR20.16cr Loan to B+ --------------------------------------------------------- ICRA has upgraded the long term rating assigned to INR9.89 crore term loans (revised from INR28.65 crore), INR8.95 crore long term fund based facilities (revised from INR7.0 crore) and INR20.16 crore proposed long term fund based limits (revised from INR3.35) of Terra Energy Limited from [ICRA]D to [ICRA]B+. ICRA has also upgraded the short term rating outstanding on INR1.50 crore (revised from INR7.67 crore) from [ICRA]D to [ICRA]A4. The long term rating carries stable outlook. Amount Facilities (INR crore) Ratings ---------- ----------- ------- Term Loans 9.89 [ICRA]B+(stable); upgraded from [ICRA]D Long term fund based 8.95 [ICRA]B+(stable); upgraded from [ICRA]D Proposed Fund Based Limits 20.16 [ICRA]B+(stable); upgraded from [ICRA]D Short Term Non Fund Based Limits 11.00 [ICRA]A4; upgraded from [ICRA]D Rationale ICRA's rating action follows regularisation of debt servicing obligations by the company. ICRA has taken a consolidated view of the Company - along with group entities - Shree Ambika Sugars Limited (rated [ICRA]B) and Thiru Arooran Sugars Limited (rated [ICRA]B+/[ICRA]A4), due to operational and financial linkages and corporate guarantees extended. TEL has barter arrangement with the parent company - Thiru Arooran Sugars Limited for bagasse, steam and power. While the company has healthy capital structure with moderate gearing (0.78x as on March 31, 2016), it has witnessed moderation in revenue and top-line in the last few years, although there was some improvement during FY16. Moreover ICRA takes note of the continued dispute with TANGEDCO over the billing rate, with the Company recognizing revenues at a higher rate than the rate at which TANGEDCO is settling the bills. This coupled with general delays in settling the receivables by TANGEDCO, has resulted in high receivable position for the Company, putting pressure on the liquidity profile. The disputes are being heard at the appropriate authorities and any adverse outcome may have impact on company's financial position and is a rating sensitivity factor. Key rating drivers: Credit Strengths * Operational power purchase agreement (PPA) with TANGEDCO for sale of generated power which is valid till 2019. * Bagasse sharing agreement with its holding company, Thiru Arooran Sugars Limited (TASL) mitigates the raw material risk for the company to some extent. Moreover, in case of low availability of bagasse from TASL, TEL can use coal as fuel. * Moderately geared capital structure Credit Weakness * Delays in payments by TANGEDCO coupled with settling of bills at a lower rate than invoice rate have resulted in built-up of debtors in TEL's books, and tight liquidity conditions. * Fixed tariff model makes the company's profitability vulnerable to fuel availability at competitive prices * Corporate guarantees extended to the group company- Thiru Arooran Sugars Limited. Sensitivities * Outcome of the dispute with TANGEDCO being heard at appropriate authorities Description of Key Rating Drivers Highlighted: Terra Energy Limited was incorporated in March 2000, following the demerger of the cogeneration plants of TASL. It has installed capacity of 47.1 MW, which includes both the cogeneration plants located at Cuddalore and Thanjavur districts. The primary customer of the company is TASL, to which the company supplies electrical power and steam for meeting the requirements of sugar operations. The excess power over and above the sugar unit's requirements is sold to TANGEDCO, which accounts for ~40-45% of total power generated. TEL primarily uses bagasse (supplied by TASL) as its fuel to generate power and hence the operational performance of TASL in terms of cane crushing volumes has a direct impact on the company's turnover and profitability. During the years of low cane crushing, TEL has resorted to power generation through coal to meet the power and steam requirements of the sugar units. As a result, of significant operational and financial dependence of TEL on TASL, the credit risk profile of TEL is significantly governed by credit profile of TASL. Further both companies have given cross guarantees to each other. TEL has entered into 15 year PPA arrangement with TANGDECO, which is valid till 2019 and sale to TANGEDCO accounts for ~70% of its operating income. However, there is a dispute between TANGEDCO and TEL over the power purchase price and the former is settling the power purchase price at a lower rate than the invoiced rate, which coupled with delays in payment by TANGEDCO has resulted in buildup of receivables and pressure on liquidity. The company has also witnessed moderation in revenue and profitability in the last few years, although there has been improvement in FY16. The capital structure of the Company also remains healthy with gearing of 0.78x as on March 31, 2016. Nonetheless, the outcome of the disputes with TANGDECO being heard at the appropriate authorities is a rating sensitivity factor. Terra Energy Limited was incorporated in March 2000, following the demerger of the cogeneration plants of TASL. It has installed capacity of 47.1 MW. TASL is the holding company of TEL with 66% shareholding. These cogeneration plants are located adjacent to the sugar plants of TASL and TEL has barter arrangement with TASL for supply of steam and power in lieu of bagasse. TEL exports surplus power to TANGEDCO. THIRU AROORAN: ICRA Assigns B+ Rating to INR235.03cr Loan --------------------------------------------------------- ICRA has upgraded/assigned the long term rating assigned to INR29.70 crore term loans (revised from INR101.7 crore), INR56.84 crore long term fund based facilities (revised from INR200.3 crore), INR16.11 crore proposed long term fund based limits (revised from INR29.5 crore) and INR235.03 crore long term non fund based facilities of Thiru Arooran Sugars Limited from [ICRA]D to [ICRA]B+. ICRA has also upgraded the short term rating outstanding on INR1.50 crore (revised from INR7.67 crore) from [ICRA]D to [ICRA]A4. The long term rating carries stable outlook. Amount Facilities (INR crore) Ratings ---------- ----------- ------- Term Loans 29.70 [ICRA]B+(stable); upgraded from [ICRA]D Long term fund Based 56.84 [ICRA]B+(stable); upgraded from [ICRA]D Proposed Fund Based Limits 16.11 [ICRA]B+(stable); upgraded from [ICRA]D Long Term Non Fund Based Limits 235.03 [ICRA]B+(stable) assigned Short Term Non Fund Based Limits 1.50 [ICRA]A4; upgraded from [ICRA]D Rationale ICRA's rating action follows the regularisation of servicing of debt obligations by the company. ICRA has taken a consolidated view of the Company- along with group entities - Shree Ambika Sugars Limited (rated [ICRA]B) and Terra Energy Limited (rated [ICRA]B+/[ICRA]A4), due to operational and financial linkages and corporate guarantees extended. ICRA takes note of the improvement in outlook for the Company's core sugar business operations on the back of increase in the domestic sugar realizations supported by lower domestic sugar production during SY2016, exports of 1.6 million MT and the expectations of further decline in the domestic sugar production in SY2017. This is expected to support the contribution margins from sugar produce in the near term. Further, TASL has also benefited from gain on the closing sugar inventory as on March 31, 2016 during H1 FY2017 with the average sugar prices prevailing around INR33,500-35,000/MT. TASL has replaced part of the high cost term loans and the working capital facilities by low cost trade advances (backed by export performance bank guarantee against future sugar export obligation) which is expected to result in reduction in the interest expenses. While ICRA takes note of the improved sugar realizations and hence improvement in financial performance during H1 2016-17, any further increase in the profitability and debt coverage metrics of TASL is linked to the quantum of increase in the cane crushing volumes, from a low level of 5.45 lakh MT in FY2016 in relation to the company's crushing capacity. Further, the cash accruals are expected to be lower than the debt repayment along with the trade advance obligation during FY2017. However, upfront interest and commission payment for FY2017 (for trade advance) and ability to liquidate stocks with reduced drawing power restrictions, offer some comfort from the debt servicing perspective. ICRA also draws some comfort from TASL's past track record in sugar exports, which will help it in meeting the commitments under the trade advance arrangement. The ratings continue to factor in TASL's fully integrated nature of operations with cogeneration and distillery units which provide alternate revenue streams and some cushion against cyclicality in sugar business. The ratings also take into consideration TASL's experienced management, the dominant position of the company in its command area and proximity of the plants of the company to ports which it has used favorably to export sugar in the recent past. ICRA also takes note of the Company's plans to enter into contract manufacturing to mitigate the impact of cyclicality in the sugar sector and early firming up of contract will be a key rating sensitivity factor. The ratings remain constrained by the weak capital structure of the Company on the back of steep erosion of net worth witnessed due to continued losses during FY2014-FY2016, which coupled with high outside liabilities (which include total debt, trade advances and creditors) has resulted in high total outside liabilities/ tangible net worth of 8.15 times as on March 31, 2016. The ratings are also constrained by the company's exposure to forex fluctuation on the trade advance availed against future sugar exports given that the equivalent amount must be repaid in USD in the event of the company not honouring the sugar export obligation. The ratings also consider the vulnerability of sugar operations to agro climatic variations and government policies relating to cane pricing and exports. Key rating drivers: Credit Strengths * Long operating history in sugar business, experienced management and proximity of the plants of the company to ports which it has used favorably to export sugar in the recent past * TASL's integrated operations into distillery provides cushion to profitability against the cyclicality in sugar business * Improvement in the domestic sugar realizations to support the profitability from the sugar division when compared to the previous years * Replacement of large part of high cost term loans and Working capital facilities by low cost trade advances (backed by export performance bank guarantee against future sugar export obligation) to result in reduction of interest expenses and mitigate liquidity pressure to some extent. Credit Weakness * Weak contribution margins from sugar division on account of relatively high cane cost of production and low sugar realizations, have resulted in continued losses at the net level since FY2014, leading to erosion of net worth. This coupled with high outside liabilities (which majorly include total debt, trade advance and creditors) has resulted in high TOL/TNW of 8.15 times as on March 31, 2016 * While sugar realizations have improved, improvement in profitability will depend on the quantum of cane crushed which have been subdued in the recent past. * Pressure on coverage metrics;however interest and commission payment for FY2017 (for trade advance) and ability of the company to meet trade advance obligation through exports (based on its past track record), mitigate the impact in near term. * Company's financial performance remains vulnerable to cyclicality inherent in the business, agro-climatic risks, forex risks and Gov't policies relating to cane pricing and export/import of sugars. * Corporate guarantees extended to group companies namely- Terra Energy Limited and Shree Ambika Sugars Limited Sensitivities * Early firming up of the contract manufacturing agreement and quantum of potential income from the same * Quantum of cane crushed during the current season Description of Key Rating Drivers Highlighted: Thiru Arooran Sugars Limited operates two sugar plants, one each in Cuddalore and Thanjavur districts of Tamil Nadu (TN). It has a total of 8,500 TCD of cane crushing capacity and a 60 klpd distillery. Its units are also integrated with 47.10 MW cogeneration units of its subsidiary Terra Energy Limited, with which it has barter arrangement for supply of steam and power. TASL and its associate company SASL, with their large crushing capacity form one of the dominant players in their command area, and have also regularly used their proximity to port in importing raw sugar or in exporting sugar. During the past few years, the company had witnessed moderation in financial performance on account of subdued sugar prices relative to cane cost, low cane availability impacting capacity utilization resulting in net losses since FY14 and operating losses during FY16. The continued losses and the subsequent erosion in net worth coupled with high outside liabilities (which include total debt, trade advances and creditors) had resulted in weakening of capital structure, with high total outside liabilities/ tangible net worth of 8.15 times as on March 31, 2016. The weak performance and the resultant liquidity pressure also resulted in delays in debt servicing by the Company during FY16. However, the Company managed to raise ~Rs. 235.0 crore (USD 35 million) as trade advance from Cargill Inc. against staggered export commitments spread over nine years. The trade advance is backed by export performance guarantees extended by banks. The proceeds from the advance were used to replace high cost term loan and working capital facilities, which is expected to result in reduction in overall interest expenses. The Company has subsequently regularised its debt servicing. While ICRA takes note of the improved sugar realizations and improvement in financial performance during H1 2016-17, any further increase in the profitability and debt coverage metrics of TASL is linked to the quantum of increase in the cane crushing volumes, from a low level of 5.45 lakh MT in FY2016 in relation to the company's crushing capacity. Further, the cash accruals are expected to be lower than the debt repayment along with the trade advance obligation during FY2017. However, upfront interest and commission payment for FY2017 (for trade advance) and ability to liquidate stocks with reduced drawing power restrictions, offer some comfort from the debt servicing perspective. ICRA also draws some comfort from TASL's past track record in sugar exports, which will help it in meeting the commitments under the trade advance arrangement. The ratings also factor in the susceptibility of company's performance to cyclicality inherent in the business, agro- climatic risks, forex risks and Gov't policies relating to cane pricing and export/import of sugars. ICRA also takes note of the company's efforts to enter into contract manufacturing to mitigate the impact of cyclicality in the sugar business. Early firming up of the contract and quantum of potential income from the same remain a key rating sensitivity factor. Analytical approach: ICRA has taken a consolidated view of the Company - along with group entities - Shree Ambika Sugars Limited (rated [ICRA]B) and Terra Energy Limited (rated [ICRA]B+/[ICRA]A4), due to operational and financial linkages and corporate guarantees extended. Thiru Arooran Sugars Limited is one of the oldest sugar companies in India and was incorporated in 1954. Its sugar plants are based in Cuddalore and Thanjavur districts of Tamil Nadu. It has 8500 TCD of cane crushing capacity in its two plants, and a 60 klpd distillery. Its units are also integrated with 47.10 MW cogeneration units of its subsidiary Terra Energy Limited (TASL holds 66.19% stake in Terra Energy Limited), with which it has barter arrangement for supply of steam and power. TRUWOODS PRIVATE: ICRA Reaffirms B+ Rating on INR7.0cr Loan ----------------------------------------------------------- ICRA has reaffirmed the long-term rating of [ICRA]B+ assigned to INR7.00 crore fund based limits and also reaffirmed the short term rating of [ICRA]A4 assigned to INR13.00 crore non fund based limits of Truwoods Private Limited. The outlook on the long term rating is stable. Amount Facilities (INR crore) Ratings ---------- ----------- ------- Fund Based Limits 7.00 [ICRA]B+ (Stable) Reaffirmed Non Fund Based Limits 13.00 [ICRA]A4 Reaffirmed Rationale The reaffirmation of the ratings is constrained by the weak financial profile of the company with thin operating profitability of ~2.75% for the past two years and modest coverage metrics with interest coverage ratio of 1.68 times and NCA/Debt of 4% for FY2016; moderate scale of operations with revenues of INR62 crore in FY2016 driven by increased timber trading and high sea sales; and vulnerability of profitability to raw material and exchange rate fluctuations. The ratings are further constrained by the weak outlook for the timber and plywood industry due to lower availability of quality timber after the imposition of ban by Myanmar; company's presence in a highly competitive timber and plywood industry with numerous reputed and unorganized players and the threat from upcoming substitutes such as like Medium Density Fibre (MDF) and particle boards. The ratings, however, favourably factor in the vast experience of the promoter in the timber plywood industry; and proximity to the Visakhapatnam port which results in the easy access of imported timber. Going forward, the ability of the company to increase its scale of operations, improve profit margins and managing its working capital requirements effectively will be the key rating sensitivities from credit perspective. Key rating drivers Credit Strengths * Experienced management with more than two decades of experience in the plywood industry with well established relations with suppliers and customers * Proximity to Visakhapatnam port reduces transportation costs for import of raw materials Credit Weakness * Weak financial profile reflected in thin profitability, modest coverage indicators with interest coverage ratio of 1.68 times and NCA/TD of 4% for FY2016 * Small scale of operations with low profitability metrics owing to the limited value addition and trading business * Exposure of the products of the company to competition from upcoming substitutes like Medium Density Fibre (MDF) and particle boards * Vulnerability of profitability margins to raw material price and exchange rate fluctuations * Highly fragmented nature of plywood manufacturing industry resulting in stiff competition with presence of numerous players in both the organized and unorganized market Description of key rating drivers highlighted: TPL is part of the Deccan Group, which has a history of about two decades in the timber and plywood business. It has a plywood and veneer manufacturing facility in Visakhapatnam which results in reduced logistic costs involved in purchase of raw material which is largely imported. The company markets their plywood and other timber products through a network of more than 300 dealers across the country. The company's financial profile has continued to remain weak due to thin profitability resulting in weak debt coverage metrics in FY2016. The company's production and sales of veneer have steadily declined over the past three years with increased restrictions on import of Myanmar timber besides lower demand for the weaker quality logs and veneer of other countries. However, the growth in turnover over the past 2-3 years was supported by the increase in trading income derived from increase in high sea sales and timber log sales during this period. The company's profitability is also exposed to raw material and exchange rate fluctuation risks in the absence of hedging its payments for imports. Further, the company, like all other players in the industry, faces threat from emerging substitutes such as Medium Density Fibre (MDF) and particle boards and competition from numerous other players in the plywood industry. Incorporated in 2001 as a private limited company, Truwoods Pvt. Ltd. is engaged in manufacturing of decorative plywood and veneers. The company is part of the Deccan Group, which has a history of about two decades in the plywood business. The other group companies include Deccan Veneers Pvt. Ltd., Maxworth Plywoods Pvt. Ltd. (rated [ICRA]B+/[ICRA]A4), Alpine Panels Pvt. Ltd. (rated [ICRA]B/[ICRA]A4), Indus Tropics Ltd, etc.; all involved in the plywood and veneer related business. TPL has its veneer and plywood manufacturing facility in Visakhapatnam, Andhra Pradesh. Recent Results: As per the audited results for FY2016, the company reported operating profit of INR1.71 crore on turnover of INR62.63 crore as against operating profit of INR1.48 crore on turnover of INR53.33 crore during FY2015. As per the provisionals for 9mFY2017, the company reported an operating income of INR60.84 crore and profit after tax of INR0.69 crore. UJALA MINERALS: Ind-Ra Assigns 'BB-' Long-Term Issuer Rating ------------------------------------------------------------ India Ratings and Research (Ind-Ra) has assigned Ujala Minerals a Long-Term Issuer Rating of 'IND BB-'. The Outlook is Stable. Instrument-wise rating actions are: -- INR100 mil. Fund-based limits assigned with IND BB-/Stable rating; -- INR150 mil. Proposed non fund-based limits* assigned with Provisional IND A4+ rating * The rating is provisional and the final rating will be assigned subject to execution of sanction letter for the above facilities to the satisfaction of Ind-Ra. KEY RATING DRIVERS The ratings reflect Ujala's small scale of operations and moderate credit metrics. During FY16, revenue declined to INR150 million (FY15: INR343 million) owing to a decline in iron ore prices. However, operating margins increased to 7.9% in FY16 (FY15: 6.0%) as the company was able to increase the gap between its procurement and selling price. Interest coverage was 1.3x in FY16 (FY15: 1.4x), while net leverage deteriorated to 5.2x (2.7x) due to a decline in the top line. The company expects revenue to increase substantially in FY17, with around INR310 million already booked until January 2017. The ratings are constrained by Ujala's tight liquidity position with full utilization of fund-based working capital limits during the 12 months ended December 2016. However, the ratings benefit from the partners' over a decade- long experience in the iron ore fines trading business. RATING SENSITIVITIES Positive: An improvement in the scale of operations and the overall credit metrics will be positive for the ratings. Negative: Deterioration in the overall credit profile will be negative for the ratings. COMPANY PROFILE Incorporated on March 15, 2004, Ujala is a partnership firm engaged in the trading of iron ore and iron ore fines. Mr. Ramesh Chandra Moharana and Mr. Anil Jaiswal are the partners. VAKRANGEE FOUNDATION: Ind-Ra Affirms 'B+' Rating on INR35.3M Loan ----------------------------------------------------------------- India Ratings and Research (Ind-Ra) has affirmed the rating on Vakrangee Foundation's (VF) term loan at 'IND B+'. The Outlook is Stable. Instrument-wise rating action is: -- INR35.3 mil. Term loans affirmed with IND B+/Stable rating KEY RATING DRIVERS Modest Scale of Operations: The rating reflects VF's small scale of operations and financial performance basis operational tract record of only five years. In FY16 (Provisional), the society recorded income of INR77.60 million (INR44.80 million in FY15) and total expenses of INR76.95 million (INR51.24 million in FY15); VF's tuition fee contributed on average 99.19% to the total income during FY12-FY16. Ind-Ra expects the income to grow steadily in coming years. VF reported INR0.65 million of net surplus in FY16(P) as against the net deficit of INR6.44 million in FY15. Weak Liquidity Profile: The rating further reflects the society's weak liquidity profile reflected in low balance sheet resources. Available funds (cash and unrestricted investments) fell to INR7.22 million in FY16 (P) from INR12.42 million in FY15. Available funds covered only 14.32% operating expenditure and 9.43% debt in FY16 (P). The society's balance sheet resources provide moderate cushion relative to operating expenses and debt. Debt Burden: VF's debt burden, - measured as debt/ current balance before interest and depreciation (CBBID) - reduced to 2.81x in FY16(P) from 4.19x in FY14 on the back of an improvement of CBBID to INR27.23 million from INR8.91 million. However, Ind- Ra expects the debt/CBBID to decrease further in coming years on account of repayment of the existing loans and absence of any major capital expenditure in the near future. Growing Headcount: VF's student strength increased at a CAGR of 63.39% over FY12-FY16(P) to 1,575 students in FY16. The headcount increased 63.04% yoy in FY16 (FY15: 39.64%) and the acceptance rate declined to 96.87% in FY16 from 100% in FY15. Improved Coverage: In FY16(P), debt service and CBBID increased which resulted in improved debt service coverage ratio to 1.93x from 0.88x in FY15. RATING SENSITIVITIES Positive: A substantial increase in the revenue base along with improvement in liquidity ratios and debt service coverage ratio could trigger a positive rating action. Negative: Any unexpected fall in student demand, leading to fall in the operating profitability, resulting in strained liquidity, could trigger a negative rating action. SOCIETY PROFILE VF was established in July 2010, and is incorporated under the Societies Registration Act, 1973. The society was founded by Mr. Manish Bohra and Mrs. Bhawna Bohra. The society is running a school by the name Academic World School in Bemetara in Chhattisgarh. The school curriculum is affiliated to Central Board of Secondary Education, Delhi and has classes from Nursery to XII. VIKAS TRANSPORT: CRISIL Reaffirms B+ Rating on INR3.8MM Loan ------------------------------------------------------------ CRISIL has reaffirmed its ratings on the bank facilities of Vikas Transport Co. at 'CRISIL B+/Stable/CRISIL A4'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Bank Guarantee 12 CRISIL A4 (Reaffirmed) Cash Credit 3.8 CRISIL B+/Stable (Reaffirmed) The ratings reflect the firm's modest scale of operations in the intensely competitive road transport business, and customer and geographical concentration in revenue. These weaknesses are partially offset by the extensive experience of its promoters. Key Rating Drivers & Detailed Description Weaknesses *Modest scale of operations in competitive segment: Limited value-added services and tender-based operations in an intensely competitive industry have led to a small scale of operations. *Customer and geographical concentration in revenue: Majority of projects are from Jammu & Kashmir State Road Transport Corporation and Food Corporation of India. Also, operations are mainly confined to Jammu & Kashmir and Punjab. Strength *Extensive experience of promoters: With presence of more than 10 years in the transport segment, the promoters have been able to win tenders and stabilise revenue. Outlook: Stable CRISIL believes VTC will benefit over the medium term from the extensive experience of its promoters. The outlook may be revised to 'Positive' in case of larger-than-expected topline, diversification in customer profile, and improvement in profitability. The outlook may be revised to 'Negative' if increase in receivables, substantial debt-funded expansion, or lower-than-expected cash accruals weakens financial risk profile. Set up in 2000 in Jammu as a partnership firm by Mr. Paramjeet Singh and his wife, Ms. Harvinder Kaur, VTC is engaged in bulk road transport services. Profit after tax (PAT) was INR1.49 crore on an operating income of INR54.89 crore in fiscal 2016, vis-a' -vis a PAT of INR1.05 crore on an operating income of INR47.67 crore in fiscal 2015. VIRAJ SYNTEX: CRISIL Reaffirms B+ Rating on INR4.15MM Loan ---------------------------------------------------------- CRISIL has reaffirmed its 'CRISIL B+/Stable/CRISIL A4' ratings on the bank facilities of Viraj Syntex Private Limited. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 4.15 CRISIL B+/Stable (Reaffirmed) Inland Guarantees 0.50 CRISIL A4 (Reaffirmed) Inland/Import Letter of Credit 1.00 CRISIL A4 (Reaffirmed) Packing Credit 1.35 CRISIL A4 (Reaffirmed) Proposed Long Term Bank Loan Facility 1.94 CRISIL B+/Stable (Reaffirmed) Term Loan 2.06 CRISIL B+/Stable (Reaffirmed) The ratings reflect VSPL's modest scale of operations, average financial risk profile marked by high gearing and large working capital requirements. These weaknesses are partially offset by the extensive industry experience of VSPL's promoters. Key Rating Drivers & Detailed Description Weaknesses * Modest scale of operations: VSPL's business risk profile is constrained by its modest scale of operations in the intensely competitive industry with turnover of around INR15.77 crores for 2014-15. * Average financial risk profile: Financial risk profile remain average marked by high gearing of 2.5 times as on March 31, 2016 and comfortable debt protection metrics with interest coverage of 2.05 times and net cash accruals to total debt of 0.1 times for fiscal 2016. * Large working capital requirements: Operations are working capital intensive as reflected in high gross current assets of 285 days as on March 31, 2016 This is due to the high debtors and high inventory levels which stood at 171 and 105 days respectively as on March 31, 2016. Strengths * Promoters' extensive industry experience: Mr Rahul Kohli and Ms Ruchi Kohli have experience of 21 years in the infrastructure and defence industry. The promoter family has diversified presence through group concerns. VSPL benefits from its promoters' extensive experience, their understanding of the local market dynamics, and established relationships with suppliers and customers. Outlook: Stable CRISIL believes VSPL will continue to benefit from its promoters' extensive industry experience. The outlook may be revised to 'Positive' if capital structure improves because of equity infusion or higher-than-expected cash accrual driven by revenue growth and prudent working capital management. The outlook may be revised to 'Negative' if the financial risk profile deteriorates on account of decline in revenue and profitability, or larger- than-expected, debt-funded capital expenditure, or if liquidity weakens significantly due to increase in working capital requirement. VSPL, incorporated in 1994 by the Kanpur based Kohli family, manufactures braided cords/ropes, personal protective equipment, material handling equipment, and load strapping equipment for the infrastructure, automotive, airforce, and defence industries. VSPL reported a net profit of INR 0.36 crore on net sales of INR15.77 crore for fiscal 2016 against a net profit of INR0.24 crore on net sales of INR18.45 crore for fiscal 2015. Any other information: The net sales of VSPL has decreased to INR 15.77 cr. in fiscal 2016 from INR18.45 cr. a year earlier on account of decline in demand from customers. The company has already recorded top line of INR 15.0 crore till January, 2017. The company is estimated to report revenues of INR19.0 crores in FY17. Operating margin remains at 13.06% which is higher than CRISIL's expectations. Operations remained working capital intensive with gross current assets (GCA) of 285 days for the twelve months ended on March 31, 2016. Financial risk profile remains average marked by high gearing of 2.5 times and comfortable debt protection metric with interest coverage of 2.05 times and net cash accruals to total debt of 0.1 times for fiscal 2016. Liquidity is marked by high limit utilisation and sufficient cash accruals against debt obligation. ========= J A P A N ========= TOSHIBA CORP: Seeks Advise on Potential US Unit Bankruptcy Cost --------------------------------------------------------------- Reuters reports that Toshiba Corp has asked a Japanese law firm to help estimate the potential financial impact if it decides its U.S. nuclear unit Westinghouse should file for Chapter 11 protection from creditors, sources with knowledge of the matter said. Toshiba is looking at a potential Chapter 11 filing as one of several options for Westinghouse as a means to limit future losses from the Pittsburgh-based company, the two sources said, Reuters relates. The sources declined to be identified as they were not authorized to speak to the media, Reuters notes. Last week, responding to media reports on a potential Chapter 11 filing, Toshiba said it was not aware Westinghouse was considering the step, Reuters recounts. According to Reuters, a spokesman on March 1 said the company had no immediate comment on whether a law firm had been approached about the matter. Reuters says the TVs-to-construction conglomerate has been plunged into crisis after it emerged that cost overruns at two U.S. nuclear power plant construction projects would result in a $6.3 billion writedown - forcing it to put a majority stake in its prized chips business up for sale. Reuters relates that analysts and sources with knowledge of the matter have previously said that even under a Chapter 11 filing, Toshiba could still be on the hook for up to $7 billion in contingent liabilities as it has guaranteed Westinghouse's contractual commitments - an arrangement typical for the nuclear industry. Toshiba dispatched a group of experts, including lawyers, to Westinghouse in mid-February to assess the U.S. unit's assets, the two sources, as cited by Reuters, said. Preliminary estimates from that group show a Westinghouse bankruptcy filing would result in Toshiba having to take a fresh charge of at least JPY300 billion ($2.6 billion), the sources said, Reuters relays. That figure is narrower in scope than the $7 billion Toshiba has in contingent liabilities, as it does not include damages that Westinghouse's customers may seek from Toshiba, including damages that the owners of the two projects could claim if they were not completed, according to Reuters. A Chapter 11 filing would still yield benefits, however, as Westinghouse would come off Toshiba's consolidated accounts. That could offset some of the charge, the sources said, adds Reuters. About Toshiba Toshiba Corporation (TYO:6502) -- http://www.toshiba.co.jp/-- is a Japan-based manufacturer involved in five business segments. The Digital Products segment offers cellular phones, hard disc devices, optical disc devices, liquid crystal televisions, camera systems, digital versatile disc (DVD) players and recorders, personal computers (PCs) and business phones, among others. The Electronic Device segment provides general logic integrated circuits (ICs), optical semiconductors, power devices, large- scale integrated (LSI) circuits for image information systems and liquid crystal displays (LCDs), among others. The Social Infrastructure segment offers various generators, power distribution systems, water and sewer systems, transportation systems and station automation systems, among others. The Home Appliance segment offers refrigerators, drying machines, washing machines, cooking utensils, cleaners and lighting equipment. The Others segment leases and sells real estate. As reported in the Troubled Company Reporter-Asia Pacific on Dec. 30, 2016, Moody's Japan K.K. downgraded Toshiba Corporation's corporate family rating (CFR) and senior unsecured rating to Caa1 from B3. Moody's has also downgraded Toshiba's subordinated debt rating to Ca from Caa3, and affirmed its commercial paper rating of Not Prime. At the same time, Moody's has placed Toshiba's Caa1 CFR and long-term senior unsecured bond rating, as well as its Ca subordinated debt rating under review for further downgrade. The TCR-AP reported on Jan. 26, 2017, that S&P Global Ratings said it has lowered its long-term corporate credit rating on Toshiba Corp. to 'CCC+' and its short-term corporate credit and commercial paper program ratings on the company to 'C', all by one notch. All of these ratings remain on CreditWatch with negative implications. S&P also lowered its senior unsecured debt rating on Toshiba two notches to 'B-' from 'B+' and kept the rating on CreditWatch negative. On Dec. 28, 2016, S&P placed the long- and short-term ratings on Toshiba on CreditWatch with negative implications at the same time as lowering the long-term ratings, in response to Toshiba's announcement that it might recognize several JPY100 billion in impairment losses related to goodwill arising from its acquisition of a nuclear power business through U.S.-based Westinghouse Electric Co. LLC, because the goodwill far exceeded the company's initial estimates. TOSHIBA CORP: Foxconn Confirms Plan to Buy Chip Business -------------------------------------------------------- Lauly Li at Taipei Times reports that Foxconn Technology Group on March 1 acknowledged that it intends to buy Toshiba Corp's loss- making chip business. Foxconn chairman Terry Gou announced the plan during a groudbreaking ceremony for a factory in China, the report says. "We have the experience of [buying] Sharp Corp. We are sincere and confident about [investing in] Toshiba," Gou told a media briefing after the ceremony at Sakai Display Production Corp's (SDP) 10.5-generation display factory in Guangzhou, China, according to Taipei Times. The briefing was live-streamed on the Internet, the report notes. It was the first time Gou publicly confirmed the company's interests in purchasing Toshiba's memorychip business, after the Japanese firm last month said it plans to sell stakes in its memorychip unit and other businesses, in a bid to alleviate its financial troubles, says Taipei Times. After South Korea's Samsung Electronics Co, Toshiba is the second-largest NAND flash memory chip manufacturer in the world, the report notes. According to Taipei Times, the Japanese firm is reportedly to send letters soliciting offers for the memory chip business this week and is seeking bids valued at JPY1.5 trillion (US$13.19 billion), Bloomberg reported on March 1, citing people familiar with the matter. Potential bidders include Foxconn, South Korea's SK Hynix Inc, Micron Technology Inc and Western Digital Corp, the report, as cited by Taipei Times, said. Gou said Foxconn is a client and a partner of Toshiba's, relays Taipei Times. Gou did not say if Foxconn has officially submitted a bid or how many of Toshiba's businesses it is willing to buy, however he said: "Money should not be the only thing [for Toshiba] to consider," adds Taipei Times. About Toshiba Toshiba Corporation (TYO:6502) -- http://www.toshiba.co.jp/-- is a Japan-based manufacturer involved in five business segments. The Digital Products segment offers cellular phones, hard disc devices, optical disc devices, liquid crystal televisions, camera systems, digital versatile disc (DVD) players and recorders, personal computers (PCs) and business phones, among others. The Electronic Device segment provides general logic integrated circuits (ICs), optical semiconductors, power devices, large- scale integrated (LSI) circuits for image information systems and liquid crystal displays (LCDs), among others. The Social Infrastructure segment offers various generators, power distribution systems, water and sewer systems, transportation systems and station automation systems, among others. The Home Appliance segment offers refrigerators, drying machines, washing machines, cooking utensils, cleaners and lighting equipment. The Others segment leases and sells real estate. As reported in the Troubled Company Reporter-Asia Pacific on Dec. 30, 2016, Moody's Japan K.K. downgraded Toshiba Corporation's corporate family rating (CFR) and senior unsecured rating to Caa1 from B3. Moody's has also downgraded Toshiba's subordinated debt rating to Ca from Caa3, and affirmed its commercial paper rating of Not Prime. At the same time, Moody's has placed Toshiba's Caa1 CFR and long-term senior unsecured bond rating, as well as its Ca subordinated debt rating under review for further downgrade. The TCR-AP reported on Jan. 26, 2017, that S&P Global Ratings said it has lowered its long-term corporate credit rating on Toshiba Corp. to 'CCC+' and its short-term corporate credit and commercial paper program ratings on the company to 'C', all by one notch. All of these ratings remain on CreditWatch with negative implications. S&P also lowered its senior unsecured debt rating on Toshiba two notches to 'B-' from 'B+' and kept the rating on CreditWatch negative. On Dec. 28, 2016, S&P placed the long- and short-term ratings on Toshiba on CreditWatch with negative implications at the same time as lowering the long-term ratings, in response to Toshiba's announcement that it might recognize several JPY100 billion in impairment losses related to goodwill arising from its acquisition of a nuclear power business through U.S.-based Westinghouse Electric Co. LLC, because the goodwill far exceeded the company's initial estimates. ================= S I N G A P O R E ================= EMAS CHIYODA: Case Summary & 30 Largest Unsecured Creditors ----------------------------------------------------------- Debtor affiliates filing separate Chapter 11 bankruptcy petitions: Debtor Case No. ------ -------- EMAS CHIYODA Subsea Limited 17-31146 2 Snowhill Birmingham 846WR United Kingdom EMAS Chiyoda Subsea Inc. 17-31139 EMAS-AMC Pte. Ltd. 17-31141 EMAS Chiyoda Subsea Services Pte. Ltd. 17-31142 Lewek Falcon Shipping Pte. Ltd. 17-31143 Lewek Constellation Pte. Ltd. 17-31144 EMAS CHIYODA ROV Pte. Ltd. 17-31145 EMAS CHIYODA Subsea Marine Base LLC 17-31147 EMAS CHIYODA Marine Base Holding Co., LLC 17-31149 Gallatin Marine Management, LLC 17-31150 EMAS CHIYODA Subsea Services LLC 17-31151 EMAS CHIYODA Subsea Services (UK) Limited 17-31152 EMAS CHIYODA Subsea Services B.V. 17-31153 EMAS Saudi Arabia Ltd. 17-31154 EMAS CHIYODA Subsea (Thailand) Co., Ltd. 17-31155 Type of Business: The Company is an international heavy lift subsea, offshore and onshore contractor offering engineering, procurement, construction, transportation, installation, and commissioning services at every stage of the project lifecycle to deliver complex construction projects for customers. Chapter 11 Petition Date: February 27, 2017 Court: United States Bankruptcy Court Southern District of Texas (Houston) Judge: Hon. Marvin Isgur Debtors' Counsel: George N. Panagakis, Esq. Justin M. Winerman, Esq. Roy Leaf, Esq. SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 155 N. Wacker Dr. Chicago, Illinois 60606-1720 Tel: (312) 407-0700 Fax: (312) 407-0411 E-mail: george.panagakis@skadden.com justin.winerman@skadden.com roy.leaf@skadden.com - and - Dominic McCahill, Esq. Kathlene Burke, Esq. SKADDEN, ARPS, SLATE, MEAGHER & FLOM (UK) LLP 40 Bank Street Canary Wharf London, E14 5DS Tel: 44-20-7519-7000 Fax: 44-20-7516-7070 E-mail: dominic.mccahill@skadden.com kathlene.burke@skadden.com Debtors' Co-Counsel: John F. Higgins, Esq. Joshua W. Wolfshohl, Esq. Aaron J. Power, Esq. Brandon J. Tittle, Esq. Eric M. English, Esq. PORTER HEDGES LLP 1000 Main Street, 36th Floor Houston, Texas 77002 Tel: (713) 226-6000 Fax: (713) 228-1331 E-mail: jhiggins@porterhedges.com jwolfshohl@porterhedges.com apower@porterhedges.com btittle@porterhedges.com eenglish@porterhedges.com Debtors' KPMG SERVICES PTE. LTD. Managerial Services Provider: Debtors' Claims and Noticing Agent: EPIQ BANKRUPTCY SOLUTIONS, LLC Estimated Assets: $500 million to $1 billion Estimated Liabilities: $100 million to $500 million The petitions were signed by Teraoka Takahiro, director. Debtor's List of 30 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ DBS Bank Working Capital $40,000,000 12 Marina Boulevard, Level 3 Loan Marina Bay Financial Centre Tower 3 Singapore, 018982 Singapore Tel: +65 6878 2024 Fax: 64451267 Email: pat.chiam@dbs.com DBS Bank Working Capital $30,000,000 12 Marina Boulevard, Level 3 Loan Marina Bay Financial Centre, Tower 3 Singapore, 018982 Singapore Tel: +65 6878 2024 Fax: 64451267 Email: pat.chiam@dbs.com DBS Bank Limited Bank Guaranty $14,636,231 12 Marina Boulevard #46-04 Claims DBS Asia Central@MBFC Tower 3 Singapore, 018982 Singapore Tel: 6878 2024 Fax: 64451267 Email: patchiam@dbs.com DNB Bank ASA, Singapore Branch Bank Guarantee $14,636,231 8 Shenton Way, Temasek Tower Claims Singapore, 068811 Singapore Tel: 6212 0710 Fax: 65 6225 7007 Email: ian.thia@dnbnor.no Overseas-Chinese Banking Bank Guarantee $13,118,982 Corporation Ltd. Claims 63 Chulia Street #06-00 OCBC Centre East Singapore, 049514 Singapore Tel: 65 9694 1264, 65 6318 7222 Fax: 65 6534 3986 Email: saswiral@ocbc.com Internal Revenue Service Center Tax Claim $8,591,376 1111 Constitution Avenue NW Washington, DC 20224 Tel: 202-283-1710 London Marine Consultants Ltd. Trade $8,322,894 Pinnacle House 23-26 St Dunstan's Hill London EC3R 8HN United Kingdom Tel: 44 0 20 7621 0050 Fax: 44 0 20 7220 7730 Email: lmc@londonmarine.co.uk Coastal Trade Limited Trade/Non-Trade $7,613,516 3 Cromwell Place London, SW7 2JE England Bibby Offshore Limited Trade $6,074,057 Atmosphere One Prospect Road, Westhill Aberdeen, AB32 6FJ Scotland Tel: 44 0 1224 857755 Fax: 44 0 1224 284444 Email: info@bibbyoffshore.com Standard Chartered Bank Bank Guarantee $5,626,880 8 Marina Boulevard #27-01 Claims Marina Bay Financial Centre, Tower 1 Singapore, 018982 Singapore Tel: 65 6596 7064 Fax: 66348119 Email: vivien.lhlow@sc.com Serimax North America, LLC Trade $4,451,357 11315 West Little York Rd. Bldg 3 Houston, Texas 77041 Tel: +350 20051777/8, 832-230-2700 Fax: +350 20051779 Email: operations@gacgibraltar.com Tigermar Global Pte Limited Trade/No-Trade $3,185,595 8 Marina View, Asia Square Tower 1 #07-04 Singapore, SG Tel: 6744 7055, 65 6715 8760 Fax: 6744 7066, 65 6532 0194 Email: info@tigermar.com Keppel Shipyard Limited Trade $2,764,580 51 Pioneer Sector 1 Singapore, 628437 Singapore Tel: 47-403095350, 65-6861-4141 Fax: 65-6861-7767 Email: brokers@f3offshore.com, ks@keppelshipyard.com Canyon Offshore, Inc. Trade $2,761,372 400 N. Sam Houston Pkwy East Suite 400 Houston, Texas 77060 US Tel: 281-618-0400 Fax: 281-618-0500 Rana Diving S.P.A. Trade $2,439,336 Via Del Trabaaccolo 16-48122 Ravenna Italy Tel: 39 0544 530742 Fax: 39 0544 531015 Email: account@benline.com.sg, rana@ranadiving.it Kuiper International Pte Ltd. Trade $2,353,435 14 Robinson Road #07-10 Far East Finance Building Singapore, SGP Tel: 65 6224 4510 Fax: 65 6224 4511 Email: info@ki.sg Chengxi Shipyard (Guangzhou) Trade $2,187,728 Co. Ltd. No. 10 Qihang Road, Longxue Street, Nansha Guangzhou, China Tel: 86 510 8166 8160 Email: jasentchow@chengxi.com Crowley Marine Services Inc. Trade $1,886,707 15894 Diplomatic Plaza DR Houston, Texas 77032 US Tel: 832-850-4100 Fax: 832-850-4141 Technip Far East SDN BHD Trade $1,837,396 Wisma Technip, No 241, 2nd Floor, Jalan Tun Razak, Wilayah Persekutuan 50400 Kuala Lumpur Malaysia Tel: 603 2116 7888 Fax: + 603 2116 7999 BAE System Australia Ltd. Trade $1,804,987 Edinburgh Parks Taranaki Road Edinburgh SA 5111 Tel: 61 8 8480 8888 Email: auswebinfo@baesystem.com.au Gulfmark Americas Inc. Trade $1,691,280 842 W Sam Houston PKWY North Suite 400 Houston, TX 77024 Tel: 713-369-7300 IHC SAS BV Trade $1,319,273 Bedrijfsweg 23 2404 CB Alphen AAN Den RIJN Tel: +31 88 015 61 00 Email: info.sas@royalihc.com Huisman Equipment BV Trade $1,230,924 Admiraal Trompstraat 2, 3115 HH PO Box 150 3100 AS Schiedam Harbour No. 561 The Netherlands Tel: 832-487-7300, 33 88 070 2222 Email: etta.chatterjee@emaschiyoda.com ap@hisman-nl.com Worleyparsons PTE Limited Trade $1,089,200 111 Somerset Road, #12-05 Tripleone Somerset, Singapore 238164 Tel: +65 6735 8444 Fax: +65 6735 7444 Horizon Survery Company (FZC) Trade $1,021,183 P.O. Box 68785, SAIF Zone, Sharjah Tel: + 971 6 557 3045 Fax: + 971 6 557 3047 James Fisher Subsea Excavation Trade $978,374 PTE. Limited Paya Lebar Square #08-07, 60 Paya Lebar Road Singapore, 409051 Singapore Tel: 65-6225-1163 65 6887 3613 Fax: 65-6225-4945 Email: weitung.lim@jitsun.com SAL Heavy Lift GMBH Trade $953,505 Brooktorkai 20 20457 Hamburg Germany Tel: 6467 3923/6468 8776 49 40 380380-0 Fax: 6469 6330, 49 40 380380-600 Email: Elinkspare@yahoo.com H.J. Stauble Limited Trade $949,123 3-5 Maharaj Avenue By-Pass San Fernando Trinidad and Tobago, WI Tel: 868-653-1870 Fax: 868-657-2810 Email: stauble@tstt.net.tt Shin Yang Shipping Co., Ltd. Trade $936,845 88-1 Songjong-dong Tonghae-shi Tonghae-SHI Gangwon, South Korea Tel: +234 808 313 1138 033-522-3422 Fax: 033-522-2907 Email: info@gulfships.net C&C Technologies Inc. Trade $911,742 730 East Kaliste Saloom Road Lafayette, LA 70508 Tel: 337-210-0000 Fax: 337-210-0003 EMAS CHIYODA: Will Implement Revised Business Plan Thru Ch. 11 -------------------------------------------------------------- Having insufficient cash to meet its day-to-day operating needs, EMAS CHIYODA Subsea Limited, together with 14 affiliated companies, has filed a voluntary petition under Chapter 11 of the Bankruptcy Code blaming deteriorating market conditions and intense competition in the deep-sea construction business for its financial troubles. EMAS Chiyoda Subsea (ECS) is a joint-venture run by the SGX- listed Ezra Holdings (40 percent) and the Japanese listed firms Chiyoda Corporation (35 percent) and NYK (25 percent), according to CNBC. According to the bankruptcy filing, the Company's revenue and cash flows have come under significant strain due to, among other things, falling demand for its services as a result of the depressed market conditions in the offshore and subsea construction market it serves; significant vessel operating costs; and a tightening of credit conditions, which ultimately led to its banks freezing various credit lines. "As a result of the global slowdown in the oil and gas industry, there has been low growth and limited new deep water exploration and production leading to low vessel utilization, which has had a negative impact on the Company's financial situation," said Stephen H. McGuire, the Company's general counsel. "Moreover, the deepsea offshore markets in which the Company operates are highly competitive." With U.S. headquarters in Houston, Texas, the Company provides services for subsea inspection, maintenance and repair, well intervention, drilling, and decommission work primarily to the oil and gas sector. Its domestic and foreign Debtor and non- Debtor subsidiaries operate throughout the world, including in the United States, Singapore, Norway, Saudi Arabia, Australia, the Netherlands, Scotland, Thailand, and Africa. As of the Petition Date, the Company's funded debt consists of approximately $480 million of secured debt and approximately $175 million of unsecured debt. In addition, the Company estimates contingent debt under Bank Guarantees of approximately $58 million, more than $150 million of remaining lease amounts under certain charters (not including those owed by non-Debtor affiliates), and $103 million in trade debt as of the Petition Date. Mr. McGuire related that the Company has taken numerous actions to mitigate the effects of the decline in activity levels, especially given the substantial fixed cost pressure. In particular, management has made steady efforts to reduce operating costs, including the vessel operating costs, by, among other things, attempting to renegotiate vessel repayments, reducing fixed costs, and reducing variable costs via staff reductions and relocations. However, Mr. McGuire maintained, these cost saving maneuvers have had mixed success. As a result of the deteriorating market conditions in the oil and gas sector coupled with the Company's financial difficulties, the Company's lenders have frozen borrowing availability under the Company's prepetition facilities, limiting the cash available to meet its operating needs. This led to the Company and its financial advisors developing a revised business plan. The Business Plan, which showed a need for substantial additional funding, was shown to the Company's shareholders, along with a request for additional funding to support the Business Plan. Subsea 7 S.A. and equityholder Chiyoda Corporation have agreed to provide up to $90 million debtor-in-possession financing necessary for the Debtors to operate their businesses, preserve value, and pursue their restructuring goals, subject to the Court's approval. To minimize the adverse effects of filing for Chapter 11 on their business and their international operations, the Debtors have filed motions and pleadings seeking various types of "first day" relief including, among other things, authority to pay employee obligations and authority to prohibit utility companies from discontinuing services. The Debtors' cases have been assigned to U.S. Bankruptcy Judge Marvin Isgur. The Debtors are seeking to have their cases jointly administered for procedural purposes under the main case docket of EMAS CHIYODA Subsea Limited Case No. 17-31146. Skadden, Arps, Slate, Meagher & Flom LLP serves as counsel to the Debtors. Porter Hedges LLP serves as the Debtors' co-counsel. KPMG Services Pte. Ltd. provides managerial services to the Debtors. Epiq Bankruptcy Solutions, LLC, acts as the Debtors' claims and noticing agent. ********* Tuesday's edition of the TCR-AP delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR-AP editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Tuesday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR-AP constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR-AP editor holds some position in the issuers' public debt and equity securities about which we report. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR-AP. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com Friday's edition of the TCR-AP features a list of companies with insolvent balance sheets obtained by our editors based on the latest balance sheets publicly available a day prior to publication. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Asia Pacific is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Valerie U. Pascual, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, and Peter A. Chapman, Editors. Copyright 2017. All rights reserved. ISSN: 1520-9482. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. TCR-AP subscription rate is US$775 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter Chapman at 215-945-7000 or Nina Novak at 202-362-8552. *** End of Transmission ***