/raid1/www/Hosts/bankrupt/TCRAP

/raid1/www/Hosts/bankrupt/TCRAP_Public/170608.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 Thursday, June 8, 2017, Vol. 20, No. 113 Headlines A U S T R A L I A DELTA SBD: In Administration; Wongawilli Ceases Operations EXCLUSIVE CONSULTANCY: First Creditors' Meeting Set for June 15 GNG (ACT): First Creditors' Meeting Set for June 15 INDIA RESOURCES: First Creditors' Meeting Set for June 15 STAX HEALTH: Second Creditors' Meeting Set for June 15 KIMBERLEY DIAMONDS: Puts Diamond Mine Into Administration H O N G K O N G NOBLE GROUP: Lenders in Talks on US$2BB Credit Line, FT Reports I N D I A ALLURI SITARAMA: CRISIL Reaffirms B+ Rating on INR21MM LT Loan ANLON HEALTHCARE: CARE Assigns 'B+' Rating to INR11.5cr Loan ARUN POLYMERS: CRISIL Cuts Rating on INR3.5MM Loan to 'B' ASIAN HANDICRAFTS: Ind-Ra Assigns 'BB-' Long-Term Issuer Rating BASUDEB AUTO: CRISIL Raises Rating on INR10.05MM Loan to B+ CHANDI MATA: CRISIL Reaffirms B- Rating on INR4.4MM Cash Loan CHAUDHARY CONST: CRISIL Assigns B+ Rating to INR7.5MM Bank Loan CPR CAPITAL: CRISIL Reaffirms 'C' Rating on INR6.50MM Loan DI-AN-ARE EXPORTS: Ind-Ra Affirms 'BB-' Long-Term Issuer Rating DKM AGENCIES: CARE Assigns 'B' Rating to INR8.30cr LT Loan DLP COTTON: CRISIL Raises Rating on INR8MM Cash Loan to B+ DMS BUILDERS: CRISIL Assigns B+ Rating to INR5.5MM Term Loan FAIRDEAL CONSUMER: CRISIL Lowers Rating on INR12MM Loan to B+ GOODEARTH MARITIME: ICRA Withdraws D Rating on INR379cr Loan HARIYANA SHIP: CRISIL Reaffirms B+ Rating on INR200MM Loan HARSHA INTERNATIONAL: CARE Assigns B+ Rating to INR25cr LT Loan HEMKUNT RICE: CRISIL Reaffirms B+ Rating on INR3.75MM LT Loan HIGH TECH: ICRA Downgrades Rating on INR5.70cr Term Loan to D INDIAN STEEL: ICRA Reaffirms 'D' Rating on INR1,046.82cr Loan J C CONSTRUCTION: Ind-Ra Assigns 'BB' Long-Term Issuer Rating KAMDHENU COTTON: CRISIL Reaffirms B+ Rating on INR17.20MM Loan MAHARASHTRA ALUMINIUM: CRISIL Reaffirms B Rating on INR10MM Loan MR. BROWN: CRISIL Raises Rating on INR8.2MM Term Loan to B+ NARAYAN COTTON: Ind-Ra Assigns 'B+' Long-Term Issuer Rating NEW LAXMI: Ind-Ra Assigns 'BB' Long-Term Issuer Rating P P RUBBER: CRISIL Reaffirms B+ Rating on INR12.5MM Cash Loan P.B. COTTON: ICRA Withdraws 'B' Rating on INR7cr Cash Loan PITAMBARA FOODS: ICRA Reaffirms B+ Rating on INR3.50cr Loan PNB REALITY: ICRA Reaffirms 'D' Rating on INR5.97cr Term Loan RELIANCE COMMUNICATIONS: Fitch Lowers Long-Term IDR to RD RELIANCE COMMUNICATIONS: Moody's Cuts CFR to Ca; Outlook Negative RELIANCE TELECOM: ICRA Lowers Rating on INR812cr LT Loan to D S.L. THAKUR: CRISIL Assigns B+ Rating to INR6.0MM Crash Credit SANT MUKTAI: Ind-Ra Assigns 'B' Long-Term Issuer Rating SHILPI CABLE: ICRA Lowers Rating on INR27cr Loan to C SHIVAM COTTON: ICRA Reaffirms 'B' Rating on INR12CR Cash Loan SHREE NARSHING: CRISIL Assigns B+ Rating to INR4MM Cash Loan SHREE RAJASVI: CRISIL Reaffirms B- Rating on INR16MM Cash Loan SHRI AAVISHKAR: ICRA Withdraws B+ Rating on INR4.50cr Loan SPECTRUM SCAN: CRISIL Cuts Rating on INR4MM LT Loan to B SPENZZER CRAFT: CARE Assigns B+ Rating to INR7.35cr LT Loan SPS YARNS: CRISIL Assigns B- Rating to INR6.55MM LT Loan SRE VENGADALAKSHMI: CRISIL Assigns B+ Rating to INR8.8MM Loan STEELMAN INDUSTRIES: CRISIL Assigns B+ Rating to INR4MM Loan SUPER OVERSEAS: Ind-Ra Assigns 'BB+' Long-Term Issuer Rating SWARAJ SYNTHETICS: CRISIL Cuts Rating on INR4MM Cash Loan to B TRIMURTI COTTON: CARE Assigns 'B' Rating to INR6.90cr LT Loan UNITECH FABRICATORS: CRISIL Reaffirms B Rating on INR5MM Loan USHA SPINCOAT: CARE Raises Rating on INR29.36cr LT Loan to BB- UTTORAYON TEA: CRISIL Upgrades Rating on INR5.75MM LT Loan to B+ VISHWAS COTTON: ICRA Reaffirms 'B' Rating on INR5.0cr Loan N E W Z E A L A N D CALLACTIVE: Payment Sought from People Tied to Directors P H I L I P P I N E S PROVIDENT PLANS: Likely to be Placed Under Conservatorship S I N G A P O R E MISA TRAVEL: STB Serves Notice of License Revocation - - - - - ================= A U S T R A L I A ================= DELTA SBD: In Administration; Wongawilli Ceases Operations ---------------------------------------------------------- Lou Caruana at MiningMonthly.com reports that Wollongong Coal's Wongawilli Colliery in New South Wales has ceased operating after its main contractor Delta SBD was placed in voluntary administration last week. John McInerney and Said Jahani of Grant Thornton were appointed joint and several administrators of the contractor on May 31 and Wollongong Coal was advised that the administrators had stood down Delta SBD's workforce, including those providing the mining services contract, the report relates. According to the report, the mining services contract between Wongawilli Coal and SBD Services dated July 17, 2016 stated the contractor was to provide mining services at the Wongawilli colliery including, but not limited to, the mining and extraction of coal, maintenance of coal stockpiles and operation, inspection and testing of certain associated machinery and equipment. "The company is in discussions with the administrators with a view to putting in place arrangements to reinstate the contractor's workforce necessary to recommence the provision of the mining services at the Wongawilli colliery, either in whole or part, during the administration period, which is typically approximately five weeks," Wollongong Coal, as cited by MiningMonthly.com, said. "The company wishes to advise that its major shareholder holder, Jindal Steel and Power (Mauritius) Limited remains supportive and their support letter remains valid, effective and in force." According to MiningMonthly.com, Delta said the administrators are undertaking an urgent assessment of the business to identify steps that may be taken to stabilise the business. EXCLUSIVE CONSULTANCY: First Creditors' Meeting Set for June 15 --------------------------------------------------------------- A first meeting of the creditors in the proceedings of Exclusive Consultancy Group Pty Ltd will be held at the offices of Mackay Goodwin, Suite 2, Level 8, 10 Bridge Street, in Sydney, NSW, on June 15, 2017, at 11:00 a.m. Domenico Alessandro Calabretta and Grahame Robert Ward of Mackay Goodwin were appointed as administrators of Exclusive Consultancy on June 5, 2017. GNG (ACT): First Creditors' Meeting Set for June 15 --------------------------------------------------- A first meeting of the creditors in the proceedings of GNG (ACT) Pty Ltd will be held at the offices of RSM Australia Partners, Equinox Building 4, Level 2, 70 Kent St, in Deakin, ACT, on June 15, 2017, at 11:00 a.m. Frank Lo Pilato of RSM Australia was appointed as administrator of GNG (ACT) on June 2, 2017. INDIA RESOURCES: First Creditors' Meeting Set for June 15 --------------------------------------------------------- A first meeting of the creditors in the proceedings of India Resources Limited will be held at the offices of Deloitte Touche Tohmatsu, Tower 2, Brookfield Place, 123 St Georges Terrace, in Perth, WA, on June 15, 2017, at 1:30 p.m. Jason Tracy and Vaughan Strawbridge of Deloitte Touche were appointed as administrators of India Resources on June 2, 2017. STAX HEALTH: Second Creditors' Meeting Set for June 15 ------------------------------------------------------ A second meeting of creditors in the proceedings of Stax Health & Fitness Pty Ltd has been set for June 15, 2017, at 10:30 a.m. at the offices of Worrells Solvency & Forensic Accountants Level 1, 160 Brisbane Street, in Ipswich, Queensland. The purpose of the meeting is (1) to receive the report by the Administrator about the business, property, affairs and financial circumstances of the Company; and (2) for the creditors of the Company to resolve whether the Company will execute a deed of company arrangement, the administration should end, or the Company be wound up. Creditors wishing to attend are advised proofs and proxies should be submitted to the Administrator by June 14, 2017, at 5:00 p.m. Adam Francis Ward and Michael John Griffin of Worrells Solvency were appointed as administrators of Stax Health on May 18, 2017. KIMBERLEY DIAMONDS: Puts Diamond Mine Into Administration --------------------------------------------------------- Paul Garvey at The Australian reports that controversial Australia-based miner Kimberley Diamonds has put its last remaining diamond mine into administration after it failed to secure fresh funding. The Australian relates that Kimberley, which avoided an estimated AUD40 million clean-up bill after it walked away from its Ellendale mine in Western Australia's north, shut its Lerala operation in Botswana last week and placed the subsidiary responsible for the project into administration. According to the report, Kimberley said its subsidiary Lerala Diamond Mines had "no choice" but to place itself into administration after the parent company was unable to strike a new financing deal. It had earlier stopped day to day operations at Lerala pending an overhaul of the mine's diamond processing plant, the report notes. "The successful completion of this performance improvement plant required further funds to be provided by investors and despite considerable progress being made on implementing these improvements, all of the required funds have not been forthcoming," Kimberley, as cited by the Australian, said. "Kimberley has been in discussions with investors regarding further funds for some time, however to date no agreement for further and sufficient funding has been reached and KDL has been forced to cease providing financial support to Lerala." But the collapse of Lerala won't kill off the parent, says the Australian. Kimberley said it remained in discussions with investors for further funding and was "exploring corporate restructuring options". The Australian says Kimberley delisted from the ASX earlier this year after a chequered history. The stock enjoyed a charmed run early on, surging from 11c in 2012 to $1.30 in 2013, but fell spectacularly in 2014 when it revealed it had failed to secure a price increase from global jeweller Tiffany & Co that it had already factored into its profit forecasts, the report recalls. Its shares never recovered, and last traded at just 0.7c prior to its delisting. The Australian adds the company, chaired by former stockbroker Alexandre Alexander, also came under fire for its handling of the closure of Ellendale. According to the report, the liquidators appointed to the Kimberley subsidiary that held Ellendale used a legal loophole to shift responsibility for the clean-up to the state government's industry-funded mining rehabilitation fund. The rehabilitation costs at Ellendale have been estimated at between AUD28 million and AUD40 million, the report states. ================ H O N G K O N G ================ NOBLE GROUP: Lenders in Talks on US$2BB Credit Line, FT Reports -------------------------------------------------------------- Alice Woodhouse at The Financial Times reports that Noble Group took another tumble on June 7 following a report the company's main banks are in last-ditch talks over whether to give the commodities trader more time to find a white knight investor or to force it into restructuring or liquidation. The FT reported banks including HSBC, Societe Generale, ABN Amro, Citigroup and ING have appointed legal advisers as they weigh extending a US$2 billion credit line to the Hong Kong-based, Singapore-listed company to allow it to continue its search for a major new investor. Noble has been hit over the past two years by a downturn in the commodities market and questions about its accounting. Its problems deepened last month when it said it may not be profitable until 2019, sparking fears it would not be able to service its US$3.2 billion debt burden, the FT notes. The company's shares fell as much as much as 6.4%, easing to be down 4.8% at SGD0.30 a share, and hovering around its lowest level since February 2001, the FT discloses. The company's shares have fallen 83.4% since the beginning of the year, the report notes. Hong Kong-based Noble Group Limited (SGX:N21) -- http://www.thisisnoble.com/-- engages in supply of agricultural, industrial and energy products. The Company supplies agricultural and energy products, metals, minerals and ores. Agriculture products include grains, oilseeds and sugar to palm oil, coffee, and cocoa. Energy business includes coal, gas and liquid energy products. In metals, minerals and ores (MMO), it supplies iron ore, aluminum, special ores and alloys. The Company operates nearly in 140 locations. It supplies growth demand markets in Asia and Middle East. Alcoa World Alumina and Chemicals is the subsidiary of this company. As reported in the Troubled Company Reporter-Asia Pacific on May 24, 2017, S&P Global Ratings lowered its long-term corporate credit rating on Noble Group Ltd. to 'CCC+' from 'B+'. The outlook is negative. At the same time, S&P lowered the long-term issue rating on Noble's outstanding senior unsecured notes to 'CCC' from 'B'. In addition, S&P lowered its long-term Greater China regional scale rating on the company to 'cnCCC+' from 'cnBB-' and on the notes to 'cnCCC' from 'cnB+'. S&P downgraded Noble because S&P believes the company's capital structure is not sustainable. This is due to continuing weak cash flows and profitability, and Noble's access to funding will have further weakened following its weak results for the three months ending March 31, 2017. The TCR-AP reported on May 18, 2017, that Moody's Investors Service has downgraded Noble Group Limited's corporate family rating and senior unsecured bond ratings to Caa1 from B2, and the rating on its senior unsecured medium-term note (MTN) program to (P)Caa1 from (P)B2. The ratings outlook remains negative. ========= I N D I A ========= ALLURI SITARAMA: CRISIL Reaffirms B+ Rating on INR21MM LT Loan -------------------------------------------------------------- CRISIL has reaffirmed its rating on the long term bank facility of Alluri Sitarama Raju Educational Society (ASRES) at 'CRISIL B+/Stable'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Long Term Loan 21 CRISIL B+/Stable (Reaffirmed) The rating continues to reflect ASRES's below-average financial risk profile because of weak capital structure, geographic concentration in revenue, and exposure to risks related to the regulated nature of the education sector. These weaknesses are partially offset by established regional position in the medical education segment, and healthy revenue from multi-speciality hospital. Key Rating Drivers & Detailed Description Weakness * Below-average financial risk profile ASRES's net worth is negative resulting in a weak gearing. Its return on capital employed and DSCR were 6.4 per cent and 1.1 times as on March, 2017. * Geographical concentration in the revenue profile ASRES's derives its revenue from Andhra Pradesh (AP). It is present in a single location and faces significant competition from other institutions and hospitals in and around the region. * Susceptibility to adverse regulatory changes in the education sector The education sector faces a high degree of regulation from various governmental and quasi-governmental agencies such as the University Grant Commission (UGC), Medical Council of India (MCI), universities, and state governments. Strengths * Established regional position in medical education segment ASRES has an established regional position, supported by its members' extensive experience in the field of medicine. ASRES has developed an established brand, and has a healthy positioning among private medical colleges. * Healthy revenue stream from its multi-specialty hospital ASRES has a stable revenue stream, supported by integrated facilities and super speciality services in various clinical disciplines. ASRES's operations have been growing at a healthy pace, with focus on increasing occupancy and revenue per bed; it achieved this growth through continuous expansions in specialties, addition of prominent consultants and state-of-the- art facilities. Outlook: Stable CRISIL believes ASRES will continue to benefit over the medium term from its established regional position in the medical education segment. The outlook may be revised to 'Positive' if the society registers substantial and sustained increase in revenue and operating margin, or receives sizeable donations, resulting in larger cash accruals and hence stronger liquidity. Conversely, the outlook may be revised to 'Negative' if revenues or operating margin declines owing to lower occupancies or substantial increase in costs, or debt increases significantly for funding large capital expenditure, weakening the financial risk profile. ASRES was established in 1998 as a not-for-profit society by Mr. G Ganga Raju, Mr. G V K Ranga Raju, and Mr. G Rama Raju. The society has two divisions: a multi-speciality hospital, and an educational institution that offers graduate and post-graduate courses in medicine, nursing, and para-medicine. ASRES is based out of Eluru, Andhra Pradesh. For 2015-16, ASRES reported net loss of INR4.2 crores on net sales of INR72.1 crores against profit after tax (PAT) of INR3.1 crores on net sales of INR65.3 crores for 2014-15. ANLON HEALTHCARE: CARE Assigns 'B+' Rating to INR11.5cr Loan ------------------------------------------------------------ CARE Ratings has assigned rating to the bank facilities of Anlon Healthcare Private Limited (AHPL) as: Amount Facilities (INR crore) Ratings ---------- ----------- ------- Long-term/Short- 3 CARE B+; Stable/CARE A4 term Bank Assigned Facilities Long-term Bank Facilities 11.50 CARE B+; Stable Assigned Detailed Rationale & Key Rating Drivers Rajkot-based (Gujarat), AHPL was incorporated in March 2014 by three directors namely Mr. Punit Rasadia, Mr. Vaibhav Ramani and Mr. Meet Vachhani. The company is setting up a unit for manufacturing of pharma intermediates and ingredients having total installed capacity of 11 metric tonnes per month. Total project cost envisaged at INR26 crore which will be funded through debt/equity mix of 1.08 times. AHPL has envisaged commencing operations by end of June 2017. Promoters of AHPL are also associated with another group company named Anlon Chemical Research Organization which is into trading of pharma products. Detailed description of the key rating drivers Key Rating Strengths Project implementation and stabilization risk: AHPL is implementing a Greenfield project of Manufacturing of Pharma intermediates and ingredients with the estimated cost of INR26 crore to be funded through debt/equity mix of 1.08 times. Till March 31, 2017, AHPL had incurred 91.92% of total cost of the project. With balance costs yet to incur, the firm is exposed to project implementation and stabilization risk. Increasing competitive pressure and regulatory burden: AHPL faces high competition within similar segment in domestic market wherein large number of players operates at large and small level. Further, pharmaceutical sector is one of the most regulated sectors by the government because of its relevance with public health. Raw material price fluctuation risk: AHPL will manufacture pharma intermediates and ingredients, which required many different chemicals and solvents as raw material. There is a risk of unexpected change of price of them depending upon the demand and supply, which can have a direct impact on the profitability of the company. Key rating strengths Experienced promoters: AHPL has been promoted by three promoters who are holding healthy experience in the pharma industry. Further, they are also associated with Anlon Chemical Research Organization (ACRO), a group entity which is engaged in the business of pharma products trading. Rajkot-based (Gujarat), AHPL was incorporated in March 2014 by three directors namely Mr. Punit Rasadia, Mr. Vaibhav Ramani and Mr. Meet Vachhani. The company is setting up a unit for manufacturing of pharma intermediates and ingredients having total installed capacity of 11 metric tonnes per month. Total project cost envisaged at INR26 crore which will be funded through debt/equity mix of a term loan of INR11.50 crore, equity share capital of INR8 crore and balance by way of unsecured loans of INR6.50 crore. AHPL has envisaged commencing operations by end of June 2017. ARUN POLYMERS: CRISIL Cuts Rating on INR3.5MM Loan to 'B' --------------------------------------------------------- CRISIL has been consistently following up with Arun Polymers (AP) for obtaining information through letters and emails dated January 19, 2017, and February 9, 2017, among others, apart from telephonic communication. However, the issuer has remained non cooperative. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Bank Guarantee 0.15 CRISIL A4 (Issuer Not Cooperating; Rating Reaffirmed) Cash Credit 3.50 CRISIL B/Stable (Issuer Not Cooperating; Downgraded from 'CRISIL B+/Stable') Letter of Credit 7.55 CRISIL A4 (Issuer Not Cooperating; Rating Reaffirmed) Proposed Short Term .90 CRISIL A4 (Issuer Not Bank Loan Facility Cooperating; Rating Reaffirmed) SME Credit 0.25 CRISIL B/Stable (Issuer Not Cooperating; Downgraded from 'CRISIL B+/Stable') Term Loan 2.40 CRISIL B/Stable (Issuer Not Cooperating; Downgraded from 'CRISIL B+/Stable') 'The investors, lenders and all other market participants should exercise due caution while using the rating assigned/reviewed with the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward looking component as it is arrived at without any management interaction and is based on best available or limited or dated information on the company. Detailed Rationale Despite repeated attempts to engage with the management, CRISIL failed to receive any information on either the financial performance or strategic intent of Arun Polymers. This restricts CRISIL's ability to take a forward looking view on the credit quality of the entity. CRISIL believes that the information available for Arun Polymers is consistent with 'Scenario 1' outlined in the 'Framework for Assessing Consistency of Information with CRISIL B' category or lower. Based on the last available information, CRISIL has downgraded the long term rating at 'CRISIL B/Stable' & Reaffirmed short term rating 'CRISIL A4'. AP is a partnership firm set up in 2000 by Mr. P. Thiyagarajan. The firm manufactures PVC pipes. ASIAN HANDICRAFTS: Ind-Ra Assigns 'BB-' Long-Term Issuer Rating --------------------------------------------------------------- India Ratings and Research (Ind-Ra) has assigned Asian Handicrafts Private Limited (AHPL) a Long-Term Issuer Rating of 'IND BB-'. The Outlook is Stable. The instrument-wise rating actions are: -- INR39.26 mil. Term loan assigned with 'IND BB-/Stable' rating; and -- INR100 mil. Fund-based working capital assigned with 'IND BB-/Stable/IND A4+' rating KEY RATING DRIVERS The rating reflects AHPL's small scale of operations and moderate EBITDA margin due to intense competition and the appreciation of the Indian rupee against the US dollar and the British pound. According to provisional financials for FY17, revenue was INR226.96 million (FY16: INR239.36 million) and EBITDA margin was 6.22% (8.87%). The ratings also reflect weak credit metrics. In FY17, gross leverage (total adjusted debt/operating EBITDA) was 9.22x (FY16: 1.60x) and gross interest coverage (operating EBITDA/gross interest expense) was 2.04x (6.28x). The deterioration in credit metrics was due to lower EBITDA and debt-led capex. The ratings, however, are supported by the promoter's experience of over three decades in the handicraft business and a comfortable liquidity position. AHPL's utilization of fund-based limits was about 73.57% during the nine months ended April 2017. RATING SENSITIVITIES Negative: A decline in operating profitability leading to deterioration in credit metrics could lead to a negative rating action. Positive: A substantial rise in revenue, along with operating profitability, leading to an improvement in credit metrics could lead to a positive rating action. COMPANY PROFILE AHPL was established as a partnership firm in 1976. In 2004, it was converted into a private limited company. AHPL manufactures handicraft products such as picture frames, decorative items, jewelry boxes and fashion jewelry, and exports to Australia, Japan, the UAE, the US, and the UK and other European countries. BASUDEB AUTO: CRISIL Raises Rating on INR10.05MM Loan to B+ ----------------------------------------------------------- CRISIL has upgraded its rating on the long-term bank facilities of Basudeb Auto Limited (BAL) to 'CRISIL B+/Stable' from 'CRISIL B/Stable'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 4.25 CRISIL B+/Stable (Upgraded from 'CRISIL B/Stable') Channel Financing 10.05 CRISIL B+/Stable (Upgraded from 'CRISIL B/Stable') Proposed Long Term .70 CRISIL B+/Stable (Upgraded Bank Loan Facility from 'CRISIL B/Stable') The upgrade reflects CRISIL's belief that BAL's business risk profile will improve over the medium term, driven by estimated 31% increase in revenue to INR67 crore in fiscal 2017 from INR51 crore in the previous fiscal, supported by government orders. The rating reflects the company's large working capital requirement, and exposure to intense competition in the automotive (auto) dealership business leading to pressure on profitability. These weaknesses are partially offset by its promoters' extensive industry experience and established relationship with principal supplier Tata Motors Ltd (TML), and its improving financial risk profile. Key Rating Drivers & Detailed Description Strengths: Extensive experience of the promoters in the auto dealership industry: BAL's promoters have been in the auto dealership business for over four decades and have developed expertise. They have dealership of other auto makers such as LML Vespa, and had a dealership of Hindustan Motors since the 1970s, which has now been closed down. BAL has been a dealer of TML's passenger vehicles for 15 years, and has an established market presence in Jharkhand, with a distribution network spread across the state, including four showrooms and two workshops in Ranchi, Hazaribagh, Ramgarh, and Daltonganj. CRISIL believes BAL's business risk profile will continue to be supported by its promoters' extensive experience and longstanding association with TML. * Improving financial risk profile: Gearing improved to 3 times as on March 31, 2016, from 4.06 times as on March 31, 2014, and is estimated to have stayed stable in fiscal 2017. Interest coverage improved to an estimated 1.37 times in fiscal 2017. CRISIL believes the financial risk profile will continue to improve over the medium term. Strengths Weakness * Exposure to intense competition leading to pressure on profitability: BAL's business depends entirely on TML. Value addition by the company is minimal, and consequently, its profitability is low. Operating margin was 4.86% for fiscal 2016. Furthermore, the Indian passenger car industry is highly competitive with a number of car manufacturers present in various car segments. Auto makers have consistently introduced newer models and variants. The success or failure of a new launch affects the profitability of all players in the value chain, including dealers. * Large working capital requirement: The company had gross current assets of 140-190 days in the four fiscals through 2017, driven by large inventory. Receivables averaged 30 days in the past three fiscals on account of delays in payments by government clients. On the other hand, BAL has to make advance payments to TML. Due to modest cash accrual, the company funds working capital requirement through bank debt and credit from other. Outlook: Stable CRISIL believes BAL will continue to benefit from its promoters' extensive industry experience and established relationship with TML. The outlook may be revised to 'Positive' if financial risk profile improves on account of higher-than-expected accrual and better working capital management. The outlook may be revised to 'Negative' if financial risk profile, particularly liquidity, weakens because of lower-than-expected cash accrual, or larger- than-expected working capital requirement, or sizeable, debt- funded capital expenditure. BAL, based in Ranchi, Jharkhand, was incorporated in 2000 as a closely held limited company by the Kataruka family. The company is an authorised dealer of passenger vehicles of TML in four districts of Jharkhand: Ranchi, Hazaribagh, Ramgarh, and Daltonganj. Profit after tax is estimated at INR0.20 crore and turnover at INR67.10 crore in fiscal 2017, against profit after tax of INR0.09 crore and turnover of INR51.09 crore in fiscal 2016. CHANDI MATA: CRISIL Reaffirms B- Rating on INR4.4MM Cash Loan ------------------------------------------------------------- CRISIL has been consistently following up with Chandi Mata Cold Storage Private Limited (CCSPL) for obtaining information through letters and emails dated January 23, 2017, and February 13, 2017, among others, apart from telephonic communication. However, the issuer has remained non cooperative. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Bank Guarantee 0.1 CRISIL A4 (Issuer Not Cooperating; Rating Reaffirmed) Cash Credit 4.4 CRISIL B-/Stable (Issuer Not Cooperating; Rating Reaffirmed) Proposed Long Term .43 CRISIL B-/Stable (Issuer Not Bank Loan Facility Cooperating; Rating Reaffirmed) Term Loan 2.07 CRISIL B-/Stable (Issuer Not Cooperating; Rating Reaffirmed) 'The investors, lenders and all other market participants should exercise due caution while using the rating assigned/reviewed with the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward looking component as it is arrived at without any management interaction and is based on best available or limited or dated information on the company. Detailed Rationale Despite repeated attempts to engage with the management, CRISIL failed to receive any information on either the financial performance or strategic intent of Chandi Mata Cold Storage Private Limited. This restricts CRISIL's ability to take a forward looking view on the credit quality of the entity. CRISIL believes that the information available for Chandi Mata Cold Storage Private Limited is consistent with 'Scenario 3' outlined in the 'Framework for Assessing Consistency of Information with Crisil BBB Rating category or Lower'.' Based on the last available information, CRISIL has reaffirmed the rating at 'CRISIL B-/Stable/CRISIL A4'. CCSPL, incorporated in 1982, is engaged in the business of providing cold storage facilities to potato farmers and traders. The company was taken over in 2013. Its cold storage facility is located in Paschim Midnapur district (West Bengal). The installed capacity of CCSPL in 2014-15 (refers to financial year, April 1 to March 31) is 1,19,792 quintal consisting of two chambers and are fully utilised. The daily operations of the company are looked after by its director, Mr. Ranjit Dandapat. CHAUDHARY CONST: CRISIL Assigns B+ Rating to INR7.5MM Bank Loan --------------------------------------------------------------- CRISIL has assigned its 'CRISIL B+/Stable/CRISIL A4' ratings to the bank facilities of Chaudhary Const. Co (CCC). The ratings reflect a modest scale of operations in the highly fragmented industry, large working capital requirement leading to high bank limit utilisation, and geographical concentration in revenue. These weaknesses are partially offset by the extensive experience of promoters, and a moderate financial risk profile. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Proposed Bank Guarantee 7.5 CRISIL B+/Stable Overdraft 3.5 CRISIL A4 Loan Against Property .75 CRISIL B+/Stable Long Term Loan .75 CRISIL B+/Stable Analytical Approach CRISIL has treated unsecured loans as nether debt nor equity as they are expected to remain in the business. Key Rating Drivers & Detailed Description Weaknesses * Small scale of operations in a highly fragmented industry: CCC's scale is modest, as reflected in gross revenue of INR52.65 crore in fiscal 2017. * Working capital-intensive operations: Working capital-intensive operations is reflected in the estimated gross current assets of 187 days as of March 2017, driven by high debtors and also due to the inherent nature of the contracting industry. Working capital requirement is funded through bank limit that have been fully utilised over the 12 months through March 2017. * Geographical concentration: Revenue is concentrated in Uttar Pradesh. Strengths * Extensive experience of proprietor in the electrical contracting industry: Mr. Vikas Sharma has over a decade of experience in the electrical contracting industry, leading to successful completion of several contracts in Uttar Pradesh. * Moderate financial risk profile: With gearing below 1.0 time as of March 2017, and debt protection metrics, with interest cover and net cash accrual to total debt ratio of over 4 times and 0.4 time, respectively, the financial risk profile remains above average and is expected to remain at similar levels in the medium term. Outlook: Stable CRISIL believes CCC will continue to benefit over the medium term from its proprietor's extensive experience. The outlook may be revised to 'Positive' in case of significant and sustained improvement in revenue, with improvement in its margins and capital structure. Conversely, the outlook may be revised to 'Negative' if significant decline in revenue or margins, or stretch in working capital cycle or any large, debt-funded capital expenditure weakens the financial risk profile. Established in 1996 as a proprietorship by Mr. Vikas Sharma, CCC, undertakes turnkey projects of setting up of substations and transmission lines for state power transmission and distribution utilities in Uttar Pradesh. Profit before tax is estimated at INR3.22 crore on an estimated operating income of INR52.65 crore for fiscal 2017, against INR3.02 crore and INR49.67 crore, respectively, for fiscal 2016. CPR CAPITAL: CRISIL Reaffirms 'C' Rating on INR6.50MM Loan ---------------------------------------------------------- CRISIL has been consistently following up with CPR Capital Services Limited (CPR) for information and a discussion with the management since March 2017. Despite several emails and calls, the company has not submitted any information. CRISIL had, through letters dated March 30, 2017 (director letter), and April 18, 2017 (senior director letter), informed the company of the extant guidelines and requested for cooperation. The issuer, however, remains non-cooperative. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Overdraft 6.50 CRISIL C (Issuer Not Cooperating; Rating Reaffirmed) 'The investors, lenders and all other market participants should exercise due caution while using the rating assigned/reviewed with the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward looking component as it is arrived at without any management interaction and is based on best available or limited or dated information on the company.' Detailed Rationale Despite repeated attempts to engage with the management, CRISIL failed to receive any information on either the financial performance or strategic intent of CPR. This restricts CRISIL's ability to take a forward-looking view on the credit quality of the entity. CRISIL believes that the information available for CPR is consistent with 'Scenario 1' outlined in the 'Framework for Assessing Consistency of Information with CRISIL B rating category or lower.' CPR has a loan against shares (LAS) facility (not rated by CRISIL); this facility remains classified as a non-performing asset. Based on the last available information, CRISIL has reaffirmed the rating at 'CRISIL C'. CPR was incorporated in Ghaziabad, Uttar Pradesh, in 1995, promoted and managed by the Garg family. Mr. Pawan Garg and his immediate family hold around 74% in the company, while other relatives and friends hold the rest. It was established to provide broking services to retail and corporate clients, especially in the equity segment. The company has business interests in securities, commodities, currency derivatives, and depository services. DI-AN-ARE EXPORTS: Ind-Ra Affirms 'BB-' Long-Term Issuer Rating --------------------------------------------------------------- India Ratings and Research (Ind-Ra) has affirmed Di-aN-aRe Exports' Long-Term Issuer Rating at 'IND BB-'. The Outlook is Stable. Instrument-wise rating actions are: -- INR100 mil. (reduced from INR120) fund-based working capital Limits affirmed with 'IND BB-/Stable/IND A4+' rating; and -- INR30 mil. Proposed fund-based limit rating withdrawn (as the company did not proceed with the instrument as envisaged) KEY RATING DRIVERS The affirmation reflects Dianare's continued moderate, albeit volatile credit profile due to its presence in a highly fragmented and competitive cut and polished diamonds industry, and fluctuations in diamond price (end-product) and foreign currency. The firm derives its revenue mainly from exports. However, it mitigates the foreign currency risk by importing rough diamonds. Provisional FY17 financials indicated revenue of INR860.1 million (FY16: INR759.7 million; FY15: INR786 million), net leverage (adjusted net debt/operating EBITDAR) of 4.5x (5.8x; 4.8x), EBITDA interest cover (operating EBITDA/gross interest expense) of 1.9x (1.8x; 2.2x) and EBITDA margin of 1.8% (1.9%; 2.2%). The ratings also factor in Dianare's moderate liquidity position with 94% average utilization of working capital limits over the 12 months ended April 2017. The ratings also remain constrained by the partnership structure of the organization. However, the ratings continue to be supported by Dianare's partners' over two decades of experience in the import, processing and export of diamonds, the firm's strong relationship with its customers and suppliers, and its Gemological Institute of America certified product range. RATING SENSITIVITIES Positive: A substantial growth in the revenue and operating profitability leading to a sustained improvement in the credit metrics will lead to a positive rating action. Negative: A decline in the revenue and/or operating profitability leading to deterioration in the credit metrics will be negative for the ratings. COMPANY PROFILE Established in 1994, Dianare is a Mumbai, Maharashtra-based firm engaged in the importing, exporting and manufacturing of diamonds. The firm imports rough diamonds and processes them to cut and polished diamonds of size 0.3-2 carats, which are exported with the Gemological Institute of America certification. Its manufacturing unit is located in Surat. DKM AGENCIES: CARE Assigns 'B' Rating to INR8.30cr LT Loan ---------------------------------------------------------- CARE Ratings has assigned rating to the bank facilities of DKM Agencies Private Limited (DKM) as: Amount Facilities (INR crore) Ratings ---------- ----------- ------- Long-term Bank Facilities 8.30 CARE B; Stable Assigned Short-term Bank Facilities 0.20 CARE A4 Assigned Detailed Rationale and key rating drivers The ratings assigned to the bank facilities of DKM are constrained by its small scale of operations along with low PAT margin, leveraged capital structure, weak debt coverage indicators and working capital intensive nature of operations. The ratings are further constrained by highly fragmented and competitive nature of industry. The ratings, however, derive strength from experienced promoters with long track record of operations, established distribution network and association with reputed customers and suppliers. Going forward, the ability of the company to scale up its operations while improving its solvency position and efficient management of working capital would remain the key rating sensitivities. Detailed description of the key rating drivers Strengths Experienced promoters with long track record of operations and established distribution network DKM has been in the trading of food products for around two decades. The company is currently being managed Mr. Sachin Malik and Ms Nainy Malik. Both the directors have an experience of around two decades. Furthermore, the company has an established distribution network of around 400 distributors spread majorly across Haryana, Punjab, Himachal Pradesh and Jammu & Kashmir. Association with reputed customer and supplier base The company is into trading of food products and is an authorized distributor of reputed players like Venky's India Limited, Fine Organic Industries Private Limited, etc. DKM is also supplying products to reputed institutional customers. Weaknesses Small scale of operations with low PAT margin Despite being in operations for around two decades, the company's scale of operations has remained small marked by the total operating income (TOI) of INR40.24 crore in FY16 (refers to the period April 01 to March 31). The small scale limits the company's financial flexibility in times of stress and deprives it from scale benefits. The PBILDT margin and PAT margin of the company stood at 3.17% and 0.20%, respectively, in FY16. Leveraged capital structure and weak debt coverage indicators The capital structure of the company stood leveraged with overall gearing ratio of 5.38x as on March 31, 2016 due to company's high dependence upon borrowings to fund various business requirements. The debt coverage indicators marked by interest coverage ratio and total debt to GCA stood weak at 1.21x in FY16 and 62.62x for FY16, respectively. Working capital intensive nature of operations The operations of the company are working capital intensive marked by full utilization of the working capital limits for 12 months period ended February 2017. The average operating cycle of the company stood at 85 days for FY16 (PY:80 days). Highly fragmented and competitive nature of industry The company operates in highly fragmented and competitive market marked by the presence of numerous organized and unorganized players in India. Presence of large number of entities in both organized and unorganized sector with low entry barriers results in intense competition in trading of food products. The same in turn limits the pricing flexibility. DKM Agencies Private Limited (DKM) was incorporated in March 1999 and is currently being managed by Mr. Sachin Malik and Ms Nainy Malik. DKM is engaged in trading of food products such as food chemicals, juices, dairy products, bakery products, frozen food, etc, at its outlet located in Ludhiana, Punjab. The company is the authorized distributor of Venky's India Limited (rated 'CARE BBB/ CARE A3+'), Fine Organic Industries Private Limited, Bambino Agro Industries Limited, Gujarat Co-operative Milk Marketing Federation Limited (Amul), Britannia Industries Limited, Dabur India Limited, etc. DKM supply products to various distributors spread all across India and also to institutional customers like Metro Cash & Carry India Private Limited, Reliance Fresh Limited and Walmart Stores Inc. The company also has a group concern, namely, DKM Enterprises which is a proprietorship firm established in 2002 and is engaged in same business as DKM. Additionally, the company has also commenced manufacturing of non-dairy creamer from October 2016. In FY16, DKM has achieved a total operating income (TOI) of INR40.11 crore with PAT of INR0.08 crore as against total operating income of INR40.06 crore with PAT of INR0.13 crore in FY15. In 11MFY17 (Provisional), the company had achieved TOI of around INR34.00 crore. DLP COTTON: CRISIL Raises Rating on INR8MM Cash Loan to B+ ---------------------------------------------------------- CRISIL has upgraded its rating on the bank facility of DLP Cotton (DLP) to 'CRISIL B+/Stable' from 'CRISIL B/Stable'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 8 CRISIL B+/Stable (Upgraded from 'CRISIL B/Stable') Term Loan 2 CRISIL B+/Stable (Upgraded from 'CRISIL B/Stable') The upgrade reflects expectation that the firm's business and financial risk profiles will improve with stabilisation in operations resulting in higher average realisation and cash accrual. Gearing moderated to 1.35 times as on March 31, 2017 from 3.54 times a year earlier, strengthening financial risk profile. The rating reflects modest scale of operations and vulnerability to changes in cotton prices. These rating weaknesses are partially offset by the extensive experience of the partners in the cotton ginning industry. Analytical Approach Unsecured loans that DLP has received from the promoters has been treated as neither debt nor equity, as the interest rates are lower than the market rate and the loans should remain in the business. Key Rating Drivers & Detailed Description Weakness * Small scale of operations in highly fragmented industry: Intense competition in the cotton ginning industry continues to constrain scalability in operations, and limits pricing powerand profitability. The operating margin were modest at 2.7% for fiscal 2017. * Vulnerability to changes in cotton prices Since cotton is an agricultural commodity its availability is highly dependent on the monsoon. Furthermore, government interventions and fluctuations in global cotton output have resulted in sharp fluctuations in cotton prices. Finished cotton prices declined and have remained volatile. Such fluctuations in cotton prices are likely to impact the margins of cotton ginners. Ability to manage this volatility will remain a key sensitivity factor. Strengths * Extensive experience of promoters in cotton ginning industry: Benefits from the extensive experience of the partners, their understanding of local market dynamics, and healthy relationships with customers and suppliers will continue to support business. Outlook: Stable CRISIL believes DLP will benefit over the medium term from the promoters' extensive experience. The outlook may be revised to 'Positive' if early stabilisation of operations leads to sizeable cash accrual. Conversely, the outlook may be revised to 'Negative' if cash accrual is low, or financial risk profile deteriorates because of stretch in working capital cycle or large debt-funded capital expenditure, or operations are disrupted by regulatory changes. Set up in 2015 as a partnership firm by the Morbi, Gujarat-based Mr. Piyush D Saradava and his family, DLP gins and trades in cotton. Operations commence in February 2016. In fiscal 2017, net profit was INR0.23crore on operating income of INR59.68crore, against net profit of INR0.01crore. on operating income of INR4.26crore in fiscal 2016. DMS BUILDERS: CRISIL Assigns B+ Rating to INR5.5MM Term Loan ------------------------------------------------------------ CRISIL has assigned its 'CRISIL B+/Stable' rating to the long- term bank facility of DMS Builders and Developers (DMS). Amount Facilities (INR Mln) Ratings ---------- --------- ------- Proposed Term Loan 5.5 CRISIL B+/Stable The rating reflects exposure to significant risks associated with implementation and saleability of an ongoing project and timely inflow of customer advances, and also to cyclicality inherent in the Indian real estate industry. These weaknesses are partially offset by the extensive industry experience of the partners and moderate bookings received for the project. Key Rating Drivers & Detailed Description Weaknesses * Exposure to risks related to implementation and saleability of the project and timely inflow of customer advances: Only about 30% of the total project cost has been incurred till April 2017; hence, the project remains susceptible to timely completion. Furthermore, despite of moderate bookings, customer advances were lower than the value of inventory sold. Any delay in sales of units or in timely receipt of customer advances will impact project implementation as well as debt servicing ability. * Vulnerability to cyclicality inherent in the Indian real estate industry: The real estate sector in India is cyclical and affected by volatile prices, opaque transactions, and a highly fragmented market structure. Hence, the business risk profile will remain susceptible to risks arising from any industry slowdown Strengths * Extensive industry experience of the partners: Over the past 10 years, the partners, have executed many real estate projects in Ratlam, Madhya Pradesh. The firm will continue to benefit from the successful project completion track record of past projects. * Moderate bookings received for the ongoing project: Favourable location and competitive prices have led to moderate bookings of around 43% of total units till April 15, 2017. Outlook: Stable CRISIL believes DMS will continue to benefit from the extensive industry experience of its partners. The outlook may be revised to 'Positive' if healthy sales of units and receipt of customer advances on the back of timely implementation of the project leads to healthy cash inflow. The outlook may be revised to 'Negative' if time and cost overruns, lower-than-expected sales, or delays in receipt of customer advances lead to low cash inflow, thus impacting liquidity. Established in 2012, DMS is a partnership firm of Mr. Jitendra Nagal and his wife. It undertakes residential real estate project development, mainly in Ratlam. FAIRDEAL CONSUMER: CRISIL Lowers Rating on INR12MM Loan to B+ ------------------------------------------------------------- CRISIL has downgraded its ratings on bank facilities of Fairdeal Consumer Durables Private Limited (FDCDL) to 'CRISIL B+/Stable/CRISIL A4' from 'CRISIL BB/Stable/CRISIL A4+' Amount Facilities (INR Mln) Ratings ---------- --------- ------- Bank Guarantee 8 CRISIL A4 (Downgraded from 'CRISIL BB/Stable') Cash Credit 12 CRISIL B+/Stable (Downgraded from 'CRISIL BB/Stable') The downgrade reflects deterioration in the company's financial risk profile particularly liquidity due to stretch in its working capital cycle. Higher receivable cycle has led to increased reliance on short term bank lines. Additionally the cash accruals of the company are expected to remain shunted below INR0.25 cr going ahead as well constraining the overall liquidity. Timely long term fund infusion from its promoters will be key driver of its liquidity position over the near to medium term. Key Rating Drivers & Detailed Description Weaknesses * Below-average financial risk profile FDCDL has a below average financial risk profile marked by low net worth of INR 1.65 as on March 31,2017 and estimated high gearing of 5.65 times for the same period. Debt protection metrics are also expected to remain subdued as on 31 march 2017due to high reliance on short term debt and week capital structure. Financial risk profile is likely to remain weak over the medium term. * Geographical concentration in revenue Fairdeal is an authorised distributor of mobile handsets of Micromax. It is also an authorised distributor for Morphy Richards and Oster range of home appliances. These products are sold to local dealers and retailers in Bengaluru. As the company derives more than 80 per cent of its revenue from distribution of these products in Bengaluru, it remains exposed to high geographical concentration risk. CRISIL believes that though Fairdeal's scale of operations will improve over the medium term, the same will remain exposed to geographical concentration risk. Strengths * Established relationships with principals Fairdeal's longstanding presence and established distribution network of 300 retailers/dealers in Bengaluru have led to strong relationships with principals. It has been associated with Morphy Richards India for over 10 years, and was awarded dealerships of Micromax mobile handsets, Apple India's iPods and iPads, Dell India's mobile handsets (distribution of Apple's and Dell's products has been discontinued) and home appliances of local brands. CRISIL believes that the proprietor's extensive experience will help the firm sustain its business risk profile over the medium term. Outlook: Stable CRISIL believes Fairdeal will benefit over the medium term from established relationships with its principals. The outlook may be revised to 'Positive' if substantial infusion of long-term funds by the promoters strengthens financial risk profile. Conversely, the outlook may be revised to 'Negative' if lower-than-expected accrual, stretched working capital cycle, or any sizeable capital expenditure increases gearing. Promoted by Mr. Devi Dasan and his wife, Ms. R Saraswathy, in 1999, Fairdeal is an authorised distributor of Micromax mobile handsets. It is also an authorised distributor of Morphy Richards and Oster range of home appliances in Bengaluru. Further in 2015- 16 (refers to financial year, April 1 to March 31) the company has signed-up for the distribution of Reliance JIO (Hardware as well as Connectivity). FDCDL reported estimated loss of INR0.88 cr on net sales of INR 24 cr for 2016-17, against loss of INR1.96 cr on net sales of INR42 cr for 2015-16. GOODEARTH MARITIME: ICRA Withdraws D Rating on INR379cr Loan ------------------------------------------------------------ ICRA Ratings has reaffirmed the long-term rating of [ICRA]D assigned to the INR242.961 -crore term loans (revised from INR302.1 crore) of Goodearth Maritime Limited. The ratings outstanding on unallocated limits have been withdrawn. Amount Facilities (INR crore) Ratings ---------- ----------- ------- Term Loans 242.96 [ICRA]D Reaffirmed Long Term Unallocated 379.00 [ICRA]D rating withdrawn Short Term Unallocated 221.90 [ICRA]D rating withdrawn Rationale The re-affirmation of ratings considers the continued delays in debt servicing by the company. The company's operations had been impacted by weakness in charter rates during the last few years due to which the operations became unviable and the company had sold its operational vessels to reduce debt levels. The sale of vessels and other assets helped the company in reducing its debt levels to some extent, however, the company still has outstanding debt to be repaid. With no operational vessels at present, its cash flows will be dependent on additional assets sales and dividend from subsidiaries, which would be irrregular in nature and hence the weak liquidity position is expected to continue in the medium term. Goodearth Maritime Limited is a part of the Chennai-based Archean Group, promoted by Mr. P.B. Anandam and family. GML commenced its operations in FY2002 by chartering ships and later acquired ships at the trough of the cycle in the calendar year (CY) 2003. However, due to sustained weakness in charter rates in the dry- bulk segment in the last few years coupled with interest burden on high debt levels, the company has been selling its vessels to reduce debt levels and at present it has no operational vessel. GML also owns a jetty in Jakhau, Gujarat from where the salt produced by Jakhau Salt Company Private Limited (JSCPL), a group company, is loaded onto barges for trans-shipment. GML also has a wholly-owned subsidiary - GML BKS Private Limited, Jersey - which was incorporated as a special purpose vehicle (SPV) for coal mining operations in Indonesia. GML also has a wholly-owned subsidiary called Drillco Exploration FZE (Drillco). Besides dry- bulk shipping, the Archean Group is present in export of granite stones, iron ore fines and industrial salts. HARIYANA SHIP: CRISIL Reaffirms B+ Rating on INR200MM Loan ---------------------------------------------------------- CRISIL's rating on the bank facilities of Hariyana Ship Demolition Private Limited (HSDPL; part of the Hariyana group) reflects deterioration in Hariyana group's business profile marked by weakened operating profitability. Additionally, the operating margin is expected to continue to remain weak over the medium term driven by oversupply of steel and subdued demand conditions prevailing globally. The lower price realization of its products, procured against letters of credit (LCs), constrains its credit profile, particularly its liquidity. The liquidity is further constrained by loans to third parties remaining at the same level, as against expectations of a decline in their quantum. The receipt of the loans continues to remain a key rating sensitivity factor affecting the group's credit profile, especially liquidity over the medium term. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Letter of Credit 200 CRISIL B+/Stable (Reaffirmed) Analytical Approach For arriving at the ratings, CRISIL has combined the business and financial risk profiles of HIPL, Hariyana Ship Demolition Ltd (HSDL), Hariyana Ship Breakers Ltd (HSBL), and Inducto Steel Ltd. This is because these entities, collectively referred to as the Hariyana group, have significant operational linkages and fungible cash flows, and are under a common management. Key Rating Drivers & Detailed Description Strengths Exposure to risks inherent in ship breaking, steel trading, and money lending businesses The Hariyana group derives majority of its revenues and profits from ship breaking, steel trading and money lending activities. While revenues from ship breaking and steel trading are volatile in nature, its money lending activities expose it to substantial risks related with recoverability, especially during a downturn in the market. The Hariyana group's earnings from ship breaking are volatile in nature and are based on freight rates and industry cycles. The cost of ships for demolition varies considerably, depending on the freight index and cost of melting scrap. Ship prices have a direct bearing on the performance of players in the ship breaking sector as it is not viable to buy costly ships, which may not fetch the expected prices for scrap sales after demolition. While the revenues from steel trading are relatively steady, it exposes the group to fluctuations in steel prices, since it has to maintain inventory of about one and a half month on an average. The company's procurement is also not backed by orders. However, this segment does provide relative stability to the group's overall revenue stream. The group also has a large money lending portfolio, which stood at an estimated INR3.5 billion as on December 31, 2015. The group mostly lends these funds to real estate developers known to the promoters. This exposes the group to risks related to recoverability, especially during any slowdown or downturns in the sector. While the group also takes charge of assets funded by these loans in return, it does not entirely eliminate risks related to recoverability. Such large and increasing exposure towards money lending could substantially impact the group's credit risk profile in case of non-recoverability. However, CRISIL expects the money lending portfolio to reduce gradually over the medium term, reducing risks pertaining to this segment. CRISIL believes that the Hariyana group's revenues will remain volatile over the medium term because of significant dependence on ship breaking activity. Group's extant investments in unrelated businesses such as real estate The Hariyana group's aggressive growth strategy has resulted in unrelated diversifications in the real estate and construction industry, and money lending activities. The management frequently resorts to inter-company borrowings; the group companies have fungible cash flows, depending on business requirements. Since 2004, when the ship breaking business was on the decline, the Hariyana group has focussed on financing activities, and extended large loans to corporate entities and partnership firms engaged in the real estate business. Although the money lending activities have been curtailed by the group and no fresh money is being lent, the outstanding exposure in money lending continues to be large. The Hariyana group has partnerships with real estate developers for development of residential projects in Bangalore for a stake of 40 to 50 per cent. Although the group's foray into the real estate development business exposes it to the risks and cyclicality inherent in the sector, the management's experience in real estate development through associate concerns mitigates this risk. However, the group remains exposed to risks inherent in the real estate business and its success in these ventures remains a key rating sensitivity factor. CRISIL believes that the Hariyana group's unrelated diversifications into real estate and financing activities expose the group to risks inherent in these sectors and will continue to influence the group's future credit risk profile. Weakness Moderate financial risk profile The Hariyana group has a moderate financial risk profile marked by healthy net worth, low gearing. The net worth and gearing stood at an estimated INR226 crores and 0.14 time respectively as on March 31, 2016. The net cash accruals to total debt ratio and interest coverage ratio are estimated at 171 per cent and 3.48 times respectively for 2015-16. However, the interest income on its money lending portfolio is not entirely received by the company and is accrued, which further results in lower adjusted debt protection metrics. The absence of capex plans and healthy accretion to reserves supports the financial risk profile. Moreover, the company's borrowings are predominantly short term in nature, with low maturing debt obligations vis-a-vis estimated cash accruals. CRISIL believes that the Hariyana group will maintain its moderate financial risk profile over the medium term, on the back of steady revenues and moderate capex plans. Established market position in ship breaking industry The Hariyana group was established in 1976 by Mr. Shanti Sarup Reniwal, who is presently the chairman of the group. The group has been engaged in the ship breaking business for over three decades, and has accumulated a strong knowledge of the industry over the years. It has demolished more than 100 ships during its tenure of ship breaking activity. The group has demonstrated expertise in demolishing various types of ships such as passenger, tankers, and navy destroyers. It is equipped to break and demolish large vessels and very large crude carriers (VLCCs); it demolished Pacific Blue, which had a capacity of about 50,000 tonnes, one of the largest vessels ever demolished in the country. The Hariyana group's management has demonstrated its ability to maintain its growth in adverse business conditions. The group has diversified into related business domains, such as sponge iron manufacturing and steel trading. These are contra-cyclical to ship breaking activity and ensure stability in revenues. CRISIL believes that the Hariyana group will leverage on its management's experience for strengthening its market position over the medium term. Outlook: Stable CRISIL believes that Hariyana group will remain exposed to risks inherent in ship-breaking. The outlook may be revised to 'Positive' if the group recovers its funds advanced to third parties sooner than expected or achieves significantly higher profitability or revenue growth thereby improving its liquidity profile. Conversely, the outlook may be revised to 'Negative' if Hariyana group incurs losses in its money-lending businesses, witnesses a steep decline in its revenues, or weakens its capital structure by undertaking a larger-than-expected debt-funded capital expenditure programme. The Hariyana group, promoted by Mr. Shanti Sarup Reniwal, is primarily into ship breaking and steel trading. The group also undertakes inter-corporate lending activities, and develops residential real estate projects. Hariyana group generated net sales of INR866 crores in 2015-16 (Refers to financial year from 1st April 2015 to 31st March 2016) with Profit after Tax of INR11.45 crores as compared to net sales of INR759 crores with Profit after Tax of INR21.83 crores in 2014-15. HARSHA INTERNATIONAL: CARE Assigns B+ Rating to INR25cr LT Loan --------------------------------------------------------------- CARE Ratings has assigned rating to the bank facilities of Harsha International (HI) as: Amount Facilities (INR crore) Ratings ---------- ----------- ------- Long-term Bank Facilities 25 CARE B+; Stable Assigned Detailed Rationale & Key Rating Drivers The rating assigned to the bank facilities of HI is constrained by project completion and implementation risk, competition from other players in the industry, seasonality associated with the hotel industry and constitution of the entity as a partnership with inherent risk of withdrawal of capital. The rating is, however, underpinned by the experienced partners, achievement of financial closure and stable demand of hotel business. Going forward, the ability of the firm to complete the project in timely manner and start the commercial operations as envisaged would be key rating sensitivity. Detailed Description of the key rating drivers Key Rating Weaknesses Project completion and implementation risk: The firm is setting up an accommodation (short-term stay)-cum-restaurant under the name "Harsha International". The total cost of the project is INR43 crore and the same is expected to be funded by partners' capital of INR18 crore and long-term loans of INR25 crore. The project is expected to be completed by August 2018. As on February 28, 2017, the firm has incurred INR9.71 crore (around 23% of the total project cost) which is funded through partners' capital. The financial closure for the project has been achieved. The ability of the firm to complete the project without any cost or time over run will remain critical from credit risk perspective. Competition from other players in the industry: The firm faces competition from a number of small and medium players. Though there are other regional players offering services, along with upcoming players in the market. Seasonality associated with hotel industry: The demand for hotel and hospitality sector has direct relation to the overall health of economy. The Indian hotel industry normally experiences high demand during October-April, followed which the monsoon months entail low demand. Usually, the December and March quarters bring in 60% of the year's turnover for India's hoteliers. However, this trend is seeing a change over the recent few years. Hotels have introduced various offerings to improve performance (occupancy) during the lean months. These include targeting the conferencing segment and offering lucrative packages during the lean period. Key Rating Strengths Experienced Partners: HI was promoted by Mr. Maharudrappa, along with his spouse. Mr. Maharudrappa is a qualified graduate having more than two decades of experience in real estate and other trading business. Stable demand of hotel business: The Indian tourism and hospitality industry has emerged as one of the key drivers of growth among the services sector in India. Tourism in India has significant potential considering the rich cultural and historical heritage, variety in ecology, terrains and places of natural beauty spread across the country. Tourism is also a potentially large employment generator besides being a significant source of foreign exchange for the country Harsha International (HI) was established in the year 2015 as partnership firm. HI is promoted by Mr. Maharudrappa along with his spouse Ms Annapurneswari. The firm is planning to construct accommodation for short-term stay and restaurant under the name "Harsha International". The firm is planning to construct 80 rooms along with food and beverage facilities. The project is expected to start commercial operations from August 2018. HEMKUNT RICE: CRISIL Reaffirms B+ Rating on INR3.75MM LT Loan ------------------------------------------------------------- CRISIL has reaffirmed its 'CRISIL B+/Stable' rating on the long- term bank facilities of Hemkunt Rice Mills Private Limited. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 5 CRISIL B+/Stable (Reaffirmed) Proposed Long Term Bank Loan Facility 3.75 CRISIL B+/Stable (Reaffirmed) Term Loan 1.25 CRISIL B+/Stable (Reaffirmed) The rating continues to reflect the company's modest scale of operations in the intensely competitive rice milling industry and below average financial risk profile marked by small net-worth and high gearing. These weaknesses are partially offset by the extensive experience of its promoters and established regional market position. Key Rating Drivers & Detailed Description Weakness * Modest scale of operations in an intensely competitive industry With revenue of INR63.31 crore in fiscal 2016 and installed paddy milling capacity of 16 tonne per hour, scale continues to remain modest in a highly fragmented and intensely competitive industry. * Below average financial risk profile HRMPL's financial risk profile remains constrained on account of high gearing of 2.5 times and small net worth of INR3.69 crores as on March 31, 2016. The gearing levels are estimated to have remained high as on March 31, 2017 on account of small net-worth and muted accretion to reserves. Strengths * Extensive industry experience of promoters and established regional market position Presence of more than two decades in the rice industry has enabled the promoters to establish strong relationship with customers and suppliers. The long standing presence has also enabled HRMPL to establish a strong regional market position. Further HRMPL was one of the first rice milling units to be set up in Hazaribagh, which is favourably located near Jharkhand's paddy-growing region. Outlook: Stable CRISIL believes HRMPL will continue to benefit over the medium term from the extensive experience of its promoters. The outlook may be revised to 'Positive' if there is a substantial and sustained increase in scale and accrual along with improved capital structure and stable working capital management, leading to an improved financial risk profile. The outlook may be revised to 'Negative' if large, debt-funded capital expenditure, decline in revenue or profitability, or stretch in working capital cycle weakens financial risk profile, particularly liquidity. Incorporated in May 2005 in Hazaribagh and promoted by Mr. Manjeet Singh Kalra and Mr. Swaranpal Singh Kalra, HRMPL mills and processes parboiled rice. The company markets its product under 10 registered brands. Profit after tax was INR0.19 crore on net sales of INR63.31 crore for fiscal 2016, against loss of of INR0.57 crore on net sales of INR46.80 crore in fiscal 2015. HIGH TECH: ICRA Downgrades Rating on INR5.70cr Term Loan to D ------------------------------------------------------------- ICRA Ratings has revised the long term rating assigned to the INR10.60 crore fund based limits of High Tech Garments Private Limited from [ICRA]BB (SO) to [ICRA]D. Amount Facilities (INR crore) Ratings ---------- ----------- ------- Term Loan 5.70 Revised to [ICRA]D from [ICRA]BB (SO) (Stable) Cash Credit 4.90 Revised to [ICRA]D from [ICRA]BB (SO) (Stable) The rating downgrade takes into account the recent delays in debt servicing due to stretched liquidity position arising out of delay in receivables from customers as well as lower offtake. Incorporated in the year 2005, High Tech Garments Private Limited is engaged in the manufacturing of grey fabric made out of polyester yarns. The company is promoted by Mr. Ajay Agrawal and other family members who have been in the textile business for over a decade. The manufacturing unit of the company is located a Kim, Surat. During FY15, the company reported a net profit of INR0.08 crore on an operating income of INR23.63 crore. INDIAN STEEL: ICRA Reaffirms 'D' Rating on INR1,046.82cr Loan ------------------------------------------------------------- ICRA Ratings has reaffirmed the [ICRA]D rating on the INR2,520.53-crore bank limits of Indian Steel Corporation Limited. Amount Facilities (INR crore) Ratings ---------- ----------- ------- Term loans 793.61 [ICRA]D; reaffirmed Fund-based limits 205.36 [ICRA]D; reaffirmed Non-fund based limits 1,046.82 [ICRA]D; reaffirmed Unallocated 474.74 [ICRA]D; reaffirmed Rationale The rating reaffirmation factors in the continued delays in debt servicing, overdrawals of fund-based (FB) limits and instances of devolvement of letters of credit (LC) over the last two years on account of ISCL's stretched liquidity profile. Given the weak market conditions, ISCL has reported decline in its turnover over the last two years along with significant losses at the net level. In addition, the company has been facing working capital funding constraints, which have further limited its scale of operations. Further, the conversion of devolved LCs into fund- based limits has resulted in higher working capital borrowings and increase in overall debt. Moreover, continued losses at net level resulted in a negative net worth in 9M FY2017, which coupled with increased debt has deteriorated ISCL's leverage profile. The rating also continues to factor in the competitive nature of the steel industry, which limits the pricing flexibility of the industry participants including ISCL and adversely impacts their profitability. ISCL's profitability also remains exposed to foreign exchange risk, given the significant level of raw material imports. However, ICRA takes note of the long experience of ISCL's promoters and the company's established operational track record in the steel industry. It has a wide customer base, which includes reputed players of the auto and white goods sector. ICRA also takes into account the management support and technical assistance available to ISCL from Mitsui and Company Limited, Japan. Going forward, the company's ability to timely service its debt obligations, achieve revenue growth and improve its profitability will be the key rating sensitivity. Credit strengths * Long experience of ISCL's promoters and the company's established operational track record in the steel industry * Association with Mitsui & Company Limited, Japan, provides access to key raw materials as well as technical assistance * Established relationship with customers, which include reputed players of the auto and white goods industry Credit weaknesses * Stretched liquidity profile resulting in LC devolvement; overdrawal of fund-based limits and delays in debt servicing * Continuous decline in revenues and net losses in FY2016 and 9M FY2017 on account of weak market demand * Inability to obtain working capital funding from banks has adversely impacted the company's business operations * Deterioration of leverage profile with increase in total debt due to conversion of devolved LCs to FB limits and negative net worth owing to continued losses * Highly competitive and fragmented industry structure limits the pricing flexibility of the industry participants, including ISCL * Exposure to fluctuation in raw material prices given the high inventory levels maintained by the company * Exposure to adverse movement in foreign exchange rates given the significant level of imports and presence of partial hedging policy * Exposed to the cyclicality inherent in the steel industry Description of key rating drivers: ISCL manufactures cold rolled (CR) coils and sheets along with galvanised plain (GP) and galvanised corrugated (GC) sheets at its manufacturing facilities at Bhimasar near Gandhidham, in Gujarat. The company has an established operational track record in the steel industry, having commenced its operations in 2004. Further, ISCL's promoters have a vast experience of over two decades in the steel manufacturing industry. This has enabled ISCL to develop an established customer base over the years, which includes several reputed players from the automobile and white goods industries. However, ISCL's financial profile has continued to remain weak over the last couple of years, marked by decline in turnover and significant net losses in FY2016 and 9M FY2017 on account of subdued market demand. This has resulted in a stretched liquidity profile, thereby leading to delays in debt servicing by the company. Further, the availability of working capital funding from banks has remained low given ISCL's weak financial profile and instances of LC devolvements and overdrawals of fund-based limits. This has adversely impacted the company's manufacturing operations, leading to lower production volumes and consequently, lower sales volumes. Further, its debt levels have constantly increased over the last few years because of conversion of devolved LC limits into fund-based limits. Total debt on ISCL's books almost doubled to INR1,614 crore in 9M FY2017 from INR829 crore in FY2014. Increased debt, coupled with negative net worth, owing to continued losses, has significantly deteriorated the company's leverage profile. J C CONSTRUCTION: Ind-Ra Assigns 'BB' Long-Term Issuer Rating ------------------------------------------------------------- India Ratings and Research (Ind-Ra) has assigned J C Construction Private Limited (JCCPL) a Long-Term Issuer Rating of 'IND BB'. The Outlook is Stable. The instrument-wise rating actions are: -- INR60 mil. Fund-based working capital limit assigned with 'IND BB/Stable' rating; -- INR9.39 mil. Term loan assigned with 'IND BB/Stable' rating; and -- INR100 mil. Non-fund-based working capital limit assigned with 'IND A4+' rating KEY RATING DRIVERS The ratings reflect JCCPL's small scale of operations and moderate liquidity position. According to provisional financials for FY17, revenue was INR309 million (FY16: INR283 million). The rise in revenue was due to healthy execution of work orders. Its utilisation of fund-based limits was 96.79% during the six months ended March 2017. It had a long net cash cycle of 142 days in FY17 (FY16: 119 days). The elongation of the net cash cycle was due to an increase in debtor days. The ratings, however, are supported by strong credit metrics. In FY17, gross interest coverage was 4.0x (FY16: 3.6x) and net financial leverage was 1.1x (1.3x). The improvement in gross interest coverage was due to an increase in operating EBITDA. Meanwhile, the improvement in net financial leverage was driven by an increase in operating EBITDA and a decline in total debt due to lower utilization of short-term debt. Moreover, it had a comfortable EBITDA margin of 11.8% in FY17 (FY16:11.08%), and its promoters have an experience of more than four decades in the construction industry. RATING SENSITIVITIES Negative: A decline in EBITDA margin leading to deterioration in credit metrics may lead to a negative rating action. Positive: An increase in revenue, along with the maintenance of its credit metrics, will lead to a positive rating action. COMPANY PROFILE JCCPL was incorporated in 1974 as a proprietorship firm by Mr. Jagot Chandra Hazarika. In 1999, it reconstituted itself as a private limiated company. It is a Class I government contractor. It undertakes various civil construction projects in Assam and Arunachal Pradesh. KAMDHENU COTTON: CRISIL Reaffirms B+ Rating on INR17.20MM Loan -------------------------------------------------------------- CRISIL has reaffirmed its ratings on the bank facilities of Kamdhenu Cotton and Spinning Mills Private Limited (KCSM) at 'CRISIL B+/Stable/CRISIL A4'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Bank Guarantee 0.5 CRISIL A4 (Reaffirmed) Cash Credit 5.8 CRISIL B+/Stable (Reaffirmed) Letter of Credit 1.0 CRISIL A4 (Reaffirmed) Proposed Long Term Bank Loan Facility 2.75 CRISIL B+/Stable (Reaffirmed) Standby Line of Credit 0.75 CRISIL B+/Stable (Reaffirmed) Term Loan 17.20 CRISIL B+/Stable (Reaffirmed) CRISIL's ratings on the bank facilities of KCSM continue to reflect the company's volatile operating profitability in the highly fragmented textile industry, and average financial risk profile because of high gearing and average debt protection metrics. These weaknesses are partially offset by the extensive experience of KCSM's promoters and their funding support along with efficient working capital management. Key Rating Drivers & Detailed Description Weaknesses * Susceptibility to volatility in raw material prices: Prices of key raw material, polyester, which accounts for 78% of total production cost, are volatile as these are linked to crude prices. * Average financial risk profile: Total outside liabilities to tangible net worth ratio was comfortable at 1.46 times as on March 31, 2017, and is expected to because of steady accretion to reserves and absence of any significant debt-funded capex. However, debt protection metrics were muted, with interest coverage and net cash accrual to total debt ratios of 2.2 times and 0.16 time, respectively, for fiscal 2017. The net cash accruals for fiscal 2017 are estimated at 2.6 crores which is tightly matched with the term loan repayments of 2.20 crores. Metrics are expected to improve over the medium term with better profitability and lowering of debt. Strengths * Extensive experience of promoters and diversified product profile: Presence of nearly two decades in the yarn industry has enabled the promoters to establish strong relationship with vendors and customers. Also, clientele is diverse, with no single customer contributing more than 25% to overall revenue. From fiscal 2017, the company began manufacturing cotton yarn only on job work basis. * Efficient working capital management: Gross current assets were 59 days as on March 31, 2017, due to moderate level of inventory and debtors. With expected ramp-up in scale of operations further improvement in working capital cycle is expected. Outlook: Stable CRISIL believes KCSM will benefit over the medium term from the extensive experience of its promoters in the textile industry. The outlook may be revised to 'Positive' if significant increase in profitability and revenue leads to higher-than-expected cash accrual, and help to improves key credit metrics. The outlook may be revised to 'Negative' if decline in profitability, lower accrual due to stretch in working capital cycle, or large capex weakens financial risk profile. Incorporated in 2008 and promoted by Ludhiana-based Dhir and Johar families, KCSM manufactures synthetic yarn (polyester, polyester-blended, and acrylic yarn) on jobwork basis. Operations, which began in January 2013, are managed by Mr. Puneet Dhir and his brother-in-law, Mr. Manav Johar. MAHARASHTRA ALUMINIUM: CRISIL Reaffirms B Rating on INR10MM Loan ---------------------------------------------------------------- CRISIL has reaffirmed its ratings on the bank facilities of Maharashtra Aluminium and Alloys Pvt Ltd (MAAPL) at 'CRISIL B/Stable/ CRISILA4'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 10 CRISIL B/Stable (Reaffirmed) Letter of Credit 2 CRISIL A4 (Reaffirmed) Proposed Long Term Bank Loan Facility 3 CRISIL B/Stable (Reaffirmed) The ratings reflect modest scale of operations and low profitability susceptible to intense competition in the industry and below average financial risk profile constrained by small networth and weak interest coverage. These weaknesses are partially offset by the extensive experience of promoters and well established relations with key suppliers and clients and efficient working capital management. Key Rating Drivers & Detailed Description Weakness * Modest Scale of operations and low operating profitability The scale of operations has remained modest at around INR70-75 cr. The margins have remained low over the past 3 years 0.6 to 18 per cent. The lower margins are primarily on account of lower value addition. CRISIL believes that the scale and margins of the company will remain modest over the medium term. * Below average financial risk profile The company has a net worth of INR5.5 cr as on March 31, 2017. With limited accretions to reserves of close to INR20 lakhs per annum, the net worth is expected to remain small. Despite the modest net worth, the company has a moderate total outside liabilities to adjusted net worth (TOLANW) supported primarily by its efficient working capital. The interest coverage has however been the weak with interest coverage of INR 1.35 times in 2016- 17. Strengths * Extensive experience of the promoters and long standing relations with key suppliers and customers Mr. Manji, 62, started a retail shop after completing his SSC. He is a first generation entrepreneur. He entered into the steel business in 1980. The promoters have been engaged in steel industry since then. Mr. Manji and Mr. Mandan have over the years developed healthy relations with the key suppliers such as Uttam Galva, National Steel, Jindal Steel etc. Outlook: Stable CRISIL believes that MAAPL will continue to benefit over the medium term from its promoters extensive experience and the well established relationships with its key suppliers and customers. The outlook may be revised to 'Positive' in case of significant improvement in its cash accrual supported by sustained improvement in its scale of operations and profitability while maintaining its efficient working capital management. The outlook may be revised to 'Negative' in case sharp deterioration in cash generation or stretch in working capital cycle leads to weakening of financial risk profile especially liquidity. MAAPL was initially set up as a proprietorship firm Maharashtra Steels in 1982. The firm was converted to a private limited company in the year 2000 under its current name. The company is engaged in trading of galvanized and colour coated sheets (MS) in Latur district. Mr. Manji Patel and Mr. Mandan Patel look after the day-to-day operations of the company. MAAPL reported a profit after tax (PAT) of INR16 lakh on net sales of INR72.2 cr for 2016-17, as against PAT of INR13 lakhs on net sales of INR70.2 cr for 2015-16. MR. BROWN: CRISIL Raises Rating on INR8.2MM Term Loan to B+ ----------------------------------------------------------- CRISIL has upgraded its rating on the long-term bank facilities of Mr. Brown Bakery & Food Products Private Limited (Mr. Brown) to 'CRISIL B+/Stable' from 'CRISIL B/Stable'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Term Loan 8.2 CRISIL B+/Stable (Upgraded from 'CRISIL B/Stable') The upgrade reflects sustained improvement in the business risk profile of Mr. Brown backed by robust demand for the company's products in the market. The robust demand has also led to upward revision in product prices, and with increasing capacity the company is expected to reap benefits of economies of scale which is further expected to positively impact the operating margins over the medium term. Revenues steadily increased to INR17 crore in fiscal 2017 from INR9 crore in fiscal 2014, at a compound annual growth rate of 23% with the operating margins improving to 13.7% from 6.7% over the same period. Revenue is expected at over INR20 crore in fiscal 2018. The liquidity is supported by unsecured loans of INR3.10 crore from the promoters as on March 31, 2017; these loans would provide financial flexibility and are expected to remain in the business over the medium term. The rating reflects the modest net worth and scale of operations, and delays in commercialization of ongoing capacity expansion. The rating weaknesses are partially offset by the extensive industry experience of the promoters and an established brand and the expected benefits of the ongoing capacity expansion. Analytical Approach CRISIL has treated INR3.01 crore of unsecured loans, outstanding as on March 31, 2017, from the directors, as neither debt nor equity. That's because these funds are subordinated to bank debt, have lower interest rate than bank debt, and are expected to remain in the business over the medium term. Key Rating Drivers & Detailed Description Weakness * Modest networth: The networth was modest at INR4.68 crore as on March 31, 2017. * Delayed commercial operation date (COD): The COD of the ongoing project, which was previously expected in fiscal 2017, is now likely to be November 2017. Strengths * Extensive industry experience of the promoters and an established brand: The promoters, Mr. Ramu Gupta and his family members, have experience of nearly a decade in the confectionary manufacturing and retail business. The company started with one retail outlet and one manufacturing unit, and, over the years, has grown to two outlets in Lucknow and two in Kanpur under the franchisee model. * Expected benefits of ongoing capacity expansion: The operating margin has been steadily improving on the back of increasing demand along with revision in product prices. With the ongoing capacity addition, the company is expected to reap benefits of economies of scale which is further expected to positively impact the operating margins over the medium term. Outlook: Stable CRISIL believes Mr. Brown Bakery will continue to benefit over the medium term from its established brand, the extensive industry experience of the promoters, and their funding support. The outlook may be revised to 'Positive' if the ongoing project is completed on time and within the budgeted cost, and there's better-than-expected cash accrual during the early stages of operations. The outlook may be revised to 'Negative' in case of any time or cost overrun in the project, or lower-than-expected cash accrual, constraining liquidity. Mr. Brown Bakery was established on June 12, 2008, promoted by Mr. Ramu Gupta and his family members. The company manufactures bakery and confectionary products that it sells through retail outlets in Lucknow and Kanpur under its brand, Mr. Brown Bakery. It is headquartered in Lucknow. On a provisional basis, profit after tax (PAT) was INR0.96 crore on operating income of INR16.78 crore for fiscal 2017; PAT and operating income were INR0.53 crore and INR13.94 crore, respectively, for fiscal 2016. NARAYAN COTTON: Ind-Ra Assigns 'B+' Long-Term Issuer Rating ----------------------------------------------------------- India Ratings and Research (Ind-Ra) has assigned Narayan Cotton Industries (NCI) a Long-Term Issuer Rating of 'IND B+'. The Outlook is Stable. Instrument-wise rating actions are: -- INR10.63 mil. Term loan assigned with 'IND B+/Stable' rating; and -- INR160 mil. Fund-based working capital limits assigned with 'IND B+/Stable' rating KEY RATING DRIVERS The ratings reflect NCI's moderate scale of operations and weak credit metrics. As per provisional FY17 financials, the firm achieved revenue of INR422.1 million (FY16: INR401.6 million). EBITDA margin expanded to 2.8% in FY17P (FY16: 2.0%) on account of a decline in raw material cost. Interest coverage (operating EBITDA/gross interest expense) improved to 1.3x in FY17P (FY16:0.7x) and net leverage (total adjusted net debt/operating EBITDA) to 8.5x (16.1x) owing to a decline in interest cost resulting from a decrease in total debt. However, the ratings are supported by NCI's strong liquidity position as reflected by 52.4% average utilization of fund-based limits during the 12 months ended April 2017. The ratings also benefit from the partners more than two decades of experience in the cotton trading business. RATING SENSITIVITIES Positive: A substantial improvement in the operating profitability along with an improvement in the credit metrics will be positive for the ratings. Negative: Deterioration in the operating profitability leading to deterioration in the credit metrics will be negative for the ratings. COMPANY PROFILE Incorporated in 2009 as a partnership firm, NCI is primarily engaged in the cotton ginning and pressing business. Its manufacturing unit is located in Kadi, Gujarat. NEW LAXMI: Ind-Ra Assigns 'BB' Long-Term Issuer Rating ------------------------------------------------------ India Ratings and Research (Ind-Ra) has assigned New Laxmi Steel & Power Private Limited (NLSP) a Long-Term Issuer Rating of 'IND BB'. The Outlook is Stable. The instrument-wise rating actions are: -- INR200 mil. Fund-based limits assigned with 'IND BB/Stable' rating; and -- INR250 mil. Proposed non-fund-based limit assigned with 'provisional IND A4+ rating KEY RATING DRIVERS The ratings reflect NLSP's moderate scale of operations and credit metrics. As per FY17 provisional financials, revenue and operating EBITDA margins improved to INR1.143 billion (FY16: INR861 million) and 5.5% (4.8%), respectively. This was on account of an increase in sale of thermo mechanical treatment bars (TMT), along with the introduction of a new product line. Consequently, interest coverage improved to 2.4x in FY17P (FY16: 2.0x) and net leverage to 5.0x (5.5x). The ratings also factor in NLSP's moderate liquidity position with 90% average utilization of working capital limits during the 12 months ended April 2017. The ratings, however, are supported by the promoters' over two decades of experience in the manufacturing of TMT bars. RATING SENSITIVITIES Positive: A sustained improvement in the scale of operations along with an improvement in the overall credit metrics would be positive for the ratings. Negative: A sustained deterioration in the credit profile would be negative for the ratings. COMPANY PROFILE Incorporated in 2007, NLSP is engaged in the manufacturing of TMT bars, structural steel and billets. The manufacturing plant is situated in Khurda, Odisha with an installed capacity of 72,000MT of TMT bars and 18,000MT of structural bars. The company plans to set up a galvanizing unit with a capacity of 36,000MT, which is expected to commence operations from 2HFY18. P P RUBBER: CRISIL Reaffirms B+ Rating on INR12.5MM Cash Loan ------------------------------------------------------------- CRISIL has reaffirmed its rating on the long term bank facility of P P Rubber Products Private Limited (PRPPL) at 'CRISIL B+/Stable'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 12.5 CRISIL B+/Stable (Reaffirmed) The rating continues to reflect exposure to a highly fragmented footwear industry, modest networth, and low current ratio. These rating weaknesses are partially offset by the promoter's extensive experience in manufacturing footwear and comfortable return on capital employed (RoCE) and debt protection metrics. Analytical Approach CRISIL has treated unsecured loan amounting to INR2 crores from promoters as on March 31, 2016 as neither debt nor equity as the same are subordinated to bank debt and are expected to remain in business over the medium term. Key Rating Drivers & Detailed Description Weaknesses * Exposure to a highly fragmented footwear industry: Company operates in the footwear industry, marked by high degree of fragmentation with several small players and low entry barriers resulting in severe competition and thus restricting the bargaining power of individual players. * Modest networth Net worth was modest at INR8.1 crores as on March 31, 2016, due to modest accretion to reserves. * Low current ratio: The current ratio was below 1 time over the four years through fiscal 2016. Strengths * Promoter's extensive experience in manufacturing footwear: Mr. Premprakash Poddar has around three decades' experience which helped in establishing strong relationship with customers and suppliers. * Comfortable return on capital employed (RoCE) and debt protection metrics: RoCE has been 15-23% over the three years through fiscal 2016. The net cash accrual to total debt ratio (NCATD) and interest coverage ratio were 15% and 2.9 times in fiscal 2016 as against 11% and 1.9 times respectively in fiscal 2015. Both are expected to remain moderate over the medium term. Outlook: Stable CRISIL believes PRPPL will continue to benefit over the medium term from its promoters' extensive industry experience. The outlook may be revised to 'Positive' if increase in scale of operations and efficient working capital management result in a considerably stronger financial risk profile. Conversely, the outlook may be revised to 'Negative' if decline in revenue or margins, or any large, debt-funded capital expenditure weakens financial risk profile. PRPPL, incorporated in October 1990, manufactures footwear. The company's manufacturing facilities are located at Jaipur (Rajasthan). The company was established by Mr. Premprakash Poddar, who has been in the business for more than two decades. Profit after tax was INR1.98 crore on net sales of INR74 crore for fiscal 2016 against INR0.95 crore and INR69.9 crore, respectively, for fiscal 2015. P.B. COTTON: ICRA Withdraws 'B' Rating on INR7cr Cash Loan ---------------------------------------------------------- ICRA Ratings has withdrawn the long-term rating of [ICRA]B outstanding on the INR7.00-crore cash credit facility, INR1.21- crore term loan facility and INR0.69-crore unallocated limits of P.B. Cotton & Oil Industries (PBCOI). Amount Facilities (INR crore) Ratings ---------- ----------- ------- Fund-based-Cash Credit 7.00 [ICRA]B; Withdrawn Fund-based-Term Loan 1.21 [ICRA]B; Withdrawn Unallocated Limits 0.69 [ICRA]B; Withdrawn Rationale The long-term rating assigned to P.B. Cotton & Oil Industries has been withdrawn at the request of the firm based on the no- objection certificate provided by its banker. Established in 2012 as a partnership firm, P.B. Cotton & Oil Industries (PBCOI) is engaged in raw cotton ginning and pressing, and cotton seed crushing. The manufacturing facility of the firm is located at Halvad, Rajkot and is equipped with 24 ginning machines, one pressing machine and four oil expellers. It commenced its commercial operations from 2013. The partners of the firm have past experience in cotton industry. PITAMBARA FOODS: ICRA Reaffirms B+ Rating on INR3.50cr Loan ----------------------------------------------------------- ICRA Ratings has reaffirmed the long-term rating of [ICRA]B+ assigned to the INR3.50-crore cash-credit facility of Pitambara Foods (PF). ICRA has also reaffirmed the short-term rating of [ICRA]A4 assigned to the INR2.50-crore bank guarantee facility of PF. The outlook on the long-term rating is 'Stable'. Amount Facilities (INR crore) Ratings ---------- ----------- ------- Fund-based-Cash Credit 3.50 [ICRA]B+ (Stable); Reaffirmed Non Fund-based- Bank Guarantee 2.50 [ICRA]A4; Reaffirmed Rationale The reaffirmation of ratings take into account PF's small scale of current operations, and weak financial profile as reflected by low profitability on account of low value-additive nature of the business and subdued coverage indicators. The ratings also consider the high working-capital intensive nature of the business, necessitated by large inventory holding that exert pressure on the liquidity position of the firm, as also reflected by high utilisation of its working capital limits. Moreover, the highly competitive nature of the industry, characterised by the presence of a large number of players, keeps the firm's profitability under check. PF also remains vulnerable to adverse changes in Government policies towards agro-based commodities. Besides, there is agro-climatic risk as paddy is an agricultural commodity. ICRA also notes the risk associated with the entity's status as a partnership firm, including the risk of capital withdrawal by the partners. The ratings, however, derive comfort from the long experience of the promoters in the rice-milling industry, and the firm's presence in a major paddy-growing area, which ensures easy availability of paddy and low landed cost of raw material. The demand prospects for the rice industry are favourable since rice is a staple food grain and India is the world's second largest consumer and producer of rice. In ICRA's opinion, the firm's ability to scale up operations while improving its profitability and coverage indicators, and manage its working capital requirement efficiently would remain key rating sensitivities, going forward. Key rating drivers Credit Strengths * Long experience of the promoters in the rice-milling industry * Proximity to raw-material sources, leading to low procurement cost and easy availability of paddy * Favorable demand prospects of the industry as India is the second largest consumer and producer of rice Credit Weaknesses * Modest scale of current operations * Weak financial profile as reflected by low profitability, weak return indicators and subdued coverage indicators * High working capital intensity of business exerts pressure on the liquidity position of the firm * Vulnerability to adverse changes in Government policies towards agro-based commodities like rice * Exposure to agro-climatic risk, which can affect the availability of paddy in adverse weather conditions * Competitive business environment due to fragmented nature of the industry with presence of multiple players in the organised and unorganised segments Description of key rating drivers highlighted above: PF, established as a partnership firm in 2004, is involved in milling of raw rice and trading of paddy, rice, broken rice, bran and husk in Raipur, Chhattisgarh. The annual milling capacity of the plant is 9,600 MT and is mainly used for custom milling which is done for the Marketing Federation, Government of Chhattisgarh. The firm's produce is primarily sold to wholesalers and traders located in Chhattisgarh, Gujarat, Maharashtra and Odisha. The primary raw material, paddy, is available in abundance in Chhattisgarh and other nearby states like Jharkhand and Bihar. PF's paddy requirements are, therefore, met mainly by local traders and farmers. The traded goods are procured from the local rice mills and traders. However, ICRA notes the agro-climatic risks, which can affect the availability of paddy during adverse weather conditions, and intense competition in the rice-milling industry, which limit the pricing flexibility of the participants, including PF. The firm also remains exposed to change in Government policies in relation to stipulation of minimum support price (MSP) for procurement of paddy from farmers and revision of policies on export of rice, levy sale, etc. The firm's operating income decreased from INR24.77 crore in FY2016 to INR23.81 crore in FY2017 (P), depicting a decline of ~4%, primarily on account of decrease in sales volume. The operating profit margin continued to remain thin and stood at 4.00% in FY2017 (P) on the back of low value-additive and highly competitive business. The capital structure remained leveraged. High debt level, coupled with low profitability kept the debt- coverage indicators weak. The firm's working capital intensity of operations remained high due to high inventory holding, as reflected by net working capital relative to operating income (NWC/OI) of 27% in FY2017 (P). Established in 2004, Pitambara Foods (PF) is involved in milling of raw rice and trading of paddy, rice, broken rice, bran, and husk. The plant is located in Raipur, Chhattisgarh, with an annual milling capacity of 9,600 metric tonnes (MT). The firm is promoted by Raipur-based Sharma and Agarwal families, who have long experience in the rice-milling industry. PNB REALITY: ICRA Reaffirms 'D' Rating on INR5.97cr Term Loan ------------------------------------------------------------- ICRA Ratings has reaffirmed the long-term rating of [ICRA]D to the INR5.97-crore fund-based term-loan facility, INR0.35-crore fund-based cash-credit facility and INR2.18-crore long-term unallocated limits of Pnb Reality Limited. Amount Facilities (INR crore) Ratings ---------- ----------- ------- Long Term-Term Loan 5.97 [ICRA]D Reaffirmed Long Term-Cash Credit 0.35 [ICRA]D Reaffirmed Long Term- Unallocated Limits 2.18 [ICRA]D Reaffirmed The rating action is based on the best available information- FY2016 audited numbers and other information. As part of its process and in accordance with its rating agreement with PRL, ICRA has been trying to seek information from the company so as to undertake a surveillance of the ratings. Despite repeated requests by ICRA, the company's management has remained non- cooperative. In the absence of requisite information, ICRA's Rating Committee has taken a rating view based on the best available information. In line with SEBI's Circular No. SEBI/HO/MIRSD4/CIR/2016/119, dated November 1, 2016, the company's rating is now denoted as: "[ICRA]D ISSUER NOT COOPERATING". The lenders, investors and other market participants may exercise appropriate caution while using this rating, given that it is based on limited or no updated information on the company's performance since the time it was last rated. PnB Realty Ltd. (PnB), a part of the PnB Group of Companies, was incorporated in March 2008 as a public limited company. The group is promoted by Mr. VGP Babudas, a second-generation entrepreneur, with a track record of more than 20 years in real estate and hospitality sectors. The company operates a hotel named Aurick Hotel and is also involved in real-estate projects. RELIANCE COMMUNICATIONS: Fitch Lowers Long-Term IDR to RD --------------------------------------------------------- Fitch Ratings has downgraded India-based Reliance Communications Limited's (Rcom) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) to 'RD' from 'CCC'. Fitch has also downgraded the rating on Rcom's USD300 million 6.5% senior secured notes due 2020 to 'C/RR4' from 'CCC/RR4'. The downgrade follows Rcom's June 2, 2017 announcement that all of its bank lenders are prepared to waive debt service obligations until end-2017 to provide time for the company to lower its debt through two proposed transactions and present a plan demonstrating how the debt can be serviced over the long term. Under Fitch ratings definitions this situation constitutes a restricted default, as multiple waivers or forbearance periods have been extended in parallel following a non-payment event. KEY RATING DRIVERS Critical Liquidity Position: Rcom had poor liquidity at end-March 2017, with cash and equivalents of INR14 billion - insufficient to pay short-term debt of INR109 billion. Rcom's EBITDA declined by 30% to INR49 billion in the financial year to end-March 2017 (FY17), from INR71 billion in FY16, and is likely to be insufficient in FY18 to meet annual interest costs of INR35 billion and maintenance capex of INR15 billion. The company's management say that it will meet its coupon obligation due on 6 November, and there will be no cross-default prospect while the banks loans are in standstill; under the bond documents, non- payment of the bank loan may trigger a cross-default under the bond documents if such non-payment continues for 30 days following written notice from either 25% of the bondholders or the bond trustee. Deal Execution Risks: Fitch believes weakening cash generation in the Indian wireless sector may hamper Rcom's plan to sell 51% of its tower business, Reliance Infratel Ltd. Reliance Infratel will have significant cash flow exposure to the proposed 50:50 wireless joint venture (JV) between Rcom and Aircel which faces merger execution risk as well as tough market conditions, although the JV's other tenant Reliance Jio is backed by Reliance Industries, rated 'BBB-'/Stable. Even if the tower business and wireless JV transactions occur and debt is paid down, Fitch believes the residual business is likely to be saddled with excessive debt. The transactions are subject to approval from lenders, shareholders and the Indian telecom regulator. The standstill provides Rcom with seven months to complete the transactions. During this time, Rcom will also provide a sustainable long-term plan to service its remaining debt of at least INR200 billion. According to Rcom, the standstill requires lenders' formal approval, which, given the company's critical liquidity, Fitch expects to be obtained. DERIVATION SUMMARY Under Fitch ratings definitions the standstill constitutes a restricted default as multiple waivers or forbearance periods have been extended in parallel following a non-payment event. KEY ASSUMPTIONS Fitch's key assumptions within Fitch ratings case for the issuer include: - Delays in executing tower sale and demerger of wireless unit, leading to inadequate liquidity to pay short-term debt. - Analytical deconsolidation of wireless JV, Infratel and subsidiary Global Cloud Xchange (GCX) businesses because of their inability to provide cash to support Rcom's creditors. - The wireless JV, Infratel and GCX do not require equity from Rcom. - Sale of 51% ownership in Infratel to lower debt by INR110 billion. RATING SENSITIVITIES Developments that May, Individually or Collectively, Lead to Positive Rating Action - Improvement in Rcom's liquidity position such that it can pay its short-term obligations. Developments that May, Individually or Collectively, Lead to Negative Rating Action - Rcom entering into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedures, or otherwise ceasing business. LIQUIDITY Poor Liquidity: Cash and equivalents were INR14 billion at end- March 2017 - insufficient to repay short-term debt of INR109 billion. The standstill helps liquidity in the short term, although the company will not be able to meet its obligations unless execution of the transactions is successful. RELIANCE COMMUNICATIONS: Moody's Cuts CFR to Ca; Outlook Negative ----------------------------------------------------------------- Moody's Investors Service has downgraded Reliance Communications Limited's (RCOM) corporate family rating and senior secured bond rating to Ca from Caa1. The outlook is negative. This concludes the review of the ratings initiated by Moody's on May 30, 2017. RATINGS RATIONALE "The downgrade of RCOM's ratings to Ca from Caa1 follows the announcement of the company's proposed debt restructuring plan -- including a standstill of RCOM's debt servicing obligations for 210 days -- which is currently being considered by the company's bank lenders," says Annalisa Di Chiara, a Moody's Vice President and Senior Credit Officer On June 2, RCOM announced the formation of a Joint Lenders' Forum (JLF) to consider and approve a debt resolution plan. Based on JLF and Corrective Action Plan (CAP) guidelines from Reserve Bank of India (RBI) dated February 2014, banks are advised that the JLF should be mandatorily formed if aggregate exposure of lenders in the account is INR1.0 billion and above and is classified as a SMA-2 meaning principal or interest are overdue between 61 and 90 days. Lenders also have the option of forming a JLF even when the aggregate exposure in an account is less than INR1.0 billion and/or when the account is reported as SMA-0 (less than 30 days ) or SMA-1 (31-60 days). It is also possible that a borrower may request formation of a JLF on account of imminent stress -- in which case the account is classified as SMA-0. RCOM's management has confirmed that its entire bank group -- including onshore and offshore lenders -- are part of the JLF and have agreed in principle to the proposed debt resolution plan with reference date of June 2, 2017. "A missed scheduled payment of either interest or principal is considered as a default under Moody's definitions. The proposed debt resolution plan evidences the company's likely inability to service its upcoming debt service obligations, as scheduled under its loan agreements," says Di Chiara, also Moody's lead analyst for RCOM. "In addition, with the formation of the JLF, the situation would suggest that the company has failed to make some interest payments when due, although RCOM's management has yet to confirm this development," adds Di Chiara. In addition, RCOM's management has stated that the standstill on debt service applies to all onshore and offshore bank facilities but not to the outstanding $300 million senior secured note due 6 November 2020. These notes are current with respect to interest payments and the next interest payment date is in November 6, 2017 for $9.75 million. The 210-day moratorium on debt servicing allows RCOM to focus on closing two strategic transactions -- the sale of its telecommunications tower assets and the de-merger of its core wireless operations which it will merge with Aircel Limited (unrated) in a new joint venture . Without the successful and timely execution of these two strategic transactions, there is no scope for RCOM to delever. According to management, the two strategic transactions will result in a INR250 billion reduction in balance sheet debt. These transactions are still subject to lenders' approval as confirmed by RCOM's management. In the event the transactions are not completed by December 31, 2017, bank lenders may exercise their right to convert their debt, in accordance with RBI guidelines. However, even assuming the two transactions are completed as planned by September 30, post restructuring, Moody's estimates that RCOM will have over $3.0 billion of debt remaining on its balance sheet. This total includes both RCOM's $300 million senior secured notes and a $350 million senior secured bond issued by its 100%-owned subsidiary, GCX Limited (B3 review for downgrade). Given the heavy debt load and the uncertainty regarding the cash flow-generating capabilities of the residual businesses post demerger and asset sales, Moody's believes the capital structure of the remaining business will remain weak. RCOM reported an 11% year-on-year decline in revenues and a 29% contraction of EBITDA to INR53.9 billion ($830 million) for the full year ending March 31, 2017. These weak operating results reflect the intense state of competition, driven in turn by the free services offered by Reliance Infocomm Limited (unrated) from mid-September 2016 through April 1, 2017. RCOM's reported total debt of INR489 billion, including INR33.2 billion of deferred payment liabilities, on March 31 resulting in reported debt/EBITDA of over 9.0x. Moreover, the company reported INR230 billion in short-term debt and current long-term debt maturities through March 31, 2018, a significant portion of which is due by September 2017, although Moody's understand that this debt is now part of the standstill arrangement with banks. Given the high level of competitive intensity in the mobile sector, Moody's believes that the company's operations will remain under significant pressure, as EBITDA continues to contract, and will continue to consume cash over the next several months. RCOM had just INR10.2 billion of cash on its balance sheet at March 31, 2017. The ratings outlook is negative, reflecting the ongoing uncertainty regarding the company's cash flow-generation capabilities, debt restructuring progress, and resultant recovery prospects for both lenders and bondholders. In addition, failure to meet the proposed restructuring timetable or of remaining current on the interest payable on the $300 million senior secured note will result in further downgrade pressure. The ratings are unlikely to be upgraded prior to the completion of RCOM's corporate restructuring and debt restructuring, repayment of debt and accrued interest with proceeds the from asset sales, and the emergence of clarity on the capital structure for the remaining businesses. Once completed, the ratings will be reviewed and potentially upgraded to reflect the company's prospective capital structure and the credit quality of the remaining businesses. The principal methodology used in these ratings was Telecommunications Service Providers published in January 2017. RELIANCE TELECOM: ICRA Lowers Rating on INR812cr LT Loan to D ------------------------------------------------------------- ICRA Ratings has downgraded the long-term rating to [ICRA]D from [ICRA]BB for the INR812-crore long-term fund-based limits (including unallocated) of Reliance Telecom Limited. ICRA has also removed the negative outlook from the long term rating. ICRA has also downgraded the short-term rating to [ICRA]D from [ICRA]A4 for the INR784-crore short-term non-fund based limits and the INR500-crore commercial paper programme of RTL. Amount Facilities (INR crore) Ratings ---------- ----------- ------- Long-term Fund- based (including unallocated) 812 Downgraded to [ICRA]D from [ICRA]BB(Negative) Short-term Non- fund Based Limits 784 Downgraded to [ICRA]D from [ICRA]A4 Commercial Paper (CP) Programme 500 Downgraded to [ICRA]D from [ICRA]A4 In arriving at RTL's ratings ICRA has taken a consolidated view of the Reliance Communications (Rcom2) group (referred to as "the Group") including RTL and Reliance Infratel Limited (RITL). Rationale The revision in ratings takes into consideration the delays in debt servicing by the Group given its weak internal cash flow generation as against sizeable debt servicing obligations. Key rating drivers Credit strengths * Healthy telecom subscriber base (84.7 million as on March 31, 2017) and pan-India telecom operations * Healthy spectrum holding with sizeable spectrum in 800 MHz band, which is best suited to provide high speed 4G data services * Moderate capital expenditure plans going forward, given the infrastructure-sharing arrangement with Reliance Jio Infocomm Limited (RJio) * No major spectrum expiry in the near to medium term. Limited regulatory payouts as compared to those to be incurred by its competitors Credit weaknesses * Delays in debt servicing given its weak internal cash flow generation * Persistently high debt levels; the debt protection metrics have further deteriorated with increase in debt and weakening in profitability; its Gross Debt/EBITDA increased to 8.48 times as on FY2017-end from 6.68 times as on FY2016-end. * Sizeable debt repayments obligations over next few quarters * Significant pressure on realisations owing to competitive pressures, resulting in decline in profitability in Q4 FY2017 and Q3 FY2017. * Heightened and protracted competitive intensity with RJio continuing to offer attractive plans and other telcos following the same; this has further eroded the pricing power of the industry. * Foreign exchange fluctuation risk given that more than 50% of debt is USD-denominated. * Modest market position with revenue market share of 2.8% and subscriber market share of 7.7% in Q3 FY2017. Description of key rating drivers: The Group has a pan-India network and an established position in the Indian telecom industry (84.7 mn subscribers as on March 31, 2017). It has healthy spectrum-holding with sizeable spectrum in 800 MHz band which is suited to provide high speed 4G data services. The Group has entered into a comprehensive infrastructure-sharing arrangement with RJio with reciprocal access to the newly laid network of RJio. This would limit the upfront capex of the Group while enabling it to offer 4G services. In addition, the Group is present across segments such as wireless services, wire-line services, enterprise connectivity solutions, domestic and international long distance segments, and direct-to-home (DTH) pay television services. The Group is undertaking three transactions: a) to merge Sistema Shyam TeleServices Limited's (SSTL) India wireless business with itself, b) to merge its wireless operations with that of the Aircel Group and c) to offload its tower business to Brookfield Infrastructure Group. Transactions (b) and (c) entail transfer/reduction of debt along with concomitant transfer of revenue and EBITDA from the RCom Group. For these transactions, the Group is in the process of obtaining necessary approvals, of which it has already received some approvals. ICRA has taken note of the investigations into acquisition of Aircel by Maxis Communications Berhad (MCB) in 2006, wherein the honourable Supreme Court of India (SC) is hearing petitions filed by certain quarters, and also the fact that the underlying proceedings brought against the shareholder of Aircel was dismissed by the special 2G Court on February 2, 2017. On completion of these transactions, the residual entity will be left with a lower quantum of debt. However, the debt coverage metrics of the residual entity are expected to remain subdued. Competitive pressures apart, shutdown of the code division multiple access (CDMA) services and demonetisation have exerted pressure on the Group's revenue and profitability in the current fiscal. In Q4FY2017, the Group has reported a decline of 24% YoY in its revenues and a decline of 46% YoY in its earnings before interest tax and depreciation (EBITDA). The Group has also reported a decline in its rate per minute (RPM) to INR0.34 in Q4FY2017 from INR0.40 in Q3FY2017. Further the financial profile of the group is characterised by sizeable debt levels and muted debt-coverage metrics with Gross Debt/EBITDA weakening to 8.48 times as on FY2017 end from 6.68 times as on FY2016-end. Moreover, the company has sizeable debt repayment obligation in the near term. ICRA has also noted that the Group has advised its lenders that it will be making repayment of an aggregate amount of INR25,000 crore (including prepayments) from the proceeds of the undergoing transactions, on or before 30th September 2017. It is also in the process of getting refinanced its scheduled instalments falling due in the interim. Reliance Telecom Limited (RTL) is a RCom group company and provides global system for mobile communications (GSM) based services in eight telecom circles, namely Madhya Pradesh, Bihar, Orissa, West Bengal, Assam, North East, Himachal Pradesh and Kolkata. S.L. THAKUR: CRISIL Assigns B+ Rating to INR6.0MM Crash Credit -------------------------------------------------------------- CRISIL has assigned its 'CRISIL B+/Stable/CRISIL A4' ratings to the bank facilities of S.L. Thakur (SLT). Amount Facilities (INR Mln) Ratings ---------- --------- ------- Term Loan .37 CRISIL B+/Stable Proposed Long Term Bank Loan Facility .63 CRISIL B+/Stable Bank Guarantee 3.00 CRISIL A4 Cash Credit 6.00 CRISIL B+/Stable The ratings reflect a modest scale of operations, high geographical concentration in revenue, and exposure to intense competition in the highly fragmented civil construction industry. These weaknesses are partially offset by the extensive industry experience of the proprietor. Key Rating Drivers & Detailed Description Weakness * Modest scale of operations and high geographical concentration in revenue: The scale of operations remains small around INR18 crore in fiscal 2017 due to competitive civil construction segment. Operations are concentrated in Sindhurg and Kolhapur in Maharashtra, rendering growth highly dependent on the number of tenders floated in the region. * Exposure to intense competition: Low entry barriers have led to many players in the civil construction industry, which affects their ability to win tenders and maintain profitability. Strengths * Extensive industry experience of the proprietor: The proprietor has an experience of around 20 years in the civil construction industry. Over this period, he has undertaken several projects for the Government of Maharashtra without significant delays in execution. Outlook: Stable CRISIL believes SLT will continue to benefit from the industry experience of its proprietor. The outlook may be revised to 'Positive' if there is significant improvement in the scale of operations and profitability, leading to high cash accrual. The outlook may be revised to 'Negative' if sizeable, debt-funded capital expenditure, failure to execute projects on time, or aggressive bidding exerts pressure on the margins. SLT was set up as a proprietorship firm in 1997 by Mr. Shrikrishna Thakur The firm undertakes civil construction work such as construction of roads, bridges, and buildings. Profit after tax (PAT) was INR0.75 crore on net sales of INR11.12 crore in fiscal 2016, against INR0.76 crore and INR12.11 crore, respectively, in fiscal 2015. SANT MUKTAI: Ind-Ra Assigns 'B' Long-Term Issuer Rating ------------------------------------------------------- India Ratings and Research (Ind-Ra) has assigned Sant Muktai Sugar and Energy Limited (SMSEL) a Long-Term Issuer Rating of 'IND B'. The Outlook is Stable. The instrument-wise rating actions are: -- INR300 mil. Fund-based limits assigned with 'IND B/Stable/IND A4' rating; and -- INR5 mil. Non-fund-based limits assigned with 'IND A4' rating KEY RATING DRIVERS The ratings reflect SMSEL's small scale of operations and weak credit metrics. According to provisional financials for FY17, revenue was INR702 million (FY16: INR198 million), EBITDA interest cover (operating EBITDA/gross interest expense) was 0.11x (1.74X) and net leverage (total adjusted net debt/operating EBITDA) was 71.8x (7.57x). The increase in revenue was mainly due to liquidation of stocks. Meanwhile, the deterioration in EBITDA interest cover and net leverage was owing to a decline in operating EBITDA. EBITDA margin was thin at 1.7% in FY17 (FY16: 65.5%). The ratings also reflect SMSEL's tight liquidity position, indicated by a fund-based facility utilization of 92.2% over the 12 months ended March 2017. This was due to the cyclical and working capital-intensive nature of the sugar industry. The ratings, however, are supported by the management's expectation of an improvement in EBITDA margin in FY18, given the installation of a 12MW cogeneration power plant on Jan. 21, 2017. RATING SENSITIVITIES Negative: A decline in revenue and EBITDA margin, and deterioration in credit metrics and liquidity profile will be negative for the ratings. Positive: Significant revenue growth, along with an improvement in EBITDA margin and credit metrics, on a sustained basis will be positive for the ratings. COMPANY PROFILE Incorporated in April 2013, SMSEL is engaged in the manufacture of sugar and co-generation of power from molasses. Its manufacturing unit is located in Jalgaon, Maharashtra. SHILPI CABLE: ICRA Lowers Rating on INR27cr Loan to C ----------------------------------------------------- ICRA Ratings has downgraded the long-term rating assigned to the INR27.00 crore NCD of Shilpi Cable Technologies Limited to [ICRA]C from [ICRA]BB with negative outlook. Amount Facilities (INR crore) Ratings ---------- ----------- ------- Non-convertible 27.00 Downgraded to [ICRA]C from debenture programme [ICRA]BB (Negative) Rationale The rating action is based on public information, which indicates delays in debt servicing by the company on a bank line, which is not rated by ICRA. Debt servicing (including interest payments) for the ICRA rated instrument is scheduled to begin from next month. As part of its process and in accordance with its rating agreement with SCTL, ICRA has been trying to seek information from the company so as to undertake a detailed review of the rating, but despite repeated requests by ICRA, the company's management has remained non-cooperative. In the absence of requisite information, ICRA's Rating Committee has taken a rating view based on best available information. In line with SEBI's Circular No. SEBI/HO/MIRSD4/CIR/2016/119, dated November 01, 2016, the company's rating is now denoted as: "[ICRA]C ISSUER NOT COOPERATING". The lenders, investors and other market participants may exercise appropriate caution while using this rating, given that it is based on limited or no updated information on the company's performance. Key rating drivers * Liquidity issues faced by the company as reflected by the ongoing irregularities in debt servicing Description of key rating drivers: The rating reflects the liquidity issues faced by the company and the ongoing irregularities in debt servicing, including instances of devolvement in letter of credit facilities, to the consortium bankers. ICRA had earlier revised the rating based on corporate governance related concerns with the company following a petition filed by an overseas operational creditor of SCTL against the company under Section 8 & 9 of the Insolvency and Bankruptcy Code, 2016 before the National Company Law Tribunal, New Delhi (NCLT). Also, some of the key management personnel and independent directors had resigned soon after the above mentioned litigation. ICRA had expected this development to impact the company's financial flexibility in raising further funds from the banking system the company relied heavily on bank borrowings to meet its working capital requirements, given that it had been generating negative cash flows from operations. SCTL was established in July 2006 as Rosenberger Shilpi Cable Technologies Limited, a 50:50 joint venture (JV) between Shilpi Communications Private Limited and Rosenberger Hochfrequenztechnik GmbH & Co. KG, Germany. The JV was formed to manufacture and sell radio frequency (RF) feeder cables in the domestic market. The JV set up a manufacturing facility at Chopanki, Rajasthan. The facility commenced commercial production in early 2008, and during the same year the stake of the German partner was bought by the Indian promoters. Though initially SCTL was only into RF feeder cables manufacturing, it has, over the years, added products such as wiring harnesses and battery cables for automobiles, wiring harness sets and power cords for white goods, and copper conductors (magnet copper wires and bunched copper wires) to expand and diversify its offerings. The company thus caters to automotive, telecom, and consumer durables segments, among others. In addition, it sells house wires, circuit breakers (MCCB and RCCB), and switches through distributors under the 'SAFE' brand name. SCTL, headquartered in Delhi, has five manufacturing units in Bhiwadi, Chopanki, Bahadurgarh (owned by an associate AGH Wires), Hosur, and Pune (Bhiwadi and Chopanki plants are owned by the company, while the remaining have been taken on lease), and has 13 sales offices across India. SCTL also has subsidiaries and joint ventures in Singapore and UAE, which trade in copper cables and other products. The company is listed on Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) since 2011. SCTL, on a consolidated basis, recorded a profit after tax (PAT) of INR165.64 crore on an operating income of INR3,895.53 crore for the year ending March 31, 2016 as against a PAT of INR159.99 crore on an operating income of INR3,212.93 crore for the year ending March 31, 2015. For the nine months ending December 31, 2016, SCTL reported 19% y-o-y growth in consolidated operating income to INR3,342.17 crore and a PAT of INR160.13 crore. SHIVAM COTTON: ICRA Reaffirms 'B' Rating on INR12CR Cash Loan ------------------------------------------------------------- ICRA Ratings has reaffirmed the long-term rating of [ICRA]B on the INR13.46-crore fund-based bank facilities and INR0.83-crore unallocated limits of Shivam Cotton Industries. The outlook on the long-term rating is 'Stable'. Amount Facilities (INR crore) Ratings ---------- ----------- ------- Fund-based-Cash Credit 12.00 [ICRA]B (Stable); Reaffirmed Fund-based-Term Loan 1.46 [ICRA]B (Stable); Reaffirmed Unallocated 0.83 [ICRA]B (Stable); Reaffirmed Rationale The rating reaffirmation continues to factor in the weak financial profile of Shivam Cotton Industries, characterised by low profitability margins, stretched capital structure and weak coverage indicators. The rating also continues to take into account the commoditised nature of products and the vulnerability of the firm's profitability to adverse movements in cotton price, which in turn is subject to seasonality and crop harvest. The firm's operations are exposed to regulations governing the industry such as restrictions on cotton exports and minimum support price (MSP). Furthermore, the rating also considers the highly fragmented nature of the industry due to the presence of large number of manufacturers, which coupled with low-entry barriers, leads to high competition and consequently limited margins. ICRA notes the potential adverse impact on net worth and gearing levels in case of any substantial withdrawal from capital accounts. The rating, however, continues to derive comfort from the long experience of SCI's partners in the cotton industry and proximity of firm's manufacturing unit to raw materials, easing procurement. Key rating drivers Credit strengths * Extensive experience of the partners in the cotton ginning industry * Locational advantage by virtue of proximity to raw materials Credit weaknesses * Weak financial profile characterised by low profit margins, stretched capital structure and weak coverage indicators * Highly fragmented industry structure due to the presence of a large number of manufacturers and traders; low-entry barriers result in high competition * Operations exposed to regulatory restrictions on cotton export, minimum support price (MSP) and agro-climatic condition * Risks inherent in partnership firms, wherein any substantial capital withdrawal could impact the net-worth and gearing levels Description of key rating drivers: SCI reported a growth of ~25% in operating income in FY2017 supported by higher sales realisations and enhancement of plant capacity carried out in FY2016. Cotton bales continue to form the major portion with 64% of total sales followed by 16% from cottonseed oilcake in FY2017. The profitability continues to remain low due to highly fragmented as well as competitive structure of the industry and limited value additive nature of business. The customer concentration of SCI remained low with top ten customers contributing to ~40% of total sales in FY2017. Despite scheduled repayments of term loan installments, the capital structure of the firm continued to remain stretched on account of high working capital requirement. In ICRA's view, the scale of the firm is expected to remain stable. However, the ability of the firm to manage the impact of raw material price fluctuations on its profitability in a highly competitive business environment and improve its capital structure by repayment of debt obligation and efficient working capital management will remain the key rating sensitivity. Established in 1998 as a partnership firm, Shivam Cotton Industry (SCI) is involved in the business of raw cotton ginning, pressing and crushing of cottonseeds. SCI's manufacturing facility, located at Karjan in Gujarat, is equipped with 36 ginning machines, 1 pressing machine and 10 expellers for crushing activity with an installed ginning capacity of 91,800 MT per annum. The partners of the firm have extensive experience in the cotton industry vide their association with other cotton ginning entities. The firm reported a net profit of INR0.51 crore on an operating income of INR51.87 crore for the year ending March 31, 2016. SHREE NARSHING: CRISIL Assigns B+ Rating to INR4MM Cash Loan ------------------------------------------------------------ CRISIL has assigned its 'CRISIL B+/Stable/CRISIL A4' ratings to the bank facilities of Shree Narshing Construction (SNC). Amount Facilities (INR Mln) Ratings ---------- --------- ------- Bank Guarantee 2 CRISIL A4 Cash Credit 4 CRISIL B+/Stable The ratings reflect the firm's modest scale of operations, exposure to tender-driven business, and average financial risk profile because of small networth and moderate gearing. The weaknesses are partially offset by the extensive experience of its proprietor and moderate order book. Analytical Approach Unsecured loans from proprietor (Rs 1.09 crore) have been treated as neither debt nor equity as these loans bear nominal interest rate and are expected to remain in business over the medium term. Key Rating Drivers & Detailed Description Weakness * Modest scale of operations and exposure to tender-based operations: With an operating income of INR5.2 crore in fiscal 2016, scale remains small due to regional concentration. Furthermore, the civil construction industry is highly fragmented due to low entry barrier which, along with tender-based operations, significantly affects business risk profile. However, new orders may stabilize revenue over the medium term. * Large working capital requirement associated with new projects: Ramp up in operations with new orders is likely to lead to sizeable incremental working capital requirement, management of which will remain a key monitorable. * Average financial risk profile: Networth was small at INR1.49 crore as on March 31, 2016, on account of capital withdrawals and limited accretion to reserves. Despite expected increase to about INR2 crore over the medium term, networth will remain subdued. Low cash accrual led to weak debt protection metrics, with interest coverage and net cash accrual to total debt ratios of 1.7 times and 0.06 time, respectively, for fiscal 2016. Though metrics will improve marginally over the medium term, it will remain muted. Strengths * Extensive experience of promoters: The firm's proprietor has been executing railway contracts for more than three decades. * Moderate order book: Outstanding order book of INR59 crore is almost 6 times the firm's estimated revenue of INR10.9 crores in FY17, leading to revenue visibility. Outlook: Stable CRISIL believes SNC will continue to benefit over the medium term from its proprietor's extensive experience in civil construction industry. The outlook may be revised to 'Positive' if significant and sustained improvement in scale of operations or profitability leads to better-than-expected cash accrual. The outlook may be revised to 'Negative' if stretch in working capital cycle, lower- than-expected cash accrual, or substantial debt-funded capital expenditure further constrains financial risk profile, especially liquidity. Jamshedpur-based SNC, formed in 1980 as a proprietorship firm by Mr. Bimal Agarwal, is engaged in construction and repairs of railway tracks, over-bridges, railway sidings, railway stations, and subways in the Eastern region. Profit after tax was INR0.26 crore on net sales of INR5.20 crore for fiscal 2016, against INR0.24 crore and INR7.25 crore, respectively, for fiscal 2015. SHREE RAJASVI: CRISIL Reaffirms B- Rating on INR16MM Cash Loan -------------------------------------------------------------- CRISIL has reaffirmed its 'CRISIL B-/Stable' rating on the long- term bank facilities of Shree Rajasvi Polyesters (SRP). The rating continues to reflect a weak financial risk profile because of a high gearing, weak debt protection metrics, and stretched liquidity. The rating also factors in a modest scale and working- capital-intensive nature of operations. These rating weaknesses are partially offset by the extensive experience of the partners in the polyester yarn industry. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 16 CRISIL B-/Stable (Reaffirmed) Proposed Long Term Bank Loan Facility 2.03 CRISIL B-/Stable (Reaffirmed) Term Loan 2.18 CRISIL B-/Stable (Reaffirmed) Key Rating Drivers & Detailed Description Weakness * Weak financial risk profile: The networth has reduced to about INR4 crore as on March 31, 2017, from INR6.9 crore as on March 31, 2015, primarily because of withdrawal of capital in fiscal 2016. Consequently, the gearing deteriorated to over 5 times from 3.6 times over this period. Despite reduction in overall debt, the debt protection metrics remained subdued with interest coverage ratio estimated at 1.3 times and net cash accrual to total debt ratio at 0.4 time for fiscal 2017. Although the partners have extended unsecured loans, liquidity remains stretched due to low cash accrual that is barely sufficient to meet debt repayment, and near full utilisation of the bank line. * Working capital-intensive operations: That's driven by large debtors and limited credit from suppliers. Credit of 60-90 days is provided to customers. The debtors were at 70-100 days over the past three fiscals, thus significantly lengthening the working capital cycle. Though inventory is low at around two weeks, no major credit available on procurement adds to the working capital intensity and constrains liquidity. * Modest scale of operations: The firm's activity involves limited value addition. Besides, there are a large number of players, leading to high fragmentation and intense price competition. With estimated revenue of about INR107 crore and operating margin of less than 4%, in fiscal 2017, operations are highly exposed to risks related to intense industry competition and limited pricing power. Strengths * Extensive industry experience of the partners: The partners have an experience of over 15 years in the polyester yarn industry. They earlier manufactured texturised and twisted polyester yarn under different entities that were dissolved and their operations consolidated in SRP. This has helped them gain an understanding of the industry and tap new customers. The firm also exports to many African, South American, and Gulf countries. The industry experience has helped to survive through different business cycles and scale up operations. Outlook: Stable CRISIL believes SRP will continue to benefit from extensive industry experience of its partners and their funding support. The outlook may be revised to 'Positive' in case of improvement in liquidity, most likely due to substantial capital infusion or a considerable increase in cash accrual. The outlook may be revised to 'Negative' if the financial risk profile, especially liquidity, deteriorates further, owing to a stretched working capital cycle, lower-than-expected net cash accrual, or sizeable cash withdrawal. SRP was set up in 2010 by Mr. Naresh Gandhi and his family by dissolving multiple entities and consolidating their operations. The firm manufactures texturised and twisted polyester yarn from partially oriented yarn (POY) at its facilities in Surat, Gujarat. It also acts as a del credere agent for selling POY of Garden Silk Mills Pvt Ltd. In fiscal 2016, profit after tax (PAT) was INR14 lakh on total sales of INR106.60 crore, as against INR18 lakh and INR80.77 crore, respectively, in fiscal 2015. SHRI AAVISHKAR: ICRA Withdraws B+ Rating on INR4.50cr Loan ---------------------------------------------------------- ICRA Ratings has withdrawn the long-term rating of [ICRA]B+ and short term rating of [ICRA]A4 outstanding on the INR4.50-crore cash credit facility, INR3.00-crore letter of credit facility and INR0.20-crore Credit Exposure Limits of Shri Aavishkar Metals Private Limited. Amount Facilities (INR crore) Ratings ---------- ----------- ------- Fund-based-Cash Credit 4.50 [ICRA]B+; Withdrawn Non Fund-based- Short Term 3.20 [ICRA]A4; Withdrawn Rationale The long-term rating and short term rating assigned to Shri Aavishkar Metals Private Limited have been withdrawn at the request of the firm based on the no-objection certificate provided by its banker. Incorporated in 2006 as a private limited company, Shri Aavishkar Metals Private Limited (SAMPL) is engaged in trading of ferrous and non ferrous scrap metals. SAMPL procures scrap through both local and international market and supplies it to end users and traders present in Gujarat. The promoter has more than two decades of experience in the scrap trading business. SPECTRUM SCAN: CRISIL Cuts Rating on INR4MM LT Loan to B -------------------------------------------------------- Despite repeated attempts to engage with the management, CRISIL failed to receive any information on either the financial performance or strategic intent of Spectrum Scan Private Limited (SSPL). This restricts CRISIL's ability to take a forward looking view on the credit quality of the entity. CRISIL believes that the information available for SSPL is consistent with 'Scenario 1' outlined in the 'Framework for Assessing Consistency of Information with CRISIL B rating category or lower.' Based on the last available information, CRISIL has downgraded the rating to 'CRISIL B/Stable/CRISIL A4' from 'CRISIL BB+/Stable/CRISIL A4' Amount Facilities (INR Mln) Ratings ---------- --------- ------- Letter of Credit 1 CRISIL A4 (Issuer Not Cooperating; Downgraded from 'CRISIL A4+') Long Term Loan 4 CRISIL B/Stable (Issuer Not Cooperating; Downgraded from 'CRISIL BB+/Stable') Proposed Long Term 1 CRISIL B/Stable (Issuer Not Bank Loan Facility Cooperating; Downgraded from 'CRISIL BB+/Stable') 'The investors, lenders and all other market participants should exercise due caution while using the rating assigned/reviewed with the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward looking component as it is arrived at without any management interaction and is based on best available or limited or dated information on the company.' Detailed Rationale Despite repeated attempts to engage with the management, CRISIL failed to receive any information on either the financial performance or strategic intent of SSPL. This restricts CRISIL's ability to take a forward looking view on the credit quality of the entity. CRISIL believes that the information available for SSPL is consistent with 'Scenario 1' outlined in the 'Framework for Assessing Consistency of Information with CRISIL B rating category or lower.' Based on the last available information, CRISIL has downgraded the rating to 'CRISIL B/Stable/CRISIL A4'.from 'CRISIL BB+/Stable/CRISIL A4' SSPL, incorporated in 1995, prints and packages Point of Purchase/Point of Sale products. It is promoted by Mr. Amit Shah who has industry experience of 20 years. The company has two manufacturing facilities in Mumbai. It undertakes screen/offset/digital printing, thermoforming, and wood and metal fabrication processes. SPENZZER CRAFT: CARE Assigns B+ Rating to INR7.35cr LT Loan ----------------------------------------------------------- CARE Ratings has assigned rating to the bank facilities of Spenzzer Craft Private Limited (SCPL), as: Amount Facilities (INR crore) Ratings ---------- ----------- ------- Long-term Bank Facilities 7.35 CARE B+; Stable Assigned Long-term/Short- 6.00 CARE B+; Stable/CARE A4 Term Bank Assigned Facilities Short-term Bank Facilities 1.00 CARE A4 Assigned Detailed Rationale and key rating drivers The ratings assigned to the bank facilities of SCPL are primarily constrained on account of its nascent stage of operations, susceptibility of its operating margins to raw material price fluctuations and its presence in the competitive paper industry. The ratings, however, derive comfort from vast experience of the promoters along with stable outlook of the paper industry in India. The ability of SCPL to achieve envisaged level of revenue, profitability along with effective management of its working capital requirement would remain the key rating sensitivity. Detailed description of the key rating drivers Key Rating Weaknesses Nascent stage of operations SCPL has successfully completed the project and started the commercial production of Kraft & Absorbent Paper from March 2017; during first 1MFY17 (provisional) the company has registered a TOI of INR1.29 crore. Furthermore, during 2MFY18 (Provisional), SCPL has achieved TOI of INR10.00 crore and has order book of INR4.5 crore, which will be executed by June, 2017. Susceptibility to the raw material price fluctuation SCPL is engaged in the business of manufacturing of Kraft & Absorbent Paper used in the manufacturing for making paper grocery bags, wrapping paper, envelops and various types of corrugated boxes. Waste cartons and waste papers are the raw material which is driven by demand and supply scenario led to volatility in the prices. Competition from other local players The entry barrier for new manufacturing unit of Kraft & Absorbent Paper is low. As a result, the manufacturing of Kraft & Absorbent Paper business has healthy competition in the region. Also, the presence of existing players with established marketing & distribution network results into intense competition in the industry. Key Rating Strengths Experienced promoter Mr. Vijeshbhai Dayalal Detharia, Mr. Pareshbhai Tribhovanbhai Panara and Mrs Sarojben Rameshbhai Vitthani are the promoters of SCPL. Mr. Vijeshbhai Dayalal Detharia is engaged in same line of activity since last about 10 years. He looks after overall management of the business. Mr. Pareshbhai Tribhovanbhai Panara is engaged in the Beverage Industry for more than 9 years while Mrs Sarojben Rameshbhai Viotthani is engaged in the chemical industry since last 12 years. Incorporated in March, 2016, Spenzzer Craft Private Limited (SCPL) is engaged into manufacturing of kraft paper. SCPL successfully completed project worth INR21 crore for manufacturing of Kraft & Absorbent Paper (KAP) which was funded through debt/equity mix of 1.63 times. The manufacturing unit of the company is located at Surat (Gujarat) and operates with an installed capacity of 100 Tonnes per day. SCPL commenced commercial production from March, 2017 and is selling its products to various players in the nearby domestic area. During 1MFY17 (Provisional), SCPL has achieved TOI of INR1.29 crore. SPS YARNS: CRISIL Assigns B- Rating to INR6.55MM LT Loan -------------------------------------------------------- CRISIL has assigned rating of 'CRISIL B-/Stable' to the long term bank loan facilities of SPS Yarns Private Limited (SPS). Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 3.45 CRISIL B-/Stable Long Term Loan 6.55 CRISIL B-/Stable The rating reflects its small scale of operations and stretched working capital cycle. The rating also factors in its weak financial risk profile marked by high gearing, modest debt protection metrics and small net worth. These weaknesses are partially offset by the benefits derived from the extensive experience of promoters. Key Rating Drivers & Detailed Description Weakness * Small scale of operations and stretched working capital management SPS's scale is small with estimated revenue of INR8 crores in fiscal 2017. SPS has stretched working capital cycle with gross current assets (GCA) days of around 418 days as on March 31, 2017 attributable to high debtor levels of over 350 days for last 3 years ending fiscal 2017. * Weak financial risk profile SPS is estimated to report high gearing of 3.5 times and a modest networth of INR3.3 crores as on March 31, 2017. The debt protection metrics are weak with net cash accruals to total debt (NCATD) and interest coverage estimated at 0.03 times and 0.9 times respectively for fiscal 2017. Strengths * Promoters' extensive experience SPS is promoted by Mr. K D Chuttar. The promoters of SPS have an extensive experience of over two decades in the textile industry, thus aiding SPS in establishing healthy customer and supplier relationships. Outlook: Stable CRISIL believes SPS will continue to benefit over the medium term from its extensive experience of promoters. The outlook may be revised to 'Positive' if the company registers a substantial increase in revenues and cash accruals, coupled with an increase in its net-worth either through sizeable equity infusion from its promoters or through larger accretions resulting in an improvement in its financial risk profile, while its working capital management betters. Conversely, the outlook may be revised to 'Negative' in case of a steep decline in the company's profitability margins, or significant deterioration in its capital structure caused most likely by a stretch in its working capital cycle. The outlook may also be revised to negative in case of delays in fund support by promoters to meet shortfalls in working capital or debt servicing, adversely impacting the liquidity profile. Established in 2011 as a private limited company, SPS is engaged in manufacturing of Polyester and plastic Zippers. Based in Hyderabad (Telangana), the company is promoted and managed by Mr. K D Chuttar. For fiscal 2016, SPS reported net loss of INR0.2 crores on net sales of INR7.2 crores against net loss of INR0.26 crores on net sales of INR8.5 crores for fiscal 2015. Status of non-cooperation with previous CRA: India Ratings And Research Private Limited had withdrawn its rating vide its release dated December 20, 2016. Reason provided by India Ratings and Research Private Limited lack of adequate information. SRE VENGADALAKSHMI: CRISIL Assigns B+ Rating to INR8.8MM Loan ------------------------------------------------------------- CRISIL has revoked the suspension of its rating on bank facilities of Sre Vengadalakshmi Spinners (SVS) and assigned its 'CRISIL B+/Stable' rating to these bank facilities. CRISIL had suspended the rating vide its rating rationale dated December 11, 2014, as SVS had not provided necessary information required for a rating review. The company has now shared the requisite information, enabling CRISIL to assign its rating to the bank facilities. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Term Loan 2.5 CRISIL B+/Stable (Assigned; Suspension Revoked) Open Cash Credit 2.2 CRISIL B+/Stable (Assigned; Suspension Revoked) Working Capital 8.8 CRISIL B+/Stable (Assigned; Demand Loan Suspension Revoked) The rating reflects modest scale and below-average financial risk profile. However, these weaknesses are partially offset by the proprietor's extensive experience and long relationships with customers. Key Rating Drivers & Detailed Description Weakness * Below average financial risk profile: The firm's financial risk profile is marked by low net worth, high gearing and subdued debt protection metrics. * Susceptibility of operating margins to volatility in raw material prices: Major raw material, cotton prices are highly volatile and the margins are susceptible to any major fluctuations. Strengths * Extensive experience of proprietor in the textile industry: The proprietor was in this line of business for over 15 years and has established relationship with customers and suppliers. Outlook: Stable CRISIL believes that SVS will continue to benefit over the medium term from the proprietor's extensive experience in the textile industry. The outlook may be revised to 'Positive' in case the concern reports higher than expected revenue growth and profitability margins, while improving its financial risk profile. Conversely, the outlook may be revised to 'Negative' in case the concern registers significantly lower-than-expected growth in its revenues and accruals, or if its working capital cycle lengthens further, or if it undertakes a larger-than- expected debt-funded capital expenditure programme, leading to weakening of its financial risk profile. SVS was established in 1999 by Ms. R Pushpa as a proprietorship concern. It manufactures cotton yarn of counts between 30 and 40 at its unit near Coimbatore (Tamil Nadu). It has installed capacity of 25,000 spindles. The firm sells its cotton yarn in domestic market. SVS's net profit was INR0.18 crore on sales of INR49.45 crore in fiscal 2016, vis-a-vis net profit of INR0.17 crore on sales of INR37.4 crore, for fiscal 2015. STEELMAN INDUSTRIES: CRISIL Assigns B+ Rating to INR4MM Loan ------------------------------------------------------------ CRISIL has revoked the suspension of its rating on the bank facilities of Steelman Industries (SMI) and has assigned its 'CRISIL B+/Stable/CRISIL A4' ratings to the facilities. CRISIL had, on November 17, 2016, suspended the ratings as the company had not provided the necessary information for a rating review. The company has now shared the requisite information, enabling CRISIL to assign a rating. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Foreign Bill 6.5 CRISIL B+/Stable (Assigned; Purchase Suspension Revoked) Foreign Letter 4.0 CRISIL A4 (Assigned; of Credit Suspension Revoked) Proposed Long Term 4.0 CRISIL B+/Stable (Assigned; Bank Loan Facility Suspension Revoked) The ratings reflect the firm's modest scale of operations along with concentrated customer base and average financial risk profile marked by a weak interest coverage ratio. These rating weaknesses are partially offset by the proprietor's extensive experience in the trading industry, a diversified product profile, and SMI's comfortable total outside liabilities to tangible net worth ratio. Key Rating Drivers & Detailed Description Weaknesses * Modest scale of operations, marked by customer concentration in revenue profile: SMI's scale of operations is small, as reflected in net sales of INR17.53 crores in 2015-16, which was around INR11.91 crores in 2014-15. The firm operates in a highly competitive spare parts industry marked by the presence of multiple players. Moreover, the trading nature of the business results in limited value addition, thus reducing the pricing power further. Furthermore, the firm derives majority of its revenue from sale of its products to two customers in Africa, leading to customer concentration risk, which makes the firm's operations susceptible to slowdown in the operations of the customer or change in vendor policy or pricing terms by the customer. Also, geographical concentration makes the firm vulnerable to any economic slowdown or political unrest in a particular country. CRISIL believes that SMI's scale of operations will remain small and that diversification of customer base will remain a rating sensitivity factor, over the medium term. * Average financial risk profile: SMI's TOLTNW ratio remained comfortable at around 5.07 times as on March 31, 2016. SMI's net worth is moderate, at around INR3.03 crores as on March 31, 2016 against debt of around INR8.67 crores. CRISIL believes that SMI's TOLTNW ratio will improve over the medium term given the expected capital infusion in the company. SMI's debt protection metrics have been weak, marked by low interest coverage ratio. The interest coverage ratio was around 1.95 times as on March 31, 2016, and is likely be below 2 times as on March 31, 2016, owning to moderate operating profitability. Strengths * Extensive experience of proprietor in bicycle components industry: SMI was set up in 1995. The proprietor has experience of more than four decades in manufacturing and trading in bicycle parts. Prior to setting up SMI in 1995, the proprietor undertook similar business in the group firm, Northern India Sales Corporation. The established industry experience of the proprietor has established strong relations with suppliers and customers, and has helped SMI in terms of pricing and assured demand-supply. An established customer base has helped the firm diversify its product base under the trading segment. CRISIL believes that SMI will continue to benefit from the extensive experience of its proprietor in the trading industry, over the medium term. * Diversified product profile: SMI started manufacture and trading in bicycle parts but eventually diversified its product range in the trading segment in 2010-11 to mitigate the risk of declining bicycle parts business. It entered the food segment and corrugated galvanised steel sheets, the three segments having contributed to around one-third each to the firm's total sales in 2015-16. Furthermore, the firm has started importing PVC resin for sale in the domestic market. SMI's diversification into different business segments has helped it to achieve stable revenue over the past two years. CRISIL believes that SMI will continue to benefit from its foray into different segments, over the medium term. Outlook: Stable CRISIL believes that SMI will continue to benefit over the medium term from the industry experience of its proprietor and its established relationships with its customers. The outlook may be revised to 'Positive' in case of significant growth in the firm's scale of operations or profitability along with customer diversification and improvement in working capital management, leading to improvement in its business risk profile. Conversely, the outlook may be revised to 'Negative' if there is a decline in sales or profitability levels, or if SMI's liquidity weakens on account of a stretch in working capital cycle. Established in 1995, SMI is a sole proprietorship firm of Mr. Sham Sunder Gupta and manufactures and trades in bicycle parts and corrugated galvanised steel sheets. It also exports biscuits, candies, liquid glucose, and corn starch to African countries. Moreover, the firm started importing and trading in polyvinyl chloride (PVC) resin and PVC panels in 2014-15 (refers to financial year, April 1 to March 31). SMI is based in Ludhiana (Punjab). SMI reported profit after tax (PAT) of INR0.32 crores on net sales of INR17.53 crores for 2015-16; it had reported a PAT of INR0.43 crores on net sales of INR11.91 crores for 2014-15. SUPER OVERSEAS: Ind-Ra Assigns 'BB+' Long-Term Issuer Rating ------------------------------------------------------------ India Ratings and Research (Ind-Ra) has assigned Super Overseas Private Limited (SOPL) a Long-Term Issuer Rating of 'IND BB+'. The Outlook is Stable. The instrument-wise rating actions are: -- INR15.68 mil. Term loan assigned with 'IND BB+/Stable' rating; and -- INR80 mil. Fund-based working capital limit assigned with 'IND BB+/Stable/IND A4+' rating KEY RATING DRIVERS The ratings reflect SOPL's moderate scale of operations and EBITDA margins. Revenue increased to INR794.49 million in FY17 (Provisional) from INR658.37 million in FY16 due to increased orders from existing and new customers. The EBITDA margins expanded to 8% in FY17P from 7.30% in FY16 on account of increase in duty drawback announced under the Ministry of Textile's new scheme for rebate of state levies on garment exports. The ratings are further constrained by the company's exposure to high customer concentration risk with the sole customer contributing around 65% to the total top line in FY17P (FY16: 74.49%). The ratings also factor in SOPL's moderate liquidity position with about 92.53% average utilization of fund-based limits during the 12 months ended April 2017. However, the ratings derive support from the company's comfortable credit metrics with gross leverage (total adjusted debt/operating EBITDA) of 1.78x in FY17 (FY16: 2.05x) and gross interest coverage (operating EBITDA/gross interest expense) of 7.12x (2.97x). The improvement in the credit metrics was on the back of repayment of loan and the subsequent decline in interest cost. The ratings are also supported by the promoter's more than two decades of experience in the textile manufacturing business. RATING SENSITIVITIES Positive: Diversified clientele along with a substantial growth in the top line while maintaining the credit metrics could lead to a positive rating action. Negative: Deterioration in the credit metrics could be negative for the ratings. COMPANY PROFILE SOPL was established in 1995 as a partnership firm and was converted to a private limited company in 2011. The company manufactures readymade garments in Noida and exports 100% of its products to the US, the UK and Europe. SWARAJ SYNTHETICS: CRISIL Cuts Rating on INR4MM Cash Loan to B -------------------------------------------------------------- CRISIL has been consistently following up with Swaraj Synthetics Private Limited (SSPL) for obtaining information through letters and emails dated January 19, 2017, and February 9, 2017, among others, apart from telephonic communication. However, the issuer has remained non cooperative. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 4 CRISIL B/Stable Issuer Not Cooperating; Downgraded from 'CRISIL BB-/Stable') Term Loan 2.42 CRISIL B/Stable Issuer Not Cooperating; Downgraded from 'CRISIL BB-/Stable') 'The investors, lenders and all other market participants should exercise due caution while using the rating assigned/reviewed with the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward looking component as it is arrived at without any management interaction and is based on best available or limited or dated information on the company. Detailed Rationale Despite repeated attempts to engage with the management, CRISIL failed to receive any information on either the financial performance or strategic intent of Swaraj Synthetics Private Limited. This restricts CRISIL's ability to take a forward looking view on the credit quality of the entity. CRISIL believes that the information available for Swaraj Synthetics Private Limited is consistent with 'Scenario 1' outlined in the 'Framework for Assessing Consistency of Information with CRISIL B' category or lower. Based on the last available information, CRISIL has downgraded the rating at 'CRISILB/Stable'. Incorporated in 2004, SSPL manufactures various kinds of suiting fabrics, primarily for uniforms, under the brand, Raghav Suiting. Its manufacturing facilities are located in Bhilwara (Rajasthan) and the company is promoted by Mr. Santosh Agal and family. TRIMURTI COTTON: CARE Assigns 'B' Rating to INR6.90cr LT Loan ------------------------------------------------------------- CARE Ratings has assigned rating to the bank facilities of Trimurti Cotton Industries (TCI), as: Amount Facilities (INR crore) Ratings ---------- ----------- ------- Long-term Bank Facilities 6.90 CARE B; Stable Assigned Detailed Rationale and Key rating drivers The rating assigned to the bank facilities of TCI is constrained on account of its thin profit margins, moderately capital structure and debt coverage indicators coupled with moderate liquidity position. The rating is further constrained by inherent risks associated with partnership form of constitution, TCI's presence in highly fragmented cotton ginning industry and susceptible to fluctuations in cotton prices and seasonal procurement resulting in working capital intensive nature of operations. The rating, however, derives comfort from experience of its promoters in the cotton industry, TCI's plant being located in proximity to cotton-producing region of Gujarat and fiscal benefits from government. TCI's ability to improve its scale of operations along with profit levels, efficient management of working capital and improvement in capital structure coupled with debt coverage indicators are the key rating sensitivities. Detailed Description of the key rating drivers Key Rating Weaknesses Thin profit margins, moderately capital structure and debt coverage indicators coupled with moderate liquidity Position. During FY17(Prov.), which is the first year of operation for TCI, it has recorded a TOI of INR 41.61crore; however the profitability remained thin, PBILDT remained thin at INR0.58 crore with a PBILDT margin of 1.38% and PAT remained at INR0.11 crore with a PAT margin of 0.26%. As at March 31, 2017, capital structure remained moderate marked by overall gearing of 0.93 times. Debt coverage indicators also stood moderate. Liquidity position remained moderate marked by working capital cycle which stood at 42 days and utilization of working capital limit for period ended April, 2017 remained high at 80%. Inherent risks associated with partnership form of constitution Being a partnership firm, TCI is susceptible to risk associated with withdrawal / transfer of capital by the partners which may lead to deterioration in the firm's capital structure. Presence in highly fragmented cotton ginning industry and susceptible to fluctuations in cotton prices Cotton ginning business involves very limited value addition and is highly dominated by small and medium scale units resulting in highly fragmented nature of industry. Further, price of raw cotton is highly volatile in nature and depends upon factors like area under production, yield for the year, international demand supply scenario, export quota decided by government and inventory carry forward of last year. Seasonal procurement resulting in working capital intensive nature of operations Cotton being an agro commodity, its production is seasonal in nature, where sowing season is normally during March to July and harvesting season is during November to February every year. Also the cotton ginners usually have to procure raw cotton in bulk to bargain better discount from the suppliers. Key Rating Strengths Experienced Promoters TCI is promoted by Mr. Jitendrakumar Chunilal Patel,Mr Rakeshkumar Kacharbhai Patel, Mr. Manojkumar Somabhai Patel and Mr. Kalpeshkumar Kantilal Patel. All the promoters are holding healthy experience in the cotton industry. Proximity to cotton-producing region of Gujarat Raw cotton is the key input required for ginning & pressing activities. TCI's plant is located in the cotton growing region of Gujarat which is the largest producer of raw cotton in India. Fiscal benefits from government TCI is likely to get benefits under various incentive schemes introduced by Government of India (GoI) and Government of Gujarat (GoG) to promote cotton ginning and pressing. Vijapur (Gujarat) based TCI was established during April 2016 by Mr. Jitendrakumar Chunilal Patel, Mr. Rakeshkumar Kacharbhai Patel, Mr. Manojlumar Somabhai Patel, Mr. Rohitkumar Rameshbhai Patel, MrKalpesh kumar Kantilal Patel. TCI in has set up a cotton ginning plant which commenced operations from December, 2016. The plant has installed capacity of Cotton Bales - 35,10,000 Kg/annum, Cotton Seeds - 27,19,059 Kg/annum, Cotton Oil - 4,66,560 Kg/annum, Cotton Cake -33,04,800 Kg/annum as on March 31, 2017. During FY17(Provisional), TCI has reported a PAT of INR0.07 crore on a total operating income of INR41.61 crore. UNITECH FABRICATORS: CRISIL Reaffirms B Rating on INR5MM Loan ------------------------------------------------------------- CRISIL has been consistently following up with Unitech Fabricators and Engineers Private Limited (UFEPL) for obtaining information through letters and emails dated January 19, 2017, and February 9, 2017, among others, apart from telephonic communication. However, the issuer has remained non cooperative. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Bank Guarantee 5 CRISIL A4 (Issuer Not Co-operating: Rating Reaffirmed) Bill Discounting 1 CRISIL A4 (Issuer Not under Letter of Co-operating: Rating Credit Reaffirmed) Cash Credit 5 CRISIL B/Stable (Issuer Not Co-operating: Rating Reaffirmed) Detailed Rationale Despite repeated attempts to engage with the management, CRISIL failed to receive any information on either the financial performance or strategic intent of Unitech Fabricators and Engineers Private Limited. This restricts CRISIL's ability to take a forward looking view on the credit quality of the entity. CRISIL believes that the information available for Unitech Fabricators and Engineers Private Limited is consistent with 'Scenario 1' outlined in the 'Framework for Assessing Consistency of Information with CRISIL B' category or lower. Based on the last available information, CRISIL has downgraded the long term rating at CRISIL B/Stable and reaffirmed short term rating to CRISIL A4. UFEPL, incorporated in 1998, was set up by Mr. Kamal Bhattacharjee and Mr. Debashish Shah. In 2003-04 (refers to financial year, April 1 to March 31), Mr. Shah exited the business to start his own venture and the entire stake in UFEPL came under Mr. Bhattacharjee. The company manufactures cable trays (used for laying cables) and associated products such as earthing material and lighting poles. It markets the products mainly to engineering industries. USHA SPINCOAT: CARE Raises Rating on INR29.36cr LT Loan to BB- -------------------------------------------------------------- CARE Ratings revised the ratings on certain bank facilities of Usha Spincoat Private Limited (USPL) as: Amount Facilities (INR crore) Ratings ---------- ----------- ------- Long-term Bank 29.36 CARE BB-; Stable Facilities Revised from CARE B+ Detailed Rationale & Key Rating Drivers The revision in the rating assigned to the bank facilities of USPL) takes into account marginal growth in total operating income and increase in profitability margins along with improvement in capital structure and debt coverage indicators in FY17 [(CA Certified, Prov.) refers to period April 1 to March 31]. The rating continues to derive strength from experience of promoters in cotton yarn business and adequate raw material availability. The rating, however, continues to be constrained by the working capital intensive nature of operations and intense competition in cotton industry. Going forward, ability of the company to increase the scale of operations, improve profitability and capital structure and efficient management of working capital requirements would remain the key rating sensitivities. Detailed description of the key rating drivers Key Rating Weaknesses Working capital intensive nature of operations The operations of the company are working capital intensive. The operating cycle of the company increased from 104 days during FY16 to 121 days in FY17 (Prov.), due to increase in collection period to 24 days, on account of bulk order delivered in March 2017 and the payment for the same was received in first week of April 2017. Furthermore, cotton being a seasonal crop, the spinning companies has to stock the inventory during the harvest season to meet the customer requirement for rest of the year resulting in average raw material inventory period between 100- 110 days. On account of the said reasons, the average utilization of working capital bank borrowings remained moderate at 80-85% during past twelve months ended April 30, 2017. Intense competition in cotton industry The cotton industry is characterized by low entry barriers due to minimal capital requirement and easy availability of technology which has resulted in proliferation of large number of small players spread across the country. High competition has resulted in thin profit margins for the companies operating in the industry. Key Rating Strengths Marginal growth in total operating income and increase in profitability margins The total operating income of the company increased marginally from INR 54.88 crore during FY16 to INR 55.25 crore during FY17 (CA Certified, Prov.) registering a marginal growth of about 0.67% on account of increase in utilized capacity to 97.30% in FY17 (CA Certified, Prov.) compare to 97.10% in FY16, coupled with stable domestic demand for 40 count spindles. The PBILDT increased from INR 7.51 crore in FY16 to INR7.78 crore in FY17 (CA Certified, Prov.), and further, the PAT increased significantly from 0.10 crore in FY16 to 0.56 crore in FY17 (CA Certified, Prov.). The PBILDT margin has increased by 41 bps from 13.68% during FY16 to 14.09% during FY17 (CA Certified, Prov.) due to higher sale of 40 counts spindles which carries relatively higher profit margins compared to 32 count cotton yarns. Furthermore, the PAT margin also increased by 83bps from 0.18% during FY16 to 1.01% during FY17 (CA Certified, Prov.) mainly due to decrease in interest expenses at the back of low utilization of working capital limits at 80-85% for the last 12 months ended on April 30, 2017 along with increase in absolute PBILDT. Satisfactory financial risk profile marked by improvement in overall gearing and debt coverage indicators Overall gearing of the company stood satisfactory and improved from 3.08x as on March 31, 2016 to 1.22x as on March 31, 2017 (CA Certified, Prov), due to increase in tangible networth from INR12.69 crore as on March 31, 2016 to INR20.76 crore as on March 31, 2017(CA Certified, Prov.), at the back of unsecured loan of INR7.50 crore considered as quasi equity (the said amount is subordinate to bank facilities) along with accretion of profit to the networth of the company and lower outstanding balance of working capital bank borrowings. Debt coverage indicators stood at moderate level during the review period. Total debt to GCA improved from 12.75x during FY16 to 7.28x in FY17 (CA Certified, Prov.) on account of low utilization of working capital requirement at 80-85% for the last 12 months ended at April 30, 2017, coupled with scheduled repayment of term loan along with increase in cash accruals. The interest coverage ratio has also improved from 1.69x during FY16 to 1.86x in FY17 (CA Certified, Prov.) due to decrease in interest expenses coupled with increase in PBILDT. Experience of promoter in cotton yarn business The company was promoted by Mr. P Ranga Rao who has 26 years of experience in the fabrication of electrical panel boards and establishment of electrical infrastructure. Currently, the company was managed by Mr. G Rajesh (Managing Director) who has a moderate experience of 5 years in cotton industry. Adequate raw material availability USPL's cotton spinning unit is located in Krishna District of AP. The unit is close to Guntur, one of the major cotton growing areas in the country. The unit is also well connected to Khammam and Warangal districts which are the prominent cotton growing belts in Andhra Pradesh which provides ease in raw material procurement to the company. Further, the company has received interest subsidy under Technology Upgradation Fund (TUF) scheme of the Central Government till FY17. Usha Spincoat Private Limited (USPL) was established by Mr. P. Ranga Rao, Mr. G. Rajesh and others in October, 2006 for the manufacturing of cotton yarn. The company started its commercial operations from February 2011 with 15,600 spindles (11 ring frames with 1440 spindles per ring frame) which was later expanded to 20,160 spindles (14 ring frames with 1440 spindles per ring frame) in September 2011. The company generated around 15% of the total revenue from exports of spindles to China and South Africa. In FY16, USPL reported a PAT of INR 0.68 crore on a total operating income of INR55.24 crore, as against a PAT and TOI of INR0.09 crore and INR 54.87 crore, respectively, in FY15. UTTORAYON TEA: CRISIL Upgrades Rating on INR5.75MM LT Loan to B+ ---------------------------------------------------------------- CRISIL has upgraded its rating on the long-term bank facilities of Uttorayon Tea Industries Private Limited (UTIPL) to 'CRISIL B+/Stable' from 'CRISIL B/Stable', and reaffirmed its 'CRISIL A4' rating on the company's short-term facility. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Bank Guarantee 0.3 CRISIL A4 (Reaffirmed) Cash Credit 2.45 CRISIL B+/Stable (Upgraded from 'CRISIL B/Stable') Long Term Loan 5.75 CRISIL B+/Stable (Upgraded from 'CRISIL B/Stable') Proposed Long Term .10 CRISIL B+/Stable (Upgraded Bank Loan Facility from 'CRISIL B/Stable') The upgrade reflects the company's improved business risk profile led by stabilization of operations. Over the years the company's revenue levels have improved to INR16.54 crore in fiscal 2017 from INR11.49 crore in fiscal 2015, which was its first full year of operations. CRISIL believes that the company will be able to sustain its scale over the medium term backed by stable demand from its customers. The financial risk profile has also improved with better gearing and debt protection metrics. Working capital management has improved, reflected in reduction in gross current assets (GCAs) from 117 days as on March 31, 2015 to 58 days as on March 31, 2017. Liquidity has also improved, reflected in increased cash accrual from INR0.53 crore in fiscal 2015 to INR1.18 crore in fiscal 2017. Financial profile and liquidity is expected to improve further over the medium term, supported by increase in operating income while profitability remains largely stable leading to better accruals and accretion to reserves. The ratings reflect the extensive experience of the company's promoters in the tea industry, and its improving business and financial risk profiles, and prudent working capital management. These strengths are partially offset by susceptibility of tea production to weather conditions. Key Rating Drivers & Detailed Description Strengths * Promoters' extensive industry experience: The promoters' experience of more than four decades in the tea industry has helped UTIPL increase sales in a short duration. The promoters have developed strong relationships with tea planters and wholesalers, which has helped UTIPL source tea leaves of desired quantity, and increase sales. * Increasing scale of operations: The company commenced operations in February 2014, and has efficiently ramped up operations, reflected in growth in revenue and operating profitability to INR16.54 crore and 9.9%, respectively, for fiscal 2017. Favourable weather conditions in North India, leading to an increase in production of tea, supported growth. Operating revenue should increase steadily, assuming that rainfall will be as expected in North India, over the medium term. * Prudent working capital management: GCAs reduced from 117 days as on March 31, 2015, to 72 days as on March 31, 2016, and were at 77 days as on March 31, 2017, on account of reduced receivables and payables. GCAs should remain stable over the medium term. * Improving financial risk profile: UTIPL's networth, though modest, inched up to INR3.30 as on March 31, 2017, from INR3.06 crore a year. CRISIL believes the networth will remain small over the medium term. Gearing was high, at 2.3 times as on March 31, 2016, and is estimated to have reduced to 1.69 times as on March 31, 2017 which is further expected to reduce below 1 time over the medium term with repayment of debt and increased networth. The debt protection metrics is improving reflected in its NCATD and interest coverage of 0.09 times and 1.8 times in fiscal 2016 and estimated to be around 0.21 times and 2.8 times in fiscal 2017 backed by improvement in topline. * Improved liquidity: Liquidity has also improved, reflected in increased cash accrual from INR53 crore in fiscal 2015 to INR1.18 crore in fiscal 2017. Net cash accrual will remain sufficient against negligible term debt obligation over the medium term. Bank limit utilisation improved to 85% over the 12 months through March 2017 from 90% over the 12 months through December 2015. Weakness * Susceptibility to weather conditions: The production of tea remains susceptible to weather conditions. The tea plant requires a warm and humid climate. Climate influences yield, crop distribution, and quality. Distribution of rainfall matters a lot for sustained productivity of tea throughout the season as adequate rainfall during winter and early spring is crucial for high yield. Hence, the company's business is sensitive to climatic conditions. Outlook: Stable CRISIL believes UTIPL will continue to benefit from its promoters' extensive experience in the tea industry. The outlook may be revised to 'Positive' if UTIPL increases its scale of operations and improves its financial risk profile. The outlook may be revised to 'Negative' if liquidity and working capital management weaken, affecting the financial risk profile. UTIPL was incorporated in July 2012 in Siliguri. It manufactures black CTC (crush, tear, curl) tea. Profit after tax (PAT) and net sales were INR0.20 crore and INR17.48 crore, respectively, for fiscal 2016, against a PAT of INR0.10 crore on net sales of INR11.49 crore for the previous fiscal. VISHWAS COTTON: ICRA Reaffirms 'B' Rating on INR5.0cr Loan ---------------------------------------------------------- ICRA Ratings has reaffirmed the long-term rating of [ICRA]B on the INR5.53-crore fund-based bank facilities and INR0.47-crore unallocated limits of Vishwas Cotton Industries (VCI). The outlook on the long-term rating is 'Stable'. Amount Facilities (INR crore) Ratings ---------- ----------- ------- Fund-based-Cash Credit 5.00 [ICRA]B (Stable); Reaffirmed Fund-based-Term Loan 0.53 [ICRA]B (Stable); Reaffirmed Unallocated 0.47 [ICRA]B (Stable); Reaffirmed Rationale The rating reaffirmation continues to factor in the weak financial profile of Vishwas Cotton Industries, characterised by low profit margins and stretched capital structure. The rating also continues to take into account the commoditised nature of products and the vulnerability of the firm's profitability to adverse movements in cotton price, which in turn is subject to seasonality and crop harvest. The firm's operations are exposed to regulations governing the industry such as restrictions on cotton exports and minimum support price (MSP). Furthermore, the rating also considers the highly fragmented nature of the industry due to the presence of large number of manufacturers, which coupled with low-entry barriers, leads to intense competition and consequently limited margins. ICRA notes the potential adverse impact on net worth and gearing levels in case of any substantial withdrawal from capital accounts. The rating, however, continues to derive comfort from the proximity of the firm's manufacturing unit to raw materials, easing procurement. Key rating drivers Credit strengths * Locational advantage by virtue of proximity to raw materials Credit weaknesses * Weak financial profile characterised by low profit margins and stretched capital structure * Highly fragmented industry structure due to the presence of a large number of manufacturers and traders; low-entry barriers result in intense competition * Operations exposed to regulatory restrictions on cotton export, minimum support price (MSP) and agro-climatic condition * Risks inherent in partnership firms, wherein any substantial capital withdrawal could impact the net-worth and gearing levels Description of key rating drivers: The firm reported a de-growth of ~21% in operating income in FY2017 due to lower sales volumes hampered by demonetisation move. Post demonetisation, because of supply shortage and delayed arrival of cotton crop, the firm benefitted in terms of higher sales realisations. However, the profitability indicators continued to remain low due to limited value additive nature of the business and highly fragmented as well as competitive industry structure. Despite positive cash flow from operations, the free cash flow remained negative in FY2017 due to repayments of term loan installments. Going forward, the capital structure of VCI is expected to improve with schedule debt repayments and efficient working capital management. The scale of the firm is expected to remain stable. The ability of the firm to manage the impact of raw material price fluctuations on its profitability amidst highly competitive business environment and improve its capital structure by scheduled debt repayment will remain the key rating sensitivity. Established in 2013 as a partnership firm, Vishwas Cotton Industries (VCI) is involved in the business of ginning and pressing of raw cotton to produce cotton bales and cottonseeds. VCI's manufacturing facility, located at Rajkot in Gujarat, is equipped with 24 ginning machines and 1 pressing machine with an installed capacity of 29,780 MT per annum. The firm commenced operations in December 2013 and is currently managed by nine partners. The firm reported a net profit of INR0.19 crore on an operating income of INR39.78 crore for the year ending March 31, 2016. ==================== N E W Z E A L A N D ==================== CALLACTIVE: Payment Sought from People Tied to Directors -------------------------------------------------------- Chloe Winter at Stuff.co.nz reports that an investigation into the financial records of CallActive has prompted a call for some people related to its bankrupt directors to pay up. CallActive was put into liquidation in November last year, following the collapse of its Australian arm. Around the same time, its Australian-based directors, Rick Allan and Phillip Allan, were declared bankrupt. Now, people related to the directors have been told to pay up, following an investigation by liquidators into the company's finances, Stuff says. According to Stuff, liquidator Colin Owens, of Deloitte, said he could not elaborate on who the individuals were, or how they were related to the directors. Stuff relates that the latest liquidators report said it has identified claims against individuals related to the directors of the company and demand has been made for payment. "These individuals currently reside in Australia and we have been liaising with their lawyer regarding our claims," the report, as cited by Stuff, said. "The debts have been acknowledged as due and we are currently discussion repayment terms with the lawyer representing the related parties." As at May 8, CallActive owed more than NZ$2.1 million, according to the report cited by Stuff. This excluded claims from former staff, who had not yet contacted liquidators. It is understood there are outstanding wages to be paid, the liquidators report said, Stuff relays. Stuff says about 60 CallActive workers at the Willeston Street office in Wellington were made redundant weeks before Christmas last year. This came after its Australian branch folded a month earlier. Following the liquidation of the Australian company, the New Zealand company ceased trading. Liquidators froze the company's bank account with ANZ, which held a small amount of money, Stuff adds. ===================== P H I L I P P I N E S ===================== PROVIDENT PLANS: Likely to be Placed Under Conservatorship ---------------------------------------------------------- Ben O. de Vera at the Philippine Daily Inquirer reports that the Department of Finance on June 5 said the Insurance Commission might place pre-need company Provident Plans International Corp. under conservatorship due to its poor financial state. According to the Inquirer, the DOF said Insurance Commissioner Dennis B. Funa reported to Finance Secretary Carlos G. Dominguez III that "while Provident Plans manifested before the IC [Insurance Commission] in February and March this year that it has a 'white knight' investor to cover up its capital impairment and trust fund deficiencies, [the regulator] has yet to receive any concrete plan or letter of intent from this supposed investor." "Thus, [the IC] has ordered Provident Plans to submit a concrete plan and letter of intent from its proposed investor or to cover up its capital impairment and trust fund deficiencies within 60 days from receipt of the directive dated April 12, or until June 17. Otherwise, [the IC] will issue a cease and desist order and place the company under conservatorship," Mr. Funa told Mr. Dominguez. Based on the IC's assessment, Provident Fund had PHP340.61 million in capital impairment on top of PHP284 million in trust deficiency as of December 2016, the DOF said. The Inquirer relates that the DOF quoted the IC as claiming that "the primary cause of [Provident Plans'] capital impairment and trust fund deficiency is the unrecoverable investment with its previous trustee bank, the Export and Industry (EIB), and the neglect by its new trustee bank, the United Coconut Planters Bank (UCPB), in protecting the trust fund." "The primary reason behind these deficiencies was the 'disallowance of the unrecoverable/unqualified trust fund investment made by EIB as a trustee bank of Provident Plans, in its own bank in the form of time deposits in 2005,'" Mr. Funa, as cited by the Inquirer, explained. "That year, EIB invested Provident Plans' trust funds in a seven- year 'double-your-money' time deposit. But in December 2008, Provident Plans' investment group recommended the withdrawal of the trust fund deposits because of the following: the resignation of key officers of EIB's trust department; EIB's 2006 and 2007 audited financial statements showed the bank incurred losses of PHP2.7 billion; and the suspension of EIB from stock trading," Mr. Funa said. "EIB was ordered closed and placed under receivership by the Bangko Sentral ng Pilipinas in 2012 over its failure to meet its maturing obligations, insufficient realizable assets and its inability to continue business without inflicting losses on its depositors and creditors," Mr. Funa noted. According to the report, Mr. Funa said "Provident Plans told the IC that it has regularly met with its new trustee bank - UCPB - but the latter apparently did not do anything to protect the trust fund investment of the pre-need firm in EIB." Provident Plans sold education, memorial and pension plans, with 70 percent of sales comprised of life policies. ================= S I N G A P O R E ================= MISA TRAVEL: STB Serves Notice of License Revocation ---------------------------------------------------- The Singapore Tourism Board (STB) said that MISA Travel Pte Ltd has been served a notice of revocation on May 30, 2017, in accordance with the Travel Agents Act (Chapter 334). MISA Travel has been served a notice of revocation as it has ceased to carry on the business of a travel agent and is unable to fulfil its obligations towards its customers. Affected consumers should contact MISA Travel regarding the status of their booking or to seek a refund. In the event that MISA Travel cannot be reached or fails to provide the relevant service delivery or refund, consumers with applicable travel insurance should approach their insurance providers for assistance. Consumers who are not covered by travel insurance can approach the Consumers Association of Singapore (CASE) or the Small Claims Tribunal (SCT), where appropriate. "We take this opportunity to remind consumers to take precautionary measures such as purchasing travel insurance upon payment of the travel plans, and to pay by instalments instead of making full payment. The travel insurance should provide coverage for unforeseen events such as when a travel agent becomes insolvent," STB said. STB said the latest list of licensed travel agents in Singapore is available at the Travel Related Users' System (TRUST) website. Travel agents can email stb_ta@stb.gov.sg for related licensing queries, it added. In accordance with the Travel Agents Act, MISA Travel Pte Ltd will be given till June 21, 2017, to provide reasons against the revocation of their travel agent licence, failing which the revocation will take effect unless an appeal is submitted to the Ministry of Trade and Industry (MTI). ********* 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, Ivy B. Magdadaro 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 Joseph Cardillo at 856-381-8268. *** End of Transmission ***