/raid1/www/Hosts/bankrupt/TCRAP_Public/170616.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
A S I A P A C I F I C
Friday, June 16, 2017, Vol. 20, No. 119
Headlines
A U S T R A L I A
ARRIUM LTD: Korean Consortium Emerges as Preferred Bidder
G.G. ENGINEERING: Second Creditors' Meeting Set for June 23
IGNITE HOMES: Second Creditors' Meeting Set for June 23
LOOKOUT INVESTIGATIONS: First Creditors' Meeting Set for June 26
NOVO IT: Blames 2013 Rapid Expansion Over Collapse
OUTBACK TRAVEL: First Creditors' Meeting Set for June 26
PATIS TRADING: First Creditors' Meeting Set for June 21
PEPPER RESIDENTIAL: Notes Redemption No Impact on Moody's Ratings
PWK MEDAM: Second Creditors' Meeting Set for June 22
TIME CORRIDOR: First Creditors' Meeting Set for June 26
C H I N A
GREENLAND HOLDING: Fitch Cuts LT IDR to BB; Outlook Negative
H O N G K O N G
NOBLE GROUP: Ex-CEO Sue Founder for SGD79.2 Million
NORD ANGLIA: Moody's Lowers Corporate Family Rating to B2
I N D I A
AMBUR MUNICIPALITY: CARE Assigns CARE B (Is) Issuer Rating
BAG POLY: CARE Lowers Rating on INR23.40cr LT Loan to B+
BASUNDHARA GREEN: CARE Assigns B+ Rating to INR10.20cr LT Loan
BHAGYODAY AGRO: CARE Reaffirms B+ Rating on INR7.6cr Loan
BHALLA CHEMICAL: ICRA Assigns B+ Rating to INR4.40cr Cash Loan
CKS MEDICARE: CARE Reaffirms B+ Rating to INR33.50cr Loan
DIAMOND PRODUCTS: ICRA Reaffirms B Rating on INR10cr Cash Loan
DOLPHIN MARINE: ICRA Reaffirms B Rating on INR2.08cr Term Loan
FRIENDS AGRO: ICRA Lowers Rating on INR9.60cr Loan to 'D'
GATIK TEA: CARE Assigns B+ Rating to INR8.75cr LT Loan
GOLDSTAR POLYMERS: CARE Assigns B+ Rating to INR7.0cr Loan
GORAYA INDUSTRIES: CARE Assigns B+ Rating to INR10.50cr LT Loan
GREENLAND MOTORS: ICRA Reaffirms B+ Rating on INR1.55cr Loan
GREENLANDS (A&M): ICRA Reaffirms B+ Rating on INR18.50cr Loan
GTC OILFIELD: Ind-Ra Affirms 'BB' Long-Term Issuer Rating
HOSLEY INDIA: ICRA Assigns B+ Rating to INR1.0cr Term Loan
JOYMAKALI COLD: ICRA Assigns 'B' Rating to INR5.62cr Loan
K.N. SINGH: CARE Assigns B+ Rating to INR3.19cr LT Loan
LASER FIBERS: ICRA Raises Rating on INR12.80cr Cash Loan to B+
LEISURE WEAR: ICRA Lowers Rating on INR6.0cr Loan to 'D'
MAA MAHARANI: CARE Assigns B+ Rating to INR6.07cr LT Loan
MANTRA PACKAGING: ICRA Reaffirms 'B' Rating on INR5.0cr Loan
MARIANELLA PROPERTIES: ICRA Reaffirms B Rating on INR15cr Loan
MARUTI BULK: CARE Assigns 'B' Rating to INR4.40cr LT Loan
MARVELOUS ENGINEERS: CARE Reaffirms 'B' Rating on INR2.25cr Loan
MSS INFRACON: CARE Assigns B+ Rating to INR55cr LT Loan
NEELKANTH ENTERPRISE: CARE Assigns B+ Rating to INR5.5cr Loan
PARKSONS CARTAMUNDI: Ind-Ra Affirms 'BB+' Long-Term Issuer Rating
R M ENTERPRISE: CARE Assigns B+ Rating to INR7.50cr LT Loan
RAVIRAJ HI-TECH: CARE Assigns B+ Rating to INR10.50cr LT Loan
RELIANCE BIG: CARE Lowers Rating on INR90cr Bank Loan to D
RELIANCE COMMUNICATIONS: CARE Cuts Rating on INR1,180cr Loan to D
S.M MUSTHAFA: CARE Assigns 'B' Rating to INR22cr LT Loan
SAVITRI SWADESHI: CARE Assigns B+ Rating to INR10cr LT Loan
SHIV SHAKTI: CARE Reaffirms B+ Rating on INR8cr LT Loan
SIGNET CONDUCTORS: ICRA Reaffirms B+ Rating on INR15cr Loan
SRI JYOTHI: CARE Assigns B+ Rating to INR15cr LT Loan
SWOSTI PREMIUM: Ind-Ra Migrates 'BB' Rating to Non-Cooperating
TIRUVANNAMALAI MUNICIPALITY: CARE Assigns B Issuer Rating
* INDIA: Banks to Go to Court Over Bad Loans of 12 Large Debtors
J A P A N
TOSHIBA CORP: Western Digital Seeks Injunction to Block Chip Sale
P H I L I P P I N E S
RURAL BANK OF BAROTAC: Creditors Must File Claims By July 11
V I E T N A M
SAIGON THUONG: Moody's Cuts Ratings to Caa1; Keeps Outlook Neg.
- - - - -
=================
A U S T R A L I A
=================
ARRIUM LTD: Korean Consortium Emerges as Preferred Bidder
---------------------------------------------------------
The Australian reports that Korean steel giant Posco and private
equity firm Newlake have been named as preferred bidders for
Arrium, ousting rival consoritum Liberty House and Simec.
Arrium was placed into voluntary administration last year and has
been in the hands of KordaMentha, The Australian discloses.
Morgan Stanley has been advising on the sale, the report says.
Posco's partner, Newlake, is run by a group of former executives
from the private equity giant Blackstone, The Australian relates.
JB Asset Management is also involved in the bid.
On offer has been Arrium's iron ore mining operations, Whyalla
Steelworks in South Australia and its more profitable east coast
steel operations, recalls The Australian.
The report says the administrators previously indicated a desire
to have the bid process finalised by June 30.
Arrium went into voluntary administration in 2016 amid escalating
debts and sustained low commodity prices after negotiations with
its lenders failed, the report recounts.
According to The Australian, the South Australian government has
pledged $50 million to support the company, in particular its
Whyalla steelworks, and has called on the Commonwealth to also
provide assistance.
The federal government has so far resisted making any direct
financial commitment but has pledged to buy Arrium steel for some
key government projects, adds The Australian.
Arrium Limited (ASX:ARI) -- http://www.arrium.com/-- is an
Australia-based mining and materials company. The Company is
engaged in mining and supply of iron ore and steelmaking raw
materials; manufacture and supply of mining consumable products;
manufacture and distribution of steel products, and recycling of
ferrous and non-ferrous scrap metal. Its segments include Mining,
Mining Consumables, Steel and Recycling. Its Mining segment
exports hematite iron ore and supplies both pelletized magnetite
iron ore and hematite lump iron ore. Its Mining Consumables
segment consists of Moly-Cop grinding media business, Waratah
steel mill and Altasteel steel mill. Its Mining Consumables
segment supplies various mining consumables, such as grinding
media, wire ropes and rail wheels. Its Steel segment manufactures
billet and distributes steel and metal products, including
structural steel selections, steel plate, angels, channels,
reinforcing steel and carbon products. Its Recycling segment
supplies steelmaking raw materials.
Pursuant to orders made by the Federal Court of Australia on
April 12, 2016, Mark Mentha, Bryan Webster, Martin Madden and
Cassandra Mathews of KordaMentha have been appointed Joint and
Several Voluntary Administrators of the Company and its 93
Australian subsidiaries replacing Said Jahani, Paul Billingham,
Michael McCann and Matthew Byrnes of Grant Thornton, who were
appointed earlier in April.
G.G. ENGINEERING: Second Creditors' Meeting Set for June 23
-----------------------------------------------------------
A second meeting of creditors in the proceedings of G.G.
Engineering (Aust) Pty Ltd has been set for June 23, 2017, at
9:30 a.m., at Highview Accounting & Financial, 2 Codrington
Street, in Cranbourne, Victoria.
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 22, 2017, at 4:00 p.m.
Stephen Robert Dixon and Ahmed Bise of Grant Thornton were
appointed as administrators of G.G. Engineering.
IGNITE HOMES: Second Creditors' Meeting Set for June 23
-------------------------------------------------------
A second meeting of creditors in the proceedings of Ignite Homes
Pty Ltd has been set for June 23, 2017, at 2:00 p.m., at the
offices of SV Partners, SV House, 138 Mary Street, in Brisbane,
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 22, 2017, at 4:00 p.m.
Terrence John Rose and David Michael Stimpson of SV Partners were
appointed as administrators of Ignite Homes on May 19, 2017.
LOOKOUT INVESTIGATIONS: First Creditors' Meeting Set for June 26
----------------------------------------------------------------
A first meeting of the creditors in the proceedings of Lookout
Investigations Pty Limited will be held at the offices of Veritas
Advisory Pty Ltd, Level 5, 123 Pitt Street, in Sydney, NSW, on
June 26, 2017, at 11:00 a.m.
Steve Naidenov and David Iannuzzi of Veritas Advisory were
appointed as administrators of Lookout Investigations on June 14,
2017.
NOVO IT: Blames 2013 Rapid Expansion Over Collapse
--------------------------------------------------
Samira Sarraf at CRN reports that Novo IT has blamed its rapid
expansion in 2013 and a reliance on Telstra for problems that led
to its voluntary administration.
Robert Kell, managing director of the Wollongong-headquartered IT
firm, has outlined the events that led up to the appointment of
Deloitte Financial Advisory as voluntary administrators on
May 23, CRN says.
During 2014-15, the company, which then traded as AVC, saw a
rapid expansion that led to working capital constraints. The
directors also recognised the need to reduce the MSP's
reliability on Telstra, according to CRN.
CRN relates that in 2016, the company went through a restructure
of the business and entered into a payment arrangement with the
Australian Taxation Office (ATO) over tax debts.
When the ATO this year rejected a request to amend the payment
scheme, the directors decided to place the company into voluntary
administration to "undertake a formal restructure," CRN relays.
A report lodged with corporate regulator ASIC listed formal and
informal proof of debts amounting to more than $800,000,
including $50,000 to Gartner Australasia and $69,000 to Ingram
Micro, according to CRN. The ATO's debt was not on this draft of
the creditors' list.
CRN says the administrators expect Novo IT's directors to propose
a deed of company arrangement (DOCA). This is an arrangement
between the company and its creditors on how to deal with
affairs, and typically includes a repayment plan.
The director's advisor said the DOCA would include provisions to
protect employees' entitlements.
A Deloitte spokesperson told CRN earlier this month that the
company's 30 staff were still being employed by the
administrators.
When news emerged of the insolvency earlier this month, director
Stephen Chapman told CRN that the board was taking the
opportunity to restructure the business "to better align our
business model with the needs of our clients and to attract new
and rising talent".
He claimed that the company in administration, Novo IT Pty Ltd,
was "one of our non-trading subsidiaries" and that the "principal
trading entity, Novo IT Australia Pty Limited, a wholly owned
subsidiary of the group, is unaffected," CRN relays.
David Ian Mansfield and Neil Robert Cussen of Deloitte Financial
Advisory Pty Ltd were appointed as administrators of Novo IT on
May 23, 2017.
Novo IT Australia Pty Ltd was established by the three directors
of Novo IT Pty Ltd on April 21, 2017, a month before the
administrators were appointed.
AVC Pty Ltd was registered with ASIC in 2001 and was renamed Novo
IT Pty Ltd on March 16, 2016, CRN discloses.
OUTBACK TRAVEL: First Creditors' Meeting Set for June 26
--------------------------------------------------------
A first meeting of the creditors in the proceedings of Outback
Travel Centres Pty Ltd and Outback Fuel Distributors Pty Ltd will
be held at the offices of Ferrier Hodgson, Level 28, 108 St.
Georges Terrace, in Perth, WA, on June 26, 2017, at 10:00 a.m.
Martin Bruce Jones and Wayne Rushton of Ferrier Hodgson were
appointed as administrators of Outback Travel on June 15, 2017.
PATIS TRADING: First Creditors' Meeting Set for June 21
-------------------------------------------------------
A first meeting of the creditors in the proceedings of Patis
Trading Co Pty Limited will be held at the offices of Jones
Partners Insolvency & Business Recovery, Level 13, 189 Kent
Street, in NSW, on June 21, 2017, at 12:00 p.m.
Joshua Philip Taylor of Jones Partners was appointed as
administrator of Patis Trading on June 9, 2017.
PEPPER RESIDENTIAL: Notes Redemption No Impact on Moody's Ratings
-----------------------------------------------------------------
Moody's Investors Service announced that the redemption of the
Class A1-u2 notes with the proceeds from the issuance of Class
AR-u Notes on June 13, 2017 (the Refinancing) will not, in and of
itself and at this time, result in the downgrade or withdrawal of
the current ratings of notes issued by Pepper Residential
Securities Trust No. 14.
Specifically, Moody's has determined that the Refinancing, in and
of itself and at this time, will not result in the downgrade or
withdrawal of the ratings of the notes below.
Class AR-u Notes, currently rated Aaa (sf)
Class A1-a Notes, currently rated Aaa (sf)
Class A2 Notes, currently rated Aaa (sf)
Class B Notes, currently rated Aaa (sf)
Class C Notes, currently rated Aa1 (sf)
Class D Notes, currently rated A2 (sf)
Class E Notes, currently rated Baa3 (sf)
Class F Notes, currently rated Ba3 (sf)
However, Moody's opinion addresses only the credit impact
associated with the Refinancing, and Moody's is not expressing
any opinion as to whether the Refinancing has, or could have,
other non-credit related effects that may have a detrimental
impact on the interests of note holders.
The transaction is supported by a liquidity reserve which is
equivalent to 2.5% of the outstanding principal balance of the
notes, with a floor of AUD1,250,000.
The transaction is an Australian non-conforming RMBS secured by a
portfolio of residential mortgage loans. A portion of the
portfolio consists of loans extended to borrowers with impaired
credit histories or made on a limited documentation basis.
The principal methodology used in these ratings was Moody's
Approach to Rating RMBS Using the MILAN Framework published in
September 2016.
Please note that on March 22, 2017, Moody's released a Request
for Comment, in which it requested market feedback on potential
revisions to its Approach to Assessing Counterparty Risks in
Structured Finance. If the revised Methodology is implemented as
proposed, the ratings on Pepper Residential Securities Trust No.
14 are not expected to be affected.
PWK MEDAM: Second Creditors' Meeting Set for June 22
----------------------------------------------------
A second meeting of creditors in the proceedings of PWK Medam NSW
Pty Ltd has been set for June 22, 2017, at 10:30 a.m. Suite 1,
Level 15, 9 Castlereagh Street, in Sydney, NSW.
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 22, 2017, at 10:30 a.m.
Nicholas Craig Malanos -- nick.malanos@worrells.net.au -- of
Worrells Solvency & Forensic was appointed as administrator of
PWK Medam on May 24, 2017.
TIME CORRIDOR: First Creditors' Meeting Set for June 26
-------------------------------------------------------
A first meeting of the creditors in the proceedings of Time
Corridor Pty Ltd will be held at the offices of Romanis Cant,
Level 2, 106 Hardware Street, in Melbourne, Victoria, on June 26,
2017, at 11:00 a.m.
Anthony Robert Cant and Renee Sarah Di Carlo of Romanis Cant
Advisory were appointed as administrators of Time Corridor on
June 14, 2017.
=========
C H I N A
=========
GREENLAND HOLDING: Fitch Cuts LT IDR to BB; Outlook Negative
------------------------------------------------------------
Fitch Ratings has downgraded Chinese homebuilder Greenland
Holding Group Company Limited's (Greenland) Long-Term Foreign-
and Local-Currency Issuer Default Ratings (IDR) to 'BB' from
'BB+', with a Negative Outlook. Fitch has also downgraded
Greenland's senior unsecured rating and the ratings of all
outstanding bonds to 'BB'.
The downgrade of the IDR follows the downgrade of Greenland's
standalone rating to 'BB-' from 'BB' and the incorporation of a
one-notch uplift reflecting its moderate linkage with its parent,
the State-owned Assets Supervision and Administration Commission
(SASAC) of Shanghai Municipality, in line with Fitch's Parent and
Subsidiary Linkage criteria.
The downgrade of the standalone rating is driven by Greenland's
persistent high leverage of above 60% as the company remained
aggressive in expanding its land bank in 2016. Leverage, as
measured by net debt-to-adjusted inventory, had reached 67% by
end-2016. The Negative Outlook reflects Fitch views that
Greenland's cash collection of its pre-sold commercial properties
in 2017 is likely be below Fitch previous understanding, and this
may keep leverage sustained above 65% - the level at which Fitch
may considers further negative rating action.
KEY RATING DRIVERS
Hard to Deleverage: Fitch's expectation that leverage may exceed
65% in 2017 and 2018 is due to construction expenditure likely to
remain high even as the company slowed down its attributable land
acquisition to about CNY8 billion in 5M17. Greenland has been
reducing the proportion of commercial property sales, which came
down to 36% in 2016 from 49% in 2015. The cash-collection ratio
also improved to 79% from 59% in 2015, though it is still behind
the industry average of 90% in 2016. The low cash-collection rate
is a result of its high exposure to sales of commercial property
development that has a slower sales collection rate than for
residential property sales.
Large Construction Expenditure Commitment: Fitch believes
Greenland's rapid construction pace will continue to pressure
leverage. Greenland's new construction start gross floor area
(GFA) totalled 19.3 million square metres (sqm) in 2016, and this
outpaced its land-acquisition GFA of 14.9 million sqm. The 2016
completed GFA of 22.7 million sqm was faster than both
construction starts and new land added. Greenland's aggressive
pace of construction resulted in completed properties available
for sale growing significantly in 2016 to CNY93 billion from
CNY49 billion in 2015. The build-up of unsold completed
properties can be a cash drain, and a persistent rising trend of
unsold completed properties may also reflect uncertainties of its
property sales.
Contracted Sales Growth to Slow: Fitch expects Greenland's
contracted sales to be sustained at around CNY280 billion in
2017, slowing down in 2H17 as the Chinese authorities continue to
implement increasingly stricter measures to curb property prices
and restrict residential property transactions. Contracted sales
rose by 11% to CNY255 billion in 2016. This trend had maintained
its momentum earlier in 2017, with contracted sales growing by
17.9% yoy in 1Q17.
Non-Property Adds to Leverage Pressure: Fitch believes that
Greenland's non-property businesses are still immature and will
need to be funded with cash flow generated from the property
business. Greenland has made extensive investments in the
financial institutions (FI), consumer goods and infrastructure
industries. All these have contributed to the increase in
leverage.
Benefits of Large Scale: Greenland is one of the top property
developers in China as measured by contracted sales. Its
property-development business is well diversified in over 40
cities in China and overseas. The company intends to sustain
contracted sales of over CNY200 billion in the next few years.
One-Notch Parental Support: Greenland has moderately strong
linkages with the Shanghai government. It will continue to be one
of the major contributors to Shanghai's tax revenue among
Shanghai SASAC-owned enterprises, and remain the largest
Shanghai-based property company. Fitch believes the Shanghai
SASAC, which owns 46% of Greenland, will continue to be the
biggest shareholder and exert influence on Greenland's ability to
acquire quality sites for development.
DERIVATION SUMMARY
Greenland's rating is supported by its business profile -
including scale as measured by contracted sales and EBITDA, and
its market position. However, its rating is constrained by higher
leverage than most of the 'BB' category peers and relatively low
contracted sales efficiencies (measured by contracted sales/gross
debt) - due to its higher exposure to the commercial property
segments. Greenland's peers, like China Evergrande Group
(B+/Stable) and Sunac China Holdings Limited (BB/Negative), are
similarly aggressive in expanding their scale, and are among the
10 largest Chinese homebuilders.
Greenland's leverage is as high as that of Evergrande, but
Greenland has a large level of uncollected sales to mitigate its
high leverage. Greenland, as a state-owned enterprise, has a
stronger position in acquiring land at low costs, especially for
new city districts that local governments are keen to develop.
This enhances Greenland's business profile over that of
Evergrande and Sunac.
KEY ASSUMPTIONS
Fitch's key assumptions within Fitch ratings case for the issuer
include:
- Contracted sales to increase by 13% in 2017 and slow to 5% in
2018.
- Sales of commercial property to form 40% of total sales, and
residential sales to make up the remainder in 2017-2019
- Land premium of around CNY75 billion-90 billion in 2017-2019.
RATING SENSITIVITIES
Positive: Future Developments That May, Individually or
Collectively, Lead to Negative Rating Action on the Ratings
Include:
The Outlook on the standalone ratings may be revised to Stable if
the negative guidelines are not met in the next 12 months.
Future Developments That May, Individually or Collectively, Lead
to Negative Rating Action:
Net debt/adjusted inventory sustained above 65% (Fitch estimate
for 2016: 67%)
Property EBITDA margin sustained below 15% (Fitch estimate for
2016: 16%)
Contracted sales/total debt sustained below 0.8x (Fitch estimate
for 2016: 0.9x)
Evidence of weakening support from parent.
LIQUIDITY
Greenland had cash of CNY60 billion at end-2016, which is not
sufficient to cover its short-term debt of CNY96 billion.
However, the company had CNY105 billion of available bank
facilities and the capability to raise funds through multiple
channels domestically.
FULL LIST OF RATING ACTIONS
Greenland Holding Group Company Limited
- Long-Term Foreign-Currency IDR downgraded to 'BB'/Negative from
'BB+'/Negative
- Long-Term Local-Currency IDR downgraded to 'BB'/Negative from
'BB+'/Negative
- Senior unsecured rating downgraded to 'BB' from 'BB+'
- USD3 billion medium-term note programme downgraded to 'BB' from
'BB+'
- USD2 billion medium-term note programme downgraded to 'BB' from
'BB+'
Issued by Greenland Hong Kong Holdings Limited with Keepwell from
Greenland Holding Group Company Limited
- USD450 million 3.875% senior notes due 2019 downgraded to 'BB'
from 'BB+'
- USD500 million 4.375% senior notes due 2017 downgraded to 'BB'
from 'BB+'
- CNY1.5 billion 5.5% senior notes due 2018 downgraded to 'BB'
from 'BB+'
Issued by Greenland Global Investment Limited and Guaranteed by
Greenland Holding Group Company Limited
- USD500 million 3.5% senior notes due 2017 downgraded to 'BB'
from 'BB+'
- USD400 million 3.75% senior notes due 2019 downgraded to 'BB'
from 'BB+'
- USD300 million 3.5% senior notes due 2019 downgraded to 'BB'
from 'BB+'
- USD600 million 5.875% senior notes due 2024 downgraded to 'BB'
from 'BB+'
================
H O N G K O N G
================
NOBLE GROUP: Ex-CEO Sue Founder for SGD79.2 Million
---------------------------------------------------
Reuters reports that the former chief executive of troubled
commodity trader Noble Group, Yusuf Alireza, has issued a claim
against the firm's founder and emeritus chairman Richard Elman
over alleged unpaid share payments worth millions of dollars.
In a writ of summons issued on June 13 to Hong Kong's High Court,
Alireza claims that Elman as well as a company called Fleet
Overseas (New Zealand), which is allegedly affiliated with Elman,
failed to pay out shares of Noble Group following Alireza's
departure of the company in 2016, Reuters relates.
The writ, seen by Reuters, demands the payment of the outstanding
shares and, "in addition, the Plaintiff (Alireza) claims damages
for late delivery (of the shares), based on the difference in
value of the shares when they ought to have been delivered on
February 1, 2015 . . . and the date of actual delivery."
Reuters says the document claims Alireza is owed two batches of
shares totalling 1.4 per cent of Noble Group's stock, which it
claims have a combined value of SGD79.2 million.
According to Reuters, the document also demands "damages for late
delivery."
A writ of summons is used to start legal proceedings and can lead
to legal action if the demands are not met, Reuters says.
Reuters notes that the shares of Hong Kong-based but Singapore-
listed Noble Group have collapsed by 98% from their 2011 peak to
just 32 Singapore cents as the company battles accusations of
murky accounting and a broad commodity downturn.
The firm's market capitalization has slumped from a peak of more
than SGD10 billion to just SGD430 million, Reuters discloses.
Reuters says the company is in negotiations with banks over a
roll-over of a US$2 billion credit facility, and it is also being
sounded out by rival trading houses for its remaining business,
which is mainly focused on thermal coal trading but also includes
US oil assets.
The court document states that Alireza approached Elman in early
May of 2016 and "raised his concerns over the future viability of
the Noble Group."
Alireza left the company later that month, Reuters notes.
About Noble Group
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.
NORD ANGLIA: Moody's Lowers Corporate Family Rating to B2
---------------------------------------------------------
Moody's Investors Service has downgraded Nord Anglia Education,
Inc's (NAE) corporate family rating (CFR) to B2 from B1.
At the same time, Moody's has also downgraded the senior secured
ratings of the $862 million senior secured term loan B, $125
million senior secured revolving credit facility, and CHF200
million senior secured notes issued by Nord Anglia Education
Finance LLC to B2 from B1. Nord Anglia Education Finance LLC is a
subsidiary under NAE.
Moody's has also assigned a B1 senior secured rating to the Euro
equivalent of USD1.225 billion first lien term loan, issued by
Fugue Finance B.V. and guaranteed by Bach Finance Limited. Bach
Finance Limited and NAE - which are part of the restricted group
- will merge with NAE as the surviving entity.
The proceeds from the term loans together with the shareholders'
contribution will be used to repurchase shares from part of the
existing shareholders and to repay existing debt.
The ratings outlook is stable.
This rating action concludes Moody's review of NAE's CFR, which
was initiated on April 26, 2017.
RATINGS RATIONALE
"The downgrade of NAE's CFR reflects the significant increase in
the company's financial leverage, after the completion of a debt-
funded buyout," says Stephanie Lau, a Moody's Vice President and
Senior Analyst.
Moody's expects that NAE's adjusted debt/EBITDA will weaken to
around 10x in the fiscal year ending August 2017 (FY2017) or to
about 9.0x on a pro forma basis - assuming full-year earnings
contribution from the acquisitions in FY2017 - from 7.3x in
FY2016. This weakening in its adjusted debt/EBITDA is because its
reported debt will increase to about USD2.2 billion upon the
completion of the buyout from USD1.1 billion at February 28,
2017.
A consortium of investors, led by the Canada Pension Plan
Investment Board and Baring Private Equity Asia will acquire NAE
for a total transaction value of USD4.7 billion, including the
repayment of existing debt. Of the USD4.7 billion, USD1.96
billion will be funded with debt, which consists of a EUR first-
lien term loan equivalent to USD1.23 billion, a USD315 million
first-lien term loan, and USD416 million second-lien term loan.
Although the projected financial leverage in FY2017 is high even
for NAE's B2 CFR level, Moody's expects that NAE's pro forma
financial leverage will fall to about 8.0x in FY2018 and further
to 7.0x or below in FY2019. This situation is driven by a steady
growth in earnings - which will be underpinned by a gradual
increase in tuition fees and enrollment - and cost-cutting
measures.
NAE's B2 CFR is supported by its solid operating margins and cash
flow, the predictable nature of its revenue based on strong
demand, good geographic diversification and adequate liquidity.
The proposed USD250 million revolving credit facility will
further strengthen its liquidity.
At the same time, the rating is constrained by the company's high
financial leverage and appetite for acquisitions.
The B1 rating on the Euro equivalent of USD1.225 billion term
loan reflects the first lien on the company's major operating
assets, including all assets under Viking Holdco Inc., the equity
interests of Bach Finance Limited and most of its material
subsidiaries. This structure means that the term loans rank ahead
of other second lien loans and unsecured claims.
The rating outlook is stable, reflecting Moody's expectation that
Nord Anglia will pursue growth and acquisitions in a prudent
manner, benefit from stable cash flow, fee growth, and better
operational leverage, which will in turn support its leverage
trending to 8.0x over the next 12-18 months.
Upward rating pressure is unlikely over the next 1-2 years,
because of the company's initial high leverage after the
transaction. The rating could be upgraded over time if the
company: 1) maintains stable business conditions; 2) pursues
acquisitions in a prudent manner; and (3) reduces leverage, such
that its adjusted debt/EBITDA stays below 6.0x-6.5x.
The rating could be downgraded if the company: (1) demonstrates
that its business has deteriorated; 2) pursues an aggressive
acquisition strategy, such that its adjusted debt/EBITDA fails to
trend down to 8.0x-8.5x.
Indications of stress on the company's liquidity position would
add further downward pressure on the rating.
The principal methodology used in these ratings was Business and
Consumer Service Industry published in October 2016.
Nord Anglia Education, Inc is headquartered in Hong Kong and
operates 44 international premium schools in Asia, Europe, the
Middle East, and North America, with more than 38,400 students
ranging in level from pre-school through to secondary school. NAE
also provides curriculum products through its Learning Services
division.
=========
I N D I A
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AMBUR MUNICIPALITY: CARE Assigns CARE B (Is) Issuer Rating
----------------------------------------------------------
CARE Ratings has assigned CARE B (Is) Issuer Rating to Ambur
Municipality.
The rating is subject to overall debt level of INR23 crore.
Detailed Rationale & Key Rating Drivers
The rating factors in the stressed financial condition of the
municipality which has been recording a revenue deficit during
FY13-15. The Municipality also has high levels of debt, with a
Debt/Revenue Receipts of over 140%. The rating is further
constrained by volatility in revenue receipts, high level of
dependence of the Municipality on the State Government for its
income in the form of devolution fund, its inability to cover its
establishment and administrative expenditure from its own revenue
sources, low collection efficiency of tax and user charges and
shortfalls in civic infrastructure. There has also been a decline
in the capital expenditure undertaken by the Municipality which
has implications for future revenues and economic growth
potential of the region.
The rating has also taken into consideration the sustained growth
in tax revenues of the Municipality as well as the economic
profile of the region which is a leading cluster for export of
finished leather and leather related products. Going forward, the
ability of Ambur Municipality to maintain the consistency in
revenue receipts and improve its own revenue would be the key
rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Volatility in revenue receipts: Revenue receipts have exhibited a
volatile trend in the past. From INR19.20 cr in FY12 it dropped
to INR12.80 cr in FY13 and though it has improved during the
FY14-15 period, the revenue receipts have continued to remain
lower at INR16.28 cr in Fy15 vis a vis the high of INR19.20 cr in
FY12.
Low level of Self Reliance and high dependence on devolution
funds: The municipality has a low degree of self-reliance with
only 35% of its revenues comprising of own revenue sources - tax
and non-tax sources as of FY15. Tax revenue and user charges
though have shown a marginal growth account only for a small
share of the revenue receipts over the years owning to the low
tax base.
Devolution Fund accounts for the highest share in revenue
receipts at about 50-60% of the revenue receipts over the last
three years. However, it has been volatile and it declined from
INR9.08 cr in FY12 to INR7.97 cr in FY13 declining by 12.22% and
subsequently increased to INR9.83 crore in FY14 followed by a
fall to INR8.23 crore in FY15.
Low level of collection efficiency: The overall tax collection
efficiency of the municipality is low at less than 60%.
Collection efficiency is low on account of receivables from water
charges not received, thus arrears are built up over the years.
The collection efficiency of the municipality improved from
50.53% in FY12 to 58.50% in FY13; however it declined to 56.10%
in FY15.
Revenue Deficit: Ambur municipality has been registering revenue
deficit since FY13. The deficit in FY15 stood at INR3.78
crore.
Declining Capex: Capital Expenditure has been declining over the
years with a CAGR growth of -4.28% between FY12-FY16 (RE).
Capital Expenditure declined till FY15, and registered a growth
of 36.44% in Fy16 (RE), the same is however expected to decline
by 17.35% in FY17 (BE). Capital outlay accounts for more than 70%
of total capital expenditure. In FY17 (BE) the capital outlay is
expected to decline to INR 2.96 crore. The municipality is not
able to undertake new projects owing to the revenue deficit
incurred.
High level of debt: The outstanding loan of Ambur municipality
consists of loans from Government, TUFIDCO and MUDF. The
outstanding debt increased significantly to INR23.47 crore in
FY15 and the Debt to RR ratio has been significantly high at
144.44 in FY15.
Ambur was upgraded as a third grade municipality from the status
of town panchayat and was constituted in 1948. Ambur Municipality
spreads over an extent of 17.97 sq km and is divided in to 36
municipal wards. As per 2011 census, the population of the town
stands at 1,15,273.
Ambur Municipality is providing services such as water supply,
street light, roads, drains and solid waste management, health
and sanitation etc. The other important functions of the
municipality are assessment and collection of taxes, approval of
building plans, maintenance of bus stand, construction and
maintenance of toilets, providing medical services, maintaining
shelter for homeless etc.
BAG POLY: CARE Lowers Rating on INR23.40cr LT Loan to B+
--------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Bag Poly International Private Limited (BIPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 23.40 CARE B+; Stable Suspension
revoked and rating revised
from CARE BB
Long-term/Short-
term Bank Facilities 7.95 CARE B+; Stable/CARE A4
Suspension revoked and
Long-term rating revised
from CARE BB-/Shortterm
rating reaffirmed
Short-term Bank 0.50 CARE A4 Suspension revoked
Facilities And rating reaffirmed
Detailed Rationale
The revision in the long-term rating assigned to the bank
facilities of Bag Poly International Private Limited (BIPL)
factors in deterioration in the financial risk profile as marked
by declining profitability on a y-o-y basis in last 3 financial
years (FY14-16 - refers to the period April 1 to March 31)) and
elongation of collection period. Furthermore, the ratings
continue to be constrained by working capital intensive nature of
operations, exposure to foreign exchange fluctuation risk coupled
with BIPL's presence in a highly competitive nature of industry
and susceptibility of the profitability margins to fluctuation in
raw material prices. The revision in the rating also factors in
subdued operating performance during 9MFY17 (based on provisional
results-refers to the period April 1 to December 31).
The ratings, however, continue to draw comfort from BIPL's
experienced promoter's long track record of operations. Going
forward, the company's ability to increase its scale of
operations while registering improvement in profitability
profile, and coverage indicators along with efficient management
of working capital requirement shall be the key rating
sensitivities.
Detailed description of the key rating drivers
Key Rating Weakness
Deterioration in the financial risk profile: The profitability
margin continues to remain low and declining in nature in last
three financial years i e FY14 to FY16. The declining
profitability margin of the company is due to the company's
limited bargaining power with customers and company's inability
to pass the increased raw material cost to customer. However,
profitability margins of the company witnessed marginal
improvement in 9MFY17 owing to change in the product mix.
BIPL had subdued operating performance as evident from total
operating income (TOI) of INR47.34 crore and gross cash accruals
(GCA) of INR0.35 crore, respectively for 9M-FY17 (based on
provisional results, refers to the financial year April 1 to
December 31). The decline in the TOI is due to discontinuation of
one of its manufacturing facilities based out in Alipur Khalsa
(Haryana).
Furthermore, the coverage indicators weak stood weak and likely
to deteriorate going forward on the back of subdued operating
performance. However, overall gearing stood moderate during last
2 financial years FY15-16.
Working capital intensive nature of operations: The operating
cycle of BIPL continues to remain working capital intensive owing
to elongation of receivable days. Company's high receivable
period is owing to company's limited bargaining power thus, BIPL
has to extend a liberal credit period to its customers resulting
in elongation of collection period. Furthermore, being a
manufacturer it is critical for the company to have to maintain
minimum level of raw materials to ensure smooth production
process and in the form of finished goods for on time supply. The
high working capital requirements are largely met from external
borrowings resulted in fully utilization of working capital
limits for the last 12 months ending March 2017.
Foreign exchange fluctuation risk: BIPL imports a significant
portion (about 50% in FY16) of its raw materials. The sales are
completely generated from domestic markets. With significant cash
outlay for procurement in foreign currency and sales realization
in domestic currency, the company is exposed to the fluctuation
in exchange rates. The risk is more evident now that the rupee
has registered considerable volatility and could leave the
company carrying costly inventory in case of sudden appreciation.
Highly competitive industry: The Indian flexible packaging
industry is highly competitive on account of the low capital
intensity and technology requirements, easy availability of raw
materials, low entry barriers and small gestation period. The
intense industry competition will continue to exert pricing
pressures on BIPL, the bargaining power of the company remains
very low which also leave the profits vulnerable particularly in
a scenario of increasing competitive pressure. Furthermore, the
prospects of BIPL are also highly dependent on the repeat orders
from its customers.
Susceptibility to fluctuation in raw material prices: High
density polyethylene (HDPE), Poly Propylene (PP) and low density
polyethylene (LDPE) are also a petrochemical derivative, thus
BIPL is exposed to the risk of volatility in the prices of crude
oil. The operating margin of BPIPL remains susceptible to any
sharp movement in the raw material prices which the company is
unable to pass on to its customers due to low bargaining power
towards increase in final product prices.
Key Rating Strength
Experienced management and long track record of operations: The
company was incorporated in 1995 and is currently being managed
by Mittal family. Mr. Ved Prakash Mittal, founder and director of
the company manages routine operations with the help of his sons
Mr. Amit Mittal and Mr. Aman Mittal along with other family
members. All the directors have an experience in the range of one
decade to almost three decades.
Panipat-based Bagpoly International Pvt. Ltd. (BIPL) incorporated
in 1994 and is currently managed by Mr. Ved Prakash Mittal. BIPL
is engaged in the manufacturing of polypropylene (PP) and high
density polyethylene (HDPE) based woven sacks, fabrics and
various woven polymer based packaging products. The company's
products found application in packaging of agro products, heavy
chemicals, poultry feed, cement and fertilizers. The major
clientele of the company includes various state government
agencies in the state of Haryana and Punjab, Food Corporation of
India (FCI), Central Warehousing Corporation (CWC) etc. The
manufacturing facilities of the company are located at Panipat
(Haryana) and Kala Amb (Himachal Pradesh) with an installed
manufacturing capacity of 10 tons per day as on March 31, 2017.
The manufacturing plant located in Alipur Khalsa, operational
since April, 2011 has witnessed closure amid consolidation of
manufacturing facilities led by change in product mix and
shifting focus on HDPE bags over PP bags due to decline in
orders.
BIPL reported a PAT of INR0.35 crore on a total operating income
of INR120.09 crore in FY16 as against PAT of INR0.20 crore on a
total operating income of INR109.49 crore in FY15.As per 9MFY17
provisional financial performance (refers to the period April 01
to December 31) firm has achieved TOI of INR47.34 crore.
BASUNDHARA GREEN: CARE Assigns B+ Rating to INR10.20cr LT Loan
--------------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of
Basundhara Green Power Limited (BGL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 10.20 CARE B+; Stable Assigned
Detailed Rationale and key rating drivers
The rating assigned to the bank facilities of Basundhara Green
Power Limited (BGL) is constrained by its small scale of
operation, project implementation risk, volatile input prices and
raw material availability risks due to exposure to vagaries of
nature, highly fragmented fish farming industry and poultry
sector coupled with inherent risk associated with seasonality
associated with the fish processing industry along with risk of
outbreaks of bird flu and highly price sensitive consumer segment
and working capital intensive nature of business. The rating,
however, derives comfort from its experienced promoters with
moderate track record of operations, and comfortable gearing
level.
The ability of the company to complete the envisaged project
without cost and time overrun and derive benefits there from,
further grow its scale of operation along with improvement in
profit margins and manage its working capital effectively will
remain as the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Small scale of operations and moderately low profit margin BGL is
a relatively small player in the fish farming industry with total
operating income and PAT of INR3.90 crore and INR0.17 crore
respectively in FY16 (refers to the period April 01 to March 31).
The total capital employed was also low at around INR3.19 crore
as on March 31, 2016. Hence, BGL suffers on account of lack of
economies of scale. The total operating income (TOI) increased
continuously during FY14-FY16 with a CAGR increase of 16.17% on
the back of higher demand of its products in the market place.
The PBILDT margin declined continuously during FY14-FY16 and
remained moderately low at 5.98% in view of lack of operational
efficiency resulting in under absorption of fixed over heads,
intense competition from unorganized players in the industry and
volatility in the input material cost as the company does not
have any long term contracts with its suppliers. The PAT margin
moved in line with the PBILDT margin and remained moderately low
in FY16. The Company has generated revenue of INR8.25 crore in
FY17.
Project implementation risk for poultry unit and stabilization
risk for expanded fish farming unit
BGL is currently undertaking a green field project to establish a
poultry farming unit for production of broiler meat with proposed
capacity of 5.60 lakh birds and also undertaking expansion of its
existing fish farming & cultivation unit by enhancing its
capacity by 18 MTPA at Jalpaiguri, West Bengal. For the poultry
project, the total cost of the project is estimated at INR7.93
crore (excluding margins for working capital) to be funded at a
debt equity ratio of 2.14:1. The project execution process is at
a nascent stage where about 26% of the project cost has been
incurred till December 31, 2016 with an aggregate amount of
INR2.19 crore spent for the project and the same has been funded
through promoters' contribution of INR 1.19 crore and term loan
of INR 1.00 crore.
The project is expected to be commissioned by March, 2017.
Accordingly there exists risk of project implementation involving
cost and time overruns. Furthermore, BGL has undertaken expansion
of its existing fish farming & cultivation unit by enhancing its
capacity by 18 MTPA. The total cost of the expansion project was
INR5.14crore (excluding margins for working capital) funded at a
debt equity ratio of 1.24:1. The project was commissioned by
February, 2017. Accordingly there exists risk of stabilization of
the expanded unit.
Volatile input prices and input material availability risks due
to exposure to vagaries of nature
For the fish farming unit, SDEPL sources its input materials
(shrimps) from local farmers/agents. The prices of shrimps are
highly volatile as prices of the same are decided by natural
demand supply factor. Furthermore, shrimp procurement is seasonal
as the harvesting (fishing) season is normally between June-
December, when the shrimps are available in large quantities in
the market and prices are more or less stagnant. However, during
the off season shrimps are available from aquaculture farmers and
accordingly the prices of the same remain on the higher side. For
the proposed poultry unit, the poultry feeds will be the major
raw material for the company, which are mostly agro based
commodities like maize, soybean etc. and dependent on agro-
climatic conditions. In view of the same the prices are volatile
and in turn has a negative bearing on the profitability.
Highly fragmented fish farming industry and poultry sector
coupled with inherent risk associated with seasonality associated
with the fish processing industry along with risk of outbreaks of
bird flu and highly price sensitive consumer segment.
The fish farming market is characterized by uncertainty, which is
more pronounced in supply than in demand. BGL procures its input
material requirement primarily from local farmers in West Bengal,
which exposes it to risks of regional concentration as well.
Besides, fish procurement is seasonal, with the fishing season
lasting from September to May; hence the company has to stock
fish for export during the off season, thus increasing its
inventory levels. Apart from seasonality, adverse climate
conditions, lack of quality feed, rampant diseases continue to
pose risk in the input material procurement. Furthermore, due to
limited value addition nature of business and less technological
input entry barriers are low. As a result fish farming industry
is highly competitive with the presence of a large number of
players.
Furthermore, the chick farming sector is exposed to inherent
risks associated with the industry, like bird flu, extreme
weather conditions and contamination by pathogens. The outbreak
of bird flu leads to a fall in demand and consequent sharp crash
in chick's prices. On the other hand, poultry feed industry is
highly price sensitive on account of its intensely competitive
and fragmented nature due to presence of many regional
unorganized players. This apart, availability of cheaper
substitutes (like cotton seedcake, copra etc.) further induce
pricing and profitability pressures.
Working capital intensive nature of operation
The business of BGL is highly working capital intensive mainly on
account of moderately high collection period. The average
collection period deteriorated continuously and remained
moderately high in the range of 43-55 days during FY14-FY16 on
the back of higher credit period being provided to its customers
to attract them and retain them on the back of increased
competition.
Key Rating Strengths
Experienced promoter
The main promoters of BGL are Mr. Ranjan Kumar Barai, Mr.
Gobardhan Mondal and Mrs Suparna Bhattacharya of West Bengal with
Shri Ranjan Kumar Barai being the main promoter. Mr. Ranjan Kumar
Barai (Graduate), Managing Director, aged about 47 years has an
experience of around two decades in the fish farming industry;
albeit lacking experience in the poultry sector. He looks after
the overall operation of the company with active support from
other co-directors and team of experience personnel.
Comfortable gearing level
The debt profile of BGL consisted of unsecured loans
(unsubordinated) as on the last three account closing dates. The
capital structure of BGL remained comfortable as on the last
three accounts closing dates with both the long-term debt equity
ratio and the overall gearing ratio remaining comfortable as on
March 31, 2016.
BGL was incorporated in December, 2009 by Mr. Ranjan Kumar Barai,
Mr. Gobardhan Mondal and Mrs Suparna Bhattacharya of West Bengal.
The company is currently engaged in fish farming & cultivation
with its unit being located at Jalpaiguri, West Bengal. BGL is
operating with a processing capacity of 378 metric tonnes per
annum (MTPA). Furthermore, BGL has undertaken expansion of its
existing fish farming & cultivation unit by enhancing its
capacity by 18 MTPA. The total cost of the expansion project was
INR5.14 crore (excluding margins for working capital) funded at a
debt equity ratio of 1.24:1. The project was commissioned in
February, 2017.
BGL is in the process of setting up a new poultry farming unit
for production of broiler meat with proposed capacity of 5.60
lakh birds. The total cost of the project is estimated at INR7.93
crore (excluding margins for working capital) to be funded at a
debt equity ratio of 2.14:1. The project is expected to be
commissioned by March, 2017 During FY16 (refers to the period
April 1 to March 31), the company reported a total operating
income of INR3.90 crore (FY15: INR3.70 crore) and a PAT of
INR0.17 crore (in FY15: INR0.18 crore). During FY17, the company
has booked turnover of INR8.25 crore.
BHAGYODAY AGRO: CARE Reaffirms B+ Rating on INR7.6cr Loan
---------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Bhagyoday Agro Industries, as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 7.60 CARE B+; Stable Reaffirmed
Long-term/Short
term Bank
Facilities 2.00 CARE B+;Stable/CARE A4
Reaffirmed
Short-term Bank
Facilities 2.80 CARE A4 Reaffirmed
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of Bhagyoday Agro
Industries continue to remain constrained on account of modest
scale of operations with low capitalization, leveraged capital
structure, weak debt coverage indicators and thin profitability
margins owing to limited value addition nature of business and
working capital intensive nature of operations. The ratings are
further constrained by exposure of profitability margins to
fluctuation in raw material price, presence of the entity in
highly competitive cotton ginning and pressing industry with
susceptibility to adverse changes in government regulations and
limited financial flexibility owing to partnership nature of
constitution.
However, the ratings continue to factor in experience of
promoters in cotton industry and location advantage. The ability
of the entity to increase its scale of operations, improve its
solvency position and profitability margins along-with efficient
management of working capital requirements remain the key rating
sensitivity.
Detailed description of the key rating drivers
Key Rating Strengths
Experienced promoters: BAI, incorporated in 2009, is promoted by
Mr. Shantilal Gulabchandji Pahade and his wife Mrs Anita Pahade.
The promoters have an average experience of half decade in cotton
ginning & pressing under BAI. Mr. Shantilal Pahade and Mrs. Anita
Pahade looks after the manufacturing activity of the entity.
Strategic location of plant: BAI is located in Maharashtra, which
is the 2nd largest producer of cotton in India. The land under
cultivation in Maharashtra has increased over the last three
years. BAI falls under the Marathwada cotton belt which is the
2nd largest producer of cotton in Maharashtra thus providing
logistic benefits.
Key Rating Weaknesses
Modest scale of operations, weak capital structure and debt
coverage indicators: The scale of operations of the entity
remained small with low networth base in FY17 (Prov.), thus
depriving it of scale benefits. Furthermore, high dependence
of entity on external borrowings resulted in leveraged capital
structure owing to low net worth base.
Susceptibility of margins to fluctuation in input prices and
adverse changes in government regulations: The price of raw
cotton in India is regulated through function of MSP by the
government. Hence, any adverse change in government policy
i.e. higher quota for any particular year, ban on the cotton or
cotton yarn export may negatively impact the prices of raw
cotton in domestic market and could result in lower realizations
and profit for BAI.
Risk associated with seasonality and fragmented nature of
industry: Operation of cotton business is highly seasonal in
nature, as the sowing season is from July to September and the
harvesting season is spread from October to March. Hence, the
average working capital utilization is high. Furthermore, the
cotton industry is highly fragmented with large number of players
operating in the unorganized sector.
Bhagyoday Agro Industries (BAI) was incorporated in January 2009
as a partnership firm by Mr. Shantilal Gulabchandji Pahade and
his wife Mrs Anita Pahade. BAI is engaged in the business of
cotton ginning and pressing. BAI's sole processing unit is
located at Vaijapur, Aurangabad with an installed capacity of 135
Metric Tonne Per Annum (MTPA) for cotton seeds and 8000 MTPA for
cotton bales as on March 31, 2016. The firm has utilised around
80% of its annual installed capacity in FY16 and works for 180
days (October to May) in a year. The firm does not operate in
rest 180 days due to unavailability of raw material. During this
period, the firm undertakes maintenance of its unit and
machineries. In FY16, the firm has done exports of around 60%
(through distributors) of total sales whereas the rest 40% sales
are in the domestic market. The firm procures raw material from
the local market and the domestic sales are made in the regions
in and around Maharashtra.
The entity reported TOI of INR57.40 crores with PAT of INR0.74
crore in FY17 (Prov.) against TOI of INR39.35 crore with a
PAT of INR0.12 crore in FY16 (Audited).
BHALLA CHEMICAL: ICRA Assigns B+ Rating to INR4.40cr Cash Loan
--------------------------------------------------------------
ICRA Ratings has assigned the long-term rating of [ICRA]B+ to the
INR4.40-crore fund-based facilities of Bhalla Chemical Works
Private Limited (BCWPL). ICRA has also assigned the short-term
rating of [ICRA]A4 to the INR5.60-crore of non-fund based
facilities of BCWPL. The outlook on the long-term rating is
'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based Limits-
Cash Credit 4.40 [ICRA]B+ (Stable); assigned
Non-fund Based
Limits 5.60 [ICRA]A4; assigned
Rationale
The assigned ratings are constrained by the decline in the
production volumes over the last few years due to muted demand in
the market as well as lower realisation, leading to decline in
the operating income from INR22.70 crore in FY2013 to INR13.50
crore in FY2016. The ratings are also constrained by the high
working capital intensity owing to high inventory necessitated by
long transit and processing time. Furthermore, the company faces
high competition from substitutes as well as imports and thus the
profitability is expected to remain range bound. The ratings also
factor in the vulnerability of profitability to adverse foreign
exchange fluctuations due to the absence of a formal hedging
policy and a weak financial profile characterised by low net
margins and moderate coverage indicators.
The ratings, however, take comfort from the experience of the
promoters spanning over four decades in the zircon industry and
their long-term association with various customers, which yields
repeat orders and provides revenue visibility. The ratings also
positively factor in the continuous improvement in the operating
margins of the company during the last three years despite the
fluctuations in the raw material prices.
Going forward, the ability of the company to increase its sales
volumes and pass on the increase in the raw material prices to
the customers while improving its profitability will be the key
rating sensitivity.
Credit weaknesses
* Decline in the production volumes in FY2017 by 17% due to
muted demand in the market as well as lower realisations
* High working capital intensity on account of long transit
and processing time
* High competitive intensity due to imports from China and
alternate chemicals; profitability expected to remain range
bound due to high competition
* Vulnerability of profitability to adverse foreign exchange
fluctuations due to the absence of a formal hedging policy
* Financial profile characterised by low net margins, moderate
coverage indicators and modest working capital intensity
Description of key rating drivers:
BCWPL has an installed capacity of ~5100 MTPA of zircon sand
spread across two manufacturing locations in Gurgaon. The
capacity utilisation of the company has remained low in the last
few years and declined to 14% in FY2017 (from 17% in FY2016). The
decline in production was mainly on account of muted demand for
zirconium carbonate due to stiff competition from cheaper
substitutes from China.
Zircon sand is the key raw material for the company along with
other raw materials such as hydrochloric acid and caustic soda.
BCWPL either imports zircon sand directly or purchases the
imported sand through traders. Due to the absence of a formal
hedging policy, the profitability of the company remains
dependent on adverse forex fluctuations; however, due to the
presence of export sales, there exists a natural hedge to a
certain extent.
The operating margins of the company have been increasing over
the last four years and improved from 8.97% in FY2013 to 16.08%
in FY2017. The working capital intensity remains high and stood
at ~59% in FY2017. The conversion time of raw material to
finished good is 20-25 days; hence, the company maintains a stock
of raw material supply of three months to mitigate both the
effect of price spikes and the lead time involved in inward
transportation and handling.
Bhalla Chemical Works Pvt. Ltd. (BCWPL) was incorporated in 1976
and is involved in manufacturing zirconium speciality chemicals.
BCWPL's products find applications in various fields such as
engineering, ceramics, paints and anti prespirants. BCWPL's
manufacturing plant in the Gurgaon region has an input capacity
of 5100 MTPA. BCWPL is a closely held entity and members of the
Bhalla family are the key stakeholders.
Before FY2012, the company was manufacturing only one product,
zirconium silicate, which is used as an input for manufacturing
ceramic glaze frits for tiles, sanitary ware etc. However,
because of increase in competition in this business line, the
company started manufacturing other speciality chemicals such as
zirconium carbonate, which mainly find application in paints and
anti-prespirants.
CKS MEDICARE: CARE Reaffirms B+ Rating to INR33.50cr Loan
---------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
CKS Medicare Private Limited (CKS), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank
Facilities 33.50 CARE B+; Stable Reaffirmed
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of CKS continues to
remain constrained on account of delay in completion of its
greenfield debt funded project to set up a multi super speciality
hospital and its presence in the highly competitive and regulated
hospital industry. The rating, further, remain constrained owing
to stabilization risk associated with its project. The rating,
however, continues to derive strength from highly experienced and
well qualified promoters with presence of associate concerns in
the same line of business. The rating, further, derives strength
from proposed wide range of medical care services provided by
hospital. The ability of the company to stabilization its
operations with achievement of envisaged level of Total Operating
Income and profitability would be the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weakness
Delay in completion of the project with time overrun
The project was envisaged to be completed by January 2017,
however, has started its commercial operations from May, 2017.
The delay in the project implementation is due to negotiation for
prices and quotation and finalizing medical equipments and
machinery with the vendors.
High competition along with the highly regulated nature of the
industry
The healthcare sector is highly fragmented with few large players
in the organised sector and numerous small players in the
unorganised sector leading to high level of competition in the
business. Thus, differentiating factors like range of services
offered, quality of service, reputation of doctors, success rate
in the treatment of complex cases will be crucial in order to
attract patients and increase occupancy. Further, the healthcare
industry in India is well regulated by the government and require
strict adherence to the norms stipulated by the concerned
authorities.
Key Rating Strengths
Wide range of medical care services proposed
The hospital being set up under CKS proposes to provide
comprehensive super-specialty services in the disciplines of
cardiac sciences like cardiology & cardiac surgery, neurology,
nephrology and urology including dialysis. The wide range of
service offerings and affordability proposed will result in a
fair occupancy rate.
Longstanding presence through renowned group entities operating
hospitals
The promoters of CKS are also operating hospitals in Jaipur under
the name of Cardiac Care & Allied Health Private Limited
(Cardiac) and Khetan Hospital (Khetan).
Jaipur (Rajasthan) based CKS Medicare Private Limited (CKS) was
incorporated in April, 2011 by Mr. Prakash Chandwani, Mr.
Rajendra Prasad Khetan and Mr. Subhash Singhvi with an objective
to set up a multi and super-specialty hospital. Earlier, CKS was
originally incorporated in the name of J.S. Hardware Industries
Private Limited in 1980 with an objective to start operations in
manufacturing of hardware products. The hospital will provide
various medical specialties viz. Cardiology, Urology, Nephrology
and Neurology. CKS will consists of 197 beds which includes 2
beds in suite room, 29 beds in deluxe room, 60 beds in private
rooms, 50 beds in Intensive-Care Units (ICU), 26 beds in General
ward and 6 in triage. The hospital is proposed to have nine
floors and basement having a total built-up area of 3113.35 sq
meters. The project has started its operations from May 2017.
DIAMOND PRODUCTS: ICRA Reaffirms B Rating on INR10cr Cash Loan
--------------------------------------------------------------
ICRA Ratings has reaffirmed its long term rating at [ICRA]B with
a Stable outlook and short term rating at [ICRA]A4 for the
INR23.0 crore facilities of Diamond Products Limited.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Cash Credit 10.00 [ICRA]B(Stable); reaffirmed
Term Loan 8.50 [ICRA]B(Stable); reaffirmed
Bank Guarantee 4.50 [ICRA]A4; reaffirmed
The rating action is based on DPL's established track record and
significant experience of its promoters in EVA injected footwear
and the company's relationships with established brands. The
ratings are however constrained on account of high working
capital requirements. As part of its process and in accordance
with its rating agreement with DPL, ICRA has been trying to seek
information from the company so as to undertake a surveillance of
the ratings, but despite repeated requests by ICRA, the company's
management has remained non-cooperative. 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] B(Stable)/A4 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.
Incorporated in 1991, DPL is a group company of Diamond Group
promoted by Mr. Om Prakash Gupta and Family. The company
manufactures EVA injected footwear and markets its products under
"Diamond and Sisco brand". Further in addition to sports footwear
the company also manufactures EVA gum boots for Bata, Fila,
Lotto, Sg Sports, Walmart, Adidas and other established brands in
the footwear industry. The company has its manufacturing facility
at Kala-Amb, Himachal Pradesh, with a total manufacturing
facility of 90000 pairs. The plant has centralized all production
processes to carry out cutting and stitches of uppers, cutting
machines, complete rubber sole plant, EVA, processing unit etc.
DOLPHIN MARINE: ICRA Reaffirms B Rating on INR2.08cr Term Loan
--------------------------------------------------------------
ICRA has reaffirmed the long-term rating of [ICRA]B for the
INR4.08-crore fund-based bank facilities of Dolphin Marine Foods
& Processor (India) Pvt. Ltd. ICRA has also reaffirmed the short-
term rating of [ICRA]A4 for the INR9.00-crore fund-based facility
of the company. ICRA has reaffirmed long-term and short-term
ratings of [ICRA]B and [ICRA]A4 for the INR1.92 crore unallocated
limits of the company. The outlook on the long-term rating is
'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based-Cash
Credit 2.00 [ICRA]B (Stable); Re-affirmed
Fund-based-Term
Loan 2.08 [ICRA]B (Stable); Re-affirmed
Fund-based-FDBP/
FIDBP 9.00 [ICRA]A4; Re-affirmed
Fund-based-Packing
Credit (9.00) [ICRA]A4; Re-affirmed
Unallocated 1.92 [ICRA]B (Stable)/A4;
Re-affirmed
Rationale
The rating action is based on the best available information. As
part of its process and in accordance with its rating agreement
with Dolphin Marine Foods & Processor (India) Pvt. Ltd., ICRA has
been trying to seek information from the company to undertake a
surveillance of ratings; but despite multiple requests, the
company's management has remained non-cooperative. In the absence
of the 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]B
(Stable) / [ICRA]A4; 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 information or no updated information on the company's
performance since the time it was last rated.
Key rating drivers
Credit strengths
* Experienced promoters with established track record in
the seafood business
* Proximity to fishing belt which provides easy access to
raw materials
Credit weaknesses
* Small scale of operations and de-growth in revenues during
FY2015 owing to a fishermen's strike in the Mumbai region
resulting in dependence on sale of cultured products
* Weak financial profile in FY2015 characterised by losses at
net level, high gearing and weak coverage indicators
* Extended inventory holding requirements leading to high
working capital intensity of operations
* Exposure to risks inherent in sea food industry such as
susceptibility to diseases, climate change risks, variations
in domestic and foreign government policies
* Highly fragmented industry structure with intense competition
from domestic players and other exporting nations, which
limits pricing flexibility and margin expansion
Description of key rating drivers:
DMPL processes and exports seafood. Export sales contribute to
~75% of the total revenues of the company. DMPL is also involved
in the merchant processing business for other seafood exporters
and earns about ~10% of its revenues from this line of activity.
Fishing is a seasonal activity with peak season from August to
January. During this period, DMPL sources raw materials from the
landing stations at Colaba from agents who have tie-ups with
boatmen. These subsequently undergo processes like washing,
weighing, icing, processing and packing and are exported in
specialised containers.
Its promoters have extensive experience in the seafood business.
Nonetheless, the ratings continue to remain constrained by the
company's weak financial profile characterised by losses at the
net level, high gearing and weak coverage indicators. The ratings
also take into account the revenue de-growth during FY2015 owing
to fishermen's strike in the Mumbai region resulting in
dependence on the sale of cultured products. The ratings also
reflect the highly fragmented nature of the seafood business with
intense competition and the extended inventory holding
requirements leading to high working capital intensity of
operations. ICRA also notes that the company's operations are
exposed to risks inherent in the seafood industry such as
susceptibility to diseases, climate change risks and regulatory
changes.
FRIENDS AGRO: ICRA Lowers Rating on INR9.60cr Loan to 'D'
---------------------------------------------------------
ICRA Ratings has revised the long-term rating to [ICRA]D from
[ICRA]B on the INR9.60 crore fund-based bank facilities of
Friends Agro Industries (FAI).
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund based limits 9.60 [ICRA]D; revised from
[ICRA]B
Rationale
The revision in rating is on account of overutilization of cash
credit limits for more than 30 days owing to the stretched
liquidity position of the company. ICRA takes note of highly
leveraged capital structure, which coupled with the firm's thin
profitability has also resulted in stretched debt coverage
indicators. ICRA however, takes note of the extensive experience
of the promoters in the rice industry.
Going forward, the ability of the company to improve its
liquidity position and service its debt in a timely manner will
be the key rating sensitivity.
Key rating drivers
Credit strengths
* Experienced promoters with long presence in the industry.
Credit weaknesses
* Over-utilisation in the working capital facilities on account
of stretched liquidity position.
* High gearing due to funding of working capital requirement
through bank borrowings.
* Intense industry competition, characterised by a large number
of organized and unorganised players
* Agro climatic risks can affect paddy availability.
* Risk inherent in the partnership firm.
Description of key rating drivers:
The working capital intensity has remained high, primarily on
account of high inventory holdings. Paddy is a seasonal crop and
millers have to buy and stock paddy from September to December
every year, leading to high inventory level. Moreover, millers
undertake ageing of paddy before it is processed (as it fetches
better realisation) which necessitates higher inventory days and
consequently higher working capital requirement. Furthermore
funding of working capital primarily through bank loans have led
to a leveraged capital structure. Higher debt, coupled with
moderate profitability, has translated to weak debt metrics.
The promoters and their family have been involved in the rice
milling business for more than a decade and have gained a
thorough knowledge of the market. The long presence in the
industry has helped the firm to establish strong relationship
with its suppliers and customers.
Friends Agro Industries is a partnership firm established in
January 2010 by Mr. Gaurav Aneja, Mr. Sandeep Aneja, Mr. Vipin
Kumar and Mr. Vikram Kumar as partners. The firm is involved in
the milling and processing of basmati and non-basmati rice. It is
based out of Jalalabad, Punjab.
GATIK TEA: CARE Assigns B+ Rating to INR8.75cr LT Loan
------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Gatik
Tea Co. Private Limited, as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 8.75 CARE B+; Stable Assigned
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of Gatik Tea Co.
Private Limited (GTCPL) is constrained by project implementation
risk, susceptibility to vagaries of nature, volatility associated
with tea prices, high competition and lack of backward
integration for its raw material. The rating, however, derives
strength from the experience of the promoters and proximity to
raw material sources. Going forward, the ability of GTCPL to
timely complete the project without any cost & time overrun and
acheivment of the projected turnover and profitability as
envisaged will be the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Project implementation risk
GTCPL is planning to engage in the manufacturing of black CTC tea
in Siliguri, West Bengal with its manufacturing unit in
Jalpaiguri, West Bengal. The ongoing project has a cost of
INR10.93 crore which is proposed to be financed by way of term
loan from bank of INR6.0 crore, promoter's contribution of
INR2.50 crore and unsecured loan from promoters of INR2.43 crore.
The company has already invested INR3.0 crore towards land & site
development, building, plant & machinery etc till April 30, 2017
which is met through promoter's contribution and term loan from
bank. The company is expected to start its operation from June,
2017.
Susceptibility to vagaries of nature
Tea production, besides being cyclical, is susceptible to
vagaries of nature. GTCPL's tea processing unit is located in
Jalpaiguri district of West Bengal, one of the largest tea
producing state in India. However, the region has sometimes
witnessed erratic weather conditions in the past. Though demand
for tea is expected to have a stable growth rate, supply can vary
depending on climatic conditions in the major tea growing areas.
Therefore adverse natural events have negative bearing on the
productivity of tea gardens in the region and accordingly GTCPL
is exposed to vagaries of nature.
Volatility associated with tea prices
The prices of tea are linked to the auctioned prices, which in
turn, are linked to prices of tea in the international market.
Hence, significant adverse price movement in the international
tea market can affects GTCPL profitability margins. Further, tea
prices fluctuate widely with demand-supply imbalances arising out
of both domestic and international scenarios. Tea is a perishable
product and demand is relatively price inelastic, as it caters to
all segments of the society. While demand has a strong growth
rate, supply can vary depending on climatic conditions in the
major tea growing countries. Unlike other commodities, tea price
cycles have no linkage with the general economic cycles, but with
agroclimatic conditions.
High competition
While the tea industry is an organised agro-industry, it is
highly fragmented in India with presence of many small, midsized
and large players. There are about 1000 of tea brands in India,
of which 90% of the brands are represented by regional players
while the balance of the 10% is dominated by big corporate
houses. GTCPL is expected to sells all its produce through
auctions and doesn't have any brand. This, coupled with the
growing shift from loose to branded tea among consumers, would
further intense the competition for GTCPL.
Lack of backward integration for its raw material
GTCPL is expected to purchase green leaves from the small and
local gardens in nearby area and has its own manufacturing unit
having a tea producing capacity of about 9.5 lakhs kg per annum
enabling the company to supply black CTC tea, as per demand
scenario. As the green leaves are procured fully from nearby
gardens in the area, GTCPL depend on external raw material
suppliers which, in turn, results in pressure on margins due to
higher raw material cost.
Key Rating Strengths
Experienced promoters
Mr. Swapan Das (aged 49 years), one of the directors, has over
two decades of experience in the tea industry, and Mr. Ashok
Kumar Agarwal (aged 54 years), the other director, also has
experience of almost two decades in similar line of business.
Both the directors mutually look after the overall management of
the company, with adequate support from a team of experienced
personnel.
Proximity to raw material sources
GTCPL processing unit is located in Jalpaiguri, West Bengal which
is one of the largest tea producing state in India and has close
proximity to raw material sources. The entire raw material
requirement is met locally which helps the company to save
substantial amount of transportation cost and also procure raw
materials at effective prices.
Gatik Tea Co Private Limited (GTCPL) was set up as a private
limited company in 2013, by Mr. Swapan Das and Mr. Ashok Kumar
Agarwal of Siliguri, West Bengal. The company is engaged in the
business of processing of black CTC tea in Siliguri, West Bengal.
The company is setting up a manufacturing unit in Jalpaiguri,
West Bengal. The company is planning to sell its tea in auction
and through brokers. The company is expected to start its
operation from June, 2017 with FY18 being the first year of
operation. Currently, the company is planning to have an
installed capacity of 9.5 lakh kgs per annum. The project is
estimated to be set up at a cost of INR10.93 crore to be financed
by way of term loan from bank of INR6.0 crore, promoter's
contribution of INR2.50 crore and unsecured loan from promoters
of INR2.43 crore.
Mr. Swapan Das, one of the directors, has over two decades of
experience in the tea industry, and Mr. Ashok Kumar Agarwal, the
other director, also has experience of almost two decades in
similar line of business. Both the directors mutually look after
the overall management of the company, with adequate support from
a team of experienced personnel.
GOLDSTAR POLYMERS: CARE Assigns B+ Rating to INR7.0cr Loan
----------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of
Goldstar Polymers Limited (GPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term/Short- 7.00 CARE B+; Stable/CARE A4
Term Bank Assigned
Facilities
Short-term Bank
Facilities 0.25 CARE A4 Assigned
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of Goldstar Polymers
Limited (GPL) are constrained by the relatively small scale of
operations, moderate & fluctuating profit margins with
susceptibility to volatile input prices and foreign exchange
fluctuation, moderately leveraged capital structure & moderately
weak debt coverage indicators, working capital intensive nature
of operations, moderately concentrated clientele base and risks
inherent to geopolitical uncertainties. The ratings, however,
derive strength from the company's long track record of over
three decades in manufacturing of plastic products, highly
experienced promoters with over two decades of experience in the
plastic industry and established relationship with reputed
clientele.
The ability of GPL to increase its scale of operations and
improve profit margins, along with improving the capital
structure and liquidity position with efficient working capital
management is the key rating sensitivity.
Detailed description of the key rating drivers
Key Rating Strengths
Long track record of over three decades of operations in
manufacturing of plastic products coupled with diversified group
presence: GPL possesses a long track record of over 27 years of
operations in manufacturing of plastic products, viz. plastic
drums, which find application in carriage of various materials
across different industries viz. oil & petroleum, lubricants,
inks, chemicals, etc. GPL belongs to the Goldstar Group (GG)
having diversified presence across various industries viz.
plastic, metals, mining, real estate, etc.
Highly experienced promoters with an average two decades of
experience in manufacturing of plastic products: The overall
operations of GPL are looked after by the promoters Mr. Prem
Prakash Saraogi with his son Mr. Harsh Saraogi and another
director Mr. Anil Kumar Garg, who possess an average experience
of over two decades in the plastic products industry.
Established relationship with reputed albeit moderately
concentrated clientele: GPL's products cater to various reputed
players across different industries viz. oil & petroleum,
lubricants, inks, chemicals, etc. However, the customer profile
of
the company is moderately concentrated with top 5 customers
comprising 50.50% of the net sales in FY17 (refers to the period
April 1 to March 31).
Key Rating Weaknesses
Relatively small scale of operations: The scale of operations of
GPL stood modest, whereas the same has been fluctuating over
FY13-FY16 owing to changing demand and supply sentiments in the
market. Given this, the tangible networth base also stood small,
thereby limiting the financial flexibility of the company.
Moderate & fluctuating profit margins susceptible to volatile raw
material prices: The PBILDT margin of GPL remained moderate in
the range of 7%-11% over FY13-FY16, whereas the same has been
fluctuating over the same period owing to volatility in raw
material prices coupled with variations in exchange rates.
Working capital intensive nature of operations with stressed
liquidity position: The operations of GPL are working capital
intensive in nature with majority of funds blocked in debtors
followed by inventory, thereby leading to high gross current
asset days of 80-95 days. Given this, the utilization of its
working capital limits stood high.
Foreign exchange fluctuation & geopolitical risks: GPL is exposed
to significant foreign exchange fluctuation risk, since 21.72% of
the total purchases comprised imports in FY17. Moreover, since
the entire portion of imports is sourced from
UAE, the company is also exposed to significant geopolitical
risks, since any unrest in that region would have an adverse
bearing on the dealings of the company.
Established in 1990 as a proprietorship concern by Mr. Prem
Prakash Saraogi, Goldstar Containers (GC) was later converted
into a public limited company as GPL in 2006. The company is
engaged in manufacturing of plastic drums which find application
in carriage of various materials across different industries viz.
oil & petroleum, lubricants, inks, chemicals, etc. The
manufacturing facility of the company is located in Daman,
equipped with an installed capacity of 2,500 MTPA utilized at
about 71% annually during FY17. The products manufactured by the
company are entirely sold in the domestic market, whereas the
primary raw material viz. HDPE is sourced locally from domestic
market and also import from UAE (imports comprise 21.72% in
FY17).
During FY16, the total operating income of the company stood at
INR28.16 crore (vis-a-vis INR24.82 crore in FY15), whereas the
PAT during the same year stood at INR0.58 crore (vis-a-vis
INR0.54 crore in FY15). During FY17 (provisional), the company
posted a net sales of INR29.78 crore, whereas a PBT of INR0.70
crore was posted in the same year.
GORAYA INDUSTRIES: CARE Assigns B+ Rating to INR10.50cr LT Loan
---------------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Goraya
Industries (GRI) as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 10.50 CARE B+; Stable Assigned
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of Goraya Industries
(GRI) is constrained by its small scale of operations coupled
with low profitability margins, leveraged capital structure and
weak debt coverage indicators. The rating is further constrained
by the firm's working capital intensive nature of operations,
constitution being a partnership firm, susceptibility to
fluctuation in raw material prices, monsoon dependant operations
and its presence in a fragmented industry coupled with high level
of government regulation. The rating, however, derives strength
from the experienced partners in the agro processing industry,
growing scale of operations and from the firm's favourable plant
location. Going forward, the ability of the firm to scale-up its
operations while improving its profitability margins and overall
solvency position would remain the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Small though growing scale of operations coupled with low
profitability margins: The firm's scale of operations has
remained small marked by Total Operating Income (TOI) of INR39.90
crore in FY16 (refers to the period April 1 to March 31). The
profitability margins of the firm stood low marked by PBILDT
margin and PAT margin of 4.35% and 0.87% respectively in FY16.
Leveraged capital structure and weak debt coverage indicators:
The capital structure of the firm stood highly leveraged with
overall gearing ratio of 4.16x as on March 31, 2016.
Additionally, the debt coverage indicators also remained weak
with the total debt to GCA at 18.13x for FY16 and interest
coverage ratio at 1.62x in FY16.
Working Capital intensive nature of operations: The operating
cycle of the firm stood elongated at 139 days for FY16. As
per the bankers, the average utilization of the working capital
limits remained at ~90% for the last 12 months period ended
October, 2016.
Susceptibility to fluctuation in raw material prices and monsoon
dependent operations: Agro-based industry is characterized by its
seasonality, due to its dependence on raw materials whose
availability is affected directly by the vagaries of nature.
Adverse climatic conditions can affect their availability and
leads to volatility in raw material prices.
Fragmented nature of industry coupled with high level of
government regulation: The commodity nature of the product
makes the industry highly fragmented with numerous players
operating in the unorganized sector with very less product
differentiation. Additionally, the raw material (paddy) prices
are regulated by government to safeguard the interest of farmers,
which in turn limits the bargaining power of the rice millers.
Partnership nature of constitution: GRI's constitution as a
partnership firm has the inherent risk of possibility of
withdrawal of the partners' capital at the time of personal
contingency and firm being dissolved upon the
death/retirement/insolvency of partners.
Key Rating strengths
Experienced partners in the agro processing industry: Mr.
Inderjeet Singh and his brothers, Mr. Balwinder Singh and Mr.
Joginder Singh have an industry experience of around 15 years
through their association with GRI and other entities engaged in
similar business operations. The promoters have adequate acumen
about various aspects of business which is likely to benefit GRI
in the long run.
Favorable plant location: GRI's manufacturing unit is located in
Fazilka, Punjab. The area is one of the hubs for paddy/rice,
leading to its easy availability. The unit is also in proximity
to the grain market resulting in procurement at competitive rates
and lower logistical costs.
Goraya Industries (GRI) was established in 2010 by Mr. Inderpreet
Singh and his two brothers, Mr. Balwinder Singh and Mr. Joginder
Singh as a partnership firm sharing profit and losses equally.
The firm is engaged in processing of paddy at its manufacturing
facility located in Fazilka, Punjab. The firm sells basmati and
non-basmati rice under the brand name of "Goraya Gold" and
"Kashmir Ki Rani" through brokers to various wholesalers based in
Delhi, Punjab, Gujarat, Maharashtra etc. The raw material, i.e.
paddy, is procured from grain markets through commission agents
based in Punjab. GRI has a group concern namely Goraya Commission
Agent (GRA) which was established in 2015 as a proprietorship
firm and is working as a commission agent for buying and selling
paddy and wheat.
In FY16 (refers to the period April 01 to March 31), GRI has
achieved a total operating income (TOI) of INR39.90 crore with
PAT of INR0.35 crore as against total operating income of
INR24.07 crore with PAT of INR0.26 crore in FY15. In 7MFY17
(Provisional), the firm has achieved TOI of INR28.00 crore.
GREENLAND MOTORS: ICRA Reaffirms B+ Rating on INR1.55cr Loan
------------------------------------------------------------
ICRA Ratings has reaffirmed its long-term rating of [ICRA]B+ and
short-term rating of [ICRA]A4 on the INR18.30-crore bank
facilities of Greenland Motors (GLM). The outlook on the long-
term rating is 'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term-Cash
Credit 1.50 [ICRA]B+ (Stable); re-affirmed
Long-term-Term
Loan 1.55 [ICRA]B+ (Stable); re-affirmed
Short-term-Fund-
based facilities 14.25 [ICRA]A4; re-affirmed
Short-term- Non-
fund based limits 1.00 [ICRA]A4 ; re-affirmed
Rationale
ICRA's ratings continue to take into account the GLM's
established track record in the auto dealership business; the
extensive experience of the promoters; the presence of the group
firm as authorised dealers for OEMs across diversified vehicle
segments (such as two-wheelers, three-wheelers, commercial
vehicles, tractors etc); and the healthy growth of ~13% in its
operating income (driven by a ~5% growth in volume in FY2016).
The ratings reflect the firm's healthy market position in
Allahabad, UP (by virtue of its exclusive dealership of MSIL) and
the strong performance of the original equipment manufacturer
(OEM). ICRA also notes the growing sales of GLM in the premium
vehicle segment (such as Ciaz, Brezza) that offers higher margin,
which would be further boosted by the addition of "NEXA" outlet
in Allahabad.
However, the ratings are constrained by the stretched liquidity
position of GLM, as reflected in the almost fully utilised bank
facilities. Furthermore, the high debt level in relation to the
net worth has resulted in weak capital structure as reflected in
the high gearing ratio (5.3 times in FY2016). The ratings also
factor in the high competition GLM faces from other OEMs in its
limited geographical area of operations.
Going forward, a sustained improvement in operating profitability
and ability to manage its working capital efficiently would
remain the key rating sensitivities.
Key rating drivers
Credit strengths
* Authorised dealer of Maruti Suzuki India Limited (MSIL),
the market leader in the passenger car segment in India
* Extensive experience of promoters in the auto dealership
business, with presence of the group firm as authorised
dealers for OEMs across diversified vehicle segments (such
as two-wheelers, three-wheelers, commercial vehicles,
tractors etc)
* Healthy growth in the operating income from INR137.58 crore
in FY2015 to INR155.46 crore in FY2016
* Favorable growth outlook for passenger cars
Credit weaknesses
* Capital structure continues to remain weak with gearing of
5.29 times in FY2016; planned debt-funded capex is likely
to increase the debt level further
* Stretched liquidity profile indicated by almost fully
utilised bank facilities
* Stable but low profitability
* High competitive intensity in the business along with low
geographical diversification
* Risks inherent in partnership constitution in terms of risk
of capital withdrawal, risk of dissolution etc.
Description of key rating drivers:
GLM is an authorised dealer of Maruti Suzuki India Limited (MSIL)
and is involved in the sale of new cars, servicing of vehicles,
sales of spare parts, and sales and purchase of pre-owned cars.
The firm has three sales and service outlets in Allahabad,
Pratapgarh and Kaushambi in Uttar Pradesh. GLM witnessed healthy
growth of ~13% in its top-line, from INR137.58 crore in FY2015 to
INR155.46 crore in FY2016. The sales of vehicles marginally
increased to 3,093 cars in FY2016 from 2,959 cars in the previous
year. During the 11M FY2017, GLM reported sales of 2,864 cars.
However, the firm's capital structure has remained weak because
of its dependence on loans to meet its extensive working capital
requirements. Furthermore, the profit margin in the dealership
business is thin due to high competitive intensity.
Established in 2005, GLM is engaged in the dealership of MSIL's
cars. The firm has three sales and service outlets in Allahabad,
Pratapgarh and Kaushambi (all in Uttar Pradesh). GLM has three
outlets in UP, two of which are the sole dealerships of MSIL and
one where it is the larger of the two dealerships operational in
Allahabad.
In FY2016, the firm reported a net profit of INR0.82 crore on an
operating income of INR155.46 crore, as compared to a net profit
of INR0.62 crore on an operating income of INR137.58 crore in the
previous year. On a provisional basis, the company reported an
operating income of INR166 crore in FY2017.
GREENLANDS (A&M): ICRA Reaffirms B+ Rating on INR18.50cr Loan
-------------------------------------------------------------
ICRA Ratings has reaffirmed its long-term rating of [ICRA]B+ and
short-term rating of [ICRA]A4 on the INR19.75-crore bank
facilities of Greenlands (A&M) Corporation (GLC). The outlook on
the long-term rating is 'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term-fund-
based limits 18.50 [ICRA]B+ (Stable); re-affirmed
Short-term-Non-
fund based limits 1.25 [ICRA]A4; re-affirmed
Rationale
ICRA's ratings continue to take into account the GLC's
established track record in the auto dealership business; the
extensive experience of the promoters; and the diversified
product offering. The company has dealerships of different
vehicle segments (two-wheelers, three-wheelers, tractors etc),
which protects the firm against cyclical fluctuations in a
particular product segment. ICRA also notes the increase in
operating margins, from 4.7% in FY2015 to 5.2% in FY2016, even
though the overall top-line reported marginal decline.
However, the ratings are constrained by GLC's stretched liquidity
position, which is due to high working capital requirements
attributed to the high working capital intensity caused by
elevated inventory levels. Liquidity position is reflected in the
almost fully-utilised bank facilities. Furthermore, GLC faces
high degree of competition from other OEMs in its limited
geographical area of operations.
Going forward, the firm's ability to increase its scale of
operations while improving profitability and optimally managing
its working capital intensity will be the key rating sensitivity.
Key rating drivers
Credit strengths
* Extensive experience of promoters in the auto dealership
business, established relationship with principal OEMs
* Diversified product offering, with dealerships of different
vehicle segments (two-wheelers, three-wheelers, tractors etc)
protects the firm against cyclicality of a particular product
segment
Credit weaknesses
* Low profitability of the dealership business
* Stretched liquidity profile indicated by almost fully utilized
bank facilities due to considerably high inventory holding
period
* Highly working capital intensity results in high debt, which
coupled with thin profit margins results in a stretched
financial risk profile
* High competitive intensity in the business along with low
geographical diversification
* Risks inherent in partnership constitution in terms of risk
of capital withdrawal, risk of dissolution etc.
Description of key rating drivers:
GLC is an authorised dealer of various automobile original
equipment manufacturers (OEMs) such as TVS Motors (2-wheelers),
Atul Auto (3-wheelers), Force Motors (Passenger and Light
Commercial Vehicles), TAFE (tractors), Volvo Eicher Commercial
Vehicles (Medium and Heavy Commercial Vehicles). It sells and
services new vehicles along with selling spare parts from its
sales outlets in Allahabad and Varanasi (Uttar Pradesh). The firm
also provides transport services to India Yamaha Motors Private
Limited and TVS. The diversified nature of the business protects
the firm from cyclicality of a particular product segment.
However, the firm's capital structure has remained weak because
of its dependence on loans to meet its extensive working capital
requirements arising from high inventory levels. Furthermore, the
profit margin in the dealership business is thin due to high
competitive intensity. The firm is also exposed to the risk of
capital withdrawal by the partners.
GTC OILFIELD: Ind-Ra Affirms 'BB' Long-Term Issuer Rating
---------------------------------------------------------
India Ratings and Research (Ind-Ra) has affirmed GTC Oilfield
Services Private Limited's (GTC Oil) Long-Term Issuer Rating at
'IND BB' with a Stable Outlook. The instrument-wise rating
actions are:
-- INR243.1 mil. (reduced from INR331.2) Term loans affirmed
with 'IND BBB+(SO)/Stable' rating;
-- INR269.7 mil. (reduced from INR369.5) Term loans affirmed
with 'IND BB/Stable' rating;
-- INR70 mil. Fund-based cash credit limits affirmed with
'IND BBB+(SO)/Stable' rating; and
-- INR146 mil. Non-fund-based limits affirmed with
'IND A2(SO)' rating
KEY RATING DRIVERS
The affirmation reflects GTC Oil's sustained moderate credit
metrics in line with Ind-Ra's expectations. According to
unaudited FY17 financials, GTC Oil had operating EBITDA/gross
interest coverage of 2.2x (FY16: 2.5x) and net debt/operating
EBITDA of 3.7x (FY16: 5.2x). The improvement in net leverage was
on account of an improvement in EBITDA margins to 43.2% in FY17
(FY16: 40.4%) due to the renewal of the majority of workover rigs
contracts at better rentals and lower debt. In FY18, GTC Oil
expects to incur debt-funded capex of INR290 million for a high
capacity 250MT workover rig. The financial closure is in
process. GTC Oil also expects to receive the letter of
appointment from ONGC Ltd and commission the workover rig in the
same year. According to management, the contracts provide better
revenue visibility and better rentals. Ind-Ra expects credit
metrics to remain stable in the near to medium term.
The ratings are constrained by the company's tight liquidity
position with 90% maximum utilization of working capital limits
in the 12 months ended March 2017. In FY17, its net cash cycle
weakened to negative 9 days (FY16: negative 53 days), on account
of an increase in receivable days and decline in payable days.
Management says the delay in the receipt of receivables from ONGC
was not backed by higher credit from subcontractors. The company
expects the net working capital cycle to turn positive due to the
limited credit period, leading to lower payable days and higher
working capital requirements. Furthermore, the agency believes
that GTC Oil's cash flow from operations will fall short of the
term debt repayments lined up in FY18. However, the agency
expects timely support from its parent/promoters to continue. In
FY17, the promoter debt stood at INR 254 million (FY16: INR171
million).
The ratings are further constrained by GTC Oil's high asset
intensity. The company has seven rigs: one drilling and six
work-over. The ratings also reflect the susceptibility of GTC
Oil's turnover and EBIDTA to fluctuations in crude oil prices. A
significant decline in crude oil prices could impact exploration
activities, and consequently revenue and EBITDA. The ratings are
also constrained by moderate industry competition.
However, the ratings draw support from the unconditional and
irrevocable guarantee provided by GTC Oil's sister concern Globe
Ecologistics Pvt Ltd (GEPL; 'IND BBB+'/Stable) to the majority of
GTC Oil's bank facilities. GTC Oil has common promoters with
GEPL.
The ratings also benefit from GTC Oil's strong customer
relationships with public and private exploration and production
(E&P) players, which ensure repeat business. Also, the company
is geographically diversified, given that its rigs and other
assets are deployed across India, in Barmer (Rajasthan), Duljian
and Shivsagar (Assam) and Mehsana and Ahmedabad (Gujarat).
The ratings also factor in GTC Oil's promoters operating
experience of close to seven years in providing on-shore drilling
and work-over rigs to private and public E&P operators.
RATING SENSITIVITIES
Negative: A negative rating action could result from the
withdrawal of the corporate guarantee or a downgrade in GEPL's
rating. Any decline in GEPL's turnover and profitability leading
to weakening in its EBITDA interest coverage would also lead to a
negative rating action.
Positive: A positive rating action could result from further
strengthening in GTC Oil's linkages with GEPL and an upgrade in
GEPL's ratings. Substantial growth in GEPL's revenue and EBITDA
accompanied by an improvement in gross EBITDA interest coverage
could also lead to a rating upgrade.
COMPANY PROFILE
GTC Oil was incorporated in 2007 and provides onshore drilling
and work-over rigs to public and private E&P operators.
Incorporated in 1958, GEPL is an ISO 9001:2000 compliant company.
It has over five decades of experience in the heavy-lift,
logistics and supply chain space with specialization in project
cargo and over-dimensional cargo (especially power and wind mill
domain) consignments using trailers, trucks, cranes, forklifts,
etc. The scope of services rendered includes full truck load,
hiring services, parcel booking and over-dimensional cargo.
HOSLEY INDIA: ICRA Assigns B+ Rating to INR1.0cr Term Loan
----------------------------------------------------------
ICRA Ratings has assigned its long-term rating of [ICRA]B+ on the
INR1.00 crore fund based bank facilities of Hosley India Private
Limited. ICRA has also reaffirmed its short-term rating of
[ICRA]A4 on the INR10.00 crore fund based bank facilities of
HIPL. The outlook on the long-term rating is 'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based-Term
Loan 1.00 [ICRA]B+ (Stable); assigned
Fund-based-Bills
Discounting/
Packing Credit 10.00 [ICRA]A4; assigned
Rationale
The assigned rating takes into account HIPL's relatively smaller
scale of operations and fluctuations in the operating income over
the past few years. The company sells its products under the
brand name 'Hosley'. The business certainty of the company is
dependent upon the performance of its group concerns to which it
makes ~90% of the sales. Performance of other group companies is
further dependent on demand in the exports markets and acceptance
of its products in the market which has imparted volatility to
its revenues and profitability in the past exposing it to high
client concentration risk. ICRA also notes that the company's
presence in an unorganised and competitive market which coupled
with lack of price escalation clauses in its orders puts pressure
on its profitability which has translated into low operating
profitability margin of 2.63% in FY2017. As the company is
exporting ~90% of its sales and it does not hedge its
receivables, it remains exposed to forex fluctuations risk. ICRA
also notes that the elongated receivable cycle has resulted in
high working capital debt and negative cash flows thereby
impacting the liquidity of HIPL. However, ICRA draws comfort from
the extensive track record of HIPL's promoters in the industry.
HIPL is a part of 'Hosley Group' which has several other
companies in the international and domestic markets. ICRA also
notes the increase in the sales in FY2017 on account of increase
in order book as well selling its products through online e-
commerce websites. ICRA also notes support to the top line from
favourable government policies in form of duty drawbacks and sale
of licenses in the past few years. Going forward, HIPL's ability
to grow at a healthy rate through increased market penetration,
improving its profitability and efficiently managing its working
capital cycle will be the key rating sensitivity.
Key rating drivers
Credit Strengths
* Extensive track record of more than a decade of the promoters
in the business
* Presence of other group companies in domestic and export
markets helps in procurement of new orders across various
countries
* Healthy growth in revenue in FY2017 backed by increase in
orders from existing export clients. Further ramp up in
scale is expected going forward due to healthy orders in
hand
* Favourable government policies for exporters by way of duty
drawback and sale of license, which contributes ~9% to
company's top-line annually
Credit Weakness
* Relatively smaller scale of operations
* Elongated working capital cycle largely on account of high
debtor and inventory days resulting in high limit utilization
and stretched liquidity position
* Low profitability at operating and net level on account of low
realizations and low value addition in the semi furnished
products
* Vulnerability to escalation in raw material prices, labour
costs and foreign exchange rates as also seen in the
fluctuating margins
* Exposure to intense competition from low-cost countries as
well as a number of domestic players
Description of key rating drivers:
HIPL is managed by experienced professionals who have long track
record in the home decor industry. It has other group companies
located in India and outside India which aids in obtaining
overseas orders. The company has recently started selling its
products through online channels which along with healthy export
orders have helped it in boosting its revenue growth in the
recent years. The company is primarily manufacturing for its
group companies based in India as well in the foreign market. The
revenue has shown growth in FY2017 led by increase in orders from
its group concern based in Hong Kong. HIPL is a relatively
smaller player in the decorative and handicraft industry with
moderate size of operations. It manufactures as well as processes
the semi furnished handicraft items leading to low value addition
and low realisations per piece for the company over the years.
This coupled with high competitive pressures faced by the company
in the domestic and export markets have put pressures on the
operating profitability margins of the company in the past. The
interest cost has further subdued the net profitability. As the
company is majorly an exporter of goods it receives duty
drawbacks and premium on sale of licensees which continue to
support the top line of the company. The company's orders mostly
do not have price escalation clauses in them which make it
vulnerable to unfavourable changes in raw material and labour
costs. Further, it follows a selective hedging policy to protect
its net receivables from adverse movement in the exchange rates.
The long debtor days cycle coupled with high inventory levels in
the past has led to high requirement of working capital needs
which is primarily funded through bill discounting limits. The
working capital intensity has been in the past and the cash flows
from operations have been negative in the past which has led to
stretched liquidity position.
HIPL was incorporated in March 2013 by the Kumar family. Mr.
Piyush Kumar, Mrs. Suniana Paul Kumar and Mr. Ashish Raj Kumar
are the directors of the company at present. HIPL is a part of
'Hosley Group' which has other companies in USA, China,
Mauritius, Hongkong and India. The company is manufacturing and
trading home decor and fragrance items. Its manufacturing
facility is located in Noida, Uttar Pradesh in an approximate
area of about 75,000 sq. ft. The product profile of the company
includes perfumed wax candles, incense sticks, iron art ware,
glass art wares as well as wooden art wares, and other handicraft
and decorative items. 80-90% of the products manufactured by the
company are being exported to group companies.
HIPL reported an Operating Income (OI) of INR43.03 crore and a
net profit of INR0.38 crore for FY2017 on a provisional basis, as
compared to an OI of INR27.60 crore and a net profit of INR0.19
crore for the previous year.
JOYMAKALI COLD: ICRA Assigns 'B' Rating to INR5.62cr Loan
---------------------------------------------------------
ICRA Ratings has assigned a long-term rating of [ICRA]B to the
INR5.62-crore cash-credit facilities of Joymakali Cold Storage
Private Limited. The outlook on the long-term rating is 'Stable'.
ICRA has also assigned a long-term rating of [ICRA]B and a short-
term rating of [ICRA]A4 to the INR0.38-crore untied limits of
JCSPL.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based Limits 5.62 [ICRA]B (Stable); Assigned
Untied Limits 0.38 [ICRA]B (Stable)/[ICRA]A4;
Assigned
Rationale
The assigned ratings take into account JCSPL's small scale of
current operations, and its weak financial risk profile as
reflected by high gearing, depressed coverage indicators and low
return on capital employed. The rating also considers the high
working capital-intensive nature of operations due to the
practice of extending up-front advances to the farmers at the
time of loading of potatoes, which exerts pressure on the
liquidity position. The ratings are further constrained by the
regulated nature of the industry, making it difficult to pass on
the increase in operating costs, exerting pressure on the
profitability. Besides, JCSPL remains exposed to agro-climatic
risks as its business performance entirely depends upon a single
agro commodity - potato. ICRA notes that the company also remains
exposed to the counterparty risk due to loans extended to
farmers, given the chances of delinquencies, if potato prices
fall to a low level.
The ratings, however, derive support from the established track
record of the company in the cold storage business and the
promoters' experience of more than four decades in the industry.
Besides, JCSPL enjoys location-specific advantage as its cold
storage unit is situated in Burdwan, a district well known for
large-scale potato production.
In ICRA's opinion, the company's ability to increase its scale of
operations, while improving profitability and debt-protection
metrics would remain key rating sensitivities. Any sharp
deterioration in the working capital intensity of operations,
which could adversely impact the liquidity position of the
company, would remain a credit concern, going forward.
Key rating drivers
Credit strengths
* Established track record of the promoters in the cold-storage
business, with an experience of around four decades
* Location-specific advantage as its cold-storage unit is
present in Burdwan district of West Bengal, where a large
quantity of potato is produced
Credit weaknesses
* Small scale of current operations
* Regulated nature of the industry makes it difficult to pass
on the increase in operating costs, thus exerting pressure
on the profitability
* Business entirely depends upon a single agro commodity-
potato, making the company susceptible to agro-climatic risks
* Weak financial risk profile as reflected by high gearing,
depressed coverage indicators and subdued return on capital
employed
* High working capital intensity of business exerts pressure
on the liquidity position
* Risks associated with delinquency of loans extended to the
Farmers
Description of key rating drivers:
JCSPL had set up its cold storage unit in 1978 at Taktipur in
Burdwan district of West Bengal. It has a cumulative storage
capacity of 150,604 quintal. The company is involved in the
business of providing cold-storage facility to potato-growing
farmers and traders. The favourable location of the cold storage
unit, in close proximity to the leading potato-growing areas of
West Bengal, augurs well for the company as it provides a wide
catchment area. However, ICRA notes that JCSPL remains exposed to
agro-climatic risks as it deals with the storage of only one agro
commodity - potato. JCSPL's income stream is primarily generated
from multiple sources that include basic cooling charges,
insurance commission and interest on advance to farmers. However,
basic cooling charges accounted for around 75-88% of the
company's operating income during FY2014-FY2016. The basic rental
rate for cold storages operating in West Bengal is regulated by
the State Government, which makes it difficult to pass on any
increase in operating costs, thus exerting pressure on the
profitability. The cold-storage units' operations are seasonal in
nature. With the harvesting period commencing in February, the
loading of potatoes in cold storages begins by the end of
February and lasts till March. Further, with potatoes having a
limited life even after preservation, farmers liquidate their
stock from the cold storage by November. The unit remains non-
operational from December to February, during which it undergoes
annual maintenance. Against the pledge of potatoes stored, JCSPL
provides interest-bearing advances to the farmers. These advances
are funded by the banks which are routed to the farmers through
the company. Before the close of the season in November, the
farmers have to pay their outstanding dues, which include
repayment of the loans taken, along with interest. Moreover, any
significant downward correction in potato prices exposes the
company to the risk of delinquency in loans extended to the
farmers. However, in such cases, JCSPL has the right to auction
the stock and recover its dues.
The operating income (OI) of JCSPL declined from INR2.22 crore in
FY2015 to INR2.10 crore in FY2016, registering a de-growth of
around 5% because of lower interest income from lending to
farmers. The operating margin declined to 21.35% in FY2016 from
25.60% in FY2015 on account of higher overhead expenses incurred
during the year. Despite a decline in OPM, the net margin of the
company increased to 5.35% in FY2016 compared to 4.38% in FY2015
due to reduction in interest expenses.
JCSPL's capital structure deteriorated significantly with a
gearing of 4.84 times as on March 31, 2016, since the company
availed cash-credit facility for extending advances to the
farmers, which in turn also kept the working capital requirement
at a high level. High debt, coupled with low profits led to weak
coverage indicators. The company has to extend advances to the
farmers, depending upon the value of goods stored. These advances
are recovered at the time of offloading of potatoes, which
results in high working capital intensity of operations for the
company. The working capital intensity of operations surged to
240% in FY2016 since the company extended significant advances to
the farmers at the end of the year.
Incorporated in 1978 as a private limited company, Joymakali Cold
Storage Private Limited (JCSPL) is a closely held company
promoted by Mr. Naba Kumar Kundu and his family members. The
company provides cold-storage facility to potato-growing farmers
and traders on a rental basis with a storage capacity of 150,604
quintals. The cold-storage unit is located in Burdwan, West
Bengal.
JCSPL reported a net profit of INR0.11 crore on an operating
income of INR2.10 crore for the year ended on March 31, 2016
compared to a net profit of INR0.10 crore on an operating income
of INR2.22 crore for the year ended on March 31, 2015.
K.N. SINGH: CARE Assigns B+ Rating to INR3.19cr LT Loan
-------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of K.N.
Singh Infratech Private Limited (KSIPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 3.19 CARE B+; Stable Assigned
Short-term Bank
Facilities 3.25 CARE A4 Assigned
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of K.N. Singh
Infratech Private Limited (KSIPL) are constrained by its small
scale of operations, working capital intensive nature of
operations, leverage capital structure with moderate debt
coverage indicators, seasonal nature of its business, intense
competition and tender driven process risk. The ratings, however,
derive strength from the experience of the promoters,
satisfactory track record of operations, satisfactory profit
margins and client profile.
The ability of the company to increase its scale of operations
along with an improvement in the profit margins and
effective management of working capital would be the key rating
sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Small scale of operations: KSIPL is a small player with a PAT of
INR0.86 crore on a total operating income of INR17.10 crore
in FY17 (Provisional; refers to the period April 1 to March 31).
Working capital intensive nature of operations: The business of
KSIPL is working capital intensive in nature marked by its higher
debtor's collection period. The company mainly works for Western
Coalfields Ltd and it needs to allow high credit period due to
its low bargaining power and the procedural delays involved in
getting payment from government entities.
Henceforth, it depends on external borrowings for its working
capital needs. Accordingly the average utilization of cash
credit was about 99% during last 12 months ending in April 2017.
Leverage capital structure and moderate debt coverage indicators:
The capital structure of the company remained leveraged marked by
overall gearing of 3.96x as on March 31, 2017. Furthermore, the
debt protection metrics of the company has remained moderate with
satisfactory interest coverage of 3.48 times and moderate total
debt to GCA of 5.23 years in FY17.
Seasonal nature of industry: KSIPL is into mining-related
activities. Mining and allied activities are susceptible to
decline in output in rainy season due to adverse weather
condition, resulting in volatility of margins and cash flows.
Intense competition and exposure to tender driven process risk:
Western Coalfields Ltd awards bid for coal lifting from its coal
mine to its registered bidder only through e-auctions. There is
intense competition among the registered bidders in securing
purchase bid through auction. Henceforth, there is a risk of non-
receipt of contract or bidding prices go up significantly in a
highly competitive scenario.
Key Rating Strengths
Satisfactory track record of operations and experienced
promoters: KSIPL has started operations since 2009 and thus has
satisfactory track record of operations. Mr. Amar Narayan Singh
has around a decade of experience in the same line of business,
looks after the day-to-day operations of the company. He is
supported by Mr. Kamal Narayan Singh who has around five decades
of experience in diversified industry. Satisfactory profit
margins and client profile: The profit margins of the company
remained satisfactory in FY17 marked by healthy PBILDT margin at
20.82% and satisfactory PAT margin at 5%. Furthermore, the client
profile of the company comprises of Western Coalfields Limited
and thus risk of default is minimal.
KSIPL was incorporated in June 2009 by Mr. Amar Narayan Singh and
Mr. Kamal Narayan Singh. KSIPL is engaged in coal mining-related
activities and transportation services which include lifting of
coal from mine, overburden clearance of ash and transportation of
coal to the contractor place as per the contract. KSIPL has
contract from Western Coalfield Ltd (WCL) for three years (2016-
2019) for lifting of coal from mine, overburden clearance of ash
and transportation of coal to the WCL' stock yard.
As per the provisional results for FY17 (refers to the period
April 1 to March 31), KSIPL has reported PAT of INR0.86 crore
(INR0.21 crore in FY16) on a total income of INR17.10 crore
(INR.6.10 crore in FY16).
LASER FIBERS: ICRA Raises Rating on INR12.80cr Cash Loan to B+
--------------------------------------------------------------
ICRA Ratings has upgraded the long-term rating to [ICRA]B+ from
[ICRA]B and has re-affirmed the short-term rating of [ICRA]A4 for
the fund-based and the non-fund based bank limits aggregating to
INR14.52 crore of Laser Fibers Private Limited. The outlook on
the long-term rating is 'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund Based-Term
Loans 1.72 [ICRA]B+ (Stable); Upgraded
from [ICRA]B
Fund Based-Cash
Credit 12.80 [ICRA]B+ (Stable); Upgraded
from [ICRA]B
Fund Based-Packing
Credits Cum.
FBP/FBD (2.00) [ICRA]A4; Re-affirmed
Non-fund Based-
Bank Guarantee (0.50) [ICRA]A4; Re-affirmed
Rationale
The rating upgrade for LFBPL factors in the surge in company's
market share largely driven by the strategic restructuring
carried out with its sister concern (Laser Filament Private
Limited) resulting consolidation of the texturising operation
under one entity. The ratings also continues to favourably factor
in the extensive experience of the promoters in the textile
industry and the favourable location of the company's
manufacturing facility in Surat (Gujarat) resulting in easy
access to key raw materials and proximity to end users.
The ratings, however, continues to remain constrained by
company's operation in the highly fragmented and competitive
industry structure with low entry barriers, which limits pricing
flexibility, ICRA notes the company's low value additive nature
of yarn processing business which has kept the profit metrics
weak. Furthermore, LFBPL's profit margins are vulnerable to price
fluctuations of the primary raw material, i.e., partially
oriented yarn (POY), which are dependent on crude oil prices. The
ratings also continue to take into consideration the moderately
stretched capital structure and the thin profitability, which
leads to weak coverage indicators with elevated total
debt/OPBDITA. The ratings also factor in the company's high
working capital intensive nature of operations and low accruals,
which has led to tight liquidity position as, reflected in high
utilisation of sanctioned bank limits.
Key rating drivers
Credit strengths
* Surge in market share largely driven by consolidation of
operations of sister concern under one single entity which
entail operational synergies and drive growth
* Extensive experience of promoters in the textile industry
* Locational advantages in terms of raw material availability
and proximity to downstream processing units from presence
in Surat
Credit weaknesses
* Financial profile characterised by modest profitability and
weak coverage indicators
* Stretched liquidity profile as reflected in high utilization
of sanctioned bank Limits
* Susceptibility of profits to adverse fluctuations in prices
of key raw material i.e Partially Oriented Yarn (POY) which
are in turn pegged to crude oil prices
* Highly fragmented and competitive industry structure with
low entry barriers, which limits pricing flexibility
Detailed description of key rating drivers:
LFBPL manufactures polyester texturised yarn which is offered in
more than 16 deniers and 8 types. Further, in FY15, the company
forayed into manufacturing knitted fabrics by setting a second
hand warp knitting machines with a modest installed capacity of
250 MTPA. The manufacturing unit of the company is located at
Mangrol, proximity to Surat, which is a textile hub in Gujarat.
This in turn enables easy raw material availability and access to
a larger customer base for business expansion. Promoters of the
company, Mr. Murarilal Saraf and Mr. Pawankumar Saraf have an
experience of around two decades in same sector and are the key
management personnel of the company. Since February 2015, LFBPL
has taken over the running of the business of its associated
concern Laser Filament Private Limited (LFPL), which was engaged
in the same sector. This was undertaken for a single point of
control over production and other business operations, since both
companies share the same management and the same supplier base.
LFBPL's operations surged considerably over last five years,
backed by increase in sales volumes as well as the consolidation
of the group companies into a single entity - LFBPL. However, the
low value additive nature of operations, coupled with highly
fragmented market with low entry barriers restricts the pricing
flexibility of the company. Further, margins remain highly
susceptible to adverse raw material price variations, which in
turn, are linked to crude oil prices. LFBPL's capital structure
remains moderately stretched, however, relatively low
profitability and high interest cost leads to weak coverage
indicators of the company. Adverse credit terms with customers
and supplier, coupled with higher inventory levels, lead to a
working capital intensive nature of business and high utilisation
of working capital facilities.
Going forward, the company's ability to improve its operating
profitability amid competitive pricing pressures, along with
effectively managing its working capital cycle, will be critical
for improvement in debt coverage indicators and its liquidity
profile, and hence will be the key rating sensitivities.
Laser Fibers Private Limited, promoted by Mr. Murarilal L. Saraf
and Pawankumar L. Saraf was incorporated as a private limited
company in 2009 and commenced operations from 2011. The company
is engaged in manufacturing polyester texturised yarn from
partially oriented yarns. In FY2015, the company forayed into the
manufacturing of knitted fabrics as well. LFBPL registered office
is at Jash Textile Market in Surat (Gujarat) and manufacturing
facility setup at Mangrol, near Surat.
The company has recorded an operating profit of INR2.62 crore and
net profit of INR0.35 core on an operating income of ~INR82.13
crore for FY2017 (provisional), as against an operating profit of
INR2.52 crore and a net profit of INR0.27 crore on an operating
income of ~INR83.61 crore for FY2016.
LEISURE WEAR: ICRA Lowers Rating on INR6.0cr Loan to 'D'
--------------------------------------------------------
ICRA Ratings has revised the long-term rating to [ICRA] D from
[ICRA] C for the INR6.00-crore of fund-based facilities of
Leisure Wear Exports Limited (LWEL).
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based Limits 6.00 [ICRA]D; downgraded from
[ICRA]C
Rationale
The rating revision is on account of overutilisation of fund-
based limits for more than 30 days owing to the stretched
liquidity position of the company. ICRA takes note of the
company's moderate scale of operations in the highly competitive
readymade garments segment and the vulnerability of its
profitability to fluctuations in foreign exchange rates. ICRA,
however, takes note of the extensive experience of the promoters
in the textile industry.
Going forward, the ability of the company to improve its
liquidity position and service its debt in a timely manner will
be the key rating sensitivity.
Key rating drivers
Credit strengths
* Experienced promoters with long-track record in the textile
Business
Credit weakness
* Small scale of operations with high geographical and client
concentration risk exposes the company to volatility in
revenues
* Exposure to foreign exchange fluctuations and regulatory
risks related to export incentives
* Stretched liquidity position due to high working capital
intensive business
Description of key rating drivers:
On account of weak demand for its products, LWEL's operating
income has been declining over the past three years. This was
accompanied by a decline in operating margins and increase in
debtor days, which has resulted in high utilisation of the
company's working capital limits and weak debt protection
indicators. The company has moderate scale of operations in the
highly competitive readymade garments segment and its
profitability is vulnerable to fluctuations in foreign exchange
rates.
LWEL, incorporated in 1989, manufactures and exports collared and
polo-neck T-shirts and also trades in fabrics. The company's
manufacturing facility in Ludhiana has a capacity of 8000 T-
Shirts per day. The company carries out knitting, stitching,
dyeing and embellishment work. The company exports its products
to the US market, under the brand name 'Hautes'.
MAA MAHARANI: CARE Assigns B+ Rating to INR6.07cr LT Loan
---------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Maa
Maharani Rice Mill (MRM), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 6.07 CARE B+; Stable Assigned
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of Maa Maharani Rice
Mill (MRM) is constrained by its short track record, small scale
of operations with moderate profit margins, regulation by
government in terms of minimum support price, constitution as
partnership firm, seasonal nature of availability of raw material
resulting in high working capital intensity and exposure to
vagaries of nature and its presence in an fragmented and
competitive industry. The rating, however, derives strength from
the experience of the partners, comfortable capital structure
with moderate debt coverage indicators, close proximity to raw
material sources and favorable industry scenario.
Going forward, the ability of MRM to increase its scale of
operations with improvement in profit margins and effective
management of working capital will be the key rating
sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Short track record and small scale of operation with moderate
profit margins: MRM has commenced operations from 2014 and thus
has short track record of operations. Furthermore, MRM is a small
player in the rice milling business with a PAT of INR0.14 crore
on total operating income of INR8.77 crore in FY16 (refers to the
period April 1 to March 31). During FY17, the firm has booked
turnover of around INR6.00 crore as maintained by the management.
Regulation by Government in terms of minimum support price (MSP):
The Government of India (GOI), every year decides a minimum
support price (MSP - to be paid to paddy growers) for paddy which
limits the bargaining power of rice millers over the farmers. The
MSP of paddy has increased during the crop year 2016- 17 to
INR1,470/quintal (as suggested by the Commission for Agricultural
Costs and Prices, the apex body to advice on MSP to the
government) from INR1,410/quintal in crop year 2015-16.
Constitution as partnership firm: MRM, being a partnership firm,
is exposed to inherent risk of the partner's capital being
withdrawn at time of contingency and firm being dissolved upon
the death/insolvency of the partners. Furthermore, partnership
firms have restricted access to external borrowing as credit
worthiness of partners would be the key factors affecting credit
decision for the lenders.
Seasonal nature of availability of raw material resulting in
working capital intensity and exposure to vagaries of nature:
Agro product processing business is working capital intensive as
the millers have to stock paddy by the end of each season till
the next season as the price and quality of agro products are
better during the harvesting season. Also, agro products
cultivation is highly dependent on monsoons, thus exposing the
fate of the firm's operation to the vagaries of nature.
Fragmented and competitive nature of the industry: MRM's plant is
located in Wazidpur, Bihar which is in close proximity to hubs
for paddy/rice cultivating region of Bihar. Owing to the
advantage of close proximity to raw material sources, large
number of small units are engaged in milling and processing of
rice in the region. This has resulted in intense competition
which is also fuelled by low entry barriers. Given that the
processing activity does not involve much of technical expertise
or high investment, the entry barriers are low.
Key Rating Strengths
Experienced partners: Though the firm has short track record of
operations, the partners (Mr Uma Shankar Singh aged about 55
years, Mr. Avinash Singh aged about 35 years and Mr. Arvind Kumar
Singh aged about 40 years) have more than five years of
experience in rice milling business through their family business
and the firm is deriving benefits out of the partners experience.
Close proximity to raw material sources and favourable industry
scenario: MRM's plant is located in Wazidpur, Bihar which is
close to the vicinity to a major rice-growing area of Bihar,
thus, resulting in logistic advantage. The entire raw material
requirement is met locally from the farmers (or local agents)
helping the firm to save simultaneously on transportation cost
and paddy procurement cost. Furthermore, rice being a staple food
grain with India's position as one of the largest producer and
consumer, demand prospects for the industry is expected to remain
good in near to medium term.
Comfortable capital structure with moderate debt coverage
indicators: The capital structure of the firm improved and
remained comfortable marked by debt equity and overall gearing of
0.47x and 0.95x, respectively, as on March 31, 2016. The debt
coverage indicators of the firm have remained moderate with
satisfactory interest coverage of 2.18 times and moderate total
debt to GCA of 5.86x in FY16.
MRM was constituted as a partnership firm via partnership deed
dated April 01, 2013. However, the firm is currently governed by
the partnership deed dated August 31, 2016, and it is managed by
Mr. Uma Shankar Singh, Mr. Avinash Singh and Mr. Arvind Kumar
Singh. The firmhas commenced operations from April 2014 onwards
and it is into processing and milling of non-basmati rice. The
manufacturing facility of the firm is located at Wazidpur, Bihar
with an installed capacity of 38880 metric ton per annum.
During FY16 (refers to the period April 1 to March 31), the firm
has reported a total operating income of INR8.77 crore (Rs.7.76
crore in FY15) and a PAT of INR0.14 crore (Rs.0.08 crore in
FY15). During FY17, the firm has booked turnover of INR6.00
crore.
MANTRA PACKAGING: ICRA Reaffirms 'B' Rating on INR5.0cr Loan
------------------------------------------------------------
ICRA Ratings has re-affirmed the long-term rating of [ICRA]B for
the INR5.00 crore fund based limits of Mantra Packaging Private
Limited. ICRA has also reaffirmed the short-term rating of
[ICRA]A4 for the INR2.00 crore non-fund based limits and the
INR2.25 crore interchangeable limits of the company. The outlook
on the long-term rating is 'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term fund
based 5.00 [ICRA]B(Stable); re-affirmed
Short-term non-
fund based 2.00 [ICRA]A4; re-affirmed
Short-term
interchangeable (2.25) [ICRA]A4; re-affirmed
Rationale
The rating action is based on the best available information. As
part of its process and in accordance with its rating agreement
with MPPL, ICRA has been trying to seek information from the
company so as to undertake a surveillance of the ratings, 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 1, 2016, the
company's rating is now denoted as: "[ICRA]B (Stable) and
[ICRA]A4; 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.
Key rating drivers
Credit strengths
* Established experience of the promoters in the plastic
industry
Credit weaknesses
* Vulnerability of profitability to fluctuations in the prices
of
key raw materials, which are crude oil derivatives
* Susceptibility of margins to any adverse fluctuations in
foreign exchange in the absence of any formal hedging
mechanisms; imports, however, provide a natural hedge
* Industry characterised by strong competition from organised
and unorganised players
Description of key rating drivers
MPPL has been engaged in the manufacturing and trading of plastic
bags since 2010. Since part of the company's revenues is derived
from exports, its margins remain vulnerable to any adverse
fluctuations in foreign exchange. The prices of the company's
major raw materials, comprising low density polyethylene (LDPE),
high density polyethylene (HDPE), polypropylene and starch-
polyester blend compostable plastic are derived from highly
volatile crude oil prices. Since the company procures inventory
in anticipation of demand, its margins remain vulnerable to raw
material price volatility. Furthermore, the company's presence in
the highly fragmented plastic industry, which is characterised by
intense competition, limits its pricing flexibility and thereby
its ability to effectively pass on increase in raw material
prices to customers.
Mantra Packaging Pvt. Ltd. was incorporated as a private limited
company in June 2010 and commenced manufacturing operations from
September 2011. MPPL is engaged in the manufacturing of various
types of plastic bags that find myriad applications as grocery
bags, retail shopping and apparel bags, garbage can liners,
industrial, food, and agricultural packaging and protective
covering for painting, etc. The company's registered office is in
Mumbai and its manufacturing facility is at Silvassa (Dadra &
Nagar Haveli).
MARIANELLA PROPERTIES: ICRA Reaffirms B Rating on INR15cr Loan
--------------------------------------------------------------
ICRA Ratings has reaffirmed the long-term rating of [ICRA]B for
the INR15.00-crore fund-based bank facilities of Marianella
Properties Private Limited. The outlook on the long-term rating
is 'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based-Term
Loan 15.00 [ICRA]B (Stable); Re-affirmed
Rationale
The rating action is based on best available information. As part
of its process and in accordance with its rating agreement with
Marianella Properties Private Limited, ICRA has been trying to
seek information from the company to undertake a surveillance of
ratings; but despite multiple requests, the company's management
has remained non-cooperative. In the absence of the 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]B (Stable) /
[ICRA]A4; 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 information
or no updated information on the company's performance since the
time it was last rated.
Key rating drivers
Credit strengths
* Established track record of the promoter group in executing
real estate projects in Mumbai
* Financial closure for the project has been achieved and with
the entire budgeted promoter contribution brought in
Credit weaknesses
* High funding risk with ~40% of the project cost proposed to
be funded by way of advances from customers which remain
contingent on healthy sales and timely collection of advances
* Execution risk as nearly 75% of the project cost remains to be
incurred as on September 2015
* Exposure to the risk of slowdown in demand, falling property
prices and inherent cyclicality in real estate sector,
particularly in the commercial segment
Description of key rating drivers:
Marianella Properties Private Limited (MPPL) is involved in
developing a retail mall in Vasai, Maharashtra. The total
saleable area under the project is ~0.97 lakh square feet,
comprising a basement, ground-floor and three upper floors. The
complex will have 48 shops, five miniplexes, a food court and a
banquet hall.
The total project cost is estimated to be INR46.35 crore. As on
September 2015, the company had incurred only INR11.24 crore,
which forms 24% of the total project cost (15% of construction
cost incurred) - exposing the company to a high execution risk.
However, the development plans for the project have been approved
by the local authority and the company has also received a
commencing permission for the project which mitigates regulatory
concerns. The project also stands high funding risk with ~40% of
the project cost is proposed to be funded by way of advances from
customers which remain contingent on healthy sales and timely
collection of advances. ICRA also takes cognisance of the
company's exposure to the risk of slowdown in demand, falling
property prices and inherent cyclicality of the real estate
sector, particularly in the commercial segment. Moreover, the
project was initially assumed to be completed by September 2016.
However, due to some delays in availability of machines at the
project site, there were delays in project execution as well. As
on date, the project remains incomplete.
Incorporated in 2008, Marianella Properties Private Limited
(MPPL) is involved in developing a retail mall in Vasai,
Maharashtra with an area of 0.97 lakh square feet. The company is
promoted and managed by Mr. Lancelot D'Souza and his family. The
promoters have executed 13 projects (through Rose Builders) in
Mumbai with a total saleable area of 2.5 lakh square feet.
MARUTI BULK: CARE Assigns 'B' Rating to INR4.40cr LT Loan
---------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Maruti
Bulk Packaging (MBP), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 4.40 CARE B; Stable Assigned
Long-term/Short 5.25 CARE B; Stable/CARE A4
term Bank Assigned
Facilities
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of Maruti Bulk
Packaging (MBP) are constrained on account of project
implementation and stabilization risks associated with the up-
coming debt-funded capex, its presence in highly competitive and
fragmented industry and partnership nature of its constitution.
The ratings are further constrained on account of susceptibility
of operating margin to raw material prices and foreign exchange
fluctuation risks along with high bargaining power of suppliers.
The above constraints, however, outweigh the comforts derived
from the experienced partners with support of group entities.
The ability of MBP to successfully commission its upcoming capex
within specified time and cost parameters along with ability to
achieve the envisaged level of sales and profitability would be
the key rating sensitivities.
Detailed description of key rating drivers
Key Rating Weaknesses
Up-coming debt-funded capex: Project implementation and
stabilization risk persists as MBP is currently implementing a
greenfield project for manufacturing plastic packaging products.
With project gearing of 3 times and majority costs yet to incur,
MBP is exposed to project implementation and stabilization risk.
Susceptibility of operating margin to fluctuations in raw
material prices and foreign exchange rates along with high
bargaining power of suppliers: The raw materials, primarily
PP/LDPE granules and chips, polyethylene resins are derivatives
of crude oil, prices of which are fluctuating in nature and
affect the margins of MBP. Also, the entity is going to import
few raw materials as well as export majority of the finished
goods, which makes the operating margin susceptible to foreign
exchange fluctuation risk in absence of active hedging policy.
Moreover, as the market of PP/polyethylene granules is seller
dominated, it restricts the bargaining power of buyers.
Partnership nature of constitution with presence in highly
competitive and fragmented industry: The constitution of
MBP as a partnership firm restricts its overall financial
flexibility and has inherent risk of possibility of withdrawal of
capital in times of personal contingency. MBP is present in a
highly fragmented and competitive industry characterized by
large number of players operating in small and medium scale
sector along with low capital intensiveness.
Key Rating Strengths
Experienced partners along with support of group entities: The
key partner of MBF, Mr. Jagdishbhai Gandalal Patel has an
experience of more than 4 decades in varied industries including
more than 5 years of experience in the same line of business,
while its association with its group entities who are in the same
line of business is expected to bolster sales during its
preliminary year of operations.
Ahmedabad-based (Gujarat) MBP is a partnership firm incorporated
in January 2017 by the partners Mr. Jagdishbhai Gandalal Patel
and Ms Kruti Vishal Patel. The entity is currently undertaking a
greenfield project to manufacture plastic woven sacks and
Flexible Intermediate Bulk Containers (FIBC's) like bulk bags and
jumbo bags, with a proposed installed capacity of 350 tonnes of
plastic tapes per month, at its sole manufacturing facility in
Kheda (Gujarat). The products manufactured by MBP will be used as
plastic packaging products for transportation and storage of
goods and will find application primarily in industries like
construction, hazardous waste collection, agriculture, food-
packaging, pharmaceutical, etc.
The total project cost is estimated to be INR7.40 crore
(including margin for working capital of INR1.19 crore) with a
proposed debt-equity mix of 3 times. The commercial production is
envisaged to commence from end of Q2FY18. While, MBP will
purchase Polyproplylene (PP), Low-density polyethylene (LDPE),
Linear low-density Polyethylene (LLDPE) and High-density
polyethylene (HDPE) granules from local markets as well as will
import from few Gulf and South East Asian countries, the finished
goods will be sold both domestically and exported primarily to
Gulf countries, European nations and North and South America.
MARVELOUS ENGINEERS: CARE Reaffirms 'B' Rating on INR2.25cr Loan
----------------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Marvelous Engineers Private Limited (MEPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 2.25 CARE B; Stable Reaffirmed
Short-term Bank
Facilities 3.15 CARE A4 Assigned
CARE has withdrawn the rating assigned to the proposed term loan
of MEPL with immediate effect, as the company has not availed the
amounts under the said issue and there is no amount outstanding
under the facility as on date.
Detailed Rationale
The ratings assigned to the bank facilities of MEPL continues to
remain constrained on account of the small scale of operations,
low profit margins, leveraged capital structure, moderate debt
coverage indicators, weak liquidity position and susceptibility
of profit margins to volatility in raw material prices. The
rating, however, continues to draw support from the experience of
the promoter of more than two decades, reputed and established
client base and operational linkages with group concerns.
The ability of the company to improve profitability along with
improvement in capital structure is the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Strengths
Experienced promoters along with operational linkage with group
concern: the company is promoted by Mr. Sangram Vishnu Patil. He
has an average experience of more than two decades in the same
business through group entities, namely, Marvelous Machinist
Private Limited and Marvelous Vimercati Foundry, which are
engaged in manufacturing of machined components and manufacturing
castings. Furthermore, MEPL gains support from the group
companies in the form of easy and timely availability of raw
material (grey cast iron castings). The purchase from the group
company constituted around 60% of the total purchases for FY16.
Furthermore, the company also gets benefit from the established
network of the group entities.
Associated with a reputed clientele albeit customer concentration
risks: MEPL's clients are reputed entities in their respective
line of business such as John Deere India Private Limited,
Lombardini S.R.I, Fairfield Atlas Limited, Comet S.P.A, Hyva
India Private Limited amongst others. However, MEPL has high
concentration of its customers with the top five customers
contributing around 70% of the total income in FY16.
Key Rating Weaknesses
Small scale of operations with low profit margins: During FY16,
the company registered turnover of INR35.94 crore and PAT of
INR0.19 crore. The operating margin of the company remained
erratic during the past years, on account of volatility in raw
material cost and remained in the range of 5.80% to 7.18%. The
PAT margin though improved is low in FY16. Leveraged capital
structure and weak debt coverage indicators: The high debt
profile of the company as against the low net worth base resulted
in a leveraged capital structure for the company as on March 31,
2016. Moreover, with low profitability and high gearing levels,
the debt coverage indicators of the company are weak.
Working capital intensive nature of operations: The liquidity
position of the company remained stressed with funds mainly been
blocked in inventory and debtors as reflected by high gross
current asset days of over 129 days during last three years
ending FY16. The same resulted in high utilization of its working
capital limits.
Susceptibility of operating margin to volatility in raw material
prices: The major raw material is iron castings, the prices
of which are volatile in nature. Material cost accounted for
about 62% of the total cost of sales in FY17 making the
profitability of the company exposed to any sudden spurt in the
raw material prices.
MEPL is a Kolhapur-based (Maharashtra) company incorporated in
March 29, 1990. It is promoted by Mr. Sangram Vishnu Patil, Mr.
Vishnu Baburao Patil and is managed by Patil Family of Kolhapur.
Since inception, the company is engaged in manufacturing of
precision engineering and auto components namely bearing, chasis,
brackets, cover, drum, flywheel, hub, housing, pinion which are
used in earth moving equipment, trucks, tractors and allied
equipment. The manufacturing facility of the company is ISO
9001:2000 certified and located at Kolhapur, Maharashtra. The
company mainly caters to the domestic market. The company
registered total operating income of INR35.94 crore with PAT of
INR0.19 crore in FY16 as against INR31.63 crore and a net loss of
INR0.24 crore in FY15.
MSS INFRACON: CARE Assigns B+ Rating to INR55cr LT Loan
-------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of MSS
Infracon Private Limited (MSS), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 55.00 CARE B+; Stable Assigned
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of MSS Infracon
Private Limited (MSS) is constrained on account of maiden project
of the entity, weak financial risk profile, excessive dependence
on customer advances for the execution of the project and
inherent risk associated with the real estate sector. The rating,
however, derives strength from long track record of the promoters
and experienced management team and availability of major
approvals for the project.
Ability of the company to maintain the sales momentum and timely
recovery of sales receipts/advances from the customers and timely
execution of the project within envisaged cost remain the key
rating sensitivities.
Detailed description of the key rating drivers
Key Rating Strengths
Long track record of promoters' in real estate sector and
experienced management team
MSS Infracon Private Limited (MSS) was incorporated in February
2015 and is promoted by Mr. Sanjeev Kumar Goel. He has over two
decades of experience in real estate sector. Mr. JP Jain
(Chairman) has over three decades of experience in real estate
sector. He is also one of the founder trustee of Roorkee
Engineering and Management Technology Institute, Shamli Uttar
Pradesh. The Management of MSS is supported by a team of
experienced & qualified professionals who are involved in day to
day operations of the company.
Major approvals in place
All the major requisite approvals for the project 'Bliss Homes
and Bliss Square' from relevant authorities are in place.
Building plan has been approved by Ghaziabad Development
Authority (GDA).
Key Rating Weaknesses
Maiden venture of the entity in competitive real estate sector
MSS was incorporated in February 2015 and is currently developing
its maiden project- Bliss Homes and Bliss Square, the entity is
relatively new in the field of real estate development, this lack
of track record and experience in this sector often considered as
a critical factor for the successful implementation of real
estate development.
Weak financial risk profile
The financial profile of MSS is marked by low profitability, high
gearing and low interest coverage indicator. Profit for FY16
stood at INR0.01 crore as against nil for FY15. Tangible net
worth stood negative at INR0.06 crore as on March 31, 2016.
Excessive dependence on customer advances for the execution of
the project
MSS has shown excessive dependence on customer advances as a
means of finance for project execution. For the ongoing project
'Bliss Homes and Bliss Square'. Excessive dependence on customer
advances for project execution might impact the schedule of the
project if the advances are not timely received.
MSS Infracon Private Limited (MSS) was incorporated in February
2015. MSS belongs to JSP group which is engaged in real estate
development and construction of residential group housing
projects from the past 25 years through various group companies
and Joint Ventures (JVs). MSS is currently developing a mixed use
residential cum commercial project namely Bliss Homes and Bliss
Square in two phases involving development of 5.93 lakh square
feet of saleable area comprising of 337 flats and 299 shops with
a projected cost of INR258 crore.
During FY16 (refers to the period April 01 to March 31), MSS
earned PAT of INR0.01 crore (PY: Nil) on a total operating
income of INR0.07 crore (PY: Nil).
NEELKANTH ENTERPRISE: CARE Assigns B+ Rating to INR5.5cr Loan
-------------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of
Neelkanth Enterprise (NKE), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 5.50 CARE B+; Stable Assigned
Detailed Rationale and key rating drivers
The rating assigned to the bank facilities of Neelkanth
Enterprise (NKE) is primarily constrained on account of
consistent decline in its scale of operations, moderate profit
margins, moderately leveraged capital structure and weak debt
coverage indicators. The rating is further constrained on account
of NKE's constitution as partnership firm, its presence in the
highly fragmented and competitive salt industry which is highly
susceptible to adverse weather conditions and instance of any
natural calamities.
The rating, however, derives comfort from experienced partners
along with established presence of group and location advantage.
The rating also factor in the improvement in scale of operations
during FY17 (Provisional).
The ability of NKE to increase its total operating income with
improvement in profit margins and capital structure and
managing its working capital requirement efficiently would remain
the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Consistent decline in TOI albeit improvement during FY17
During FY16, NKE reported TOI of INR14.65 crore as against
INR23.12 crore during FY15 and INR41.02 crore during FY14.
However, during FY17 (Provisional), NKE has reported 85.30% y-o-y
growth in its TOI with improved market conditions
backed by increase in demand from its customers as well as
addition of new customers in its portfolio.
Moderate profit margins, moderately leveraged capital structure
weak debt coverage indicators The PBILDT margin has increased
from 7.67% during FY15 to 10.67% during FY16 whereas, PAT margins
remained low at 1.23% during FY16 (1.53% during FY15).
As on March 31, 2016, capital structure though improved remained
moderate marked by overall gearing ratio of 1.65 times
Debt coverage indicators remained weak marked by an interest
coverage ratio of 1.57 times during FY16 (1.75 times during FY15)
and total debt to GCA of 18.46 times as on March 31, 2016 (14.81
times as on March 31, 2015) As on March 31, 2016, liquidity
position remained moderate as indicated by current ratio of 1.54
times (1.29 times as on March 31, 2015) and quick ratio of 1.25
times (1.18 times as on March 31, 2015).
Presence in highly fragmented and competitive salt industry
The company operates in the trading and manufacturing of salt
which is highly fragmented industry with presence of numerous
independent small-scale enterprises. The industry is
characterized by low entry barrier due to minimal capital
requirement, no inherent resource requirement constraints and
easy access to customers and supplier.
Partnership nature of constitution
NKE being a partnership firm is exposed to inherent risk of
partners' capital being withdrawn at time of personal contingency
and firm being dissolved upon the death/retirement/insolvency of
key partners. Salt business is highly susceptible to adverse
weather conditions and instance of any natural calamities The
salt industry is highly fragmented with the presence of numerous
regional unorganized players. Furthermore, the business is
seasonal and highly dependent on weather conditions and is
exposed to natural calamity.
Key Rating Strengths
Experienced partners and established presence of group Mr.
Shamjibhai Kangad and Mr. Arjanbhai Kangad have more than three
decades of experience into manufacturing and trading of salt
industry. Neelkanth group has presence in various businesses such
as salt manufacturing, civil construction, water supply,
transportation and LAM coke manufacturing.
Location advantage
India is the third largest salt producing country in the world
after China and USA. Gujarat accounts for major portion of total
salt produced in India. Gujarat provides land on lease to the
individual/companies for manufacture of salt and salt based
chemicals.
Neelkanth Enterprise (NKE) is part of Gandhidham based Neelkanth
group which was established in 1989 by Mr. Shamjibhai Kangad, Mr.
Arjanbhai Kangad and Mrs Jasumatiben Kangad. NKE is engaged into
manufacturing and trading of salt. As on March 31, 2017, the firm
is having annual production capacity of 70,000 tons of salt.
Neelkanth group has presence in various businesses such as salt
manufacturing, civil construction, water supply, transportation
and low ash meteorological (LAM) coke manufacturing. The overall
operations of NKE are managed by Mr. Shamjibhai Kangad.
During FY16, NKE reported PAT of INR0.18 crore on a TOI of
INR14.65 crore as against PAT of INR0.35 crore on a TOI of
INR23.12 crore during FY15. During FY17 (Prov.), NKE has achieved
TOI of INR27.14 crore.
PARKSONS CARTAMUNDI: Ind-Ra Affirms 'BB+' Long-Term Issuer Rating
-----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has affirmed Parksons
Cartamundi Private Limited's (PCPL) Long-Term Issuer Rating at
'IND BB+'. The Outlook is Stable. Instrument-wise rating
actions are:
-- INR45.3 mil. Term loans affirmed with 'IND BB+/Stable'
rating; and
-- INR147.5 mil. Fund-based facilities affirmed with
'IND BB+/Stable/IND A4+' rating
KEY RATING DRIVERS
The affirmation reflects PCPL's continued moderate credit
profile. According to the company's 11MFY17 unaudited financials,
revenue was INR520 million (FY16: INR571 million). EBITDA margin
expanded to 10% in 11MFY17 (FY16: 7.1%) on account of a decline
in operating expenses. EBITDA interest coverage (operating
EBITDA/gross interest expense) improved to 2.1x in 11MFY17
(FY16:1.5x) and net financial leverage (total adjusted net
debt/operating EBITDA) to 3.1x (5.5x) due to repayment of debt
and improvement in operating EBITDA.
However, the ratings are supported by the company's comfortable
liquidity position as reflected by 80.1% average utilization of
fund-based facilities over the 12 months ended May 2017.
The ratings also benefit from the promoter's more than four-
decade-long experience in the manufacturing of playing cards and
collectable cards.
RATING SENSITIVITIES
Positive: A significant increase in the scale of operations and
operating profitability leading to a sustained improvement in the
credit metrics will be positive for the ratings.
Negative: A decline in the revenue and operating profitability
resulting in a significant deterioration in the credit metrics
will be negative for the ratings.
COMPANY PROFILE
PCPL is engaged in the manufacturing of playing cards and
collectable cards. In 2010, Belgium-based Cartamundi NV, the
world leader in playing cards and games, entered into 50:50 joint
venture with PCPL. The company's head office is located in
Mumbai, Maharashtra and the manufacturing factory is at Pardi,
Gujarat.
R M ENTERPRISE: CARE Assigns B+ Rating to INR7.50cr LT Loan
-----------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of R M
Enterprise (RME), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 7.50 CARE B+; Stable Assigned
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of R M Enterprise
(RME) remained constrained on account of its project
implementation risk associated with its on-going real estate
residential project and saleability risk associated with the
remaining flats in the highly cyclical real estate industry which
is witnessing downturn along with the risk related to timely
receipt of the advances. Furthermore, the rating remained
constrained on account of its constitution as a partnership firm
and its presence in a cyclical and highly fragmented real estate
industry.
The rating however, derives strength from experienced partners in
the real estate industry.
The ability of RME to complete its on-going project in timely
manner and sale of its units at envisaged prices along with
timely realization of sales proceeds is the key rating
sensitivity.
Detailed description of the key rating drivers
Key Rating Weaknesses
Constitution as a partnership firm: RME being a partnership firm
is exposed to inherent risk of the partners capital being
withdrawn at the time of contingency and also limits the ability
to raise the capital.
High project implementation risk: RME started construction
activities of project in October 2015 and till April 2017, the
firm has incurred cost of INR8.81 crore forming 45% of envisaged
project cost. With balance costs yet to incur, RME is exposed to
project implementation risk.
Risk related to timely receipt of advances: RME has received
booking for 20% of total saleable area and has received the
booking advance of only INR0.20 crore which forms 4.31% of sales
value of booked units against 45% of cost incurred reflecting
lower receipt of advances against cost incurred and thereby high
risk associated with timely receipt of remaining booking
advances. Furthermore, firm's ability to sell the un-booked space
at the envisaged rate and in a timely manner would also be
crucial for timely debt servicing.
Key rating strengths
Experienced partners: RME is promoted by two partners namely Mr.
Rohitbhai Patel and Mr. Mukeshbhai Patel. Both the partners are
holding more than two and half decades of experience in the real
estate industry.
Surat-based (Gujarat), RME was established as a partnership firm
in 2015. RME is currently executing a residential scheme of 3 BHK
51 flats at Surat named 'Kusum Heights' which comprises of 13
floors involving development of total 1.18 lakh Square Feet area.
The project implementation has commenced in October 2015 and till
April 2017, RME has incurred total cost of INR8.81 crore out of
the total cost of INR19.43 crore and rest is expected to be
incurred by end of October 2017. RME has received approvals for
land and other relevant clearances for the project. Both partners
are also associated with Swapna Enterprise which is associate
firm of Green Group. Promoters have gained an expertise in real
estate development and are well versed with the changing demand
of real estate market of Surat.
RAVIRAJ HI-TECH: CARE Assigns B+ Rating to INR10.50cr LT Loan
-------------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of
Raviraj Hi-Tech Private Limited (RHPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 10.50 CARE B+; Stable Assigned
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of Raviraj Hi-Tech
Private Limited (RHPL) is constrained on account of modest scale
of operations with low capitalization, leveraged capital
structure, moderately weak debt coverage indicators and working
capital intensive nature of operations. The rating is further
constrained by exposure of profitability margins to fluctuation
in raw material prices and foreign exchange rates. However, the
rating derives strength from experience of promoters in auto
component industry and association of company with concentrated
albeit reputed customer base. The ability of the company to
increase its scale of operations, improve its solvency position
and profitability margins along-with efficient management of
working capital requirements are the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Strengths
Experienced promoters: The promoters have an average experience
of more than two decades in the same business. Furthermore, the
company also gets benefit from the established network of the
group regarding marketing and customers. This aids the company in
its smooth operations.
Association with reputed clientele albeit concentration risk:
RHPL's clients are reputed entities in their respective line of
business such as Emerson Group, Alfa Laval Group, Husco Group,
Eaton Group, Lucy Group, etc. While top five customers accounted
to around ~75% of the total income in FY17 (Prov.) resulting in
concentration risk.
Key Rating Weaknesses
Modest scale of operations, weak capital structure and debt
coverage indicators: The scale of operations of RHPL remained
small with low networth base in FY17 (Prov.) despite moderate
profitability, thus, depriving it of scale benefits. Furthermore,
high dependence of company on external borrowings resulted in
leveraged capital structure and moderately weak debt coverage
indicators.
Exposure to foreign exchange fluctuation risks: RHPL exports its
products to overseas market mainly to UK, USA and Europe. The
invoicing for the same is done in foreign currency, which makes
the entity exposed to foreign exchange fluctuation risk.
Moreover, the company does not hedge its positions due to foreign
currency losses in the past owing to adverse fluctuation in
foreign currency and faulty hedging strategies which has resulted
in lower profitability and impacted the bottom line.
Susceptibility of operating margin to volatility in raw material
prices: The raw materials (mainly stainless steel and ferrous
non-ferrous metals) required by RHPL accounted for about 75% of
the total cost of sales for the said period. The prices of these
materials are highly volatile. Moreover, around 5% of the raw
material is imported exposing company to foreign exchange risk.
The profit margins of the company are exposed to any sudden spurt
in the raw material prices. However, long standing relationship
with its major suppliers for purchase of aforesaid raw materials
reduces the risk of price volatility to some extent.
Pune-based (Maharashtra) Raviraj Hi-Tech Private Limited (RHPL)
was incorporated in the year 1990 by Mr. Rajendra Pawar as a
proprietorship concern and was subsequently converted to Private
Limited on March, 2004. The company is engaged in manufacturing
of precision engineering and auto components namely Switchgear
Parts, Engineering Parts, Automobile Parts, Hydraulic Parts, and
Process Industry Parts which are used in engineering sector, auto
sector, hydraulic sectors and allied equipment.
The manufacturing facility of the company is located at Pune,
Maharashtra. The company caters to both domestic and
international market. The exports contributed ~60% to the total
operating income in FY16 with major export destinations being
United States, UAE and Europe. RHPL's clients are reputed
entities in their respective line of business such as Emerson
Group, Alfa Laval Group, Husco Group, Eaton Group, Lucy Group,
etc. The top five customers accounted to around 72% of the total
income in FY16. Mr. Rajendra Pawar, Managing Director (MD), looks
after the day-to-day affairs of the company with adequate support
from other directors and team of experienced personnel.
The entity reported TOI of INR21.48 crore with PAT of INR1.09
crore in FY17 (Prov.) against TOI of INR20.38 crore with a
PAT of INR0.75 crore in FY16 (Audited).
RELIANCE BIG: CARE Lowers Rating on INR90cr Bank Loan to D
----------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Reliance Big TV Limited (RBTL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term/Short 90.00 CARE D/CARE D Revised from
term non fund CARE BB (SO)/CARE A4
based bank (Credit Watch with Developing
facilities Implications)
Rating Rationale
The revision in the rating of RBTL factors in the significant
stress in the financial position of the group given the weakening
of cash flows of Reliance Communications Ltd (RCOM) and its
subsequent impact on RBTL.
The ratings assigned to the bank facilities, NCD issue and Short
Term debt issue of RCOM were downgraded from CARE BB (Credit
Watch with Developing Implications)/A4 (Credit Watch with
Developing Implications) to CARE D.
Rating Rationale of Guarantor: RCOM
The ratings assigned to the bank facilities, NCD issue and short
term debt issue of Reliance Communications Limited (RCOM) takes
into account delays in the servicing of its debt obligations as a
result of significant stress on its cash flows and high levels of
debt repayments. The company is currently in discussions with the
lenders of its bank facilities for restructuring / refinancing
its debt which is due for repayment. The company has witnessed
significant deterioration in its financial profile and liquidity
profile over the past six months due to a significant increase in
the competitive intensity in the telecom industry.
Detailed description of the key rating drivers
Key Rating Weakness
Delay in servicing of debt obligation: The group had delayed in
servicing of its debt obligations due to severe deterioration in
the financial and liquidity profile coupled with high debt
service obligations.
Analytical approach: Considering the strong operational and
financial linkage with the subsidiaries, the consolidated
financials of RCOM are considered for analysis purpose.
Reliance Communications Limited (RCOM), founded by late Mr.
Dhirubhai H Ambani, is the flagship company of the Reliance Group
(Reliance Group), led by Mr. Anil Dhirubhai Ambani. RCOM is one
of India's leading integrated telecommunications service
providers with a customer base of around 87.7 million as at
December 31, 2016. RCOM's corporate clientele includes over
39,000 Indian and multinational corporations including small and
medium enterprises and over 290 global, regional and domestic
carriers. It has an established pan-India, integrated (wireless
and wireline), convergent (voice, data and video) digital network
that can support the entire communications value chain, covering
over 21,000 cities and towns and over 400,000 villages. RCOM owns
and operates one of the largest IP enabled connectivity
infrastructure, comprising over 280,000 kilometres of fibre optic
cable systems in India, USA, Europe, Middle East and the Asia
Pacific region. RCOM offers Nationwide Direct-To-Home (DTH)
service through its wholly owned subsidiary, Reliance Big TV
Limited in many towns across the country. Using MPEG 4
technology, it offers close to 290 channels.
RCOM's FY16 total income stood at INR21,819 crore (Rs.21,820
crore in FY15) and net profit of Rs705 crore (Rs.623 crore in
FY15). Furthermore, RCOM's 9MFY17 total income stood at INR15,181
crore (Rs.16,272 crore in 9MFY16) and reported losses at the PAT
level of INR339 crore (Rs.580 crore profit at the PAT level in
9MFY16).
In August 2008, under the brand name Reliance Big TV, Reliance
Group launched the Direct-To-Home (DTH) digital TV Business
currently offering a Standard Definition, High Definition and
High Definition-DVR STBs with large channel bouquet of 290+
channels in HD quality.
Reliance Digital TV is available at nearly 37,350 outlets across
many cities in the country. The retail and distribution reach,
as well as other elements of infrastructure established for its
wireless network, have been leveraged to expand the DTH presence.
Reliance Digital TV currently has about 5 million subscribers as
on December 31, 2016.
During FY16, Reliance Big TV Ltd reported total income of INR638
crores (Rs.994 crore in FY15) and PAT (Profit After Tax) of
INR232 crore (Rs. 12 crore in FY15).
RELIANCE COMMUNICATIONS: CARE Cuts Rating on INR1,180cr Loan to D
-----------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Reliance Communications, as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Short term non 1,180 CARE D Revised from
Fund based bank CARE A4 (SO)
Facilities
Rating Rationale
The revision in the rating of Reliance Communications
Infrastructure Limited factors in the significant stress in the
financial position of the group given the weakening of cash flows
of Reliance Communications Ltd (RCOM) and its subsequent impact
on RCIL. The ratings assigned to the bank facilities, NCD issue
and Short Term debt issue of RCOM were downgraded from CARE BB
(Credit Watch with Developing Implications)/A4 (Credit Watch with
Developing Implications) to CARE D.
Rating Rationale of Guarantor: RCOM
The ratings assigned to the bank facilities, NCD issue and short
term debt issue of Reliance Communications Limited (RCOM) takes
into account delays in the servicing of its debt obligations as a
result of significant stress on its cash flows and high levels of
debt repayments. The company is currently in discussions with the
lenders of its bank facilities for restructuring / refinancing
its debt which is due for repayment. The company has witnessed
significant deterioration in its financial profile and liquidity
profile over the past six months due to a significant increase in
the competitive intensity in the telecom industry.
Detailed description of the key rating drivers
Key Rating Weakness
Delay in servicing of debt obligation: The group had delayed in
servicing of its debt obligations due to severe deterioration in
the financial and liquidity profile coupled with high debt
service obligations.
Analytical approach: Considering the strong operational and
financial linkage with the subsidiaries, the consolidated
financials of RCOM are considered for analysis purpose.
Reliance Communications Limited (RCOM), founded by late Mr.
Dhirubhai H Ambani, is the flagship company of the Reliance Group
(Reliance Group), led by Mr. Anil Dhirubhai Ambani. RCOM is one
of India's leading integrated telecommunications service
providers with a customer base of around 87.7 million as at
December 31, 2016. RCOM's corporate clientele includes over
39,000 Indian and multinational corporations including small and
medium enterprises
and over 290 global, regional and domestic carriers. It has an
established pan-India, integrated (wireless and wireline),
convergent (voice, data and video) digital network that can
support the entire communications value chain, covering over
21,000 cities and towns and over 400,000 villages. RCOM owns and
operates one of the largest IP enabled connectivity
infrastructure, comprising over 280,000 kilometres of fibre optic
cable systems in India, USA, Europe, Middle East and the Asia
Pacific region. RCOM offers Nationwide Direct-To-Home (DTH)
service through its wholly owned subsidiary, Reliance Big TV
Limited in many towns across the country. Using MPEG 4
technology, it offers close to 290 channels.
RCOM's FY16 total income stood at INR21,819 crore (INR21,820
crore in FY15) and net profit of INR705 crore (INR623 crore in
FY15). Furthermore, RCOM's 9MFY17 total income stood at INR15,181
crore (INR16,272 crore in 9MFY16) and reported losses at the PAT
level of INR339 crore (INR580 crore profit at the PAT level in
9MFY16).
RCIL, a wholly owned subsidiary of Reliance Communications
Limited, offers Passive Infrastructure and other telecom
support services. It is the holding company of Reliance Infratel
Limited (RITL). RITL is in the business to build, own and
operate telecommunication towers, optic fiber cable assets and
related assets at designated sites and to provide these
passive telecommunication infrastructure assets on a shared basis
to wireless service providers and other communications service
providers under long term contracts.
During FY16, RCIL reported total income of INR2,962 crores
(INR2,333 crore in FY15) and PAT (Profit After Tax) of INR759
crore (INR120 crore in FY15).
S.M MUSTHAFA: CARE Assigns 'B' Rating to INR22cr LT Loan
--------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of S.M
Musthafa (SMM), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 22 CARE B; Stable Assigned
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of S.M Musthafa (SMM)
is constrained by small scale of operations and low networth
base, leveraged capital structure and weak debt coverage
indicators, short-term revenue visibility from order book
position, and constitution of the entity as a proprietorship firm
with inherent risk of withdrawal of capital. However, the rating
is underpinned by the experienced of the proprietor over one
decade in construction of buildings, growth in total operating
income, and satisfactory profit margins and operating cycle.
The ability of the firm to increase its scale of operations and
improve profitability margins, capital structure and debt
coverage indicators and execute the project in timely manner are
the key rating sensitivities.
Detailed Description of the key rating drivers
Key Rating Weaknesses
Small scale of operations and low networth base: SMM was
established in 2011. In spite of six years of track record, the
scale of operations remains small marked by total operating
income of INR9.26 crore in FY16 (refers to the period April 1 to
March 31) and small networth of INR1.81 crore as on March 31,
2016 compared to other peers in the construction industry.
Financial risk profile marked by leveraged capital structure and
weak debt coverage indicators: The firm has leveraged capital
structure due to increasing debt exposure along with low networth
base. The overall gearing ratio of the firm deteriorated from
0.73x as on March 31, 2015 to 6.83x as on March 31, 2016 mainly
due to the additional bank facility (term loan) of INR14.00 crore
availed by the firm out of which INR11.80 crore was disbursed as
on March 31, 2016 for execution of work orders. Considering the
above factors, the total debt/GCA of the firm also remained weak
during review period i.e, TD/GCA deteriorated from 7.03x in FY14
to 12.14x in FY16. However, the PBILDT interest coverage ratio
improved from 30.50x in FY15 to at 37.55x in FY16 due to high
PBILDT levels.
Short-term revenue visibility from order book position: The firm
has order book of INR2.15 crore as on February 28, 2017.
The said order book provides revenue visibility for short term
period.
Constitution of the entity as proprietorship firm with inherent
risk of withdrawal of capital: Constitution as a proprietor
firm has the inherent risk of possibility of withdrawal of the
capital at the time of personal contingency which can adversely
affect its capital structure.
Furthermore, the firm has restricted access to external
borrowings as credit worthiness of the partners would be key
factors affecting credit decision for the lenders.
Key Rating Strengths
Experience of the proprietor for more than one decade in the
construction industry: SMM was established in the year 2011,
promoted by Mr. Sajeepa Mohammed Musthafa. He is a qualified
Graduate and has over one decade of experience in the civil
construction industry. He is actively involved in the day to day
operations of the firm.
Growth in total operating income and satisfactory profit margins
during the review period: The total operating income of the SMM
increased from INR0.83 crore in FY14 to INR9.26 crore in FY16 due
to year on year increase in execution of work orders coupled with
addition of new orders.
The PBILDT margin of the firm has increased during review period
i.e., 5.95% in FY15 to 6.49% in FY16 due to absorption of fixed
overheads due to increase in scale of operations. Moreover,
despite increase in interest and depreciation cost, the PAT
margin of the firm has increased from 4.83% in FY15 to 9.95% in
FY16 due to income received from long term capital gains in FY16
amounting to INR0.43 crore.
Comfortable operating Cycle: The operating cycle of the entity
remained comfortable during the review period due to timely
collection of payments along with moderate inventory levels.
Furthermore, the firm has established relationship with vendors
for sand, aggregates, etc. who provide credit period of around 2
months. The firm receives the payment from its customer within
15-30 days from the date of raising the bill. Apart, the firm
manages its working capital requirement through unsecured loans
from the proprietor.
S.M Musthafa (SMM) was established in the year 2011 promoted by
Mr. Sajeepa Mohammed Musthafa. The firm is engaged in
construction of buildings for the Education Sector. The firm
receives the work orders directly from the customers for
construction in various segments like building hostels and
college building In FY16, SMM reported a Profit after Tax (PAT)
of INR0.92 crore on a total operating income of INR9.22 crore, as
against a PAT and TOI of INR0.27 crore and INR5.65 crore,
respectively, in FY15 (April 2015- March 2015).
SAVITRI SWADESHI: CARE Assigns B+ Rating to INR10cr LT Loan
-----------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of
Savitri Swadeshi Bikri Kendra (SSB), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 10 CARE B+; Stable Assigned
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of Savitri Swadeshi
Bikri Kendra (SSB) is primarily constrained by its modest scale
of operations with low net worth base and weak financial risk
profile characterized by low profitability margins, leveraged
capital structure and weak debt coverage indicators. The rating
is further constrained by SSB's constitution of the entity being
a proprietorship firm and competitive nature of industry. The
rating, however, draws comfort from experienced management and
association with the established brand "Patanjali", growing scale
of operations and moderate operating cycle.
Going forward, the ability of the firm to profitably increase its
scale of operations while improvement in the capital structure
along with efficient working capital management shall be the key
rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Modest though growing scale of operations coupled with low net
worth base: Despite the growth registered on y-o-y basis in last
3 financial years (FY14-FY16 [refers to the period April 1 to
March 31]) the scale of operations stood modest which limits the
company's financial flexibility in times of stress and deprives
it of scale benefits.
Weak financial risk profile: The financial profile of SSB is
characterized by low profitability margins, leveraged capital
structure, stressed coverage indicators and weak liquidity
position. The profitability margins of the firm had remained on
the lower side owing to the trading nature of business. The
capital structure of the firm stood leveraged for the past three
balance sheet dates (i.e. FY14-FY16) owing to low net worth base
and high dependence on working borrowing borings to meet its
requirements. Furthermore, coverage indicators stood weak for the
past three financial years i.e. FY14-FY16, owing to low and
declining profitability margins.
Highly fragmented nature of industry characterized by intense
competition: The trading industry is a competitive industry
wherein there is a presence of a large number of players in the
unorganized and organized sector. There are a number of small and
regional players catering to the same market which limits the
bargaining power that the company exerts pressure on its margins.
Key Rating Strengths
Experienced management: SSBs overall management is headed by Mrs
Nutan Sharma; who has an experience of five years through her
association with the firm. However the firm's operations are
supported by expertise of Mr. Trilok Sharma and Mr. Shyam Sundar
Sharma, both have their expertise in business management and
finance.
Association with established brand "Patanjali"
SSB has set up extensive marketing and distribution network to
sell its products and cover mainly Gurugram, Rewari, Mahendergarh
and Nuh. 'Patanjali' is an established brand among the masses
across the country, with the promoters being instrumental in
reviving yoga and Ayurvedic products at various levels. Firm's
association with PAL and DP provides broad support with respect
to the product off take.
Moderate operating cycle
The operating cycle of the Firm stood moderate at 24 days in FY16
with average inventory holding 34 days in FY16. The Firm allows
as well as receives credit period of around 1-2 months owing to
long-standing relationship.
Gurgaon-based (Haryana) SSB was established as a proprietorship
firm in 2012 by Mrs Nutan Sharma. The firm is currently being
managed by Mr. Trilok Sharma and Mr. Shyam Sunder Sharma. SSB has
distributorship of Patanjali Ayurvedic Limited (PAL) and Divya
Pharmacy (DP). Patanjali has 500-plus products on offering for
customers categorized, namely, into two segments, ie, PCD
(Personal Care Division) which includes cosmetic products such as
Face wash, toothpaste, hair cleaner, Detergent Powder, etc. Food
and Beverage Division (F&B) which includes Ghee, Mustard Oil,
Rice, Ata, etc. M/s Savitri Swadeshi Vikri Kendra caters to the
needs of distributers, Patanjali Chikitsalya Arogya Kendra of 4
districts, namely, Gurgaon, Rewari, Mahendergarh and Nuh. Total
around 40 such outlets are there in the entire four districts.
In FY16, SSB has achieved a total operating income (TOI) of
INR74.67 crore with PAT of INR0.35 crore as against total
operating income (TOI) of INR38.16 crore and PAT of INR0.22 crore
in FY15. In FY17 (based on provisional results), the firm
achieved a total operating income of INR90 crore.
SHIV SHAKTI: CARE Reaffirms B+ Rating on INR8cr LT Loan
-------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Shiv Shakti Rice Mills (SSRM), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 8 CARE B+; Stable Reaffirmed
Detailed Rationale and Key Rating Drivers
The rating assigned to the bank facilities of Shiv Shakti Rice
Mills (SSRM) continues to remain constrained by its small scale
of operations coupled with low net worth base, weak financial
risk profile as characterized by low profitability margins,
leveraged capital structure, weak debt coverage indicators and
elongated operating cycle. The rating is further constrained by
dependence on the vagaries of nature and its presence in a
fragmented and competitive industry. The rating, however,
continues to take comfort from experienced partners and favorable
manufacturing location. Going forward; ability of SSRM to
increase its scale of operations while improving its
profitability margins and overall gearing ratio shall remain the
key rating sensitivities. Also, effectively managing the working
capital requirements shall be the key rating sensitivity.
Detailed description of the key rating drivers
Key Rating Weakness
Small scale of operations: The scale of operations stood small at
INR21.56 crore in FY16 (refers to the period April 1 to March 31)
which limits the firm's financial flexibility in times of stress
and deprives it of scale benefits.
Low profitability margins, leveraged capital structure and weak
debt coverage indicators: The firm's profitability margins have
been historically on the lower side owing to low value addition
and its presence in a highly fragmented and competitive industry.
Interest cost and depreciation has further restricted the net
profitability of the firm. Also, the capital structure of the
company continues to remain leveraged on account of high
dependence on external borrowings to meet the working capital
requirements coupled with low capital base. Furthermore, the debt
coverage indicators of the firm continue to remain weak on
account of low profitability margins coupled with high debt
levels.
Elongated operating cycle: Operations of the firm continue to
remain elongated marked by operating cycle of 153 days in FY16.
Being a seasonal product, the firm maintains adequate inventory
of raw material (paddy) to cater to the milling and processing of
rice throughout the year, resulting in average inventory period
of around 4-5 months. Furthermore, the same elongated over the
years mainly on account of accumulated inventory due to fall in
prices. The firm normally allows credit period of around 2 months
to its customers. Also, it procures the raw material on credit of
60 days. The working capital limits of the firm remained fully
utilized during the peak season from November to January, however
on an average it remained 60% utilized during the past 12 months
ended April, 2017.
Business susceptible to the vagaries of nature: Paddy is the
major raw material and the peak paddy procurement season is
during November to January during which the firm builds up raw
material inventory to cater to the milling and processing of rice
throughout the year. The monsoon has a huge bearing on crop
availability which determines the prevailing paddy prices.
Fragmented and competitive nature of industry: The commodity
nature of the product makes the industry highly fragmented, with
numerous players operating in the unorganized sector with very
less product differentiation.
Furthermore, the concentration of rice millers around the paddy
growing regions makes the business intensely competitive.
Key Rating Strengths
Experienced partners in processing of paddy: The operations of
SSRM are currently managed by Mr. Nathi Ram, Mr. Madan Lal, Mr.
Ram Pal and Mr. Ram Phal. All the partners are having more than
two and half decades of experience in the rice processing
industry through their association with SSRM.
Favorable manufacturing location: Its presence in the Haryana
region which is one of the highest producers of paddy in India,
gives additional advantage in terms of easy availability of the
raw material as well as favorable pricing terms. SSRM owing to
its location is in a position to cut on the freight component of
incoming raw materials.
Karnal-based (Haryana) Shiv Shakti Rice Mills (SSRM) was
established in 1990 as partnership concern by four partners viz.,
Mr. Nathi Ram, Mr. Madan Lal, Mr. Ram Pal and Mr. Ram Phal
sharing profit and losses in the ration of 20%, 24%, 16%, and 40%
respectively. The firm is engaged in processing and trading of
both basmati and non-basmati with an installed capacity of 2
metric tons per hour as on March 31, 2017. The firm procures the
raw material (paddy) from grain market located in Haryana and
Uttar Pradesh through commission agents and sells its product to
wholesalers in Haryana, U.P, Delhi, Punjab and Gujarat. Kishori
Lal Nathi Ram is an associate firm engaged as a commission agent
for rice trading.
For FY16 (refers to the period April 1 to March 31), SSRM
achieved a total operating income (TOI) of INR21.56 crore with
profit after tax (PAT) of INR0.08 crore respectively as against
INR26.24 crore and INR0.07 crore in FY15. Furthermore, the firm
achieved TOI of around INR16.68 crore in FY17 (based on
provisional results).
SIGNET CONDUCTORS: ICRA Reaffirms B+ Rating on INR15cr Loan
-----------------------------------------------------------
ICRA Ratings has reaffirmed the long-term rating of [ICRA]B+ on
the INR15.87-crore fund-based bank facilities and the short-term
rating of [ICRA]A4 on the INR4.65-crore non-fund based facilities
of Signet Conductors Private Limited (SCPL). ICRA has also re-
affirmed the long-term/ short-term rating of [ICRA]B+/[ICRA]A4 on
the INR0.42-crore unallocated limits of SCPL. The outlook on the
long-term rating is 'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Term Loan 0.87 [ICRA]B+, re-affirmed;
Stable outlook assigned
Working Capital
Limits 15.00 [ICRA]B+, re-affirmed;
Stable outlook assigned
Non-fund Based
Limits 4.65 [ICRA]A4, re-affirmed
Long-Term/Short-
Term Unallocated 0.42 [ICRA]B+ (Stable)/[ICRA]A4;
re-affirmed
Rationale
ICRA's rating reaffirmation takes into account healthy growth in
SCPL's operating income (OI) in the past two years, which has,
however, been accompanied by declining operating profitability
and increasing gearing levels.
ICRA's ratings continue to take into account SCPL's limited scale
of operations in a highly competitive and fragmented conductor
manufacturing industry, resulting in modest economies of scale
and moderate profitability indicators, with the company's margins
being vulnerable to raw material price fluctuations. The ratings
continue to factor in the high gearing of the company due to the
funding of working capital requirements primarily through bank
borrowings and a low net worth base. The ratings, however,
continue to derive comfort from the extensive experience of the
promoters in the industry and the company's established client
base. Further, the ratings also derive comfort from healthy
orders from new clients such as Bharat Heavy Electrical Limited
(BHEL), which would improve the operating income and
profitability in the near term.
Going forward, the ability of the company to increase its scale
of operations and improve its operating margins while improving
the capital structure and maintaining optimal working capital
intensity will be the key rating sensitivity.
Key rating drivers
Credit strengths
* Extensive experience of promoters in the conductor
manufacturing business
* Large manufacturing order received from BHEL coupled with
continuous addition of new customers provides revenue
visibility in the near term
Credit weaknesses
* Highly competitive and fragmented industry marked by the
presence of large number of players limits the pricing
flexibility of SCPL
* High client concentration risk, with top five customers
contributing 81% to the total sales in FY2017
* Weak financial profile marked by low net worth base and
high working capital intensity.
Description of key rating drivers:
The operational profile of SCPL has been weak on account of its
small scale of operations. Although, the scale has been improving
over the past few years with addition of new customers in the
profile, dealing with such customers limits the bargaining power
of the entity, thereby limiting its profitability.
Although the raw material procurement of the company is order
backed, an increase in inventory days exposes it to the risk of a
high cost inventory in fluctuating market conditions. Further,
with Hindalco being the main supplier, the company's working
capital intensity also remains under stress as it has to make
advance payments.
Low entry barriers in terms of capital expenditure and technical
knowhow required have resulted in the presence of a large number
of players in the market, further constraining the company's
margins.
SCPL was set up in 1991 as a private limited company by Mr. D.S.
Sahni. The company manufactures bare and paper insulated
aluminium and copper conductors, which find application in
electric motors, power generators and attenuators for
transmission and distribution of power. The company's
manufacturing facility in Rewa, Madhya Pradesh has a licensed
capacity of 2,400 metric tonnes per annum.
SCPL recorded a net profit after tax (PAT) of INR0.12 crore on an
operating income of INR20.40 crore in FY2016 as against a net
profit of INR0.08 crore on an operating income of INR14.18 crore
in the previous year. SCPL, on a provisional basis, reported a
PAT of INR0.13 crore on an operating income of INR26.75 crore in
FY2017.
SRI JYOTHI: CARE Assigns B+ Rating to INR15cr LT Loan
-----------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Sri
Jyothi Cotton Ginners (SJCH), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 15 CARE B+; Stable Assigned
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of Sri Jyothi Cotton
Ginners (SJCH) is constrained by fluctuating total operating
income and thin profitability margins, leveraged capital
structure and weak debt coverage indicator, highly fragmented
industry and seasonal nature of business, highly fragmented
industry with susceptibility of operating margins to cotton price
fluctuation and constitution of the entity as proprietorship
concern with inherent risk of withdrawal of capital. The rating,
however, derives strength from long track record and experienced
of the proprietor, locational advantage and comfortable operating
cycle.
Going forward, the ability of the firm to improve the
profitability margins, capital structure and debt coverage
indicators and manage its working capital requirements
efficiently are the key rating sensitivities.
Detailed Description of the key rating drivers
Key Rating Weaknesses
Fluctuating total operating income and thin profitability margins
during the review period: The total operating income (TOI) of the
firm has been fluctuating during the review period depending upon
number of orders received from customers and availability of
cotton in the area of Raichur, Karnataka. The TOI of the firm
increased from INR124.42 crore in FY14 to INR143.34 crore in FY15
(refers to the period April 1 to March 31), however, declined to
INR140.34 crore in FY16. During FY17 (Provisional), the firm has
managed to achieve total operating income of INR147 crore. The
PBILDT margin of the firm though improving y-o-y remained thin
during the review period FY14-FY16 i.e., in the range of 1.01% to
1.04% due to fluctuating raw material prices. The PAT margins are
also thin, however, improving y-o-y i.e., from 0.17%- 0.22% due
to increase in PBILDT level.
Leverage capital structure and weak debt coverage indicators: The
capital structure of the firm has been leveraged during the
review period due to low networth base along with high debt
levels. The debt equity and overall gearing ratio of the firm
deteriorated from 0.79x and 2.38x respectively as on March 31,
2015 to 1.82x and 6.23x respectively as on March 31, 2016 on
account of enhancement of working capital limit along with
increase in long term loans. Furthermore, the firm availed adhoc
limit of INR1 crore as on balance sheet date for the period of 15
days to meet the working capital requirement during the peak
season.
The debt coverage indicators marked by total debt/GCA and PBILDT
interest coverage ratio stood weak at 14.88x and 2.73x
respectively in FY16. Total debt/GCA of SJCG deteriorated from
5.09x in FY15 to 14.88x in FY16 due to increase in debt levels
coupled with decrease in gross cash accruals. The PBILDT interest
coverage ratio also deteriorated from 2.79x in FY15 to 2.73x in
FY16 due to marginal increase of interest cost.
Highly fragmented industry with susceptibility of operating
margins to cotton price fluctuation: Prices of raw cotton are
highly volatile in nature and depend upon the factors like area
under cultivation, crop yield, international demand-supply
scenario, export quota decided by the government and inventory
carry forward of the previous year. Hence, the profitability
margins of the company are susceptible to fluctuation in raw
material prices.
Presence in highly fragmented industry and seasonal nature of
business: The company is engaged in the ginning and pressing of
cotton which involves very limited value addition and hence
results in thin profitability. Moreover, on account of large
number of units operating in cotton ginning business, the
competition within the players remains very high resulting in
high fragmentation and further restricts the profitability.
Cotton being a seasonal crop as it is available mainly from
November to February results into a higher inventory holding
period for the business. Thus, aggregate effect of both the above
factors results in exposure of ginners to price volatility risk.
Constitution of the entity as a proprietorship concern with
inherent risk of withdrawal of capital: Constitution as a
proprietor firm has the inherent risk of possibility of
withdrawal of the capital at the time of personal contingency
which can adversely affect its capital structure.
Furthermore, the firm has restricted access to external
borrowings as credit worthiness of the partners would be key
factors affecting credit decision for the lenders.
Key Rating Strengths
Long track record and experience of proprietor for a decade in
the cotton industry: Sri Jyothi Cotton Ginners (SJCG) was
established in the year 2008. The firm is managed by Mr. Gopal,
who is a qualified graduate and has more than a decade of
experience in the cotton ginning industry. Due to long term
presence in the market, the proprietor has good relation with
customer and suppliers resulting in bagging of new orders from
existing customers along with addition of new customers.
Locational advantage: SJCG is well connected to prominent cotton
growing belts. The firm enjoys proximity to the cotton growing
areas of Raichur, Karnataka. Hence, it derives benefits from
lower logistics expenditure (both on transportation and storage),
easy availability of labour and procurement of cotton at
competitive prices, and consistent demand for finished goods
resulting in sustained revenue visibility.
Comfortable operating cycle: The operating cycle of the firm
remained comfortable during the review period and stood
at 12 days in FY16. The average collection period marginally
increased from 47 days in FY14 to 52 days in FY16 due to addition
of new customers where the firm has increased the credit period
in order to retain them. The firm makes the payment to its
domestic supplier within 15-30 days. SJCG holds the raw material
and final product (cotton lint) for about 30-45 days. The average
utilization of the working capital limit was around 85-90% for
the last 12 months ended April 30, 2017.
Sri Jyothi Cotton Ginners (SJCG) was established in the year 2008
as a proprietorship firm by Mr. Gopal. The firm is engaged in
processing of cotton lint and sale of cotton seeds. The firm
sells its products to the customers located in and around
Karnataka and purchase the raw material from local farmers and
traders. The firm has around more than 300 customers. The
installed capacity of the firm is 60 tons of cotton lint per day.
SJCJ generates around 75% revenue from sale of ginned cotton and
the remaining from sale of cotton seeds.
In FY16 (refers to the period April 01 to March 31), SJCG
reported a Profit after Tax (PAT) of INR0.30 crore on a total
operating income of INR140.34 crore, as against a PAT and TOI of
INR0.28 crore and INR140.34 crore, respectively, in FY15 (April
2015- March 2015). Furthermore, the company has achieved sales of
INR147 crore during FY17 (Provisional).
SWOSTI PREMIUM: Ind-Ra Migrates 'BB' Rating to Non-Cooperating
--------------------------------------------------------------
India Ratings and Research (Ind-Ra) has migrated Swosti Premium
Ltd's Long Term Issuer Rating of 'IND BB' to the non-cooperating
ategory. The issuer did not participate in the rating exercise
despite continuous requests and follow-ups by the agency.
Therefore, investors and other users are advised to take
appropriate caution while using these ratings. The rating will
now appear as 'IND BB(ISSUER NOT COOPERATING)' on the agency's
website. The instrument-wise rating actions are:
-- INR40 mil. Fund-based facilities migrated to Non-Cooperating
Category;
-- INR701.1 mil. Long-term loans migrated to Non-Cooperating
Category; and
-- INR9.6 mil. Non-fund-based facilities migrated to Non-
Cooperating Category
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
April 20, 2016. Ind-Ra is unable to provide an update, as the
agency does not have adequate information to review the ratings.
COMPANY PROFILE
Swosti Premium was incorporated as a public limited company in
1997 and commenced operations in 2000. The company operates a
three-star hotel Swsoti Premium in Bhubaneswar, Odisha.
TIRUVANNAMALAI MUNICIPALITY: CARE Assigns B Issuer Rating
---------------------------------------------------------
CARE Ratings has assigned CARE B (Is) Issuer Rating to
Tiruvannamalai Municipality.
The rating is subject to overall debt level of INR 17 crore.
Detailed Rationale & Key Rating Drivers
The rating of Tiruvannamalai Municipality factors in its stressed
financial condition marked by a revenue deficit position since
FY13. The rating is further constrained by increasing debt burden
of the municipality, low tax base, low self-reliance, low
collection efficiency of tax and user charges, its inability to
cover its establishment and administrative expenditure from its
own revenue source and its increasing debt burden. The rating has
also taken into consideration the increase in capital expenditure
undertaken by the Municipality towards creating infrastructure,
park improvement and office buildings. Additionally, the economic
profile of the region which is favoured tourist destination being
a famed temple town has also been taken into account.
Going forward, the ability of Tiruvannamalai Municipality to
improve its own revenue, and move to a revenue surplus would be
the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Strengths
Growth in Capital expenditure: Although the capital expenditure
has recorded a growth rate of 10% during FY12-FY15, same has
declined by 62% in FY15 to grow by 11.2% in FY16. Predominantly
projects towards Roads and water supply are undertaken under
capital expenditure. In addition, projects towards park
improvement and office buildings are undertaken. All these
projects are financed from grants.
Key Rating Weaknesses
Declining revenue receipts: Revenue receipts of the Municipality
have contracted during in FY15, after recording a 22% growth in
FY14. It was also lower than that in FY13. This decline in
revenues can be largely attributed to the decline in receipts
under the devolution fund and other incomes (rents, lease of
land, road restoration charges etc.). Tax revenues on an average
accounted for 17% of the revenues of the Municipality during
FY12 - FY15. There has been a moderation in the tax revenues in
FY15. The tax base of the Municipality is low as the region is
predominantly a religious place. As per data provided by the
municipality the revenue receipts for Fy16 stood at INR19.24 cr.
Revenue expenditure growing faster than revenue receipts: The
Municipalities revenue receipts are not sufficient to cover it
establishment and Operations & maintenance expenditure owing to a
faster increase in revenue expenditure in FY15 and FY16. The
increase in revenue expenditure can be ascribed to the increase
in operation and maintenance and establishment expenditure.
Operation and maintenance expenditure has been increasing since
FY13 on account of increase in fuel, power and labour charges.
Revenue Deficit: The finances of the Municipality have been
stressed in recent years with it recording a revenue deficit
since FY13. The revenue deficit has been widening during FY13-15.
The ratio of revenue deficit to revenue receipt too has
been increasing consistently over the years.
Low self-reliance: The municipality is heavily dependent upon the
devolution funds received from government and hence exhibits a
low level of self-reliance with only 40% of its revenues being
accounted by its own revenues viz. tax and non-tax revenues.
Low level of collection efficiency: The Municipality has low
collection efficiency of its taxes and user charges. The
collection efficiency has declined from 53% since FY13 to 40% in
FY16.
Weak civic Infrastructure: Tiruvannamalai has a weak civic
infrastructure with water supply and storm water drainage
coverage at around 60%. Around 30% of the municipality is covered
under sewerage system and 60% under solid waste collection.
Increase in debt burden: The debt of the municipality has
increased since FY13 from INR13.05 cr to INR16.56 cr in FY16.
Tiruvannamalai is a temple town and a major pilgrimage centre in
Tiruvannamalai district in Tamil Nadu. It has been declared as a
Special Grade Municipality in 2008. The Municipality is spreads
over 13.64 sq. km km and is divided in to 39 municipal wards. As
per 2011 census, the population of the town stands at 1,44,683 of
which 44,594 comprises of the slum population.
The region is well connected by road and rail network and
airport.
Trade, commerce and service activities such as transport,
ommunication, storage are the major contributors to the
economy of the town. The region sees a large number of tourists.
* INDIA: Banks to Go to Court Over Bad Loans of 12 Large Debtors
----------------------------------------------------------------
Anto Antony at Bloomberg News reports that India's banks have
been ordered to use the country's courts to resolve bad loans
totaling about INR2 trillion ($31 billion) issued to 12 large
debtors.
The Reserve Bank of India told the banks to use insolvency laws
to find a solution for the debtors, which account for a quarter
of the country's total bad loans, before moving on to resolve the
other problem accounts within six months, Bloomberg News citing a
statement posted on the central bank's website on June 13. Indian
banks have among the world's worst stressed-asset ratios with
total soured loans of more than $180 billion, Bloomberg notes.
Last month, Prime Minister Narendra Modi's government gave new
powers to the RBI in an effort to clean up the bad loan mess,
Bloomberg recalls. It amended the Banking Regulation Act to
enable the RBI to order lenders to initiate insolvency
proceedings against defaulters and to create committees to advise
banks on recovering nonperforming loans.
The RBI didn't disclose the names of the 12 largest debtors,
Bloomberg notes.
Bloomberg relates that for Modi, getting rid of the bad loans is
crucial to reviving Asia's third-largest economy and meeting his
election pledge of adding jobs before his party seeks re-election
in 2019. But banks have so far filed only 18 cases under the
Insolvency and Bankruptcy Act, which was passed by India's
parliament last year, according to a note by analysts at Credit
Suisse Group AG cited by Bloomberg. The delay in getting verdicts
has deterred lenders from taking more cases to the insolvency
court.
Resolving the 12 largest accounts will entail provisions of at
least 50 percent of the 2 trillion-rupee face value of the total
loans, according to Credit Suisse, Bloomberg relays.
"Provisions that lenders have to set aside for these stressed
accounts referred to insolvency courts could shoot up, leading to
severe pain on bank balance sheets over the next two quarters,"
Bloomberg quotes Asutosh Kumar Mishra, a Mumbai-based banking
analyst at Reliance Securities Ltd., as saying.
Stressed assets -- bad loans, restructured debt and advances to
companies that can't meet servicing requirements -- have risen to
about 17 percent of total loans, the highest level among major
economies, Bloomberg discloses citing data compiled by the
government.
=========
J A P A N
=========
TOSHIBA CORP: Western Digital Seeks Injunction to Block Chip Sale
-----------------------------------------------------------------
Ian King at Bloomberg News reports that Western Digital Corp.
asked a court in California for an order blocking the sale of the
chip unit of Toshiba Corp., its partner in a manufacturing joint
venture.
Bloomberg relates that the U.S. company is trying to stop Toshiba
from transferring joint ventures that they have together in
preparation for a sale, it said in a statement on June 14.
Western Digital on June 14 asked a San Francisco state court to
keep the sale on hold while it pursues arbitration, Bloomberg
says.
According to Bloomberg, the companies are increasingly at odds as
Toshiba tries to raise cash to plug a multibillion-dollar
writedown following a disastrous investment in the nuclear power
equipment business. The legal step may add yet another impediment
to an already complicated process.
"We cannot comment as we have not yet received the complaint,"
Bloomberg quotes Kaori Hiraki, a spokeswoman for Toshiba, as
saying. "We are proceeding with selecting the preferred bidder by
the second half of June, and will seek to close the definitive
agreement by June 28."
Western Digital wants to make sure Toshiba's chipmaking operation
isn't bought by a competitor, a development that could disrupt
its access to chips that are the future of the computer storage
business that provides it with the majority of its revenue,
Bloomberg says. The U.S. and Japanese companies have clashed over
their agreement and what legal rights Western Digital has to have
a say in the sale.
"Toshiba has no right to offer to transfer its joint venture
interests to a third party and has no ability to enter into any
transaction with a third party without obtaining our consent,"
Western Digital said in the statement. "We are confident in our
ability to protect our interests and rights."
Western Digital Chief Executive Officer Steve Milligan traveled
to Tokyo last week to press for an acquisition of the division,
as he continues to spar with Toshiba over the legality of the
sale. Western Digital is planning to offer JPY2 trillion ($18.2
billion), a person familiar with the matter has said, but Toshiba
is skeptical of the bid because of its financing and conditions,
Bloomberg relays.
Bloomberg says Toshiba previously told Western Digital not to
interfere in the sale and that it may take legal action. It also
said the U.S. company failed to formalize their relationship
after Western Digital became its flash-memory manufacturing
partner with the acquisition of SanDisk Corp. last year, adds
Bloomberg.
About Toshiba
Toshiba Corporation (TYO:6502) -- http://www.toshiba.co.jp/-- is
a Japan-based manufacturer involved in five business segments.
The Digital Products segment offers cellular phones, hard disc
devices, optical disc devices, liquid crystal televisions, camera
systems, digital versatile disc (DVD) players and recorders,
personal computers (PCs) and business phones, among others. The
Electronic Device segment provides general logic integrated
circuits (ICs), optical semiconductors, power devices, large-
scale integrated (LSI) circuits for image information systems and
liquid crystal displays (LCDs), among others. The Social
Infrastructure segment offers various generators, power
distribution systems, water and sewer systems, transportation
systems and station automation systems, among others. The Home
Appliance segment offers refrigerators, drying machines, washing
machines, cooking utensils, cleaners and lighting equipment. The
Others segment leases and sells real estate.
As reported in the Troubled Company Reporter-Asia Pacific on
on March 21, 2017, that S&P Global Ratings has lowered its long-
term corporate credit rating on Toshiba Corp. two notches to
'CCC-' from 'CCC+' and lowered the senior unsecured debt rating
three notches to 'CCC-' from 'B-'. Both ratings remain on
CreditWatch with negative implications. Also, S&P is keeping its
'C' short-term corporate credit and commercial paper program
ratings on the company on CreditWatch negative. The long- and
short-term ratings on Toshiba have remained on CreditWatch with
negative implications since December 2016, when S&P also lowered
the long-term ratings because of the likelihood that the company
might recognize massive losses in its U.S. nuclear power
business; S&P kept them on CreditWatch negative when it lowered
the long- and short-term ratings in January 2017.
=====================
P H I L I P P I N E S
=====================
RURAL BANK OF BAROTAC: Creditors Must File Claims By July 11
------------------------------------------------------------
Creditors of the closed Rural Bank of Barotac Viejo (Iloilo),
Inc. have until July 11, 2017 only to file their claims against
the bank's assets. Claims filed after said date shall be
disallowed. Creditors refer to any individual or entity with a
valid claim against the assets of the closed Rural Bank of
Barotac Viejo and include depositors with uninsured deposits that
exceed the maximum deposit insurance coverage (MDIC) of
PHP500,000.
The Philippine Deposit Insurance Corporation (PDIC), the
liquidator of the closed Rural Bank of Barotac Viejo, announced
that creditors of the closed bank may file their claims
personally at the PDIC Public Assistance Center located at the
3rd Floor, SSS Bldg., 6782 Ayala Avenue corner V.A. Rufino St.,
Makati City, Monday to Friday, 8:00 AM to 5:00 PM, except
holidays. Creditors also have the option to file their claims
through mail addressed to the PDIC Public Assistance Department,
6th Floor, SSS Bldg., 6782 Ayala Avenue corner V.A. Rufino St.,
Makati City. A sample Claim Form against the assets of the closed
bank may be downloaded from the PDIC website, www.pdic.gov.ph.
The Corporation also reiterated that creditors should transact
only with authorized PDIC personnel.
In case claims are denied, creditors shall be notified officially
by PDIC through mail. Claims denied or disallowed by the PDIC may
be filed with the liquidation court within sixty (60) days from
receipt of final notice of denial of claim. PDIC also clarified
that depositors who filed their deposit insurance claims on or at
any time prior to July 11, 2017 are deemed to have filed their
claims against the closed bank's assets.
Rural Bank of Barotac Viejo was ordered closed by the Monetary
Board (MB) of the Bangko Sentral ng Pilipinas on February 23,
2017 and as the designated Receiver, PDIC was directed by the MB
to proceed with the takeover and liquidation of the closed bank
in accordance with Section 12(a) of Republic Act No. 3591, as
amended. The bank's Head Office is located along Zulueta Drive,
Brgy. Poblacion, Barotac Viejo, Iloilo. Its lone branch is
located in Concepcion, Iloilo.
All requests and inquiries relating to the closed Rural Bank of
Barotac Viejo should be addressed to the PDIC Public Assistance
Department through mail at the 6th Floor, SSS Bldg., 6782 Ayala
Avenue corner V.A. Rufino St., Makati City, or through telephone
numbers (02) 841-4630 or 841-4631. Depositors and creditors
outside Metro Manila may call the PDIC Toll Free Hotline at 1-
800-1-888-PDIC (7342). Walk-in clients may also visit the PDIC
Public Assistance Center at the 3rd Floor, SSS Bldg., 6782 Ayala
Avenue corner V.A. Rufino St., Makati City, Monday to Friday,
8:00 AM to 5:00 PM, except holidays.
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V I E T N A M
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SAIGON THUONG: Moody's Cuts Ratings to Caa1; Keeps Outlook Neg.
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Moody's Investors Service has downgraded Vietnam-based Saigon
Thuong Tin Commercial Joint-Stock Bank's (Sacombank) long-term
deposit and issuer ratings to Caa1 from B3.
The ratings outlook remains negative.
Concurrently, Moody's has downgraded the bank's baseline credit
assessment (BCA) and adjusted BCA to caa2 from caa1, and the
long-term counterparty risk assessment to B3(cr) from B2(cr). The
bank's NP short-term bank deposit and issuer ratings, and NP(cr)
short-term counterparty risk assessment were affirmed.
RATINGS RATIONALE
Moody's downgraded Sacombank's long-term ratings to Caa1 from B3
mainly on account of the bank's weakened solvency position, as
reflected in its large stock of problem assets. Concurrently,
Moody's has downgraded the bank's BCA to caa2 from caa1 to
reflect the higher risk to the bank's standalone financial
position.
In May 2017, the State Bank of Vietnam, which is Vietnam's
central bank, had approved the restructuring plan for Sacombank
from now until 2025. According to Sacombank, the plan is the
consequence of its merger with the problematic Southern Bank (not
rated) in late 2015.
The plan identifies problem assets that need to be dealt with by
2025. The plan gives the bank the flexibility to create credit
provisions over the coming years, without the need to create
provisions upfront, giving Sacombank time to gradually work out
its problem assets through the repossession and disposal of
collateral. The plan does not envisage the provision of capital
or liquidity support either from the government or the State Bank
of Vietnam. Moody's also understands that the majority
shareholders of Sacombank have entrusted their shares to the
State Bank of Vietnam through the Vietnam Asset Management
Company (VAMC), which currently manages these shares.
Sacombank's total stock of problem assets stood at around VND90
trillion at the end of 2016, or around 27% of total assets.
According to the bank, problem assets include non-performing
loans, VAMC securities, repo transactions, and accrued interest
receivables.
According to Moody's, the bank has low balance sheet buffers
against such a large stock of problem assets. Buffers included
credit provisions of VND4.8 trillion and Tier 1 capital of
VND19.6 trillion at the end of 2016. In Moody's view, it will
take the bank many years to gradually resolve its large stock of
problem assets.
As part of its restructuring plan, Sacombank plans to
aggressively repossess and sell collateral that is backing its
problem assets. According to the bank, the value of such
collateral -- mostly real estate -- amounted to VND77 trillion at
the end of 2016, and bank management has very high recovery
expectations on problem assets in the coming years. Moody's
considers that success in recoveries is far from assured, because
collateral repossession can be lengthy in Vietnam, while its
monetization depends on the dynamics of the real estate market.
The reported capital position of the bank is modest, with a
tangible common equity to adjusted risk weighted assets ratio of
8.5% at the end of 2016. The economic capital position of the
bank is actually much weaker in Moody's view, because of the
large provisioning gap, even if the bank is able to sell the
collateral at close to its expected valuation. Moreover, Moody's
expects that Sacombank will pursue a rapid growth strategy to
increase the share of performing assets, which will create
further negative pressure on its capital position.
Profitability will remain very low in the coming years, as a
large part of pre-provision income will be channeled into credit
provisions. For 2016, the bank's financial performance was close
to break-even level.
Sacombank's liquidity and funding profiles were relatively stable
in 2016 and the early part of 2017, however, at a thin level,
after deteriorating in 2015 following the merger with Southern
Bank. Liquid assets amounted to 14% of total assets at the end of
March 2017, providing a weak buffer against funding and liquidity
shocks.
Sacombank's Caa1 deposit and issuer ratings benefit from one-
notch uplift above the bank's caa2 BCA, based on "moderate"
support probability from the Government of Vietnam (B1 positive).
Moody's support assumption is underpinned by Sacombank's
approximate 4% market share in banking system assets at the end
of 2016. Although Moody's does not expect any capital support to
be provided to Sacombank from the government, some emergency
liquidity assistance from the State Bank of Vietnam may be
provided, in case of need.
Because the bank's BCA was downgraded to caa2 from caa1, Moody's
has downgraded its adjusted BCA to caa2 from caa1, and long-term
counterparty risk assessment to B3(cr) from B2(cr).
OUTLOOK IS NEGATIVE
The negative outlook captures the elevated downside risks related
to the rating of Sacombank. In Moody's view, the bank faces very
high solvency and liquidity risks.
WHAT COULD CHANGE THE RATING UP/DOWN
The ratings could be downgraded if the bank achieves very limited
success in cleaning its balance sheet through collateral
disposals in the next 12-18 months, or if its liquidity profile
deteriorates below its currently weak level.
The ratings could be upgraded if the bank materially improves its
solvency profile, by successfully repossessing and disposing of
collateral, including writing off large parts of its problem
assets. Sustainable improvements in the bank's liquidity profile
will also be positive for the rating.
Furthermore, a substantial core capital increase will be positive
for the rating. However, Moody's sees a low probability of the
bank being recapitalized.
The principal methodology used in these ratings was Banks
published in January 2016.
Saigon Thuong Tin Commercial Joint-Stock Bank, headquartered in
Ho Chi Minh City, Vietnam, had consolidated assets of VND344
trillion at the end of March 2017.
*********
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*********
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