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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
Tuesday, July 18, 2017, Vol. 20, No. 141
Headlines
I N D I A
ANTIQUE ART: ICRA Assigns 'B' Rating to INR9.60cr LT Loan
AKAL INFORMATION: ICRA Reaffirms B+ Rating on INR5cr LT Loan
AKSHAR GINNING: ICRA Reaffirms B+ Rating on INR8.0cr LT Loan
BMS PROJECTS: ICRA Reaffirms B- Rating on INR5cr Cash Loan
CLASSIC COTTON: ICRA Reaffirms B+ Rating on INR22cr LT Loan
KARE POWER: ICRA Lowers Rating on INR121.80cr Term Loan to B
KOHINOOR CARPETS: ICRA Reaffirms B+ Rating on INR15cr LT Loan
NUPUR CARPETS: ICRA Reaffirms B- Rating on INR4.80cr LT Loan
SHITARAM INDUSTRIES: ICRA Reaffirms B- Rating on INR4.50cr Loan
SSV VALVES: ICRA Reaffirms B+ Rating on INR12.91cr Loan
J A P A N
TAKATA CORP: Taps Prime Clerk as Claims Agent
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I N D I A
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ANTIQUE ART: ICRA Assigns 'B' Rating to INR9.60cr LT Loan
---------------------------------------------------------
ICRA has reaffirmed the long-term rating of [ICRA]B on the
INR9.60-crore fund-based facilities of Antique Art Exports Pvt.
Ltd. (AAEPL). ICRA has also reaffirmed the short-term rating of
[ICRA]4 on the INR6.00-crore fund-based facilities of AAEPL. The
outlook on the long-term rating is Stable.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Fund-
based Limits 9.60 [ICRA]B reaffirmed, stable
outlook assigned
Short-term Fund-
based Limits 6.00 [ICRA]A4; reaffirmed
Rationale
The rating reaffirmation factors in the healthy augmentation in
the company's operating scale (operating income of INR64.09 crore
in FY2017 owing to sales of INR31.36 crore in FY2016) driven by
the increase in order flow from existing clients as well as the
constant addition of new clients. Moreover, there has been an
improvement in the company's working capital cycle on account of
faster turnaround time due to robust volumetric growth resulting
in lower inventory days. These factors, however, have been
accompanied by the decline in operation margins on account of
lower realisations, higher raw material procurement cost and
adverse foreign exchange movement in FY2017.
The ratings remain constrained by the company's stretched
liquidity position as evidenced by the full utilisation of its
working capital limits. The ratings also take into account the
exposure of the company's profitability to volatility in raw
material prices and fluctuations in currency exchange rates.
Additionally, the ratings reflect AAEPL's weak financial profile
as evident from the moderate scale of operations, low net worth
base and elevated debt/OPBDITA level. ICRA also takes note of the
company's increased client concentration risk as a single group
accounted for a significant portion of the sales in FY2017.
However, the ratings derive support from the extensive experience
of the partners, and the company's well-established clientele and
favorable Government policies.
Going forward, the firm's ability to register profitable revenue
growth as well as improve its capital structure and maintain an
optimal working capital management will be the key rating
sensitivities.
Key rating drivers
Credit strengths
* Extensive experience of the promoters in the carpet-
manufacturing industry and the long track record of the
company; established relationship with buyers and weavers
* Healthy top-line growth driven by robust volumetric increase
in all segments
* Fiscal incentives in terms of duty drawback and import
license premium on exports; these incentives contribute ~11%
to the operating income (OI)
* Improvement in working capital intensity
Credit weaknesses
* Modest scale of operation in the highly fragmented and
competitive industry
* Weak financial risk profile marked by low margins, highly
leveraged capital structure and stretched liquidity position.
* Volatility associated with raw material prices
* Dependence on exports exposes the company to economic
conditions in international markets and adverse movements
in foreign exchange currency rates.
* Significant operating profits on account of export
incentives; adverse changes in duty drawback/import license
policies can affect the company's profitability
Description of key rating drivers
In FY2017, the company's sales trend shifted towards lower value-
addition products, where per unit realisation was lesser but the
company witnessed a strong volumetric growth. This is evidenced by
the decline in operating margins to 3.80% in FY2017 from 11.17% in
FY2016. This was also partly due to the competitive prices offered
to the client, increase in raw material procurement cost and
adverse foreign exchange fluctuations in FY2017. The appreciation
in the Indian rupee led to a foreign exchange loss of INR2.00
crore in FY2017 as against a gain of INR0.40 crore in FY2016. This
shift in trend also led to lower inventory-holding requirement
because of higher sales and lesser processing time required for
lower value-added carpets. Till FY2016, the company had a moderate
customer concentration with around 62% of sales from the top five
customers. However, in FY2017, sales to the Teppiche Group of
Germany increased to 40% from 22% n FY2016. Earlier, this Group
primarily sold to traders and vendors but in FY2017 it tied up
with two retail chain stores, which increased requirement.
Incorporated in 1990 by Mr. Ashok Jain and his family, AAEPL
manufactures and exports a wide range of hand-tufted and hand-
knotted carpets, shaggy rugs and other floor coverings. The
company has in-house manufacturing facilities for the production
of hand-tufted carpets and durries at Panipat, Haryana. It
primarily exports to Europe, the Middle-East and the US.
AAEPL reported a net profit of INR0.19 crore on an operating
income of INR31.36 crore in FY2016, as against a net profit of
INR0.21 crore on an operating income of INR30.20 crore in FY2015.
The company, on a provisional basis, reported an operating income
of INR64.09 crore in FY2017.
AKAL INFORMATION: ICRA Reaffirms B+ Rating on INR5cr LT Loan
------------------------------------------------------------
ICRA has reaffirmed the long-term rating of [ICRA] B+ on the
INR6.50-crore1 fund-based and non-fund based bank facilities of
Akal Information Systems Limited. The outlook on the long-term
rating is Stable.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Fund-
based Limits 5.00 [ICRA]B+ (Stable); re-affirmed
Long-term Non-
fund Based Limits 1.50 [ICRA]B+ (Stable); re-affirmed
Rationale
The rating reaffirmation takes into account the stagnant growth in
the company's operating income. However, its operating margins
improved in FY2017 on a provisional basis as the contribution of
the more profitable information technology (IT) services business
to the top line increased over the year, though the scale of
operations continues to be moderate. AISL's customer concentration
remains high with its top five customers accounting for most of
its total sales in FY2017. ICRA also takes note of the company's
stretched liquidity position due to the delay in receipt of
payments from some of its customers. However, the rating
favourably factors in its highly reputed client profile, the
experienced promoters with more than a decade of experience in the
IT industry and the comfortable order book position as of May
2017.
Going forward, the company's ability to scale up its operations,
improve its liquidity position and maintain profitability and
working capital intensity of operations will be the key rating
sensitivities.
Key rating drivers
Credit strengths
* Two decade-long experience of the promoters in the industry
* Highly reputed client profile
* Favorable demand prospects for the IT industry
Credit weaknesses
* Modest scale of operations
* High customer concentration with the top five customers
accounting for most of the total sales
* Stretched liquidity position, given the high utilisation of
working capital limits
Description of key rating drivers
The company is involved in the IT business, where it operates in
two different verticals of trading in hardware components as well
as providing different IT services to customers. The promoters of
AISL have two decades of experience of operating in the industry.
As a result, they have a reputed and diversified clientele of big
industry players, such as GAIL, DLF Group, Shiv Nadar Group etc.
With the advent and penetration of technology in different
industries, the reliance on various technological tools have
increased. As a result, the company has been able to bag orders in
the past few months leading to a order book of around INR20.00
crore, which is to be executed in the coming months.
AISL's scale of operations remains modest as it operates in an
industry that is predominately marked by the presence of big
players. The company has not being able to add new customers over
the years, leading to high customer concentration. Its liquidity
position also remains stretched due to delay in receipt of
payments from some of its customers.
AISL was incorporated in January 2000 by Mr. Sarabjit Singh, Mr.
Sukhneet Kaur and Mr. Ajeet Singh. The company provides IT
software, hardware, and infrastructure and technology support
solutions to reputed clients. It also provides software solutions
and tech support to a few USA-based clients. Its wholly-owned
subsidiary - Akal Information System Inc. - was setup in the USA
in 2003. The affiliate carries out its operations independently.
In FY2016, the company reported a net profit of INR0.08 crore on
an operating income of INR21.16 crore, compared with a net profit
of INR0.14 crore on an operating income of INR18.44 crore in the
previous year. On a provisional basis, it reported an operating
income of INR21.24 crore in FY2017.
AKSHAR GINNING: ICRA Reaffirms B+ Rating on INR8.0cr LT Loan
------------------------------------------------------------
ICRA has reaffirmed the long-term rating assigned to the INR8.00-
crore fund-based limits of Akshar Ginning & Pressing Industries
at [ICRA]B+. The outlook on the long-term rating is 'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Fund-
based Limits 8.00 [ICRA]B+(Stable); Reaffirmed
Rationale
The ratings reaffirmation continue to factor in the modest scale
of operations of AGPI and its weak financial profile,
characterised by net losses, stretched capital structure and
modest coverage indicators. ICRA also takes into account the
commoditised nature of the firm's products and the vulnerability
of its profitability to adverse movements in cotton prices, which
are subject to seasonality and crop harvest. The firm's operations
are also exposed to regulations governing the industry such as
restrictions on cotton exports and minimum support price (MSP).
Furthermore, the ratings are constrained by the highly fragmented
nature of the industry, due to a large number of ginners, which
coupled with low-entry barriers lead to stiff competition,
pressurising pricing and margins. ICRA notes the potential adverse
impact on net-worth and gearing levels in case of any substantial
withdrawal from capital accounts.
The ratings, however, continue to derive comfort from the long
experience of the promoters in the cotton ginning industry and the
proximity of the firm's manufacturing unit to raw material
sources, easing procurement.
Key rating drivers
Credit strengths
* Extensive experience of the promoters in the cotton industry
* Locational advantage from proximity to raw materials
Credit weaknesses
* Modest scale of operations
* Weak financial profile characterised by net losses, stretched
capital structure and moderate coverage indicators
* Highly fragmented industry structure due to a large number of
manufacturers and traders; low entry barriers result in high
competition
* Operations exposed to regulatory restrictions on cotton
export and MSP
* Profitability vulnerable to any adverse movement in raw
material prices as well as competitive pressures
* Risks inherent in partnership firms, wherein any substantial
capital withdrawal could impact the net-worth and gearing
levels
Description of key rating drivers:
AGPI curtailed its production of cotton bales during a declining
pricing scenario in FY2016. Furthermore, during FY2017 firm has
not operated expellers for crushing activity looking to increasing
cotton seed prices. Moreover, with increased trading volume of
cotton bales in FY2017, the proportion of cotton bales to total
sales increased to ~71% over ~66% in FY2016.
AGPI's operating income fell by ~39% to INR17.75 crore in FY2016
from INR29.07 crore in FY2015; however, with improved realisation
and volume in FY2017 (provisional data) operating income increased
to INR28.31 crore. The operating profit margin remained low at
2.97% in FY2017. In line with low operating margins and high
financial charges, the net margin remained negative in FY2017. The
capital structure remained leveraged as reflected in the gearing
of 2.34 times as on March 31, 2017. The coverage indicators
remained modest with OPBDITA/I&F at 1.09 times and NCA/Debt at 1%
for FY2017.
In ICRA's view, the ability of the firm to manage the impact of
raw material price fluctuations on its profitability in a highly
competitive business environment and improve its capital structure
by managing working capital requirements will remain the key
rating sensitivities.
Established in 2006, Akshar Ginning & Pressing Industries (AGPI)
is a partnership firm that gins and presses raw cotton to produce
cotton bales and cottonseeds. The firm also crushes cottonseeds to
produce cottonseed oil. The manufacturing facility, located at
Una, Gujarat, is equipped with 24 ginning machines and a pressing
machine, with a production capacity of 240 finished bales per day.
The firm also has three expellers with a processing capacity of 15
tonnes of cottonseeds per day.
AGPI is managed by six partners, namely, Mr. Shambhu B.
Zalavadiya, Mr. Himmat B. Zalavadiya, Mr. Chunilal B. Zalavadiya,
Mr. Pareshkumar H. Zalavadiya, Mr. Jaydipkumar C. Zalavadiya and
Mr. Ashvinkumar V. Barvaliya. All of them family members, with an
extensive experience in the cotton industry.
For the year FY2017, as per provisional financials, the firm
reported an operating income of INR28.31 crore and net loss of
INR0.05 crore.
BMS PROJECTS: ICRA Reaffirms B- Rating on INR5cr Cash Loan
----------------------------------------------------------
ICRA has reaffirmed the long-term rating of [ICRA]B- assigned to
the INR5.00-crore2 cash credit facility and the short-term rating
of [ICRA]A4 assigned to the INR4.00-crore bank guarantee facility
of BMS Projects (BMS). ICRA has also reaffirmed the long-term
rating of [ICRA]B- and the short-term rating of [ICRA]A4 assigned
to the INR1.00-crore unallocated limits of BMS. The outlook on the
long-term rating is 'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based-Cash
Credit 5.00 [ICRA]B- (Stable); Reaffirmed
Non Fund-based-
Bank Guarantee 4.00 [ICRA]A4; Reaffirmed
Unallocated Limits 1.00 [ICRA]B- (Stable)/[ICRA]A4;
Reaffirmed
The rating action is based on the best available information. As
part of its process and in accordance with its rating agreement
with BMS, ICRA has been trying to seek information from the
company so as to undertake a surveillance of the ratings and also
had sent repeated reminders to the company for payment of
surveillance fee that became overdue, but despite repeated
requests by ICRA, the entity'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 entity'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 or no updated information on the
entity's performance since the time it was last rated.
Established in September, 2014 as a partnership firm, BMS is
engaged in construction of buildings and roads in the state of
Chhattisgarh. The firm is a registered Class I category contractor
with P.W.D. - Chhattisgarh. The promoters have been engaged in the
civil construction business for around a decade through its
erstwhile company, Baldev Infra Projects Pvt. Ltd.
CLASSIC COTTON: ICRA Reaffirms B+ Rating on INR22cr LT Loan
-----------------------------------------------------------
ICRA has reaffirmed the long-term rating assigned to the INR22.00
crore fund-based limits of Classic Cotton Private Limited at
[ICRA]B+. The outlook on the long-term rating is 'Stable'. ICRA
has also reaffirmed the short-term rating assigned to the INR1.00-
crore short-term, fund based limits of CCPL. Furthermore, ICRA has
reaffirmed the rating of ICRA]B+(Stable)/A4 for the INR2.40 crore
unallocated limits of CCPL.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Fund-
based Limits 22.00 [ICRA]B+(Stable); Reaffirmed
Short-term Fund-
based Limits 1.00 [ICRA]A4; Reaffirmed
Unallocated Limit 2.40 [ICRA]B+(Stable)/[ICRA]A4;
Reaffirmed
Rationale
The ratings reaffirmation continue to factor in the weak financial
profile of Classic Cotton Private Limited, characterised by thin
profitability margins, stretched capital structure and moderate
coverage indicators. ICRA also takes into account the commoditised
nature of the company's products and vulnerability of its
profitability to adverse movements in cotton prices, which are
subject to seasonality and crop harvest. The company's operations
are also exposed to regulations governing the industry such as
restrictions on cotton exports and minimum support price (MSP).
Furthermore, the ratings are also constrained by the highly
fragmented nature of the industry, due to a large number of
ginners, which coupled with low-entry barriers lead to stiff
competition, pressurising pricing and margins.
The ratings, however, continues to derive comfort from the long
experience of the promoters in the cotton ginning industry and the
proximity of its manufacturing unit to raw material sources,
easing procurement. Furthermore, the rating also considers the
company's diversification in white coal and agri-waste powder
manufacturing and bleaching of grey fabric on job-work basis;
although the contribution from the same remained low in FY2017.
Key rating drivers
Credit strengths
* Extensive experience of the promoters in the cotton industry
* Location advantage from proximity to raw materials
* Diversification in white coal (bio coal) and agri-waste
powder manufacturing and bleaching of grey fabric on job-
work basis; though margin continued to remain weak
Credit weaknesses
* Weak financial profile characterised by thin profitability
margins, stretched capital structure and moderate coverage
indicators
* Highly fragmented industry structure due to a large number
of manufacturers and traders; low entry barriers result in
high competition
* Operations exposed to regulatory restrictions on cotton
export and MSP
* Profitability vulnerable to any adverse movement in raw
material prices as well as competitive pressures
Description of key rating drivers:
CCPL curtailed its production of cotton bales during a declining
pricing scenario in FY2016. Furthermore, the company derived
majority of its revenue through trading operations during FY2017;
owing to which its capacity utlisation for ginning as well as
crushing operations reduced drastically to ~3% over ~14% in FY2016
and ~19% in FY2015. Moreover, with increased trading volume of
cotton bales in FY2017, its proportion of cotton bales to total
sales increased to ~83% in FY2017 over ~73% in FY2016.
CCPL's operating income fell by ~5% to INR116.52 crore in FY2016
from INR123.21 crore in FY2015. However, with improved realisation
in FY2017 (provisional), the Operating Income increased to
INR117.40 crore. Moreover, in spite of diversification into
different businesses, the operating profit margin continued to
remain low at 2.71% in FY2017. In line with low operating margins
and high financial charges, the net margin also remained low at
0.16% in FY2017. The capital structure continued to remain
leveraged as reflected in the gearing of 3.94 times as on March
31, 2017. The coverage indicators remained modest with OPBDITA/I&F
at 1.34 times and NCA/Debt at 3% for FY2017.
In ICRA's view, the ability of the company to manage the impact of
raw material price fluctuations on its profitability in a highly
competitive business environment and improve its capital structure
by managing working capital requirements will remain the key
rating sensitivities.
Incorporated in April 2007, Classic Cotton Private Limited (CCPL)
is involved in ginning and pressing of raw cotton for the
production of cotton bales and cottonseeds. The company is also
involved in crushing of cottonseeds for the production of
cottonseed oil. CCPL's manufacturing facility, located at Jetpur-
Rajkot district in Gujarat, is equipped with 36 ginning machines,
nine expellers and a pressing machine with an installed capacity
of 400 cotton bales per day (24-hour operations) and processing
capacity of 10 MT of cottonseeds per day. From April 2016, CCPL
diversified into manufacturing white coal and agri-waste powder
from ground shells, as well as into bleaching of grey fabric on a
job-work basis The promoters, Mr. Mansukh Khachariya and Mr.
Kishor Khachariya, have extensive experience in the cotton
industry.
For FY2017, as per provisional financials, the company reported an
operating income of INR117.40 crore and profit after tax of
INR0.19 crore.
KARE POWER: ICRA Lowers Rating on INR121.80cr Term Loan to B
------------------------------------------------------------
ICRA has revised the long-term rating assigned to the INR121.80
crore term loan of Kare Power Resources Private Limited from
[ICRA]BB- to [ICRA]B. The outlook on the long-term rating remains
Negative.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based-Term
Loan 121.80 [ICRA]B(Negative); Revised
from [ICRA]BB-(Negative)
Rationale
The rating action is based on the best available information. As
part of its process and in accordance with its rating agreement
with KPRPL, 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. Furthermore, ICRA had sent repeated
reminders to the company for payment of surveillance fee that
became overdue. However, despite multiple requests, the company's
management has remained non-cooperative. Hence, 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(Negative) 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
* Technical know-how and financial strength of the promoter
Group
* Eligibility of the project for receipt of subsidy of INR5.80
crore post completion of one year of operations; which is
expected to improve its viability to a certain extent
Credit weaknesses
* Pressure on cash flows as repayment of term loan commenced
prior to commencement of full scale power generation
* Exposure of project's cash flows to hydrology risks as the
project is not covered under any deemed generation clause
in case of loss of generation due to shortage of water
Description of key rating drivers:
KPRPL operates a run-of-the-river variety hydro power plant with
an installed capacity of 24.75 MW in Karnataka. While the
construction work in the project as well as synchronization was
completed by July 2015, the project could not operate during
FY2016 due to lack of availability of water resources. On the
other hand, the repayment of the term loan availed for
construction of the project commenced in March 2016. Furthermore,
while the company had a long term power purchase agreement with
BMM Ispat Limited as per information provided during the last
rating exercise, details of the current sale arrangement are not
available with ICRA.
In addition, while information on the performance of the company
during FY2017 is not available, ICRA estimates that the generation
levels may have been impacted by poor monsoons during the year.
The company's cash flows remain exposed to hydrology risks given
that the project is not covered under any deemed generation
clause. In the absence of generation of adequate power, the
ability of the promoter group to provide financial assistance on a
timely basis remains crucial.
Kare Power Resources Private Limited (KPRPL) operates a small
hydro project with an installed capacity of 24.75 MW in Yelangudi
Village, Lingasur Taluk, Raichur District, Karnataka. While the
construction of the project as well as synchronization was
completed by July 2015, the project was able to generate power
only during FY2017 due to lack of water resources during FY2016.
The company is promoted by Mr.K.R.Pradeep who is one of the
promoter-directors of Lakshmi Vilas Bank Limited.
KOHINOOR CARPETS: ICRA Reaffirms B+ Rating on INR15cr LT Loan
-------------------------------------------------------------
ICRA has reaffirmed the long-term rating of [ICRA] B+ on the
INR19.18-crore bank facilities of Kohinoor Carpets. The outlook on
the long-term rating is stable.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term fund-
based Limits 15.00 [ICRA]B+ reaffirmed, stable
outlook assigned
Term Loan 4.18 [ICRA]B+ reaffirmed, stable
outlook assigned
Rationale
The rating reaffirmation factors in the decline in the firm's
sales in FY2017 as well as the increase in working capital
intensity. These factors have been, however, accompanied by an
improvement in the operation margins on account of higher
realisations and cost cutting measures undertaken by the firm.
The ratings continue to remain constrained by the stretched
liquidity position of the firm due to increase in its working
capital intensity and pending insurance claim receivable of
INR5.70 crore. The ratings continue to take into account the
exposure of the firm's profitability to volatility in raw material
prices and fluctuations in currency exchange rates. Additionally,
the ratings continue to reflect the weak financial profile as
evident from the moderate scale of operations, low net worth base
and elevated Debt/OPBDITA level. ICRA also factors in the intense
competition in the hand-made carpet industry and the reliance on
favourable Government policies to a certain extent. ICRA also
continues to take cognizance of the proprietorship nature of the
firm, which exposes it to risks of capital withdrawal and
dissolution. The ratings, however, continue to derive support from
the extensive experience of the partners, the firm's well
established clientele and favourable government policies.
Going forward, the firm's ability to register revenue growth and
profitability, improve its capital structure and maintain an
optimal working capital intensity will be the key rating
sensitivity.
Key rating drivers
Credit strengths
* Extensive experience of the promoters in the carpet
manufacturing industry and the proven track record of the
firm; established relationship with buyers and weavers
* Fiscal incentives in terms of duty drawback and import
license premium on exports; these incentives contribute
~11% to the OI
* Consistently improvement in operating margins
Credit weaknesses
* Modest scale of operations in the highly fragmented and
competitive industry
* Weak financial risk profile marked by low margins, highly
leveraged capital structure and stressed liquidity position
* Volatility associated with raw material prices
* Dependence on exports as it exposes the firm to economic
conditions in international markets and adverse movements
in foreign exchange currency rates
* Significant operating profits on account of export
incentives; any adverse changes in duty drawback/import
license policies can affect the firm's profitability
adversely
* Risks inherent in the proprietorship firm
Description of key rating drivers
The sales declined in FY2016 on account of fire in the warehouse
in September 2015. The firm has filed for an insurance claim of
INR5.70 crore, which has not been received yet. This has resulted
in tight liquidity position and increase in working capital
intensity. However, the firm's operating margins have consistently
improved over the past few years on account of increase in
popularity of its products in the US, addition of new customers
(leading to better realisations) and cost cutting measures taken
by the firm. The firm had been diligent in choosing orders to
execute so as to maintain its profits against a declining
operating income.
Kohinoor Carpets is a proprietorship firm owned by Mr. Ram Chander
Chuttani. The firm manufactures cotton rugs, bath mats, carpets,
cotton puffs, polar blankets and various home furnishings. The
firm's manufacturing facilities are located at Panipat and Karnal
in Haryana and about 80% of its revenues come from exports, with
the US, the UK and Australia being the key markets.
Kohinoor Carpets reported a net profit of INR0.88 crore on an
operating income of INR40.45 crore in FY2016, as against a net
profit of INR0.96 crore on an operating income of INR39.62 crore
in FY2015. The firm, on a provisional basis, reported a net profit
of INR0.87 crore on an operating income of INR33.89 crore in
FY2017.
NUPUR CARPETS: ICRA Reaffirms B- Rating on INR4.80cr LT Loan
------------------------------------------------------------
ICRA has reaffirmed the long-term rating of [ICRA] B- on the
INR4.80-crore fund-based facilities of Nupur Carpets. ICRA has
also reaffirmed the short-term rating of [ICRA] A4 on the INR4.00-
crore fund-based facilities of the firm. The outlook on the long-
term rating is stable.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term fund-
based Limits 4.80 [ICRA]B- reaffirmed, stable
outlook assigned
Short-term fund-
based Limits 4.00 [ICRA]A4; reaffirmed
Rationale
The rating reaffirmation factors in the healthy augmentation in
the firm's operating scale (operating income of INR34.95 crore in
FY2017 vis-a-vis sales of INR13.02 crore in FY2016) driven by the
increase in order flow from its existing clients and constant
addition of new clients. Moreover, there has been an improvement
in the working capital cycle of the firm on the back of faster
turnaround time due to robust volumetric growth, which has
resulted in lower inventory days. These factors were, however,
offset by the decline in operation margins on account of lower
realisations, higher raw material procurement cost and adverse
foreign exchange movement in FY2017.
The ratings continue to be constrained by the firm's stretched
liquidity position, which gets reflected in the full utilisation
of its working capital limits. The ratings also continue to take
into account the exposure of the firm's profitability to
volatility in raw material prices and fluctuations in currency
exchange rates. Additionally, the ratings continue to reflect the
weak financial profile as evident from the moderate scale of
operations, low net worth base and elevated Debt/OPBDITA level.
ICRA also takes note of the increased client concentration risk of
the firm as a single group accounted for significant portion of
the sales in FY2017. ICRA also takes cognizance of the partnership
nature of the firm, which exposes it to risks of capital
withdrawal and dissolution. However, the ratings continue to
derive support from the extensive experience of the partners, the
firm's well established clientele and the favourable Government
policies.
Going forward, the firm's ability to register revenue growth in a
profitable manner, improve its capital structure and maintain an
optimal working capital management will be the key rating
sensitivity.
Key rating drivers
Credit strengths
* Extensive experience of the promoters in the carpet
manufacturing industry and the long track record of
the firm; established relationship with buyers and weavers
* Healthy top-line growth driven by high volumetric growth in
all segments
* Fiscal incentives in terms of duty drawback and import
license premium on exports; these incentives contribute ~11%
to the OI
* Improvement in working capital intensity
Credit weaknesses
* Modest scale of operation in a highly fragmented and
competitive industry
* Weak financial risk profile marked by low margins, highly
leveraged capital structure and stressed liquidity position.
* Volatility associated with raw material prices
* Dependence on exports exposes the firm to economic conditions
in international markets and adverse movements in foreign
exchange currency rates.
* Significant operating profits from export incentives; any
adverse changes in duty drawback/import license policies can
affect the firm's profitability adversely
* Risks inherent in the partnership firm
Description of key rating drivers
In FY2017, the sales trend of the firm shifted towards lower value
addition products where per unit realization was lower but the
firm witnessed a strong volumetric growth in FY2017. This can be
seen in the decline in the operating margins to 9.52% in FY2017
from 3.17% in FY2016. This was also partly due to the competitive
prices offered to the client, increase in raw material procurement
cost and adverse foreign exchange fluctuations in FY2017. The
appreciation in Indian Rupee led to a foreign exchange loss of
INR0.21 crore in FY2017. This shift in trend also led to lower
inventory holding requirement because of higher sales and lower
processing time required for lower value added carpets. Till
FY2016, the firm had a moderate customer concentration of around
60% of sales from the top 5 customers. However, in FY2017, sales
to the Teppiche group of Germany increased to 50% from 15% n
FY2016. This group earlier was selling primarily to traders and
vendors but in FY2017 the group had a tie up with two retail chain
stores because of which their requirement increased.
Nupur Carpets trades and exports Kashmir Silk Carpets and Hand
Knotted Woollen Carpets which it procures from Gwalior, Bhadohi,
Agra and Jaipur. Trading constitutes 80% and manufacturing
constitutes 20% of the sales mix. The firm primarily exports to
the European market.
Nupur Carpets reported a net profit of INR0.04 crore on an
operating income of INR13.02 crore in FY2016, as against a net
profit of INR0.04 crore on an operating income of INR9.52 crore in
FY2015. The firm, on a provisional basis, reported an operating
income of INR34.95 crore in FY2017.
SHITARAM INDUSTRIES: ICRA Reaffirms B- Rating on INR4.50cr Loan
---------------------------------------------------------------
ICRA has reaffirmed its long term rating assigned to the INR5.33
crore fund based facilities of Shitaram Industries at [ICRA]B-.
The outlook on the long term rating is Stable.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based-Cash
Credit 4.50 [ICRA]B- (Stable); Reaffirmed
Fund-based-Term
Loan 0.83 [ICRA]B- (Stable); Reaffirmed
Rationale
The rating action is based on the best available information. As
part of its process and in accordance with its rating agreement
with SI, ICRA has been trying to seek information from the company
so as to undertake a surveillance of the ratings and also had sent
repeated reminders to the company for payment of surveillance fee
that became overdue, but despite repeated requests by ICRA, the
company's management has remained non-cooperative. In the absence
of requisite information, ICRA's Rating Committee has taken a
rating view based on best available information. In line with
SEBI's Circular No. SEBI/HO/MIRSD4/CIR/2016/119, dated November
01, 2016, the company's rating is now denoted as: "[ICRA]B-
(Stable) 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.
Established in April 2012 as a partnership firm, Shitaram
Industries (SI) is engaged in ginning and pressing of raw cotton.
The manufacturing facility is located in Rajkot, Gujarat and is
equipped with 18 ginning machines having an input capacity of
~11,860 MTPA. The commercial operations commenced in December
2013. The firm is promoted and managed by Mr. Harshad K Ratanpara,
Mr Suresh N Ratanpara, Mr. Bhudar R Chikani, Mr Harjivan V Bhadja
and Mr. Pravin B Vachhani along with other family members and
relatives.
SSV VALVES: ICRA Reaffirms B+ Rating on INR12.91cr Loan
-------------------------------------------------------
ICRA has reaffirmed the long-term rating of [ICRA]B and short-term
rating of [ICRA]A4 to the INR12.91-crore fund-based facilities of
SSV Valves (SSVV). ICRA has also reaffirmed the long-term rating
of [ICRA]B+ and short-term rating of [ICRA]A4 to the INR1.71-
crore unallocated limits of SSVV. The outlook on the long-term
rating is 'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based Limits 12.91 [ICRA]B+(Stable)/[ICRA]A4;
Reaffirmed
Unallocated Limits 1.71 [ICRA]B+(Stable)/[ICRA]A4;
Reaffirmed
Rationale
The ratings reaffirmation continues to factor in the firm's weak
financial profile as is evident from its low profitability,
leveraged capital structure, moderate coverage indicators and high
working capital intensity. Moreover, the firm's profit margins
remain exposed to fluctuation in steel prices and foreign exchange
rate as exports contribute to more than 90% of total sales. ICRA
also takes note of the proprietorship constitution of the firm,
which exposes it to risks of continuity and capital withdrawal.
The ratings are also constrained by the firm's imminent debt-
funded capex, which is likely to exert pressure on the
profitability owing to the associated finance cost and servicing
obligations.
Nonetheless, the ratings positively take into account the long
experience of the proprietor in the valves-manufacturing industry
and also its established and reputed client profile. The ratings
also draw comfort from the consistent growth in operating income
in the last five fiscals, supported by increase in sales volumes
in export markets.
Going forward, SSVV's ability to improve the profitability,
generate commensurate cash flows to suffice the debt-servicing
obligations, maintain a prudent capital structure and effectively
manage working capital requirements will remain the key rating
considerations.
Key rating drivers
Credit strengths
* Extensive experience of the proprietor in valve-manufacturing
Industry
* Established and reputed clientele
* Consistent growth in the operating income in the past five
Years
Credit weaknesses
* Financial profile characterised by low profitability,
leveraged capital structure, moderate coverage indicators and
high working capital intensity
* Profitability susceptible to foreign exchange fluctuation
risk with exports constituting about 90% of the revenues
* Inherent cyclicality associated with the steel industry,
which exposes the company's margins to fluctuation in raw
material prices
* Risks associated with proprietary concern in terms of
continuity, capital infusion and withdrawal
Description of key rating drivers
SSVV manufactures engine valves from its facility at Metoda in
Rajkot district of Gujarat, having an installed capacity of
manufacturing 32,00,000 units. The firm's products find
application in various industries such as locomotive, automotive,
defence etc. The firm caters to PSU departments but a major part
of the revenue is derived from private entities.
The operating income of the firm witnessed a healthy growth of
~31% in FY2016 and stood at INR54.22 crore compared to INR41.49
crore in FY2015. The same increased further by 9% in FY2017 to
INR59.15 crore on the back of increased demand from both domestic
and overseas customers. The operating profit margins remained low
at 5.81% in FY2017 mainly due to fluctuation in raw materials
prices and varying realisations due to different applications of
the firm's products. Exports accounted for more than 90% of the
revenue in FY2017, exposing the firm to foreign exchange
fluctuation risks in the absence of any hedging mechanism. The
firm incurred a debt-funded capex of INR4.16 crore in FY2016 to
increase its installed capacity, which was funded partially
through term loan and the rest through infusion of unsecured
loans. The firm has further plans to incur capex in FY2018 for
capacity expansion, which would be funded partly through infusion
of term loan and the rest through a mix of unsecured loans and
internal accruals. The profitability of the firm is exposed to
fluctuation in the raw material prices. However, the proprietor's
long experience in the valve-manufacturing industry is expected to
support the firm's operations.
Established in 1981, SSV Valves (SSVV) is a proprietary concern,
involved in the manufacturing of engine valves. SSVV is owned and
managed by Mr. Rajendrasingh Jadav. The proprietor is associated
with another group concern namely, SSV Technocrates, which
manufactures engine valves, valve seat inserts and valve tappets.
SSVV's manufacturing facility is located at Metoda in Rajkot
district of Gujarat with an installed capacity of manufacturing
32,00,000 units of engine valves. The firm's products find
application in locomotive, automotive and defence.
The firm reported a profit before tax of INR0.66 crore on an
operating income of INR59.15 crore, as per the provisional
financials of FY2017. It had generated a net profit of INR0.48
crore on an operating income of INR54.22 crore in the previous
year.
=========
J A P A N
=========
TAKATA CORP: Taps Prime Clerk as Claims Agent
---------------------------------------------
TK Holdings Inc. received approval from the U.S. Bankruptcy Court
for the District of Delaware to hire Prime Clerk LLC as its claims
and noticing agent.
The firm will oversee the distribution of notices, and the
maintenance and processing of claims filed in the Chapter 11 cases
of the company and its affiliates.
The hourly rates charged by the firm are:
Analyst $25 - $45
Technology Consultant $35 - $75
Consultant/Senior Consultant $60 - $155
Director $165 - $180
Solicitation Consultant $170
Director of Solicitation $190
Prior to their bankruptcy filing, the Debtors provided Prime Clerk
a retainer in the amount of $75,000.
Shai Waisman, chief executive officer of Prime Clerk, disclosed in
a court filing that the firm is a "disinterested person" as
defined in section 101(14) of the Bankruptcy Code.
Prime Clerk can be reached through:
Shai Y. Waisman
Prime Clerk LLC
830 Third Avenue, 9th Floor
New York, NY 10022
Phone: (212) 257-5450
About Takata Corp
Japan-based Takata Corporation (TYO:7312) --
http://www.takata.com/en/-- develops, manufactures and sells
safety products for automobiles. The Company offers seatbelts,
airbags, steering wheels, child seats and trim parts.
Headquartered in Tokyo, Japan, Takata operates 56 plants in 20
countries with approximately 46,000 global employees worldwide.
The Company has subsidiaries located in Japan, the United States,
Brazil, Germany, Thailand, Philippines, Romania, Singapore, Korea,
China and other countries.
Takata Corp. filed for bankruptcy protection in Tokyo and the
U.S., amid recall costs and lawsuits over its defective airbags.
Takata and its Japanese subsidiaries commenced proceedings under
the Civil Rehabilitation Act in Japan in the Tokyo District Court
on June 25, 2017.
Takata's main U.S. subsidiary TK Holdings Inc. and 11 of its U.S.
and Mexican affiliates each filed voluntary petitions under
Chapter 11 of the U.S. Bankruptcy Code (Bankr. D. Del. Lead Case
No. 17-11375) on June 25, 2017. Together with the bankruptcy
filings, Takata announced it has reached a deal to sell all its
global assets and operations to Key Safety Systems (KSS) for
US$1.588 billion.
Nagashima Ohno & Tsunematsu is Takata's counsel in the Japanese
proceedings. Weil, Gotshal & Manges LLP and Richards, Layton &
Finger, P.A., are serving as counsel in the U.S. cases.
PricewaterhouseCoopers is serving as financial advisor, and Lazard
is serving as investment banker to Takata. Ernst & Young LLP is
tax advisor. Prime Clerk is the claims and noticing agent.
Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal
counsel, KPMG is serving as financial advisor, Jefferies LLC is
acting as lead financial advisor. UBS Investment Bank also
provides financial advice to KSS.
On June 28, 2017, TK Holdings, as the foreign representative of
the Chapter 11 Debtors, obtained an order of the Ontario Superior
Court of Justice (Commercial List) granting, among other things,
a stay of proceedings against the Chapter 11 Debtors pursuant to
Part IV of the Companies' Creditors Arrangement Act. The Canadian
Court appointed FTI Consulting Canada Inc. as information officer.
TK Holdings, as the foreign representative, is represented by
McCarthy Tetrault LLP.
The U.S. Trustee has appointed an Official Committee of Unsecured
Trade Creditors and a separate Official Committee of Tort
Claimants. Pachulski Stang Ziehl & Jones LLP represents the
Official Committee of Tort Claimants as bankruptcy counsel.
The Official Committee of Unsecured Creditors has selected
Christopher M. Samis, Esq., L. Katherine Good, Esq., and Kevin F.
Shaw, Esq., at Whiteford, Taylor & Preston LLC, in Wilmington,
Delaware; Dennis F. Dunne, Esq., Abhilash M. Raval, Esq., and
Tyson Lomazow, Esq., at Milbank Tweed Hadley & McCloy LLP, in New
York; and Andrew M. Leblanc, Esq., at Milbank, Tweed, Hadley &
McCloy LLP, in Washington, D.C., as its bankruptcy counsel.
*********
Tuesday's edition of the TCR-AP delivers a list of indicative
prices for bond issues that reportedly trade well below par.
Prices are obtained by TCR-AP editors from a variety of outside
sources during the prior week we think are reliable. Those
sources may not, however, be complete or accurate. The Tuesday
Bond Pricing table is compiled on the Friday prior to
publication. Prices reported are not intended to reflect actual
trades. Prices for actual trades are probably different. Our
objective is to share information, not make markets in publicly
traded securities. Nothing in the TCR-AP constitutes an offer
or solicitation to buy or sell any security of any kind. It is
likely that some entity affiliated with a TCR-AP editor holds
some position in the issuers' public debt and equity securities
about which we report.
A list of Meetings, Conferences and Seminars appears in each
Wednesday's edition of the TCR-AP. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com
Friday's edition of the TCR-AP features a list of companies with
insolvent balance sheets obtained by our editors based on the
latest balance sheets publicly available a day prior to
publication. At first glance, this list may look like the
definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical
cost net of depreciation may understate the true value of a
firm's assets. A company may establish reserves on its balance
sheet for liabilities that may never materialize. The prices at
which equity securities trade in public market are determined by
more than a balance sheet solvency test.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Asia Pacific is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Valerie U. Pascual, Marites O. Claro, Joy A. Agravante, Rousel
Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro and
Peter A. Chapman, Editors.
Copyright 2017. All rights reserved. ISSN: 1520-9482.
This material is copyrighted and any commercial use, resale or
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*** End of Transmission ***