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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
Friday, October 13, 2017, Vol. 20, No. 204
Headlines
A U S T R A L I A
GOLDUS PTY: First Creditors' Meeting Set for Oct. 19
GORDAGEN PHARMA: First Creditors' Meeting Set for Oct. 19
HEALTHZONE LIMITED: Former Exec Chairman Found Guilty of Fraud
KITCHEN DESIGN: Second Creditors' Meeting Set for Oct. 19
METALTECH FABRICATIONS: First Creditors' Meeting Set for Oct. 23
MINTECH RESOURCES: First Creditors' Meeting Set for Oct. 19
STE ENGINEERING: First Creditors' Meeting Set for Oct. 20
TEN NETWORK: Shares Have Nil Value, KPMG Report Shows
C H I N A
HUAI AN: Fitch Affirms BB+ Long-Term IDR; Outlook Stable
SHANDONG RUYI: IPO No Impact on Moody's B2 Corp. Family Rating
SUNSHINE 100: S&P Affirms 'CCC+' CCR, Outlook Negative
I N D I A
A.N.R. COTTON: CRISIL Reaffirms 'B' Rating on INR13MM Loan
ABDUL JALEEL: CRISIL Assigns 'B' Rating to INR4.5MM LT Loan
ALPHA TOCOL: ICRA Withdraws B+ Rating on INR10.74cr LT Loan
ANAND CRANKS: ICRA Moves B+ Rating to Not Cooperating Category
BARUAPARA SK: ICRA Moves B Rating to Not Cooperating Category
CANARA BANK: Proposed Tap Bond Issue No Impact on Moody's ba3 BCA
CMC COMMUTATORS: ICRA Moves B Rating to Not Cooperating Category
DIAMANT INFRASTRUCTURE: CRISIL Reaffirms C Rating on INR8MM Loan
ESES BIO-WEALTH: CRISIL Lowers Rating on INR8MM LT Loan to D
FALCON GLASS: CRISIL Raises Rating on INR3.25MM Cash Loan to B+
GMR HYDERABAD: Fitch to Rate Proposed Bond Issue BB+
GMR HYDERABAD: Moody's Assigns Ba1 Corporate Family Rating
GMR HYDERABAD: S&P Assigns 'BB+' CCR With Positive Outlook
INDIABULLS REAL: Fitch Affirms B+ IDR; Outlook Stable
INDO VACUUM: ICRA Moves 'B' Rating to Not Cooperating Category
JAYPEE INFRATECH: Bid to Extend Time to Deposit INR2,000cr Denied
KGS SUGAR: ICRA Moves 'D' Rating to Not Cooperating Category
KRISHNA PAPER: CRISIL Reaffirms B+ Rating on INR6.42MM Cash Loan
M J K MERCANTILES: CRISIL Reaffirms B+ Rating on INR4.11MM Loan
M.M. GARMENTS: CRISIL Assigns 'B' Rating to INR5.5MM Cash Loan
MAHALAXMI SEAMLESS: CRISIL Reaffirms B Rating on INR4MM Cash Loan
MEHSANA DAIRY: CRISIL Reaffirms B Rating on INR30MM Term Loan
NEESARG MOTORS: CRISIL Assigns 'B+' Rating to INR6.25MM Loan
PASHUPATI METALLICS: CRISIL Ups Rating on INR7.5MM Loan to B+
POLYSOL INDUSTRIES: ICRA Moves B+ Rating to Not Cooperating
POPULAR MOTOR: CRISIL Reaffirms B+ Rating on INR11.5MM Loan
PRAVEEN ELECTRICAL: CRISIL Assigns B+ Rating to INR6MM Loan
ROOPLAXMI INDUSTRIES: ICRA Moves B- Rating to Not Cooperating
SAHAJ SOLAR: ICRA Moves B+ Rating to Not Cooperating Category
SEMI EXPORTS: CRISIL Reaffirms B+ Rating on INR4MM Cash Loan
SHREE HALASIDHANATH: CRISIL Assigns B- Rating to INR30MM Loan
SIRSA BANSIVAT: CRISIL Raises Rating on INR3MM Cash Loan to B+
SWARG GOLDTOUCH: CRISIL Reaffirms B- Rating on INR6MM Cash Loan
TARA FINVEST: CRISIL Reaffirms B+ Rating on INR12.4MM Cash Loan
UMA RANI: ICRA Moves C+ Rating to Not Cooperating Category
I N D O N E S I A
ALAM SUTERA: S&P Affirms 'B' Corp Credit Rating, Outlook Stable
J A P A N
TOSHIBA CORP: To Invest Extra JPY110BB in Yokkaichi Plant
N E W Z E A L A N D
PROPERTY VENTURES: Liquidator Pursues Claims After Pwc Settlement
X X X X X X X X
SOLOMON ISLANDS: Moody's Affirms B3 Issuer Ratings, Outlook Stable
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A U S T R A L I A
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GOLDUS PTY: First Creditors' Meeting Set for Oct. 19
----------------------------------------------------
A first meeting of the creditors in the proceedings of Goldus Pty
Ltd will be held at the offices of DuncanPowell, Level 4, 70 Pirie
Street, in Adelaide, South Australia, on Oct. 19, 2017, at 10:00
a.m.
Christopher Robert Powell and Stephen James Duncan of DuncanPowell
were appointed as administrators of Goldus Pty on Oct. 9, 2017.
GORDAGEN PHARMA: First Creditors' Meeting Set for Oct. 19
---------------------------------------------------------
A first meeting of the creditors in the proceedings of Gordagen
Pharmaceuticals Pty Ltd will be held at the offices of Hamilton
Murphy, 237 Swan Street, in Richmond, Victoria, on Oct. 19, 2017,
at 10:30 a.m.
Richard Trygve Rohrt of Hamilton Murphy was appointed as
administrator of Gordagen Pharmaceuticals on Oct. 9, 2017.
HEALTHZONE LIMITED: Former Exec Chairman Found Guilty of Fraud
--------------------------------------------------------------
Peter David Roach, of Burradoo, NSW, has been found guilty of
fraud and other related offences in the Sydney District Court on
Oct. 12. Mr. Roach was the former executive chairman and director
of health food chain Healthzone Limited (currently under external
administration).
Following an investigation by the Australian Securities and
Investment Commission, Mr. Roach was charged with conspiracy to
dishonestly obtain a director's loan of AUD1 million from the
company. The AUD1 million was loaned to Healthzone by CBA for
on-lending to Mr. Roach to buy shares in Healthzone. Instead, Mr.
Roach used AUD900,000 of those funds to settle a family-related
property issue and did not purchase any shares with the money from
the loan.
In addition, Mr. Roach was found guilty of two charges in relation
to providing false information to the ASX, announcing that he had
acquired shares on June 14, 2011 when he had not done so. He was
also convicted of six counts relating to the falsification of
Healthzone's records, including legal advice obtained from
Healthzone's lawyers concerning the loan.
Mr. Roach will be sentenced on November 20.
The matter is being prosecuted by the Commonwealth Director of
Public Prosecutions.
Healthzone Limited was listed on the ASX in November 2006
following an initial public offering and was delisted when it was
placed into external administration and receivership in November
2011. Healthzone went into liquidation in March 2012.
KITCHEN DESIGN: Second Creditors' Meeting Set for Oct. 19
---------------------------------------------------------
A second meeting of creditors in the proceedings of Kitchen Design
Studio Australia Pty Ltd has been set for Oct. 19, 2017, at 11:00
a.m., at the offices of Dye & Co. Pty Ltd, 165 Camberwell Road, in
Hawthorn East.
The purpose of the meeting are (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 Oct. 18, 2017, at 5:00 p.m.
Shane Leslie Deane and Nicholas Giasoumi of Dye & Co. were
appointed as administrators of Kitchen Design on Sept. 19, 2017.
METALTECH FABRICATIONS: First Creditors' Meeting Set for Oct. 23
-----------------------------------------------------------------
A first meeting of the creditors in the proceedings of Metaltech
Fabrications Pty Ltd will be held at the offices of HLB Mann Judd
(Insolvency WA), Level 3, 35 Outram Street, in West Perth, West
Australia, on Oct. 23, 2017, at 10:00 a.m.
Kimberley Stuart Wallman of HLB Mann Judd was appointed as
administrator of Metaltech Fabrications on Oct. 11, 2017.
MINTECH RESOURCES: First Creditors' Meeting Set for Oct. 19
-----------------------------------------------------------
A first meeting of the creditors in the proceedings of Mintech
Resources Pty Ltd will be held at the offices of DuncanPowell,
Level 4, 70 Pirie Street, in Adelaide, South Australia, on
Oct. 19, 2017, at 9:15 a.m.
Christopher Robert Powell and Stephen James Duncan of DuncanPowell
were appointed as administrators of Mintech Resources on Oct. 9,
2017.
STE ENGINEERING: First Creditors' Meeting Set for Oct. 20
---------------------------------------------------------
A first meeting of the creditors in the proceedings of STE
Engineering Pty Ltd will be held at the Boardroom of Chifley
Advisory, Level 2, 9 Phillip Street, in Parramatta, New South
Wales, and at the trading premises of the Company at 4 Hynes
Court, in Mildura, Victoria, on Oct. 20, 2017, at 1:00 p.m.
Gavin Moss and Trent McMillen of Chifley Advisory were appointed
as administrators of STE Engineering on Oct. 10, 2017.
TEN NETWORK: Shares Have Nil Value, KPMG Report Shows
------------------------------------------------------
An independent report by KPMG has estimated the value of shares in
Ten Network Holdings Limited at nil value, as the implied or
calculated value of equity is between negative AUD1,054.9 million
and negative AUD529.2 million.
The Ten business -- before taking into account creditors and other
adjustments -- was valued by KPMG at between negative AUD408.0
million and AUD117.7 million. The KPMG report says Ten's business
would need to be valued at a minimum of AUD649.9 million in order
for shares in Ten to have any value.
Ten Group creditors last month voted overwhelmingly to accept an
offer by CBS that paid 100 cents in the dollar to most creditors.
The KPMG report forms part of the evidence in a Court application
by KordaMentha, the Deed Administrators of Ten, to transfer the
shares to CBS International Television Australia Pty Ltd.
Any shareholders seeking to appear in the NSW Supreme Court
hearing are required to have filed grounds by October 13. A
directions hearing will be held on October 16 and a tentative date
for hearing of the application has been set for October 31.
About Network Ten
Network Ten is a division of Ten Network Holdings, one of
Australia's leading entertainment and news content companies,
with free-to-air television and digital media assets. Ten Network
Holdings includes three free-to-air television channels - TEN/TEN
HD, ELEVEN and ONE - in Australia's five metropolitan markets of
Sydney, Melbourne, Brisbane, Adelaide and Perth, plus the online
catch-up and streaming service tenplay.
Network Ten was forced to go into voluntary administration in June
2017 when its billionaire shareholders backed out from
guaranteeing a loan for the Company. KordaMentha Restructuring
partners Mark Korda, Jenny Nettleton and Jarrod Villani were
appointed as voluntary administrators.
The creditors of Ten Network on Sept. 19 voted in favor of a
AUD209.7 million takeover bid from CBS Corp.
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C H I N A
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HUAI AN: Fitch Affirms BB+ Long-Term IDR; Outlook Stable
--------------------------------------------------------
Fitch Ratings has affirmed China-based Huai An Traffic Holding
Co., Ltd's Long-Term Foreign- and Local-Currency Issuer Default
Ratings (IDR) at 'BB+'. The Outlook is Stable.
Fitch has also affirmed the company's USD300 million 4.95% notes
due 2019 at 'BB+'. The bonds are issued directly by Huai An
Traffic and are rated at the same level as its IDR. The bonds
constitute the company's direct, unconditional, unsubordinated and
unsecured obligations and rank pari passu with all its other
senior unsecured obligations.
KEY RATING DRIVERS
Links to Huai'an Municipality: Huai An Traffic's ratings are
linked to, but not equalised with, Fitch's internal assessment of
Huai'an municipality. This is reflected in the company's full
government ownership, strong government control and oversight and,
to a lesser extent, the strategic importance of the entity's
operation to the municipality. These factors result in a high
likelihood of extraordinary support, if needed, from the
municipality. Therefore, Huai An Traffic is classified as a
credit-linked public-sector entity under Fitch's criteria.
Huai'an Municipality's Healthy Creditworthiness: Huai'an, located
in Jiangsu province, has a satisfactory budget performance and a
diversified socio-economic profile. Huai'an's gross regional
product growth rate is higher than the national average and its
budgetary performance improved over the previous decade. These
strengths are partly offset by potentially high contingent
liabilities arising from the municipality's public-sector
entities.
Legal Status Attribute Midrange: Huai An Traffic is a 100%
registered municipal State-Owned Assets Supervision and
Administration Commission (SASAC)-owned limited liability company
under China's company law. The legal status is moderate because,
according to company law, the company can be liquidated or made
bankrupt and employees are not civil servants. Under its legal
status, major decisions - such as M&A, spin-offs, bankruptcy and
liquidation - require verification and approval from the municipal
government. According to Huai'an SASAC, the government had no
plans to dilute its shareholding in Huai An Traffic as of
September 2017.
Strategic Importance Attribute Midrange: Huai An Traffic is
designated by Huai'an municipality as a major investment and
financing platform for transportation-related infrastructure in
Huai'an. Its major activities include developing, financing,
operating and managing toll roads, airports and ship locks and its
business is diversified to include construction, trading,
logistics, shipping, catering and tourism. The commercialised
parts of the business could undermine Huai An Traffic's strategic
importance.
Weak Government Integration: The government has supported Huai An
Traffic via asset transfers. For example, it injected CNY12.9
billion of assets in 2016. However, transfers and grants/total
revenue shows a declining trend to 14% in 2016 from 19% in 2015.
Fitch expects the declining ratio to continue in the medium term.
Asset purchases from government also help fund Huai An Traffic's
operations and capital spending for transportation-related
infrastructure development. However, delayed settlement has
impaired cash flow generation.
Sponsor Control Attribute Stronger: The Huai'an municipal
government sets the course of Huai An Traffic's strategic
development, appointing most of its senior management and signing
off on its major decisions. The company's financing plans and debt
levels are also closely monitored by the municipality. In
addition, Huai An Traffic is required to regularly report its
operational and financial results to the municipality, according
to the company.
Weak Financial Profile: The company has high leverage due to its
large capex requirements. Its debt/Fitch-calculated EBITDA reached
more than 40x in 2016, from around 20x in 2015. Fitch expects the
ratio to stabilise below 30x in the medium term as Huai An
Traffic's debt increases at a more controlled pace along with
rising revenue and EBITDA. Interest coverage remains weak, with
negative FFO during 2014-2016. Fitch expects FFO to remain
negative in the medium term. An extended settlement period for
purchased assets increased account receivables due from the
government in 2016, constraining cash flow generation.
RATING SENSITIVITIES
An upgrade of Fitch's internal assessment of Huai'an municipality
would lead to positive rating action on Huai An Traffic. A
stronger or more explicit commitment of support from the
municipality may also trigger positive rating action.
A significant weakening in the company's strategic importance to
the municipality, dilution of the municipal government's
shareholding or reduced municipal support may result in a
downgrade. A downgrade may also stem from weaker fiscal
performance or increased indebtedness of the municipality, leading
to deterioration of Fitch's assessment of is creditworthiness.
Rating action on Huai An Traffic would lead to similar action on
the rating of its US dollar notes.
SHANDONG RUYI: IPO No Impact on Moody's B2 Corp. Family Rating
--------------------------------------------------------------
Moody's Investors Service says that the launch of an initial
public offering (IPO) by SMCP Group (SMCP, B1 stable), a
subsidiary of Shandong Ruyi Technology Group Co., Ltd. -- if
successfully executed -- will be credit positive for Ruyi.
However, the IPO will have no immediate impact on Ruyi's B2
corporate family rating, or the B3 backed senior unsecured rating
on the notes issued by Prime Bloom Holdings Limited, and
guaranteed by Ruyi and Ruyi's wholly owned subsidiary, Forever
Winner International Development Ltd.
The ratings outlook is stable.
"SMCP's IPO launch is credit positive for Ruyi, as the proceeds
will be used to reduce debt at SMCP, which will in turn reduce
Ruyi's financial leverage, and improve Ruyi's access to equity
funding," says Chenyi Lu, a Moody's Vice President and Senior
Credit Officer.
On October 9, 2017, SMCP launched its IPO on the regulated market
of Euronext Paris and expects to raise net proceeds of
approximately EUR121 million.
The proceeds of new share issuances will be used to fully redeem
SMCP's EUR100 million in floating-rate notes due 2022 and to
partially redeem SMCP's EUR334 million in fixed-rate notes due
2023.
The pricing of the IPO will likely take place on October 19, 2017.
Assuming that Ruyi uses the proceeds to pay down the debt, the
company's adjusted debt of RMB26.9 billion at end-June 2017 will
fall modestly by 3.5%, and its adjusted debt/EBITDA will decrease
slightly by 0.3x to around 8.4x for the 12 months ended June 30,
2017.
Furthermore, Ruyi's adjusted debt/EBITDA will improve to 7.0x-7.5x
over the next two years, as strong revenue growth and improved
earnings, supported by newly added production capacity in the yarn
and fabrics business and the full-year revenue contribution from
SMCP, will only be partially offset by a moderate rise in debt to
support its expanded operations.
"Ruyi will retain controlling ownership of SMCP as Ruyi will
increase its ownership of European TopSoho SÖrl (TopSoho), which
will own at least 51% of SMCP following the successful execution
of the IPO, down from 83.8%," adds Lu.
Ruyi will purchase all or part of the shares of TopSoho owned by
Yinchuan WeiXin Industry Funds Ltd Partnership. The funding will
come from the proceeds of the sales of its existing SMCP shares
through TopSoho in the IPO and Ruyi's internal cash resources.
Ruyi currently owns 51.8% of TopSoho and Yichuan WeiXin owns the
remaining stake.
Moody's will closely monitor the execution of the IPO and Ruyi's
final ownership of SMCP. Moody's estimates that SMCP will account
for about 20% and 30% of Ruyi's revenue and adjusted EBITDA,
respectively, in 2017.
Moody's expects Ruyi's revenue to grow by about 18% in 2017 and 5%
in 2018, driven by newly added production capacity in its yarn and
fabrics business, and improved business traction from SMCP as the
entity continues its international expansion outside of France and
into Asia.
Ruyi's adjusted EBITDA margin should improve to 12.0%-12.5% over
the next two years from an estimated 8.7% for the 12 months ended
June 2017, underpinned by a greater revenue contribution from and
higher margins at SMCP.
The principal methodology used in these ratings was Retail
Industry published in October 2015.
Established in 2001, Shandong Ruyi Technology Group Co., Ltd. is a
vertically integrated textile company that engages in textile
manufacturing, trading, the manufacturing and retailing of
apparel, and cotton and wool production.
The company has two listed subsidiaries, namely, Shenzhen Stock
Exchange-listed Shandong Jining Ruyi Woolen Textile Co. Ltd. and
Tokyo Stock Exchange-listed Renown Incorporated.
SUNSHINE 100: S&P Affirms 'CCC+' CCR, Outlook Negative
------------------------------------------------------
S&P Global Ratings affirmed its 'CCC+' long-term corporate credit
rating on China-based property developer Sunshine 100 China
Holdings Ltd. The outlook is negative. S&P removed the rating from
CreditWatch, where it had placed it with negative implications on
July 18, 2017.
S&P said, "We affirmed the rating and removed it from CreditWatch
after Sunshine repaid its US$215 million offshore senior unsecured
notes on Oct. 8, 2017. The company issued new US$235 million
offshore senior unsecured notes due 2020 to fund the transaction.
The refinancing has not only extended Sunshine's debt maturities
and reduced its interest costs, but also demonstrates the
company's fair access to the capital market.
"We believe Sunshine will continue to face liquidity pressure in
the next 12 months, given its large debt maturities and callable
onshore corporate bonds. As of June 30, 2017, the company has
Chinese renminbi (RMB) 8.5 billion of debt due within one year
(including the US$215 million matured offshore senior notes) and
RMB2.5 billion of onshore corporate bond with a put option. Given
Sunshine's cash and restricted deposits of RMB4.6 billion, we
believe the company will rely on rolling over its debt to meet its
financial obligations.
"The company's capital structure, with 29% of debt due within 12
months (after redemption of the US$215 million bond) and a ratio
of cash to short-term debt of less than 0.5x, is unsustainable in
our view. That said, we believe Sunshine has a stronger ability to
meet its onshore financial obligations compared to its offshore
maturities, mainly because of the company's improving sales, long
operating record, and sound relationships with financial
institutions. In addition, most of the onshore borrowings are
secured by Sunshine's properties and restricted deposits. Lenders
are therefore more willing to provide new financing or extend
maturities.
"We affirmed the rating because we believe Sunshine's fundamentals
have not changed materially after the debt refinancing. We believe
the company's high leverage and weak operating performance are not
sustainable over the longer term. We estimate that Sunshine will
continue to have negative operating cash flow in the coming 12
months because its contracted sales will not be able to cover its
related interest, construction, and operating expenses. We expect
the company's debt servicing ability to remain weak over the next
12 months, in the absence of any significant improvement in its
property sales or any large-scale assets sales.
"We believe Sunshine will continue to seek opportunities to
dispose of projects in the next one to two years as part of its
strategy of redirecting resources and investments to eastern and
southern China. The company withdrew a proposed disposal of a
project in Chongqing (announced in July 2017) after the purchaser
failed to meet some of the conditions. In our view, while Sunshine
may find it difficult to dispose of projects in lower-tier cities
that have limited market interest, the disposal of quality
projects could reduce future cash flows. In addition, the impact
of such disposal on leverage will depend on how the company uses
the proceeds.
"The negative outlook reflects our expectation that Sunshine's
liquidity may remain weak in the next 12 months, given the
company's large short-term debt maturities and low cash level. We
also believe that Sunshine may be vulnerable to further tightening
in onshore credit conditions.
"We may lower the rating if Sunshine's liquidity deteriorates,
which could be due to a significant increase in short-term debt
maturities or a quicker depletion in cash balance than we expect.
We may also lower the rating if we believe the company faces a
near-term liquidity crisis.
"We could revise the outlook to stable if Sunshine improves its
liquidity through asset disposal, or if the company demonstrates a
more sustainable business model, resulting in better sales,
margins, and financial leverage."
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I N D I A
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A.N.R. COTTON: CRISIL Reaffirms 'B' Rating on INR13MM Loan
----------------------------------------------------------
CRISIL Ratings has reaffirmed its 'CRISIL B/Stable' rating on the
long-term bank facility of A. N. R. Cotton Traders (ACT) and has
removed the 'Issuer Not Cooperating' suffix as the client has now
shared the requisite information.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 13 CRISIL B/Stable (Reaffirmed;
Removed from 'Issuer Not
Cooperating')
The rating continues to reflect ACT's modest scale of operations
with susceptibility to volatility in cotton prices and to changes
in government regulations. The rating also factors its weak
financial risk profile because of an aggressive capital structure
and sub-par debt protection metrics. These weaknesses are
partially offset by the extensive experience of the partners in
the cotton industry and the firm's established customer
relationships.
Analytical Approach
CRISIL has treated unsecured loans of INR2.07 crore extended to
ACT by the partners and their relatives as neither debt nor
equity, as the loans are interest-free, and are likely to remain
in the business over the medium term.
Key Rating Drivers & Detailed Description
Weaknesses
* Modest scale of operations: The firm's small scale is reflected
in operating income of INR74.7 crore in fiscal 2017. Intense
competition in the fragmented cotton industry will keep the scale
modest over the medium term.
* Susceptibility to volatility in cotton prices and to changes in
government regulations: Cotton prices are affected by demand and
supply, and government policies, and any sharp change in prices
will impact the firm's profitability.
* Weak financial risk profile: Financial risk profile is
constrained by high total outside liabilities to adjusted networth
of 3.41 times as on March 31, 2017, and modest risk and interest
coverage ratios of 2.9 times and 1.4 times, respectively, in
fiscal 2017.
Strength
* Extensive experience of the partners and established customer
relationships: Experience of two decades of managing partner Mr. A
Gopalakrishna and his established relationships with customers and
suppliers will continue to support ACT's business risk profile.
Outlook: Stable
CRISIL believes ACT will continue to benefit from its partners'
extensive industry experience. The outlook may be revised to
'Positive' if capital structure improves because of a significant
increase in cash accrual or infusion of funds. The outlook may be
revised to 'Negative' if the firm undertakes debt-funded capital
expenditure or if operating margin is lower than expected,
resulting in deterioration in the financial risk profile.
Set up in 2001 as a partnership firm, ACT trades in cotton bales
and seeds. The firm is promoted by Mr. A Gopalakrishna and Mr. A
Ravi Kumar.
ACT reported a provisional profit after tax (PAT) of INR52.49
lakhs on revenue of INR74.75 crore in fiscal 2017 (INR43.99 lakhs
and INR58.42 crore, respectively, for fiscal 2016).
ABDUL JALEEL: CRISIL Assigns 'B' Rating to INR4.5MM LT Loan
-----------------------------------------------------------
CRISIL Ratings has assigned its 'CRISIL B/Stable' rating to the
long-term bank facilities of Abdul Jaleel MM (AJ). The rating
reflects the firm's modest scale of operations in the highly
fragmented construction industry, limited scale of operations
owing to presence in a single state and a below-average financial
risk profile. These rating weaknesses are partially offset by the
long-standing industry experience of its promoter.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Term Loan 2 CRISIL B/Stable
Cash Credit 3.5 CRISIL B/Stable
Proposed Long Term
Bank Loan Facility 4.5 CRISIL B/Stable
Key Rating Drivers & Detailed Description
Weakness
* Modest scale of operations in a highly fragmented industry: AJ's
scale of operations is modest, as reflected in its estimated
revenues of INR3.89 crore in fiscal 2017. This is due to tender-
based nature of operations. This also results in volatility in
revenue profile and also makes the firm susceptible to volatility
in operating margins as the same vary across various tenders.
Furthermore, the civil construction industry is highly fragmented
and marked by low entry barriers, due to which AJ faces intense
competition from other players. CRISIL believes that the modest
scale of its operations will continue to impinge on the credit
profile of AJ.
* Limited scalability owing to presence in a single state: The
firm undertakes all of its projects in Kerala, limiting the scale
of operations to new projects across a limited geography. Any
events such as slowdown in the infrastructure spending in Kerala
or operational delays may affect the flow of orders for the firm
and thus impact its revenue growth. The operations of AJ shall
remain constrained owing to its presence in a single state.
* Below-average financial risk profile: AJ's financial risk
profile is marked by a small net worth, estimated to be around
INR1.72 crores as at March 31, 2017. Moreover, the capital
structure of the firm exhibits moderate level of gearing, as
marked by total outside liabilities to tangible net worth (TOLTNW)
ratio of 2.06 times as at the said date. With interest coverage
ratio of 1.69 times and net cash accruals to total debt (NCATD) of
6% for fiscal 2017, the firm's debt protection metrics remain
average. CRISIL believes that AJ's financial risk profile shall
continue to remain below-average in the medium term.
Strength
* Promoter's long-standing experience in the civil construction
industry: Mr. Abdul Jaleel MM has more than three decades of
experience in the civil construction industry. The promoter's
extensive industry experience has helped AJ bag projects
frequently from PWD. AJ currently has a healthy order book of
around INR 30 crores. The healthy order book provides the firm
with healthy revenue visibility over the medium term. CRISIL
believes that AJ shall continue to benefit over the medium term
from its promoter's extensive industry experience and its strong
revenue visibility.
Outlook: Stable
CRISIL believes that AJ will benefit over the medium term from the
experience of its promoters in civil construction industry. The
outlook may be revised to 'Positive', if the firm increases its
scale of operations and operating profitability significantly over
the medium term in a sustainable fashion there by leading to an
improvement in its financial risk profile. Conversely, the outlook
may be revised to 'Negative', if the firm undertakes any
significant debt-funded capital expenditure or if its revenues and
operating profitability decline or if its working capital cycle
elongates or there are significant capital withdrawals leading to
deterioration in its financial profile.
AJ is a proprietorship firm involved in civil construction works
such as construction of roads, bridges and construction and
maintenance for irrigation facilities in Kerala. The firm is
managed by Mr. Abdul Jaleel MM.
ALPHA TOCOL: ICRA Withdraws B+ Rating on INR10.74cr LT Loan
-----------------------------------------------------------
ICRA Limited has withdrawn the long term rating of [ICRA]B+
outstanding on the INR10.74-crore fund-based facilities and
INR0.50-crore non-fund based facility of Alpha Tocol Engineering
Services Private Limited in accordance with ICRA's policy on
withdrawal and suspension.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term-Fund-
based 10.74 [ICRA]B+; Withdrawn
Long term-Non-
fund based 0.50 [ICRA]B+; Withdrawn
Rationale
The rating assigned to the fund based and non-fund based
facilities of ATESPL have been withdrawn at the request of the
company and based on the no objection certificate provide by its
banker.
The company was founded in the year 1972 by Mr. A.S. Narasimha
Murthy and has been mainly into fabrication activity since its
inception. It was acquired by Alpha Design Technologies Private
Limited (ADTPL) in December 2009. Since its acquisition by ADTPL,
the company has been focusing on the manufacturing of precision
machined components, sheet metal components and sub-assemblies for
aircraft structural assemblies. It caters to the defence sector
with Hindustan Aeronautics Limited and Tara Aerospace Private
Limited being its key clients.
ANAND CRANKS: ICRA Moves B+ Rating to Not Cooperating Category
--------------------------------------------------------------
ICRA Limited has moved the ratings for the INR10.0 crore bank
facilities of Anand Cranks to the 'Issuer Not Cooperating'
category. The rating is now denoted as: "[ICRA]B+(Stable)/A4
ISSUER NOT COOPERATING"
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
LT-Fund-based 8.0 [ICRA]B+ (Stable); ISSUER NOT
Limits COOPERATING; Rating moved to
the 'Issuer not Cooperating'
category
ST/LT-Fund-based 2.0 [ICRA]B+(Stable)/A4 ISSUER NOT
Limits COOPERATING; Rating moved to
the 'Issuer not Cooperating'
category
Rationale
The rating is based on limited or no updated information on the
entity's performance since the time it was last rated in Feb,
2016. The lenders, investors and other market participants are
thus advised to exercise appropriate caution while using this
rating as the rating does not adequately reflect the credit risk
profile of the entity. The entity's credit profile may have
changed since the time it was last reviewed by ICRA; however, in
the absence of requisite information, ICRA is unable to take a
definitive rating action.
As part of its process and in accordance with its rating agreement
with AC, ICRA has been trying to seek information from the entity
so as to monitor its performance, but despite repeated requests by
ICRA, the entity's management has remained non-cooperative. In the
absence of requisite information, and in line with SEBI's Circular
No. SEBI/HO/MIRSD4/CIR/2016/119, dated November 1, 2016, ICRA's
Rating Committee has taken a rating view based on the best
available information.
Credit Strengths
* Extensive experience of promoter group, involved in
manufacturing of forged parts for automotive applications
Credit Challenges
* Moderate scale of operations with fluctuating operating margins
due to inability to pass on increase in raw material cost to its
customers
* Highly working capital intensive nature of operations due to
elevated receivable levels funded by bank borrowings, which keeps
liquidity position stretched
Started off in 2012 as a partnership firm, Anand Cranks (ANC) is
engaged in the manufacturing of forged parts such as linkage
parts, transmission gears, tie rods, propeller shafts, stub axles
and half axles. The firm is a group concern of Inderjit Forgings
(P) Ltd. which is engaged in a similar business. ANC manufactures
forged parts such as linkage parts, transmission gears, tie rods,
propeller shafts, stub axles and half axles.
BARUAPARA SK: ICRA Moves B Rating to Not Cooperating Category
-------------------------------------------------------------
ICRA Limited has moved the ratings for the INR11.0 crore bank
facilities of Baruapara SK Tea Factory Private Limited (BSKTFPL)
to the 'Issuer Not Cooperating' category. The rating is now
denoted as [ICRA]B (Stable); ISSUER NOT COOPERATING".
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based-Term 7.35 [ICRA]B (Stable) ISSUER NOT
Loan COOPERATING Rating moved to
the 'Issuer Not Cooperating
category
Fund-based-Cash 3.00 [ICRA]B (Stable) ISSUER NOT
Credit COOPERATING Rating moved to
the 'Issuer Not Cooperating
category
Fund-based-Standby 0.25 [ICRA]B (Stable) ISSUER NOT
Line of Credit COOPERATING Rating moved to
the 'Issuer Not Cooperating
category
Non-fund based 0.40 [ICRA]B (Stable) ISSUER NOT
Facility COOPERATING Rating moved to
the 'Issuer Not Cooperating
category
Rationale
The rating action is based on limited cooperation and no updated
information on the entity's performance since the time it was last
rated in March 2016. The lenders, investors and other market
participants are thus advised to exercise appropriate caution
while using this rating as the rating does not adequately reflect
the credit risk profile of the entity. The entity's credit profile
may have changed since the time it was last reviewed by ICRA;
however, in the absence of requisite information, ICRA is unable
to take a definitive rating action.
As part of its process and in accordance with its rating agreement
with BSKTFPL, ICRA has been trying to seek information from the
entity so as to monitor its performance and has also been sending
repeated reminders to the entity for payment of surveillance fee
that became due. However, despite multiple requests by ICRA, the
entity's management has remained non-cooperative. In the absence
of requisite cooperation and in line with SEBI's Circular No.
SEBI/HO/MIRSD4/CIR/2016/119, dated November 1, 2016, ICRA's Rating
Committee has taken a rating view based on the best available
information.
Key rating drivers
Credit strengths
* Experience of the promoters in the tea industry: Incorporated
in April 2011, BSKTFPL set up a CTC tea manufacturing facility in
August 2013, and has an annual capacity of 21.0 lakh kg of made
tea. The company's manufacturing facility is located at Dooars,
West Bengal. The promoters have over a decade experience in the
tea industry.
* Favourable long term outlook on the domestic bulk tea industry:
The long term outlook on the domestic bulk tea industry is
favourable.
Credit weaknesses
* Small scale of operations and limited operations history:
BSKTFPL is a small player in the domestic tea industry and a
producer of the CTC (crush, tear, curl) variety of tea. The
company started its operations in August 2013, and hence has a
limited operating history.
* Exposure to risks related to availability, quality and prices of
green leaves, given the company's total dependence on purchased
leaves: The company depends entirely upon purchased green leaves
as it has no plantation of its own, which exposes it to
availability, quality and price risks associated with bought tea
leaves. However, the procurement of green leaves from nearby small
plantations and healthy relationships with them partly mitigates
the risk of availability of leaves to an extent.
* Margins are likely to remain range bound due to inherent nature
of operation of processing bought leaves only; however, it is also
likely to protect the company, to an extent: While the company's
nature of operations of processing purchased green leaf to produce
black tea is likely to keep its margins range bound, it is likely
to protect it, to an extent, in a scenario of declining tea prices
since cost of green leaf is largely linked to prices of black tea.
Incorporated in April 2011, BSKTFPL set up a CTC tea manufacturing
facility in August 2013, and at present has an annual capacity of
21.0 lakh kg of made tea. The company's manufacturing facility is
located at Dooars, West Bengal. The company does not have its own
plantation facilities and depends entirely on bought leaf for its
production. The company procures green leaf from small growers
located near its production facilities.
CANARA BANK: Proposed Tap Bond Issue No Impact on Moody's ba3 BCA
-----------------------------------------------------------------
Moody's Investors Service says that Canara Bank's (Baa3 stable,
ba3) proposed senior unsecured tap bond issuance under its US$2
billion Medium-Term Note (MTN) program carried out from its London
branch has no impact on Canara Bank, London Branch's Baa3 foreign
currency senior unsecured debt rating.
The outlook on the ratings, where applicable, is stable.
The tap bond issuance follows from the bank's US$400 million, 3.25
percent notes which was earlier issued on August 10, 2017. The
bonds will be listed on the Singapore Exchange (SGX-ST).
The rating for the tap bond issuance is subject to receipt of
final documentation, the terms and conditions of which are not
expected to change in any material way from the draft documents
reviewed by Moody's.
The Baa3 foreign currency senior unsecured debt rating is anchored
on Canara Bank's ba3 baseline credit assessment (BCA) and Moody's
assessment of the likelihood of a very high level of support from
the Indian government (Baa3 positive) in a stressed situation.
Canara Bank's BCA of ba3 is underpinned by its weak asset quality;
and while its gross nonperforming loan (NPL) ratio is somewhat
better than its domestic peers, it is significantly weaker
compared to its ba3 global peers, with a trend of increasing NPLs.
Furthermore, provisioning levels and capital buffers are lower
compared with similarly rated peers.
On balance, its ratings also account for its adequate liquidity
position and funding profile, and sound deposit franchise.
The bank's final Baa3 rating incorporates three notches of uplift
due to Moody's assumption of the bank's very high level of support
from the Indian government in a stressed situation. The assumption
of high support is based on the bank's majority government
ownership and its importance to the domestic banking system.
The principal methodology used in these ratings was Banks
published in September 2017.
Canara Bank is headquartered in Bangalore, India. As of end-June
2017, it reported standalone assets of INR5,799 billion
(approximately USD89.7 billion).
CMC COMMUTATORS: ICRA Moves B Rating to Not Cooperating Category
----------------------------------------------------------------
ICRA Limited has moved the long-term rating outstanding of [ICRA]B
on the INR3.00-crore cash credit facility, INR2.00 crore term loan
facility and INR3.35 crore unallocated limits of CMC Commutators
Private Limited (CMC) to 'Issuer not cooperating' category. ICRA
has also moved the short-term rating outstanding of [ICRA]A4 on
the INR1.65-crore non-fund based limits of CMC to 'Issuer not
cooperating' category. The rating is now denoted as '[ICRA]B
(Stable)/[ICRA]A4 ISSUER NOT COOPERATING'.
ICRA gave these ratings:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term-Cash 3.00 [ICRA]B (Stable); ISSUER NOT
Credit COOPERATING; Rating moved to
the 'Issuer Not Cooperating'
category
Long-term-Term 2.00 [ICRA]B (Stable); ISSUER NOT
Loan COOPERATING; Rating moved to
the 'Issuer Not Cooperating'
category
Long-term- 3.35 [ICRA]B (Stable); ISSUER NOT
Unallocated Limit COOPERATING; Rating moved to
the 'Issuer Not Cooperating'
category
Short-term-Non 1.65 [ICRA]A4; ISSUER NOT
Fund Based Limit COOPERATING; Rating moved to
the 'Issuer Not Cooperating'
category
Rationale
The rating is based on the limited information on the company's
performance since the time it was last rated in March 2016. The
lenders, investors and other market participants are thus advised
to exercise appropriate caution while using this rating as the
rating does not adequately reflect the credit risk profile of the
entity. The entity's credit profile may have changed since the
time it was last reviewed by ICRA; however, in the absence of
requisite information, ICRA is unable to take a definitive rating
action. As part of its process and in accordance with its rating
agreement with Bharat Silks, ICRA has been trying to seek
information from the entity so as to monitor its performance, but
despite repeated requests by ICRA, the entity's management has
remained non-cooperative. In the absence of requisite information,
and in line with SEBI's Circular No. SEBI/HO/MIRSD4/CIR/2016/119,
dated November 1, 2016, ICRA's Rating Committee has taken a rating
view based on the best available information.
Key rating drivers
Credit Strengths
* Long track record of promoters for more than three decades in
the manufacturing of commutators
Credit Weaknesses
* Small scale of operations limits economies of scale
* Weak profitability which remains vulnerable to the key raw
material (copper) price volatility
* High working capital intensity of the business majorly driven
by high inventory holding period
* Reduced financial flexibility due to large debt funded
investment in real estate properties
* High client concentration
Incorporated in 1977, CMC is owned and managed by Mr. Ramesh Gudi
and family. Based in Belgaum (Karnataka), the company is engaged
in the manufacturing of industrial commutators, molded commutators
and sliprings. The company is ISO 9001:2000 certified. The company
has an installed capacity to manufacture 75000 units per month.
The promoters of the company own 72% stake in its subsidiary
company- Indo Vacuum Technologies Private Limited (IVT) which is
engaged in the manufacturing of vacuum pumps. The promoters are
also associated with another group company Acme Flowtech Private
Limited.
DIAMANT INFRASTRUCTURE: CRISIL Reaffirms C Rating on INR8MM Loan
----------------------------------------------------------------
CRISIL Ratings has been consistently following up with Diamant
Infrastructure Limited (DIL) for obtaining information through
letters and emails May 29, 2017 and July 12, 2017, among others,
apart from telephonic communication. However, the issuer has
remained non cooperative.
CRISIL gave these ratings:
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Bank Guarantee 2 CRISIL A4 (Issuer Not
Cooperating; Rating
Reaffirmed)
Cash Credit 8 CRISIL C (Issuer Not
Cooperating; Rating
Reaffirmed)
Proposed Long Term 4 CRISIL C (Issuer Not
Bank Loan Facility Cooperating; Rating
Reaffirmed)
The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of DIL. This restricts CRISIL's
ability to take a forward looking view on the credit quality of
the entity. CRISIL believes that the information available for DIL
is consistent with 'Scenario 2' outlined in the 'Framework for
Assessing Consistency of Information' which is usually mapped to
CRISIL BBB' category or lower. Based on the last available
information, CRISIL has reaffirmed the rating at 'CRISIL C/CRISIL
A4'.
DIL, established in 1980, is a Nagpur based player, engaged in the
infrastructure business in India primarily as a sub-contractor in
the road sector.
ESES BIO-WEALTH: CRISIL Lowers Rating on INR8MM LT Loan to D
------------------------------------------------------------
CRISIL Ratings has downgraded its rating on the long-term bank
facilities of ESES BIO-Wealth Private Limited (EBPL) to 'CRISIL D'
from 'CRISIL B-/Stable'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Long Term Loan 8 CRISIL D (Downgraded from
'CRISIL B-/Stable')
Proposed Term Loan 4 CRISIL D (Downgraded from
'CRISIL B-/Stable')
The rating downgrade reflects delays in debt servicing by the
company, due to a liquidity crunch.
The rating also reflects the company's susceptibility to risks
associated with stabilisation of operations at its new
manufacturing facility and intense competition in the flooring
industry. These weaknesses are partially offset by the extensive
entrepreneurial experience of the promoters.
Key Rating Drivers & Detailed Description
Weakness
* Stabilisation of operations at the new manufacturing facility:
EBPL has set up a production facility to manufacture floor tiles
and doors made of bamboo. Though the commercial operations started
from April 2017, there have been intermittent delays. Moreover,
given the sanctioning delays for working capital funding, the
company will remain exposed to risk related to stabilisation of
operations.
* Intense market competition: The flooring industry is highly
fragmented with significant competition from both organised and
unorganised sectors. Though unorganised players compete on the
basis of price, large and organised players use their brand value
as a key differentiator. Being a small player, EBPL will face
competition from other players, imports from countries, such as
China, and from substitutes, such as ceramic and polyvinyl
chloride tiles.
Strengths
* Extensive entrepreneurial experience of promoters: The promoters
have a diversified business experience encompassing construction
of roads, bridges, irrigation work, and development of agriculture
and forests. Also, the management has established relationships
with suppliers of raw bamboo and tied up with around 350 farmers
for its supply. The company will benefit, over the medium term,
from the extensive experience of its promoters and the favourable
location of its manufacturing unit.
EBPL has set up its manufacturing facility in Morigaon district,
Assam with a capacity of 3600 tonne per annum and started its
commercial operations from April 2017 onwards.
FALCON GLASS: CRISIL Raises Rating on INR3.25MM Cash Loan to B+
---------------------------------------------------------------
CRISIL Ratings has upgraded its long-term rating on the bank loan
facility of Falcon Glass Palace (FGP; part of the Al-fas group) to
'CRISIL B+/Stable' from 'CRISIL B/Stable' while reaffirming short
term rating at 'CRISIL A4'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 3.25 CRISIL B+/Stable (Upgraded
from 'CRISIL B/Stable')
Letter of Credit 3.25 CRISIL A4 (Reaffirmed)
The upgrade reflects CRISIL's belief that the Al-fas group will
sustain the improvement in its business and financial risk
profiles over the medium term. Operating income is estimated at
INR74.7 crore in fiscal 2017, up 30% over the previous fiscal. The
revenue growth was driven by increasing presence in Kerala with
successful ramp-up of operations at the new wholesale showroom in
Kochi. Revenue was earlier concentrated in southern Kerala. The
improvement in scale of operations while maintaining stable
profitability led to improvement of financial risk profile with
networth rising to INR7.25 crore as on March 31, 2017, from
INR5.76 crore a year earlier, while gearing strengthened to 1.55
times from 1.93 times. CRISIL believes revenue will continue to
rise over the medium term while maintaining working capital
management and financial risk profile.
Analytical Approach
For arriving at its ratings, CRISIL has combined the business and
financial risk profiles of Al-Fas Trading International Pvt Ltd
(ATIPL; part of the Al-fas group) and FGP. The entities,
collectively referred to as the Al-fas group, have operational and
financial linkages, the same management, and a common marketing
network.
Key Rating Drivers & Detailed Description
Weakness
* Moderate scale of operations: Estimated revenue of INR74.7 crore
in fiscal 2017 of Al-fas group reflects the moderate scale of
operations with FGP on a standalone basis is estimated to register
revenue of INR39.01 crores however a substantial portion of FGP's
products are sold to ATIPL.
* Moderately leveraged capital structure: Due to working capital
debt, total outside liabilities to tangible networth ratio was
high, estimated at 3.01 times as on March 31, 2017.
Strengths
* Promoters' extensive industry experience: The promoters have
experience of over 16 years in the industry leading to healthy
relationships with customers and suppliers, thus supporting the
group's business risk profile.
* Moderate interest coverage ratio: Despite modest profitability
due to trading business, the group had moderate interest coverage
ratio of 3 times estimated for fiscal 2017.
Outlook: Stable
CRISIL believes the Al-fas group will over the medium term
continue to benefit from its promoters' extensive industry
experience. The outlook may be revised to 'Positive' if revenue
grows significantly leading to increase in cash accrual, while
maintaining working capital cycle. Conversely, the outlook may be
revised to 'Negative' if revenue or profitability declines,
working capital management elongates, or if significant debt-
funded capital expenditure weakens the financial risk profile,
particularly liquidity.
Al-fas group is owned by Mr. Shibu Aboobacker and his wife Ms
Leefa Shibu. The day to day operations are handled by Mr. Shibu
Abookbacker.
FGP and ATIPL were set up in 1998 and 2013 respectively. Both the
entities are dealer/distributor of medium density fibre board
(MDF), glass, and plywood, based out of Trivandrum (Kerala).
GMR HYDERABAD: Fitch to Rate Proposed Bond Issue BB+
----------------------------------------------------
Fitch Ratings has published GMR Hyderabad International Airport
Limited's (GHIAL) Issuer Default Rating at 'BB+' with a Stable
Outlook and assigned an expected rating of 'BB+(EXP)' with a
Stable Outlook to GHIAL's proposed bond issuance.
Hyderabad is a growing, mid-sized regional origin and destination
(O&D) airport, with a relatively short track record, that operates
a blended till-pricing regime and at capacity. Volumes recovered
rapidly from the collapse in 2013 of its main airline, but the
airport lacks a record in terms of volume volatility in an
economic downturn, or with respect to consistent and transparent
price regulation.
Fitch believes the experienced management will deliver the debt-
funded capex to fulfill anticipated demand growth. The debt,
including the anticipated debt issuance, is senior secured but
bullet with limited credit protections. The consolidated average
net debt to EBITDA is 3.3x in the Fitch Rating Case for financial
2018 (to end-March; FY18)-FY22. In Fitch views, the long
concession to 2038 mitigates refinance risk.
KEY RATING DRIVERS
Strong Passenger Growth - Volume Risk: Midrange
Hyderabad's traffic in FY17 was 15.2 million of mostly O&D
passengers. Fitch expects traffic to grow strongly because India
is an emerging economy with an increasing propensity to fly,
although the airport has limited record of resilience through an
economic cycle, as it has been operational since 2008.
Traffic recovered within two years following the 2013 bankruptcy
of Kingfisher Airlines, its main airline with around 35% market
share. GHIAL faces limited regional competition from Bangalore and
Chennai airports or alternative modes of transport. The largest
carrier at Hyderabad accounts for 34% of aeronautical revenue.
Blended Till, Some Remaining Uncertainty - Price Risk: Midrange
The Ministry of Civil Aviation confirmed GHIAL's blended till
regulatory framework but, there is still some uncertainty around
the price increases for FY17-FY21. Fitch expects India's Airport
Economic Regulatory Authority to confirm by the end of 2017
traffic growth and cost-allocation assumptions, capex plans and as
result price increases during control period 2 from April 2016 to
March 2021. The regulator approved on an ad hoc basis the FY17
tariff. The lack of consistent and transparent record with respect
to the pricing regime constrains Fitch assessment.
Significant Capex but Experienced Management - Infrastructure
Development / Renewal: Midrange
The airport is operating at capacity. Fitch expects most the
airport's significant capacity expansion to be debt funded. Fitch
believes that management has well-developed internal plans for the
expansion and significant experience with the airports in
Hyderabad and Delhi to ensure timely and on-budget delivery.
Maintenance needs are well defined but the regulator has yet to
approve the final plan.
Limited Creditor Protections - Debt Structure: Weaker
The debt, including the anticipated debt issuance, is senior
secured but bullet with limited credit protections, except for the
expected bond issuance's fixed-charge cover ratio test for
additional indebtedness. Fitch see significant refinancing risk as
a result of the bullet structure of the debt. This is mitigated by
the long concession tenor to 2038. In addition, GHIAL has notified
the grantor for an extension of the concession agreement by
another 30 years to 2068.
Financial Metrics: Debt-Funded Capex to Increase Leverage
The five-year average projected net debt/EBITDA is 3.3x in the
Fitch Rating Case, higher than other emerging-market airports such
as DME Limited (BB+/Stable) at 2.5x.
Peer Group
DME is the closest EMEA peer. It has lower leverage and a strong
O&D traffic base, but higher traffic risk given recent
underperformance and Russia's recent economic decline. DME
benefits from a flexible tariff structure in contrast to GHIAL's
blended till. DME requires substantial terminal expansion, which
is on track.
RATING SENSITIVITIES
Future developments that may, individually or collectively, lead
to positive rating action include:
- GHIAL demonstrates a track record of stable and transparent
price regulation and volume resilience.
- 5-year average rating case forecast net debt to EBITDA falls
under 2x.
Future developments that may, individually or collectively, lead
to negative rating action include:
- Substantial revenue underperformance leading to 5-year average
net debt to EBITDA greater than 4x in the rating case.
Credit Update
Consolidated revenue for the full year ending March 2017 rose year
on year by 62% from INR9.01 billion to about INR14.7 billion
following the reinstatement of the user development fee (UDF) in
November 2015 and 22% growth in traffic. Revenue for FY16 had
eight months of no UDF, which formed about 75% of aeronautical
revenues and about 54% of total consolidated revenue in FY17.
Consolidated EBITDA increased to INR955 million from INR448
million during the same period. Net debt to EBITDA fell from 5.1x
in FY16 to 2.2x in FY17. GHIAL is waiting for the final pricing
decision from the regulator for the current regulatory period.
Fitch Cases
Traffic: The Fitch Base Case (FBC) assumed the Fitch sovereign
forecast for GDP and a multiplier of 1.1x, being the average
multiplier of all Indian airports from 2007 to 2015. The Fitch
Rating Case (FRC) assumed a lower sovereign 10-year GDP CAGR at
6.0% than the FBC of 7.4% from 2013-2022, while keeping the FBC
curve shape. The Fitch Stress Case (FSC) replicated the largest
contraction of 11.2% for all Indian airports over the past 10
years in FY19 and then assumed a slow recovery.
Price: The three Fitch cases assumed the user development fee
(UDF) per passenger to be in line with management forecast, as it
is defined by regulation and not recovery of lost UDF from the
pre-control period. The three cases assumed other price increases
to be in line with the management forecast, except that the FBC
and FRC assumed lower duty-free expenditure per passenger and a
lower US dollar to Indian rupee forex rate.
Results: The FRC five-year average projected net debt -to EBITDA
is 3.3x, which is comfortable at this rating level. Even under
FSC, the average five-year net debt -to EBITDA is at 4.1x,
slightly above the downgrade sensitivity of 4.0x. The credit
metrics are comfortable at this rating level.
GMR HYDERABAD: Moody's Assigns Ba1 Corporate Family Rating
-----------------------------------------------------------
Moody's Investors Service has assigned a first-time corporate
family rating of Ba1 to GMR Hyderabad International Airport
Limited (HIAL).
The outlook for the rating is stable.
HIAL has a long-term concession to operate Hyderabad airport,
which is one of the leading airports in India.
RATINGS RATIONALE
"The Ba1 corporate family rating primarily reflects HIAL's strong
market position and its strategic location in the city of
Hyderabad, which is India's fourth most populous city and a major
economic center", says Abhishek Tyagi, a Moody's Vice President
and Senior Analyst.
These factors position HIAL well to benefit from continued growth
in travel over the next 2-3 years.
"HIAL's credit profile is also underpinned by its low business
risk due to low concession revenue share payment to the
government", Tyagi says, adding "The airport's core aeronautical
revenue stream is regulated on a price cap basis and, as such, is
not exposed to the risk of fluctuations in passenger volumes,
thereby providing key rating support".
However, the rating is challenged by 1) the limited track record
of India's regulatory framework and 2) HIAL's significant capital
expenditure to expand its capacity, which will elevate financial
leverage and raise execution challenges.
"Reflecting its strong market position, Moody's expects the
airport to benefit from increased travel demand in the country as
income grows, particularly because an increasing proportion of the
airport's revenues - being non-aeronautical revenues -- will be
driven by rising passenger volumes", adds Tyagi.
HIAL's credit profile benefits from its location in the city of
Hyderabad, which is the fifth most populous city of India with a
population of 6.7 million. Hyderabad is also a major economic
center and is one of the key information technology (IT) and
information technology enabled services (ITeS) hubs of India --
with nearly all global and local majors present in the country.
The city is also one of the biggest pharmaceutical and
biotechnology hubs.
HIAL has exhibited solid operating performance relative to its key
performance targets, as stipulated by the concession. The Airports
Authority of India has the right to terminate the concession if
HIAL fails to meet its operating performance targets for a
sustained period. However, Moody's see the risk of termination as
being remote, given HIAL's solid operating track record, which
Moody's expects to continue, notwithstanding its upcoming
expansion program.
HIAL has one of the lowest concession fees in India, at 4% of the
gross revenues -- which can be passed on as a part of operating
expenses as per the regulations. This compares with 45.99% and
38.7% revenue share for Delhi and Mumbai airports respectively
The regulatory regime for the airport sector is still quite new
and is yet to establish a stable and predictable framework.
Further track record of consistent application of regulated
settings will provide support for HIAL's credit profile.
HIAL has a significant expansion programme (in the range of INR22-
25 billion), which will be implemented over the next four years.
While the project is indicative of the passenger growth
experienced by HIAL, the expansion will challenge its financial
metrics, although from a solid base. Moody's expects financial
leverage -- as measured by funds from operations to gross adjusted
debt-- to worsen to 9-10% over FY2019-FY2020 (fiscal year ending
31 March) as the company executes its capex plans to increase its
terminal capacity to 20 million passengers annually.
The rating factors in the effectiveness of the ring fence between
HIAL and its shareholders under the transaction documents which
insulates HIAL's credit profile from that of its shareholders.
The Ba1 rating also factors in Moody's expectation that HIAL will
be issuing bonds shortly, the proceeds of which will be used to
refinance the existing foreign and domestic currency bank term
loan facilities.
The stable outlook reflects HIAL's strong liquidity and Moody's
view that the company's financial profile over the next 12-18
months is manageable at the Ba1 rating level.
Upward rating movement in the near term is unlikely, given the
planned expansion program and the uncertainty associated with the
regulatory process. Over time, the ratings can be upgraded if HIAL
demonstrates an ability to maintain robust financial metrics,
including funds from operations /gross adjusted debt above 18-20%
and debt service coverage exceeding (DSCR) 2x on a consistent
basis.
The ratings could be downgraded if there is a deterioration in
financial leverage that is beyond Moody's base case expectations,
and which could be due to a larger expansion program, or missteps
in implementing the expansion project, or a reduction in
aeronautical and/or non-aeronautical revenues relative to Moody's
base case expectation. The financial metrics that could indicate a
downward pressure on the ratings include funds from operations to
gross adjusted debt declining below 8% and/or the DSCR below 1.4x
on a consistent basis.
The principal methodology used in this rating was Privately
Managed Airports and Related Issuers published in September 2017.
HIAL is one of the larger airports to be operationalized under the
PPP model. HIAL started commercial operations from 23rd March
2008. The airport has a current design capacity of 12 million
passengers per annum and 150,000 tons of cargo handling capacity
per annum. The airport pays Government of India (GOI) a fee of 4%
of Gross Revenue annually as per the terms specified in the
Concession Agreement which ends in 2038. HIAL's shareholders are
GMR Airports (63%), Malaysia Airports Holdings Berhad (A3,
negative - 11%), the Government of India through Airports
Authority of India (AAI, 11%), and Government of Telangana (13%).
GMR Airports is a subsidiary of GMR Infrastructure Ltd
GMR HYDERABAD: S&P Assigns 'BB+' CCR With Positive Outlook
----------------------------------------------------------
S&P Global Ratings assigned its 'BB+' long-term corporate credit
rating to India-based airport operator GMR Hyderabad International
Airport Ltd. (GHIAL). The outlook is positive. S&P also assigned
its 'BB+' issue rating to the company's senior unsecured notes.
S&P said, "The rating reflects our expectation that GHIAL will
maintain its financial strength over the next 12-24 months despite
a delay in the resetting of tariffs and the company's high
spending plans.
"We view India's regulatory regime for airports to be still
evolving, resulting in higher regulatory risks for airport
operators than in other countries in Asia-Pacific. However, we
expect GHIAL's regulatory uncertainty to decrease over the next
six to 12 months following the implementation of revised tariffs
and the resolution of some disputed items.
"Furthermore, we believe that the company's strong domestic
passenger growth will offset the impact of these regulatory
delays. This is despite Hyderabad airport's relatively weak market
position and small size. In our view, GHIAL has a good geographic
location and market position, which allows the company to benefit
from India's strong growth in the aviation sector, particularly as
domestic travel continues to rise."
GHIAL is exposed to regulatory uncertainty because the Airports
Economic Regulatory Authority of India (AERA) continues to delay
the implementation of the second control-period tariff (2016-2022)
even as GHIAL's plans to spend Indian rupee (INR) 15 billion-INR20
billion over the next three years.
S&P said, "We expect the second control-period tariff to be
implemented by March 2018. We anticipate that the new tariff will
encompass "true-up", which recovers GHIAL's loss of earnings as a
result of past regulatory disputes. Moreover, we expect the
revised tariff to account for the recovery of capital expenditure
for GHIAL's next phase of terminal expansion. If approved, we
believe that the new tariff will support increased predictability
and stability in earnings for the next control period, because the
uncertainty over how much capital spending the company can recover
will be largely removed.
"In our opinion, the recent delays in implementing the second
tariff order reflect the less-established and evolving regulatory
framework for airports in India. This is demonstrated by the
number of disputes and delays in passing regulatory orders by
AERA. However, the tariff mechanism provides assured returns on a
regulated asset base including the true up mechanism if traffic
volume is lower than anticipated. Regulatory risk is much lower
for airports in countries such as Australia. Southern Cross
Airport, for example, benefits from a regulatory regime that is
well-established and light-handed.
"We believe the impact of regulatory risks for GHIAL is limited
because the size of its regulatory contentions are smaller and its
disputes are less complex than what we have observed with average
private airports in India. GHIAL's airport's largest regulatory
contention was in relation to the implementation of its hybrid
till, which was resolved in November 2015. Under the hybrid till,
airport charges are cross-subsidized by 30% of non-aeronautical
revenues. In contrast, under GHIAL's previous single till, airport
charges were subsidized by all non-aeronautical charges. This
change in till resulted in a strong financial performance in
fiscal year ended March 31, 2017, where the ratio of funds from
operations (FFO) to debt increased to 23%, from just 7% in the
previous year.
"We believe that GHIAL's strong operating performance supported by
good passenger traffic will also help the company withstand these
regulatory delays. Although we view GHIAL's market position and
catchment area as smaller and less economically developed than
most rated peers', we believe that the airport's strong growth
fundamentals mitigate this weakness. With a population of around
7.5 million, Hyderabad is a tier-2 city in India. In comparison,
Delhi International Airport Ltd (DIAL) operates as the sole
provider to the National Capital Region, one of the largest
regional economies in India, with a population of around 45
million. However, given GHIAL's strategic central location in
India, we believe the company is well positioned to benefit from
India's growing aviation industry, which emphasizes regional
connectivity. Hence, while not a hub like DIAL with a high
proportion of transit passengers, GHIAL is likely to benefit from
more stable domestic traffic. With a large geographic footprint,
increasing disposable incomes, and falling air fares, GHIAL's
growth fundamentals are strong, in our view. Around 75% of
destinations served directly by GHIAL are domestic.
"We expect passenger traffic for GHIAL to increase by 8%-10% over
the next three years in an underpenetrated Indian aviation market.
The growth will be driven mainly by an increase in domestic
passengers, although the terminal has capacity constraints.
Passenger traffic has grown by around 45% over the past two years,
with 77% of passengers being domestic. The airport is currently
operating at full capacity and will need to significantly increase
its capital expenditure in the next three years to address the
constraint. While GHIAL's current capacity is around 12 million
passengers, it had 15 million passengers in 2016. As such, the
company plans to expand the existing terminal by the end of 2019.
"The materially weaker credit profile of GHIAL's major
shareholder, GMR Infrastructure Ltd., is unlikely to negatively
affect GHIAL's credit profile, in our view. GMR Infrastructure's
ability to control the strategy and cash flows of GHIAL is
significantly restricted under the shareholder agreement between
the Airports Authority of India (AAI) and the Telangana state
government (GoT). The AAI and GoT together have a 26% shareholding
in GHIAL, participate at the board level, and are required to
approve any change in strategy or related-party transactions.
"The positive outlook reflects our view that GHIAL's financial
position will remain strong, with a ratio of FFO to debt of about
18% over the next 12-18 months. We also expect greater clarity on
GHIAL's regulatory regime in the next six to 18 months, providing
greater stability and predictability to the company's operations
and cash flow.
"We may raise the rating if the tariff reset in the next six to 18
months significantly reduces GHIAL's exposure to regulatory
uncertainties such that the company can sustainably maintain a
ratio of FFO to debt of over 18%. This would be predicated on
GHIAL maintaining a strong operational performance and being
adequately compensated for the agreed capital expenditure.
"We could revise the outlook to stable if GHIAL's regularity
environment does not improve as we expect, resulting in the FFO-
to-debt ratio unlikely to stay above 18% on a sustainable basis.
This may result from, among other things, the regulator failing to
compensate GHIAL adequately for the agreed capital expenditure."
INDIABULLS REAL: Fitch Affirms B+ IDR; Outlook Stable
-----------------------------------------------------
Fitch Ratings has affirmed property developer Indiabulls Real
Estate Limited's (IBREL) Long-Term Foreign-Currency Issuer Default
Rating (IDR) at 'B+'. The Outlook is Stable. The agency also
affirmed the rating on Century Limited's USD175 million 10.25%
senior notes due 2019 at 'B+ ' and Recovery Rating of 'RR4'.
Century Limited is a Jersey-based subsidiary of IBREL.
IBREL's rating reflects its position as one of India's largest
property developers and the high-quality investment properties
held under its 55%-owned subsidiary Indiabulls Properties
Investment Trust (IPIT), which adds stability to its inherently
cyclical business model. The Stable Outlook reflects the recovery
in IBREL's contracted sales following India's currency
demonetisation last year. The rating headroom is limited because
Fitch expects IBREL's leverage to be high in the next few years as
the company uses improving collections in its property development
business to fund expansion in its investment-property portfolio.
KEY RATING DRIVERS
Investment-Property Acquisitions Raise Leverage: IBREL's leverage,
measured as net adjusted debt/adjusted inventory, increased to 66%
in financial year ended 31 March 2017 (FY17). Leverage rose after
IBREL raised its stake in IPIT to 55% from 47.5% and consolidated
the financial results of the subsidiary from 1Q FY17. In addition,
contracted sales and collections decreased following the
demonetisation and the company made certain investment-property
acquisitions. Leverage in FY17 remained above 60%, the level where
Fitch would consider negative rating action, but reduced to 58% in
1Q FY18 as the company liquidated a portion of its treasury stock.
Limited Rating Headroom: Fitch expects IBREL's leverage to remain
high until FYE19 because the company is likely to use the
improving cash flows from its property-development business to
expand its investment-property portfolio. Fitch expects
significant collections from Blu, a luxury residential project in
Central Mumbai, and Greens, a mass-market project in Panvel, Navi
Mumbai. The two projects had pending collections net of remaining
development costs of about INR28 billion at 30 June 2017.
Recovering Property-Development Business: IBREL's presales
decreased by nearly 13% to INR25.4 billion in FY17 due to weak
property demand after India's currency demonetisation in November
2016. However, quarterly sales have recovered, with contracted
sales reaching INR8.8 billion in 1Q FY18, compared with INR2.6
billion in 3Q FY17 and INR7.0 billion in 4Q FY17. IBREL sold about
a third of the homes in the Blu project in the six months to June
2017 because road connectivity improved and buyer interest
increased as the project neared completion.
IBREL's land bank, which comprises 2,588 acres (1,047 hectares) at
the Nashik Special Economic Zone and 1,046 acres at the National
Capital Region (NCR), Mumbai and Chennai, can support six to seven
years of development. In Fitch's view, this should limit the
company's capital-intensive land replenishing activities.
Expansion of Investment-Property Portfolio: Fitch expects IBREL's
strategy to expand its investment-property portfolio to add some
stability to the company's cash flows, which are subject to
cyclicality in its property-development business. With the larger
stake in IPIT, IBREL controls two high-quality office properties
with 3.3 million square feet of leasable area and INR6 billion in
annual rental income. The properties benefit from sustained high
occupancy (in excess of 90%), long-term leases with institutional
tenants, and built-in annual rental increase of about 5%.
In addition, IBREL acquired 1.9 million square feet of office
space in Chennai in March 2017 and intends to develop additional
investment properties in Mumbai and NCR, which will increase its
leasing portfolio to about 9 million square feet and INR14 billion
in annual rental income over the next four to five years.
London Project on Track: IBREL soft launched its mixed-use project
in the Mayfair district in London in 1Q FY18 and sold four of the
79 units, which Fitch believes is a good response that tapped
Asian investor interest amid a weaker sterling. A formal launch is
due in 3Q FY18. Fitch expects the project, which has all the
requisite approvals in place, to generate significant cash flows
upon its completion by 2020 or 2021. Fitch does not see any
material funding requirements for the project as IBREL reduced the
debt borrowed in London by almost 50% after March 2017 and
construction cost of GBP158 million is manageable relative to
sales potential of GBP572 million.
Limited Impact from New Regulation: Fitch believes that the
implementation of India's Real Estate Regulation Act of 2016
(RERA), which came into full effect on 1 May 2017, would restrict
property developers' ability to move cash freely out of
construction projects. Nonetheless, Fitch expects IBREL's
financial flexibility to remain good because many of the company's
key cash-contributing projects are in advanced stages of
construction.
DERIVATION SUMMARY
IBREL's 'B+' rating compares well against peers Lodha Developers
Private Limited's (B/Rating Watch Negative), PT Alam Sutera Realty
Tbk (ASRI, B/Rating Watch Negative) and Times Property Holdings
Limited (B+/Positive). Lodha has a larger operating scale and a
better track record of sales over the last few years, but these
are partly offset by IBREL's more stable investment-property
portfolio. IBREL's leverage is lower and its deleveraging profile
is better than Lodha's over the medium term, which supports a
higher rating for IBREL.
IBREL has a stronger business risk profile than ASRI given its
larger scale, more diversified projects and more stable leasing
assets. However, IBREL's leverage is higher. Times Property has a
larger scale but a smaller land bank than IBREL, which
necessitates land acquisitions that may raise its leverage. Times
Property's lower leverage and robust execution track record
underpins its rating and Positive Outlook.
KEY ASSUMPTIONS
Fitch's key assumptions within its ratings case for the issuer
include:
- Presales of around INR37 billion in FY18 and INR45 billion in
FY19
- Cash collections of at least INR20 billion in FY18 and INR30
billion in FY19
Key Recovery Rating Assumptions:
- The recovery analysis assumes IBREL would be liquidated in a
bankruptcy rather than continue as a going-concern because it
is an asset trading company
- In Fitch calculations of IBREL's liquidation value, Fitch has
taken IBREL's share in residual equity at IPIT after repaying
debt at IPIT. In Fitch's opinion, the IPIT assets would
sufficiently cover its debt without any further liability to
IBREL.
- Accounts receivable includes unbilled revenue, which stems
from the completion of construction milestones of property
projects. Fitch has assumed a 75% advance rate against
receivables and unbilled revenue.
- Fitch has assumed a 100% advance rate against the book value
of IBREL's consolidated adjusted inventory (excluding IPIT
assets). Fitch estimates that the market value of IBREL's
inventory is at least 2.0x that of its book value. This is
because IBREL has posted a gross profit margin of around 50%
over the last few years.
- All of IBREL's pro forma consolidated debt at FYE17, apart
from the USD47 million of outstanding senior notes, have been
treated as prior-ranking or secured debt.
- Fitch estimates IBREL's liquidation value to be able to cover
91%-100% of its secured and unsecured debt, corresponding to a
'RR1' Recovery Rating for the senior notes after adjusting for
administrative claims. Nevertheless, Fitch has rated the
senior notes at 'B+' with a Recovery Ratings of 'RR4' because
under Fitch's Country-Specific Treatment of Recovery Ratings
criteria, India falls into 'Group D' of creditor friendliness.
Instrument ratings of issuers with assets in this group are
subject to a soft cap at the issuer's IDR.
RATING SENSITIVITIES
Fitch does not anticipate any positive rating action in the near
term given IBREL's high leverage.
Developments that may, individually or collectively, lead to
negative rating action include:
- EBITDA margin sustained below 25% (FY17: 32%)
- Net debt/adjusted-inventory sustained above 60% (1Q FY18: 58%)
LIQUIDITY
Adequate Liquidity: IBREL's high-quality property portfolio and
its position as one of the leading developers in India support its
refinancing ability in the domestic market. In addition, the
company's unrestricted cash balance and listed mutual fund
investments of INR9.3 billion and availability of INR3 billion
under committed credit facilities provide some financial
flexibility in meeting debt maturities of INR20.6 billion in FY18.
Fitch believes the company's improving free cash generation from
projects that are due to be completed in the near to medium term
will strengthen its liquidity profile.
INDO VACUUM: ICRA Moves 'B' Rating to Not Cooperating Category
--------------------------------------------------------------
ICRA Limited has moved the long-term rating outstanding of [ICRA]B
on the INR2.20-crore cash credit facility and INR1.50-crore term
loan facility of Indo Vacuum Technologies Private Limited (IVT) to
'Issuer not cooperating' category. ICRA has also moved the short-
term rating outstanding of [ICRA]A4 on the INR0.50-crore non-fund
based limits of IVT to 'Issuer not cooperating' category. ICRA has
also moved the ratings outstanding of [ICRA]B and [ICRA]A4, on the
INR3.35-crore unallocated limit of IVT to 'Issuer not cooperating'
category. The rating is now denoted as '[ICRA]B (Stable)/[ICRA]A4
ISSUER NOT COOPERATING'.
ICRA gave these ratings:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term-Cash 2.20 [ICRA]B (Stable); ISSUER NOT
Credit COOPERATING; Rating moved to
the 'Issuer Not Cooperating'
category
Long-term-Term 1.50 [ICRA]B (Stable); ISSUER NOT
Loan COOPERATING; Rating moved to
the 'Issuer Not Cooperating'
category
Short-term-Non 0.50 [ICRA]A4; ISSUER NOT
Fund Based Limit COOPERATING; Rating moved to
the 'Issuer Not Cooperating'
category
Long-term/Short- 3.35 [ICRA]B (Stable)/[ICRA]A4;
term- Non Fund ISSUER NOT COOPERATING;
Based Limit Rating moved to the 'Issuer
Not Cooperating' category
Rationale
The rating is based on limited information on the company's
performance since the time it was last rated in March 2016. The
lenders, investors and other market participants are thus advised
to exercise appropriate caution while using this rating as the
rating does not adequately reflect the credit risk profile of the
entity. The entity's credit profile may have changed since the
time it was last reviewed by ICRA; however, in the absence of
requisite information, ICRA is unable to take a definitive rating
action. As part of its process and in accordance with its rating
agreement with Bharat Silks, ICRA has been trying to seek
information from the entity so as to monitor its performance, but
despite repeated requests by ICRA, the entity's management has
remained non-cooperative. In the absence of requisite information,
and in line with SEBI's Circular No. SEBI/HO/MIRSD4/CIR/2016/119,
dated November 1, 2016, ICRA's Rating Committee has taken a rating
view based on the best available information.
Key rating drivers
Credit Strengths
* Longstanding and established track record of the company as well
as experience of promoters in the vacuum pumps industry
Credit Weaknesses
* Small scale of operations and weak profitability
* Vulnerability of profitability to volatility in raw material
prices and high competition
* High working capital intensity of the business majorly driven by
high inventory holding period
* Reduced financial flexibility due to large debt funded
investment in real estate properties
* Exposure to foreign exchange risks
Incorporated in 2001, IVT is owned and managed by Gudi family and
is engaged in the manufacturing of a range of vacuum pumps in
Belgaum (Karnataka). The company was established as a 50:50 joint
venture with Woosung Vacuum Co Ltd, based out of South Korea;
however, in 2009 the promoter family bought the stake from the
Korean company. IVT is a subsidiary of its group concern- CMC
Commutators Private Limited (CMC) with latter holding 72% stake in
the former.
JAYPEE INFRATECH: Bid to Extend Time to Deposit INR2,000cr Denied
-----------------------------------------------------------------
The Times of India reports that with the October 27 deadline to
deposit INR2,000 crore to protect the interest of homebuyers
affected by insolvency of Jaypee Infratech Ltd (JIL) approaching,
holding company Jaiprakash Associates Ltd (JAL) made a futile
attempt in the Supreme Court on Oct. 9 to get the date deferred.
According to the report, Advocate Anupam Lal Das told the court
that JIL's assets were more than its liabilities and it was ready
to give an undertaking that the interest of each and every
homebuyer would be safeguarded.
He added that if JAL was forced to deposit INR2,000 crore, it too
would become insolvent, affecting a wide range of stakeholders and
creating another problem in addition to that arising from
insolvency proceedings being initiated against JIL, TOI relays.
"JAL and JIL are earnestly working towards resolving the working
capital requirement of JIL and assure the SC that the investment/
money of homebuyers is fully secured. JIL is continuing to deliver
homes to homebuyers and from April till September 2017, has
delivered 1,138 homes in addition to 2,942 delivered earlier and
will deliver another 1,862 homes by December 2017," the report
quotes Lal as saying.
A bench of Chief Justice Dipak Misra and Justices A M Khanwilkar
and D Y Chandrachud brushed aside Das's repeated requests to list
JAL's application and give an opportunity to place facts relating
to financial difficulties of the company before the SC. "We will
hear you (JAL) on October 27. Your ambition to wriggle out of the
liabilities towards homebuyers is mistaken. Give the money back to
them, we will hear you. We will have to protect the interest of
homebuyers. We are not going to modify the September 11 order
(directing JAL to deposit INR2,000 crore by October 27). We are
not going to list the application for hearing before October 27,"
the report CJI Misra as saying.
This means JAL has no option but to deposit INR2,000 crore. In
case it fails to do so, its directors could face the prospect of
being charged with contempt of court. TOI relates that JAL's
application said making the holding company responsible if JIL
failed to deposit INR2,000 crore would "force JAL as well into
insolvency and an additional problem would be created rather than
solving the problem at hand, which would ultimately affect all the
stakeholders of the JAL, including public shareholders and almost
4,500 home buyers of JAL".
Though it has not appealed against the order of National Company
Law Tribunal, Allahabad, directing initiation of insolvency
proceedings against JIL, JAL told the SC that JIL was solvent, the
report relays. To back its claim, it said fair market value of
JIL's total assets was INR32,882 crore as against total
liabilities of INR12,902 crore, thus giving it a net asset value
of INR19,980 crore.
In its application, JAL said it was engaged in constructing
several high-value government projects and employed nearly 50,000
people directly or indirectly with an annual salary outgo of
INR700 crore, relates TOI. "The above facts clearly demonstrate
that JAL is in no financial position to deposit INR2,000 crore
before the SC," JAL said and requested the SC to dispense with the
requirement of depositing INR2,000 crore by October 27, the report
adds.
About Jaypee Infratech
Jaypee Infratech Limited (JIL) is engaged in the real estate
development. The Company's business segments include Yamuna
Expressway Project and Healthcare. The Company's Yamuna
Expressway Project is an integrated project, which inter alia
includes construction of 165 kilometers long six lane access
controlled expressway from Noida to Agra with provision for
expansion to eight lane with service roads and associated
structures on build, own, operate and transfer basis. The Company
provides operation and maintenance of Yamuna Expressway for over
36 years, collection of toll and the rights for development of
approximately 25 million square meters of land for residential,
commercial, institutional, amusement and industrial purposes at
over five land parcels along the expressway. The Healthcare
business segment includes hospitals. The Company has commenced
development of its Land Parcel-1 at Noida, Land Parcel-3 at
Mirzapur and Land Parcel-5 at Agra.
KGS SUGAR: ICRA Moves 'D' Rating to Not Cooperating Category
------------------------------------------------------------
ICRA Limited has downgraded the long term rating to [ICRA]D from
[ICRA]BB- and short term rating to [ICRA]D from [ICRA]A4 to the
INR450.00 crore bank facilities of KGS Sugar and Infra Corporation
Limited. ICRA has moved the ratings to the 'Issuer Not
Cooperating' category. The rating is now denoted as: "[ICRA]D
ISSUER NOT COOPERATING.
ICRA gave these ratings:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term, fund 210.81 [ICRA]D ISSUER NOT COOPERATING
Based-Term Loan Downgraded from [ICRA]BB-
(Stable); and moved to the
'Issuer Not Cooperating'
category
Long Term, fund 117.33 [ICRA]D ISSUER NOT COOPERATING
Based-Cash Credit Downgraded from [ICRA]BB-
(Stable); and moved to the
'Issuer Not Cooperating'
category
Short Term, fund 52.00 [ICRA]D ISSUER NOT COOPERATING
based Downgraded from [ICRA]A4; and
moved to the 'Issuer Not
Cooperating' category
Long Term/Short Term 69.86 [ICRA]D ISSUER NOT COOPERATING
Unallocated Downgraded from [ICRA]BB-
(Stable)/A4 and moved to the
'Issuer Not Cooperating'
category
Rationale
The rating downgrade follows the delays in debt servicing by KGS
to the bankers, as confirmed by them to ICRA. ICRA has limited
information on the entity's performance since the time it was last
rated in February 2016 which was based on detailed information.
As part of its process and in accordance with its rating agreement
with KGS, 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]D/D ISSUER NOT COOPERATING". The
lenders, investors and other market participants may exercise
appropriate caution while using this rating, given that it is
based on limited or no updated information on the company's
performance since the time it was last rated.
Key rating drivers
Credit strengths
* Established promoters' experience in the sugar industry: The
promoter of KGS has long standing experience in sugar industry and
the company has hired technically qualified staff.
* Forward integration of sugar operations with co-generation:
KGS's sugar mill operations are forward integrated in the form of
co-generation unit which provides an additional source of revenue
and cushion against cyclicality in the sugar business and thus
improves viability of operations.
* Location advantage: ICRA also take into account location
advantage with mill present in cane surplus region and nearby
sugar mills currently being non-operational giving ample scope for
cane procurement from non-command area.
Credit weaknesses
* Delay in servicing debt obligation: KGS has been delaying in
repayment of term loan obligation and there has been
overutilization in cash credit account for more than 30 days on
account of strained liquidity position of the company.
* High working capital intensity: The working capital intensity
of the company remains high in line with trend in the sugar
industry.
* Exposure of agro climatic risks and Government's regulations:
The ratings also take into account company's exposure to agro
climatic risks, cyclical trends in sugar industry. The company
remains exposed to Government regulations prevalent in sugar
industry in terms of cane pricing and export regulations.
KGS is involved in the manufacturing of sugar and its allied
products. The company has set up a sugar plant with capacity of
4500 tonnes crush per day (TCD) which is forward integrated with a
co-generation unit of 14 MW. KGS is also setting up a sugar
refinery unit of 400 tonnes per day (TPD) capacity. The
manufacturing facilities of the company are located at Niphad in
Nashik district of Maharashtra. KGS began its sugar mill and co-
generation operations in Jan-15 while the sugar refinery was
expected to commence operations from Oct-16.
KRISHNA PAPER: CRISIL Reaffirms B+ Rating on INR6.42MM Cash Loan
----------------------------------------------------------------
CRISIL Ratings has reaffirmed its rating on the bank facilities of
Krishna Paper Projects Private Limited (KPPPL:-part of Krishna
Group) at 'CRISIL B+/Stable/CRISIL A4'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 6.42 CRISIL B+/Stable (Reaffirmed)
Proposed Short Term
Bank Loan Facility 11.08 CRISIL A4 (Reaffirmed)
The rating continues to reflect the Krishna group's exposure to
risks associated with ramp-up of operations of the newly set up
kraft paper manufacturing unit, large working capital requirement,
and susceptibility of profitability to volatility in raw material
prices. These weaknesses are partially offset by established
clientele and the extensive experience of the promoters in the
paper industry.
Analytical Approach
For arriving at the rating, CRISIL has combined the business and
financial risk profiles of KPPPL, MJK Mercantiles Pvt Ltd (MJK),
Tara Finvest Private Limited (TFPL) and Krishna Tissues Private
Limited (KTPL). All the companies, collectively referred to as the
Krishna group, have a common management and significant
operational linkages
Key Rating Drivers & Detailed Description
Weaknesses
* Exposure to risks associated with timely ramp up of operations
of kraft paper unit: The group undertook capex of INR308 crore
till fiscal 2017 for setting up a kraft paper manufacturing
facility, which started operations by mid of fiscal 2017. The
capex was funded through term loan of INR208 crore and remaining
was through own funds or internal accrual. Timely ramp-up of
operations and generation of adequate cash accrual will be key
rating sensitivity factors over the medium term on account of the
significant obligations for the debt contracted for the project.
* Large working capital requirement: The group's gross current
assets have been sizeable at 138-197 days in the three years
through fiscal 2017 and the same is largely on account of extended
credit period given to the debtors for increasing its market share
coupled with sizeable amount of inventory maintained by the
company in form of raw materials to ensure timely execution of
orders.
* Exposure of profitability to volatility in raw material prices
and forex rates: The group keeps raw material inventory at around
55-60 days and sale prices are fixed at the time of receipt of
confirmed orders from customers. As intense competition restricts
players' ability to pass on increase in raw material price to
customers, profitability will remain vulnerable to volatility in
prices of key raw materials, such as waste paper
Strength
* Promoters' extensive experience in the paper industry and
established customer base: The founder-promoter of the Krishna
group, Mr. M L Bajaj, has experience of over four decades in the
paper industry. The promoter's family set up a paper mill in KTPL,
which commenced commercial operation in the last quarter of fiscal
2009. Mr. Bajaj's extensive industry experience has helped KTPL
market its products. The promoters' established relationships with
raw material suppliers and logistics service providers help in
smooth and timely procurement and transportation of raw material.
Backed by the promoters' extensive experience, the group has
established a diversified and wide clientele for its products. The
group primarily markets its product domestically in eastern India,
and sometimes exports to Nepal and Bangladesh.
Outlook: Stable
CRISIL believes the Krishna group will continue to benefit from
the extensive experience of its promoters. The outlook may be
revised to 'Positive' if the new kraft paper unit stabilises
operations sooner-than-expected, and if the group generates
adequate cash accrual and manages working capital efficiently. The
outlook may be revised to 'Negative' if lower-than-expected
operating income or accrual, stretch in working capital cycle, or
any significant capital expenditure weakens the financial risk
profile, particularly liquidity.
The Krishna group manufactures duplex paper board and kraft paper.
KPPPL, TFPL, and MJK trade in waste paper and chemicals used in
the paper industry, and procure waste paper for the group's
manufacturing unit in KTPL. The group is promoted by Kolkata-based
Bajaj family. Its paper mill is at Ghoraghata near Bagnan (West
Bengal), and kraft paper unit is in Burdwan (West Bengal).
M J K MERCANTILES: CRISIL Reaffirms B+ Rating on INR4.11MM Loan
---------------------------------------------------------------
CRISIL Ratings has reaffirmed its rating on the bank facilities of
M J K Mercantiles Private Limited (MJK:-part of Krishna Group) at
'CRISIL B+/Stable/CRISIL A4'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 4.11 CRISIL B+/Stable (Reaffirmed)
Letter of Credit 2.50 CRISIL A4 (Reaffirmed)
Proposed Short Term
Bank Loan Facility 6.39 CRISIL A4 (Reaffirmed)
The rating continues to reflect the Krishna group's exposure to
risks associated with ramp-up of operations of the newly set up
kraft paper manufacturing unit, large working capital requirement,
and susceptibility of profitability to volatility in raw material
prices. These weaknesses are partially offset by established
clientele and the extensive experience of the promoters in the
paper industry.
Analytical Approach
For arriving at the rating, CRISIL has combined the business and
financial risk profiles of MJK, Krishna Paper Projects Private
Limited (KPPPL), Tara Finvest Private Limited (TFPL) and Krishna
Tissues Private Limited (KTPL). All the companies, collectively
referred to as the Krishna group, have a common management and
significant operational linkages
Key Rating Drivers & Detailed Description
Weaknesses
* Exposure to risks associated with timely ramp up of operations
of kraft paper unit: The group undertook capex of INR308 crore
till fiscal 2017 for setting up a kraft paper manufacturing
facility, which started operations by mid of fiscal 2017. The
capex was funded through term loan of INR208 crore and remaining
was through own funds or internal accrual. Timely ramp-up of
operations and generation of adequate cash accrual will be key
rating sensitivity factors over the medium term on account of the
significant obligations for the debt contracted for the project.
* Large working capital requirement: The group's gross current
assets have been sizeable at 138-197 days in the three years
through fiscal 2017 and the same is largely on account of extended
credit period given to the debtors for increasing its market share
coupled with sizeable amount of inventory maintained by the
company in form of raw materials to ensure timely execution of
orders.
* Exposure of profitability to volatility in raw material prices
and forex rates: The group keeps raw material inventory at around
55-60 days and sale prices are fixed at the time of receipt of
confirmed orders from customers. As intense competition restricts
players' ability to pass on increase in raw material price to
customers, profitability will remain vulnerable to volatility in
prices of key raw materials, such as waste paper
Strength
* Promoters' extensive experience in the paper industry and
established customer base: The founder-promoter of the Krishna
group, Mr. M L Bajaj, has experience of over four decades in the
paper industry. The promoter's family set up a paper mill in KTPL,
which commenced commercial operation in the last quarter of fiscal
2009. Mr. Bajaj's extensive industry experience has helped KTPL
market its products. The promoters' established relationships with
raw material suppliers and logistics service providers help in
smooth and timely procurement and transportation of raw material.
Backed by the promoters' extensive experience, the group has
established a diversified and wide clientele for its products. The
group primarily markets its product domestically in eastern India,
and sometimes exports to Nepal and Bangladesh.
Outlook: Stable
CRISIL believes the Krishna group will continue to benefit from
the extensive experience of its promoters. The outlook may be
revised to 'Positive' if the new kraft paper unit stabilises
operations sooner-than-expected, and if the group generates
adequate cash accrual and manages working capital efficiently. The
outlook may be revised to 'Negative' if lower-than-expected
operating income or accrual, stretch in working capital cycle, or
any significant capital expenditure weakens the financial risk
profile, particularly liquidity.
The Krishna group manufactures duplex paper board and kraft paper.
KPPPL, TFPL, and MJK trade in waste paper and chemicals used in
the paper industry, and procure waste paper for the group's
manufacturing unit in KTPL. The group is promoted by Kolkata-based
Bajaj family. Its paper mill is at Ghoraghata near Bagnan (West
Bengal), and kraft paper unit is in Burdwan (West Bengal).
M.M. GARMENTS: CRISIL Assigns 'B' Rating to INR5.5MM Cash Loan
--------------------------------------------------------------
CRISIL Ratings has assigned its 'CRISIL B/Stable' rating to the
long-term bank facilities of M.M. Garments (MMG).
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 5.5 CRISIL B/Stable
Proposed Long Term
Bank Loan Facility 4.5 CRISIL B/Stable
The rating continues to reflect the firm's small scale of
operations in the intensely competitive ready-made garments
industry and large working capital requirement. These weaknesses
are partially offset by the extensive experience of its promoters.
Key Rating Drivers & Detailed Description
Weaknesses
* Working capital-intensive operations: Gross current assets were
226 days as on March 31, 2017, due to moderate receivables and
sizeable inventory of 226 days.
* Small scale of operations: Intense competition has led to
modest scale, as reflected in revenue of around INR7.8 crore in
fiscal 2017. This limits bargaining power with customers and
suppliers, leading to pressure on working capital management and
operating margin.
Strength
* Extensive experience of promoters: Presence of around two
decades in ready-made garments segment through group entities (MM
Exports (India) and Gudi Exports Pvt Ltd) has enabled the
promoters to establish strong relationship with major customers
and suppliers.
Outlook: Stable
CRISIL believes MMG will benefit over the medium term from the
extensive experience of its promoters and established customer
relationship. The outlook may be revised to 'Positive' if
substantial improvement in revenue and profitability leads to
higher-than-expected cash accrual and better financial risk
profile. The outlook may be revised to 'Negative' if lower-than-
expected accrual, deterioration in working capital management, or
large, debt-funded capital expenditure weakens financial risk
profile, especially liquidity.
Set up in April 2006 as a partnership firm by Mr. Ajit Singh Wasu
and Mr. Mandeep Wasu, MMG manufactures ready-made garments for
women brands such as Marks &Spencer and Westside. Facility is in
Faridabad, Haryana.
MAHALAXMI SEAMLESS: CRISIL Reaffirms B Rating on INR4MM Cash Loan
-----------------------------------------------------------------
CRISIL Ratings has been consistently following up with Mahalaxmi
Seamless Limited (MSL) for obtaining information through letters
and emails dated May 25, 2017 and July 12, 2017, among others,
apart from telephonic communication. However, the issuer has
remained non cooperative.
CRISIL gave these ratings:
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Bank Guarantee 1.5 CRISIL A4 (Issuer Not
Cooperating; Rating
Reaffirmed)
Cash Credit 4.0 CRISIL B/Stable (Issuer Not
Cooperating; Rating
Reaffirmed)
Inland/Import 4.0 CRISIL A4 (Issuer Not
Letter of Credit Cooperating; Rating
Reaffirmed)
The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of MSL. This restricts CRISIL's
ability to take a forward looking view on the credit quality of
the entity. CRISIL believes that the information available for MSL
is consistent with 'Scenario 2' outlined in the 'Framework for
Assessing Consistency of Information' which is usually mapped to
CRISIL BBB' category or lower. Based on the last available
information, CRISIL has reaffirmed the rating at 'CRISIL
B/Stable/CRISIL A4'.
Incorporated in 1992, MSL manufactures cold-drawn seamless pipes
and tubes used in various industries such as oil and gas,
petrochemicals, engineering, and power. It is promoted by Mr.
Madhavprasad Jalan and Mr. Vivek Jalan. Its manufacturing
facilities are at Sukeli, in the Raigad district of Maharashtra.
MEHSANA DAIRY: CRISIL Reaffirms B Rating on INR30MM Term Loan
-------------------------------------------------------------
CRISIL Ratings has reaffirmed its rating on the long-term bank
facilities of Mehsana Dairy and Food Products Limited (MDFPL) at
'CRISIL B/Stable'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 7 CRISIL B/Stable (Reaffirmed)
Long Term Loan 16.25 CRISIL B/Stable (Reaffirmed)
Term Loan 30 CRISIL B/Stable (Reaffirmed)
The rating reflects delayed commencement of commercial operations,
and consequently, subdued operating performance. Operations were
expected to commence from November 2016, but it started from
February 2017, and resulted in turnover of INR2.86 crore and
minimal operating profits and net losses in fiscal 2017.
Demonstration of ramp up in sales in current year remains critical
and hence will be closely monitored.
The rating also factors in a weak financial risk profile because
of high gearing. Gearing was over 2.5 times as on March 31, 2017.
However, the rating continues to reflect the extensive experience
of promoters and their funding support in the form of unsecured
loans.
The ratings for the bank facilities of MDFPL are downgraded by one
notch to 'CRISIL B/stable' from 'CRISIL B+/Stable' on 29 Aug 2017
on account of delay in stabilization of operations.
Analytical Approach
For arriving at the ratings, CRISIL has treated unsecured loans of
INR5.90 crore as on March 31, 2017, from promoters as neither debt
nor equity. That's because the loans are expected to remain in the
business over the medium term and these are from promoters.
Key Rating Drivers & Detailed Description
Weakness
* Subdued operating performance because of delayed commencement of
commercial operations: Revenue and operating profitability
remained subdued at INR2.86 crore and 9.4%, respectively, for
fiscal 2017 due to delay in operations of the skimmed milk powder
(SMP) plant which was proposed to start in November 2016, began
only in February 2017. The company also incurred net losses. With
repayment already begun, the ramp-up in sales and adequate
profitability remain critical.
* Weak financial risk profile: Financial risk profile remains
constrained by high gearing (on account of debt-funded capital
expenditure) and stretched liquidity. Liquidity is stretched,
owing to high debt repayments in coming years. Controlled working
capital management and generation of adequate cash accrual will
remain a key rating sensitivity factor.
Strength:
* Promoters' extensive experience and established milk procurement
network through group concern: The promoters have over two
decades of experience in the dairy industry and also set up Bharat
Dairy in 2010, which processes milk and manufactures ice cream,
cheese, butter, ghee, and buttermilk. Their experience has helped
establish a strong network of farmers, resulting in uninterrupted
supply of milk for its group concern and the same will also
benefit the new plant. Benefits from the promoters' extensive
experience, established milk procurement network, and widespread
distribution network of its group firm will support the business
risk profile over the medium term.
Outlook: Stable
CRISIL believes MDFPL will continue to benefit over the medium
term from the promoters' extensive experience. The outlook may be
revised to 'Positive' if revenue and profitability improve,
leading to higher-than-expected cash accrual, coupled with
efficient working capital management. Conversely, the outlook may
be revised to 'Negative' in case of lower-than-expected cash
accrual or stretch in working capital cycle, or any large, debt-
funded capital expenditure deteriorates the financial risk profile
and liquidity.
Incorporated in 2015, MDFPL, promoted by Mr. Bahubhai Patel, Mr.
Rajnikanth Patel and Mr. M.M. Bhatt has established a greenfield
dairy project for manufacturing SMP, ice cream, and other related
dairy products. Its manufacturing unit will be located at Kadi in
Mehsana.
MDFPL is proposed to have two divisions: SMP division, with
estimated production capacity of 30 tonne per day; and ice cream
division, with estimated production capacity of 20,000 litre per
day. SMP operations began in February 2017, while operations of
ice cream and food products are proposed to begin by end of
October 2017.
For fiscal 2017, provisional net loss was INR2.68 crore on net
sales of INR3.30 crore.
NEESARG MOTORS: CRISIL Assigns 'B+' Rating to INR6.25MM Loan
------------------------------------------------------------
CRISIL Ratings has assigned its 'CRISIL B+/Stable' rating to the
long-term bank facility of Neesarg Motors (NM).
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 6.25 CRISIL B+/Stable
The rating reflects the firm's modest scale of operations and
average financial risk profile because of small networth and
subdued debt protection metrics. These weaknesses are partially
offset by the extensive experience of its promoters in the
automotive dealership segment and healthy automobile industry
prospects.
Key Rating Drivers & Detailed Description
Weaknesses
* Weak financial risk profile: The financial risk profile is
modest marked by low networth, high gearing of over 4 times and
weak debt protection metrics with NCATD at below 0.1 times and
interest coverage at 1.35 times in FY 17. The financial profile is
expected to remain modest in the medium term.
* Modest scale of operations: NM scale of operations is modest
reflecting in low operating income of INR30 crore in FY 2017,
scale remains small as the firm operates in smaller towns
constraining its growth.
Strengths
* Extensive experience of the promoters: Presence of over a
decade in the automobile industry has enabled the promoters to
establish strong relationship with suppliers and customers.
* Healthy Automobile Industry Prospects: After depressed sales in
fiscal 2017 post demonetisation, two-wheelers are set to witness
an uptick in rural demand in fiscal 2018.
Outlook: Stable
CRISIL believes NM will benefit over the medium term from the
extensive experience of its promoters. The outlook may be revised
to 'Positive' if increase in sales or profitability leads to
higher-than-expected cash accrual, or if financial risk profile
strengthens with equity infusion. Conversely, the outlook may be
revised to 'Negative' in case of lower-than-expected sales and
cash accrual, or if financial risk profile deteriorates due to
higher-than-expected capital expenditure or stretched in working
capital cycle.
Established in 2008 as a partnership by Mr. Yasin Banglawala, NM
is a dealer of two-wheelers manufactured by Honda Motorcycle &
Scooter India Pvt Ltd Company Limited, and also a service provider
of Tata Motors Ltd (TML) in Palanpur, Gujarat. The firm has three
authorised showrooms with 3S (sales, service and spares)
facilities; and a TML service centre.
PASHUPATI METALLICS: CRISIL Ups Rating on INR7.5MM Loan to B+
-------------------------------------------------------------
CRISIL Ratings has upgraded its rating on the long-term bank loan
facility of Pashupati Metallics (PM) to 'CRISIL B+/Stable' from
'CRISIL B/Stable' and assigned its 'CRISIL A4' rating to the
firm's short-term facility.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Bank Guarantee 2.5 CRISIL A4 (Reassigned)
Cash Credit 7.5 CRISIL B+/Stable (Upgraded
from 'CRISIL B/Stable')
The upgrade reflects improvement in PM's business risk profile,
driven by significant increase in revenue in spite of drop in
operating margin, leading to better-than-expected cash accrual in
fiscal 2017. On a provisional basis, revenue was INR18 crore and
operating margin was 7.5% in fiscal 2017, against INR6 crore and
12% margin, respectively, in the previous fiscal. Consequently,
cash accrual rose to INR0.7 crore in fiscal 2017. The improved
operating performance led to a better interest coverage ratio of
1.96 times for fiscal 2017 against 1.09 times in the previous
fiscal.
The ratings reflect PM's modest scale of operations in the
intensely competitive steel products industry, and its subdued
financial risk profile. These weaknesses are partially offset by
the extensive experience of the proprietor and established
relationships with customers.
Key Rating Drivers & Detailed Description
Weaknesses
* Modest scale of operations in the intensely competitive steel
industry: The firm's small scale is reflected in revenue of INR18
crore in fiscal 2017. The firm's modest scale of operations
constrains its ability to achieve economies of scale. The firm's
operations are also constrained by the fragmented nature of the
industry, as reflected in intense competition from other small
unorganised players.
* Average financial risk profile: Financial risk profile is
constrained by modest networth of INR4.8 crores as on March 31,
2017. The firm has moderate gearing ratio of 1.94 times as on
March 31, 2017. The gearing factors the unsecured loans from the
promoters as part of total debt. Interest cover is average at
around 2 times for fiscal 2017.
Strength
* Extensive industry experience of the proprietor: Mr. Rajiv
Bansal has experience of over three decades in the steel industry
and has been engaged in the steel business through a partnership
firm, Pashupati Engineering (PE), which manufactures cast iron
bars. He has leveraged his industry experience and established
customer relationships to ramp-up sales and stabilise PM's
business.
Outlook: Stable
CRISIL believes PM will benefit from the extensive industry
experience of its proprietor. The outlook may be revised to
'Positive' if substantial increase in revenue or profitability
improves the cash accruals and thereby the financial risk profile.
The outlook may be revised to 'Negative' if large debt is
contracted to fund capital expenditure, or stretch in working
capital cycle, weakens the financial risk profile.
Set up in 2009, Chennai-based PM manufactures thermo mechanically
treated (TMT) steel bars at its unit in Gumidipoondi, which became
operational in fiscal 2015. The daily operations are managed by
proprietor Mr. Rajiv Bansal.
POLYSOL INDUSTRIES: ICRA Moves B+ Rating to Not Cooperating
-----------------------------------------------------------
ICRA Limited has moved the ratings for the INR11.80 crore bank
facilities of Polysol Industries to the 'Issuer Not Cooperating'
category. The rating is now denoted as: "[ICRA]B+(Stable)/
[ICRA]A4; ISSUER NOT COOPERATING".
ICRA gave these ratings:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term, fund 2.00 [ICRA]B+(Stable) ISSUER NOT
based limits COOPERATING; Rating moved to
the 'Issuer Not Cooperating'
category
Short-term, Non- 9.00 [ICRA]A4 ISSUER NOT
fund based limits COOPERATING; Rating moved to
the 'Issuer Not Cooperating'
category
Short-term, Non- 0.80 [ICRA]A4 ISSUER NOT
fund based limits COOPERATING; Rating moved to
the 'Issuer Not Cooperating'
category
Rationale
The rating action is based on no updated information on the
entity's performance since the time it was last rated in March
2016. The lenders, investors and other market participants are
thus advised to exercise appropriate caution while using this
rating as the rating does not adequately reflect the credit risk
profile of the entity. The entity's credit profile may have
changed since the time it was last reviewed by ICRA; however, in
the absence of requisite information, ICRA is unable to take a
definitive rating action.
As part of its process and in accordance with its rating agreement
with PI, ICRA has been trying to seek information from the entity
so as to monitor its performance, but despite repeated requests by
ICRA, the entity's management has remained non-cooperative. In the
absence of requisite information, and in line with SEBI's Circular
No. SEBI/HO/MIRSD4/CIR/2016/119, dated November 1, 2016, ICRA's
Rating Committee has taken a rating view based on the best
available information.
Key rating drivers
Credit strengths
* Extensive experience of partners and the group in chemical
industry: Incorporated in 1996, the firm manufactures Poly
Aluminum Chloride Solution and Alumina Sulphate (Ferric and Non
ferric). The firm is a part of the "Polysol Group", which was
earlier known as 'Nataraj Industries'. This group has been in the
business of chemicals and dyes for the past three decades and also
undertakes trading activities. The extensive experience of the
promoters has helped the firm in establishing its position.
Credit weaknesses
* Stretched liquidity position on account of slow receivables: As
on March 31, 2015, debtor days have increased to 189 days as
compared to 135 days in March 31, 2014 on account of extended
credit period provided to the customers, which has resulted in a
stretched liquidity position.
* Working capital intensive nature of operation funded through a
mix of working capital borrowings and creditors resulting in high
TOL/TNW of 6.42 times as on 31st March 2015: High dependence on
external borrowings following working capital intensive nature of
operations, along with elongated payables has also led to high
TOL/TNW of 6.42 times as on March 31, 2015.
* Concentrated product profile with the firm manufacturing
aluminium sulphate and poly aluminium chloride: The firm derives
its revenues from manufacturing aluminium sulphate and poly
aluminium chloride (PAC), indicating a concentrated product
profile which exposes it to demand fluctuations in the key user
industries. Aluminium sulphate finds applications in the
production of soap, detergent powder and also as a waterproofing
agent in the construction industry. PAC can be used as a
flocculent for all types of water treatment. However, the firm has
also diversified into trading of edible oils which mitigates the
product concentration risk to an extent.
* Highly competitive business environment given the fragmented
industry structure and limited entry barriers, margins exposed to
fluctuations in raw material prices: The margins of the firm are
vulnerable to the fluctuations in the raw material prices and to
the competitive pressure prevailing in the chemical industry.
However, the fixed price contract entered into with some of the
suppliers mitigates the raw material price fluctuation risk to an
extent.
* Being a partnership firm, the capital structure hinges on
withdrawal or infusion of funds by the partners: Given its
constitution as a partnership firm, the risk of capital
withdrawals is inherent and any substantial withdrawal from the
partner's capital account might affect the capital structure and
credit metrics.
Polysol Industries was established on 1st April 1996 as a
partnership firm. The firm is managed by Mr. Shailesh B. Desai,
Mr. Umang S. Desai and Mrs. Nilima S. Desai. It is engaged in the
manufacturing of aluminium sulphate and poly aluminum chloride
solution. The firm also carries out trading activities. The firm
is a part of the Polysol group, consisting of three entities. The
other two entities are Gujarat Polysol Chemicals Pvt. Ltd. and
Urmi Polymer Industries. Both the entities are engaged in the
business of chemicals. The firm has its registered office at Vapi,
Gujarat and its manufacturing unit is located in GIDC, in the
district of Valsad, Gujarat.
In FY2015, the company reported a net profit of INR0.39 crore on
an operating income of INR50.00 crore, as compared to a net profit
of INR0.06 crore on an operating income of INR30.80 crore in the
previous year.
POPULAR MOTOR: CRISIL Reaffirms B+ Rating on INR11.5MM Loan
-----------------------------------------------------------
CRISIL Ratings has reaffirmed its 'CRISIL B+/Stable' rating on the
long-term bank loan facilities of Popular Motor World Pvt Ltd
(PMW).
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 0.5 CRISIL B+/Stable (Reaffirmed)
Inventory Funding
Facility 11.5 CRISIL B+/Stable (Reaffirmed)
The rating continues to reflect the company's below-average
financial risk profile marked by high total outside liabilities to
tangible networth (TOLTNW) and modest debt protection metrics due
to large working capital debt. However, business risk profile
remains above-average with operating income at INR679 crore in
fiscal 2017, up 22% over the previous fiscal, though operating
margin declined due to higher discounts. Operating margin is
expected at 3% over the medium term.
Analytical Approach
CRISIL had earlier treated unsecured loan as neither debt nor
equity. However, the loan has now been treated as debt as it is
likely to be withdrawn in the near term.
Key Rating Drivers & Detailed Description
Weakness
* Below-average financial risk profile: PMW had a high TOLTNW
ratio of 14.31 times as on March 31, 2017, because of large
working capital debt. Modest operating profitability and large
debt resulted in weak interest coverage of 1.28 times in fiscal
2017.
* Vulnerability of business to economic cycles and to intense
competition in the automotive dealership industry, and low
bargaining power with principal supplier: PMW's business growth is
vulnerable to economic cycles and is directly linked to the
performance of its principal supplier Hyundai Motor India Ltd
(Hyundai). PMW has to compete with other dealers of Hyundai, as
well as of other car brands. Furthermore, it has limited
bargaining power with its supplier, and its purchases are
primarily against advance payments.
Strength
* Extensive experience of promoters in the automotive dealership
business: PMW belongs to the Popular group, which has dealerships
of various brands across South India. PMW is an authorised and a
leading dealer of Hyundai in Kerala, and has 25 showrooms and 33
service centers in the state. PMW will benefit from its promoters'
extensive industry experience and their ability to bring in funds
when needed.
Outlook: Stable
CRISIL believes PMW will benefit from its established position as
a dealer of Hyundai's vehicles in Kerala. The outlook may be
revised to 'Positive' if cash accrual increases, driven by higher
revenue and profitability, while working capital requirement is
efficient, leading to a better financial risk profile. The outlook
may be revised to 'Negative' if the company undertakes larger-
than-expected, debt-funded capital expenditure, or if its revenue
or profitability declines steeply, leading to deterioration in the
financial risk profile.
PMW, incorporated in 2004, is a dealer of Hyundai's cars and
spares, and provides vehicle servicing services in south and
central Kerala. The company has 25 showrooms and 33 service
centers.
PRAVEEN ELECTRICAL: CRISIL Assigns B+ Rating to INR6MM Loan
-----------------------------------------------------------
CRISIL Ratings has assigned its 'CRISIL B+/Stable/CRISIL A4'
ratings to the bank facilities of Praveen Electrical Works (PEW).
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Proposed Long Term
Bank Loan Facility 3 CRISIL B+/Stable
Bank Guarantee 11 CRISIL A4
Overdraft 6 CRISIL B+/Stable
The ratings reflect the firm's modest scale of operations in a
fragmented industry, its large working capital requirement, and
subdued financial risk profile because of small networth, high
total outside liabilities to tangible networth (TOLTNW) ratio, and
weak debt protection metrics. These weaknesses are partially
offset by extensive experience of its promoter in the electrical
engineering, procurement, and construction (EPC) industry.
Analytical Approach
Unsecured loan of INR4.4 crore as on March 31, 2017, has been
treated as neither debt nor equity as it is interest free and is
likely to remain in the business over the medium term.
Key Rating Drivers & Detailed Description
Weaknesses
* Modest scale of operations in a fragmented industry: With
revenue of INR49.6 crore for fiscal 2017, scale remains modest in
the competitive power EPC business. The segment has numerous
small, unorganised players catering to local demand, which may
restrict significant increase in scale of operations. Due to
limited orders, revenue is expected to decline in fiscal 2018
compared to the previous fiscal.
* Working capital-intensive operations: Working capital
requirement is large due to sizeable work-in-progress inventory
and tender-based business, and requirement of earnest money,
security deposit, and bank guarantees.
* Subdued financial risk profile: As on March 31, 2017, networth
was small at INR8.6 crore, and TOLTNW ratio was high, at 3.9
times. Interest coverage and net cash accrual to total debt ratios
were below average, at 1.9 times and 0.13 time, respectively, for
fiscal 2017.
Strengths
* Extensive experience of promoter in the electrical EPC industry:
The promoter's experience of around two decades has helped the
firm bag turnkey orders from major clients and register consistent
revenue growth in the past five years.
Outlook: Stable
CRISIL believes PEW will continue to benefit from the extensive
industry experience of its promoter. The outlook may be revised to
'Positive' if the firm achieves higher than anticipated revenue
growth while maintaining profitability, leading to higher cash
accrual and better financial metrics. The outlook may be revised
to 'Negative' if financial risk profile, particularly liquidity,
weakens on account of larger-than-expected working capital
requirement, low cash accrual, or unanticipated, large, debt-
funded capital expenditure.
PEW was set up in 1994 as a sole proprietorship firm by Mr.
Prakash C Angadi. The firm undertakes turnkey projects for laying
electrical cables and poles, and electrification projects. It has
a facility in Karnataka.
In fiscal 2017, profit after tax (PAT) was INR1.65 crore on total
sales of INR49.61 crore, as against PAT of INR0.99 crore on total
sales of INR39.85 crore in fiscal 2016.
ROOPLAXMI INDUSTRIES: ICRA Moves B- Rating to Not Cooperating
-------------------------------------------------------------
ICRA Limited has moved the ratings for the INR7.90 crore bank
facilities of Rooplaxmi Industries India Private Limited (RIIPL)
to the 'Issuer Not Cooperating' category. The rating is now
denoted as [ICRA]B- (Stable); ISSUER NOT COOPERATING".
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Term Loan 2.90 [ICRA]B- (Stable); ISSUER NOT
COOPERATING Rating moved to
the 'Issuer Not Cooperating
category
Cash Credit 5.00 [ICRA]B- (Stable); ISSUER NOT
COOPERATING Rating moved to
the 'Issuer Not Cooperating
category
Rationale
The rating action is based on limited cooperation and no updated
information on the entity's performance since the time it was last
rated in March 2016. The lenders, investors and other market
participants are thus advised to exercise appropriate caution
while using this rating as the rating does not adequately reflect
the credit risk profile of the entity. The entity's credit profile
may have changed since the time it was last reviewed by ICRA;
however, in the absence of requisite information, ICRA is unable
to take a definitive rating action.
As part of its process and in accordance with its rating agreement
with RIIPL, ICRA has been trying to seek information from the
entity so as to monitor its performance and has also been sending
repeated reminders to the entity for payment of surveillance fee
that became due. However, despite multiple requests by ICRA, the
entity's management has remained non-cooperative. In the absence
of requisite cooperation and in line with SEBI's Circular No.
SEBI/HO/MIRSD4/CIR/2016/119, dated November 1, 2016, ICRA's Rating
Committee has taken a rating view based on the best available
information.
Key rating drivers
Credit strengths
* Favourable location of the manufacturing unit in Chhattisgarh,
in proximity to raw material sources and key customers, leading to
low freight costs: Incorporated in 2011, RIIPL's the
manufacturing unit in Chhattisgarh, in proximity to raw material
sources and key customers, thus reducing freight costs.
Credit weaknesses
* Weak financial risk profile as reflected by low net
profitability and weak debt coverage indicators: RIIPL's
financial risk profile is characterised by low profitability and
depressed debt coverage indicators. The company's operating margin
stood at 1.70% in FY2016. The net margin for RIIPL remains
consistently low, at less than 1%, over the last three years. Low
profitability coupled with moderate gearing resulted in weak debt
coverage indicators for RIIPL, with net cash accruals to total
debt of 11% and interest cover of 1.84 times during FY2016.
* Susceptibility of profitability to variations in raw material as
well as final product price: The ratings rating also factor in
the vulnerability of profitability to adverse movement in raw
material
Prices
* Cyclicality inherent in the steel industry, is likely to put
pressure on profitability and cash flows: RIIPL's margins are
under check as the company's is exposed to the cyclicality
associated with the steel industry which puts pressure on its
profitability and cash flows of the company.
Incorporated in June 2011, RIIPL is engaged in manufacturing
ingots. The manufacturing facility is located at Raipur in
Chhattisgarh, with an annual production capacity of 30,000 metric
tonnes (MT) of MS ingots. The company is also engaged in trading
textile products.
SAHAJ SOLAR: ICRA Moves B+ Rating to Not Cooperating Category
-------------------------------------------------------------
ICRA Limited has moved the ratings for INR7.00 crore bank
facilities of Sahaj Solar Private Limited to the 'Issuer non-co-
operating category'. The rating is now denoted as
[ICRA]B+(Stable)/A4; Issuer not co-operating.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Cash Credit 0.50 [ICRA]B+ (Stable) ISSUER NOT
CO-OPERATING Rating moved to
the 'Issuer Not Cooperating'
category'
Corp SME liquid 1.40 [ICRA]B+ (Stable) ISSUER NOT
Plus Scheme (CSLPS) CO-OPERATING Rating moved to
the 'Issuer Not Cooperating'
category'
Term Loan 1.45 [ICRA]B+ (Stable) ISSUER NOT
CO-OPERATING Rating moved to
the 'Issuer Not Cooperating'
category'
Vehicle Loan 0.06 [ICRA]B+ (Stable) ISSUER NOT
CO-OPERATING Rating moved to
the 'Issuer Not Cooperating'
category'
Bank Guarantee 2.30 [ICRA]A4 ISSUER NOT CO-
OPERATING Rating moved to
the 'Issuer Not Cooperating'
category'
Unallocated Limits 1.29 [ICRA]B+ (Stable)/A4 ISSUER
NOT CO-OPERATING
Rationale
The rating action is based on the best available information. As
part of its process and in accordance with its rating agreement
with SRPL, 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 1, 2016, the company's
rating is now denoted as: "[ICRA]BB- (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.
Key rating drivers
Credit Strength
* Technical tie ups: The company has technical arrangement with
Austrian based "KPV Solar" for design and consultation regarding
assembly and supply of solar modules to solar farm developers
Credit Concerns
* Weak financial risk profile: The financial risk profile of the
company is characterized by low profitability, stretched capital
structure and weak return indicators
* Vulnerability of profitability to the fluctuations in the raw
material prices: The main raw material for the company for the
manufacturing of the PV modules are solar cells forming about 50%-
55% of the total raw material costs. Consequently, the company's
contribution levels remain exposed to movement in the same.
* High competition in solar space: The company faces intense
competitive pressure both from established domestic manufacturers
as well as overseas manufacturers based in China, USA, Taiwan and
Malaysia. Large number of organized/ unorganized players
indicating high level of competition may lead to difficulties in
getting new contracts and may pressurize margins
Sahaj Solar Private Limited (SSPL) was incorporated in the year
2007 by the Surat based promoters -- Mr. Sandip and Mr. Rajani
Radadiya, with initial operations involving R&D activity for
developing solar PV modules, following which the company commenced
commercial operations in the year 2011. The aforementioned
promoters sold their entire stake equity holding in the company to
the Ahmedabad based promoter-Mr Pramit Brahmbhatt. The new
promoters took over the company in November 2014 along with the
brand, licenses, product approvals (including MNRE approvals for
solar panels, ISO 9001:2008 certifications, TUV Saar, IEC 61215,
IEC 61730-1 and IEC 61730-2) and started commercial production
from January 2015 onwards.
Following change in ownership, the company shifted its
manufacturing facility from Surat to Changodar near Ahmedabad and
currently has semi-automated is capable of manufacturing solar
modules totaling to ~25MW per annum. SSPL manufactures solar
modules ranging between 5W to 300W. The company has also
diversified in solar water pumps in the current fiscal year FY
2016. The current product profile of the company consists of solar
PV panels, solar home lighting systems, solar street lights,
rooftop Industrial systems, solar water pump, solar power pack and
trading of solar cells.
SEMI EXPORTS: CRISIL Reaffirms B+ Rating on INR4MM Cash Loan
------------------------------------------------------------
CRISIL Ratings has reaffirmed its ratings on the bank facilities
of Semi Exports (SE) at 'CRISIL B+/Stable/CRISIL A4'
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 4 CRISIL B+/Stable (Reaffirmed)
Letter of Credit 5 CRISIL A4 (Reaffirmed)
The ratings reflect a modest scale in the intensely competitive
cashew industry, and a below-average financial risk profile. These
weaknesses are partially offset by proprietor's extensive
experience in the cashew industry.
Key Rating Drivers & Detailed Description
Weaknesses
* Modest scale in the intensively competitive industry: Business
risk profile remains constrained by modest scale in an intensely
competitive industry as reflected in revenue of around INR28.2
crore in fiscal 2017. Limited differentiation in technology and
moderate capital requirements to set up a cashew processing unit
have resulted in low entry barriers. Consequently, the domestic
cashew processing industry is highly fragmented, with presence of
many small players, intensifying competition in both the organised
and unorganised segments.
* Below-average financial risk profile: The financial risk profile
is constrained by a highly leveraged capital structure; Networth
and total outside liabilities to tangible networth ratio were
around INR2 crore and 5.9 times, respectively, as on March 31,
2017. Accretion to reserve is expected to remain small on account
of modest scale and profitability; consequently, the financial
risk profile is expected to remain below average.
Strength
* Proprietor's extensive experience: SE benefits from the industry
experience of over three decades of its proprietor, Ms Laija
Navabudeen. Established relationships with key customers and
longstanding presence in the cashew segment gives it an edge over
various intermediaries. SE also has a good network of raw cashew
nut suppliers across African countries, and other areas, which
ensures availability of high-quality cashew nuts throughout the
year.
Outlook: Stable
CRISIL believes SE will continue to benefit from its established
track record and stable demand for cashew nuts. The outlook may be
revised to 'Positive' if sharp rise in cash accrual strengthens
the financial risk profile. The outlook may be revised to
'Negative' if lower-than-expected growth in revenue and
profitability, large, debt-funded capital expenditure, or
significant capital withdrawal leads to deterioration in financial
risk profile.
SE, a proprietorship firm of Ms Laija Navabudeen, processes and
trades in raw cashew nuts and is based in Kollam (Kerala).
In fiscal 2017, on a provisional basis, profit after tax (PAT) was
INR0.2 crore on net revenue of INR28.2 crore, against a PAT of
INR0.2 crore on net revenue of INR25.1 crore in fiscal 2016.
SHREE HALASIDHANATH: CRISIL Assigns B- Rating to INR30MM Loan
-------------------------------------------------------------
CRISIL Ratings has assigned its 'CRISIL B-/Stable' rating to the
long-term bank facilities of Shree Halasidhanath Sahakari Sakhar
Karkhana Limited (SHSSKL).
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 30 CRISIL B-/Stable
Proposed Long Term
Bank Loan Facility 35 CRISIL B-/Stable
The rating reflects SHSSKL's weak financial risk profile because
of subdued capital structure and debt protection metrics, average
scale of operations, and exposure to regulatory risks and
cyclicality in the sugar industry. These weaknesses are partially
offset by established relationships with members/farmers, and
expected benefits from newly set-up co-generation plant.
Key Rating Drivers & Detailed Description
Weaknesses
* Weak financial risk profile: The financial risk profile is
constrained by weak capital structure and debt protection metrics
due to large accumulated loss, which has eroded the networth.
Also, the society had large debt to fund working capital
requirement and recently concluded capital expenditure for
expanding its mill and setting up a co-gen plant. Liquidity is
stretched, as reflected in almost fully utilised bank limit, and
net cash accrual is likely to be inadequate to meet debt
obligation which shall necessitate refinancing.
* Average scale of operation: SHSSKL's average scale is reflected
in revenue of INR115 crore in fiscal 2017. In the last sugar
season, the society expanded its sugar mill capacity to 3500 tonne
crushed per day (tcd) from 2250 tcd. However, low sugar cane
availability resulted in low sugar production and limited revenue.
Improvement in sugar cane crushing remains critical for society to
augment its scale of operation.
* Exposure to regulatory changes and cyclicality in sugar
industry: Regulatory mechanisms and dependence on monsoon cause
cyclicality in the sugar industry. The government regulates the
domestic demand-supply scenario by restricting import and export.
While input prices are determined by the government, sugar prices
are driven by open market prices, which depend on production.
Operating margin varied sharply in the three fiscals through 2016,
because of volatile sugar prices.
Strengths
* Established relationships with sugarcane producing farmers:
SHSSKL has been in the sugar business since 1987 and has
established relationships with cane producers in its command area.
* Expected benefits from commencement of co-gen plant: The society
has set up a 15-megawatt co-gen plant which is likely to commence
operations in sugar season 2017-18. The production of electricity
using bagasse (a byproduct in the production of sugar) and its
sale will support the society's profitability and business risk
profile.
Outlook: Stable
CRISIL believes SHSSKL will continue to benefit over the medium
term from its promoters' extensive industry experience. The
outlook may be revised to 'Positive' if the society reports
substantial improvement in sugar cane crushing, which along with
co-gen operations, leads to higher cash accrual and improved
liquidity. The outlook may be revised to 'Negative' if liquidity
and debt servicing ability weaken due to lower cash accrual driven
by low sugar cane crushing, or unanticipated, debt-funded capital
expenditure.
SHSSKL is a cooperative society, set up in 1987 by the late Mr.
Baburao B Patil. The society operates a single-unit sugar factory
at Budhihalkar in Belgaum (Karnataka) with a cane crushing
capacity of 3500 tcd and a co-gen plant of 15MW.
SIRSA BANSIVAT: CRISIL Raises Rating on INR3MM Cash Loan to B+
--------------------------------------------------------------
CRISIL Ratings has upgraded its rating on the long-term bank
facility of The Sirsa Bansivat Cooperative Labour And Construction
Society Limited (Sirsa) to 'CRISIL B+/Stable' from 'CRISIL
B/Stable', while reaffirming the short-term rating at 'CRISIL A4'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Bank Guarantee 4.5 CRISIL A4 (Reaffirmed)
Cash Credit 3.0 CRISIL B+/Stable (Upgraded
from 'CRISIL B/Stable')
The upgrade reflects CRISIL's expectation of sustained improvement
in the business risk profile in the medium term. Revenue has grown
at a healthy compound annual rate of 42% to INR60.64 crore in
fiscal 2017, from INR21.21 crore in fiscal 2014, driven by
incremental business from state electricity departments. Revenue
may increase steadily by 10% per fiscal over the medium term,
backed by new customers, and established relationships with
existing customers. This, coupled with steady (though low)
operating margin of around 1.5%, should lead to gradual rise in
cash accrual.
Analytical Approach
Unsecured loans of INR2.92 crore (estimated as on March 31, 2017)
extended by the promoters, have been treated as neither debt nor
equity, as these are interest-free, and may remain in business in
the medium term.
Key Rating Drivers & Detailed Description
Weaknesses
* Modest scale of operations and low operating margin: Operating
income of INR60.64 crore in fiscal 2017, reflects the modest scale
of operations, which restricts bargaining power with customers, in
terms of pricing and negotiation for better credit terms. Cash
accrual was also low at INR0.42 crore for the fiscal, constrained
by low operating margin of around 1.5%. Though revenue is likely
to grow at a steady pace, scale of operations may remain small in
the medium term.
* Moderately working capital intensity in operations: Gross
current assets, estimated at 70 days as on March 31, 2017, were
driven by receivables of 49 days, with the balance representing
security deposits with electricity departments. Hence, bank limit
utilisation was high at 94% over the 12 months through July 2017.
* Average financial risk profile: Total outside liabilities to
tangible networth ratio was moderate, estimated at 2.29 times as
on March 31, 2017, and may remain at similar level in the medium
term, owing to incremental working capital debt and low accretion
to reserves. Debt protection metrics were average, with estimated
interest coverage and net cash accrual to total debt ratios of
1.67 times and 0.10 time, respectively, in fiscal 2017.
Strength
* Extensive experience of the promoters: The society has been
promoted by 11 members, who have more than a decade's experience
in the manpower staffing industry. Longstanding presence of the
promoters, and their established relationships with clients, have
supported healthy revenue growth of 42% (in compounded terms) over
the four years through fiscal 2017.
Outlook: Stable
CRISIL believes Sirsa will continue to benefit from the extensive
experience of its promoters, and established customer
relationships. The outlook may be revised to 'Positive' if a
substantial improvement in revenue and profitability leads to
higher cash accrual, or if the promoters infuse significant amount
of equity. The outlook may be revised to 'Negative' if low cash
accrual, or a stretch in receivables, weakens liquidity.
Set up in 2005, Sirsa offers manpower to various electricity
departments in Haryana. The company has contracts with three
boards - Dakhin Haryana Bijli Vitran Nigam, Haryana Vidyut
Prasaran Nigam Ltd and Uttar Haryana Bijli Vitran Nigam (UHBVN).
SWARG GOLDTOUCH: CRISIL Reaffirms B- Rating on INR6MM Cash Loan
---------------------------------------------------------------
CRISIL Ratings has reaffirmed its 'CRISIL B-/Stable' rating on the
long-term bank facilities of Swarg Goldtouch Limited (SGTL).
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 6 CRISIL B-/Stable (Reaffirmed)
Proposed Long Term
Bank Loan Facility 1 CRISIL B-/Stable (Reaffirmed)
The rating continues to reflect modest scale of operations and
exposure to intense competition and below average financial risk
profile. These rating weakness are partially offset by extensive
experience of promoters in trading of imitation jewellery
Analytical Approach
For arriving at the ratings, CRISIL has treated unsecured loans of
INR1.25 crores (as on March 31, 2017) extended to Swarg Gold touch
Limited (SGTL) by its promoters as neither debt nor equity as the
loans are expected to be retained in the business over the medium
term.
Key Rating Drivers & Detailed Description
Weaknesses
* Modest scale of operations and exposure to intense competition:
SGTL has a modest scale of operations, as reflected in its revenue
of around INR29.07 crore in 2016-17 (refers to financial year,
April 1 to March 31). The domestic jewellery industry is highly
fragmented and dominated by unorganised players, as it is neither
capital- nor technology-intensive. As a result, SGTL faces intense
competition from large jewellery players, present for past several
decades, in its area of operations. Furthermore, SGTL operates in
the imitation jewellery segment that is a highly fragmented
segment, which squeezes the company's margins.
* Below-average financial risk profile: Financial risk profile of
SGTL has below-average financial risk profile marked by modest net
worth of INR4.3 cr., moderate total outside liability to tangible
net worth of 1.8 times as on March 31, 2017. The company has weak
debt protection metrics with net cash accrual to Total debt
(NCATD) and interest coverage ratios of over 0.02 and 1.17 times,
respectively, for 2016-17. CRISIL believes the financial risk
profile may remain below average over the medium term.
Strength
* Extensive experience of promoters in trading of imitation
jewellery: SGTL's promoter, Mr. Manilal Chheda, has been in the
retail trading of jewellery business for nearly a decade. The
promoter has opened 10 showrooms in cities such as Mumbai, Pune,
and Nashik. The promoter's extensive experience has helped the
company to develop healthy relationships with customers and
suppliers. CRISIL believes that SGTL will continue to benefit from
its promoter's extensive industry experience, over the medium
term.
Outlook: Stable
CRISIL believes that SGTL will continue to benefit from the
extensive experience of its promoters, over the medium term. The
outlook may be revised to 'Positive' if the company's financial
risk profile improves driven by improvement in cash accruals,
efficient working capital management, or capital infusion by the
promoters. Conversely, the outlook may be revised to 'Negative' in
case the company's financial risk profile, particularly its
liquidity, deteriorates due to substantially low cash accruals or
sizeable working capital requirements.
Set up as a proprietorship firm in 2004, SGTL was reconstituted as
a limited company in 2008. SGTL trades in imitation jewellery. The
company has 10 retail shops in Mumbai, Pune, and Nashik (all in
Maharashtra).
For fiscal 2017, SGTL profit after tax (PAT) was INR0.06 crore on
net sales of INR29.07 crore, against a PAT of INR0.12 crore on net
sales of INR32.19 crore for fiscal 2016.
TARA FINVEST: CRISIL Reaffirms B+ Rating on INR12.4MM Cash Loan
---------------------------------------------------------------
CRISIL Ratings has reaffirmed its rating on the long term bank
facilities of Tara Finvest Private Limited (TFPL:-part of Krishna
Group) at 'CRISIL B+/Stable'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 12.4 CRISIL B+/Stable (Reaffirmed)
The rating continues to reflect the Krishna group's exposure to
risks associated with ramp-up of operations of the newly set up
kraft paper manufacturing unit, large working capital requirement,
and susceptibility of profitability to volatility in raw material
prices. These weaknesses are partially offset by established
clientele and the extensive experience of the promoters in the
paper industry.
Analytical Approach
For arriving at the rating, CRISIL has combined the business and
financial risk profiles of TFPL, MJK Mercantiles Pvt Ltd (MJK),
Krishna Paper Projects Pvt Ltd (KPPPL), and Krishna Tissues
Private Limited (KTPL). All the companies, collectively referred
to as the Krishna group, have a common management and significant
operational linkages.
Key Rating Drivers & Detailed Description
Weakness
* Exposure to risks associated with timely ramp up of operations
of kraft paper unit: The group undertook capex of INR308 crore
till fiscal 2017 for setting up a kraft paper manufacturing
facility, which started operations by mid of fiscal 2017. The
capex was funded through term loan of INR208 crore and remaining
was through own funds or internal accrual. Timely ramp-up of
operations and generation of adequate cash accrual will be key
rating sensitivity factors over the medium term on account of the
significant obligations for the debt contracted for the project.
* Large working capital requirement: The group's gross current
assets have been sizeable at 138-197 days in the three years
through fiscal 2017 and the same is largely on account of extended
credit period given to the debtors for increasing its market share
coupled with sizeable amount of inventory maintained by the
company in form of raw materials to ensure timely execution of
orders.
* Exposure of profitability to volatility in raw material prices
and forex rates: The group keeps raw material inventory at around
55-60 days and sale prices are fixed at the time of receipt of
confirmed orders from customers. As intense competition restricts
players' ability to pass on increase in raw material price to
customers, profitability will remain vulnerable to volatility in
prices of key raw materials, such as waste paper
Strength
* Promoters' extensive experience in the paper industry and
established customer base: The founder-promoter of the Krishna
group, Mr. M L Bajaj, has experience of over four decades in the
paper industry. The promoter's family set up a paper mill in KTPL,
which commenced commercial operation in the last quarter of fiscal
2009. Mr. Bajaj's extensive industry experience has helped KTPL
market its products. The promoters' established relationships with
raw material suppliers and logistics service providers help in
smooth and timely procurement and transportation of raw material.
Backed by the promoters' extensive experience, the group has
established a diversified and wide clientele for its products. The
group primarily markets its product domestically in eastern India,
and sometimes exports to Nepal and Bangladesh.
Outlook: Stable
CRISIL believes the Krishna group will continue to benefit from
the extensive experience of its promoters. The outlook may be
revised to 'Positive' if the new kraft paper unit stabilises
operations sooner-than-expected, and if the group generates
adequate cash accrual and manages working capital efficiently. The
outlook may be revised to 'Negative' if lower-than-expected
operating income or accrual, stretch in working capital cycle, or
any significant capital expenditure weakens the financial risk
profile, particularly liquidity.
The Krishna group manufactures duplex paper board and kraft paper.
KPPPL, TFPL, and MJK trade in waste paper and chemicals used in
the paper industry, and procure waste paper for the group's
manufacturing unit in KTPL. The group is promoted by Kolkata-based
Bajaj family. Its paper mill is at Ghoraghata near Bagnan (West
Bengal), and kraft paper unit is in Burdwan (West Bengal).
UMA RANI: ICRA Moves C+ Rating to Not Cooperating Category
----------------------------------------------------------
ICRA Limited has moved the ratings for the INR5.65-crore bank
facilities of Uma Rani Agrotech Private Limited (URAPL) to the
'Issuer Not Cooperating' category. The ratings are now denoted as:
"[ICRA]C+ / [ICRA]A4 ISSUER NOT COOPERATING".
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based Limits 5.40 [ICRA]C+ ISSUER NOT
COOPERATING; Rating moved
to the 'Issuer Not
Cooperating' category
Non-fund based Limit 0.25 [ICRA]A4 ISSUER NOT
COOPERATING Rating moved
to the 'Issuer Not
Cooperating' category
Rationale
The ratings are based on limited updated information on the
entity's performance since the time it was last rated in March,
2016. The lenders, investors and other market participants are
thus advised to exercise appropriate caution while using this
rating as the rating does not adequately reflect the credit risk
profile of the entity. The entity's credit profile may have
changed since the time it was last reviewed by ICRA; however, in
the absence of requisite information, ICRA is unable to take a
definitive rating action.
As part of its process and in accordance with its rating agreement
with URAPL, ICRA has been trying to seek information from the
entity so as to monitor its performance, but despite repeated
requests by ICRA, the entity's management has remained non-
cooperative. In the absence of requisite information, and in line
with SEBI's Circular No. SEBI/HO/MIRSD4/CIR/2016/119, dated
November 1, 2016, ICRA's Rating Committee has taken a rating view
based on the best available information.
Key rating drivers
Credit strengths
* Long experience of the promoters in the rice trading business:
The promoters of the company have experience of more than a decade
in the rice-trading business. This mitigates operational risks of
the company.
* Presence in a major paddy growing area results in easy
availability of paddy: The manufacturing facility of the company
is located amid a highly paddy growing region in the Birbhum
district of West Bengal. Paddy requirements are, therefore,
majorly met through local purchases from Birbhum and its
surroundings districts in West Bengal, which ensures easy
availability of paddy.
Credit weaknesses
* Intensely competitive nature of industry characterized by a
large number of small players: Fragmented nature of the rice mill
industry and low entry barriers lead to intense competition from a
large number of small players, exerting pressure on margins.
* Agro-climatic risks that can affect availability of paddy in
adverse weather conditions: The level of paddy production as well
as quality of the crop largely depend on agro-climatic conditions.
Hence, adverse weather conditions can affect raw material
availability for the company.
* Vulnerability to adverse changes in Government policies towards
agro-based commodities such as rice: The rice milling industry
remains exposed to the changes in Government policies, which
includes stipulation of minimum support price (MSP) for
procurement of paddy from farmers and revision of policies on
export of rice, levy sale, etc.
Established in 2010, URAPL is engaged in milling of par boiled
rice; and has an installed production capacity of 28,800 MTPA of
rice. The rice mill started commercial production from February
2014. The company's rice milling facility is located in the
Birbhum district of West Bengal.
=================
I N D O N E S I A
=================
ALAM SUTERA: S&P Affirms 'B' Corp Credit Rating, Outlook Stable
---------------------------------------------------------------
S&P Global Ratings affirmed its 'B' long-term corporate credit
rating on PT Alam Sutera Realty Tbk. (ASRI). The outlook is
stable. S&P also affirmed its 'B' long-term issue ratings on the
senior unsecured notes issued by Alam Synergy Pte. Ltd. ASRI is an
Indonesian property developer and guarantees the notes.
S&P said, "We affirmed the ratings despite ASRI's breach of its
restricted payment covenants because we expect the company to
swiftly and successfully resolve this technical breach. Given the
small amount of dividend involved, we believe that bondholders
will not call an event of default. In addition, ASRI continues to
perform in line with our expectations and maintains adequate
near-term liquidity.
"We believe ASRI will solicit consent from bondholders for waiver
of the breach to address the breach in a timely manner. ASRI
triggered the restricted payment covenant breach by mistakenly
disbursing Indonesian rupiah (IDR) 29 billion of dividends in July
2017 despite failing the fixed charge coverage ratio of at least
2.5x for the 12 months ended June 30, 2017.
"We believe ASRI will meet the fixed charge coverage covenant for
the 12 months ended Sept. 30, 2017, because its operating
performance is better than in 2016. The company's operating
performance in the first half of 2017 is in line with our
expectations. Its marketing sales were IDR895 billion in the first
six months of 2017. We therefore believe that the company will be
able to meet our sales and financial ratios expectations for the
rating for 2017 and 2018."
ASRI continues to maintain adequate liquidity to meet the cost of
potential consent solicitation. The company has a cash balance of
IDR1.15 trillion as of June 30, 2017.
S&P said, "The stable outlook reflects our expectation that ASRI
will resolve the covenant breach in a timely manner. We also
expect the company to maintain sustained marketing sales and
disciplined capital expenditure over the next 12-18 months such
that its EBITDA interest coverage remains above 2x. In addition,
we anticipate that ASRI will manage its liquidity by selling land
or assets, or reducing capital expenditure if the market weakens.
"We may lower the rating, most likely by more than one notch, if
ASRI fails to resolve the breach in a timely manner, such that
bondholders are compelled to trigger an event of default, which
will accelerate debt repayment."
S&P may also lower the rating if one or more of the following
occurs:
-- ASRI's liquidity deteriorates substantially. This could
materialize if market conditions weaken substantially and
affect cash collections significantly more than S&P
anticipated, while capital spending stays high; or
-- ASRI increases its reliance on short-term working capital
funding.
The company's EBITDA interest coverage falls below 2x because of
lower margins or rising interest costs.
The credit profile of parent Argo Manunggal Group weakens because
of more aggressive debt-funded expansion or weaker profitability
at the group. ASRI engages in substantial related-party
transactions or develops closer operating and financial
relationships with Argo Manunggal or its sister companies.
S&P may raise the rating if ASRI materially improves its debt
servicing ability and adequate liquidity. An indication of this
improvement would be EBITDA interest coverage staying materially
above 3x and liquidity uses being well covered by liquidity
sources. For either of these scenarios to occur, ASRI would need
to practice financial prudence, reining in its capital
expenditure.
=========
J A P A N
=========
TOSHIBA CORP: To Invest Extra JPY110BB in Yokkaichi Plant
---------------------------------------------------------
The Japan Times reports that Toshiba Corp. said on Oct. 13 that it
will make an additional investment of JPY110 billion to expand
flash memory production at its Yokkaichi plant in Mie Prefecture.
According to the report, Toshiba will ask whether U.S. partner
Western Digital Corp. will participate in the fresh investment. If
Western Digital chooses not to, Toshiba will make the investment
on its own.
It is uncertain whether the U.S. hard-disk drive maker will join,
the report states.
Western Digital has filed petitions with the International Chamber
of Commerce's International Court of Arbitration to stop Toshiba's
plans to invest JPY195 billion in the same plant single-handedly
and sell the plant operator, Toshiba Memory Corp., The Japan Times
discloses.
Toshiba said the fresh investment is intended to introduce
production equipment at a facility under construction in the
Yokkaichi plant in order to make large-capacity memory products,
the report relays.
As a result, Toshiba's semiconductor-related investments will
total JPY400 billion in the current year ending next March, the
report notes.
The Japan Times says Western Digital has claimed that Toshiba does
not have the right to make any single-handed investment in the
Yokkaichi plant.
Western Digital has also criticized Toshiba for trying to exclude
the U.S. firm from the plant's operation to manufacture new memory
products whose demand is seen rising and for increasing pressure
to accept the sale of Toshiba Memory, the report notes.
About Toshiba Corp
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
Oct. 6, 2017, S&P Global Ratings said that it has affirmed its
'CCC-' long-term corporate credit and 'C' short-term corporate
credit and commercial paper program ratings on Japan-based capital
goods and diversified electronics company Toshiba Corp. S&P also
removed the ratings from CreditWatch. The outlook is negative.
S&P said, "At the same time, we raised the senior unsecured rating
one notch to 'CCC-' from 'CC' following completion of our review
of the rating. The review follows our publication of our revised
issue rating criteria, "Reflecting Subordination Risk In Corporate
Issue Ratings" on Sept. 21, 2017, after which we placed the rating
"under criteria observation" (UCO). With our criteria review
complete, we are removing the UCO designation from the rating. We
also removed the senior unsecured rating from CreditWatch with
negative implications following our affirmation of the long-term
corporate credit rating and resolution of the CreditWatch."
====================
N E W Z E A L A N D
====================
PROPERTY VENTURES: Liquidator Pursues Claims After Pwc Settlement
-----------------------------------------------------------------
Chris Hutching at Stuff.co.nz reports that the liquidator of
Christchurch-based Dave Henderson's Property Ventures is
continuing his claims against directors of the group after an out-
of-court settlement with auditors PricewaterhouseCoopers.
Stuff relates that Wellington-based accountant Robert Walker said
a court date had been set for early February and the amount under
claim could be as high as NZ$600 million.
According to the report, the High Court has approved a reduction
in money Mr. Walker was required to provide for security of costs
-- an amount he must make available in case his lawsuit fails and
could be used to satisfy costs of the Property Ventures directors.
Following the recent confidential settlement with PwC, the High
Court has reduced the security of costs amount from NZ$2.7 million
to NZ$720,000 which Mr. Walker's litigation funder LPV is expected
to come up with, Stuff says.
Stuff relates that the amount was reduced by High Court Justice
Graham Lang because the length of the case will be shorter with
PwC no longer involved.
Even so, Justice Lang expected the trial to last for 12 weeks and
said it could even go longer, according to Stuff.
Stuff notes that the Property Ventures directors tried to
challenge the adjustment, saying it was premature to gauge the
shape of the trial.
Included in the final amount is several hundred thousand dollars
as a provision to pay for expert witnesses, Stuff notes.
Christchurch barrister Austin Forbes QC with law firm Clarendon
Chambers is first defendant because of his role as director of
Property Ventures from 2004 to just before its collapse in 2008,
and his chairmanship after 2005, Stuff discloses.
Next in line is Auckland-based director Alister Johnston, followed
by Christchurch accountant Gordon Hansen, Dave Henderson, Phoenix-
based wealth adviser and author Adolph de Roos, and former general
manager Daniel Godden.
Liquidator Walker holds a claim against any payout on the
directors' insurance policy with Vero, the report relates.
His claim will allege breach of fiduciary duty over such things as
Property Ventures' claims of financial health even though previous
auditors Grant Thornton had queried that the company was a going
concern, before being replaced after 2006 by PwC as auditors,
Stuff relays.
Other claims will relate to valuations of properties, the
intermingling of the affairs of subsidiaries, development delays,
and payment of creditors, says Stuff.
Property Ventures (PVL), the central company of the
David Henderson property development ventures, was put into
receivership in March 2010, and then into liquidation in July the
same year.
===============
X X X X X X X X
===============
SOLOMON ISLANDS: Moody's Affirms B3 Issuer Ratings, Outlook Stable
------------------------------------------------------------------
Moody's Investors Service has affirmed the Government of Solomon
Islands' local and foreign currency issuer ratings at B3 and
maintained the stable outlook.
The factors supporting the rating affirmation and stable outlook
are Moody's expectation that:
(1) Technical and financial support from donors and international
financial institutions and adherence to the Solomon Islands'
fiscal management framework will continue to drive high fiscal
strength
(2) Very weak shock absorption capacity given low incomes, narrow
economic diversification and weak institutions will remain key
credit constraints
In addition, the economy and public finances will remain highly
vulnerable to both sudden climate events and gradual climate
change trends.
The local-currency bond and deposit ceilings are unchanged at B2.
The foreign currency bond ceiling is unchanged at B2 and the
foreign currency deposit ceiling is also unchanged at Caa1. In
addition, the short-term foreign-currency bond and deposit
ceilings are "Not Prime."
RATINGS RATIONALE
RATIONALE FOR RATING AFFIRMATION AT B3
TECHNICAL AND FINANCIAL SUPPORT WITH ADHERENCE TO FISCAL FRAMEWORK
TO CONTINUE DRIVING HIGH FISCAL STRENGTH
Moody's expects the Solomon Islands' credit profile to continue to
be supported by a very low government debt burden and high debt
affordability.
Government debt, which Moody's estimates to reach 10% of GDP in
2017, is one of the lowest among the sovereigns that Moody's
rates. Debt relief by key creditors significantly reduced the debt
burden in 2004. Adherence to legislation that sets a ceiling on
the debt to GDP ratio and precludes the use of borrowing to fund
recurrent expenditure has maintained debt at very low levels since
then.
Moody's expects government debt to increase slightly to around 12%
of GDP by the end of 2018, still very low relative to other B-
rated sovereigns and, more generally, all rated sovereigns.
Although the government's cash balance has fallen to low levels
this year, as revenues have come in below expectations, Moody's
expects the government to maintain its ongoing commitment to
ensuring robust public finances. Solomon Islands' successful
graduation from an IMF program in 2016 has helped strengthen
fiscal management through the Public Financial Management Act, the
introduction of a multiyear budget framework and enhancements to
debt management.
The recently launched tax review, which includes examining the
consumption tax, sales tax, income tax and other taxes such as
gambling tax, would raise prospects for government revenue
receipts if successfully implemented. At this stage and given the
likely implementation lags and potential narrowing of the scope of
the fiscal reforms, Moody's does not factor a significant
broadening of the tax base in Moody's projections.
Larger borrowing to fund key development projects such as the Tina
River Hydro project will be done on concessional terms and include
grants. Moody's also expects Australia (Aaa stable) to continue to
provide aid to Solomon Islands, which will help to maintain the
sovereign's low borrowing needs and high debt affordability.
Overall, interest payments on government debt will remain below
0.5% of government revenues, a very low level compared to other
rated sovereigns.
Beside financial assistance, Australia provides technical support
that contributes to the smooth functioning of the Solomon Islands'
government institutions. Technical advisors are seconded to help
strengthen the Solomon Islands' capacity to undertake core state
functions.
Although an escalation of domestic political and social tensions
could have a high credit impact by threatening the continuity of
donor support and hampering the effectiveness of policies and
economic growth, Moody's think it is a low probability risk. There
has been some progress on restoring law and order in the past
decade through the Regional Assistance Mission to Solomon Islands
(RAMSI), which Moody's expects to persist.
Moody's expects Australia's technical and financial engagement
with Solomon Islands to continue following the conclusion of
RAMSI. Australia will continue to provide development support for
justice and governance, education, health and police development
through its bilateral aid investment program. Australia provides
about 70% of Solomon Islands' total aid, equal to around 28% of
the government's revenue or 12% GDP. The signing of a security
treaty in August 2017 underscores the continued engagement on
security issues between the two countries.
LOW INCOMES, NARROW ECONOMIC BASE AND WEAK INSTITUTIONS CONSTRAIN
SHOCK ABSORPTION CAPACITY
Solomon Islands' very small economy (nominal GDP of $1.1 billion
in 2016) offers limited scope for diversification of economic
activity and leaves the sovereign highly vulnerable to credit
negative shocks. Such potential shocks include Solomon Islands'
exposure to climate change, which poses significant economic and
fiscal risks.
At the same time, resilience is low on account of the country's
low level of development, reflected in very low incomes, low
quality of infrastructure and weak institutions. These
characteristics are somewhat mitigated by low government debt
levels that provide room for expansionary fiscal policy, if
necessary, and the potential for physical assistance and financial
support from international partners.
The economic base is narrow, reliant on agricultural and forestry
production for around 30% of GDP. The economy's dependence on
forestry resources -- which are depleting at a sustained pace --
and goods exports to China -- which account for a sizeable 26% of
GDP -- raise the sovereign's susceptibility to sector and market -
specific shocks.
The Medium-Term Development Strategy 2016-2035 aims to bolster the
economy's resilience through new sources of growth and revenues,
though the effectiveness of these measures has yet to be revealed.
Constraints on access to finance are a hurdle to strengthening
economic output. Although banks are adequately capitalised, highly
liquid and profitable, a potential further reduction in
correspondent banking services could hinder the flow of credit to
trade and investment sectors.
Incomes, with GDP per capita around $2,000 in 2016 at purchasing
power parity, are very low relative to other B-rated sovereigns,
despite more than doubling over the past decade.
Furthermore, most economic and policy institutions are nascent.
Solomon Islands' rankings on Worldwide Governance Indicators,
particularly government effectiveness and the rule of law, are
low. Perceptions of corruption have the potential to hinder the
implementation of key investment projects and stymie progress on
economic development. Lack of transparency on parts of government
funding and spending weighs on the operation of and reporting of
the budget, particularly given the emphasis donors have placed on
adherence to fiscal reforms.
More generally, the country's very small size constrains the
effectiveness of institutions by subjecting Solomon Islands to
factors beyond the control of domestic policymakers.
RATIONALE FOR STABLE OUTLOOK
The stable outlook indicates risks to Solomon Islands rating are
balanced.
On the upside, the successful development of the Tina River Hydro
project and Oceanic Cable project could boost potential growth by
increasing domestic electricity supply and internet connectivity,
allowing the development of some new sectors of economic activity.
In addition, the potential for gold production to resume at the
Gold Ridge Mine in 2019 would boost mining activity. At this
stage, there are significant challenges to the timely and
effective implementation of these projects, such as land rights
and geopolitical issues.
On the downside, the economy's growth potential could weaken
materially in particular if the structural decline in the logging
industry, weak competitiveness and low quality infrastructure
hinder investment more significantly than Moody's currently
assume. In turn, a prolonged economic slowdown or sudden negative
economic shock, combined with lower donor funding and depleting
government's cash reserves, would undermine fiscal strength.
Moreover, a deterioration in the bilateral relationship with
Australia or in the country's engagement with multilateral
development partners would undermine high fiscal strength given
the prominent role of aid and concessional financing and hinder
fiscal management through lower institutional capacity.
WHAT COULD CHANGE THE RATING UP
Upward rating pressures could develop as a result of 1) steady
diversification of the economy away from the logging sector; or 2)
significant strengthening in institutional capacity.
WHAT COULD CHANGE THE RATING DOWN
Downward rating triggers could stem from 1) a reversal in fiscal
discipline and debt consolidation, reflected in a further lasting
erosion in government cash reserves and potentially stemming from
sharp cuts in aid from donors; or 2) a worsening political
environment that hinders policymaking and leads to lower financial
and technical support from international partners, or 3) a
deterioration in the external balance sheet that would result in
depleting foreign exchange reserves and raise balance of payments
risks.
GDP per capita (PPP basis, US$): 1,981 (2016 Estimate) (also known
as Per Capita Income)
Real GDP growth (% change): 3.2% (2016 Estimate) (also known as
GDP Growth)
Inflation Rate (CPI, % change Dec/Dec): -3% (2016 Actual)
Gen. Gov. Financial Balance/GDP: -3.1% (2016 Estimate) (also known
as Fiscal Balance)
Current Account Balance/GDP: -4.6% (2016 Estimate) (also known as
External Balance)
External debt/GDP: 25.7% (2016 Estimate)
Level of economic development: Very Low level of economic
resilience
Default history: At least one default event (on bonds and/or
loans) has been recorded since 1983.
On October 5, 2017, a rating committee was called to discuss the
rating of the Solomon Islands, Government of. The main points
raised during the discussion were: The issuer's economic
fundamentals, including its economic strength, have not materially
changed. The issuer's institutional strength/ framework, have not
materially changed. The issuer's fiscal or financial strength,
including its debt profile, has materially increased. The issuer's
susceptibility to event risks have decreased.
The principal methodology used in these ratings was Sovereign Bond
Ratings published in December 2016.
The weighting of all rating factors is described in the
methodology used in this credit rating action, if applicable.
*********
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.
Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez,
Julie Anne L. Toledo, Ivy B. Magdadaro and Peter A. Chapman,
Editors.
Copyright 2017. All rights reserved. ISSN: 1520-9482.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding,
electronic re-mailing and photocopying) is strictly prohibited
without prior written permission of the publishers.
Information contained herein is obtained from sources believed
to be reliable, but is not guaranteed.
TCR-AP subscription rate is US$775 for 6 months delivered via e-
mail. Additional e-mail subscriptions for members of the same
firm for the term of the initial subscription or balance
thereof are US$25 each. For subscription information, contact
Peter Chapman at 215-945-7000 or Joseph Cardillo at 856-381-8268.
*** End of Transmission ***