/raid1/www/Hosts/bankrupt/TCRAP_Public/171130.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
A S I A P A C I F I C
Thursday, November 30, 2017, Vol. 20, No. 238
Headlines
A U S T R A L I A
AMBASSADOR: Collapse Causes Dispute Between Landlord, Liquidators
ECHOICE LIMITED: First Creditors' Meeting Slated for Dec. 7
MOGL PROPERTY: First Creditors' Meeting Set for Dec. 7
SUN GROWTH: Second Creditors' Meeting Scheduled for Dec. 8
* Australian Auto ABS Delinquencies Decline in Q3 2017
C H I N A
CHINA HUISHAN: Creditors File Bankruptcy Bid Against Two Units
FOSUN INTERNATIONAL: S&P Rates Sr. Unsec. Guaranteed Notes 'BB'
XINYUAN REAL: Fitch Assigns Final B Rating to US$200MM Notes
H O N G K O N G
CHINA SOUTH: Fitch Rates US$300MM Senior Notes Final 'B'
NOBLE GROUP: To Sell Four Dry Bulk Vessels for About US$95MM
NOBLE GROUP: Balance Sheet May Still Mask Problems, Iceberg Says
PEARL HOLDING III: S&P Assigns Prelim 'B' Corp. Credit Rating
I N D I A
AIRCEL LIMITED: CARE Lowers Rating on INR17,479cr Loan to D
AIRCEL SMART: CARE Downgrades Rating on INR17,479cr Loan to D
AMRUT COTTON: ICRA Reaffirms B+ Rating on INR17.70cr Loan
BAJRANG BRONZE: ICRA Moves B- Rating to Not Cooperating Category
BAZARGAON PAPER: ICRA Raises Rating on INR7.25cr Loan to B
BOLTMASTER INDIA: ICRA Lowers Rating on INR22.80cr Loan to D
CALISTA PROPERTIES: CARE Reaffirms B-/A4 Rating on INR15cr Loan
CAPTAIN TRACTORS: ICRA Withdraws B+ Rating on INR18.46cr Loan
DISHNET WIRELESS: CARE Cuts Rating on INR17,479cr Loan to D
EVEREST KANTO: CARE Raises Rating on INR84.99cr LT Loan to BB
GARG INDUSTRIES: Ind-Ra Affirms BB- Issuer Rating, Outlook Stable
HINDUSTAN CONCRETES: Ind-Ra Assigns B+ LT Issuer Rating
INTERNATIONAL COMMERCE: Ind-Ra Cuts LT Issuer Rating to BB+
JAYASWAL NECO: ICRA Reaffirms D Rating on INR3086.70cr Loan
KUNJ BIHARI: ICRA Moves B+ Issuer Rating to Not Cooperating
LOVATO CERAMIC: ICRA Reaffirms B+ Rating on INR5cr Loan
MAA PADMAVATI: CARE Reaffirms B+ Rating on INR6cr LT Loan
MOENUS TEXTILE: Ind-Ra Downgrades LT Issuer Rating to BB-/Stable
OLIVE INDUSTRIES: CARE Assigns 'B' Rating to INR25.58cr Loan
P.D. BAJORIA: CARE Assigns 'B' Rating to INR7.48cr LT Loan
PERSANG ALLOY: Ind-Ra Moves BB Issuer Rating to Non-Cooperating
RAMAKRISHNA TELETRONICS: ICRA Moves D Rating to Not Cooperating
RELIANCE COMMUNICATIONS: CDB Files Insolvency Bid Against Firm
S. K. TIMBERS: CARE Assigns 'B' Rating to INR8cr LT Loan
S.S. AGRI: CARE Assigns B+ Rating to INR11.53cr LT Loan
SAFAR POLYFIBRE: ICRA Reaffirms B Rating on INR25.25cr Loan
SAHAKAR MAHARSHI: CARE Lowers Rating on INR35cr LT Loan to C
SAI POINT: ICRA Moves B Rating to Not Cooperating Category
SESHA SAI: ICRA Moves B Rating to Not Cooperating Category
SHIV DAL: ICRA Assigns B+ Rating to INR5cr Term Loan
SHRI BALAJI: Ind-Ra Assigns B+ Issuer Rating, Outlook Stable
SORT INDIA: ICRA Lowers Rating on INR8cr Loan to 'D'
SRI MURARI: ICRA Reaffirms B- Rating on INR10cr Term Loan
TANISHQ REALITIES: Ind-Ra Affirms B Issuer Rating, Outlook Stable
VAIDEHI ENTERPRISE: ICRA Moves B Rating to Not Cooperating
VEDAMATHA ENTERPRISES: ICRA Moves D Rating to Not Cooperating
VGS ENTERPRISES: Ind-Ra Moves B+ Issuer Rating to Not Cooperating
VICKY FASHION: ICRA Moves B Rating to Not Cooperating Category
J A P A N
TOSHIBA CORP: To Take Down Times Square Sign
P H I L I P P I N E S
UNIWIDE GROUP: Court Enters Liquidation Order
S I N G A P O R E
PEARL HOLDING: Moody's Assigns B1 Corporate Family Rating
S R I L A N K A
SRI LANKA TELECOM: Fitch Affirms B+ Long-Term FC/LC IDRs
X X X X X X X X
MALDIVES: Fitch Assigns B+(EXP) Rating to USD Bonds
- - - - -
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A U S T R A L I A
=================
AMBASSADOR: Collapse Causes Dispute Between Landlord, Liquidators
-----------------------------------------------------------------
Renato Castello at The Advertiser reports that the company
operating one of Adelaide's oldest pubs has collapsed, triggering
a dispute between the landlord and liquidators over who owns the
business's assets.
According to The Advertiser, liquidator Richard Auricht --
richardauricht@rrcut.com.au -- said landlord the Polites Group
has filed a Supreme Court injunction to prevent him seizing the
assets of the heritage-listed Ambassadors Hotel on King William
Street.
The Advertiser relates that the move came after the court ordered
the winding up of venue operator Ambassador KW Pty Ltd last month
over a debt owed to gaming company Ainsworth Game Technology Pty
Ltd.
The hotel remains open to the public, the report notes.
The report relates that Mr. Auricht, of Richard Auricht Accounts,
said businessman George Polites was running the 178-year-old
venue.
"There's a dispute as to who owns the assets in there . . . he is
saying he does," the report quotes Mr. Auricht as saying.
"That's not yet been resolved (and is) subject to a Supreme Court
proceeding."
He said Mr. Polites had permission from the Liquor and Gaming
Commissioner to continue operating the pub for another month and
will have to reapply for any licence extensions, the report
relays.
But Mr. Auricht said that he retained control of the gaming
licences.
The Advertiser has sought comment from the Polites Group.
ECHOICE LIMITED: First Creditors' Meeting Slated for Dec. 7
-----------------------------------------------------------
Geoffrey Reidy and Andrew Barnden of Rodgers Reidy were appointed
as Voluntary Administrators of eChoice Limited and thirteen (13)
subsidiary companies on November 27, 2017, pursuant to Section
436C of the Corporations Act.
A first meeting for each of the Companies will be held at Yurra
Room, Level 2, The Grace Hotel, 77 York Street, Sydney, New South
Wales, on Dec. 7, 2017, at 10:30 a.m.
The Companies are:
eChoice Limited (ACN 002 612 991)
Xplore Capital Pty Limited (ACN 075 949 478)
Equipment Leasing Solutions Pty Limited (ACN 129 323 351)
Folio Financial Services Pty Limited (ACN 078 713 345)
Folio Loan Services Pty Limited (ACN 104 700 870)
Folio Loans Australia Pty Limited (ACN 100 071 654)
Firstfolio Capital Management Pty Limited (ACN 125 150 101)
eChoice Services Pty Limited (formerly Firstfolio Services Pty
Ltd) (ACN 093 078 356)
Folio Leasing Pty Limited (ACN 101 633 738)
Folio Wholesale Pty Limited (ACN 094 017 571)
Aptura Developments Pty Limited (ACN 117 144 644)
Club Financial Services Holdings Pty Limited (ACN 108 411 909)
Folio Franchising Pty Limited (ACN 127 618 517)
Folio Mortgage & Finance Pty Limited (ACN 120 208 415)
(Administrators appointed) (Collectively "the Group")
The appointment was made by the secured creditor, Welas Pty Ltd.
The secured creditor has supported the Group for many years but
reached the view that it could no longer continue to support the
Group in its current form. Welas took the step to appoint the
Voluntary Administrators to enable eChoice to assess its options
on how to secure and sustain the future viability of the
business.
Excluding the historical debt burden, the business remains a
viable opportunity in the hands of a new owner.
The Voluntary Administrators have not been appointed over any
group companies with existing contracts with brokers or lenders.
Accordingly, the administration will not affect ongoing third
party stakeholder contractual obligations, such as trail payments
by lenders to these companies and payments of trail by these
companies to brokers.
The Voluntary Administrators will consider opportunities to sell
the business and are already aware of one major financial
institution which is interested in the business.
In the meantime, it is business as usual as far as possible. The
focus of the business will be to ensure that employees,
suppliers, lenders and brokers are able to deliver for customers
as they always have.
MOGL PROPERTY: First Creditors' Meeting Set for Dec. 7
------------------------------------------------------
A first meeting of the creditors in the proceedings of Mogl
Property Portfolio Pty Ltd will be held at the offices of Mackay
Goodwin, Suite 1, Level 2, 10 Bridge Street, in Sydney, New South
Wales, on Dec. 7, 2017, at 11:00 a.m.
Domenico Alessandro Calabretta and Grahame Robert Ward of Mackay
Goodwin were appointed as administrators of Mogl Property on Nov.
27, 2017.
SUN GROWTH: Second Creditors' Meeting Scheduled for Dec. 8
----------------------------------------------------------
A second meeting of creditors in the proceedings of Sun Growth
Pty. Ltd. has been set for Dec. 8, 2017 at 11:00 a.m. at the
offices of PKF Melbourne, Level 13, 440 Collins Street, in
Melbourne, on Dec. 8, 2017, at 11:00 a.m.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the
Company be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by Dec. 7, 2017, at 4:00 p.m.
Petr Vrsecky and Glenn J. Franklin of PKF Melbourne were
appointed as administrators of Sun Growth on Nov. 2, 2017.
* Australian Auto ABS Delinquencies Decline in Q3 2017
------------------------------------------------------
Moody's Investors Service says that the performance of Australian
auto loan asset-backed securities (ABS) improved in Q3 2017.
"Specifically, the average 30+ day delinquency rate declined to
1.60% at September 30, 2017 from 1.66% at June 30, 2017," says
Alena Chen, a Moody's Vice President and Senior Analyst.
"The performance of most Australian auto loan ABS programs - with
the exception of St.George Bank Limited's Crusade deals -
improved during the same quarter," says Chen.
Macquarie Leasing Pty Limited's SMART transactions had the lowest
weighted-average 30+ day delinquency rate of 1.02% at September
30, 2017, down from 1.16% at June 30, 2017.
The weighted-average 30+ delinquency rate of BOQ Equipment
Finance Limited's REDS transactions was 1.15% at September 30,
2017, down from 1.52% at June 30, 2017.
Liberty Financial Pty Limited's Liberty transactions, although
they had the highest weighted-average 30+ day delinquency rate of
9.90% at September 30, 2017, also saw an improvement from 10.13%
at June 30, 2017. This program securitizes auto loans from both
prime and non-conforming borrowers.
St.George Bank Limited's Crusade transactions, however, saw a
deterioration in performance. The weighted-average 30+ day
delinquency rate increased to 2.18% at September 30, 2017 from
2.08% at June 30, 2017.
Defaults and loss levels remained low during Q3 2017. At
September 30, 2017, the 2013 vintage - the most seasoned of the
outstanding pools - registered a cumulative default rate of 2.36%
and a net loss rate of 1.21%.
Recovery rates for all vintages stayed stable in Q3 2017, at
around 45%-50%.
During Q3 2017, Moody's rated one new auto ABS deal, with a total
volume of AUD588 million.
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C H I N A
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CHINA HUISHAN: Creditors File Bankruptcy Bid Against Two Units
--------------------------------------------------------------
Reuters reports that China Huishan Dairy Holdings, burdened by
billions of dollars worth of debt, said on Nov. 28 its creditors
had filed a plea in a local court for bankruptcy restructuring
against two if its wholly-owned subsidiaries.
The application was filed on Nov. 28 against Huishan Dairy China
Co Ltd and Liaoning Huishan Dairy Group Shenyang Co Ltd by the
embattled company's onshore creditors, it said in a filing to the
Hong Kong stock exchange, Reuters relays.
Shares in China Huishan, once a hot property with investors, have
been suspended since they plunged 85 percent in March, after
which the company said it had fallen behind with some loan
repayments, according to Reuters.
The company's debts totalled at least CNY38 billion ($5.73
billion) at the end of July, according to a work-out plan seen by
Reuters.
Huishan, billed as China's biggest integrated dairy firm when it
went public in 2013, said this month it was preparing for
provisional liquidation, Reuters recalls. In response to its
creditors' latest action, Huishan said on Nov. 28 it was taking
legal advice on the banks' bankruptcy restructuring plea and
would take such steps to preserve the assets of the company, the
report adds.
About China Huishan
China Huishan Dairy Holdings Co Ltd (HKG:6863) is principally
engaged in the production and sales of raw milk, liquid milk
products and milk powder products. The Company operates its
business through three segments. The Dairy Farming segment is
engaged in planting, growing and harvesting alfalfa grass and
other feed crops, processing feeds and breeding dairy cows. The
Liquid Milk Products Production segment is engaged in the
production and sales of pasteurized milk, ultra-high temperature
(UHT) milk, yoghurt and milk beverages. The Milk Powders
Production segment is engaged in the production and sales of
infant milk formula products, adult milk powder products and
dairy ingredient products.
As reported in the Troubled Company Reporter-Asia Pacific on
April 13, 2017, The South China Morning Post said a Shanghai
court has frozen assets of China Huishan Dairy Holding and its
chairman as requested by a mainland wealth management firm, and
that HSBC alleges it has defaulted on a US$200 million loan.
Huishan said in a filing to the Hong Kong stock exchange on
April 10 that it had received a letter on April 7 from HSBC
alleging "non-compliance with certain of the covenants" and "has
therefore called events of default under the Facility Agreement".
HSBC acted on behalf of six creditor banks, including China CITIC
Bank International.
FOSUN INTERNATIONAL: S&P Rates Sr. Unsec. Guaranteed Notes 'BB'
---------------------------------------------------------------
S&P Global Ratings assigned its 'BB' long-term issue rating to a
proposed issue of U.S. dollar-denominated senior unsecured notes
that will be unconditionally and irrevocably guaranteed by the
China-based conglomerate, Fosun International Ltd. (BB/Stable/--
). Fortune Star (BVI) Ltd., a special purpose entity, will issue
the notes. The ratings are subject to S&P's review of the final
issuance documentation. Fosun intends to use the issuance
proceeds for refinancing and other general corporate purposes.
The rating on the notes is the same as the corporate credit
rating on Fosun because of credit substitution under the
guarantee. As an investment holding company, Fosun's secured debt
at the parent level is less than 50% of total debt at the parent
level, therefore S&P does not notch down the issue rating for
structural subordination risk.
Fosun has recently announced that it will sell some of its real
estate businesses to its Shanghai-listed subsidiary, Shanghai
Yuyuan Tourist Mart Co., Ltd. The transaction is in line with
S&P's expectation and in line with management's strategy of
monetizing assets through injections into listed vehicles.
The stable outlook on the corporate credit rating reflects our
expectation that Fosun will maintain a well-diversified asset
portfolio and gradually improve its asset liquidity via asset
capitalization and IPOs. A diversified portfolio supports Fosun's
flexibility in navigating industry cyclicality and avoiding
concentration risk in single markets. S&P expects the company
will maintain its debt leverage at the current level while making
investments and disposal plans.
XINYUAN REAL: Fitch Assigns Final B Rating to US$200MM Notes
------------------------------------------------------------
Fitch Ratings has assigned Xinyuan Real Estate Co., Ltd.'s
(B/Stable) US$200 million 8.875% senior notes due 2020 a final
rating of 'B' and a Recovery Rating of 'RR4'.
The notes are rated at the same level as Xinyuan's senior
unsecured rating because they constitute its direct and senior
unsecured obligations. The assignment of the final rating follows
the receipt of documents conforming to information already
received. The final rating is in line with the expected rating
assigned on November 12, 2017.
The Chinese homebuilder's ratings are supported by strong
contracted sales and Fitch's expectation of moderate margin
recovery. The ratings are constrained by its small land bank,
high leverage driven by land replenishment needs and tight, but
sustainable, liquidity.
KEY RATING DRIVERS
Solid Contracted Sales: Xinyuan's contracted sales increased 38%
yoy to CNY7 billion in 1H17. The strong growth was driven by
robust market sentiment in its core Tier 2 cities and satellite
cities around Tier 1 cities, namely Zhengzhou, Jinan, Suzhou and
Kunshan. Tier 2 cities contributed 61% of contracted sales in
1H17 (1H16: 61%).
Small Land Bank Constrains Ratings: Xinyuan's total sellable
gross floor area increased to 2.9 million sq m at end-1H17, from
2.2 million sq m at end-2016. Its land bank will last for two
years - based on 2016 sales - which is low compared with 'B'
rated peers. Xinyuan pays advance deposits to local government
and industry partners to secure a large part of its land bank,
excluding the usual public auctions. This strategy creates
uncertainty about its land acquisitions and is a constraint on
the company's sales growth.
Land Replenishment Pressures Leverage: Xinyuan has accelerated
acquisitions after not purchasing any new land in 2015. It
announced acquisitions of CNY3.6 billion of sites in China and
the US in 2016, with cash outlay of around CNY2.6 billion after
considering returned land deposits and prepayments for certain
land parcels. With its low land bank and fast asset-churn model,
Xinyuan's need to replenish its land bank will continue to
pressure leverage, which Fitch expects to hover at around 45%-50%
in 2016-2017. This is made worse by surging land prices in
higher-tier cities amid fierce competition and a moderate
acquisition pace with the ratio of cash land premium paid to
contracted sales at 40%-45%.
Margin Recovery Sustainable: Fitch expects Xinyuan's gross margin
to continue improving in 2017, with the average selling price
(ASP) to rise for most of its top-10 projects on sale in 1H17.
Xinyuan's contracted sales ASP of USD1,564 per sq m in 2016 was
also higher than the aggregate price of USD1,387 per sq m
recognised in its 2016 revenue. The higher ASPs in core cities
and recognition of the Oosten project in the US helped the
homebuilder's gross margin recover in 2H16 by 2%-3% from the 1H16
level.
The homebuilder's EBITDA margin is likely to improve faster than
the gross margin, as selling, general and administration (SG&A)
costs rose by a slower 15% in 1H17, compared with the 38%
increase in contracted sales, which suggests that operational
costs are under control. Xinyuan's SG&A costs will also be spread
over a wider base and boost its EBITDA margin, as its 2016
revenue of USD1.6 billion catches up with its contracted sales of
USD1.8 billion. However, the improvement in Xinyuan's gross
margin could be jeopardised from 2H17 if land acquisition costs
sprint ahead of the rising ASP.
DERIVATION SUMMARY
Xinyuan's rating is supported by its solid sales and constrained
by its tight liquidity and small land bank. Xinyuan has a larger
scale measured by EBITDA, more contract sales and higher leverage
compared with 'B' rated Chinese property peers, such as Redco
Properties Group Ltd (B/Stable). Xinyuan has more stable
profitability and lower leverage than 'B-' peers, such as Jingrui
Holdings Limited (B-/Negative).
KEY ASSUMPTIONS
Fitch's key assumptions within Fitch rating case for the issuer
include:
- Contracted sales gross floor area to increase by 40%-50% in
2016 and 5% in 2017-2018 due to improved churn in Tier 1 and 2
cities.
- ASP of contracted sales to increase by around 5% between 2016
and 2018 due to price increases in Tier 1 and 2 cities.
- Moderate acquisition pace with the ratio of cash land premium
paid to contracted sales at 40%-45% in 2016-2018.
- Construction cost per sq m declining to around USD650-700 in
2016-2018, due to cheaper construction costs in Tier 2 cities.
- SG&A costs as a percentage of contracted sales to gradually
decrease to between 12% and 13%, as Xinyuan plans to cut
internal costs.
RATING SENSITIVITIES
Developments that may, individually or collectively, lead to
negative rating action include:
- Net debt/adjusted inventory rising above 60% on a sustained
basis (2016: 45%).
- Contracted sales/total debt falling below 0.6x on a sustained
basis (2016: 0.8x).
- EBITDA margin falling below 15% on a sustained basis (2016:
19%).
Developments that may, individually or collectively, lead to
positive rating action include:
- Significant increase in scale, as reflected by contracted
sales
exceeding CNY15 billion.
- Net debt/adjusted inventory sustained below 40%.
- Contracted sales/total debt improving to above 1.0x on a
sustained basis.
- EBITDA margin improving to above 20% on a sustained basis.
LIQUIDITY
Tight but Sustainable Liquidity: The company's liquidity position
is stable, with a ratio of cash/short-term debt of 112% at end-
June 2017 (end-2016: 107%). Xinyuan's total cash of USD1.3
billion and undrawn credit facilities of USD300 million should be
sufficient to cover its short-term borrowings of USD1.2 billion,
although the liquidity position will depend on the pace of land
acquisition. Active fundraising in the onshore bond market has
alleviated Xinyuan's refinancing pressure.
================
H O N G K O N G
================
CHINA SOUTH: Fitch Rates US$300MM Senior Notes Final 'B'
--------------------------------------------------------
Fitch Ratings has assigned China South City Holdings Limited's
(CSC; B/Stable) US$300 million 7.25% senior notes due 2022 a
final rating of 'B' and a Recovery Rating of 'RR4'.
The notes are rated at the same level as CSC's senior unsecured
rating because they constitute its direct and senior unsecured
obligations. The assignment of the final rating follows the
receipt of documents conforming to information already received.
The final rating is in line with the expected rating assigned on
November 13, 2017.
CSC's ratings are supported by well-located property projects,
growing non-development income, close collaboration with local
governments, a long record in integrated trade centre development
and sufficient liquidity. The ratings are constrained by CSC's
rising leverage and weak industry outlook.
KEY RATING DRIVERS
Rising Non-Development Income: Income from CSC's non-development
business increased by 12% yoy in the financial year ended March
2017 (FY17) to HKD1.6 billion, driven mainly by growth in its
outlet, property management service, and logistics and
warehousing businesses. Fitch believes CSC's diversification will
enhance internal cash flow and smooth out sales volatility. Fitch
expect non-development income/interest coverage to exceed 1.0x in
the next year or two (FY17: 0.9x; FY16: 0.8x).
Higher Leverage: CSC's leverage, measured by net debt/adjusted
inventory, rose to 50.0% at end-March 2017 from 48.3% at end-
March 2016, which is in line with Fitch estimate. This is due to
persistently high construction expenditure to build up saleable
residential products and spending on investment properties. The
company had 14.3 million square metres (sq m) of property under
development and unsold completed properties, including investment
properties, as at end-March 2017, compared with 14.2 million sq m
a year earlier.
Fitch expects leverage to remain between 50% and 60% for the next
two to three years if CSC continues with Fitch estimated capex of
HKD8.5 billion-10 billion a year, taking into consideration the
construction expenditure to build up saleable residential
resources and faster land acquisition to replenish its
residential land bank in Tier 2 cities, as well as investment on
its non-development segment. Fitch believes the developer's
rising leverage is mitigated by its growing recurring income.
However, CSC's ratings will come under pressure if the non-
development segment fails to grow despite continued investment.
Residential Sales Support Performance: Contracted sales rose 30%
yoy to HKD8.6 billion in FY17, buoyed by strong sales in three
Tier 2 cities - Nanchang, Hefei and Nanning. Residential sales
accounted for around 80% of total contracted value. Average
selling prices decreased by 5.6% yoy over FY16 to HKD8,000 per sq
m due to product-mix changes. Fitch expects contracted sales to
reach HKD10 billion-11 billion in FY18 as residential markets in
the Tier 2 cities where the company operates remain strong.
Weak Demand for Trade Centres: Demand in the trade and logistics-
centre sector has been weak since late 2014 as small and medium-
sized enterprises have withheld investment amid weaker economic
growth, relocation demand has slowed, local governments have
delayed completing transportation networks and investor appetite
has declined. Fitch does not see any signs of recovery in demand
for trade centre space in the next 12-18 months.
Sustained EBITDA Margin: CSC's EBITDA margin remained
satisfactory at 33.8% in FY17 amid low weighted-average land
costs of CNY320 (HKD374) per sq m in FY17, a cut in selling and
general expenses (-13% yoy), and larger recurring EBITDA from the
non-development segment. A government subsidy also helped CSC
maintain a healthy margin (FY17: HKD841 million; FY16: HKD1
billion). Fitch expects CSC's EBITDA margin to remain above 30%
in the next year or two, providing a buffer to absorb average
selling price volatility.
DERIVATION SUMMARY
CSC's projects are located in Tier 1 and 2 cities in China, which
are better located than those of the other two Fitch-rated trade
centre developers - Hydoo International Holding Limited (B-
/Stable) and Wuzhou International Holdings Limited (CCC), whose
projects are mainly in Tier 3 and 4 cities. This translates into
larger scale and better EBITDA margins for CSC compared with its
peers in the same industry. CSC's leverage is higher than that of
Hydoo and Wuzhou as part of its cash is tied up in the
construction of investment properties. Fitch expects its
diversification into the non-development segment to generate
stable operational cash flow for the company.
KEY ASSUMPTIONS
Fitch's key assumptions within the rating case for CSC include:
- Contracted sales at HKD10 billion-11 billion a year in FY18-
FY19.
- Non-development income to increase to HKD1.8 billion-2 billion
in FY18.
- Capital expenditure at HKD8.5 billion-10 billion per year in
FY18-FY19.
- Land replenishment ratio (land acquired/gross floor area
presold) at 2x in FY18
RATING SENSITIVITIES
Developments that may, individually or collectively, lead to
negative rating action include:
- EBITDA margin sustained below 20% (FY17: 33.8%; FY16: 32.5%);
- Net debt/adjusted inventory sustained above 50% (FY17: 50.0%;
FY16: 48.3%) if non-development income/interest is below 1.0x
(FY17: 0.9x; FY16: 0.8x) and
- Net debt/adjusted inventory sustained above 60% if non-
development income/interest is above 1.0x.
No positive rating action is expected in the next 12-18 months
given persistent weak demand for trade and logistic centres.
LIQUIDITY
Adequate Liquidity: CSC had cash and cash equivalents, including
restricted cash, of around HKD10.5 billion and unutilised banking
facilities of HKD5.4 billion as at FYE17, covering short-term
debt of HKD8.4 billion. CSC's successful issuance in the onshore
bond market has also alleviated refinancing pressure and lowered
its average borrowing cost to 6.2% at FYE17, from 6.3% at FYE16
and 6.8% at FYE15.
NOBLE GROUP: To Sell Four Dry Bulk Vessels for About US$95MM
------------------------------------------------------------
Lee MeiXian at The Business Times reports that a day after
Iceberg Research issued another fresh attack on Noble Group, the
commodity trader on Nov. 29 announced the proposed disposal of
four wholly owned Kamsarmax dry bulk carrier vessels, which it
said was part of its debt reduction plans and strategic review
announced in July 2017.
It expects to get proceeds of about US$95 million from the
disposal, which will be payable in cash on closing, BT says. Net
proceeds to the group, following repayment of bank loans
associated with the vessels and other costs, will amount to about
US$30 million.
BT relates that the consideration is in line with the average of
two valuations obtained, which stood at US$92.25 million.
"The vessels are currently mortgaged to financial institutions
and part of the proceeds from the proposed disposal will be used
by Noble Group to pay down the amounts owned under such
facilities," Noble said, notes BT.
According to the report, the proposed disposal of the vessels is
subject to approval by Noble shareholders and also by the board
of directors of each of the buyers and the parent company of the
buyers for the acquisition of the vessels.
The vessels are operated as part of the group's freight business,
and the disposal will not significantly impact the freight
business operation, it said, BT relays. This business segment
services external customers, as well as the group's internal
freight requirements, with ocean transport in the dry bulk
segment. Additionally, the freight business provides both
external and internal customers with long-term freight solutions
and freight market guidance.
On Nov. 29, Noble also called for a special general meeting on
Dec. 15 for the purpose of obtaining approval for the proposed
disposal of its Americas-focused oil liquids business Noble
Americas Corp., BT adds.
About Noble Group
Hong Kong-based Noble Group Limited (SGX:N21) --
http://www.thisisnoble.com/-- engages in supply of agricultural,
industrial and energy products. The Company supplies agricultural
and energy products, metals, minerals and ores. Agriculture
products include grains, oilseeds and sugar to palm oil, coffee,
and cocoa. Energy business includes coal, gas and liquid energy
products. In metals, minerals and ores (MMO), it supplies iron
ore, aluminum, special ores and alloys. The Company operates
nearly in 140 locations. It supplies growth demand markets in
Asia and Middle East. Alcoa World Alumina and Chemicals is the
subsidiary of this company.
As reported in the Troubled Company Reporter-Asia Pacific on
Nov. 22, 2017, Fitch Ratings downgraded Hong Kong-based
commodities trader Noble Group Limited's Long-Term Foreign-
Currency Issuer Default Rating (IDR), senior unsecured rating and
the ratings on all its outstanding senior unsecured notes to 'CC'
from 'CCC'. The Recovery Rating is 'RR4'. The downgrade follows
Noble's Nov. 15, 2017 announcement that it has commenced
discussions with stakeholders on its capital structure.
NOBLE GROUP: Balance Sheet May Still Mask Problems, Iceberg Says
----------------------------------------------------------------
Jasmine Ng and Jack Farchy at Bloomberg News report that Noble
Group Ltd's long-time foe Iceberg Research made a fresh attack on
the embattled commodity trader on Nov. 8, saying that its balance
sheet may still mask problems and that the company's bid to
restructure its obligations won't lead to a turnaround.
"The problem with this company is not only that assets have been
wildly overvalued. Some liabilities have probably been
drastically undervalued," Bloomberg quotes Iceberg as saying in
an open letter to the creditors of the Hong Kong-based company.
"Don't believe that Noble's balance sheet is clean after they
recognized billions of impairments."
An external media representative for Noble Group declined to
comment on the report, Bloomberg notes. Over the years, Noble has
consistently rejected the claims made by Iceberg, which doesn't
disclose the identity of the person behind it, but the company
has since done much of what Iceberg predicted it would do. Noble
Group is suing the man it claims is responsible, Arnaud Vagner,
calling him a disgruntled ex-employee, according to Bloomberg.
Once Asia's largest commodity trader, Noble Group's decline since
2015 has been marked by losses, concern it won't be able to pay
its debt, and accusations from Iceberg it inflated the value of
some contracts, Bloomberg says. The company has taken massive
writedowns and sold assets at a loss to raise funds amid a
liquidity squeeze, while at the same time attempting to get
creditors to agree to restructuring $3.5 billion in bonds and
loans, the report relates.
"This restructuring will not address any of the fundamental
weaknesses that led to Noble's collapse," Iceberg, as cited by
Bloomberg, said. "Noble is overly-optimistic on the valuation of
the remaining assets that would back the newly issued bonds," the
researcher said, adding: "The company will continue to burn cash
or generate minimum operating cash flow."
Noble Group has posted losses of more than $3 billion this year,
largely due to a decision to write down the value of some of its
assets, Bloomberg discloses. Chairman Paul Brough has warned that
the company will probably have to incur further non-cash losses
as it offloads more assets, Bloomberg relates.
In its letter, Iceberg urged creditors to seek to have Noble
Group's senior managers replaced, Bloomberg says. The researcher
also called attention to recent moves by the company to invest
several million dollars in an obscure rare earths mining company,
Mkango Resources Ltd, Bloomberg reports.
About Noble Group
Hong Kong-based Noble Group Limited (SGX:N21) --
http://www.thisisnoble.com/-- engages in supply of agricultural,
industrial and energy products. The Company supplies agricultural
and energy products, metals, minerals and ores. Agriculture
products include grains, oilseeds and sugar to palm oil, coffee,
and cocoa. Energy business includes coal, gas and liquid energy
products. In metals, minerals and ores (MMO), it supplies iron
ore, aluminum, special ores and alloys. The Company operates
nearly in 140 locations. It supplies growth demand markets in
Asia and Middle East. Alcoa World Alumina and Chemicals is the
subsidiary of this company.
As reported in the Troubled Company Reporter-Asia Pacific on
Nov. 22, 2017, Fitch Ratings downgraded Hong Kong-based
commodities trader Noble Group Limited's Long-Term Foreign-
Currency Issuer Default Rating (IDR), senior unsecured rating and
the ratings on all its outstanding senior unsecured notes to 'CC'
from 'CCC'. The Recovery Rating is 'RR4'. The downgrade follows
Noble's Nov. 15, 2017 announcement that it has commenced
discussions with stakeholders on its capital structure.
PEARL HOLDING III: S&P Assigns Prelim 'B' Corp. Credit Rating
-------------------------------------------------------------
S&P Global Ratings assigned its preliminary 'B' corporate credit
rating to Pearl Holding III Ltd., a Hong Kong headquartered
precision-engineered plastic components manufacturer. The outlook
is stable. S&P said, "At the same time, we assigned our
preliminary 'B' issue rating to the company's proposed senior
secured notes due 2022. Pearl will use the notes proceeds to
refinance a bridge loan for the acquisition of Fischer Tech Ltd.
The preliminary ratings are subject to our review of the final
and executed documentation."
The preliminary rating reflects Pearl's small market share in the
highly competitive, volatile, and fragmented plastic injection
molding and component market, and the company's high customer
concentration risk. Additionally, S&P believes that Pearl's
financial policy will be aggressive because it is owned by
Platinum Equity Partners, a private equity firm.
S&P said, "Pearl's small scale of operations in a fragmented and
competitive market curtails its ability to raise prices, in our
view. While Pearl's contract terms with its clients provide some
protection for significant swings in input prices, the company
will still need to absorb some level of volatility in input
prices.
"We believe the acquisition of Fischer will improve Pearl's
revenue profile and reduce volatility of the combined entity's
financial performance. So far, Pearl has focused on consumer
products where the contracts tend to be annual and short term but
with good profit margins. Fischer focuses on automotive products
where revenue visibility is higher but profit margins are lower."
Pearl has a track record of good execution as well as cost
discipline, which has contributed to its long client
relationships. The company's relationship with its clients
averages about 10 years. This is especially important in light of
the low switching costs and intense competition. However, as the
majority of Pearl's clients have significant scale, demand
volume, and pricing power, the company's expansion in profit
margin will mainly come from cost savings and better utilization
of existing and new assets. S&P said, "We estimate that Pearl's
pro forma EBITDA margin for 2017 will be 17.0%-17.5%. We expect
the EBITDA margin to decrease to 16.0%-16.5% at the end of 2018
mainly due to restructuring costs following the acquisition. We
expect the EBITDA margin to improve in subsequent years as the
company benefits from its cost-saving initiative."
S&P said, "We expect Pearl's customer and geographical
concentration risk to remain high over the next 12 months. The
company's top 5 customers contribute more than 50% of its total
revenue, and over 80% of revenue is derived from China. We
believe a key client loss and adverse economic conditions in
China could significantly weaken Pearl's operating performance.
"We estimate Pearl's pro forma adjusted debt-to-EBITDA ratio to
be 4.5x-5.0x at the end of 2017. However, we believe the
company's financial policy will be aggressive owing to its
private equity ownership. Over the next 18 months, we believe
Pearl will focus on integrating and rationalizing its existing
assets and that of Fischer. If the integration is successful and
business performance in on track, we cannot rule out debt-
financed dividends or other actions to reward the private equity
owners. We assess Pearl's financial risk profile as highly
leveraged based on the above factors. The stable outlook on Pearl
reflects our view that the company will maintain its market
position, leverage ratio, and adequate liquidity over the next 12
months. Integration with Fischer's business should help to
diversify Pearl's businesses and customer base. Pearl's
relationships with major customers will continue to drive stable
revenue growth over the period, in our view.
"We may lower the rating on Pearl if the company's debt-to-EBITDA
ratio rises above 6.0x and if its liquidity deteriorates to less
than adequate. This could result from a debt-financed special
dividends or a significant decline in demand.
"We see limited potential for an upgrade over the next 12 months,
given Pearl's ownership by a private equity firm and its weak
competitive position.
"We would consider raising the rating if Pearl's adjusted debt-
to-EBITDA ratio decreases to 3.5x or below for a sustained period
and if the company adopts a more conservative financial policy."
=========
I N D I A
=========
AIRCEL LIMITED: CARE Lowers Rating on INR17,479cr Loan to D
-----------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Aircel Limited (AL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank
Facilities 17,479 CARE D Revised from
CARE BB+ (SO)
Detailed Rationale & Key Rating Drivers
The ratings are based on a consolidated view on the credit risk
profiles of Aircel Limited (AL) and its wholly-owned
subsidiaries, namely Aircel Cellular Limited (ACL), Dishnet
Wireless Limited (DWL) and Aircel Smart Money Limited (ASML), as
all the companies operate under common management and are
characterized by high level of business integration. AL, ACL, DWL
and ASML are hereinafter collectively referred to as "Aircel".
The revision in the ratings assigned to the bank facilities of
Aircel take into account the delays in servicing of its debt
obligations.
Going forward, the ability of the company to service its debt
obligations in a timely manner, finalization of its new business
plan after discussions with the lenders and any change in
regulations affecting the business and the telecom industry shall
be the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Delays in servicing of debt obligations: The company has delayed
in repayment of interest on its debt obligations on account of
its weak liquidity position as a result of its continuing weak
operational performance in the hyper competitive telecom sector.
Deterioration in the operational performance of Aircel: The
Indian telecom sector is witnessing intense competition with the
launch of services by Jio. The competitive pressure has led to
stress on the cash flows and profitability of the incumbents.
Gross revenue of the telecom sector for the quarter ended on
March 31, 2017 was moderated by around 7% on y-o-y basis.
Although, Aircel has reported a 6% growth on y-o-y basis in the
number of subscribers, Average Revenue per User (ARPUs) and
PBILDT margin have consistently shown a downward trend leading to
deterioration in its financial risk profile.
PBILDT for CY16 moderated to INR598 crore as against INR1429
crore in CY15. Loss for CY16 doubled to INR4319 as against a loss
of INR2215 crore in CY15. The ability of Aircel to improve its
operational performance in the current industry scenario will be
critical and will continue to be a key rating monitor.
Highly competitive business environment and exposure to
regulatory risk: The Indian telecom sector is witnessing a lot of
volatility for the past few quarters with the launch of
commercial services by Jio. The sector has seen continuing and
intensifying competition which has resulted in consolidation
among the players, with a few of the minor players exiting the
telecom business while some others merging their businesses with
larger players. The data services bundled with free voice
services offered by the newest entrant have cannibalized both
voice and data revenue stream of telecom service operators. With
the ongoing tariff war among telecom service operators, ARPUs are
showing a consistent downward trend. Revenue growth, as a result
is also expected to be moderated, as telecom operators are
offering very competitive service plans. This will also impact
the government's share of revenue from the telecom sector as the
government earns license fees based on the revenue of the telecom
companies and taxes and levies.
Key Rating Strengths
Long track record of the group: Aircel started its operations
with the launch of services in the Chennai circle in 1995. Since
then, the company had expanded its operations and became a pan-
India player. As on March 31, 2017, Aircel (AL, ACL and DWL) is
present in 22 circles with a total subscriber base of around 90.9
million.
AL, together with two of its wholly owned subsidiaries ACL and
DWL, provides 2G wireless telecom services in all the 22 circles
of India and 3G services in 13 circles. ASML, another wholly
owned subsidiary of AL, provides mobile banking services. As on
March 31, 2017, Aircel has a subscriber base of approximately
90.9 million.
MCB, through Global Communication Service Holdings Limited and
Deccan Digital Networks Private Limited, effectively holds
approximately 73.99% equity interest in AL.
AIRCEL SMART: CARE Downgrades Rating on INR17,479cr Loan to D
-------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Aircel Smart Money Limited (ASML), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank 17,479 CARE D Revised from
Facilities CARE BB+ (SO); Negative
Detailed Rationale & Key Rating Drivers
The ratings are based on a consolidated view on the credit risk
profiles of Aircel Limited (AL) and its wholly-owned
subsidiaries, namely Aircel Cellular Limited (ACL), Dishnet
Wireless Limited (DWL) and Aircel Smart Money Limited (ASML), as
all the companies operate under common management and are
characterized by high level of business integration. AL, ACL, DWL
and ASML are hereinafter collectively referred to as "Aircel".
The revision in the ratings assigned to the bank facilities of
Aircel take into account the delays in servicing of its debt
obligations.
Going forward, the ability of the company to service its debt
obligations in a timely manner, finalization of its new business
plan after discussions with the lenders and any change in
regulations affecting the business and the telecom industry shall
be the key rating sensitivities. Detailed description of the key
rating drivers
Key Rating Weaknesses
Delays in servicing of debt obligations: The company has delayed
in repayment of interest on its debt obligations on account of
its weak liquidity position as a result of its continuing weak
operational performance in the hyper competitive telecom sector.
Deterioration in the operational performance of Aircel: The
Indian telecom sector is witnessing intense competition with the
launch of services by Jio. The competitive pressure has led to
stress on the cash flows and profitability of the incumbents.
Gross revenue of the telecom sector for the quarter ended on
March 31, 2017 was moderated by around 7% on y-o-y basis.
Although, Aircel has reported a 6% growth on y-o-y basis in the
number of subscribers, Average Revenue per User (ARPUs) and
PBILDT margin have consistently shown a downward trend leading to
deterioration in its financial risk profile.
PBILDT for CY16 moderated to INR598 crore as against INR1429
crore in CY15. Loss for CY16 doubled to INR4319 as against a loss
of INR2215 crore in CY15. The ability of Aircel to improve its
operational performance in the current industry scenario will be
critical and will continue to be a key rating monitor.
Highly competitive business environment and exposure to
regulatory risk: The Indian telecom sector is witnessing a lot of
volatility for the past few quarters with the launch of
commercial services by Jio. The sector has seen continuing and
intensifying competition which has resulted in consolidation
among the players, with a few of the minor players exiting the
telecom business while some others merging their businesses with
larger players. The data services bundled with free voice
services offered by the newest entrant have cannibalized both
voice and data revenue stream of telecom service operators. With
the ongoing tariff war among telecom service operators, ARPUs are
showing a consistent downward trend. Revenue growth, as a result
is also expected to be moderated, as telecom operators are
offering very competitive service plans. This will also impact
the government's share of revenue from the telecom sector as the
government earns license fees based on the revenue of the telecom
companies and taxes and levies.
Key Rating Strengths
Long track record of the group Aircel started its operations with
the launch of services in the Chennai circle in 1995. Since then,
the company had expanded its operations and became a pan-India
player. As on March 31, 2017, Aircel (AL, ACL and DWL) is present
in 22 circles with a total subscriber base of around 90.9
million.
Analytical approach: The ratings consider a consolidated view on
credit risk profiles of Aircel Limited and its wholly-owned
subsidiaries namely Aircel Smart Money Limited, Aircel Cellular
Limited and Dishnet Wireless Limited.
AL, together with two of its wholly owned subsidiaries ACL and
DWL, provides 2G wireless telecom services in all the 22 circles
of India and 3G services in 13 circles. ASML, another wholly
owned subsidiary of AL, provides mobile banking services. As on
March 31, 2017, Aircel has a subscriber base of approximately
90.9 million.
MCB, through Global Communication Service Holdings Limited and
Deccan Digital Networks Private Limited, effectively holds
approximately 73.99% equity interest in AL.
AMRUT COTTON: ICRA Reaffirms B+ Rating on INR17.70cr Loan
---------------------------------------------------------
ICRA has re-affirmed the long-term rating of [ICRA]B+ to the
INR17.70-crore fund-based facilities of Amrut Cotton Industries.
The outlook on the long-term rating is Stable.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based Limits 17.70 [ICRA]B+ (Stable); Re-affirmed
Rationale
The rating continues to derive comfort from the long-standing
experience of the partners in the cotton ginning industry and the
proximity of the ACI's manufacturing unit to raw material
sources, which eases procurement. The rating further positively
factors in the diversification achieved through groundnut
processing facilities providing additional revenues and
improvement in its profit margin.
However, the rating is constrained by the firm's weak financial
profile as is evident from low profitability, stretched capital
structure and modest debt coverage metrics. The rating further
takes into account the intense competition in the agro-commodity
business resulting from low entry barriers and limited value
addition in the finished products. The rating also considers the
exposure of ACI's profitability to any adverse regulatory changes
particularly those related to export incentives and availability
of agro-commodities, as the same is linked to seasonality and
crop harvest. ICRA also notes that ACI is a partnership firm and
any significant withdrawals from the capital account could
adversely impact its net-worth and thereby the credit profile.
Key rating drivers
Credit strengths
* Experienced management and diversified product portfolio: The
firm's partners have more than a decade-long experience in
ginning and pressing of raw cotton. ACI diversified into
groundnut processing operations from December, 2016. Hence, its
product profile includes peanuts along with cotton bales, cotton
seeds and occasional trading of agro-commodities, giving it a
wider scope of increasing revenue of the business.
* Strategic location of the plant in the cotton and groundnut-
producing belt of India: The manufacturing facility of the firm
is located in Gondal, Gujarat, which ensures an easy availability
of raw materials namely raw cotton and groundnuts.
Credit weaknesses
* Financial profile characterised by low profitability, leveraged
capital structure and modest coverage indicators: The financial
profile of the firm remains weak, as is evident from its thin net
profit margin (0.81% in FY2017). This is primarily because of low
value-added operations. Its capital structure continues to remain
leveraged with the gearing of 2.9 times as on March 31, 2017
because of the INR1.70-crore term loan availed to fund the capex
in order to set up the groundnut processing unit. Besides, it
also witnessed capital withdrawal by the partners. The low
profitability and high debt level resulted in modest debt
protection metrics.
* Business exposure to agro-climatic changes; intense competition
due to low entry barriers: Being an agro-commodity processing
business, ACI's performance remains dependent on the agricultural
sector, which is further impacted by a combination of factors
like climatic conditions, Government policies, prevailing demand-
supply scenario, etc. Further, the low value additive nature of
operations, coupled with the intense competition in the industry,
exert pressure on its profitability.
* Net-worth exposed to the withdrawal of capital by partners:
ACI, being a partnership firm, is exposed to the risk of
reduction in its net-worth due to withdrawal by the partners that
may affect its capital structure.
Established in 1994, ACI started as a cotton trading concern. In
2007, ACI had set up its own unit for cotton ginning and pressing
at Gondal, Gujarat. At present, the plant is equipped with 30
ginning machines with the capacity of producing 250 bales per day
(for 24 hours operations). Later in December, 2016, the firm
diversified in the groundnut processing operation in the same
premises for which it has installed nine shell peeler machines,
six cleaning machines and a sortex machine.
In FY2017, ACI reported a profit after tax of INR0.60 crore on an
operating income of INR74.29 crore, as compared to a profit after
tax of INR0.40 crore on an operating income of INR72.53 crore in
FY2016.
BAJRANG BRONZE: ICRA Moves B- Rating to Not Cooperating Category
----------------------------------------------------------------
ICRA has moved the long term ratings for the bank facilities of
Bajrang Bronze LLP (BBL) 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
Loan 2.29 [ICRA]B- (Stable) ISSUER NOT
COOPERATING; Rating moved to
the 'Issuer Not Cooperating'
category
Fund based-Cash
Credit 3.00 [ICRA]B- (Stable) ISSUER NOT
COOPERATING; Rating moved to
the 'Issuer Not Cooperating'
category
The rating is based on limited or no updated information on the
entity's performance since the time it was last rated in May
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 Bajrang Bronze LLP, 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.
Established in October 2015, Bajrang Bronze LLP (BBL)
manufactures castings and bushing of various non-ferrous alloys
such as bronze, brass, aluminium etc. The manufacturing facility
of the entity is located at Rajkot, Gujarat with an installed
capacity of 1200MT (700 MT of Bronze Casting, 200 MT of Brass
Casting and 300 MT of Aluminium Casting). The commercial
production has commenced in May 2016. BBL was established by the
Mungara family having established experience in the business of
casting materials, serving as proprietors or partners in
associate concerns engaged in similar business lines.
BAZARGAON PAPER: ICRA Raises Rating on INR7.25cr Loan to B
----------------------------------------------------------
ICRA has upgraded the long-term rating to [ICRA]B from [ICRA]B-
to the INR7.25 crore cash credit facility and INR1.50 crore term
loan facility of Bazargaon Paper and Pulp Mills Private Limited.
ICRA has reaffirmed the short-term rating of [ICRA]A4 to the
INR0.50 crore bank guarantee facility of the company. The long-
term rating for the INR0.75 crore unallocated limit has been
upgraded from [ICRA]B- / [ICRA]A4 to [ICRA]B / [ICRA]A4. The
outlook on the long-term rating is Stable.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based-Cash
Credit 7.25 [ICRA]B (Stable); Upgraded
from [ICRA]B-
Fund-based-Term
loan 1.50 [ICRA]B (Stable); Upgraded
from [ICRA]B-
Non-fund based-
Bank guarantee 0.50 [ICRA]A4 Reaffirmed
Unallocated 0.75 [ICRA]B (Stable)/[ICRA]A4;
Upgraded from
[ICRA]B-/[ICRA]A4
Rationale
The rating up-gradation takes into account the robust growth of
52% in the company's operating income in FY2017 backed by
improvement of capacity utilisation to 66% in FY2017 from 38% in
the previous year. The ratings continue to factor in the
extensive experience of the Bazargaon's promoters in kraft paper
industry. The ratings, however, remain constrained by the
company's modest scale of operations in a highly competitive
business environment characterised by presence of large number of
organised and unorganised players. The ratings also take into
account the vulnerability of company's profitability to adverse
movements in waste paper prices, especially for lower BF (Burst
Factor) category kraft paper. Furthermore, the ratings also take
into account the leveraged capital structure with a gearing of
1.52 times as on March 31, 2017 along with tight liquidity
position due to high receivable days.
Going forward, the company's ability to scale up its business in
a profitable manner, along with efficiently managing its working
capital requirements, remains the key rating sensitivities.
Key rating drivers
Credit strengths
* Robust growth in the operating income in FY2017: The up-
gradation of the machinery and equipments resulted in better
quality product. This, together with heavy discounts offered to
the customers resulted in ~52% growth in the operating income to
INR35.68 crore in FY2017 from INR23.42 crore in FY2016. However,
the same resulted in decreased operating profit margin from
~12.4% in FY2016 to 6.5% in FY2017.
* Extensive experience of promoters in kraft paper manufacturing
business: The company was started more than three decades ago by
Mr. Surajbhan Agarwal and Mr. Jaiprakash Agarwal. The promoters
have also founded the associate companies namely Decor Paper
Mills in Hyderabad and Kolar Paper Mills in Puttur. The extensive
experience of the promoters has enabled the company to increase
its capacity ten-fold times since inception and receive bulk
orders from established customers.
Credit weaknesses
* Modest size of operations: The company has increased its
capacity utilisation in the past one year by almost 69%; however,
it still remains below optimum level at 66% in FY2017. The modest
scale of operations also results in low bargaining power with the
customers and suppliers.
* Profitability exposed to volatility in raw material prices: The
main raw material used in the manufacturing process is waste
kraft paper, i.e. used corrugated boxes as well as old newspapers
and used white paper, which altogether form about 90% of the
total raw material costs. The company remains exposed to the
price fluctuations in the raw material prices.
* Leveraged capital structure with high gearing as on March 31,
2017: The gearing of the company has remained at relatively high
level in the past due to high working capital intensity as
reflected by NWC/OI of 28% as on March 31, 2017. The gearing
stood at 1.52 times as on March 31, 2017 as compared to 1.40
times as on March 31, 2016. However, the gearing adjusted for
debt from relatives stood at comfortable level of 0.82 times as
on March 31, 2017 as compared to 1.09 times as on March 31, 2016.
* Tight liquidity position emanating from slow receivable
position: The company usually provides a credit period of 60-75
days to its customers, but it has increased drastically in past 2
years to more than 100 days. As on March 31, 2017, debtors
outstanding for more than six months stood at ~56% of the total
debtors. However, to reduce the debtor days, the company has
adopted heavy discount policy for customers who pay within the
credit timeline.
* High competitive intensity from domestic players: There are
about 400 kraft paper mills in the country serving various
centers of corrugated box manufacturers. However, due to low
margins in the business, the sales of kraft paper remain largely
regionalised as high transportation costs make it economically
unviable to sell the paper at faraway locations. The company
largely faces competition from kraft paper units based out of
Nashik and Nagpur (Maharashtra).
Bazargaon was incorporated in 1982 and started commercial
production from 1989. The company is engaged in the manufacturing
of kraft paper which finds its application in the packaging
industry, especially for making corrugated boxes. The company has
its manufacturing unit located in Nagpur (Maharashtra). Over the
years, Bazargaon has undergone several phases of expansion. It
commenced with a production capacity of 2,500 TPA (Tonnes per
annum) in 1989 which has been enhanced to 25,000 TPA over the
last 28 years. It manufactures kraft paper of various grades viz.
14 BF, 16 BF, 18 BF, 22 BF, 24 BF and 28 BF. The company has
traditionally been manufacturing lower BF category paper with 16-
20 BF paper forming about 80% of its total production mix.
In FY2017, the company reported a net profit of INR0.40 crore on
an operating income of INR35.68 crore, as compared to a net
profit of INR0.16 crore on an operating income of INR23.42 crore
in the previous year.
BOLTMASTER INDIA: ICRA Lowers Rating on INR22.80cr Loan to D
------------------------------------------------------------
ICRA has downgraded the rating of bank facilities of Boltmaster
(India) Private Limited (Boltmaster) to [ICRA]D from [ICRA]B-.
ICRA has also moved the ratings to the 'Issuer Not Cooperating'
category. The rating is now denoted as "[ICRA]D ISSUER NOT
COOPERATING".
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund based-Term
Loan 22.80 [ICRA]D ISSUER NOT
COOPERATING; Revised from
[ICRA]B-
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. The current
rating action has been taken by ICRA basis best available/dated/
limited information on the issuers' performance. Accordingly the
lenders, investors and other market participants are advised to
exercise appropriate caution while using this rating as the
rating may not adequately reflect the credit risk profile of the
entity, despite the downgrade.
Rationale
The rating downgrade follows the delays in debt servicing by
Boltmaster to the lender(s), as confirmed by them to ICRA.
Boltmaster started manufacturing activities in 1976 at Goregaon
Mumbai and has developed more than 2500 different varieties of
fasteners either as per customer's requirements or conforming to
national/international standards. In 1994, to meet increased
demand, the company set up new factory at Bhayander in suburban
Mumbai with installed capacity of 4000 MTPA or 12 million pieces
per annum. The company's product range covers various types of
Fasteners such as Bolts, Screws, Nuts Studs etc. and forged
components, conforming to national and international standards
such as ISO, IS, BS, DIN, ASTM, ANSI etc.
CALISTA PROPERTIES: CARE Reaffirms B-/A4 Rating on INR15cr Loan
---------------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Calista Properties Private Limited (CPPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long/Short term 15.00 CARE B-; Stable/CARE A4
Bank Facilities Reaffirmed
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of CPPL continue to
remain constrained on account of moderate track record of
operations, moderate occupancy levels and high operating costs
translating into loss and risk associated with revenue
concentration on single property. The ratings also take into
account weak capital structure and debt coverage indicators along
with inherent cyclicality associated with the hotel industry. The
ratings, however, continue to derive strength from experience of
the promoters in hotel management, marketing cum-management
contract with 'Radisson Hotels International Inc'. (RHI) and
favorable location of the hotel in Pune. The ability of CPPL to
improve occupancy levels and average room rent (ARR) in light of
competitive nature of industry while reducing its operating costs
thus improving its operating margin and capital structure is the
key rating sensitivities. Furthermore, efficient management of
working capital requirement and improvement in liquidity position
is also crucial.
Detailed description of the key rating drivers
Key Rating Weaknesses
* Weak solvency and liquidity position: The liquidity position of
the company continues to be weak with below unity current and
quick ratio as on March 31, 2017. The operating cycle of company
stood at -13 days as on March 31, 2017.Furthermore, CPPL
continues to suffer losses on account of higher fixed capital
charges resulting in deterioration of networth base leading to
weak solvency profile. Furthermore, with weak solvency and low
profit margins, the debt coverage indicators also stood weak.
* Inherent cyclicality with the hotel industry: CPPL is exposed
to the cyclicality associated with the hotel industry which has a
direct linkage with level of disposable income available with
individuals.
* Risk associated with Single Property: The company derives its
total revenue from single property and has to solely depend on
its own for revenue generation. The fortunes of CPPL are linked
to hospitality segment and slow down in hospitality industry
could cause an adverse effect on its business operations.
* Moderate track record of operations and continuous losses: CPPL
has a track record of operations of more than half decade and has
a moderate scale of operations, which stood at INR26.58 cr in
FY17, however on account of high interest and depreciation
expenses, the company, reported continuous losses at net level.
* Likely effect on supply glut on ARR and occupancy levels in
Pune market: The company faces high competition from large number
of hotels located in same vicinity and its presence in highly
fragmented industry. Such industry is characterized with high
entry barriers and high number of players operational. Hence,
this limits bargaining power of companies operating in the
sector. Further, CPPL is likely to be effected in terms of
average occupancy and room rent rates.
Key Rating
* Strengths Experienced promoters: CPPL is promoted by the
Kalmadi group and Mr. Vijay Kumar Gupta. Mr. Gupta was earlier
associated with Le Meridien (name changed to The Grand
Sheraton,Pune), in his capacity as promoter and managing director
for tenure of one and half decade (2002-2017).The Kalmadi Group
is the owner of automobile company viz. Sai Service Station Ltd.
(SSSL) which has an automobile dealership. The experience of
promoters in diverse industry, aids in day today decision making
process of CPPL.
* Contract with reputed brand: CPPL has a management-cum-
marketing contract for 10 years, with Radisson Hotels
International Inc. (RHI) for 'Radisson' brand. RHI is a
subsidiary of the Carlson Rezidor Hotel Group, of which Carlson
is the main stakeholder. It operates the brands Radisson,
Radisson blu, Radisson RED and Park Inn by Radisson brand with
more than 990 locations in 73 countries. Marketing of CPPL is
taken care of by the Global Distribution System (GDS) of Carlson.
* Favourable location: The Hotel is located in the Kharadi area
at Nagar Road in Pune and has close proximity to the Pune
Airport, railway station and IT parks.
* Financial support from Promoters in past: The promoters of CPPL
have always been active in infusing funds hence providing
financial support to the company,in the form of equity capital,
share application money and unsecured loan.
* Positive long-term outlook for hospitality industry: The
prospects of the hospitality industry in India in the long term
are bright. The Indian hospitality industry especially the Mid-
market/Budget category is expected to witness a strong growth of
about 15% going ahead thereby surpassing the growth in inventory
additions in the segment. With the expected improvement in
investment cycle and with revival in the global as well as Indian
economy and subsequently the increase in disposable income of the
individuals, people are expected to spend on events like
marriages, parties, hang-outs etc, which augurs well for the
hospitality industry and for existing players such as CPPL.
Calista Properties Private Limited (CPPL), incorporated in March,
2006, is promoted by the Kalmadi group and Mr. Vijay Kumar Gupta.
Mr. Gupta carries a rich experience of over a one and a half
decade in the hospitality industry, through his association as MD
and CEO of The Grand Sheraton (formerly known as Le Meridien).
Moreover, The Kalmadi Group is the owner of automobile company
viz. Sai Service Station Limited, which is an authorized dealer
of Maruti Suzuki India Limited for various locations in
Maharashtra.
CPPL owns a 5-star hotel with 141 rooms on Nagar Bypass Road,
Kharadi, Pune operating under the brand "Radisson". CPPL has
entered into 10 year management-cum-marketing arrangement with
Radisson Hotels International, Inc. The hotel started its
commercial operations from November 2009.
CAPTAIN TRACTORS: ICRA Withdraws B+ Rating on INR18.46cr Loan
-------------------------------------------------------------
ICRA has withdrawn the long term rating of [ICRA]B+ assigned to
the INR18.46 crore fund-based facilities of Captain Tractors
Private Limited. ICRA has also withdrawn the short-term rating of
[ICRA]A4 assigned to the INR0.50 crore non-fund based facilities
of CTPL.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based Limits 18.46 [ICRA]B+; Withdrawn
Non-fund Based Limits 0.50 [ICRA]A4; Withdrawn
Rationale
The ratings assigned to CTPL have been withdrawn at the request
of the company based on the no objection certificate provided by
its banker.
Key rating drivers: Not applicable
Description of key rating drivers: Not applicable
Incorporated in 1994, Captain Tractors Private Limited (CTPL) is
engaged in the business of manufacturing tractors and implements
(farm equipment). After successfully manufacturing mini tractors
in 1998, the company obtained approval for beginning commercial
operations of tractors in 2001. From 2002, it started
manufacturing implements in order to provide a complete package
for farming purposes. CTPL is predominantly present in the
domestic market; however, it also transacts in overseas markets
such as Saudi Arabia, Iran, Bangladesh, Sri Lanka, Nepal, Myanmar
and several African nations.
CTPL is currently managed by seven directors. Mr. G.T. Patel and
Mr. M.T. Patel are the founders of the firm, with more than two
decades of experience in the field of tractor manufacturing.
Captain Tractors Private Limited has three group concerns --
Captain Agrotech, a dealer arm of CTPL engaged in trading
tractors and implements on retail basis; Captain Agri Machinery
Exim LLP, a merchant exporter, mainly for CTPL; and Jark Pharma
Private Limited, an investment firm where the directors of CTPL
have made investments.
DISHNET WIRELESS: CARE Cuts Rating on INR17,479cr Loan to D
-----------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Dishnet Wireless Limited, as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank 17,479 CARE D Revised from
Facilities CARE BB+ (SO); Negative
Detailed Rationale & Key Rating Drivers
The ratings are based on a consolidated view on the credit risk
profiles of Aircel Limited (AL) and its wholly-owned
subsidiaries, namely Aircel Cellular Limited (ACL), Dishnet
Wireless Limited (DWL) and Aircel Smart Money Limited (ASML), as
all the companies operate under common management and are
characterized by high level of business integration. AL, ACL, DWL
and ASML are hereinafter collectively referred to as "Aircel".
The revision in the ratings assigned to the bank facilities of
Aircel take into account the delays in servicing of its debt
obligations.
Going forward, the ability of the company to service its debt
obligations in a timely manner, finalization of its new business
plan after discussions with the lenders and any change in
regulations affecting the business and the telecom industry shall
be the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
* Delays in servicing of debt obligations: The company has
delayed in repayment of interest on its debt obligations on
account of its weak liquidity position as a result of its
continuing weak operational performance in the hyper competitive
telecom sector.
* Deterioration in the operational performance of Aircel: The
Indian telecom sector is witnessing intense competition with the
launch of services by Jio. The competitive pressure has led to
stress on the cash flows and profitability of the incumbents.
Gross revenue of the telecom sector for the quarter ended on
March 31, 2017 was moderated by around 7% on y-o-y basis.
Although, Aircel has reported a 6% growth on y-o-y basis in the
number of subscribers, Average Revenue per User (ARPUs) and
PBILDT margin have consistently shown a downward trend leading to
deterioration in its financial risk profile. PBILDT for CY16
moderated to INR598 crore as against INR1429 crore in CY15. Loss
for CY16 doubled to INR4319 as against a loss of INR2215 crore in
CY15. The ability of Aircel to improve its operational
performance in the current industry scenario will be critical and
will continue to be a key rating monitor.
* Highly competitive business environment and exposure to
regulatory risk: The Indian telecom sector is witnessing a lot of
volatility for the past few quarters with the launch of
commercial services by Jio. The sector has seen continuing and
intensifying competition which has resulted in consolidation
among the players, with a few of the minor players exiting the
telecom business while some others merging their businesses with
larger players. The data services bundled with free voice
services offered by the newest entrant have cannibalized both
voice and data revenue stream of telecom service operators. With
the ongoing tariff war among telecom service operators, ARPUs are
showing a consistent downward trend. Revenue growth, as a result
is also expected to be moderated, as telecom operators are
offering very competitive service plans. This will also impact
the government's share of revenue from the telecom sector as the
government earns license fees based on the revenue of the telecom
companies and taxes and levies.
Key Rating Strengths
* Long track record of the group: Aircel started its operations
with the launch of services in the Chennai circle in 1995. Since
then, the company had expanded its operations and became a pan-
India player. As on March 31, 2017, Aircel (AL, ACL and DWL) is
present in 22 circles with a total subscriber base of around 90.9
million.
Analytical approach: The ratings consider a consolidated view on
credit risk profiles of Aircel Limited and its wholly-owned
subsidiaries namely Aircel Smart Money Limited, Aircel Cellular
Limited and Dishnet Wireless Limited.
AL, together with two of its wholly owned subsidiaries ACL and
DWL, provides 2G wireless telecom services in all the 22 circles
of India and 3G services in 13 circles. ASML, another wholly
owned subsidiary of AL, provides mobile banking services. As on
March 31, 2017, Aircel has a subscriber base of approximately
90.9 million.
MCB, through Global Communication Service Holdings Limited and
Deccan Digital Networks Private Limited, effectively holds
approximately 73.99% equity interest in AL.
EVEREST KANTO: CARE Raises Rating on INR84.99cr LT Loan to BB
-------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Everest Kanto Cylinder Ltd (EKC), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term fund 84.99 CARE BB; Positive Revised
based bank from CARE B
facilities
(Yes Bank Term
Loan)
Long-term fund 8.50 CARE BB; Positive Revised
based bank from CARE B
facilities
(EXIM Bank Term
Loan)
Long-term fund 81.00 CARE BB; Positive Revised
based bank from CARE B
facilities-Cash
Credit
Short-term non- 54.92 CARE A4+ Revised
fund based bank from CARE A4
facilities
Detailed Rationale & Key Rating Drivers
The revision of the ratings assigned to the bank facilities of
EKC factor in significant improvement in capital structure due to
reduction of debt from sale of Gandhidham facility and improved
operational performance.
However, the rating continues to be constrained due to subdued
demand, suboptimal capacity utilization, working capital
intensive nature of operations, volatility of raw material prices
as well as foreign exchange fluctuation risk.
Furthermore, the rating favorably factors in EKC's established
market position in high pressure seamless cylinders,
diversified customer mix and experience of promoters in the high
pressure seamless cylinder industry.
The ability of the company to improve its capital structure
further, capacity utilization, profit margins and debt coverage
indicators are the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
* Working capital intensive nature of operations: EKCL's
operations are inherently working capital intensive in nature due
to procurement of its entire raw material (Seamless Steel Tubes)
requirement from China which takes a lead time of 3 to 6 months
coupled with relatively smaller credit period and maintenance of
inventory.
* Volatility of raw material prices and foreign exchange
fluctuation risk: Raw material (imported seamless steel tubes)
constitutes majority of operating expenses of EKCL. Fluctuations
in raw material prices, therefore, tend to impact the Profit
Before Interest Leases Depreciation and Taxes (PBILDT) margins.
Any adverse change in the exchange rate between the US Dollar and
the Indian rupee will have a negative impact on EKCL's results of
operations and financial condition as the seamless steel tubes
(basic raw material) are fully imported. EKCL does not hedge its
foreign currency exposure thus exposing itself to currency risk.
* Low capacity utilization due to subdued demand: EKCL expanded
its capacity very aggressively in the past in anticipation of
higher demand in future which did not materialize and lead to
suboptimal utilization of capacity. EKCL has manufacturing
capacity to produce CNG cylinders, industrial cylinders and jumbo
cylinders totaling 12.52 lakh units annually across India, China,
Dubai and USA. The capacity utilization on consolidated level
improved in FY17 at 39% from 36% in FY16 however, the same
continues to be low.
Key Rating Strengths
* Improved financial profile due to sale of Gandhidham Plant:
During FY17, EKCL sold land and building along with electric
installations situated at Gandhidham, Gujarat to SNF Flopam India
Private Limited which improved its standalone and consolidated
net worth from INR76 crore and INR 342 crore respectively, as on
March 31, 2016 to INR148 crore and INR416 crore respectively, as
on March 31, 2017. The proceeds from the sale of assets and
infusion of unsecured loans from promoters were used by EKCL to
prepay its term loan from Yes Bank and EXIM Bank to the extent of
INR138 crore in H1FY18 out of total outstanding term debt of
INR241 crore as on March 31, 2017 on standalone basis.
* Experienced Promoters: EKCL has an experienced management
headed by Mr. P.K. Khurana, who has over three decades of
experience in the cylinder manufacturing business and is ably
supported by his sons, Mr. Pushkar Khurana and Mr. Puneet Khurana
(CEO) both of whom have been in the business for about 15 years.
Top officials of EKCL have been associated with the Company for a
long period of time which provides depth and continuity of
management.
Established market position in High Pressure Seamless Cylinders
and diversified customer mix: EKCL is the largest player with
highest market share of high pressure seamless cylinders in India
with diversified customer mix consisting of OEMs like Bajaj Auto
Ltd, Tata Motors Ltd, etc, industrial gases manufacturers like
Linde India and City Gas distribution companies.
Improved operational performance: The total operating income on
consolidated basis increased from INR507 crore in FY16 to INR579
crore in FY17 due to improvement in volumes as demand for
cylinders improved in India as well as in USA.
Similarly PBILDT improved from INR8 crore in FY16 to INR70 crore
in FY17. For Q1FY18, on a consolidated basis EKCL reported PBILDT
of INR7 crore on a total operating income of INR125 crore against
PBILDT of INR10 crore on a total operating income of INR147 crore
for the corresponding previous period.
On a standalone basis, the total operating income improved from
INR174 crore in FY16 to INR254 crore in FY17 due increase in
demand for CNG cylinders demand in Northern India for controlling
the pollution due to recent ruling by National Green Tribunal for
not registering Diesel Vehicles. PBILDT improved to INR45 crore
in FY17 as compared to loss before interest leases depreciation
and tax of INR20 crore mainly due to reduction in raw material
prices.
Incorporated in 1978, EKCL is engaged in manufacturing high
pressure seamless cylinders for industrial gases and CNG
applications, large diameter high pressure seamless vessels,
large seamless cylinders, jumbo cylinders and jumbo skids for the
storage and bulk transportation of CNG and various other
industrial and specialty gasses like Nitrogen, Helium, Argon,
etc. The products manufactured by EKC find application in
domestic and international markets like aerospace, chemical
processing, construction, food production, industrial controls,
medicine, nuclear and power propulsion systems, etc. The company
has two facilities to manufacture cylinders in India (located at
Tarapur in Maharashtra and Kandla in Gujarat) as well as Outside
India (located at Dubai, China & USA). During the year ended
March 31, 2017, EKCL sold Gandhidham facility for $129 million
(around INR192 crore) and shifted its manufacturing facilities to
Kandla, Gujarat. EKCL has total manufacturing capacity to produce
12.52 lakh cylinders annually across India, China, Dubai and USA.
GARG INDUSTRIES: Ind-Ra Affirms BB- Issuer Rating, Outlook Stable
-----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has affirmed Garg Industries'
(GAIN) Long-Term Issuer Rating at 'IND BB-'. The Outlook is
Stable. The instrument-wise rating actions are:
-- INR135 mil. Fund-based working capital limit affirmed with
IND BB-/Stable/IND A4+ rating; and
-- INR5 mil. Non-fund-based working capital limit affirmed with
IND BB-/Stable/IND A4+ rating.
KEY RATING DRIVERS
The affirmation reflects GAIN's continued small scale of
operations, along with its moderate credit metrics. In FY17,
revenue was INR384.62 million (FY16: INR394.42 million), net
financial leverage (total adjusted net debt/operating EBITDAR)
was 5.85x (5.18x) and interest coverage (operating EBITDA/gross
interest expense) was 3.15x (2.66x). The decline in revenue was
due to due to unfavourable market conditions. The deterioration
in net financial leverage was owing to a decrease in operating
profit. Meanwhile, the improvement in interest coverage was
driven by a decrease in interest obligations.
The ratings factor in a decline in EBITDA margin to 6.29% in FY17
from 7.44% in FY16. The decline was due to an increase in overall
expenditure.
However, the ratings continue to be supported by GAIN's
comfortable liquidity, indicated by an average utilisation of
91.88% of its fund-based limits for the 12 months ended
October 2017, and the promoters' experience of over two decades
in the steel industry.
RATING SENSITIVITIES
Negative: Any decline in EBITDA margin resulting in any
deterioration in the credit metrics could lead to a negative
rating action.
Positive: A significant improvement in the scale of operations
and/or credit metrics on a sustained basis could lead to a
positive rating action.
COMPANY PROFILE
Established in 1948 and managed by BM Garg, GAIN manufactures and
exports steel hinges (square butt hinges, back flap hinges and
piano hinges), staples, nuts, bolts, brackets and others. GAIN is
a Delhi-based government-recognised export house and has been
accredited with ISO: 9001-2000, CE Marking and Bureau of Indian
Standards certifications.
HINDUSTAN CONCRETES: Ind-Ra Assigns B+ LT Issuer Rating
-------------------------------------------------------
India Ratings and Research (Ind-Ra) has assigned Hindustan
Concretes (HC) a Long-Term Issuer Rating of 'IND B+'. The Outlook
is Stable. Instrument-wise rating actions are:
-- INR75 mil. Fund-based working capital limits assigned with
IND B+/Stable rating; and
-- INR4 mil. Non-fund-based working capital limits assigned with
IND A4 rating.
KEY RATING DRIVERS
The rating reflects HC's small scale of operations and moderate
credit metrics owing to the nascent stage of operations as the
company began operations in November 2015. FY17 was the firm's
first full-year of operations. Revenue was INR152 million in FY17
(FY16: INR5 million), EBITDA margin was 10.6% (27.0%), interest
coverage (operating EBITDA/gross interest expenses) was 2.7x
(FY16: 6.1x) and net financial leverage (total adjusted net
debt/operating EBITDAR) was 5.9x (32.7x).
The ratings are also constrained by HC's tight liquidity position
with 98.5% average utilisation of working capital facility during
the 12 months ended October 2017.
The ratings also factor in the partnership nature of the
business.
However, the ratings are supported by the partners' near a decade
of experience in manufacturing of pre-stressed cement concrete
poles.
RATING SENSITIVITIES
Positive: An improvement in the revenue along with an improvement
in the credit metrics will be positive for the ratings.
Negative: Deterioration in the operating profitability along with
a decline in the credit metrics will be negative for the ratings.
COMPANY PROFILE
HC was established as a partnership firm in 2015 by Mr. Veeru
Manik and Mr. Pravin Bansal. The firm, located at Hazirabagh
(Jharkhand), manufactures highly durable and heavy duty
prestressed cement concrete poles used extensively for
establishing electrical connections and fittings. HC incurred
INR22.21 million for setting up the plant, of which INR11.207
million was infused by partners and the remaining in the form of
unsecured loans.
INTERNATIONAL COMMERCE: Ind-Ra Cuts LT Issuer Rating to BB+
-----------------------------------------------------------
India Ratings and Research (Ind-Ra) has downgraded International
Commerce Limited's (ICL) Long-Term Issuer Rating to 'IND BB+'
from 'IND BBB-'. The Outlook is Stable. The instrument-wise
rating actions are:
-- INR150 mil. Fund-based working capital limit downgraded with
IND BB+/Stable/IND A4+ rating;
-- INR600 il. Non-fund-based limits downgraded with IND A4+
rating.
KEY RATING DRIVERS
The downgrade reflects Ind-Ra's expectation of a significant
decline in ICL's overall credit profile in FY18. The company
major revenue and profitability driver in FY16 and FY17
contributed marginally to revenue in 1HFY18. The revenue
contribution from scrap recovery & processing and excavation,
overburden removal & transportation of coal together come down to
INR125.1 million in 1HFY18 (FY17: INR1,112 million; FY16:
INR1,421.5 million). The company had booked revenue of only
INR214.8 million during April-September 2017, as the contract
from Steel Authority of India Limited ('IND AA-'/Negative) for
scrap recovery and processing had ended in December 2016 and the
work for excavation, overburden removal and transportation of
coal for Eastern Coalfields Limited was halted due to landslides.
Ind-Ra expects revenue to improve in 2HFY18 as the management has
informed that the Eastern Coalfields site is operational since
October 2017 along with an improvement in trading revenue.
However, the overall revenue for FY18 will be lower than that in
previous years.
ICL's credit profile was comfortable in FY17, despite a marginal
decline. Revenue for FY17 declined to INR1,988.3 million (FY16:
INR2,018.6 million) and EBITDA margin fell to 13.2% (16.8%) due
to an increase in the contribution of low-margin trading segment
to the company's overall revenue to 43% (30%). The credit metrics
however improved in FY17 with EBITDA interest coverage (operating
EBITDA/gross interest expense) of 4.2x (FY16: 3.1x) and net
leverage (Ind-Ra adjusted net debt/operating EBITDAR) of 1.9x
(2.6x), due to a decrease in total debt and interest expenses.
Liquidity continues to be tight as evident from 98.5% average
peak utilisation of its cash credit limits during the 12 months
ended October 2017.
The ratings factor in ICL's moderate unexecuted order book of
around INR2,942.8 million on 30 September 2017, which is to be
executed by FY24. The orders are from Central Coalfield Limited
and Eastern Coalfields Limited.
The ratings are supported by over two decades of operating
experience of the company's promoters in ferrous scrap recovery
and processing as well as trading of iron and steel scrap.
RATING SENSITIVITIES
Positive: Maintaining the overall credit profile at the current
level will be positive for the ratings.
Negative: Greater-than-expected deterioration in the overall
credit profile in FY18 and beyond will lead to a further negative
rating action.
COMPANY PROFILE
Incorporated in 1980 and headquartered in Bengaluru, ICL recycles
and processes ferrous scrap as well as trades iron and steel
scrap. It is also engaged in the removal of overburden,
excavation and transportation of coal and rents out equipment.
JAYASWAL NECO: ICRA Reaffirms D Rating on INR3086.70cr Loan
-----------------------------------------------------------
ICRA has reaffirmed the long-term rating of [ICRA]D to the
INR3086.70-crore term loans and INR653.04 crore fund based
facilities of Jayaswal Neco Industries Ltd. ICRA has also
reaffirmed the short-term rating of [ICRA]D to the INR435.26
crore non-fund based bank facilities of JNIL.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund based-Term
Loan 3086.70 [ICRA]D; Reaffirmed
Fund based-Working
Capital Facilities 653.04 [ICRA]D; Reaffirmed
Non-fund based-
Working Capital
Facilities 435.26 [ICRA]D; Reaffirmed
Rationale
The rating reaffirmations take into account the continued delays
in debt servicing by JNIL with the bank account remaining a non-
performing asset (NPA) by its lenders. ICRA notes that the delays
in repayment of term loans are continuing but the servicing of
JNIL's working capital bank facilities is regular at present.
JNIL's restructuring proposal involving conversion of part of its
debt to equity was recently recommended by the Independent
Evaluation Committee (IEC) formed as per RBI guidelines to the
Joint Lender's Forum (JLF), and is currently pending for the JLF
approval.
The ratings also take into consideration loss-making operations
of the company due to significant increase in its capital charges
post capitalisation of its expansion projects in FY2017, which
along with elevated debt levels kept its capital structure
leveraged and coverage indicators under pressure. Tight liquidity
and sluggish demand have also kept the capacity utilisation of
the new steel melting shop and rolling mill low while JNIL's
investment in the green-field sponge iron and captive power
projects in Bilaspur, Chhattisgarh remains stuck and has been
kept on hold due to liquidity squeeze.
The ratings are further constrained by exposure of the company's
profitability to price risks, given the cyclicality inherent in
the steel industry and susceptibility of JNIL's foundry division
to intense competition due to the fragmented nature of the
industry.
The ratings, however, favourably factor in long track record of
its promoters in the steel and casting businesses, benefits from
scale economies and locational advantage of the company's plants.
ICRA also notes that some of the iron ore mines of JNIL have
ramped up their production in the current year post receiving
approval for the enhancement in production capacity, which would
lead to a reduction in cost of production and partly insulate the
company's profitability from volatility in iron ore prices.
However, the production still remains low in comparison to the
overall iron ore requirement of the company.
Any adverse movement in steel and/or raw material prices could
dent JNIL's profitability and further impact its liquidity. On
the other hand, factors such as ability of the company to
monetise some of its non-core assets and successful restructuring
of loans with favourable maturity profile can improve its
liquidity and hence remain key rating sensitivities.
Key rating drivers
Credit strengths
* Integrated nature of operations ensuring better control on
product quality and costs: JNIL is a mid-sized integrated steel
manufacturer, specialising in alloy steel products and steel
castings catering to various engineering, industrial,
construction and automotive industries. JNIL also generates power
from its 54.5 MW captive power plant units. Presence of sinter,
pelletisation and coke oven facilities ensures adequate backward
integration while downstream facility includes rolling mill
capable of producing long products including that of alloy steel
category. The steel segment contributed about 85% to the net
sales in FY2017, while the remaining was contributed by the
casting division.
* Promoter's experience of more than 50 years in the castings and
steel industry: JNIL was founded by Mr. B L Shaw, who has
industry experience of more than 50 years in the castings and
steel industry, and is co-promoted by Mr. Arbind Kumar Jayaswal
and Mr. Ramesh Kumar Jayaswal having a long track record in the
steel and foundry business. As a result, the company has
developed strong relationship with reputed customers with a
significant portion of sales coming in the form of repeat
business.
* Access to captive iron ore mines: Although the company has been
allocated various iron ore mines, only three of them are
currently operational with the current production capacity of
about 0.3 to 0.4 mt. The production has increased in the last few
months with the approval of mining plan for the enhanced
production capacity and is likely to support the company's cost
structure in the current year. The company's annual iron ore
requirement stands at about 1.5 mtpa for the current facilities
(assuming full capacity utilization).
* Locational advantage derived from the steel plant and casting
division being situated in Raipur and Nagpur respectively: Given
the fact that Raipur is a steel cluster and Nagpur and Bhilai are
casting clusters, presence of JNIL's plants at these locations
provides it a ready access to suppliers and customers and reduces
its freight costs.
Credit weaknesses
* Continued delays in debt servicing with the account remaining
an NPA by its lenders: JNIL's bank account remains an NPA with
persistent delays in repayment of principal and interest on term
loans. However, ICRA notes that the servicing of working capital
facilities is regular at present. The company's restructuring
proposal, which involves conversion of a part of its debt into
equity and longer loan maturity profile, is pending at JLF level.
* Low capacity utilisation of the new steel melting shop and
rolling mill: Due to weak liquidity profile and tepid demand
conditions from the end-user industries, the company is yet to
achieve ramp-up of its new SMS and rolling mill, which were
commissioned in FY2017, and is currently operating at about 40%
capacity utilisation levels. ICRA does not expect the ramp-up of
these capacities to happen in the near to medium term due to
inherent demand and liquidity related issues.
* Leveraged capital structure and depressed coverage indicators:
Due to capitalisation of the expanded capacities in FY2017, the
capital charges of JNIL increased sharply during the year and led
to increased losses at net level to INR459.31 crore as against a
loss of INR86.54 crore in the previous year. This along with
elevated debt levels led to a further deterioration in JNIL's
capital structure and most of the coverage indicators in FY2017.
* Vulnerability of profits and cash flows to unfavourable
movement in raw material prices: Although JNIL is protected to an
extent against volatility in iron ore prices due to its captive
mines, its profitability remains significantly exposed to
volatility exhibited by coking coal prices in the recent past and
also to the cyclicality inherent in the steel manufacturing
business. JNIL's practice of maintaining high inventory levels
accentuates such risks.
* Susceptibility of the foundry division to intense competition:
In case of castings business, the company caters to various
established players in the engineering and automotive industries;
however a highly fragmented nature of the domestic casting
industry limits the scope of margin expansion of players
including JNIL. The profit margins of the casting business have
remained low since FY2014 while the revenues from the foundry
division too remained lower at INR413 crore in FY2017 against
INR510 crore reported in FY2012.
Stuck up investment in the greenfield sponge iron and captive
power project in Bilaspur (Chhattisgarh) - JNIL's green-field
project of 0.3 mtpa sponge iron facility and 50.0 MW captive
power plant got delayed by more than three years on account of
various reasons including delays in land acquisition and
environmental clearance and is kept on hold by the management.
Total investment in these projects by JNIL as on September 30,
2017 stood at INR680.21 crore, which is likely to remain
unproductive in the near to medium term and would adversely
impact the business return indicators of the company.
Analytical approach: For arriving at the ratings, ICRA has
applied
JNIL, incorporated in 1972, began operations with foundry units
at Nagpur and subsequently integrated backward by setting up a
pig iron (with captive power) manufacturing unit at Raipur in
1995. Following a number of mergers, expansions and group
restructurings, JNIL currently operates a 0.75 million tonnes per
annum (mtpa) blast furnace unit, 0.2 mtpa coke oven plant, 0.8
mtpa sinter plant, 0.255 mtpa sponge iron unit, 1.2 mtpa pellet
Plant, 0.98 mtpa billet making unit, 0.95 mtpa rolling mills and
54.5 MW captive thermal/waste heat recovery based power plants.
The company has also been allocated multiple iron ore mines out
of which a few are already operational. JNIL also has an iron and
steel casting capacity of 0.2 mtpa, with its facilities located
in Nagpur, Bhilai and Anjora. Further, the company is setting up
0.3 mtpa sponge iron and 50 MW captive power plants, which are
yet to be completed.
In FY2017, the company reported a loss of INR459.31 crore on an
operating income of INR2516.42 crore, as compared to a loss of
INR86.54 crore on an operating income of INR2632.62 crore in the
previous year.
KUNJ BIHARI: ICRA Moves B+ Issuer Rating to Not Cooperating
-----------------------------------------------------------
ICRA has moved the ratings for the INR7.50 crore bank facilities
of Kunj Bihari Lal Radhey Shyam Metals Private Limited (KBL) to
the 'Issuer Not Cooperating' category. The rating is now denoted
as: "[ICRA]B+(Stable); ISSUER NOT COOPERATING".
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
LT-Fund-based
Limits 7.50 [ICRA]B+ (Stable); ISSUER NOT
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 May,
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 KBL, 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 01, 2016, ICRA's Rating Committee has taken a rating
view based on the best available information.
Credit Strengths
* Long experience of the promoters in the brass metal industry.
* Established relationship with clients which help them generate
repeat business
Credit Challenges
* Modest scale of operation of the company characterized by thin
profitability owing to fragmented and low value additive nature
of trading business
* Stretched liquidity position on account of elongated receivable
cycle and inventory levels
Incorporated in 1987, Kunj Bihari Lal Radhe Shyam Metals Private
Limited is a private limited company based in Mirzapur Uttar
Pradesh. The company is a manufacturer and distributor for brass
kitchen utensils and brass sheet circles. The manufacturing
facility for the company is located in Mirzapur area of Uttar
Pradesh. The current operations of the company are managed by Mr
Rajesh Agarwal who holds over three decades of experience in the
industry and is assisted by other family members including Mr
Kashi Agarwal and Mr Triveni Agarwal.
The company's major product line comprises of Brass Kitchen
Utensils and Brass Sheet Circles, the major raw material for
which is Brass, Copper and Nickel. The company procures raw
material from various domestic players based in Karnataka, West
Bengal, Bihar and others, this apart the company also procures
imported raw material depending upon the price and the quality.
The imported brass is procured from agents and other dealers
based in India only where the transactions take place in domestic
currency only. The details about the client concentration and
procurement have not been shared as it keeps varying depending
upon the price and quality.
LOVATO CERAMIC: ICRA Reaffirms B+ Rating on INR5cr Loan
-------------------------------------------------------
ICRA has reaffirmed the long -term rating of [ICRA]B+ on the
INR2.71 crore term loans and the INR5.00 crore cash credit
facility of Lovato Ceramic Private Limited. ICRA has also
reaffirmed the short term rating of [ICRA]A4 on the INR1.60 crore
non fund based bank guarantee of LCPL. The outlook on the long-
term rating is 'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund based-Term
Loan 2.71 [ICRA]B+ (Stable); Reaffirmed
Fund based-Working
Capital Facilities 5.00 [ICRA]B+ (Stable); Reaffirmed
Non-fund based-
Bank Guarantee 1.60 [ICRA]A4; Reaffirmed
Rationale
The reaffirmation of ratings take into account the company's
small scale of operations, high gearing, average coverage
indicators and the intense competitive business environment given
the fragmented nature of the tiles industry which results in
moderate profitability levels. The ratings also continue to take
into account the vulnerability of LCPL's profitability to the
cyclicality associated with the real estate industry as well as
to volatility in the prices of raw materials and fuel costs.
The ratings, however, continue to take comfort from the
longstanding experience of the promoters in the ceramic industry
and the competitive advantage of the company in raw material
procurement over other tile manufacturers on account of its
favourable location in Morbi (Gujarat).
Outlook: Stable
ICRA believes Lovato Ceramic Private Limited will continue to
benefit from the extensive experience of its promoters. The
outlook may be revised to 'Positive' if substantial growth in
revenue and profitability, and better working capital management,
strengthens the financial risk profile. The outlook may be
revised to 'Negative' if cash accrual is lower than expected, or
if any major debt-funded capital expenditure, or stretch in the
working capital cycle, weakens liquidity.
Key rating drivers
Credit strengths
* Long experience of the management in the ceramic industry: The
promoters have a longstanding experience of close to a decade in
the ceramic industry vide their association with other companies
in the ceramic industry.
* Locational advantage: The manufacturing facility of the company
is located in the ceramic tiles manufacturing hub of Morbi
(Gujarat), which provides easy access to quality raw materials
like body clay, feldspar and glazed frit in Gujarat as well as
Rajasthan.
Credit weaknesses
* Moderate financial risk profile: The financial profile of the
company remains moderate as reflected by small scale of
operations, high gearing levels and average coverage indicators.
The company reported an operating income of INR34.86 crore and
net profit of INR0.49 crore in FY2017. The operating margins
remain low in the range of 6.00%-6.50%. The debt levels have
increased as on March 31, 2017 owing to the debt funded capex
incurred during the fiscal coupled with higher utilisation of
working capital facilities to fund the increased inventory
holdings. The same has resulted in deterioration in the gearing
levels and weakening of coverage indicators. Nonetheless, the
coverage indicators remain average with NCA/Debt at 16%, Total
Debt/OPBDITA at 4.50 times and OPBDITA/I&F at 3.38 times for
FY2017 as compared to 41%, 1.66 times and 4.55 times respectively
for FY2016.
* Margins subject to pressure from intense competition and
cyclicality of the real estate industry: The tile manufacturing
industry remains highly fragmented with competition from the
organised as well as unorganised segments, apart from imports.
The large number of players in the unorganised segment, most of
whom are located in Gujarat and operate with low cost structures,
create a pressure on prices. Moreover, the demand for tiles
remains exposed to cyclicality in the real estate sector, which
currently is in a downward trend.
* Profitability susceptible to volatility in raw material and
fuel prices: Despite the locational advantage for raw material
procurement, the company has limited control over the prices of
other key inputs such as natural gas/coal, and thus its margins
remain exposed to adverse movement in gas/coal prices.
* Profitability vulnerable to adverse fluctuation in foreign
currency exchange rate: The export sales of the company have
witnessed an gradual increase from 16% of revenues in FY2014 to
27% in FY2015 and further to 64% in FY2016 and 79% in FY2017.
Given the lack of a formal hedging policy, the increasing
contribution of exports exposes the company's profitability to
any adverse fluctuation in foreign currency exchange rate.
Incorporated in June 2009, Lovato Ceramic Private Limited (LCPL)
commenced commercial production of ceramic wall tiles in February
2010. Its plant is located at Morbi in Rajkot district of
Gujarat. LCPL is managed by Mr. Jaydeep Patel. The company
currently manufactures wall tiles of sizes 12"x12", 12"x18" and
12"x24" and has established 'Lovato' brand for selling its
product. In FY2017, the company reported a net profit of INR0.49
crore on an operating income of INR35.90 crore, as compared to a
net profit of INR0.66 crore on an operating income of INR33.83
crore in the previous year.
MAA PADMAVATI: CARE Reaffirms B+ Rating on INR6cr LT Loan
---------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Maa Padmavati Fabrics (MPF), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 6.00 CARE B+; Stable Re-affirmed
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of Maa Padmavati
Fabrics (MPF) continues to be tempered by its moderate scale of
operations with thin profit margins owing to limited value
addition nature of business, leveraged capital structure and weak
debt coverage indicators. The rating also continue to be
undermined by working capital intensive nature of operations, its
presence in highly fragmented and competitive industry and
constitution of entity as a proprietorship firm limiting
financial flexibility in times of stress.
The above constraints outweigh the comfort derived from the
experience of the promoters in the cotton yarn industry and
established relationship with its customers and suppliers.
The ability of the entity to increase its scale of operations
with improvement in profitability and capital structure along
with efficient management of working capital requirement are the
key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
* Relatively modest scale of operations with thin profitability
margins: The operations of the entity remained small with total
operating income of INR 46.07 crore in FY17 (Provisional) and low
networth base of INR0.53 crore as on March 31, 2017(Provisional)
thus limiting financial flexibility of the entity in times of
stress. Since the entity is into trading business which is
inherently a low value additive and volume driven nature of
business its operating profit margins remained low.
* Leveraged capital structure with weak debt service coverage
indicators: The relatively low net worth base of the entity led
to increased reliance on working capital borrowings and unsecured
loans to support its business operations, hence resulting in
leveraged capital structure. Moreover, with low profitability and
high debt profile, the debt coverage indicators of the entity
remained weak.
* Working capital intensive nature of operations: Operations of
the entity remained working capital intensive with high gross
current assets of 163 days resulting stretched payment to
suppliers FY17(Provisional) . The working capital requirements
are met by the cash credit facility availed by the entity
utilization of which remained high.
* Limited value addition to goods leading to low profitability of
the firm: The entity is into trading of cotton yarn and synthetic
fabrics from manufacturers and sells them to retailers. The
margins of MPF depend on the cost of garments set by
manufacturers which is the end user industry and demand for
garments in the retail market. Thus, value addition by MPF is
minimal leading to low profitability of the entity.
* Presence in highly fragmented and competitive industry: MPF
operates in a highly competitive cotton industry with presence of
large number of small scale units operating in the cotton value
chain resulting in highly fragmented nature. Thus, the entities
present in the segment generally have a very low bargaining power
vis-a-vis their customers. Moreover; MPF manages its entire
operation from Ichalkaranji (Maharashtra) and majorly sells its
products in Ichalkaranji. Accordingly, the entity is exposed to
geographical concentration risk.
* Proprietorship nature of constitution: Being a proprietorship
concern, it is exposed to the risk of withdrawal of capital by
the proprietor on personal emergencies, dissolution of firm due
to death and restricted financial flexibility due to inability to
explore cheaper sources of finance leading to limited growth
potential.
Key Rating Strengths
* Wide experience of promoters: MPF has a track record of around
13 years and has established its presence in the trading of
readymade garment business segment in the market it operates and
has established good relations with various customers and
suppliers. The firm is managed by Ms Mamta Kasliwal with adequate
support from Mr Dinesh kumar Kasliwal. Mr Dinesh kumar Kasliwal
(38 years) who has an experience of over 18 years in the trading
of cotton yarn and fabrics.
Established relations with suppliers and customers: MPF has long-
standing relationship with its suppliers and customers due to the
entity's long operational track record and experience of the
management in the same segment. The clients have been associated
with MPF over the years. Moreover, the entity receives repeat
orders from its clients given the quality of the yarn. However,
being in a highly competitive business, customer retention is a
constant challenge for the entity.
Established in 2004 by Ms Mamta Kasliwal, Ichalkaranji
(Maharashtra) based Maa Padmavati Fabrics (MPF) is a
proprietorship firm engaged in trading of cotton yarn and
synthetic fabrics. The firm is managed by Ms Mamta Kasliwal with
adequate support from Mr Dinesh kumar Kasliwal . The firm
procures cotton yarn from local suppliers and sells its finished
products to Ichalkaranji based firms.
MOENUS TEXTILE: Ind-Ra Downgrades LT Issuer Rating to BB-/Stable
----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has downgraded Moenus Textile
Private Limited's (MTPL) Long-Term Issuer Rating to 'IND BB-'
from 'IND BB+'. The Outlook is Stable. The instruments-wise
rating actions are:
-- INR121 mil. (increased from INR106 mil.) Fund-based working
capital limit downgraded with IND BB-/Stable rating;
-- INR120 mil. (increased from INR57.1 mil.) Term loans due on
March 31, 2025 downgraded IND BB-/Stable rating;
-- INR21 mil. Non-fund-based working capital limit affirmed IND
A4+ rating.
KEY RATING DRIVERS
The downgrade reflects a significant deterioration in credit
metrics to moderate levels in FY17 from comfortable levels in
FY16. In FY17, interest coverage (operating EBITDA/gross interest
expense) was 3.51x (FY16: 4.06x) and net leverage (total adjusted
net debt/operating EBITDAR) was 4.07x (1.64x). The deterioration
in credit metrics was mainly due to a fall in EBITDA margin to
7.3% in FY17 from 14.2% in FY16. This was primarily owing to an
increase in raw material procurement cost (FY17: INR288 million;
FY16: INR224 million). Ind-Ra expects credit metrics to stay at
the same levels in FY18 in view of the adverse impact of the
goods and services tax on operations so far, which has already
been factored into the ratings. Revenue was INR130 million in
April-October 2018.
The ratings reflect MTPL's continued small scale of operations.
In FY17, revenue was INR440 million (FY16: INR390 million). The
slight increase in revenue was due to an increase in per unit
sales price.
The ratings factor in MTPL's moderate liquidity, indicated by an
average working capital utilisation of 75% for the 12 months
ended October 2017.
The ratings, however, are supported by over two decades of
operating experience of one of the company's promoters in the
textile industry.
RATING SENSITIVITIES
Negative: Deterioration in the credit metrics on a sustained
basis will be negative for the ratings.
Positive: An increase in the scale of operations, along with an
improvement in the credit metrics, on a sustained basis will be
positive for the ratings.
COMPANY PROFILE
Incorporated in 2005, MTPL manufactures cotton yarn at its
facility in Mandideep, Madhya Pradesh, using the rotor spinning
technology. In addition, it has a waste recycling plant in
Mandideep to produce low-value cotton yarn.
OLIVE INDUSTRIES: CARE Assigns 'B' Rating to INR25.58cr Loan
------------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Olive
Industries (OIND), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank
Facilities 25.58 CARE B; Stable Assigned
Short-term Bank
Facilities 3.00 CARE A4 Assigned
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of OIND remained
constrained on account of implementation and stabilization risk
associated with ongoing debt funded project, competition from
existing players coupled with threat of new entrants and
susceptibility of profit margins to volatility in raw material
prices along with limited bargaining power with suppliers.
The ratings, however, derives strength from widely experienced
partners in the similar line of operations, access to easily
available customer/supplier base of other associate entities,
fiscal benefits from the government and location advantage with
easy access to raw material.
OIND's ability to achieve envisaged scale of operations and
profitability will be the key rating sensitivity.
Detailed description of the key rating drivers
Key Rating Weaknesses
* Implementation and stabilization risk associated with ongoing
project: OIND is setting up green field project at a total cost
of INR37.82 crore which will be funded through project
debt/equity ratio of 1.94x. Till October 30, 2017, OIND has
incurred cost of INR19.42 crore while balance costs will be
incurred till March 2018. With majority of costs yet to incur,
the firm is exposed to project implementation and consequent
stabilization risk.
* Competition from existing players and threat of new entrants:
The firm will face tough competition from other reputed
established players in the industry. Further, low entry barriers
and government incentives, makes this industry attractive. Hence,
the firm might faces challenges from various smaller players in
the market.
* Susceptibility of profit margins to volatility in raw material
prices along with limited bargaining power with suppliers: The
major raw material for the firm is HDPE (High Density
Polyethylene) for which there are limited suppliers in India like
GAIL, OIC, ONGC, Reliance etc. So the firm will have negligible
bargaining power with its suppliers. Further, the price of raw
material is linked to fluctuation associated with crude oil
prices which leads to pricing fluctuation risk.
Key Rating Strengths
* Experience partners: The firm is headed by Mr. Naginbhai
Makwana, who is having experience of more than 16 years in
manufacturing industry and Ms. Bhartiben Makwana, who is already
proprietor of one of the sister companies named "Vera
Industries", engaged in manufacturing of fishing nets since 2015.
She will be looking after administrative and marketing division
of the Olive Industries.
* Access to easily available customer and supplier base of
associate concerns: Olive Industries has a readily available
market for itself due to experience of the partners in the same
line of business through other associate entities.
* Fiscal benefits from Government: The firm is eligible for
receiving subsidies under TUFS and Interest subsidy from DIC.
Further, the demand for shade nets is expected to grow in the
coming years because of the efforts made by the government to
promote use of agro textiles through various schemes of National
Horticultural Mission (NHM) and National Horticultural Board
(NHB).
Olive Industries, a Partnership firm was constituted during
September 2016 by seven partners. Later in April 2017, the firm
was reconstituted due to retirement of four partners. The firm is
promoted by Makwana group of industries and headed by Shri
Naginbhai Devjibhai Makwana with an objective of manufacturing of
Fish Nets, Agricultural Nets & allied products. The firm is
proposing to set up an Agricultural & Fish Net plant at Sanand
GIDC - II, At Sanand, Dist. Ahmedabad at total cost of INR37.82
crore. The manufacturing capacity of plant would be 1,920 MT per
annum.
P.D. BAJORIA: CARE Assigns 'B' Rating to INR7.48cr LT Loan
----------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of P.D.
Bajoria Tea And Agro Products Pvt Ltd (PDB), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 7.48 CARE B; Stable Assigned
Short-term Bank
Facilities 0.35 CARE A4 Assigned
Detailed Rationale& Key Rating Drivers
The ratings assigned to the bank facilities of P.D. Bajoria Tea
And Agro Products Pvt Ltd (PDB) are primarily constrained by its
small scale of operation with short track record, susceptible to
vagaries of the nature and exposure to raw material price
fluctuation risk, high competition with lack of backward
integration and weak financial risk profile marked by net loss
and negative net worth and weak liquidity. The ratings, however,
derive strength from its experienced promoters and proximity to
raw material sources.
Going forward, the ability of the company to improve its scale of
operation along with profitability margins and efficient
management of working capital are the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
* Small scale of operation with short track record: PDB is a
small player in tea manufacturing business with revenue of
INR1.53 crore and net loss of INR0.79 crore in FY17. Furthermore,
the total capital employed was also modest at INR6.74 crore as on
March 31, 2017. The small scale restricts the financial
flexibility of the company in times of stress. According to the
management, during 7MFY18, the company has earned a total
operating income of INR6.97 crore. The company has started
operation from November 2016, thus having very short track record
of about one year.
* Susceptible to vagaries of the nature and exposure to raw
material price fluctuation risk: Most of the tea gardens from
which PDB procures green leaves are concentrated in the state of
West Bengal and Assam. However, the region is prone to erratic
weather conditions. Therefore adverse natural events have
negative bearing on the productivity of tea gardens in the region
and accordingly PDB is exposed to vagaries of nature which
further exposes the company to raw material price fluctuation
risks.
* High competition with lack of backward integration: The tea
industry is an organised agro-industry. It is highly fragmented
in India with presence of many small, mid-sized and large
players. There are number of tea brands in India, of which 90% of
the brands are represented by regional players while the balance
of the 10% is dominated by Tata Tea, HUL, Wag Bakri Chai, Godrej,
Sapat International and others. Furthermore, the company does not
own any tea garden, thus it has to depend completely on local
gardens and open market which in turn decreases its profitability
on account of lack of backward integration.
* Weak financial risk profile marked by net loss and negative net
worth and weak liquidity: Financial risk profile of the company
is weak marked by negative net worth of the company as on March
31, 2017. This apart, interest coverage ratio has been below
unity during FY17 on account of lower operating profit with
respect to interest expense. The company served the interest
expenses from unsecured loan. The current ratio of the company
remained just above unity as on March 31, 2017. Average CC
utilisation during last 12 months ending on October 2017, was
90%.
Key Rating Strengths
* Experienced promoters: PDB is currently managed by Mr.
VikashAgarwal, Director, having about a decade of experience in
similar line of business. These apart, the other two directors
are also having around a decade of experience in similar
industry.
* Proximity to raw material sources: PDB's unit has close
proximity to local tea gardens and processing plants. Further,
West Bengal and nearby state like Assam are one of the major tea
producing area in India. Accordingly, PDB has locational
advantage in terms of proximity to raw material. This apart, the
plant is located in the vicinity of industrial area of West
Bengal, having good transportation facilities and other
requirements like good supply of power, water etc.
PERSANG ALLOY: Ind-Ra Moves BB Issuer Rating to Non-Cooperating
---------------------------------------------------------------
India Ratings and Research (Ind-Ra) has migrated Persang Alloy
Industries Private Limited's (PAIPL) Long-Term Issuer Rating to
the non-cooperating category. The issuer did not participate in
the rating exercise despite continuous requests and follow-ups by
the agency. Therefore, investors and other users are advised to
take appropriate caution while using these ratings. The rating
will now appear as 'IND BB(ISSUER NOT COOPERATING)' on the
agency's website. The instrument-wise rating actions are:
-- INR80 mil. Fund-based working capital limits migrated to non-
cooperating category with IND BB(ISSUER NOT COOPERATING)/IND
A4+(ISSUER NOT COOPERATING) rating; and
-- INR43.48 mil. Term loan migrated to non-cooperating category
with IND BB(ISSUER NOT COOPERATING) rating.
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
Nov. 3, 2016. Ind-Ra is unable to provide an update, as the
agency does not have adequate information to review the ratings.
COMPANY PROFILE
Established as a partnership firm in 1989, PAIPL was converted to
a private limited company in 2007. The company is engaged in
manufacturing of soldering products such as solder bars, solder
wire, and solder paste and fluxes. Its manufacturing plant is
located at Vadodara in Gujarat.
RAMAKRISHNA TELETRONICS: ICRA Moves D Rating to Not Cooperating
---------------------------------------------------------------
ICRA has downgraded the ratings for the INR60.00 crore bank
facilities of Ramakrishna Teletronics Private Limited to
[ICRA]D/[ICRA]D from [ICRA]B(Stable)/ [ICRA]A4. ICRA has also
moved the ratings to the 'Issuer Not Cooperating' category. The
rating is now denoted as "[ICRA]D/[ICRA]D ISSUER NOT
COOPERATING".
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Non-Fund Based
Limits 6.00 [ICRA]D ISSUER NOT
COOPERATING; Rating
downgraded from [ICRA]A4
and moved to the 'Issuer
Not Cooperating' category
Unallocated Limits 54.00 [ICRA]D/[ICRA]D ISSUER NOT
COOPERATING; Rating
downgraded from
[ICRA]B(Stable)/[ICRA]A4
and moved to the 'Issuer
Not Cooperating' category
Rationale
The rating downgrade follows the delays in debt servicing by RTPL
to the lenders, as confirmed by them.
ICRA has limited information on the entity's performance since
the time it was last rated in January, 2017. As part of its
process and in accordance with its rating agreement with RTPL,
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
* Steady growth in operating income: The operating income
increased from INR112.76 crore in FY2013 to INR247.49 crore in
FY2016 owing to opening up of new stores.
* Long experience of the promoters in distribution and retail
business: RTPL is involved in retailing and distribution of
consumer durables such as flat panels, refrigerators, washing
machine, air conditioners, electronic appliances, mobiles through
a chain of 12 retail stores located across Hyderabad, Vizag and
Rajahmundry under the brand name "Yes Mart".
Credit weaknesses
* Delays in debt servicing: The rating downgrade follows the
delays in debt servicing by RTPL owing to closure of its
showrooms.
* RTPL's weak financial risk profile and high working capital
intensity: The financial profile of RTPL is characterised by high
gearing of 4.83 times, low interest coverage ratio of 1.16 times,
and low NCA/Total Debt of 1.76% for FY2016 and high working
capital intensity of 34% due to high inventory levels required to
be maintained in consumer durables retailing business.
* High geographic concentration: The geographic concentration is
high with nine out of 12 stores located in Hyderabad.
* Low margins, stiff and increasing competition limiting
profitability: The low margins in electronic retailing business
coupled with stiff and increasing competition from e-commerce
players which restricts pricing flexibility, and fragmented
nature of the industry leading to high competitive intensity
(resulting in pressure on the retailers to offer discounts),
limits the profitability of RTPL
Ramakrishna Teletronics Pvt. Ltd. (RTPL) was incorporated in 2008
by Mr. V. Raghavendra and Mr. V Ravi Kumar based in Hyderabad.
RTPL is involved in retailing and distribution of consumer
durables such as flat panels, refrigerators, washing machine, air
conditioners, and electronic appliances, mobiles through a chain
of 12 retail stores located across Hyderabad, Vizag and
Rajahmundry under the brand name "Yes Mart". The company is
acting as a distributor of Sony in Telangana region and Vu flat
Panels in Telangana and Andhra Pradesh region.
RELIANCE COMMUNICATIONS: CDB Files Insolvency Bid Against Firm
--------------------------------------------------------------
The Economic Times reports that China Development Bank (CDB) has
filed an insolvency petition against Reliance in the bankruptcy
court to recover $1.78 billion, or about INR11,460 crore, it had
lent to the Anil Ambani-owned telco, said a person close to the
matter.
According to the report, CDB moved National Company Law Tribunal
(NCLT) on November 24. It accounts for 37.11% of RCom's total
secured debt, the report says. CDB's petition negates any hopes
of an out of court settlement between RCom and its lenders, and
is expected to hurt the strategic debt restructuring of the telco
that some Indian banks had undertaken in September. "What else is
it to do?" the source, as cited by ET, said. "This is the only
hope of some recovery, otherwise it seems most of the debt in
RCom is lost." RCom said it is "surprised by the untimely and
premature action" of CDB.
ET relates that the telco said it continues to remain engaged
with all lenders including CDB and is confident and committed to
a full resolution with the support of all the lenders. RCom said
it has not yet been served any notice of the application CDB
filed with NCLT, the report relays.
The development comes almost two months after RCom called off its
proposed merger with rival Aircel. In its application before
NCLT, the Chinese bank nominated Abhilash Lal as an independent
resolution professional, with an understanding that Alvarez &
Marshal (A&M) will be his advisors to take over the company,
according to ET.
"Within a month it is expected that A&M will be in charge and
then propose a resolution plan," said the person cited earlier.
CDB continues to be represented by Darius Khambata, a senior
advocate in Mumbai High Court, who represented the company in its
objection against the RCom-Aircel merger, ET relays.
According to ET, people familiar with details said RCom had
offered CDB equity in real estate development of land held by
RCom in Dhirubhai Ambani Knowledge City (DAKC) in Navi Mumbai to
settle the matter. However, it was unclear if that land would be
diluted as part of the SDR being run by Indian banks, they said.
This is the fourth case slapped against RCom post its plans to
merge with Aircel fell apart, ET notes. Swedish telecom equipment
maker Ericsson earlier moved the bankruptcy court to recover
INR1,150 crore dues from RCom.
ET says the Chinese bank -- along with Standard Chartered Bank
and HSBC, and creditors such as Ericsson, Indus Towers, Bharti
Infratel and GTL Infrastructure's Chennai Network Infrastructure
-- had earlier objected to a petition seeking approval of RCom's
$6 billion merger with Aircel being admitted in the NCLT, citing
unpaid loans and dues. In its petition filed then, CDB said RCom
did not disclose the bank's security interest, and that movable
assets were pledged to it. It also questioned the contention that
the rights of creditors will remain unaffected. ET has not seen a
copy of the latest petition that was filed in the Mumbai branch
of the tribunal.
About Reliance Communications
Based in Mumbai, India, Reliance Communications Ltd (BOM:532712)
-- http://www.rcom.co.in/Rcom/personal/home/index.html-- is a
telecommunications service provider. The Company operates through
two segments: India Operations and Global Operations. India
operations segment comprises wireless telecommunications services
to retail customers through global system for mobile
communication (GSM) technology-based networks across India;
voice, long distance services and broadband access to enterprise
customers; managed Internet data center services, and direct-to-
home (DTH) business. Global operations comprise Carrier,
Enterprise and Consumer Business units. It provides carrier's
carrier voice, carrier's carrier bandwidth, enterprise data and
consumer voice services. The Company owns and operates Internet
protocol (IP) enabled connectivity infrastructure, comprising
over 280,000 kilometers of fiber optic cable systems in India,
the United States, Europe, Middle East and the Asia Pacific
region.
As reported in the Troubled Company Reporter-Asia Pacific on
Nov. 22, 2017, Moody's Investors Service has withdrawn Reliance
Communications Limited's (RCOM) Ca corporate family rating (CFR)
and its negative outlook. At the same time, Moody's has also
withdrawn the Ca rating on RCOM's senior secured notes.
On Nov. 6, 2017, RCOM announced that pursuant to the invocation
of Strategic Debt Restructuring (SDR) scheme by the lenders of
the company as per the Reserve Bank of India guidelines agreed in
June 2017, the company is under a debt standstill period until
December 2018, as it looks to complete a corporate and debt
restructuring. Accordingly, for the time being, no payment of
interest and/or principal is being made to any RCOM lenders
and/or bondholders.
S. K. TIMBERS: CARE Assigns 'B' Rating to INR8cr LT Loan
--------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of S. K.
Timbers (SKT), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 8.00 CARE B; Stable Assigned
Detailed Rationale& Key Rating Drivers
The rating assigned to the bank facilities of SKT is constrained
by its partnership nature of constitution, small scale of
operation with low profitability margins, volatility in prices of
input material, capital as well as working capital intensive
nature of business, client concentration risk albeit reputed
clientele and high competition amidst fragmented nature of
industry. However, the aforesaid constraints are partially offset
by its experienced partner along with satisfactory track record
of operation and healthy order book position.
The ability of the firm to improve its scale of operations along
with profitability margins and efficient management of working
capital are the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Partnership nature of constitution: S. K. Timbers, being a
partnership firm, is exposed to inherent risk of the partner's
capital being withdrawn at time of personal contingency and firm
being dissolved upon the death/retirement/insolvency of the
partners. Furthermore, partnership firms have restricted access
to external borrowing as credit worthiness of partners would be
the key factors affecting credit decision for the lenders.
Small scale of operation and low profitability margins along with
negative tangible networth: SKT is a relatively moderate player
in transportation & logistics business with revenue and PAT of
INR30.96 crore and INR0.59 crore respectively, in FY17.
Furthermore, the total capital employed was also low at INR2.73
crore and negative tangible networth of INR0.36 crore as on
March 31, 2017. The small scale restricts the financial
flexibility of the firm in times of stress. This apart, the
PBILDT and PAT margin is low at 2.82% and 1.90% respectively,
during FY17. The firm has achieved the total revenue of INR18.50
crore during 7MFY18.
Volatility in prices of input materials: Fuel expenses form one
of the major expenses for the firm during last three years.
Furthermore the present contracts with Tata group of companies do
not have any provision for fuel price variation clause and
therefore the profitability of the firm is vulnerable to price
fluctuations.
Capital as well as working capital intensive nature of business:
Transportation & logistics business is capital intensive in
nature. Initially to purchase commercial vehicles for
transportation requires capital. The operations of the firm also
remained working capital intensive as the firm allows around a
month credit to its customers due to its low bargaining power
compared to its big clients. Furthermore, it maintains inventory
of input materials of around half months for mitigating price
fluctuation risk as well as smooth functioning of its operations.
The firm avails high credit from its suppliers due to long
association with them and accordingly the average creditor's days
was on the higher side during past years. The average utilization
of working capital was on the higher side at around 90% during
last 12 months ended October 31, 2017.
Client concentration risk albeit reputed clientele: SKT works
mainly for Tata group of companies like Tata Motors Ltd (rated
CRISIL AA; Positive/CRISIL A1+), The Tinplate Company of India
Limited (rated ICRA AA-; Stable and ICRA A1+) etc. and earns
revenue of around 70% of its total operating income from these
clients which exposes it to client concentration risk. However,
the firm has long standing relationship with these clients for
more than two decade which offsets the risk to some extent.
Further the clients of the firm are reputed players and hence,
default risk is minimal.
High competition amidst fragmented nature of industry:
Transportation and logistics services industry is a very
competitive space due to low entry barriers resulting into
presence of numerous players in the industry which further
results in an intensely competitive environment especially for
small players like SKT. The highly fragmented and unorganized
nature of the industry results in intense price competition and
may lead to pressure on the firm's profitability in case of
adverse situations.
Key Rating Strengths
* Experienced partner along with satisfactory track record of
operation: Md. ShaukatUddin (aged 37 years) having around two
decades of experience in the transportation & logistics business.
He looks after the overall management of the firm, with adequate
support from other partner and a team of experienced personnel.
The firm is into transportation, all kind of logistics packing
and material handing job business since 1996 and thus has long
track record of operations of around 21 years. Due to long track
record of operations the firm has established satisfactory
relationship with its clients.
Established in 1996, S. K. Timbers (SKT) is engaged in
transportation, all kind of logistics packing and material
handing job. SKT is associated with the Tata group for last
twenty one years and provide services mainly to Tata Motors Ltd.,
The Tinplate Company of India Limited etc. The activities of the
firm mainly include logistics packing and transportation of
materials. The firm earned around 70% of total revenue in FY17
from transportation and logistics packing for Tata group of
companies. The firm has an order book position of INR55.00 crore
(1.78x of FY17 total operating income) as on October 31, 2017.
Md. ShaukatUddin (aged 37 years) having around two decades of
experience in the transportation & logistics business. He looks
after the overall management of the firm, with adequate support
from other partner and a team of experienced personnel.
S.S. AGRI: CARE Assigns B+ Rating to INR11.53cr LT Loan
-------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of S.S.
Agri Business Private Limited (SSABPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 11.53 CARE B+; Stable Assigned
Detailed Rationale& Key Rating Drivers
The ratings assigned to the bank facilities of SSABPL are
constrained by its small scale of operation with low
profitability margins, project implementation risk, regulated
nature of the industry, fragmented and competitive nature of the
industry, high working capital intensity and exposure to vagaries
of nature and moderately leveraged capital structure with
moderate debt coverage indicators. The aforesaid constraints are
partially offset by its experienced promoters, close proximity to
raw material sources &favourable industry scenario, and stable
demand outlook of rice.
The ability of the company to complete the project without any
cost & time overrun, ability to grow its scale of operation and
profitability margins and ability to manage working capital
effectively would be the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
* Small scale of operation with low profitability margins: SSABPL
is a relatively small player in the rice milling industry with
revenue and PAT of INR26.01 crore and INR0.22 crore respectively,
in FY17. Further, the net worth base and total capital employed
was low at INR2.16 crore and INR11.37 crore, respectively, as on
March 31, 2017. This apart, the PBILDT and PAT margin is low at
6.63% and 0.83% respectively, during FY17. The management is
stated to have achieved total operating income of INR23.16 crore
during first six months of FY18 i.e. H1FY18. The small size
restricts the financial flexibility of the company in times of
stress and it suffers on account of economies of scale.
* Project implementation risk: SSABPL is engaged in the expansion
of its rice milling unit with an additional proposed installed
capacity of 28,800 metric tonne per annum (MTPA). The project is
estimated to be set up at a cost of INR7.61 crore, to be financed
by way of unsecured loan from promoters aggregating INR2.09
crore, equity infusion of INR0.51 crore and term loan of INR5.01
crore. The company has already invested INR1.83 crore towards
plant & machinery etc. till September 30, 2017 which is met
partially through term loan of INR1.20 crore and unsecured loan
from promoters of INR0.63 crore. The project is expected to be
operational from January, 2018.
* Regulated nature of the industry: The Government of India (GoI)
decides a minimum support price (MSP-to be paid to paddy growers)
for paddy every year limiting the bargaining power of rice
millers over the farmers. The MSP of paddy was increased during
the crop year 2017-18 to INR1550/quintal from INR1470/quintal in
crop year 2016-17. Given the market determined prices for
finished product vis-a-vis fixed acquisition cost for paddy, the
profitability margins are highly volatile. Such a situation does
not augur well for the company, especially in times of high paddy
cultivation.
* Fragmented and competitive nature of the industry: SSABPL's
plant is located in Balasore district, Orissa which is in close
proximity to hubs for paddy/rice cultivating region of Orissa.
Owing to the advantage of close proximity to raw material
sources, large numbers of small units are engaged in milling and
processing of rice in the region. This has resulted in intense
competition which is also fuelled by low entry barriers. Given
that the processing activity does not involve much of technical
expertise or high investment, the entry barriers are low.
* High working capital intensity and exposure to vagaries of
nature: Rice milling is a working capital intensive business as
the rice millers have to stock rice by the end of each season
till the next season as the price and quality of paddy is better
during the harvesting season. Also, paddy cultivation is highly
dependent on monsoons, thus exposing the fate of the company's
operation to vagaries of nature. Accordingly, the working capital
intensity remains high leading to higher stress on the financial
risk profile of the rice milling units. Accordingly, the average
utilization of working capital limits was around 95% during last
12 months ended September 30, 2017.
* Moderately Leveraged capital structure with moderate debt
coverage indicators: Capital structure of the company remained
leveraged as on last three account closing dates owing to high
working capital intensity of the business. The debt protection
indicators remained moderate marked by moderately high total debt
to GCA of 10.37x in FY17 on account of increased in utilization
of cash credit limit during the period. However, Interest
coverage ratio is comfortable marked by 2.19 as on FY17.
Key Rating Strengths
* Experienced promoters: The company is being promoted by Mr.
Chunnilal Gupta and his brother Mr. Rajendra Kumar Gupta based
out of Odisha. Mr. Chunnilal Gupta and Mr. Rajendra Kumar Gupta
are having an average experience of three decade in the agro
industry by virtue of being the co-promoters of entities engaged
in coconut oil manufacturing but they have limited experience (of
6 years) in rice milling business. They are supported by a team
of experienced personnel having experience in the rice milling
industry.
* Close proximity to raw material sources and favourable industry
scenario: SSAB's plant is located at Balasoredistrict, Odisha
which is in the midst of paddy growing areas of the state. The
entire raw material requirement is met locally from the farmers
(or local agents) which helps the company to save on substantial
amount of transportation cost and also procure raw materials at
effective prices. Further, rice being a staple food grain with
India's position as one of the largest producer and consumer,
demand prospects for the industry is expected to remain good in
near to medium term.
* Stable demand outlook of rice: Rice, being one of the primary
food articles in India, demand is high throughout the country and
with the change in life style and health consciousness; by-
products of the same like rice bran oil etc. are in huge demand.
S.S. Agri Business Private Limited (SSABPL), incorporated in
1997, commenced operation from February, 2011. The company is
engaged in processing and milling of rice. The milling unit of
SSABPL is located at Balasore, Orissa with processing capacity of
28,800 Metric Ton Per Annum (MTPA). SSABPL procures paddy from
farmers & local agents and sells its products through the
wholesalers and distributors in Odisha, West Bengal, Bihar,
Andhra Pradesh, etc. and also exports to Bangladesh (15% of FY17
sales). The company also has premium flagship brand named
'Nirmalya'. The company sales its products through wholesalers
and distributors spreading all across Orissa, West Bengal, Andhra
Pradesh etc. The company also exports its products to Bangladesh.
The company is engaged in the expansion of its rice milling unit
with an additional proposed installed capacity of 28,800 metric
tonne per annum (MTPA). The project is estimated to be set up at
a cost of INR7.61 crore, to be financed by way of unsecured loan
from promoters aggregating INR2.09 crore, equity infusion of
INR0.51 crore and term loan of INR5.01 crore. The company has
already invested INR1.83 crore towards plant & machinery etc.
till September 30, 2017 which is met partially through term loan
of INR1.20 crore and unsecured loan from promoters of INR0.63
crore. The project is expected to be operational from January,
2018.
Mr. Chunnilal Gupta(aged, 57 years), having more than three
decades of experience in the rice milling industry, looks after
the day to day operations of the company. He is supported by
other director Mr. Rajendra Kumar Gupta (aged, 51 years) and a
team of experienced professionals.
SAFAR POLYFIBRE: ICRA Reaffirms B Rating on INR25.25cr Loan
-----------------------------------------------------------
ICRA has reaffirmed the long-term rating of [ICRA]B to the 10.00-
crore1 fund-based cash credit facility and INR25.25-crore fund-
based term loan facility of Safar Polyfibre Private Limited. ICRA
also has reaffirmed the short-term rating of [ICRA]A4 to the
INR4.79-crore non-fund based limits of SPPL. The outlook on the
long-term is Stable.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based-Cash
Credit 10.00 [ICRA]B(Stable) Reaffirmed
Fund-based-Term
Loan 25.25 [ICRA]B(Stable) Reaffirmed
Non-fund Based-
Bank Guarantee 4.70 [ICRA]A4; Reaffirmed
Non-fund Based-
CEL for Forward
Contract 0.09 [ICRA]A4; Reaffirmed
Rationale
The ratings reaffirmation continues to be constrained by the
limited track record of SPPL's operation with associated
stabilisation risk with regard to achievement of estimated
operating parameters. Furthermore, the rating takes into account
the company's weak financial profile with the debt-equity-ratio
of 4.74 times on a project basis, which is expected to remain
stretched in the near to medium term, given the debt-funded
nature of the project and the impending debt repayments. The
ratings are also constrained by SPPL's presence in the highly
competitive technical textile industry and the susceptibility of
SPPL's profitability to volatility in virgin poly-staple fibre
prices.
The ratings continue to positively factor in the experience of
the promoters in plastics and related businesses.
Key rating drivers
Credit strengths
* Long experience of promoters in plastics and related products -
The promoters have two decades of experience in manufacturing
various plastic products from virgin material and scrap. With
industry knowledge and an existing network of plastic scrap and
poly-ethylene terephthalate waste suppliers, the promoters have
led SPPL to diversify into the business of RPSF manufacturing.
The promoters also have a vast experience of other sectors such
as construction, trading of grit, stones, pesticides and
manufacturing of wall tiles, among others.
Credit weaknesses
* Limited track record of operation: SPPL has recently commenced
commercial production from October 2017. Thus with limited track
record of operations, SPPL remains exposed to stabilisation risks
associated with a greenfield project.
* Financial profile expected to remain stretched in the near
term: High reliance on debt-funding and its associated servicing
burden are expected to keep the company's credit metrics
stretched over the near to medium term.
* Competition from organised players: The recycled polyester
staple fibre (RPSF) F market is fragmented with a large number of
small to mid-sized players. The top three players - Ganesh
Ecosphere Limited, Reliance Industries Limited and Pashupati
Polytex - account for ~50% of the installed capacities of RPSF in
India. SPPL is a relatively new entrant in the market with
smaller capacities (50 MTPD) vis-Ö-vis the other players and thus
faces stiff competition.
* Volatile PSF prices could squeeze profitability: The market
price of regenerated polyester fibre shows variation with the
price of VPSF (substitute for RPSF), which in turn, is linked to
crude oil prices (as its raw materials purified terephthalic acid
and mono ethylene glycon are crude derivatives) and alternative
fibre prices like cotton. Accordingly, the profitability of RPSF
can fluctuate and come under pressure in case of a substantial
fall in crude oil prices, resulting in the fall in virgin-grade
PSF prices.
Incorporated in February 2016, Safar Polyfibre Private Limited
(SPPL) has set up a greenfield project with production capacity
of 50 tonnes per day of recycled polyster stable fibres (RPSF)
using waste polyethylene terephthalate (PET) bottles as raw
material at Kuchiyadad in Rajkot, Gujarat. It commenced
commercial operation from October 2017.
SPPL is promoted by Mr. Hitesh Bhalodiya, Mr. Nilesh Bhalodiya
and Mr. Paresh Bhalodiya, along with seven other directors. The
promoters have two decades of experience in manufacturing various
plastic products from virgin material and scrap. The promoters
also have a vast experience of other sectors such as
construction, trading of grit, stones, pesticides and
manufacturing wall tiles, among others.
Against the estimated project cost of INR51.67 crore, SPPL has
incurred a cost of INR53.67 crore resulting in cost overrun of
INR1.50 crore. The repayment of the bank term loan is scheduled
to commence from January 2018, providing a cushion of about four
months to the company. Hence, the future cash flow adequacy of
the company would be sensitive to its ability to successfully
market its product and thereby ramp up its operations in a
competitive industry.
SAHAKAR MAHARSHI: CARE Lowers Rating on INR35cr LT Loan to C
------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Sahakar Maharshi Shankarrao Mohite Patil SSK Limited (SMSMPSSK),
as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank
Facilities 35.00 CARE C; Stable Revised from
CARE B; Stable
The revision in ratings assigned to the bank facilities of
SMSMPSSK factors in the ongoing delays in debt servicing in the
facility which is not rated by CARE due to the stressed liquidity
position.
Detailed description of the key rating drivers
Key Rating Weakness
* Ongoing delays in debt servicing: There are ongoing delays in
servicing of its debt obligations of bank facilities (which is
not rated by CARE) due to the stretched liquidity position on
account of cash losses.
Sahakar Maharashi Shankarrao Mohite Patil SSK Limited (SMSSKL)
was incorporated in the year 1960 under guidance of Mr.
Vijaysingh Shankarrao Mohite Patil, chief promoter to undertake
the manufacturing of sugar and related products at Village
Yashwantnagar, TalukaMalshiras, Solapur, Maharashtra. The first
crushing season of factory was conducted in the year 1963 with an
installed capacity of 1,000 tonnes of cane crushed per day (TCD).
The crushing capacity was subsequently enhanced in stages to
reach capacity as on March 31, 2016 at 7,500 TCD. In year 2009,
SMSSKL also commissioned a 60 kilo-litre per day (KLPD)
distillery unit and installed a baggase fired co-generation unit
with an installed capacity of 33mega-watts (MW).
SAI POINT: ICRA Moves B Rating to Not Cooperating Category
----------------------------------------------------------
ICRA has moved the rating for the INR12.00 crore fund-based bank
facilities of Sai Point Bikes and Cars to the 'Issuer Not
Cooperating' category. The rating is now denoted as "[ICRA]B
(Stable); ISSUER NOT COOPERATING".
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Dropline facility 12.00 [ICRA]B(Stable); ISSUER NOT
COOPERATING; Rating moved
to the 'Issuer Not
Cooperating' category
Rationale
The rating action is based on the best available information. As
part of its process and in accordance with its rating agreement
with Accord, ICRA has been trying to seek information from the
company to undertake a surveillance of ratings; but despite
multiple requests, the company's management has remained non-
cooperative. In the absence of the requisite information, ICRA's
Rating Committee has taken a rating view based on the best
available information. In line with SEBI's Circular No.
SEBI/HO/MIRSD4/CIR/2016/119, dated November 1, 2016, the
company's rating is now denoted as: "[ICRA]B (Stable); 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
* Extensive experience of proprietor in the automobile dealership
sector through its group companies: The proprietor enjoys a
longstanding experience in the auto dealership sector through its
group companies, which has resulted in a strong market presence
in Maharashtra. Further, Sai Point derives operational and
financial synergy from its group companies due to similar line of
business operations.
Credit weaknesses
* Nascent stage of operations with strong competitive intensity
amongst other organised and unorganised players engaged in
similar line of business: The firm commenced commercial
operations from April 2015 in the field of in reselling second
hand luxury cars. Due to nascent stage of operations in a highly
competitive industry, Sai Point's revenues are vulnerable to
cyclicality inherent in the automotive industry in its area of
operations.
* Stretched financial risk profile characterised by high gearing,
relatively modest coverage indicators, low cash accruals and high
working capital intensity of operations: The financial profile of
the firm is weak due to a leveraged capital structure with
gearing of 8.39 times, modest debt protection metrics with
OPBDITA/Interest at 1.88 times and low cash accruals with
NCA/Total Debt at 8% as a result of high reliance on external
borrowings for the period Apr-Dec 2016. Further, inventory of
superior value luxury cars has resulted in high working capital
intensity of operations with NWC/OI of 39% for the period Apr-Dec
2016.
Established in 2015, Sai Point Bikes and Cars (SPBC or firm) is a
proprietorship concern started by Mr. Dilip Patil. The company
refurbishes and sells pre-owned luxury cars of known brands,
mainly Audi, Mercedes Benz, BMW and Jaguar and has two showrooms
one in Mumbai and the other in Pune.
SPBC is part of the established Sai Point Group, based in Thane,
Maharashtra. The group's flagship company Sai Point Automobiles
Private is an authorised dealer of two-wheelers and spare parts
manufactured by Honda Motorcycle and Scooter India, Private
Limited. The other group companies are also involved in
automobile (four-wheeler) dealership and vehicle financing and
construction businesses.
SESHA SAI: ICRA Moves B Rating to Not Cooperating Category
----------------------------------------------------------
ICRA has moved the long-term rating for the INR6.00-crore cash-
credit and INR6.00-crore unallocated facilities of Sesha Sai
Cotton Company to the 'Issuer Non-Co-operating' category. The
rating is now denoted as "[ICRA]B (Stable) ISSUER NOT
COOPERATING".
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term-Cash
Credit 6.00 [ICRA]B (Stable) ; ISSUER NOT
COOPERATING; Ratings moved
to the 'Issuer Not
Cooperating' category
Unallocated 6.00 [ICRA]B (Stable) ; ISSUER NOT
COOPERATING; Ratings moved
to the 'Issuer Not
Cooperating' category
Rationale
The rating is based on no updated information on the entity's
performance since the time it was last rated in July 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 Sesha Sai Cotton Company, 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
* Significant experience of the promoter in the cotton industry:
More than two decade experience of promoters in cotton industry
helps in understanding the market trend resulting in procuring
better raw materials at competitive rate.
* Location Advantage: The firm benefits from its presence in
cotton growing region of Andhra Pradesh and proximity to ginning
mills which resulting in ease of raw material procurement and
lower transportation costs.
Credit weaknesses
* Small scale of operations: The firm has small scale of
operations in a highly fragmented industry characterised by
presence of large number of players which limits firm's ability
to pass on any adverse movement to its customers.
* Industry susceptible to agro-climatic risks: The industry is
susceptible to agro-climatic risks, which can affect the
availability of raw material in adverse weather conditions.
* Profitability indicators exposed to the volatility in price
movements of raw material: The margins of the firm are affected
by the raw material price fluctuation which in turn affects the
sales realisations. Any adverse movement in the price of raw
materials could have an adverse impact on the firm's margins
* High Customer Concentration risk: The company is exposed to
high customer concentration risk with 62% of the total sales for
FY2015 were derived from the top five customers.
* Risk from proprietorship nature of business: Any substantial
withdrawal would adversely affect the capital structure of the
firm as evidenced in FY2015
SSCC was established in the year 2001 as a proprietorship concern
by Mr. Jampu Anjaneyulu. The entity is engaged in ginning and
pressing of cotton and trading of cotton lint and cotton seed.
The firm has an installed capacity of 12 ginning machines located
in Guntur, Andhra Pradesh on lease, while pressing of cotton
bales is outsourced.
SHIV DAL: ICRA Assigns B+ Rating to INR5cr Term Loan
----------------------------------------------------
ICRA has assigned a long-term rating of [ICRA]B+ to the INR5.0-
crore1 term loan and INR5.0-crore cash credit facility of M/s.
Shiv Dal Mill. The outlook on the long-term rating is Stable.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based Term
Loan 5.00 [ICRA]B+ (Stable) assigned
Fund-based Cash
Credit 5.00 [ICRA]B+ (Stable) assigned
Rationale
The assigned ratings reflect the risks associated with the
stabilisation of its operations as per the expected operating
parameters, since the firm commenced operations from April, 2017.
ICRA notes the stretched financial profile, given the high debt
repayments on the term loan availed to set up the facility, which
is likely to keep its cash flows under pressure in the near to
medium term. The ratings are further constrained owing to
vulnerability to the agro-climatic conditions and Government
regulations on pricing, availability and distribution of
agricultural commodities. The rating also takes note of the
highly competitive nature of the pulse-processing industry and
limited value additive nature of the business, which is likely to
exert pressure on the firm's profitability.
However, the rating favourably factors in the experience of the
partners with a long track record in the agro-commodities
business through other group entities, along with favourable
demand outlook as pulses are an important part of the stable
Indian diet.
Going forward, the firm's ability to successfully stabilise as
well as scale up its operations in a profitable manner will be
the key rating sensitivities.
Key rating drivers
Credit strengths
* Established track record of the partners in the food-processing
and biri manufacturing business: SDM started its commercial
operations in April 2017. The unit has been set up at
Murshidabad, West Bengal. The partners are involved in the agro-
processing business through other entities like Shiv Rice Mill
(operating since 2005) and biri manufacturing through Shiv Biri
Manufacturing Co. Pvt Ltd (operating since 1998).
* Favourable demand outlook as pulses are important part of the
stable Indian diet: SDM manufactures products like red lentil
(masur dal), grass pea (kheshari dal) and split-bengal gram
(chola dal). Going forward, the firm has the option to mill
pulses of various other varieties. Pulses as an agricultural
produce, have a stable demand outlook, which is likely to
sustain, as it forms an important part of the staple Indian diet.
Credit weaknesses
* Limited operational track record as the unit started operations
in April 2017; stabilisation risk remains: The commercial
production started in April 2017 and thus the entity has limited
operational track record of few months. The firm is currently
operating at 8% capacity during 6 months FY2018, and thus the
stabilisation of operations as per the expected operating
parameters is yet to be achieved.
* Stretched financial risk profile owing to high debt repayment
obligations relative to expected net cash accruals in the medium
term: The project cost of setting up the unit was around INR9.56
crore, which was funded through a term loan of INR5.00 crore and
balance through partner's capital of INR4.56 crore. The repayment
of the bank term loan has commenced from August 2017 onwards.
ICRA notes that the high debt repayment relative to the expected
net cash accruals is likely to keep its cash flows under pressure
in the near to medium term. Thus, the future cash flow adequacy
would be sensitive to its ability to successfully market its
product, and thereby, ramp-up its operations in a competitive
industry.
* Highly competitive nature of pulse-milling industry on account
of low entry barriers and limited value addition, which are
likely to impact the profit margins: Apart from a few large
established players, the pulse milling industry is marked by
various small and medium size players, given the stable nature of
demand for pulses and low entry barriers. Further, the low value-
added nature of work and intense competition exert pressure on
the profitability and also limit the pricing flexibility of the
players in the industry.
* Pulse-milling business remains exposed to raw material
availability, its quality and pricing; which in turn depend on
monsoon conditions and government policies: India is the largest
producer as well as consumer of pulses in the world. Though
pulses are grown in both Kharif and Rabi seasons, production of
pulses during Rabi season contribute to more than 60 per cent of
the total production. However, since West Bengal is a kharif
producing state, there is scarce in availability of local raw
materials in other seasons. Pulse seeds have to be procured from
other states and buffer stocks has to be maintained to run the
mills seamlessly throughout the year. Moreover, pulses being an
agro commodity, its price and availability depend on a
combination of factors like climatic conditions, government
policies, prevailing demand-supply scenario, etc. However, on
account of the shorter order completion time, the exposure to
volatility in prices is limited.
SDM was established as a partnership firm in August 2014 by Mr.
Jakir Hossain and Mr. Montu Rahaman for milling of pulses of all
varieties. Later, in April 2016, Mrs. Mira Bibi joined as a
partner. SDM is involved in pulse milling of all varieties with
an installed capacity of 80 metric tonnes per day (MTPD) at its
manufacturing facility located at Murshidabad, West Bengal. The
commercial operations of the facility commenced in April 2017.
SHRI BALAJI: Ind-Ra Assigns B+ Issuer Rating, Outlook Stable
------------------------------------------------------------
India Ratings and Research (Ind-Ra) assigned Shri Balaji Business
House Private Limited (SBBHPL) a Long-Term Issuer Rating of 'IND
B+'. The Outlook is Stable. The instrument-wise rating action is:
-- INR95 mil. Fund-based limit assigned with IND B+/Stable
rating; and
-- INR130 mil. Proposed fund-based limits assigned with
Provisional IND B+/Stable rating.
KEY RATING DRIVERS
The ratings reflect SBBHPL's nascent stage of operations as it
began commercial operations in January 2017, and low EBITDA
margins and moderate credit metrics due to the trading nature of
the business. The company reported revenue of INR944.6 million in
1HFY18 (FY17: INR108 million). EBITDA margin was 3.7%, gross
interest coverage (operating EBITDA/gross interest expense) was
6.9x and net financial leverage (total adjusted net
debt/operating EBITDAR) was 2.74x.
The ratings are also constrained by the company's tight liquidity
position with near full utilisation of the fund-based limits
during the seven months ending October 2017.
However, the ratings benefit from the low disease risk associated
with vannamie shrimps, which account 64% of the shrimps cultured
by SBBHPL's customers, resulting in continued feed demand.
The ratings are also supported by SBBHPL's promoters' close to
two decades of experience in the seafood business.
RATING SENSITIVITIES
Positive: Stabilisation of operations along with an improvement
in the liquidity position will lead to a positive rating action.
Negative: A decline in the EBITDA margin leading to deterioration
in the liquidity position would lead to a negative rating action.
COMPANY PROFILE
Founded in 2016, SBBHPL started commercial operation in January
2017. The company is engaged in trading of aqua feeds. Mr.
Bhabatosh Sahoo and Mr. Krishna Sahoo are the promoters.
SORT INDIA: ICRA Lowers Rating on INR8cr Loan to 'D'
----------------------------------------------------
ICRA has revised the rating for the INR8.00 crore Non-convertible
Debentures (NCD) of Sort India Enviro Solutions Limited (SIESL)
to [ICRA]D ISSUER NOT COOPEARATING from [ICRA]B+(Negative) ISSUER
NOT COOPERATING. The rating continues to remain in the 'Issuer
Not Cooperating' category. The rating is now denoted as "[ICRA]D
ISSUER NOT COOPERATING".
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Non Convertible
Debentures 8.00 [ICRA]D ISSUER NOT
COOPERATING; Revised from
[ICRA]B+ (Negative) ISSUER
NOT COOPERATING
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. The current
rating action has been taken by ICRA basis best available
information on the issuers' performance. Accordingly the lenders,
investors and other market participants are advised to exercise
appropriate caution while using this rating as the rating may not
adequately reflect the credit risk profile of the entity, despite
the downgrade.
Rationale
The rating downgrade follows the delays in debt servicing by
SIESL to the lender(s), as confirmed by them and debenture
trustee to ICRA.
Incorporated in January 2010, SIESL is engaged in collecting and
sorting of paper recyclables in the major cities of Gujarat,
namely Vadodara, Ahmedabad, Surat, Mehsana, Rajkot, Anand and
Nadiad. The company is promoted by Mr. Paresh Parekh and other
relatives. It has a wholly-owned subsidiary, Surat Recycling
India Limited (SRIL), which is in the same line of business and
caters to the region of Surat.
SRI MURARI: ICRA Reaffirms B- Rating on INR10cr Term Loan
---------------------------------------------------------
ICRA has reaffirmed the long-term rating to [ICRA]B- to the
INR16.00-crore bank facilities of Sri Murari Oil Industries
Private Limited. The outlook on the long-term rating is 'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund based-Term
Loan 10.00 [ICRA]B-(Stable); Reaffirmed,
removed from Issuer not
cooperating category
Fund based-Working
Capital Facilities 6.00 [ICRA]B-(Stable); Reaffirmed,
removed from Issuer not
cooperating category
Rationale
The rating reaffirmation takes into account the company's nascent
stages of operations and the intensely competitive industry. This
coupled with the exposure to fluctuations in the availability and
prices of raw material owing to its dependence on agricultural
product result in modest and fluctuating profitability
indicators. The ratings are further constrained by the weak
coverage and capitalisation indicators. Furthermore, the
liquidity position of the company is tight as evident from the
high utilisation of its working capital limits.
However, the rating favourable factors in the extensive
experience of the promoters spanning over years in the cotton
ginning, edible oil extraction and trading of agricultural
products, and the established customer and supplier base of the
company. ICRA also takes into account the location advantage with
proximity to the cotton producing belt of India providing regular
and easy access to the raw materials.
Key rating drivers
Credit strengths
* Long experience of the promoters: The promoters have more than
two decades of experience in the business of cotton ginning,
edible oil extraction, manufacturing of equipments for oil
extraction and trading of agriculture products, which enables
them to build strong customer and supplier base.
* Favorable location of the manufacturing unit: The manufacturing
unit is located in Bellary district, Karnataka which falls in the
cotton producing belt of India, providing regular and easy access
to the raw materials at lower transportation costs.
Credit weaknesses
* Nascent stages of operations of the company: The company
started its operations in November 2016. Given the high
competitive intensity in the cottonseed oil manufacturing
business, the company's ability of the company to ramp-up its
sales volumes, and improve profits and accruals is critical for
timely debt-servicing.
* Exposure of the company's profitability to changes in agro-
climatic conditions: The company is exposed to the risk of
fluctuations in the availability and prices of the raw-materials
owing to its dependence on agricultural product. It is also
exposed to the movements in the international oil prices.
* Intense competition, given the low complexity of work involved:
The company faces stiff competition from other unorganised
players as this industry is commoditized in nature and there are
virtually no entry barriers, which limits its pricing flexibility
and bargaining power with customers, thereby putting pressure on
its revenues and margins.
* Financial profile characterised by leveraged capital structure
and weak debt coverage indicators: The company has a weak
financial profile with high gearing of 12.20 times as on March
31, 2017, and weak coverage indictors with interest coverage of
2.04 times, Total Debt/OPBDITA at 7.01 times and NCA/TD at 7.36%.
Further, the debt-funded capex plans could impact the capital
structure and coverage indicators further in the near term.
* Tight liquidity position: The liquidity position of the company
has been constrained as reflected in high utilisation of working
capital limits. The average utilisation stood at 93% for the
period November 2016 to September 2017. Moreover, the company has
high repayment obligations in the near term stretching the
liquidity further.
Incorporated in 2014, SMOIPL is involved in de-linting and
crushing of cottonseeds to produce cottonseed oil, de-oiled cake
and cotton linters along with hull and liquid soap as by-products
since November 2016. The plant is located in Ballari, Karnataka.
Four promoters, namely, Mr. Vijay Bhaskar Reddy, Mr. Murahari
Reddy, Mr. Ananda Mohan Rao and Mr. V Chandrashekar manage the
operations of the company. The promoters have rich experience in
the businesses such as cotton ginning, edible oil extraction,
manufacturing of equipments for oil extraction and trading of
agriculture products.
In FY2017, the company reported a net profit of INR0.05 crore on
an operating income of INR31.96 crore.
TANISHQ REALITIES: Ind-Ra Affirms B Issuer Rating, Outlook Stable
-----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has affirmed Tanishq
Realities' (TR) Long-Term Issuer Rating at 'IND B'. The Outlook
is Stable. The instrument-wise rating action is:
-- INR300 mil. Term loan* (reduced from INR400 mil.) Term loan*
due on June 2020 assigned with IND B/Stable rating.
*The final rating is assigned following the receipt of sanction
letter by Ind-Ra.
KEY RATING DRIVERS
The affirmation reflects the continued saleable risk and
execution risk associated with TR's ongoing residential project
in Pune-Tanishq Vlasta. The project is being executed under a
joint development agreement. Of the total 434 flats in the
project, land owners will possess 154 flats and TR will own the
rest. At end-September 2017, TR sold 82 flats out of its share of
210 units and collected INR109 million (52% of the total amount)
from the buyers. This is the company's first real estate project.
The ratings factor in the risk of cash flow mismatches as
construction completion depends on customer advances. The project
cost is INR1,124 million, which is being funded by a debt of
INR300 million, a promoter contribution of INR400 million and a
customer advance of INR424 million.
The ratings are supported by the timely project execution and the
management expectation that the construction work would be
completed by FY20. TR completed 55% of the total construction
work and incurred a construction cost of INR643.9 million at end-
September 2017 by using a promoter fund of INR332 million, bank
debt of INR295.5 million and rest from customer advances.
The ratings are also supported by the promoters' experience of
over three decades in the real estate business and the locational
advantage of the project with respect to road connectivity, shops
and other basic amenities.
RATING SENSITIVITIES
Negative: Further leveraging of the existing business for new
projects and/or time and cost overruns, stressing cash flows for
debt service, could lead to a negative rating action.
Positive: Sales of flats as planned, leading to strong visibility
of cash flows, could lead to a positive rating action.
COMPANY PROFILE
Set up in 2012, TR is a Pune-based partnership firm, engaged in
executing residential and commercial real estate projects in the
city.
VAIDEHI ENTERPRISE: ICRA Moves B Rating to Not Cooperating
----------------------------------------------------------
ICRA has moved the long term ratings for the bank facilities of
Vaidehi Enterprise (VE) 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-Cash
Credit 5.00 [ICRA]B (Stable) ISSUER NOT
COOPERATING; Rating moved to
the 'Issuer Not Cooperating'
category
The rating is based on limited or no updated information on the
entity's performance since the time it was last rated in April
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 Vaidehi Enterprise, 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.
Incorporated in July 2014 by Mr. Suresh Goyal and Mr. Ajay
Bhaootra, Vaidehi Enterprises (VE) is engaged in the marketing of
high end women's dress material in tier I and tier II cities. The
firm commenced commercial operations in December 2014. The firm's
products include sarees and dress materials. While it procures
grey cloth from the local market, it outsources the dyeing &
printing activities and embroidery work to local units and
utilises the premises of its group company for the finishing work
and for despatching to wholesalers / distributors.
VEDAMATHA ENTERPRISES: ICRA Moves D Rating to Not Cooperating
-------------------------------------------------------------
ICRA has downgraded the rating to [ICRA]D and has also moved the
rating to the 'Issuer Not Cooperating' category for the INR12.50-
crore bank facilities of Vedamatha Enterprises Pvt. Ltd. The
rating is now denoted as "[ICRA]D ISSUER NOT COOPERATING."
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term-Fund- 12.50 [ICRA]D ISSUER NOT
based Cash Credit COOPERATING; downgraded
from [ICRA]B; Rating moved
to the 'Issuer Not
Cooperating' category
Rationale
The rating downgrade follows the delays in debt servicing by
Vedamatha Enterprises Pvt. Ltd. to the lender, as confirmed by
them to ICRA.
ICRA has limited information on the entity's performance since
the time it was last rated in July 2016.
As part of its process and in accordance with its rating
agreement with Vedamatha Enterprises Pvt. Ltd., 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 01, 2016, ICRA's
Rating Committee has taken a rating view based on the best
available information.
Key rating drivers
Credit strengths
* Long experience of promoters in the business: The rating takes
into account the director's long experience of around 3 decades
in the trading business.
Credit weaknesses
* Delays in debt servicing: The company has delayed in servicing
its debt obligations with State Bank of India and the account has
turned into a non performing asset.
Vedamatha Enterprises Pvt Ltd was incorporated in 2002, and is
currently engaged in the decorative laminations business as a
distributor of Greenlam Industries Ltd for Bangalore, under a
partnership firm named as "Vishaka Enterprises". The company is
also engaged in to trading of silk sarees through its retail show
room 'Devanad Silks' in Chickpet, Bangalore through partnership
firm named "Devanand Marketing". Since inception till June 2015,
the company was a distributor of HUL's FMCG products for
Bangalore City area.
VGS ENTERPRISES: Ind-Ra Moves B+ Issuer Rating to Not Cooperating
-----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has migrated VGS Enterprises
(VGSE) Long Term Issuer Rating to the non-cooperating category.
The issuer did not participate in the rating exercise despite
continuous requests and follow ups by the agency. Therefore,
investors and other users are advised to take appropriate caution
while using these ratings. The rating will now appear as 'IND
B+(ISSUER NOT COOPERATING)' on the agency's website. The
instrument-wise rating actions are:
-- INR45 mil. Fund-based working capital limit migrated to non-
cooperating category with IND B+(ISSUER NOT COOPERATING)/IND
A4(ISSUER NOT COOPERATING) rating; and
-- INR40 mil. Non-fund-based working capital limit migrated to
non-cooperating category with IND A4(ISSUER NOT COOPERATING)
rating.
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
Nov. 25, 2016. Ind-Ra is unable to provide an update, as the
agency does not have adequate information to review the ratings.
COMPANY PROFILE
Incorporated in 1997, VGSE is engaged in the trading of steel
products and processing of pre-painted galvanised iron sheets and
galvanised plain sheets/coils. The company's processing facility,
situated at Ghaziabad (Uttar Pradesh), has a monthly installed
capacity of 500MT. The firm is promoted by Mr. Arun Gupta, Mr.
Vaibhav Gupta and Mr. Saurabh Gupta.
VICKY FASHION: ICRA Moves B Rating to Not Cooperating Category
--------------------------------------------------------------
ICRA has moved the rating for the INR7.00-crore bank facilities
of Vicky Fashion Limited to the 'Issuer Not Cooperating'
category. The rating is now denoted as "[ICRA]B (Stable)/[ICRA]A4
ISSUER NOT COOPERATING."
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based-Cash 5.00 [ICRA]B (Stable); ISSUER NOT
Credit COOPERATING; Rating moved to
the 'Issuer Not Cooperating'
category
Fund-based-Packing 2.00 [ICRA]A4; ISSUER NOT
Credit COOPERATING; Rating moved to
the 'Issuer Not Cooperating'
category
Rationale
The rating is based on no updated information on the entity's
performance since the time it was last rated in June 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 Vicky Fashion Limited, 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 promoters in the textile business:
VFL's key promoter has an experience of more than four decades in
the textile business. The extensive experience of the promoters
has facilitated the company to establish strong relationship with
customers as well as suppliers.
* Comfortable capital structure: The total debt of INR4.33 Crore
as on March 31, 2016 comprised of cash credit facilities (INR0.20
Crore), packing credit (INR1.58 Crore), unsecured loan from
directors and their relatives (INR1.77 Crore) and vehicle loan
(INR0.76 Crore). With a gearing of 0.26 times as on March 31,
2016, the capital structure is at comfortable level.
Credit weaknesses
* Fluctuating operating income and weak coverage indicators:
VFL's operating income has been fluctuating over the past few
years. The coverage indicators have also remained at a modest
level as reflected by interest coverage of 0.41 times and Total
Debt/OPBDITA of 9.80 time in FY2016.
* Low profitability due to low value added nature of business:
The margins of VFL have remained low on account of low value
added nature of business due to significant presence of trading
revenues. This along with high competition in fabric
manufacturing business has limited the company's pricing
flexibility.
* Intense competitive pressures on account of fragmented industry
structure: VFL faces stiff competition from established organised
players and dominant unorganised players in the industry. During
the last few years, the textile industry has become more
competitive with several new players entering the industry,
thereby putting pressure on VFL's revenues and margins.
Incorporated in 1996, Vicky Fashion Limited (VFL) is
predominantly into trading of grey yarn and fabrics. In the year
2006, the company diversified into manufacturing of garments. The
company has an in-house manufacturing unit at Mahape in Mumbai
with a processing capacity of ~50,000 garments a
month. Apart from domestic sales, the company also exports
garments to various destinations like Italy, United States of
America (USA) and France.
VFL is one of the group companies run by the Jhunjhunwala family.
The other companies in the group are Colours International
Limited (CIL) which is involved in fabric trading and has a
similar customer base as VFL and J.J Exports which mainly acts as
a commission agent in fabric trading business.
=========
J A P A N
=========
TOSHIBA CORP: To Take Down Times Square Sign
--------------------------------------------
Jiji Press reports that Toshiba Corp. will terminate its 48-year-
old sponsorship for popular television anime "Sazae-san" at the
end of March, as part of its business restructuring, company
officials said on Nov. 22.
Jiji Press relates that the financially strapped company will
also pull out as a sponsor of "Nichiyo Gekijo" (Sunday theater),
a Sunday night TV drama slot that has been filled by hits
including "Shitamachi Rocket" (Downtown Rocket).
Furthermore, Toshiba will give up its billboard advertising at a
building in New York's Times Square in the first half of 2018,
according to the officials cited by Jiji Press.
According to Jiji Press, the withdrawals are the latest in a
series of operational reform and cost reduction measures by
Toshiba, which was hit hard by huge losses from its U.S. nuclear
power business.
The report says the company has sponsored "Sazae-san," a Sunday
evening program, since the show started in October 1969, running
commercials to advertise its household electrical appliances.
After the sale of its white goods business to Chinese consumer
electronics company Midea Group Co. last year and an agreement
this month to sell its TV business to China's Hisense Group, the
sponsorship for ad slots targeting general consumers became less
meaningful for Toshiba, the report states.
Toshiba, therefore, has decided to opt out of the sponsorship
contract for the TV anime when it comes up for renewal at the end
of March, the officials said, Jiji Press relays.
The Times Square billboard, shown prominently in TV broadcasts of
New Year's countdowns, has contributed to raising the name
recognition of Toshiba, according to Jiji Press.
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."
=====================
P H I L I P P I N E S
=====================
UNIWIDE GROUP: Court Enters Liquidation Order
---------------------------------------------
Doris Dumlao-Abadilla at the Philippine Daily Inquirer reports
that a regional trial court has issued an order to liquidate the
assets of the Uniwide group, declaring as insolvent the former
high-flying retailer which was still pleading for a chance to
undergo corporate rehabilitation.
In an order dated Nov. 23, the RTC of Paranaque Branch 258 issued
an order to liquidate Uniwide Sales Inc., Uniwide Holdings Inc.,
Naic Resources and Development Corp., Uniwide Sales Realty and
Resources Corp., First Paragon Corp. and Uniwide Sales Warehouse
Club, the Inquirer discloses.
According to the report, the court petition for liquidation was
filed by creditor Manila Bay Development Corp., through Zamora
Poblador Vasquez & Bretana Law Offices.
"Finding the allegation in the instant petition to be sufficient
in form and substance, debtors Uniwide Group of Companies are
hereby declared insolvent; consequently their assets are directed
to be liquidated pursuant to Section 112 Chapter 7 of Republic
Act No. 10142 otherwise known as the Financial Rehabilitation and
Insolvency Act (FRIA) of 2010," the Inquirer quotes RTC Judge
Noemi Balitaan as saying in the order.
"The sheriff of this court is directed to take possession and
control of all the properties of the debtors, except those that
may be exempt from execution," the RTC said.
This means the assets of the Uniwide group will be sold off to
pay liabilities, the Inquirer states.
Under the FRIA, the Uniwide group led by businessman Jimmy Gow
can no longer elevate the case to the Court of Appeals but it can
appeal straight to the Supreme Court, the report says.
The Inquirer notes that the court's order is in line with the
2013 order of the Securities and Exchange Commission en banc for
the dissolution and liquidation of assets of the Uniwide group.
As early as 2009, a hearing panel at the SEC had called for the
termination of the Uniwide group's rehabilitation.
The SEC had said the group was "insolvent" since 2003, which
meant that the company had more liabilities than assets, adds the
Inquirer.
About Uniwide Holdings
Uniwide Holdings Inc. (UW) was incorporated on Sept. 15, 1994,
primarily to engage in the business of investment by way of
acquisition, transfer, exchange or disposal of real or personal
property. The company started commercial operations on July 1,
1995. UW was established to act as the franchisor of the
retail/wholesale stores that trade under the name Uniwide Sales,
and to consolidate the real estate interests of the Gow Family.
The company is currently the franchisor of five Uniwide Sales
Warehouse Clubs and one Uniwide Sales Department Store.
Uniwide filed for rehabilitation in June 1999, and the
Securities and Exchange Commission approved its rehabilitation
plan in 2000. Under the plan, the Company will convert 50% of
its unsecured debt into 15-year convertible notes redeemable
anytime at its convenience, while the remaining 50% would be
restructured into a 10-year loan with 0% interest and a 3-year
grace period; payment will begin on the fourth year.
At that time, it still had eight warehouse clubs and two
department stores with total assets of PHP19.864 billion and
liabilities worth PHP11.101 billion, according to GMANews.TV.
By the end of 2008, Uniwide was operating only five warehouse
clubs and a department store. At the end of September 2009, the
group's assets stood at PHP2.726 billion, while liabilities
further increased to PHP12.292 billion.
The Uniwide group is composed of Uniwide Sales, Inc., Uniwide
Holdings, Inc., Naic Resources and Development Corp., Uniwide
Sales Realty & Resources Corp., First Paragon Corp., and Uniwide
Sales Warehouse Club, Inc.
=================
S I N G A P O R E
=================
PEARL HOLDING: Moody's Assigns B1 Corporate Family Rating
---------------------------------------------------------
Moody's Investors Service has assigned a first-time B1 corporate
family rating (CFR) to Pearl Holding lll Limited (Pearl lll).
At the same time, Moody's has assigned a B1 rating to the
proposed $175 million senior secured notes to be issued by Pearl
III.
The rating outlook is stable.
Pearl lll plans to use the proceeds from the senior secured notes
to repay the existing M&A loan facility of $175 million initially
borrowed by FT Holding ll Limited - which was merged with Pearl
lll - to acquire a 100% stake in Fischer Tech Ltd. and to repay
existing indebtedness at Pearl lll.
The ratings are dependent upon receipt of satisfactory
documentation and the successful completion of Pearl III's
refinancing.
RATINGS RATIONALE
"Pearl lll's CFR primarily reflects its small scale, the
fragmented and competitive nature of the tooling and molding
markets, customer and business concentration, as well as the
company's moderate financial leverage, following its debt-funded
acquisition of Fischer Tech," says Wan Hee Yoo, a Moody's Vice
President and Senior Credit Officer.
"At the same time, Pearl lll's CFR also factors in the company's
steady and good profitability, supported by its operating
efficiency, diversified end-markets and long-standing customer
relationships, and adequate liquidity that will improve further
upon completion of the refinancing," adds Yoo.
Although Pearl III's revenue - which will likely reach $250
million over the next 1-2 years - is larger than that of many
plastic molding components manufacturers in Asia, the company's
revenue base is still meaningfully smaller than that of most of
its similarly rated but more broadly focused manufacturing peers
in the same region.
Given this factor and its heavy reliance on the automobile and IT
segments for revenue generation, Pearl lll's operations are
vulnerable to potential industry downcycles or external market
disruptions. The company is also exposed to intense competition,
due to the fragmentation in the market and low entry barriers.
These risk factors are partly mitigated by the company's good
operational stability, supported by its: (1) long-standing
relationship with key customers; (2) improved end-market
diversity following its acquisition of Fischer Tech; and (3)
track record of offering reliable supply and on-time delivery to
global players.
Moody's expects that Pearl lll's adjusted EBITA margin will
improve to about 12.8%-12.9% over the next 1-2 years from about
12.7% for the 12 months ended 31 March 2017 (pro forma figures
including Fischer Tech), mainly owing to the company's cost-
cutting measures, as well as potential synergies from the Fischer
Tech acquisition. That said, there remains a certain degree of
execution and integration risks from the acquisition.
Pearl III's capital spending will likely remain relatively high
over the next 1-2 years, owing to potential investments to create
operational synergies with Fischer Tech. Nevertheless, Moody's
expects that the company will generate modest free cash flow,
given its good level of profitability and manageable level of
capital spending relative to its operating cash flow.
Moody's expects that the debt-funded acquisition of Fischer Tech
for $124 million in November 2017 will increase Pearl III's
adjusted gross debt/EBITDA to about 4.3x in 2017 (pro forma
figures including the full-year earnings contribution from
Fischer Tech) from about 3.1x in 2016. However, this ratio will
likely fall slightly to about 4.0x-4.2x in 2018-19, owing to
modest earnings growth. This level of financial leverage is
consistent with its current rating category.
The company's liquidity should be adequate over the next 12
months, because its operating cash flow, cash balance and unused
revolver of $25 million are sufficient to cover capital spending.
Upon successful completion of its refinancing, Pearl III will
have no material debt maturities until 2022.
The rating on the proposed senior secured notes will not be
affected by subordination to claims at the operating
subsidiaries, because: (1) the majority of claims will reside at
Pearl III post-refinancing; and (2) the notes will be secured by
a first-lien on effectively all of the assets, as well as
guarantees from Pearl lll's substantial subsidiaries, excluding
those located in China and Malaysia.
At the same time, the rating on the notes will not be higher than
the CFR, because this debt will constitute effectively Pearl
III's only outstanding debt which implies limited junior cushions
in its liability structure.
The stable rating outlook reflects Moody's expectation that Pearl
lll's credit quality will remain consistent with its current
rating category over the next 1-2 years.
Upward pressure on the rating could arise over time if the
company: (1) improves its business profile through meaningful
revenue growth and further customer diversification; (2)
demonstrates adjusted gross debt/EBITDA below 3.0x on a sustained
basis; and (3) maintains a good liquidity profile.
Downward pressure on the rating could emerge if Pearl lll's
revenue and earnings weaken, such that its adjusted gross
debt/EBITDA exceeds 4.5x-5.0x on a sustained basis, or the
company's liquidity profile weakens significantly. The rating
could also be pressured in the event of significant revenue
contraction from its key customers.
The principal methodology used in these ratings was Global
Manufacturing Companies published in June 2017.
Pearl Holding lll Limited (Pearl lll) is a precision engineered
plastic components producer, mainly engaged in the manufacture
and sale of plastic injection molds and related products. In
November 2017, the company acquired Singapore-based Fischer Tech
Ltd., a former Singapore Exchange-listed manufacturer of
precision engineering plastic components. Pearl lll is an
indirectly wholly owned subsidiary of Platinum Equity, LLC, a
private equity firm, headquartered in Los Angeles.
================
S R I L A N K A
================
SRI LANKA TELECOM: Fitch Affirms B+ Long-Term FC/LC IDRs
--------------------------------------------------------
Fitch Ratings affirmed Sri Lanka Telecom PLC's (SLT) Long-Term
Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'B+'
and its National Long-Term Rating at 'AAA(lka)'. The Outlook is
Stable.
SLT's IDRs are constrained by Sri Lanka's IDRs of 'B+', as the
government directly and indirectly holds a majority stake in SLT
and exercises significant influence on its operating and
financial profile. SLT's second-biggest 44.9% shareholder,
Malaysia's Usaha Tegas Sdn Bhd, does not have special provisions
in its shareholder agreement to dilute the government's
significant influence over SLT.
KEY RATING DRIVERS
Proposed Tax Credit Negative: Fitch believes SLT's 2018 operating
EBITDAR margin could decline to 24% (2017 forecast: 29%) and its
funds flow from operations (FFO) adjusted net leverage could
deteriorate to 2.5x (2017 forecast: 1.9x) if it were to pay an
additional LKR3 billion tax for its mobile towers. The proposed
monthly tax of LKR200,000 per mobile tower was announced on
November 9, 2017 in Sri Lanka's 2018 budget. SLT's fully owned
subsidiary, Mobitel (Pvt) Ltd., owns over 1,500 towers. Fitch
expect SLT's ratings to remain unaffected, as it has sufficient
headroom to absorb the proposed tax. However, Fitch has not
factored in the impact of the tower tax in its base case, as the
budget proposal has not been finalised.
Negative FCF; Large Capex: Fitch expect SLT to have a free cash
flow (FCF) deficit during 2017-2020 (2017 forecast: LKR7 billion
deficit), as cash flow from operation could fall short in funding
large capex plans to expand the group's optical fibre
infrastructure and 3G/4G mobile networks. Fitch expect SLT's 2017
capex to reach about LKR25 billion, or 34% of revenue, before
moderating to LKR20 billion-23 billion per year. SLT's fibre
investments are likely to have low returns due to the country's
low broadband tariffs. Dividends are likely to remain similar to
historical levels of LKR1.6 billion.
Data Drives Growth: SLT's data revenue growth will improve
following the removal of the telco levy on data services from
September 2017, which will lower the effective tax rate to around
20% from 32%. However, Fitch forecast SLT's EBITDA margin to
dilute by about 50bp each year over 2018-2020, as improving
profitability on fixed-broadband and mobile internet usage will
only partly offset margin dilution from a falling share of
profitable fixed-voice and international operations.
Overall revenue growth is likely to slow to 1.5% in 2017 (9M17:
1.3%, 2016: 8.5%) due to the reintroduction of value added tax
and nation building tax on telecom services, but should recover
to the mid-single digits in 2018-2019 along with better mobile-
voice revenue and the robust data growth.
Solid Market Position: SLT's ratings are underpinned by its
market-leading position in fixed-line services and second-largest
position mobile, along with its ownership of an extensive optical
fibre network. The company's stable cash generation benefits from
its diversified service offerings, including fixed-voice,
broadband, mobile, pay-tv, enterprise and international
operations. Fitch believe SLT's market position will strengthen,
as it plans to expand its mobile and fibre infrastructure.
Market Consolidation, M&A Risk: Fitch expect some industry
consolidation due to ongoing intense competition, especially in
the mobile segment; this segment has five operators that face
still-high investment requirements and of which the smaller
operators are unprofitable. SLT's National Long-Term Rating could
come under pressure if it were to perform a debt-funded
acquisition of a smaller operator; any rating action will be
based on the acquisition price, funding structure and the
financial and operating profile of the combined entity. The
international ratings, which are constrained by the sovereign
ratings, have sufficient headroom to absorb a debt-funded
acquisition.
DERIVATION SUMMARY
SLT's IDRs are constrained by Sri Lanka's IDRs of 'B+' due to the
government's ownership and significant influence on SLT's
operating and financial profile. SLT's National Long-Term Rating
is based on a comparison of domestic peers. SLT has lower
exposure to the crowded mobile market and more diverse service
platforms than Sri Lanka's mobile market-leader, Dialog Axiata
PLC (AAA(lka)/Stable). Sri Lanka's hard liquor market leader,
Distilleries Company of Sri Lanka PLC (DIST, AAA(lka)/Rating
Watch Negative), has a smaller operating scale compared with SLT
because a significant portion of the country's alcoholic beverage
consumption occurs outside the formal sector in which DIST
operates. DIST is also exposed to more regulatory risk in the
form of recurrent increases in indirect taxation. These risks are
counterbalanced by DIST's substantially stronger free cash flow.
SLT's forecast 2017 FFO adjusted net leverage of 1.9x is slightly
higher than that of DIST and Dialog.
KEY ASSUMPTIONS
Fitch's key assumptions within the rating case include:
- Proposed mobile tower taxes are not implemented.
- Slower revenue growth of 1.5% in 2017 (2016: 8.5%) due to
higher taxes. Growth to recover from 2018 to mid-single-digit
percentage driven by fixed-broadband and mobile data services.
- Operating EBITDAR margin to dilute by about 50bp in 2017-2018
due to a change in revenue mix.
- Capex/revenue to peak at 34% in 2017 (9M17: 36%), before
moderating to around 28%-30% as SLT expands it fibre and 3G/4G
networks.
- Dividend pay-out to remain similar to 2016 levels of LKR1.6
billion.
- FCF deficit during 2017-2020 resulting in gradual increase in
FFO adjusted net leverage.
RATING SENSITIVITIES
Developments that may, individually or collectively, lead to
positive rating action include:
- A change in Sri Lanka's IDRs will result in corresponding
action on SLT's IDRs.
- A weakening of links between SLT and the sovereign could
result in SLT's Local-Currency IDR being upgraded above
Sri Lanka's Local-Currency IDR. However, SLT's Foreign-
Currency IDR will remain constrained by Sri Lanka's Country
Ceiling of 'B+'.
Developments that may, individually or collectively, lead to
negative rating action include:
- A downgrade in Sri Lanka's IDRs will result in corresponding
action on SLT's IDRs.
- A debt-funded acquisition of a smaller operator could threaten
SLT's National Long-Term Rating, depending on the acquisition
price and the financial profile of the combined entity.
LIQUIDITY
Strong Access to Banks: SLT's liquidity was inadequate as at end-
September 2017, with cash of LKR6 billion and committed undrawn
bank lines of LKR10 billion being insufficient to fund short-term
debt of LKR26 billion and the annual FCF deficit of around LKR7
billion. However, Fitch expect SLT to comfortably refinance its
short-term debt, as the company has a demonstrated record of
accessing capital from local banks and capital markets.
===============
X X X X X X X X
===============
MALDIVES: Fitch Assigns B+(EXP) Rating to USD Bonds
---------------------------------------------------
Fitch Ratings has assigned The Republic of Maldives' forthcoming
US dollar-denominated bonds an expected rating of 'B+ (EXP)'.
KEY RATING DRIVERS
The expected rating is in line with the Maldives' Long-Term
Foreign-Currency Issuer Default Rating (IDR) of 'B+' with a
Stable Outlook.
RATING SENSITIVITIES
The rating would be sensitive to any changes in the Maldives'
Long-Term Foreign-Currency IDR.
Fitch assigned the Maldives a Long-Term Foreign-Currency IDR of
'B+' with a Stable Outlook in May 2017. The Long-Term Local-
Currency IDR is also 'B+'.
*********
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
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thereof are US$25 each. For subscription information, contact
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*** End of Transmission ***