/raid1/www/Hosts/bankrupt/TCRAP_Public/180301.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, March 1, 2018, Vol. 21, No. 043
Headlines
A U S T R A L I A
AUS STREAMING: Second Creditors' Meeting Set for March 9
MARJACK TPT: Second Creditors' Meeting Set for March 8
MATCH PLAY: Second Creditors' Meeting Set for March 8
MOCHELLES PTY: Second Creditors' Meeting Set for March 5
PALMER ST: First Creditors' Meeting Slated for March 8
QUINTIS GROUP: 15 Jobs Axed as Interest From Buyers Grow
RETAIL GROUP: Puts Shares in Trading Halt as Results Delayed
SUN RAY: First Creditors' Meeting Scheduled for March 7
WRAY ORGANIC: Goes Into Liquidation; Owes AUD2.8MM to Creditors
B A N G L A D E S H
BRAC BANK: S&P Assigns B+ LT Issuer Credit Rating, Outlook Stable
C H I N A
CENTRAL CHINA REAL: Fitch Rates Proposed USD Senior Notes BB-
CENTRAL CHINA REAL: Moody's Rates Proposed USD Bond 'B1'
DONGLING GROUP: Moody's Assigns B2 CFR; Outlook Stable
DONGLING GROUP: S&P Assigns B Corp Credit Rating, Outlook Stable
HNA GROUP: Investors Get Solace in Rare Guarantees on Bonds
MODERN LAND: Fitch Rates Proposed USD Senior Notes B+
TAHOE GROUP: Tap Issue No Impact on B- Rating, Fitch Says
YUZHOU PROPERTIES: Fitch Assigns BB- Rating to New USD Notes
YUZHOU PROPERTIES: S&P Rates New US$ Senior Unsecured Notes 'B+'
I N D I A
ANAND CONSTRUWELL: Ind-Ra Affirms BB+ LT Rating, Outlook Stable
ASUTI TRADING: CARE Moves D Rating to Not Cooperating Category
BAJAJ STEELS: CARE Assigns B+ Rating to INR6cr Long Term Loan
BISWAPITA COLD: CARE Assigns B+ Rating to INR6.31cr LT Loan
DAULATRAM INDUSTRIES: CARE Assigns D Rating to INR16.97cr Loan
DIGILOGIC SYSTEMS: Ind-Ra Assigns BB- LongTerm Issuer Rating
DINDAYAL INDUSTRIES: CARE Cuts Rating on INR6cr LT Loan to B
DTC PROJECTS: Ind-Ra Migrates BB Rating to Non-Cooperating
GAYATRI BIO-ORGANICS: CARE Moves D Rating to Not Cooperating
GODAWARI POWER: CARE Raises Rating on INR1503cr LT Loan to BB+
HINDUSTHAN NATIONAL: CARE Migrates D Ratings to Non-cooperating
JK HITECH: CARE Migrates B+ Rating to Not Cooperating Category
JOINT EFFORT: CARE Assigns B+ Rating to INR5.80cr LT Loan
JOYFUL PLASTICS: Ind-Ra Affirms BB- Rating on INR17.69MM Loans
KARANIA BROS: CARE Reaffirms B+ Rating on INR17.90cr LT Loan
LAHOTY BROTHERS: Ind-Ra Affirms BB+ Rating on INR75MM Loans
LANDMARK ROYAL: Ind-Ra Migrates BB Rating to Non-Cooperating
MAHAVIR GHAR: CARE Assigns 'B' Rating to INR9cr LT Loan
MANDAR ROLLER: Ind-Ra Migrates 'B+' Rating to Non-Cooperating
MKD INFRASTRUCTURE: CARE Assigns B+ Rating to INR6cr LT Loan
NMC INDUSTRIES: Ind-Ra Migrates BB- Rating to Non-Cooperating
NN GLOBAL: Ind-Ra Assigns BB- LT Issuer Rating, Outlook Stable
POPULAR AUTO: CARE Assigns B+ Rating to INR10cr LT Loan
RITESH TRADEFIN: Ind-Ra Migrates BB Rating to Non-Cooperating
ROHIT ENTERPRISES: Ind-Ra Migrates BB- Rating to Non-Cooperating
S.K. MARKETING: CARE Assigns B+ Rating to INR6cr LT Loan
SARAN ALLOY: CARE Assigns B+ Rating to INR6.35cr LT Loan
SARASWATI EDUCATIONAL: Ind-Ra Moves BB Ratings to Non-Cooperating
SCC PROJECTS: Ind-Ra Assigns B- LT Issuer Rating, Outlook Stable
SHRI OM: CARE Reaffirms B+ Rating on INR9.47cr LT Loan
SHRINI SOFTEX: Ind-Ra Affirms BB Rating on INR43.80MM Loan
SHRIRAMKRUPA FIBRES: Ind-Ra Gives B+ Rating to INR24.23MM Loan
SRI LAXMI: CARE Moves D Rating to Not Cooperating Category
SRI SRINIVASA: Ind-Ra Migrates 'B+' Rating to Non-Cooperating
SRI VEERANJANEYA: CARE Assigns B Rating to INR6cr LT Loan
SRISHTI BUILDERS: CARE Reaffirms B+ Rating on INR9cr LT Loan
STARSHINE ENGINEERING: Ind-Ra Moves B+ Rating to Non-Cooperating
SUPER HYGIENE: Ind-Ra Assigns BB- Issuer Rating, Outlook Stable
SUPREME GLAZES: Ind-Ra Gives 'BB' Rating to INR100MM Loan
TRADING ENGINEERS: Ind-Ra Lowers LT Issuer Rating to 'D'
VARDHMAN ROLLER: CARE Assigns B+ Rating to INR31.90cr LT Loan
I N D O N E S I A
KAWASAN INDUSTRI: Shutdown Won't Affect 2018 Earnings, Fitch Says
J A P A N
SOFTBANK GROUP: S&P Affirms BB+ LT CCR, Alters Outlook to Neg.
N E W Z E A L A N D
MAD BUTCHER: Sale Fair to Veritas Shareholders, Adviser Says
TAI POUTINI: West Coast Polytechnic Gets NZ$33MM Bailout
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A U S T R A L I A
=================
AUS STREAMING: Second Creditors' Meeting Set for March 9
--------------------------------------------------------
A second meeting of creditors in the proceedings of Aus Streaming
Limited has been set for March 9, 2018 at 4:30 a.m. at the
offices of DW Advisory, Level 2, 32 Martin Place, in Sydney, NSW.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the
Company be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by March 8, 2018, at 5:00 p.m.
Cameron Hamish Gray and Ronald John Dean-Willcocks of DW Advisory
were appointed as administrators of Aus Streaming on Feb. 3,
2018.
MARJACK TPT: Second Creditors' Meeting Set for March 8
------------------------------------------------------
A second meeting of creditors in the proceedings of Marjack TPT
Repairs Pty Ltd has been set for March 8, 2018, at 11:30 a.m. at
The Novotel Hotel, 200 Creek Street, in Brisbane, Queensland.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the
Company be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by March 7, 2018, at 4:00 p.m.
Gavin Moss and Trent McMillen of Chifley Advisory were appointed
as administrators of Marjack TPT Repairs on Feb. 1, 2018.
MATCH PLAY: Second Creditors' Meeting Set for March 8
-----------------------------------------------------
A second meeting of creditors in the proceedings of Match Play
Management Pty Ltd has been set for March 8, 2018 at 11:30 a.m.
at the offices of RSM Australia, Level 21, 55 Collins Street, in
Melbourne, Victoria.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the
Company be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by March 7, 2018, at 4:00 p.m.
Peter W Marsden and David M Mutton of RSM Australia were
appointed as administrators of Match Play on Feb. 2, 2018.
MOCHELLES PTY: Second Creditors' Meeting Set for March 5
--------------------------------------------------------
A second meeting of creditors in the proceedings of Mochelles Pty
Ltd has been set for March 5, 2018, at 11:00 a.m. at the offices
of Deloitte Financial Advisory Ptd Ltd, 8 Brindabella Circuit, in
Brindabella Business Park, Canberra Airport, ACT.
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 March 2, 2018, at 4:00 p.m.
Ezio Senatore of Deloitte Financial was appointed as
administrator of Mochelles Pty on Jan. 29, 2018.
PALMER ST: First Creditors' Meeting Slated for March 8
------------------------------------------------------
A first meeting of the creditors in the proceedings of Palmer St.
Developments Pty Ltd will be held at the offices of RSM Australia
Partners, Oracle Tower, Level 6, 340 Adelaide St, in Brisbane,
Queensland, on March 8, 2018, at 10:00 a.m.
Frank Lo Pilato and Mitchell Herrett of RSM Australia were
appointed as administrators of Palmer St. on Feb. 26, 2018.
QUINTIS GROUP: 15 Jobs Axed as Interest From Buyers Grow
--------------------------------------------------------
Chris McLennan at Katherine Times reports that some Quintis staff
have already been made redundant by the company's receivers.
Three staff from Katherine were made redundant, the report says.
Katherine Times relates that in a market update on Feb. 27, the
receivers said "a small number of redundancies" were made
amounting to 15 staff or seven per cent of the total workforce.
Jason Preston, Shaun Fraser and Robert Brauer were appointed as
receivers and managers of sandlwood grower Quintis Limited and a
number of its subsidiaries on January 23.
Quintis has continued to operate on a business as usual basis
since the receivers' appointment, Katherine Times says.
"Staff have been strongly supportive of the initiatives
undertaken since the appointment and remain focussed on
maintaining plantations across northern Australia and production
at Mt Romance," the receivers, as cited by Katherine Times, said.
"Institutional investors have conveyed clear messages of support,
with a number showing interest in increasing their ownership in
plantations."
According to Katherine Times, the receivers have started a
process seeking expressions of interest and inviting interested
parties to invest in or acquire all of Quintis' business and
assets.
The search includes advertisements in national newspapers in
Australia and in Asia.
"Subsequent interest in the business and assets has been strong,
with summary information packs forwarded to over 70 parties
including large institutional investors, pension funds,
specialist forestry organisations and several large sandalwood
buyers. A more detailed information memorandum and data room is
available to parties who have signed a confidentiality
agreement," receivers said, Katherine Times relays.
About Quintis
Quintis is Australia's largest sandalwood forestry management
company and manages 17 separate managed investment schemes.
Quintis employs approximately 500 staff at various locations
throughout Australia. Quintis manages nearly 13,000 hectares of
sandalwood plantations in northern Australia and owns a
distillery and pharmaceutical company to process the sandalwood
for the cosmetics, well-being and pharmaceutical industries. The
company was formed in 1997 and listed in 2007.
As reported in the Troubled Company Reporter-Asia Pacific on
Jan. 23, 2018, KordaMentha Restructuring partners Richard Tucker,
Scott Langdon, and John Bumbak have been appointed as Voluntary
Administrators of the Quintis Group.
The Voluntary Administrators were appointed on January 20 after
Asia Pacific Investments DAC exercised an option requiring
Quintis to acquire 400 hectares of plantations at a pre-
determined price of AUD37 million, with settlement required to
take place on Feb. 2, 2018. Quintis did not have the financial
resources to pay the put option.
As a result of the appointment of Administrators, on Jan. 23,
2018, the secured bondholders have appointed Jason Preston, Shaun
Fraser and Robert Brauer of McGrathNicol as Receivers and
Managers.
RETAIL GROUP: Puts Shares in Trading Halt as Results Delayed
------------------------------------------------------------
Sarah Danckert at The Sydney Morning Herald reports that the
embattled owner of the Gloria Jean's and Donut King brands,
Retail Food Group, has made a shock admission that its first-half
results will not be ready by the stock exchange's cut off date as
it faces a delay in the auditing of its accounts.
On Feb. 28, RFG took the unusual step of halting its shares from
trade ahead of its first-half results, the report says.
It again warned the market that it expected its 2018 first-half
results to be "materially lower" than in the first half of 2017,
SMH relates.
According to the report, the delay clearly caught some at RFG
offguard with the company confirming it had cancelled a planned
analyst call. It is believed the company also pushed back
scheduled media interviews.
The report says the halt comes as speculation mounts the company
will book impairments to its assets when it releases results.
RFG declined to comment on whether it has been in any discussions
with its lenders Westpac and National Australia Bank regarding
its results, SMH notes. It is understood the company's recently
refinanced $150 million senior debt remains in the frontline of
the bank's lending book and has not been placed in the workout
books for either banks, according to SMH.
The results delay and profit warning come after Fairfax Media
revealed in December that the group was using a brutal business
model that had sent hundreds of franchisees within its network to
the wall financially.
Fairfax's investigation also uncovered rampant underpayment of
workers within RFG's brands as a result of the unfair business
model for franchisees, and highlighted the company's misuse of
marketing funds contributed by franchisees, the report says.
SMH notes that the investigation came at a time when RFG was also
under pressure from analysts at UBS to properly record its leases
in its accounts as per new accounting rules. The change could
have a severe financial impact on the group, UBS has warned.
RFG owns the Gloria Jeans, Brumby's Bakeries, Donut King,
Michel's Patisserie, Crust Pizza and Pizza Capers chains.
Australian-listed companies have to report their results twice a
year -- once by the end of February and again at the end of
August, the report discloses. If RFG does not release its reports
by March 1 its shares risk suspension by the ASX. RFG said it
expected to release its results by March 2 at the latest.
SMH relates that the trading halt comes after RFG issued a profit
downgrade in January. This followed a readjusted earnings
forecast issued by the group in December.
In a statement to the Australian Securities Exchange on Feb. 28,
Retail Food Group requested the halt pending the receipt by RFG
of the auditor's report on the company's first-half result to
December 31, 2017.
"As foreshadowed in the release made on January 9, 2018, RFG
expects its statutory net profit after tax for first half 2018 to
be materially less than the result for the equivalent prior
period," the company, as cited by SMH, said. "These results can
only be finalised and released to the ASX once RFG's financial
statements for the period have been finalised.
"That can only occur once the auditor's report has been issued
which may not, RFG currently understands, be available to RFG
until Friday March 2, 2018."
PricewaterhouseCoopers partner Steven Bosiljevac conducted the
audit of RFG's annual accounts for 2017. Some of RFG's major
subsidiaries were in 2017 audited by Alfords Accounting, the firm
founded by RFG's former long-standing chief Tony Alford but to
which he is no longer associated, SMH notes.
The company has also recently appointed investigating accountants
from Deloitte to conduct a review of its Australian business, the
report adds.
SUN RAY: First Creditors' Meeting Scheduled for March 7
-------------------------------------------------------
A first meeting of the creditors in the proceedings of Sun Ray
South Pty Ltd and Sun Ray Group Pty Ltd will be held at the
offices of SM Solvency Accountants, Level 8/490 Upper Edward
Street, in Spring Hill, Queensland, on March 7, 2018, at 10:30
a.m. and 10:45 a.m.
Brendan Nixon & Leon Lee of SM Solvency Accountants were
appointed as administrators of Sun Ray on Feb. 25, 2018.
WRAY ORGANIC: Goes Into Liquidation; Owes AUD2.8MM to Creditors
---------------------------------------------------------------
Matthew Newton at The Chronicle reports that a Queensland owned
and operated organic retailer has gone into liquidation, owing
$2.8 million to more than 200 creditors.
Wray Organic Pty Ltd, which operates stores under the Wray
Organic banner in Toowoomba, Ipswich, and Newmarket, was
established by owner Deborah Wray and her partner Gary Davis at
Palm Beach on the Gold Coast in 2005.
The three stores will close if they can not be sold "as a going
concern," the report says.
According to The Chronicle, Ben Ismay -- jshaw@shawgidley.com.au
-- liquidator and director of insolvency firm Shaw Gidley, said
the six other independent Wray Organic franchises around
Queensland would be unaffected by the liquidation.
The Chronicle relates that Mr. Ismay said his priority was to
find buyers for the three stores owned and run by Wray Organic
Pty Ltd.
"The reality is that we need to find a buyer for the stores
because they won't continue in operation under our control
indefinitely," the report quotes Mr. Ismay as saying. "Our number
one priority is keeping employees in a job -- there are between
40 and 50 over the three stores . . . if we can't find a buyer
the doors will be closed and a number of people will be out of
work."
The company's Tamworth store and warehouse at Rocklea had closed
prior to the appointment of liquidators on February 18, the
report notes.
The Chronicle discloses that more than $2.8 million is owed to
203 creditors, and financial records indicate the company holds
assets valued at $1.5 million.
Mr. Ismay said it was too early to tell why the company had gone
into liquidation, the report states.
The Chronicle, citing most recent information lodged with the
Australian Securities and Investments Commission, discloses that
10 small businesses and farms around the Darling Downs region
have been caught up in the company's liquidation, owed a combined
AUD130,000. One of those is owed more than AUD54,000.
Expressions of interest for the purchase of the Toowoomba,
Ipswich and Newmarket stores are to be lodged by March 9, the
report adds.
===================
B A N G L A D E S H
===================
BRAC BANK: S&P Assigns B+ LT Issuer Credit Rating, Outlook Stable
-----------------------------------------------------------------
S&P Global Ratings assigned its 'B+' long-term and 'B' short-term
issuer credit ratings to Bangladesh-based BRAC Bank Ltd. The
outlook on the long-term rating is stable.
The rating on BRAC Bank reflects the bank's improving franchise,
satisfactory asset quality and funding, with above industry
average earnings. BRAC Bank's lower capitalization than global
peers' offsets these strengths. S&P assesses the bank's stand-
alone credit profile as 'b+'.
S&P said, "Our bank criteria use our Banking Industry Country
Risk Assessment economic risk and industry risk scores to
determine a bank's anchor, the starting point in assigning an
issuer credit rating. The anchor for banks operating only in
Bangladesh is 'bb-'.
"In our opinion, Bangladesh's low income economy, heavy
development needs, and fiscal constraints limit its economic
resilience. That said, Bangladesh has healthy growth prospects
and moderate economic imbalances with credit growing in line with
nominal GDP, as well as a benign inflation and current account
position. Bangladesh's credit risk remains substantial, with weak
foreclosure laws and underwriting standards, weak governance at
some banks, and client concentration leading to sizable stressed
assets in the banking industry.
"Bangladesh is implementing international regulatory standards.
However, in our opinion, supervision has gaps and imposes limited
market discipline. In our view, the banking system has
overcapacity and market distortions. A supportive core customer
deposit base and low reliance on external funding temper these
weaknesses.
"We expect BRAC Bank to maintain its satisfactory market position
and business stability over the next 12-18 months. The bank has a
deposit market share of about 2% and caters to a diversified
client base of corporates (41% of the loan book), small and
midsize enterprises (SME, 38%), and retail (21%) as of Sept. 30,
2017.
"We expect BRAC Bank to continue to grow its franchise in the
competitive yet underpenetrated financial services industry in
Bangladesh." The bank competes with 56 other banks in the
country. The growth of the bank is likely to come from expansion
and better utilization of its distribution network, which
includes 186 branches, 469 ATMs, and 452 SME unit offices.
BRAC Bank has a higher focus on retail and SME segments than
other local banks. It uses mobile banking solutions (through its
subsidiary bKash Ltd.) to reach a sizable underbanked and
unbanked population in the country. Banks in Bangladesh have
traditionally focused on the wholesale segment due to
relationship-based lending and higher operating costs associated
with SME and retail businesses. BRAC Bank's fee income comes
mainly from mobile banking, trade finance, and card products.
This income constitutes around 24% of the bank's operating
revenues and adds to its business diversity.
S&P said, "We consider BRAC Bank's management to be satisfactory.
The management team has identified SME and retail segments as the
bank's niche and has since 2015 embarked on strategies to improve
operating efficiency. These strategies involve increasing
products at branches, reducing unprofitable loans, deposit
accounts, and improving customer service levels and technology.
BRAC Bank was incorporated in May 1999 and commenced its
commercial operations in July 2001.
"Our assessment of BRAC bank's capital and earnings reflects our
expectation that the bank's pre-diversification risk-adjusted
capitalization (RAC) ratio will remain around 4.5% over the next
12-18 months." The bank's ratio of core earnings to average
assets averaged about 1% over the past five years and is better
than the industry average of 0.7%.
BRAC Bank's profitability is characterized by high net interest
margins owing to: (1) higher yields on its SME and retail
portfolio; (2) fee income contribution from mobile banking and
trade finance; and (3) competitive cost of funds due to sizable
low-cost deposits. The bank's strong operating revenues help to
offset elevated operating and credit costs.
S&P said, "We expect BRAC Bank's profitability to remain largely
stable, considering a cash dividend payout of around 10%. We
expect the bank to grow at 17%-20% over next 12-15 months. The
bank may have to increase capitalization over the next few years
to support its growth and meet Basel III minimum common equity
Tier 1 (CET1) and total capital ratios (including capital
conservation buffer of 2.5%) of 7% and 12.5%, respectively, by
2019. Its CET1 ratio stood at 10.36% and total capital ratio was
12.06% at the end of 2016.
"Our assessment of BRAC Bank's risk position reflects our view
that the bank's credit losses will remain within our normalized
loss expectations. We expect the bank's growth of unsecured
exposures in the SME and retail segments to be balanced by the
granularity and high spreads on these exposures." BRAC Bank has
some corporate client concentration, with the top 20 loans
comprising 16% of its loan book. However, this metric is better
than the industry average in Bangladesh. In addition, BRAC Bank
has a more balanced overall loan book comprising corporate, SMEs,
and retail. Its main corporate exposures include readymade
garments and textiles (a key export sector in Bangladesh) and
core sectors such as telecommunications, power, and steel.
BRAC Bank's SME business caters to entrepreneurs and small
businesses with average ticket sizes of US$7000-US$75,000; loans
are given for business expansion. The smaller ticket-size loans
are unsecured while the larger ticket-size loans are secured by
mortgages. The bank's retail loans consist of home loans (around
half of the retail exposure, where the loan-to-value ratio has a
regulatory cap of 70%), followed by personal loans and credit
cards.
S&P said, "We expect BRAC Bank to grow somewhat faster than the
industry (given its low base) amid a benign interest rate
environment. Still, we expect the bank's credit losses to remain
in check over the next 12 months. BRAC Bank had a lower gross
nonperforming loan (NPL) ratio of 5.8% on average over the past
five years as compared with the industry average of 9.3%.
However, given inherently weak borrower profiles and low recovery
prospects in Bangladesh, we believe the bank will need to
continue to have adequate NPL coverage (over 100% on average over
the past three years) in times of cyclically low charge-offs."
BRAC Bank's deposits, particularly its sizable low-cost current
and saving accounts (CASA), support its funding profile. Deposits
contributed more than 80% to the bank's funding base over the
past five years. Household deposits account for around half of
deposits, followed by corporates (30%) and SMEs. Its CASA ratio
of around 50% is better than the industry average (40%). BRAC
Bank's ratio of loans to customer deposits averaged 90% over the
past five years, higher than the industry average (78%). This is
partly because some state-owned banks in Bangladesh have very low
ratios given their capital constraints and due to BRAC Bank's
offshore banking unit.
BRAC Bank's assets in the form of cash and short-term funds
underpin its liquidity.
S&P said, "The stable outlook on BRAC Bank reflects our view that
the bank will steadily navigate competitive operating conditions
in Bangladesh and maintain its financial profile over the next
12-18 months.
"We could lower the ratings if the bank's asset quality declines
substantially, which could be due to its corporate or unsecured
loans.
"We could upgrade the bank if BRAC Bank raises capital to
maintain its pre-diversification RAC ratio above 5% on a
sustainable basis."
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C H I N A
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CENTRAL CHINA REAL: Fitch Rates Proposed USD Senior Notes BB-
-------------------------------------------------------------
Fitch Ratings has assigned Central China Real Estate Limited's
(CCRE; BB-/Stable) proposed US dollar senior notes a 'BB-(EXP)'
expected rating. The notes are rated at the same level as CCRE's
senior unsecured rating because they constitute its direct and
senior unsecured obligations. The final rating is subject to the
receipt of final documentation conforming to information already
received. CCRE intends to use the net proceeds from the note
issue for refinancing.
CCRE's ratings are supported by the company's competitive
position as a real-estate developer in Henan province with broad
housing product diversification and a growing non-property
development business from rental properties and project
management. Its ratings are also supported by its healthy
financial profile with low leverage, as measured by net
debt/adjusted inventory that proportionately consolidates its
joint ventures (JVs), of 27% in 2016. CCRE's ratings are
constrained by its aggressive strategy of scale expansion over
the next two years and Fitch expect CCRE's leverage to face
upward pressure to above 30% over this period.
KEY RATING DRIVERS
Solid Position in Henan: Fitch believes CCRE's track record
supports its plan to further strengthen its position by raising
its market share in Henan to 10%-15% in the next three to five
years. CCRE has been developing residential properties almost
entirely in the province over the past 25 years with a presence
across 18 prefecture-level cities and an established reputation.
CCRE's lower average selling price (ASP) of CNY6,635 per square
metre (sq m) compared with peers' ASP of above CNY11,000 per sq m
reflects its wide product exposure, which is not driven only by
the province's larger cities. The diversification helps it
mitigate the risks of policy tightening on housing sales in the
provincial capital, Zhengzhou.
CCRE's contracted sales reached CNY20 billion in 2016, with a
market share of 3.6% in Henan, among the top developers in the
province. CCRE recorded strong sales in 2017 with contracted
sales growth of 51% yoy to CNY30.4 billion, driven by increased
penetration and better sell-through rates in lower-tier cities in
Henan. Fitch expect CCRE's annual contracted sales to grow
further to CNY35 billion-45 billion in 2018-2019.
Growing Non-Development Businesses: Fitch estimate CCRE's non-
development business EBITDA/interest coverage rose to 0.3x at
end-2017 (2016: 0.15x), adding an operating cash flow source
other than development property sales to help the company service
debt. Growth in hotel and rental income, and its recent expansion
into project management of residential property developments in
the province's smaller towns drove the higher contribution from
non-development businesses. CCRE is also expanding into the
development and operation of cultural tourism projects that will
enhance its non-development income in the next three to five
years. Local governments are encouraging cultural tourism
projects, giving CCRE access to lower-cost funding and
alternative land banking channels that improve its financial
flexibility.
Aggressive Land Acquisition in 2017: In 9M17, CCRE replenished
8.2 million sq m in attributable gross floor area of land bank
for CNY9.4 billion, or a land-acquisition-to-contracted sales
value ratio of 0.6x, exceeding the 0.2x-0.3x in previous years.
The more volatile home sales performance in lower-tiered cities
may affect the pace at which CCRE sells its newly acquired
projects and may limit its scope to deleverage. CCRE's leverage
rose to 27% at end-2016 from 17% at end-2015. Fitch expect the
company's leverage to stay above 30% for the next three years on
accelerated land acquisitions.
Fitch believes CCRE's leverage will not rise above 40% as the
company has the flexibility to slow down its land acquisitions
due to a more sizeable land bank of 20.9 million sq m, sufficient
for its development for the next five to six years.
Stabilising Margin: Fitch estimate CCRE's EBITDA margin
(deducting capitalised interest from cost of sales) to be around
16%-17% in 2017-2019. The EBITDA margin fell to 17% in 2016 from
25% in 2014, affected by CCRE's strategy to accelerate inventory
clearance in 1H15. The higher contracted sales ASP in 2017 will
support its EBITDA margin when these projects are being
recognised in the next one to two years and CCRE's EBITDA margin
should stabilise over time.
DERIVATION SUMMARY
CCRE has increased its sales scale to a level comparable with
'BB-' rated peers while maintaining a healthier financial
profile. CCRE's contracted sales of CNY30 billion are comparable
with 'BB-' rated peers such as Yuzhou Properties Company
Limited's (BB-/ Stable) CNY40 billion, China Aoyuan Property
Group Limited's (BB-/Stable) CNY46 billion, and KWG Property
Holding Limited's (BB-/Stable) CNY29 billion. Its Fitch-rated
'BB' peers have higher contracted sales of CNY50 billion-70
billion.
CCRE's leverage of 20% on average in the past four years compares
favourably with 'BB-' rated peers' 30%-45%. CCRE's recent
proactive land acquisitions may increase its leverage to above
30% in the next two years, although most of the newly acquired
land sites are in Henan province, where the company has a well-
established reputation.
CCRE's EBITDA margin of 17% is near the bottom of the 18%-25%
range of 'BB-' rated peers as it has been affected by the
company's destocking strategy since 1H15. Fitch expect the
company's rising contracted sales ASP since 2017 and the
recognition of its projects to stabilise CCRE's EBITDA margin
over time. Fitch have forecast EBITDA margins of 16%-17% in 2017-
2019.
KEY ASSUMPTIONS
Fitch's key assumptions within Fitch rating case for the issuer
include:
- Total contracted sales by gross floor area to increase 39% in
2018 and 24% in 2019
- Average selling price for contracted sales to decrease by 10%
in 2018 on product mix, and increase 1% in 2019
- EBITDA margin (excluding capitalised interest) at 16%-17% for
2017-2019
- Land acquisition budget as a percentage of total contracted
sales of 53% for 2017 and 27%-33% for 2018-2019, allowing the
company to maintain a land-bank reserve of five years of
contracted sales
RATING SENSITIVITIES
Developments That May, Individually or Collectively, Lead to
Positive Rating Action
- Contracted sales sustained at above CNY50 billion
- Leverage, measured by net debt to adjusted inventory that
proportionately consolidates its JVs, persistently at 30% or
below
- Contracted sales to total debt sustained at above 1.5x
Developments That May, Individually or Collectively, Lead to
Negative Rating Action
- Sustained decline in contracted sales
- Leverage is sustained at 40% or above
- EBITDA margin sustained at below 18%
LIQUIDITY
Sufficient Liquidity: As of 30 June 2017, the company had total
cash of CNY10.9 billion (including restricted cash of CNY1.9
billion), sufficient to cover short-term debt of CNY4.4 billion
maturing in one year (consisting of bank loans of CNY0.9 billion,
other loans of CNY0.8 billion and senior notes of CNY2.7
billion).
Diversified Funding, Lower Costs: CCRE had total debt of CNY15.2
billion as of 30 June 2017, consisting of bank loans, other
loans, senior notes and corporate bonds. There were unutilised
banking facilities amounting to CNY55.7 billion as of 30 June
2017. The average cost of borrowing dropped to 6.9% in 1H17, from
8.9% in 2013 and 7.9% in 2015.
CENTRAL CHINA REAL: Moody's Rates Proposed USD Bond 'B1'
--------------------------------------------------------
Moody's Investors Service has assigned a B1 senior unsecured
rating to the proposed USD bond to be issued by Central China
Real Estate Limited (CCRE, Ba3 stable).
CCRE will use the proceeds from the proposed bonds to refinance
existing debt.
The notes' rating reflects Moody's expectation that CCRE will
complete the issuance upon satisfactory terms and conditions,
including proper registrations with the National Development and
Reform Commission and the State Administration of Foreign
Exchange in China (A1 stable).
RATINGS RATIONALE
"The proposed bonds - which will be mainly used for debt
refinancing - will not have a material impact on CCRE's credit
metrics, but they will improve the company's liquidity and debt
maturity profile," says Kaven Tsang, a Moody's Vice President and
Senior Credit Officer and also the Lead Analyst for CCRE.
CCRE's Ba3 corporate family rating reflects its leading market
position and long operating track record in Henan Province. The
rating also takes into consideration the company's track record
of achieving stable growth in contracted property sales over the
past five years.
CCRE achieved strong contracted sales of RMB30.4 billion in the
full year of 2017, a 51% year-on-year increase. Such a
performance will support the company's revenues and EBIT growth
in the next 12-18 months.
Moody's expects CCRE's revenue/adjusted debt, including from its
shares in joint ventures, to improve to 75%-80% over the next 12-
18 months from 61% during the 12 months ended June 2017.
Moody's also expects adjusted EBIT/interest, including from its
shares in joint ventures, to improve to 2.5x-3.0x from 1.8x over
the same period.
The improvement will bring CCRE's financial metrics back on track
towards level that Moody's expects for its Ba3 corporate family
rating.
On the other hand, CCRE's geographic concentration in Henan
exposes it to potential volatility in the province's economy, as
well as any changes in the local government's regulatory
restrictions on property purchases and construction activities.
CCRE's liquidity profile is adequate. It reported unrestricted
cash totaling RMB9.1 billion at the end of June 2017. Adjusted
cash/short-term debt - including amounts due to and from its
joint ventures - was at 170% at the same time.
The B1 senior unsecured debt rating is one notch lower than the
corporate family rating due to structural subordination risk.
This risk reflects the fact that the majority of claims are at
the operating subsidiaries and have priority over claims at the
holding company in a bankruptcy scenario. In addition, the
holding company lacks significant mitigating factors for
structural subordination.
As a result of these factors, the expected recovery rate for
claims at the holding company will be lower.
The stable rating outlook reflects Moody's expectation that CCRE
can maintain (1) its leadership position in Henan and generate
sales growth, (2) adequate liquidity levels, and (3) a
disciplined approach to land acquisitions.
Upward ratings pressure will be limited in the near term, given
its fairly high debt leverage.
Nevertheless, an upgrade could occur over the medium term if CCRE
(1) consistently achieves its sales targets; (2) demonstrates a
track record of good financial discipline by keeping adjusted
cash/short-term debt above 2.0x, adjusted revenue/debt above 95%-
100%, and adjusted EBIT/interest above 4.0x-4.5x, all on a
sustained basis (the ratios adjusted for its joint-venture
financials); and (3) broadens its geographic coverage in a
disciplined manner and strengthens its offshore banking
relationships.
The ratings could come under downward pressure if (1) CCRE
experiences a significant declines in sales; (2) the company
suffers a material decline in its profit margins; (3) CCRE
accelerates its expansion, such that its liquidity position
deteriorates or its debt levels rise materially, or both; or (4)
construction stoppages become more frequent and the company is
unable to make up for the lost time and misses deadlines on
project deliveries.
Specific indicators for a downgrade include (1) adjusted
cash/short-term debt below 1.0x-1.5x; (2) adjusted EBIT/interest
consistently below 2.5x-3.0x; or (3) adjusted revenue/debt below
80% on a sustained basis. The ratios are adjusted for its joint-
venture financials.
The principal methodology used in this rating was Homebuilding
And Property Development Industry published in January 2018.
Central China Real Estate Limited is a leading property developer
in Henan Province, with a land bank of 24.1 million square meters
at the end of June 2017. It was founded in 1992 and listed on the
Hong Kong Stock Exchange in June 2008.
DONGLING GROUP: Moody's Assigns B2 CFR; Outlook Stable
-------------------------------------------------------
Moody's Investors Service has assigned a first-time B2 corporate
family rating (CFR) to Dongling Group Inc. Co.
Moody's has also assigned a B3 senior unsecured rating to the
proposed USD notes to be issued by Dong Bao International Company
Limited and guaranteed by Dongling.
The bond rating reflects Moody's expectation that Dongling will
complete the bond issuance on satisfactory terms and conditions,
including proper registrations with the State Administration of
Foreign Exchange in China (A1 stable).
The ratings outlook is stable.
The company plans to use the proceeds from the proposed issuance
for general corporate purposes.
RATINGS RATIONALE
"The B2 CFR reflects Dongling's leading market position in zinc
and steel trading in China, underpinned by its long operating
track record, diversified counterparty network and prudent
working capital management," says Chenyi Lu, a Moody's Vice
President and Senior Credit Officer.
Founded in 2000, Dongling is one of the largest zinc and steel
trading companies in China (A1 stable). Dongling traded 1.9
million tons of zinc in 2016 and 1.8 million tons in the first
nine months of 2017, representing 32% and 42% of China's annual
zinc production over the same period.
In 2016, the Dongling sold approximately 6.7 million tons of
steel products, making it the largest supplier of steel products
in China, according to data from Mysteel Research Institute.
The company benefits from a diversified customer and supplier
base, with its top 5 suppliers and buyers accounting for not more
than 12% of sales.
The company also maintains a prudent working capital management
strategy, providing it with adequate liquidity to support the
commodity trading business. Between 2014 and September 2017, its
reported accountable receivables days remained below 7 days,
while its reported accounts payable days were around one to two
months.
"However, Dongling's CFR is constrained by the inherent risks in
China's commodities sector, execution risks associated with its
expansion into new metal products, and limited access to
funding," says Lu, also Moody's Lead Analyst for Dongling.
Dongling's earnings and cash flow are highly exposed to the
cyclical commodities industry. The company's key products -- non-
ferrous metal, steel and coal could also experience increased
volatility amid intensifying policy initiatives to improve air
quality and environmental standards in these sectors.
The company's strategy to expand its trading metals to aluminum
and copper can help reduce its revenue concentration in zinc and
steel. However, its expansion into these two competitive and
fragmented trading markets also raises considerable execution and
financial risks.
The company's limited access to funding is reflected by the
collateral and external guarantees required for its two onshore
bond issuances. As of September 30, 2017, RMB3.5 billion or 99.7%
of its bank loans were supported by security pledges or external
guarantees.
The company's liquidity position is weak. The company's cash
balance of around RMB8.5 billion as of September 30, 2017 was
insufficient to cover its short-term debt of RMB3.9 billion and
bills payable of RMB4.9 billion. In addition, approximately
RMB4.6 billion in cash was pledged against this debt.
Including bills payable and contingent liabilities in its
adjusted debt figures, and adding 20% of readily marketable
inventories in cash figures, Moody's forecasts the company's
adjusted net debt/EBITDA to remain at 3.0x-3.5x in the coming 12-
18 months, compared to 3.7x in 2016 and 3.4x for the 12 months
ended June 30, 2017. This level of leverage is low for a B2
rating, but is counterbalanced by its small scale, high industry
cyclicality and limited funding access.
The senior unsecured rating is one notch lower than the CFR
because of the risk of structural and legal subordination. This
risk reflects Moody's expectation that the majority of claims
will be at the operating subsidiaries' level, and will have
priority over claims at the holding company.
The stable outlook reflects Moody's expectation that Dongling
will maintain its leading market position in China's zinc and
steel trading market, and that it will manage its liquidity
position prudently without further deterioration.
An upgrade in the near term is unlikely, given the company's
small scale and concentration in a small number of commodities.
Nevertheless, Moody's would consider upgrading the ratings over
the medium term if Dongling: (1) continues to expand the scale of
its EBITDA and fixed assets; (2) successfully expands its product
offerings beyond zinc and steel; (3) improves its access to
funding.
The ratings would come under pressure if Dongling shows (1)
declining sales and/or a weakening market position; (2) a
deteriorating profit margin and weakened liquidity due to
increased competition, poor working capital management or
aggressive financial policies; and (3) rising leverage.
Credit metrics indicative of downward rating pressure include
adjusted net debt/EBITDA above 4.0x-4.5x and adjusted
debt/capitalization above 70% on a sustained basis.
The principal methodology used in these ratings was Trading
Companies published in June 2016.
Established in 2000 and headquartered in Baoji in Shaanxi
Province, Dongling Group Inc. Co. engages in the trading of zinc,
lead, steel and coal. The company is also involved in non-ferrous
metal smelting, non-ferrous metal concentrate mining and coal
mining.
The company is 57.1% owned by Shaanxi DongLing Industrial Company
Employee Share Ownership Association (SDLI) and 42.6% owned by
DongLing Village Committee. Mr. Li Heiji is the founder and the
general manager of Dongling, and owned 3.2% shareholding through
SDLI.
DONGLING GROUP: S&P Assigns B Corp Credit Rating, Outlook Stable
----------------------------------------------------------------
S&P Global Ratings assigned its 'B' long-term corporate credit
rating to China-based commodities mining, smelting, and
distribution company Dongling Group Inc. Co. (Dongling Group).
The outlook is stable. S&P also assigned its 'B-' long-term issue
rating to a proposed issue of U.S. dollar-denominated senior
unsecured bonds by Dong Bao International Co. Ltd., a wholly
owned subsidiary of Dongling Group. Dongling Group provides an
unconditional and irrevocable guarantee for the bonds.
S&P said, "Our rating reflects our view that Dongling Group's
commodities distribution business is expanding from a small scale
in a competitive market with low margins, and focuses on zinc and
steel. The rating also reflects our expectation that the
company's leverage will remain high and liquidity will be less
than adequate in the next 12 months.
"We expect Dongling Group's gross margin to remain very low due
to the company's back-to-back business model. Dongling Group has
been growing its commodities trading and distribution business
through the increase in non-ferrous and steel trading. Despite
weak commodity prices, the company's revenue growth has been
considerable over the past few years. However, we consider
Dongling Group's scale to be still small on a global basis, and
expect the company's market share to be limited in the highly
fragmented and competitive domestic China landscape. We do not
anticipate that Dongling Group will aggressively expand its other
business segments, such as smelting and property, and therefore
assume that these segments will have a limited impact on the
company's overall performance over the next two years.
"Dongling Group's margins are also likely to remain thin because
it primarily trades and distributes commodities, with limited
value-added services. On the other hand, we expect margins to
continue to have low volatility. The company does not take part
in proprietary trading, and its buying and selling prices usually
move in tandem, allowing for largely stable margins. As a result,
the company has been able to maintain slim but positive margins
in the past few years, despite volatility in underlying commodity
prices.
"Due to Dongling Group's small margins, the company's profits are
highly dependent on the scale and scope of its operations. In our
view, the concentration of its distribution business
geographically in China, and primarily in three products (zinc,
steel, and coal) is a constraint on scalability. As such, we
assess Dongling Group's business risk profile as weak. However,
the company's business concentration risk is tempered by its
diversified supplier and customer base.
"We consider Dongling Group to be highly leveraged. In the past
three years, the company's ratio of debt to EBITDA was 5.2x-
12.6x, and we forecast this ratio will remain above 5x in 2018.
We expect leverage to remain high because the company's growth is
likely to be primarily funded by debt, and a margin expansion is
not in our forecast. Due to Dongling Group's back-to-back trading
model, we view its key risk to be counterparty risk rather than
price risk. Nonetheless, the company has a fair track record of
managing working capital by maintaining a stable number of
inventory days despite its growth over the past years.
"Given the trading business is asset light and we do not expect
Dongling Group to significantly expand its other businesses, we
estimate the company's capital expenditure to remain modest at
Chinese renminbi (RMB) 400 million-RMB500 million per year in the
next two years.
"The stable outlook reflects our view that Dongling Group will
remain highly leveraged in the next 12 months because the company
will continue to fund the expansion of its trading business
through debt. We also expect the company's margins to remain
relatively stable, given the back-to-back nature of its
contracts. Dongling Group will continue to grow its trading
volume, but this will be offset by lower selling prices,
according to our assumptions, resulting in relatively stable
operating cash flow.
"We may consider downgrading Dongling Group if there is a
significant deficit in liquidity. This could happen if the
company's operating cash flow falls, its relationships with banks
weaken, or its access to the capital markets becomes restricted.
We could also lower our rating if the company materially
increases its leverage.
"We may upgrade Dongling Group if the company deleverages such
that its debt-to-EBITDA ratio falls below 5.0x for a sustained
period. This could happen if Dongling Group is able to expand its
margins or reduce leverage in its trading business. However, we
see limited upside potential in the next 12 months."
HNA GROUP: Investors Get Solace in Rare Guarantees on Bonds
-----------------------------------------------------------
Denise Wee at Bloomberg News reports that debt-laden Chinese
conglomerate HNA Group Co. has given its creditors cause for
concern in recent months, but its international bondholders are
finding some comfort in guarantees provided by the local parent
company.
Bloomberg relates that the structure means that overseas
investors would in theory have a direct claim against the
Chinese-based entity in the event of any default or bankruptcy
proceeding. While there's no indication that such events are in
the offing, scrutiny of such protections has increased after the
group's units missed payments to several Chinese banks and yields
on some of its units' notes traded at times in recent months at
levels considered distressed.
HNA said earlier this month that its finances are "very healthy,"
Bloomberg recalls.
Investors will be more comfortable with HNA securities that have
direct onshore guarantees, Owen Gallimore, head of credit
strategy at Australia & New Zealand Banking Group Ltd said,
Bloomberg relays.
According to Bloomberg, previous Chinese corporate debt failures
have resulted in more pain for overseas investors than for
domestic creditors, in part due to the lack of such guarantees
that would have given money managers a pathway to local Chinese
courts. Creditors outside China suffered heavy losses about two
decades ago when Guangdong International Trust & Investment Corp.
folded and Fujian International Trust was liquidated after
defaulting on overseas obligations, Bloomberg says.
At least four offshore bonds sold by HNA Group International Co.
are guaranteed by the onshore parent HNA Group, Bloomberg-
compiled data show:
* $473 million 8.125 percent bonds due 2018
- Has gained 4.7 cents to 97.7 cents on the dollar this month
* $300 million 6 percent 2019 securities
- Has risen 9.3 cents to 94.1 cents on the dollar this month
* $300 million 7 percent 2020 securities
- Has gained 5 cents to 93.1 cents on the dollar this month
* $200 million 6.25 percent bonds due 2021
- Has gained 7.8 cents to 88.9 cents on the dollar this month
Recent Chinese defaults such as that of property developer Kaisa
Group Holdings Ltd. in 2015 offered relatively high recovery
rates due to high asset values even without onshore guarantees.
But that isn't a true reflection of risks overall, according to
ANZ.
"Onshore creditors get better treatment and where we have seen
Chinese bond defaults, going back to Gitic and Fujian, offshore
creditors have often not fared well," Bloomberg quotes Mr.
Gallimore as saying.
Only about nine percent of all outstanding dollar bonds issued by
Chinese companies are guaranteed by entities in the nation,
according to data compiled by Bloomberg.
The "quite rare" guarantees have yet to be tested as there
haven't been any offshore defaults on such notes, according to
Christopher Lee, managing director of corporate ratings at S&P
Global Ratings, Bloomberg relays.
S&P gives a ccc+ credit assessment for HNA, which indicates a
default probability of about 35 percent based on the rating
firm's default sample for greater China for the past 17 years,
Mr. Lee said. "With HNA, the question is whether the group has
the capacity to repay that's unclear," the report quotes Mr. Lee
as saying.
Chinese creditors have responded to concerns among overseas
investors by offering deeds that enhance their creditworthiness.
Still, bonds with onshore guarantees offer clearer legal
protection and potential recovery to offshore noteholders than
securities with so-called keepwell deeds, one common kind of
sweetener, Moody's Investors Service said.
"In theory, these offshore bondholders are in the same position
as other senior unsecured debt creditors in the onshore market,
and can take legal action against the guarantor in Chinese
court," said Ivan Chung, head of greater China credit research &
analysis at the ratings firm, notes the report.
About HNA
China-based HNA Group Co. Ltd. offers airlines services. The
Company provides domestic and international aviation
transportation, air travel, aviation maintenance, and aviation
logistics services. HNA Group also operates holding, capital,
tourism, logistics, and other business.
Bloomberg News said HNA has been facing increasing pressure --
some banks are said to have frozen some unused credit lines to
HNA units after they missed payments -- after a debt-fueled
acquisition spree that left it with global assets ranging from
hotels and refrigerated trucks to aviation and car rentals.
MODERN LAND: Fitch Rates Proposed USD Senior Notes B+
-----------------------------------------------------
Fitch Ratings has assigned Modern Land (China) Co., Limited's
(B+/Negative) proposed US dollar senior notes a 'B+(EXP)'
expected rating and a Recovery Rating of 'RR4'.
The notes are rated at the same level as Modern Land's senior
unsecured rating because they constitute its direct and senior
unsecured obligations. The final rating is subject to the receipt
of final documentation conforming to information already
received.
The Outlook on Modern Land is Negative, reflecting Fitch's
estimate that Modern Land's leverage, measured by net debt over
adjusted inventory including proportionate consolidation of joint
ventures (JVs), increased to above 45% at the end of 2017. Fitch
believes Modern Land's higher leverage was mainly due to higher
leverage at JV levels as the company continued to expand by
replenishing land via JV projects. Fitch may take further
negative action if Modern Land's leverage is sustained above 40%.
KEY RATING DRIVERS
Increasing Leverage: Fitch estimates Modern Land's leverage rose
to around 46% as of end-2017 from 34% at end-2016 and 23% at end-
2015. The leverage exceeded Fitch previous expectation of below
40%, mainly due to higher leverage at JV levels. Fitch continues
to proportionately consolidate Modern Land's JV net debt and
adjusted inventory as Fitch expect the company's attributable
contracted sales to continue to account for less than 60% of its
reported contracted sales. Modern Land's leverage may improve in
2018, helped by a lower land premium budget and better sales
collection from newly acquired projects in Tier 3 cities where
home purchase policies are looser than higher-tier cities.
Limited Margin Improvement: Fitch expects Modern Land's gross
profit margin to hover around 20% in 2017-2018, compared with
41.0% in 2014 and 31% in 2015. Fitch estimate that Modern Land's
land cost as a percentage of average selling price exceeded 40%
in 2017 and will continue to pressure Modern Land's recognised
gross profit margin in 2018. Fitch expects Modern Land's EBITDA
margin (excluding capitalised interest) to continue to remain
below 20% in 2017-2018, but its lower land appreciation tax and
lower funding cost will keep its net profit margins at a
relatively stable level.
Growing Scale: Modern Land's reported contracted sales increased
34% yoy to CNY22 billion in 2017. Fitch estimates that
attributable sales also rose by more than 20% to more than CNY12
billion in 2017, if Fitch assume 54% of the contracted sales were
attributable, the same proportion as 1H17. Fitch expects the
company to target contracted sales of more than CNY30 billion, or
more than CNY16 billion in attributable sales, in 2018.
Sustained Land Bank Pressure: Fitch believes Modern Land is still
under pressure to replenish quality land to sustain growth in the
next three years, even though Fitch estimate that the company's
land bank has improved to slightly less than three years of sales
from about two years in 2015. Modern Land's attributable
available-for-sale land bank was 2.6 million square metres (sq m)
in gross floor area (GFA) at end-June 2017, compared with
attributable sales GFA of around 1 million sq m in 2016.
Modern Land extended its coverage to more Tier 1 and 2 cities in
2015-2017 but also increased land bank in Tier 3 cities in 2017
due to positive regional market sentiment. Fitch estimates that
Tier 1 cities, such as Beijing, Guangzhou and Shanghai, and Tier
2 cities, like Hefei, Suzhou and Wuhan, still account for more
than 60% of Modern Land's existing saleable resources by value.
DERIVATION SUMMARY
Modern Land's reported contracted sales and attributable sales
have been growing at CAGRs of more than 50% and 30%,
respectively, in 2013-2017, faster than most peers in the 'B'
rating category. Modern Land's historical low leverage of 30%-
40%, driven by its disciplined financial policy and low land
cost, is lower than 'B' rated peers whose leverage are around
45%-55%, such as Hong Yang Group Company Limited (B/Stable) and
Guorui Properties Limited (B/Stable). Modern Land's land bank
life is shorter than 'BB-' peers' more than three years of annual
sales, and remains one of the key constraints for the rating.
Modern Land's Negative Outlook reflects Fitch's estimate that the
company's leverage increased to above 45% as of end-2017. Fitch
will take further negative action if leverage is sustained above
40% in the next 18 months.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Fitch Rating Case for the Issuer
- Attributable contracted sales of CNY13 billion in 2017 and
CNY19 billion in 2018.
- Attributable land investment accounting for 70% of
attributable contracted sales in 2017 and 50% in 2018.
- Average selling price to increase to above CNY15,000/sq m in
2018.
RATING SENSITIVITIES
Developments That May, Individually or Collectively, Lead to
Negative Rating Action
- Insufficient land bank for two years of development.
- Sustained decline in attributable contracted sales.
- EBITDA margin (excluding capitalised interest) below 20% for a
sustained period (1H17 EBITDA margin including capitalised
interest: 13.2%).
- Net debt/adjusted inventory (including JV proportionate
consolidation) above 40% for a sustained period.
Developments That May, Individually or Collectively, Lead to
Positive Rating Action
- The Outlook may be revised to Stable if the negative
guidelines are not met in the next 18 months.
LIQUIDITY
Sufficient Liquidity, Lower Funding Cost: Modern Land's liquidity
remains healthy, with total cash of CNY8.7 billion, including
restricted cash, compared with short-term debt of CNY4.5 billion,
at end-June 2017. Modern Land significantly lowered its funding
cost to below 7% at end-June 2017 from 8.1% in 2016 and 10.5% in
2015. Fitch estimates Modern Land increased total cash to around
CNY10 billion by the end of 2017, which Fitch expect will be
sufficient to cover short-term debt obligations.
TAHOE GROUP: Tap Issue No Impact on B- Rating, Fitch Says
---------------------------------------------------------
Fitch Ratings says Chinese homebuilder Tahoe Group Co., Ltd.'s
(B/Stable) proposed additional issuance of its US$200 million
7.875% senior notes due 2021 will not affect the 'B-' rating on
the bond and its Recovery Rating of 'RR5'.
The proposed tap issuance will also be made by Tahoe Group Global
(Co.,) Limited and carry the same terms and conditions as the
existing notes. The notes are rated at the same level as Tahoe's
senior unsecured rating of 'B-' because they constitute the
direct and senior unsecured obligations of the company.
Tahoe's rating is supported by its rapidly growing contracted
sales, diversified footprint across China and its strong product
lines. Tahoe's projects, which are designed to include references
to Chinese culture, differentiate it from other small to medium
homebuilders, which have fast-churn business models. These are
offset by its very weak financial profile due to aggressive land
acquisitions since 2013.
YUZHOU PROPERTIES: Fitch Assigns BB- Rating to New USD Notes
------------------------------------------------------------
Fitch Ratings has assigned Yuzhou Properties Company Limited's
(Yuzhou; BB-/Stable) proposed US dollar senior notes an expected
'BB-(EXP)' rating.
The notes are rated at the same level as Yuzhou's senior
unsecured rating because they constitute direct and senior
unsecured obligations of the company. The final rating is subject
to the receipt of final documentation conforming to information
already received. The company's management says it plans to use
most of the net proceeds from the issue to refinance existing
indebtedness.
The Chinese homebuilder's ratings are supported by its strong
contracted sales growth, regional diversification and favourable
margin compared with its peers. Yuzhou's active land acquisition
approach will support higher contracted sales in the medium term,
though it may have driven leverage, defined by net debt to
adjusted inventory, up to around 40% by end-2017. Fitch believes
leverage of 40%-45% will be reasonable as the company's operating
scale will be larger. Fitch's assessment of Yuzhou's ratings will
depend on whether it can manage its contracted sales growth
without significantly impairing its leverage and margins.
KEY RATING DRIVERS
Land Purchases Underpin Expansion: Fitch believes Yuzhou's recent
land acquisitions will enhance its geographical diversification
as they include properties in three cities where it does not yet
operate, Beijing, Foshan and Shenyang.
The company, which is strongly positioned in the West Strait
Economic Zone and the Yangtze River Delta, will be able to
gradually expand into northern China as some properties acquired
are in Tianjin and Shenyang. Contracted sales in the West Strait
Economic Zone and the Yangtze River Delta accounted for 35% and
60% of total contracted sales in 2017, respectively. Fitch
expects the company's operating scale to continue increasing in
these two regions. Yuzhou's total contracted sales increased
73.7% to CNY40.3 billion in 2017.
Higher Leverage: Fitch expects Yuzhou's leverage to have
increased to about 40% by the end of 2017 (end-2016: 37.5%), as
Yuzhou liked used 50%-60% of its annual presales proceeds to
acquire land to maintain growth in contracted sales beyond 2017.
Fitch believes a rise in leverage to about 40% by end-2017 would
still be reasonable because of the good quality of its recent
land purchases and the increase in contracted sales. Yuzhou's
attributable land acquisition cost of CNY16.9 billion was 73% of
its total contracted sales in 2016, and most of the cost was paid
in 2016 and 2017.
Margin Remains Robust: Yuzhou's land acquisition prices will be
lowered by the very low average land cost for the recent
acquisition of seven projects in China from Coastal Greenland
Limited. Fitch expects Yuzhou's gross profit margin to remain at
30%-35% and EBITDA margin at 25%-30% (before capitalised
interest), which is high relative to peers rated in the 'BB'
category. Most of the sites purchased in 2016 and 2017 are in
good locations in major cities in the Yangtze River Delta and the
West Strait Economic Zone, where the company has a record of
achieving increases in selling prices.
DERIVATION SUMMARY
Yuzhou's business profile and scale are trending towards those of
'BB' rated peers. A faster churn rate may be achieved with a
slightly lower margin. Yuzhou's recent expansion into the Yangtze
River Delta will increase its leverage, but Fitch believes a rise
to around 40% in the next 12 months will be reasonable as it has
acquired good quality sites and achieved a much larger operating
scale.
CIFI Holdings (Group) Co. Ltd. (BB/Stable) is the closest peer to
Yuzhou as both of them are focussed on the Yangtze River Delta,
while Yuzhou is also strongly positioned in the West Strait
Economic Zone, and less exposed in the Bohai Rim. CIFI has lower
leverage and higher sales efficiency than Yuzhou, while its
EBITDA margin is lower than Yuzhou. As Yuzhou is striving to
balance its margin and sales efficiency, Fitch expects its margin
to trend down but sales efficiency to improve.
KEY ASSUMPTIONS
Fitch's key assumptions within Fitch rating case for the issuer
include:
- Attributable contracted sales of CNY30 billion-50 billion a
year in 2017-2020 (CNY30 billion in 2017)
- Contracted average selling price to rise 30% in 2017 and 10% a
year in 2018-2020 (27% in 2016)
- Gross profit margin (before capitalised interest) of 30%-35%
in 2017-2020 (37% in 2016)
- Land acquisition costs to account for 50%-60% of total
contract sales each year in 2017-2020 (73% in 2016)
RATING SENSITIVITIES
Developments That May, Individually or Collectively, Lead to
Positive Rating Action
- Attributable contracted sales sustained above CNY30 billion
(2017: CNY30 billion)
- Net debt/adjusted inventory sustained below 40% (2016: 39%)
- Contracted sales / gross debt sustained above 1.2x (2016:
0.8x)
- EBITDA margin (before capitalised interest) sustained above
25% (2016: 35%)
Developments That May, Individually or Collectively, Lead to
Negative Rating Action
- Net debt/adjusted inventory sustained above 45%
- Contracted sales/gross debt sustained below 1.0x
- EBITDA margin (before capitalised interest) sustained below
20%
LIQUIDITY
Healthy Liquidity: Yuzhou's current liquidity position is
healthy. The company had unrestricted cash of CNY18.5 billion at
end-1H17, which is ample to meet its short-term debt of CNY5.4
billion and support its planned expansion. The company has
diversified funding channels to ensure the sustainability of its
liquidity. Besides bank loans, it has established channels for
both onshore and offshore bond issuance, as well as equity
placement.
YUZHOU PROPERTIES: S&P Rates New US$ Senior Unsecured Notes 'B+'
----------------------------------------------------------------
S&P Global Ratings assigned its 'B+' long-term issue rating to a
proposed issue of U.S. dollar-denominated senior unsecured notes
by Yuzhou Properties Co. Ltd. (BB-/Stable/--).
The issue rating is one notch lower than the long-term corporate
credit rating on Yuzhou to reflect structural subordination risk.
The Chinese developer intends to use the net proceeds to
refinance existing debt and for general working-capital purposes.
The rating is subject to S&P's review of the final issuance
documentation.
S&P said, "Yuzhou's acquisition of seven projects from Coastal
Greenland Ltd. in January 2018 doesn't significantly change its
leverage, in our view. The cash consideration of Chinese renminbi
(RMB) 3.8 billion and project debt of about RMB1 billion are not
significant, given Yuzhou's total debt of RMB28 billion as of
June 30, 2017. The equivalent land costs (lower than RMB2,000 per
square meter) is also reasonable and can support Yuzhou's
profitability, in our view."
However, the company will take time to realize much of the sales,
especially those with primary land development (e.g. the Tianjin
project).
S&P said, "We expect Yuzhou to maintain financial discipline
during its expansion, and improve its leverage over the next 12
months. We also believe that the company will maintain steady
sales growth in 2018, given its sufficient saleable resources."
In January 2018, Yuzhou's sales rose 34% to RMB2.8 billion, after
rising 74% to RMB40.3 billion in 2017.
=========
I N D I A
=========
ANAND CONSTRUWELL: Ind-Ra Affirms BB+ LT Rating, Outlook Stable
---------------------------------------------------------------
India Ratings and Research (Ind-Ra) has affirmed Anand
Construwell Pvt. Ltd.'s (ACP) Long-Term Issuer Rating at 'IND
BB+'. The Outlook is Stable. The instruments-wise rating actions
are:
-- INR130 mil. Fund-based limits affirmed with IND BB+/Stable
rating; and
-- INR80 mil. Non-fund-based limits affirmed with IND A4+
rating.
KEY RATING DRIVERS
The affirmation reflects ACP's continued small scale of
operations as almost all of its contracts are executed in and
around Nashik. Revenue increased to INR725 million in FY17 (FY16:
INR667 million) on account of higher order execution. Ind-Ra
expects revenue to remain low in FY18 as the company reported
revenue of INR510 million as of 31 January 2018. EBITDA margins
improved to 7.6% in FY17 (FY16: 6.1%); on account of decrease in
cost of materials consumed and subcontracting charges.
The ratings, however, benefit from ACP's strong credit metrics.
Interest coverage (operating EBITDA/gross interest expense)
improved to 5.79x in FY17 (FY16: 2.39x) on account of an increase
in absolute EBITDA to INR55 million in FY17 (FY16: INR41
million). The company maintained a net cash position in FY17.
The ratings are also supported by ACP's strong liquidity position
as reflected by 45% average maximum use of its working capital
limits during the 12 months ended January 2018.
The ratings also benefit from the founders' over three decades of
experience in executing road and civil construction contracts for
state government entities in Nashik.
RATING SENSITIVITIES
Negative: Any weakening of liquidity position or a substantial
fall in revenue could be negative for the ratings.
Positive: A substantial increase in revenue while maintaining the
liquidity profile could be positive for the ratings.
COMPANY PROFILE
ACP has been executing civil works, road works, water supply
projects, underground drainage work for the state government
bodies, mainly in Nashik, since 1996. It was started as a
partnership firm and was converted into a private limited company
in 1996. ACP is managed by Navinchandra Premchand Chokasi and his
family.
ASUTI TRADING: CARE Moves D Rating to Not Cooperating Category
--------------------------------------------------------------
CARE Ratings has been seeking information from Asuti Trading Pvt
Ltd. to monitor the ratings vide e-mail communications dated
January 3, 2018; December 29, 2017; December 27, 2017;
December 26, 2017 and numerous phone calls. However, despite
CARE's repeated requests, the company has not provided the
requisite information for monitoring the ratings. In the absence
of minimum information required for the purpose of rating, CARE
is unable to express opinion on the rating. In line with the
extant SEBI guidelines CARE's rating on Asuti Trading Private
Limited's bank facilities will now be denoted as CARE D/CARE D;
ISSUER NOT COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term/Short 5.00 CARE D; Issuer not Cooperating
Term Bank based on best available
Facilities information
Short-term Bank 115.00 CARE D; Issuer not cooperating
Facilities based on best available
information
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating(s).
The reaffirmation of the rating of ATPL takes in to account
ongoing delays in debt servicing as a result of strained
liquidity
position.
Detailed Rationale & Key Rating Drivers
At the time of last rating on July 4, 2017 the following were the
rating strengths and weaknesses.
The revision in the ratings of ATPL takes in to account ongoing
delays in debt servicing owing to devolvement of letter of
credit as a result of strained liquidity position.
ATPL, incorporated in the month of April 1996, is engaged in to
trading of iron and steel products. It was incorporated by
Agarwal family which was subsequently bought by Mr Siddhartha
Bagrecha in 2011. It mainly trades in iron and steel products
like - Hot Rolled Coils (HRC), Cold Rolled Coils and Sheets
(CRC/s), Alloy CRC, Galvanized sheets, Mils Steel Angle
and Round bar, etc.
BAJAJ STEELS: CARE Assigns B+ Rating to INR6cr Long Term Loan
-------------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Bajaj
Steels and Industries Limited, as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 6.00 CARE B+; Stable Assigned
Detailed Rationale and key rating drivers
The rating assigned to the bank facilities of Bajaj Steels and
Industries Limited is primarily constrained by its small scale of
operations, low profitability margins and weak coverage debt
service indicators. The rating is further constrained on account
of working capital intensive nature of business along with
susceptibility to intense competition and raw material related
risk. The rating, however, draws comfort from experienced
directors, growing scale of operations and moderate capital
structure.
Going forward; ability of the company to increase its scale of
operations in the competitive market while registering
improvement in its profitability margins alongside effective
management of working capital requirement shall be the key rating
sensitivity.
Detailed description of the key rating drivers
Key Rating Weakness
Small though growing scale of operations: The scale of operations
of the company has remained small marked by total operating
income and gross cash accruals of INR26.16 crore and INR0.37
crore respectively during FY17 (April 01 to March 31). Further,
the firm's net worth base stood relatively small at INR6.11 crore
as on March 31, 2017. The small scale limits the firm's financial
flexibility in times of stress and deprives it from scale
benefits.
Though, the risk is partially mitigated by the fact that the
scale of operation is growing continuously (i.e.FY15-FY17).
BSIL's total operating income grew from INR14.92 crore in FY15 to
INR25.16 crore in FY17 reflecting a CAGR of around 30% owing to
higher quantity sold. Furthermore, the company has achieved a
total income of INR37.79 crore in 9MFY18 (refers to the period
April 1 to December 31, 2017; based on provisional results).
Low profitability margins along with weak debt coverage
indicators: The profitability margins of the company stood low
for the past two financial years i.e. FY16-FY17 due to highly
competitive nature of industry coupled with limited value
addition. PBIILDT margin improved and stood at 5.75% in FY17 as
against 4.91% in FY16 on account of economies of scale resulted
into decline in cost of production. Furthermore, the PAT margin
stood at 0.28x in FY17 against net losses in past owing to
improvement in PBILDT margin along with lower interest cost.
Owing to high debt level against the low profitability position;
the coverage indicators marked by interest coverage and total
debt to gross cash accruals stood weak. Interest coverage and
total debt to gross cash accruals stood at 1.36x and 18.76x
respectively for FY17.
Working capital intensive nature of operations: Operations of the
company are highly working capital intensive marked by an average
operating cycle of around 160 days in FY17. The company is
required to maintain adequate inventory of raw material for
smooth running of its production processes. Also, the company
maintains inventory in form finished form to meet immediate
demand of its customers. Entailing these resulted into average
inventory of 118 days for FY17. Being a highly competitive
business, the company allows an average payable period of around
90 days. On the contrary, the company receives an average payable
period of around 45 days. The high working capital requirements
were met largely through bank borrowings which resulted in a full
utilization of its sanctioned working capital limits for 12-
months ending December, 2017.
Susceptibility to intense competition and raw material related
risk: The iron and steel business is highly fragmented and
dominated by few large players having a nationwide presence. The
competition is intense due to the presence of large number of
regional and local suppliers. Around 80% of domestic steel and
iron industry consists of unorganized players, fragmented in
various regions. BSIL faces intense competition from bigger
private players and co-operative societies with well established
brand as well as unorganized sector's vendors. Our country a
whole faces direct competition from china in term of production
of steel.
The main raw material used in production of stainless steel is
Stainless Steel Flats. The raw material cost constituted ~75%
of the total cost of sales in FY17, thereby making profitability
sensitive to raw material prices mainly due to the reason that
the major raw material is commodity in nature and witness
frequent price fluctuations. The prices are driven by the
international prices which had been volatile in past. Thus any
adverse change in the prices of the raw material may affect the
profitability margins of the firm.
Key Rating Strengths
Experienced directors: The company is currently being managed Mr
Praveen Kumar Agarwal Ms Priti Agarwal and Mr Pradeep Kumar Tayal
having vast experience in the steel industry through their
association with this entity.
Moderate capital structure: As on March 31, 2017; the capital
structure of the company stood moderate marked by debt equity and
overall gearing stood at 0.16x and 1.14x.
Kanpur (U.P.) based Bajaj Steels and Industries Limited (BSIL) is
a limited company (closely held) incorporated in 1972 and is
currently being managed by Mr Praveen Kumar Agarwal, Ms Priti
Agarwal and Mr Pradeep Kumar Tayal. BSIL manufactures Stainless
Steel (SS) based products. The company has its manufacturing
facility located in Orai, Uttar Pradesh, having an installed
capacity of 700 metric ton per month as on Dec 31, 2017. The main
raw material is SS Flats which is prodcured from manufactures
located in Kanpur.
BISWAPITA COLD: CARE Assigns B+ Rating to INR6.31cr LT Loan
-----------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of
Biswapita Cold Storage Private Limited (BCSPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 6.31 CARE B+; Stable Assigned
Detailed Rationale and key rating drivers
The rating assigned to the bank facilities of BCSPL is
constrained by its small scale of operations, regulated nature of
industry, seasonality of business with susceptibility to vagaries
of nature, risk of delinquency in loans extended to farmers,
moderate capital structure with moderate debt coverage indicators
and competition from other players. The rating, however, derives
strength from its experienced promoters with long track record of
operations and proximity to potato growing area. The ability of
the company to increase the scale of operations with improvement
in profitability margins and to manage working capital
effectively will be the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Small scale of operations: BCSPL is a small player in the cold
storage industry marked by total operating income of INR2.62
crore (Rs.2.46 crore in FY16) with a PAT of INR0.05 crore
(Rs.0.04 crore in FY16) in FY17.
Regulated nature of business: In West Bengal, the basic rental
rate for cold storage operations is regulated by the state
government through West Bengal State Marketing Board. The rent of
these cold storages is decided by taking into account political
considerations, not economic viability. Due to severe government
intervention, the cold storage facility providers cannot enhance
rental charge commensurate with increased power tariff and labour
charge.
Seasonality of business with susceptibility to vagaries of
nature: BCSPL's operation is seasonal in nature as potato is a
winter season crop with its harvesting period commencing in
March. The loading of potatoes in cold storages begins by the end
of February and lasts till March. Additionally, with potatoes
having a perceivable life of around eight months in the cold
storage, farmers liquidate their stock from the cold storage by
end of season i.e., generally in the month of November. The unit
remains non-operational during the period from December to
January. Furthermore, lower agricultural output may have an
adverse impact on the rental collections as the cold storage
units collect rent on the basis of quantity stored and the
production of potato is highly dependent on vagaries of nature.
Risk of delinquency in loans extended to farmers: Against the
pledge of cold storage receipts, BCSPL provides interest bearing
advances to the farmers & traders. Before the closure of the
season in November, the farmers & traders are required to clear
their outstanding dues with the interest. In view of this, there
exists a risk of delinquency in loans extended, in case of
downward correction in potato or other stored goods prices, as
all such goods are agro commodities.
Moderate capital structure with moderate debt coverage
indicators: The capital structure of the company was moderate
with overall gearing ratio of 2.39x (FY16: 3.51x) as on March 31,
2017. Moreover, BCSPL's current ratio was below unity at 0.94x as
on March 31, 2017. Further the debt coverage indicators also
remained moderate marked by interest coverage of 1.67x (FY16:
1.57x) and total debt to GCA of 11.47x (FY16: 19.39x) in FY17.
Competition from other local players: In spite of being capital
intensive, the entry barrier for new cold storage is low, backed
by capital subsidy schemes of the government. As a result, the
potato storage business in the region has become competitive,
forcing cold storage owners to lure farmers by providing them
interest bearing advances against stored potatoes which augments
the business risk profile of the companies involved in the trade.
Key Rating Strengths
Experienced promoters with long track record of operations: Seikh
Khalilur Rahaman, possesses over four decades of experience in
the cold storage industry and looks after the overall management
of the company. Seikh Tamijuddin Khan has also more than three
decades of experience in the same line of business. They are
further supported by other two directors namely, Seikh Jiyayur
Rahaman Khan and Mr. Seikh Iktiyararuddin Khan, along with a team
of experienced professionals. Furthermore, BCSPL commenced
commercial operation since February 2009 and accordingly has a
long track record of operations.
Proximity to potato growing area: BCSPL is located in the potato
growing belt of the Paschim Medinipore district of West Bengal,
having a large network of potato growers along with potato
traders, thereby making it suitable for the farmers and traders
in terms of transportation and connectivity and ensures company's
higher level of capacity utilization.
BCSPL was incorporated in 2008 to set up a cold storage facility
with a storage capacity of 13,500 metric tonnes in Paschim
Medinipore, West Bengal. Since its inception, the company has
been engaged in the business of providing cold storage facility
primarily for potatoes to farmers. Besides providing cold storage
facility, the company also provides interest bearing advances to
farmers for their agricultural activities against the receipts of
potato stored.
DAULATRAM INDUSTRIES: CARE Assigns D Rating to INR16.97cr Loan
--------------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of
Daulatram Industries (DI), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 16.97 CARE D Assigned
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of DI is primarily
constrained on account of delay in long term loans and in
irregularity cash credit account due to interest application.
Detailed description of the key rating drivers
Key Rating Weaknesses
Delay in debt servicing owing to stressed liquidity: Banker has
confirmed in written that there are instances of delay in long
term accounts also the installments for the month of November &
December have not been served. Further CC accounts were overdrawn
during the year due to interest application. The management has
confirmed the same and delay in debt servicing was mainly due to
late receipt of payment from Railways. Late payments from
railways resulted in stressed liquidity position reflected by
elongated operating cycle of 379 days in FY17.
Bhopal (Madhya Pradesh) based Daulatram Industries (DI) was
incorporated in 1973 as a partnership firm. The firm is a
manufacturer and supplier of dynamic braking systems for diesel
and electric locomotives and cooling systems (air conditioners)
to Indian Railways.
DIGILOGIC SYSTEMS: Ind-Ra Assigns BB- LongTerm Issuer Rating
------------------------------------------------------------
India Ratings and Research (Ind-Ra) has assigned Digilogic
Systems Private Limited (DSPL) a Long-Term Issuer Rating of 'IND
BB-'. The Outlook is Stable. The instrument-wise rating actions
are given below:
-- INR30 mil. Fund-based facilities assigned with IND BB-
/Stable/IND A4+ rating;
-- INR18 mil. Non-fund-based facilities assigned with IND A4+
rating; and
-- INR45 mil. Proposed non-fund-based facilities* assigned with
Provisional IND A4+ rating.
* The ratings are provisional and shall be confirmed upon the
sanction and execution of loan documents for the above facilities
by DSPL to the satisfaction of Ind-Ra.
KEY RATING DRIVERS
The ratings reflect DSPL's low revenue base due to a small scale
of operations and stressed liquidity due to high working capital
intensity. Revenue was INR168 million in FY17 (FY16: INR149
million) and INR162.5 million (provisional) in 9MFY18. As of
November 2017, the company had an order book of INR239.33
million, which is likely to be executed within the next three
years.
In FY17, the net cash conversion cycle deteriorated to 201 days
(FY16: 66 days) on account of an increase in debtor collection
period to 183 days (143 days) and inventory holding period to 88
days (12 days). Ind-Ra expects the net cash conversion cycle to
improve in FY18 on account of a reduction in inventory holding
period. The company's use of the fund-based and non-fund-based
working capital limits at an average was 98.2% and 95.2%,
respectively, in the 12 months ended January 2018.
The ratings also factor in DSPL's moderate credit metrics. The
interest coverage (operating EBITDA/gross interest expense) fell
to 3.0x in FY17 (FY16: 4.2x) due to a higher increase in the
interest expense than in the absolute EBITDA. Net leverage
(adjusted net debt/operating EBITDAR) increased to 3.3x in FY17
(FY16: 0.7x) because of an increase in the total debt. Ind-Ra
expects the credit metrics to improve in FY18 on account of
scheduled debt repayments.
The ratings, however, are supported by the company's strong
EBITDA margins, which improved to 8.7% in FY17 from 6.9% in FY16,
on account of the execution of a higher proportion of software
development orders. The margins are likely to improve further in
FY18 as more such projects are executed. Moreover, the company's
promoter has more than two decades experience in the defense and
aerospace industry.
RATING SENSITIVITIES
Positive: An improvement in the working capital cycle resulting
into an overall improvement in liquidity will be positive for the
ratings.
Negative: Any deterioration in the working capital cycle
resulting into further liquidity stress will be negative for the
ratings.
COMPANY PROFILE
DSPL was incorporated in 2011. It offers systems, solutions and
products for the defense and aerospace industry. The plant is
located in Hyderabad and branch office is in Bangalore.
DINDAYAL INDUSTRIES: CARE Cuts Rating on INR6cr LT Loan to B
------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Dindayal Industries Limited (DIL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 6.00 CARE B; Issuer not
Facilities cooperating; Revised from
CARE B+ on the basis of
best available information
Detailed Rationale & Key Rating Drivers
Dindayal Industries Limited (DIL) has not paid the surveillance
fees for the rating exercise agreed to in its Rating Agreement.
In line with the extant SEBI guidelines, CARE's rating on DIL's
bank facilities will now be denoted as CARE B; ISSUER NOT
COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating. The ratings have been revised on account of
leveraged capital structure and weak debt coverage indicators.
Further, the rating continuous to remain constrained mainly on
account modest scale of operations with thin profitability,
stressed liquidity profile, and presence in the highly fragmented
and competitive segment of the pharmaceutical industry.
The ratings, however, continue to derive strength from the
experienced management in the pharmaceutical industry,
established marketing and distribution network and wide range of
products and ultra-modern manufacturing facility.
Detailed description of the key rating drivers
Key Rating Weakness
Leveraged capital structure and weak debt coverage indicators
Tangible Net worth of the company remained negative at INR13.78
crore as against negative INR3.71 crore in FY16, increased mainly
on account of increase in intangible asset of INR11.94 crores in
FY17. The capital structure remained weak with overall gearing of
-2.34 times as on March 31, 2017 as against -3.35 times as on
March 31, 2016. Further the total debt to GCA remained moderate
at 15.53 times in FY17 declined from 6.53 times in FY16 mainly
due to increase in Total debt level.
Modest scale of operations with thin profitability: The scale of
operations of DIL remained moderate marked by a total operating
income (TOI) of INR26.29 crosre. During FY17, TOI of the company
increased by 6.92% over FY16. PBILDT margin improved by 138 bps
and stood at 6.49% in FY17. However, PAT margin declined by 23
bps on account of higher depreciation and interest cost.
Stressed Liquidity position: The liquidity position of the
company remained stressed as reflected by operating cycle of 253
days in FY17, declined from 253 days in FY16 on account of
increase in collection and inventory period though partially
offset by increase in creditors period. The current and quick
ratio of the company stood at 1.07 times and 0.40 times
respectively as on March 31, 2017.
Presence in the highly fragmented and competitive segment of the
pharmaceutical industry: Herbal medicine plays a major role in
the healthcare and functional foods market, both in developed and
developing nations. The market for herbal supplements varies by
region based on factors such as consumer awareness, product
availability and forms of delivery, product acceptance and
regional regulations. The global herbal supplements and remedies
market is forecast to reach US$95.18 billion by the year 2017,
spurred by increasing incidence of aging population and consumer
awareness about general health and well being. Intrinsic benefits
including greater efficacy, little or no side effects, economical
and increasing inclination towards healthier natural herbs and
botanical derivatives promise animated growth in the burgeoning
market.
Key Rating Strengths
Experienced management in the pharmaceutical industry: Mr. Annand
Mohan Chhaparwal, director, have experience around 4 decades in
the pharmaceutical industry and looks after overall affairs of
the company. He is supported by Mr. Aditya Chhaparwal who is a
MBA by qualification and has experience of about 10 years. He
looks after finance and marketing function of the group. Further,
the promoters are supported by a team of qualified managerial
personnel having long standing experience in the industry.
Established marketing and distribution network: Being associated
with Dindayal group, DDIL is benefitted from the established
marketing network and existing client base of 'Dindayal Group'
which is involved in similar line of business from over one
century. The house of Dindayal has been associated with
formulation and development of ayurvedic medicines. The company
sells its products mainly in Maharashtra, Madhya Pradesh,
Rajasthan, Gujarat, Delhi etc. through 20 depots and super
stockists, 750 dealers and over 1 lakh odd outlets that are
serviced by an experienced team of 200 marketing professionals.
Wide range of products and ultra modern manufacturing facility
Ayurveda has now found acceptance amongst the aware in all walks
of life as a time-tested method of treatment for a variety of
ailments. DDIL has developed more than 500 ayurvedic products and
medicines including over-the-counter (OTC) and non OTC products
that have been well received in all over India. The range
comprises ayurvedic vitalizers, health supplements, health drink,
health care products and personal care products. All of these are
produced at Dindayal's three state-of-the-art plants. At every
step from selection of herbs, plants, flowers and roots to the
mixing, fermenting, processing and final packaging the highest
standards of quality are maintained.
Gwalior (Madhya Pradesh) based Dindayal Industries Limited (DIL)
was initially incorporated as Dindayal Aushadhi Private Limited
by Chhaparwal in 1992. DIL is engaged in the business of
manufacturing and trading of Ayurvedic Vitalizers. The company is
located in Gwalior with total installed capacity of 610 Tonnes
Per Annum (TPA) as on March 31, 2016. The company has marketing
team in Madhya Pradesh, Rajasthan, Delhi, Maharashtra, Gujarat
and other states.
DIL manufactures capsules for vitality commonly known as '303
Gold' and '303 Original' and other brand name is 'Shoot'.
DIL use 44 precious herbs and minerals activated with extracts of
20 exotic herbs in highly purified form. Further, the company
manufactures capsules for diabetes commonly known as Diabegon
pure herbal diabetic medicine and also manufactures medicines for
liver, cough & cold, chyawanprash, health supplements, natural
health drinks, ayurvedic classical medicines and personal care
products. The company met out its raw material requirement from
local dealers near to the Pohani and Shivpuri forest area and
other chemical from the importers located in Mumbai and Delhi.
DDIL utilized 70% of its installed capacity as March 31, 2016 in
its facility area spread in over 21000 square feet.
DTC PROJECTS: Ind-Ra Migrates BB Rating to Non-Cooperating
----------------------------------------------------------
India Ratings and Research (Ind-Ra) has migrated DTC Projects
Private Limited's 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:
-- INR330 mil. Term loan due on October 31, 2020 migrated to
Non-Cooperating Category with IND BB (ISSUER NOT COOPERATING)
rating; and
-- INR20 mil. Non-fund-based working capital limits* migrated to
Non-Cooperating Category with IND A4+ (ISSUER NOT
COOPERATING) rating.
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
January 23, 2017. Ind-Ra is unable to provide an update, as the
agency does not have adequate information to review the ratings.
* a bank guarantee limit, which is a sublimit of the term loan.
COMPANY PROFILE
DTC Projects was incorporated in 1995 by the DTC Group for its
real estate activities.
GAYATRI BIO-ORGANICS: CARE Moves D Rating to Not Cooperating
------------------------------------------------------------
CARE Ratings has been seeking information from Gayatri Bio-
Organics Limited to monitor the ratings vide e-mail
communications/letters dated from July 27, 2017 to January 5,
2018 and numerous telephonic interaction attempts. However,
despite CARE's repeated requests, the company has not provided
the requisite information for monitoring the ratings. In line
with the extant SEBI guidelines, CARE has reviewed the rating on
the basis of the publicly available information which however, in
CARE's opinion is not sufficient to arrive at a fair rating. The
rating on Gayatri Bio- Organics Limited's bank facilities will
now be denoted as CARE D/CARE D; ISSUER NOT COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank 16.66 CARE D; SSUER NOT COOPERATING;
Facilities based on best available
information
Short term Bank 10.00 CARE D; ISSUER NOT COOPERATING;
Facilities based on best available
information
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above ratings.
The ratings take into account the ongoing delays in debt
servicing at the back of stretched liquidity position of the
company.
Detailed description of the key rating drivers
Key Rating Weaknesses
Delays with respect to debt servicing on account of stretched
liquidity position: The company has been facing stretched
liquidity position which has led to delays in debt servicing at
the back of losses resulting in erosion of networth.
Gayatri Bio-organics Ltd (GBL) was originally incorporated as
Starchkem Industries Ltd in December 1991 by Mr. T. Sandeep Kumar
Reddy (Present Chairman). GBL is a part of Hyderabad based
Gayatri Group, which is in the business of infrastructure and
civil constructions, sugar and hospitality. GBL is engaged in the
business of manufacturing of Maize, Starch, sorbitol (Sugar
Alcohol), Liquid Glucose and other allied products having an
installed capacity of 1,35,000 MTPA for maize crushing as on
March 31, 2014.
GBL undertook backward integration and set up a maize crushing
plant in 1998. However, the company could not tackle the increase
in maize prices and sharp fall in selling price of finished goods
(starch and sorbitol) and consequently incurred heavy losses
which ultimately resulted in complete erosion of net worth of the
company. GBL was registered as sick industrial company with Board
for Industrial & Financial Reconstruction (BIFR) in 2000. The
company subsequently made preferential allotment of equity shares
to its promoters and M/s. Fursa Mauritius (Foreign Venture
Capital Investor). Fursa continues to hold 36.33% of stake in GBL
as on March 31, 2014. BIFR vide its order dated July 5, 2010,
declared that GBL ceases to be a Sick Industrial Company as the
company's net worth has turned positive and the company's revival
is sustainable.
In 2010, GBL acquired Devi Corn Products Limited (DCPL), a sick
company which has its starch manufacturing unit with an installed
capacity of 150 TPD at Balabhadrapuram, East Godavari District,
Andhra Pradesh for net consideration of INR15.50 crore by way of
term loans. DCPL also has a 1.5MW Co-generation Power Plant. GBL
had entered into a Business Transfer Agreement (BTA) for
transferring its business of manufacturing and selling starch,
sorbitol and other by products along with selling its units i.e.
Unit-I Situated at NH-9, Nandikandi Vlllaqe, Sadasivapet Mandal,
Medak District, Telangana and Unit-II Situated at Balabadrapuram
village, Biccavole Mandal, East Godavari District, Andhra Pradesh
on a "Slump Sale" basis. In the process the Company has
identified Bluecraft Agro Private Limited (BAPL). However,
transfer of assets and liabilities pursuant to BTA entered with
BAPL is still pending.
GODAWARI POWER: CARE Raises Rating on INR1503cr LT Loan to BB+
--------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Godawari Power and Ispat Limited (GPIL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank 1503.00 CARE BB+; Stable Revised from
Facilities CARE D
Short term Bank 89.34 CARE A4+ Revised from CARE D
Facilities
NCD 54.65 CARE BB+; Stable Revised from
CARE D
Detailed Rationale & Key Rating Drivers
The revision in the ratings assigned to the bank
facilities/instruments of GPIL takes into account the improved
operational and financial performance of the company in 9MFY18,
marked by increase in the revenue along with profitability owing
to increase in the sales realizations of all the products
following continued growth in domestic steel industry. The
ratings also take into account the completion of restructuring of
its debt facilities.
The ratings however are constrained by relatively high gearing
levels with high dependence on working capital related bank
borrowings, weak debt coverage indicators, lack of complete
backward integration of coal and presence in the inherently
cyclical steel industry.
The ratings also continue to derive strength from the track
record of the promoters (Hira Group), experience of the
management of GPIL in the steel industry, presence of captive
source of power and economic benefits arising out of captive iron
ore mines through backward integration.
The ability of the company to further improve its revenue growth
and profitability led by increase in mining capacity as well as
increase in sales realizations are the key rating sensitivities.
Improvement in its capital structure along with efficient working
capital management will also be critical from the credit
perspective.
Detailed description of the key rating drivers
Key Rating Weaknesses
Deterioration in operational performance in FY17, improved
substantially in 9M FY18: During FY17, the only operational
improvement which took place at GPIL was a substantial increase
in the iron ore mining activity from two of the companies owned
mines. Iron ore mined by GPIL increased from around 6.75 lakh
tonnes in FY16 to around 11.75 lakh tonnes in FY17. During the
first 9 months of FY18, GPIL has recorded further improvement in
production of iron ore as well as other products with a
substantial improvement in the operating rates for pellets and
wires. Increase in production volumes along with increase in the
sales realizations of all products during 9M FY18 has resulted
into robust revenue growth.
Deterioration in financial performance in FY17, improved
substantially in 9M FY18: During FY17, net sales remained flat on
a Y-o-Y basis primarily on account of decrease in sales
realizations (by around 6% for all the products except power &
ferro alloys). Volumes of major products like pellets, sponge
iron, billets and ferro alloys also recorded an average decline
of around 3%. During 9M FY18 however, the industry witnessed
significant recovery, with realizations increasing by around 20%
in comparison to the average realizations recorded in FY17.
The PBILDT margin though increased from around 9.83% in FY16 to
around 11.13% in FY17, the company recorded a net loss of around
INR77 crore in FY17 as compared to a net loss of INR48 crore in
FY16. However, in 9M FY18, GPIL recorded a PBILDT margins of
18.16% as compared to 8.14% in 9M FY17, recording a PAT of around
INR94 crore as compared to a net loss of around INR89 crore in
the same period previous year. On a consolidated level, the
company posted a net loss of INR74.00 crore in FY17 as compared
to a net loss of INR100 crore in FY16.
The overall gearing has deteriorated to 2.66x as on March 31,
2017 (2.41x as on March 31, 2016) on account of both decrease in
networth as well as an increase in debt owing to its re-
structuring program. As per the restructuring program with a cut-
off date as on June 1, 2016, the excess working capital limits
were converted into WCTL, Funding of interest component from June
01, 2016 to Feb 28, 2017 was converted into Funded Interest Term
Loan (FITL) and repayment period of debt was elongated as the
existing debt maturity period was very short. The re-structuring
involves a moratorium period for first 9 months, post which the
principle repayment of the TL/NCD/WCTL/FITL has started. The
company has already repaid the principle repayment due till March
2018.
Inherent cyclical nature of steel industry: The steel industry is
sensitive to the shifting business cycles, including changes in
the general economy, interest rates and seasonal changes in the
demand and supply conditions in the market. Apart from the demand
side fluctuations, the highly capital intensive nature of steel
projects along-with the inordinate delays in the completion
hinders the responsiveness of supply side to demand movements.
This results in several steel projects bunching-up and coming on
stream simultaneously leading to demand supply mismatch.
Furthermore, the value addition in the steel construction
materials like TMT bars, MS angles and channels, etc. is also
low, resulting into low product differentiation in the market.
The producers of steel construction materials are essentially
price-takers in the market, which directly exposes their cash
flows and profitability to volatility in the steel prices.
Industry Outlook: In the financial year 2017-18, steel production
is expected to remain higher. This will be backed by an expected
revival in consumption. An increase in infrastructure allocation
by the government in the Union Budget 2017- 18 is expected to
drive the pace of construction and infrastructure in the country.
Apart from this, the National Steel Policy 2017 released by the
government also aims to increase steel production. Thus, both
production and consumption of steel are expected to remain
buoyant in 2017-18.
Key Rating Strengths
Track record of promoters; experienced management: Incorporated
in 1999, GPIL is promoted by the Hira group, which has more than
two decades of experience in the steel & ferro alloys industry.
Mr. B L Agarwal, Managing Director, looks after the strategic
functions while his sons, Mr. Siddharth Agarwal (Executive
Director) and Mr. Abhishek Agarwal (Executive Director) look
after the new projects and operations of the group. The
marketing, financial and other functions are managed by a team of
professionals having good experience in the industry.
Captive sources of iron ore and power: GPIL has a 42MW of waste
heat recovery based, 11 MW of thermal power plant. In addition to
this, GPIL has a 20 MW biomass plant which was commissioned in
FY11 (refers to the period April 1 to March 31). Thus, GPIL has
the total power capacity of 73 MW. The company has sufficient
power capacity for meeting internal requirements of the plant,
and surplus power, if any, is sold to the state utility. The
availability of captive power plants provides GPIL assured and
reliable supply of power at economical rates, thereby
contributing to the operating efficiency. In addition, the
company is also expecting to tie-up another 25 MW of power
through its group companies by FY19. The company has a captive
power generation capacity of around 73 MW.
During FY17 (period refers from April 1 to March 31), despite
having labour issues in one of its mines, the company has
increased its iron ore mining output by around 80% to 11.75 lakh
tonnes from around 6.75 lakh tonnes in FY16. The company has tied
up almost 80% of its coal requirement of around 9 lakh tonnes
with Coal India Ltd.
Moving towards complete backward integration: GPIL has two
operational captive iron ore mines namely Ari Dongri and Boria
Tibu, both located in Chhattisgarh. The combined iron ore mining
capacity is 21,00,000 tpa (Ari Dongri:14,00,000 tpa and Boria
Tibu:7,00,000 tpa). During FY17, despite having labour issues in
one of its mines, the company has increased its iron ore mining
output by around 80% to 11.75 lakh tonnes from around 6.75 lakh
tonnes in FY16. GPIL also has coal linkages for about 80% of its
coal requirement from SECL while the balance is purchased
from open market. However, the company has not been able to
garner the complete benefits of its backward integration process
and the same is likely to further benefit the company in FY19.
Incorporated on September 21, 1999, Godawari Power and Ispat
Limited is promoted by the Hira group. GPIL is engaged in
manufacturing and selling of sponge iron, steel billets, ferro
alloys, pellets and various long steel products like MS round in
coil (wire rods), Cold Twisted Drawn (CTD) bars and Hard Black
(HB) wires, from its plant located at Raipur. GPIL has two
operational captive iron ore mines in Chhattisgarh at Ari Dongri,
with a capacity of 14,00,000 tonnes per annum (tpa) and at
BoriaTibu with a capacity of around 7,00,000 tpa. As on
December 31, 2017, GPIL had capacities of 21,00,000 tpa of
pellets, 4,95,000 tpa of sponge iron, 4,00,000 tpa of steel
billets and 1,00,000 tpa of HB wire. Furthermore, the company
also has a captive power plant of 73 MW and a ferro alloy
production capacity of around 16,500 tpa.
HINDUSTHAN NATIONAL: CARE Migrates D Ratings to Non-cooperating
---------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Hindusthan National Glass & Industries Limited (HNG), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 2,063.00 CARE D; Issuer Not Cooperating;
Facilities Based on best available
Information
Long-term/Short- 600.00 CARE D/CARE D; Issuer Not
term Bank Cooperating; Based on best
Facilities Available Information
NCD-Series-III 200.00 CARE D; Issuer Not Cooperating;
Revised from CARE C; (Outlook:
Negative) on the basis of
best available information
HNG has not paid the surveillance fees for the rating exercise
agreed to in its Rating Agreement. In line with the extant SEBI
guidelines, CARE's rating on HNG's bank facilities and
instruments will now be denoted as CARE D/CARE D; ISSUER NOT
COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while
using the above ratings.
The rating assigned to Non-Convertible Debenture (NCD) issue has
been revised on account of delay in servicing interest. The
liquidity position of the company has been severely impacted due
to continued high level of operational loss in FY17 (refers to
the period April 1 to March 31) and cash loss in H1FY18. The
ratings also take note of the experience of the promoters and
established position of the company in the glass industry.
Detailed description of the key rating drivers
Key Rating Weaknesses
Ongoing delays in debt servicing: There are delays in servicing
of bank facilities and interest payment of NCD issue.
Continued losses resulting in stressed liquidity position The
company's total operating income declined by 7% y-o-y from
INR1975.51 crore in FY16 to INR1853.52 crore in FY17 on account
subdued demand and stagnant realisations. PBILDT margin declined
from 13.50% in FY16 to 10.42% in FY17. Accordingly, with
relatively stable capital charges, operating loss increased from
INR187.36 crore in FY16 to INR219.81 crore in FY17. However, HNG
reported extraordinary income of INR94.59 crore in FY17 on
disposal of its entire shareholding in a subsidiary.
Consequently, the net loss reduced from INR182.31 crore in FY16
to INR127.11 crore in FY17 and the company achieved GCA of
INR47.75 crore. PBILDT interest coverage was below unity for
FY17. The company made interest payments through other income and
utilisation of working capital borrowings. During H1FY18, HNG
incurred net loss of INR137.53 crore on total operating income of
INR897.90 crore as compared to net profit of INR16.95 crore on
total operating income of INR912.13 crore during H1FY17. The cash
loss has resulted in the stressed liquidity position of the
company.
Key Rating Strengths
Long track record of the company with established market
presence:
HNG, having track record of over six decades, is a leading
manufacturer of container glass and has a pan India presence. It
is the largest container glass player in the country.
Experienced promoters HNG was promoted by late Mr. C. K. Somany,
who was a renowned technocrat having over 60 years of experience
in glass technology. Presently his two sons, Mr. Sanjay Somany
(Chairman) and Mr. Mukul Somany (Vice Chairman), manage the
overall affairs of the company. They have an experience of over
two decades in the container glass industry.
HNG, incorporated in February 1946, was promoted by late Mr. C.
K. Somany of the Kolkata-based Somany family. The company is a
leading manufacturer of container glass with seven manufacturing
units, spread across the country having an aggregate installed
capacity of 1,569,500 tpa (tonne per annum), the largest in the
country.
JK HITECH: CARE Migrates B+ Rating to Not Cooperating Category
--------------------------------------------------------------
CARE Ratings has been seeking information from JK Hitech Rice
Mill Private Limited to monitor the rating vide e-mail
communications/ letters dated June 19, 2017, Oct. 5, 2017,
Nov. 22, 2017, Nov. 29, 2017, Jan. 23, 2018 and numerous phone
calls. However, despite CARE's repeated requests, the firm has
not provided the requisite information for monitoring the rating.
In the absence of minimum information required for the purpose of
rating, CARE is unable to express opinion on the rating. In line
with the extant SEBI guidelines, CARE's rating on JK Hitech
Private Limited bank facilities will now be denoted as CARE B+;
ISSUER NOT COOPERATING for long term bank facilities; ISSUER NOT
CORPORATING for short term bank facilities.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank 10.05 CARE B+; ISSUER NOT COOPERATING;
Facilities Based on best available
information
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
Detailed description of the key rating drivers
At the time of last rating in March 22, 2017 the following were
the rating strengths and weaknesses:
Key Rating Strengths
Experienced promoters: The company is being promoted by Mr. Jata
Shankar Prasad and his sons Mr. Ghanshyam Kumar and Mr. Neeraj
Kumar based out of Bihar. Mr. Jata Shankar Prasad is having
around three decade experience in agro industry through family
businesses. He will be adequately supported by his two sons Mr.
Neeraj Kumar (aged 38 years, graduate) having an experience of
around a decade in trading of agro commodities and Mr. Ghanshyam
Kumar (aged 34 years, graduate) who is relatively new to the
business.
Proximity to raw material sources: JKH's plant is located at
Raxaul in East Champaran district, Bihar 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.
Key Rating Weaknesses
Short track record of operation: The company started its
operation from July 2015 hence having a two decade of track
record of operation.
Volatility in profit margins subject to government regulations:
The Government of India (GOI), every year decides a minimum
support price (MSP - to be paid to paddy growers) for paddy which
limits the bargaining power of rice millers over the farmers. The
MSP of paddy was increased during the crop year 2017-18 to
INR1,550/quintal from INR1,470/quintal in crop year 2016-17. The
sale of rice in open market is also regulated by the GoI through
the levy of quota, depending on the target laid by the central
government for the central pool. Given the market determined
prices for finished product vis-a-vis fixed acquisition cost for
raw material, the profitability margins are highly vulnerable.
Such a situation does not augur well for the company, especially
in times of high paddy cultivation.
Seasonal nature of availability of paddy resulting in working
capital intensity and exposure to vagaries of nature Rice milling
is a working capital intensive business, as the rice millers have
to stock paddy by the end of each season till the next season
since the price and quality of paddy is better during the
harvesting season. Further, while paddy is sourced generally on
cash payment, the millers are required to extend credit period to
their customers. Also, paddy cultivation is highly dependent on
monsoons, thus exposing the fate of the company's operation to
vagaries of nature. The average utilization of bank borrowing was
high at around 98% in last 12 months ended January, 2017.
Fragmented and competitive nature of industry: The plant is
located in Bihar which is in close proximity to hubs for
paddy/rice cultivating region of West Bengal. 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.
JK Hitech Rice Mill Private Limited (JKH), was incorporated in
Feb. 9, 2012 by Mr. Jata Shankar Prasad and family based out of
Bihar, for the purpose of setting up a rice processing unit. The
company commenced operations in July 2, 2015 with paddy
processing capacity of 38,400 metric tonne per annum (MTPA). The
milling unit of the company is located at Raxaul in East
Champaran disrict of Bihar.
JOINT EFFORT: CARE Assigns B+ Rating to INR5.80cr LT Loan
---------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Joint
Effort Society (JES), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 5.80 CARE B+; Stable Assigned
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of JES is primarily
constrained on account of its nascent stage of operations with
increasing competition in private education sector and highly
regulated industry. The rating derives strength from the well
qualified & experienced management and having franchise of Delhi
Public World School.
The ability of the society to successfully stabilize its
operations with achieving envisaged level of TOI and
profitability
margins would be the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Nascent stage of operations: JES entered into agreement in
September 2016 with Delhi Public school private limited with an
objective to run a school for providing school education by
starting "DPWS Ashta" in Ashta under Central Board of Secondary
Education (CBSE). For same, JES was undertook a project for
construction of premises in Ashta to accommodate students of
DPWS. The construction work was completed in August, 2017 and
incurred total cost of INR15.00 crore towards the project funded
through term loan of INR5.80 crore and balance of 9.20 crore from
capital and unsecured loans from trustees. The new school
building will become operational from April, 2018.
Increasing competition in private education sector and highly
regulated industry: In India, the education industry is highly
competitive and fragmented in nature with presence of several
private schools, colleges and institutes in all over India. In
Rajasthan, around 3,800 secondary schools and 1,990 senior
secondary schools are running. In such a competitive scenario to
achieve high occupancy levels appears to be a challenging task.
Thus, differentiating factors like infrastructural facility and
student to teacher ratio etc. will be crucial in order to attract
new students. Further the regulatory challenges continue to pose
a significant threat to the educational institutes.
Key Rating Strengths
Qualified and highly experienced key management personnel: JES
has a team of highly qualified and well experienced
professionals. Mr. Prashant Singhai, President, is B.E.
(Mechanical) by qualification. He has vast experience of two
decades in the education industry. Mr. Sayed Parvej Ali,
Secretary, is L.L.B.
by qualification, who has experience of around more than 2
decades in diversified industries. Both look after overall
management of JES.
Ms. Sangeeta Sud, Post Graduate (M.A.) by qualification, has
around three decades of experience in the education industry and
will work as principal of the school.
Franchise of Delhi Public World School: JES has franchise of
Delhi Public World School from Delhi Public School Private
Limited, Bihar. The agreement is valid from September 02, 2016
for lifetime until undisputed. The brand name and goodwill earned
by the Delhi Public World School will help the society in
continuously increase its scale of operations in the short span
of its business. The same is reflecting as JES has enrolment of
350 students till December 20, 2017 for Academic Year 2018-19.
Bhopal (Madhya Pradesh) based Joint effort Society (JES) was
established in 2008 by Mr. Prashant Singhai and Mr. Syed Parvej
Ali with an objective to set up educational institutions and
impart quality educational services in local area. The society is
planning to operate a school namely Delhi Public world School
(DPWS) at Aastha. The school will become operational from April,
2018. Till date, around 350 students have already enrolled. DPWS
School is affiliated from Central Board of Secondary Education
(CBSE) and initially offering classes from pre-primary to Class
VIII.
JOYFUL PLASTICS: Ind-Ra Affirms BB- Rating on INR17.69MM Loans
--------------------------------------------------------------
India Ratings and Research (Ind-Ra) has affirmed Joyful Plastics
Private Limited's Long-Term Issuer Rating at 'IND BB-'. The
Outlook is Stable.
The instrument-wise rating actions are:
-- INR17.69 mil. (increased from INR15.76 mil.) term loan due on
December 31, 2019 affirmed with IND BB-/Stable rating; and
-- INR80.5 mil. (increased from INR49.5) fund-based limits
affirmed with IND BB-/Stable/IND A4+ rating.
KEY RATING DRIVERS
The affirmation reflects Joy's continued small scale of
operations and moderate credit metrics. Revenue grew to INR242
million in FY17 (FY16: INR196 million) on account of an increase
in the installed capacity to 2,000 tons per annum (FY16: 1,700
tons, FY15: 950 tons). The company is utilizing 80% of its
installed capacity. Revenue is likely to increase in FY18 on the
back of increasing orders from existing customers. 9MFY18
financials indicated revenue of INR232 million.
EBITDA margins declined to 14.1% in FY 17 (FY16: 15.4%) due to an
increase in material costs, as well as marketing expenses
incurred by the company to promote its business. The EBITDA
margins are likely to increase in FY18 on account of the increase
in revenue. EBITDA interest coverage (operating EBITDA/gross
interest expense) was stable at 1.9x at FYE17 (FYE16: 2.0x) and
net financial leverage (total adjusted net debt/operating
EBITDAR) at 3.9x (3.9x).
The ratings also factor in the company's tight liquidity position
as indicated by 98% average utilization of its fund-based working
capital limits for the 12 months ended January 2018.
The ratings are also supported by conversion of unsecured loan of
INR20 million to equity during FY18, which will improve the
gearing ratio of the company (FY17: 2.1x, FY16: 1.8x).
The ratings also benefit from the promoters' three decades of
experience in the manufacturing of plastic ware products.
RATING SENSITIVITIES
Positive: An increase in the scale of operations as well as
operating profitability, leading to a sustained improvement in
the credit metrics could be positive for the ratings.
Negative: A substantial decline in the operating profitability,
leading to a sustained deterioration in the credit metrics, could
be negative for the ratings.
COMPANY PROFILE
Incorporated in 1995, Joy manufactures plastic ware products. The
company has its own plant located in Daman with 35 injection
molding machines and two blow molding facilities, with an annual
installed capacity of 2,000 tons. Joy is utilizing 80% of its
installed capacity.
KARANIA BROS: CARE Reaffirms B+ Rating on INR17.90cr LT Loan
------------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Karania Bros.(KB), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 17.90 CARE B+; Stable Reaffirmed
Detailed Rationale& Key Rating Drivers
The ratings assigned to the bank facilities of KB continue to be
tempered by small scale of operations, low cash
accurals,elongated operating cycle, project implementation risk
and higher amount of long term debt availed by the entity
impacting the capital structure. The ratings further tempered by
decline in PAT margins in FY17. The ratings also factor in
increase in total operating income and PBILDT margins. The
ratings are, however, continue to derive strength from long track
record of the entity with experienced promoters. Going forward,
ability of the company to increase its scale of operations,
complete ongoing project and let-out the constructed godown
completely to generate sufficient cash accruals will remain as
the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Small scale of operations: Despite of the long track of business
activity in the same line and product with established presence
in the domestic market and relations with its customers and
suppliers, the size of operations of the entity is relatively
small marked by lower total operating income and networth level
as on March 31, 2016.
Stretched liquidity position with low cash accruals and elongated
operating cycle of the entity: The entities total revenues being
commission income which are around INR0.19 crore to INR0.29 crore
during FY16-FY17. The entity had availed the long term loan of
INR14.50 crore in FY17 and a new term loan of INR3.40 crore in
November 2017 impacting in higher amount of term loan repayment
obligations. Though the promoters are expecting significant
increase in cash accruals through rental income from leasing of
their constructed godowns, timely repayment of the term
loan interest and principal repayments stands critical with the
expected cash accurals of the entity. The average creditor days
is elongated as the firm makes payment to its creditors on cash
basis and sometimes depending on the long term relationship, the
firm may stretch to 90 days. However, the sundry debtors and
sundry creditors of the firm stood at INR2.95 crore and INR2.99
crore as on March 31, 2017 at the back of majority of the trading
was happened in the closing balance sheet date. Further, the cost
of sales was remained low at INR0.19 crore in FY17 as the firm
was engaged in wholesale supply of garlic.
Project Implementation risk: Currently the entity is executing a
project for construction of industrial godown to be rented to
government/private organizations who are into agri-related
business only. The industrial godown is being constructed at
Dabaspet area, Karnataka state in a land area of 10.20 acres with
total construction of 3 lakhs Sq. Ft. of industrial sheds. The
total cost of the project is around INR25.00 crore which is to be
funded through bank term loan of INR17.90 crores and remaining
INR7.10 crores through promoters own funds. Currently, the
promoters have completed around 95% of the total project works
incurring around INR23.75 crore which was funded through term
loan disbursement of INR17.90 crore and promoters fund of INR5.85
crore. The promoter had completed leveling works, construction of
shed, painting, etc. and pending works being flooring and
installation of roof sheet of the 3 sheds. The entity is planning
to lease the 3 industrial sheds to agri based business
organizations, in order to generate an annual rental income of
around INR5.04 crore per year. The said project is going to
implement by March 2018.
Higher amount of long term debt availed by the entity impacting
the capital structure: For executing the ongoing project the
entity availed the term loan of INR17.90 crore from canara bank
which is expected to impact the capital structure of the entity.
The increased amount of term loan of the entity has impacted in
higher gearing and leverage levels. Debt equity ratio and overall
gearing ratio of the entity is expected to increase from nil
times as on March 31, 2017 to around 2.06x as on March 31, 2019
and 1.84x as on March 31, 2020.
Decline in PAT margin in FY17: The PAT margin decreased from FY16
(54.53%) to 35.22% in FY17 due to interest cost at the back of
availment of unsecured loans though increase in PBILDT in
absolute amount.
Key Rating Strengths
Long track record and experienced promoter of the firm: Karania
Brothers was established in the year 1978 by Mr.Haranchand Narshi
Karania. The promoter has more than four decades of experience in
the same line of business.
Increase in total operating income and PBILDT margin in FY17: The
total operating income of the firm increased from INR0.19 crore
in FY16 to INR0.29 crore in FY17 due to the entity had done
supply of Garlic worth around INR5.80 crore and received
commission of around INR0.29 crore which is reflected in the
books of accounts. Furthermore, the company has achieved
commission of INR0.11 crore and net profit of INR0.05 crore from
April 2017 to December 2017 (Provisional).
The PBILDT margin increased from 60.00% in FY16 to 61.54% in FY17
due to increase in total operating income in absolute amount
though increase in employee cost and overheads.
Karania Brothers was established in the year 1978 as
proprietorship concern by Mr.Haranchand Narshi Karania. The
entity has its registered and administrative office located at
Yeshwanthpur, Bangalore and is engaged in wholesale supply of
garlic on commission basis. The entity supplies the garlic
material to around 100 customers located in Karnataka region on
commission basis, receives around 5% commission on the total
trade amount. The entity does the supply arrangements from
domestic suppliers who include wholesalers and dealers of food
products like garlic and related products.
Currently the entity is executing a project for construction of
industrial godown to be rented to government/private
organizations who are engaged in agri-related business only. The
total cost of the project is around INR25.00 crore which is to be
funded through bank term loan of INR17.90 crores and rest of the
INR7.10 crores through promoters own funds. Currently, the
promoters have completed around 95% of the total project works
and project is going to be completed by February 28, 2018.
LAHOTY BROTHERS: Ind-Ra Affirms BB+ Rating on INR75MM Loans
-----------------------------------------------------------
India Ratings and Research (Ind-Ra) has affirmed Lahoty Brothers
Private Limited's (LBPL) Long-Term Issuer Rating at 'IND BB+'.
The Outlook is Stable. The instrument-wise rating actions are
given below:
-- INR75 mil. Fund-based limits affirmed with IND BB+/Stable
rating; and
-- INR110 mil. Non-fund-based limits affirmed with IND A4+
rating.
KEY RATING DRIVERS
The affirmation reflects LBPL's continued moderate scale of
operations and credit metrics attributable to the trading nature
of business. During FY17, LBPL's revenue grew to INR1,316 million
(FY16: INR1,291 million) on back of an increase in sales volume.
EBITDA margin was stable at 1.4% in FY17 (FY16: 1.3%), interest
coverage (operating EBITDA margins/ gross interest expenses) at
1.3x (1.3x) and net leverage (net debt/operating EBITDA margin)
at 6.0x (5.9x).
The company's average maximum use of working capital limits was
moderate at around 75% for the 12 months ended January 2018.
However, the ratings benefit from the promoter's experience of
over three decades in the trading line of business and the
company's association with reputed brands such as Orient and
Osram, for which it is a distributor in Assam.
RATING SENSITIVITIES
Positive: Improvements in the operating profitability and overall
credit metrics will be positive for the ratings.
Negative: Deterioration in the overall credit metrics will be
negative for the ratings.
COMPANY PROFILE
Incorporated in 1943, LBPL is engaged in product distribution for
Orient Electric (a division of Orient Paper and Industries
Limited) and Osram India Private Limited in Assam, and commodity
trading of raw jute. It also operates six petrol pumps in Assam.
The firm is managed by its four directors Prem Ratan Lahoty,
Arvind Jatia, Savita Lahoty and Sangeeta Jatia.
LANDMARK ROYAL: Ind-Ra Migrates BB Rating to Non-Cooperating
------------------------------------------------------------
India Ratings and Research (Ind-Ra) has migrated Landmark Royal
Engineering (India) Private Limited's 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:
-- INR2.5 mil. Fund-based limits migrated to Non-Cooperating
Category with IND BB (ISSUER NOT COOPERATING) rating; and
-- INR32.5 mil. Non-fund-based limits migrated to Non-
cooperating Category with IND A4+ (ISSUER NOT COOPERATING)
rating.
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
January 6, 2017. Ind-Ra is unable to provide an update, as the
agency does not have adequate information to review the ratings.
COMPANY PROFILE
Bilaspur (Chhattisgarh)-based Landmark Royal Engineering (India)
was incorporated in 2008. The company executes civil construction
contracts for various public and private sector parties.
MAHAVIR GHAR: CARE Assigns 'B' Rating to INR9cr LT Loan
-------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of
Mahavir Ghar Sansaar (MGS), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 9.00 CARE B; Stable Assigned
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of MGS is constrained
by its nascent stage of operations, its presence in highly
fragmented and competitive industry, susceptibility to government
policies related to price and trading nature of operations. The
rating is further constrained by working capital intensive nature
of operations and partnership nature of constitution. The above
constraints outweigh the comfort derived from the experience of
the promoters and long standing business relations with
suppliers. The ability of the entity to stabilise its operations
along with efficient management of working capital requirement
remains the key rating sensitivity.
Detailed description of the key rating drivers
Key Rating Weaknesses
Nascent stage of operations: The entity is in nascent stage of
operations as it commenced its operations recently in
December, 2017.
Presence in highly fragmented and competitive industry: MGS
operates in an industry characterized by high competition due to
low entry barriers, high fragmentation and the presence of a
large number of players in the organized and unorganized sector.
Thus, the entities present in the segment generally have a very
low bargaining power vis-a-vis their customers.
Working capital intensive nature of operations: The operations of
the business are working capital intensive on account of high
level of inventory required to be maintained by the retailers to
ensure ready availability of stock.
Susceptibility to government policies related to price and
trading nature of operations: The entity also deals in agro based
commodities, and accordingly, it is subjected to the risks
associated with the industry like susceptibility to vagaries
of nature and price volatility. Further, MGS is also exposed to
risk associated with the trading nature of business like
inherently low profitability on account of low value addition.
Partnership nature of constitution: Being a partnership firm, MGS
is exposed to the risk of withdrawal of capital by partners due
to personal exigencies, dissolution of firm due to retirement or
death of any partner and restricted financial flexibility due to
inability to explore cheaper sources of finance leading to
limited growth potential. This also limits the firm's ability to
meet any financial exigencies.
Key Rating Strengths
Experienced partner: MGS is promoted by Mr. Kirti Parakh, Mr.
Khushalchand Parak and Mr. Paras Parakh who are associated with
trading of food product industry for more than two decades
through previous proprietorship firms. The partners look after
the overall management of the firm with adequate support from a
team of experienced professionals. Being in the industry for more
than two decades will help the promoter to gain adequate acumen
about the business which will aid in smooth operations of MGS.
Long standing business relations with suppliers: The partners are
associated with trading industry for more than two decades
through previous entities, as a result the partners have long
standing business relationship with the suppliers.
Aurangabad (Maharashtra) based MGS established in September, 2017
is promoted by Mr. Kirti Parakh, Mr. Khusalchand Parakh and Mr.
Paras Parakh. However, the entity commenced its operations since
December 2017 and is engaged in the business of wholesale and
retail trading of grains and pulses, rice, Fast moving consumer
goods, crockery etc.
MANDAR ROLLER: Ind-Ra Migrates 'B+' Rating to Non-Cooperating
-------------------------------------------------------------
India Ratings and Research (Ind-Ra) has migrated Mandar Roller
Flour Mills Private Limited's (MRFM) 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:
-- INR15 mil. Fund-based working capital limit migrated to
Non-Cooperating Category with IND B+ (ISSUER NOT
COOPERATING)/IND A4 (ISSUER NOT COOPERATING) rating; and
-- INR175 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
February 10, 2017. Ind-Ra is unable to provide an update, as the
agency does not have adequate information to review the ratings.
COMPANY PROFILE
MRFM primarily manufactures cattle feed. In addition, it is
engaged in the trading of wheat, peas and pulses. The company is
based in Shirwal in the Satara district (Maharashtra) and has 20
employees. Its daily installed manufacturing capacity is 50 tons.
MKD INFRASTRUCTURE: CARE Assigns B+ Rating to INR6cr LT Loan
------------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of MKD
Infrastructure and Projects Private Limited (MKD), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facility 6 CARE B+; Stable Assigned
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of MKD is constrained
by its small scale of operations with low capitalisation and the
working capital intensive nature of operations. The rating is
further constrained by its presence in a highly fragmented
industry, moderate order book position and execution risk of the
same.
The rating however, derives strength from the extensive
experience of the promoters in the construction industry,
moderate profit margins and comfortable solvency position.
Ability of the company to increase its scale of operations while
maintaining its solvency position and efficiently managing its
working capital requirement is the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Small scale of operations with low capitalization: The scale of
operations remained small with total operating income (TOI) and
net-worth base of INR9.30 crore and INR1.62 crore respectively as
on March 31, 2017. Furthermore, owing to low capital base of the
firm financial flexibility is restricted.
Working capital intensive nature of operations: The working
capital cycle of the company is characterised by a stretched
creditor days. The company is indirectly dependent on the
recovery of funds from government agencies being a small size
sub-contractor. The working capital requirement is currently met
by internal accruals and funds infused by the promoters.
Modest order book position along with execution risk: MKD has a
modest outstanding order book as on December 31, 2017 which is to
be executed over a period of 12-18 months providing medium-term
revenue visibility. Furthermore, timely execution of these
projects would be critical for maintaining adequate cash flows of
the company.
Fragmented nature of business: MKD operates in construction
industry which is characterized by high competition due to
low entry barriers, high fragmentation and presence of a large
number of players in the organized and unorganized sector. Thus
the entities in present in the segment have a low bargaining
power vis-Ö-vis their customers Key Rating Strengths.
Experienced partners: MKD is currently managed by Mr.Paresh Rathi
and Ms.Ekta Rathi. The directors are well versed with the
intricacies of the business on the back of about one decade
experience in construction sector through MKD. The directors are
ably supported by a team of qualified and experienced
professionals. Being in the industry for about a decade, the
promoters have established good relationship with labor
contractors and the material suppliers resulting in smooth
execution of projects and regular receipt of orders from them.
Moderate profitability margins and comfortable solvency
indicators: The PBILDT margin has been improving the last three
years and remained in a moderate range. Moreover, PAT margin has
also seen an improvement in FY17. The capital structure of the
company remained comfortable on account of lower reliance on
external debt. The overall gearing ratio stood at 0.57x as on
March 31, 2017. Moreover, lower reliance on debt along with
moderate margins resulted in strong debt coverage indicators.
MKD Infrastructure and Projects Private Limited (MKD),
incorporated in the year 2012, is promoted by Mr. Paresh Rathi,
Director, and is engaged in the construction of building for
private players in the state of Maharashtra.
NMC INDUSTRIES: Ind-Ra Migrates BB- Rating to Non-Cooperating
-------------------------------------------------------------
India Ratings and Research (Ind-Ra) has migrated NMC Industries
Private Limited's 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 action is:
-- INR200 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
February 16, 2017. Ind-Ra is unable to provide an update, as the
agency does not have adequate information to review the ratings.
COMPANY PROFILE
Incorporated in 1949, NMC Industries is primarily engaged in the
construction of rail tracks and manufacturing of railway
components.
NN GLOBAL: Ind-Ra Assigns BB- LT Issuer Rating, Outlook Stable
--------------------------------------------------------------
India Ratings and Research (Ind-Ra) has assigned N.N. Global
Mercantile Pvt. Ltd. (NNGMPL) a Long-Term Issuer Rating of 'IND
BB-'. The Outlook is Stable. The instrument-wise rating actions
are as follows:
-- INR250 mil. Fund-based working capital limits assigned with
IND BB-/Stable rating; and
-- INR100 mil. Non-fund-based limits assigned with IND A4+
rating.
KEY RATING DRIVERS
The ratings reflect NNGMPL's moderate scale of operations and
credit metrics owing to high customer concentration (top 10
customers contributed 82.4% to the total revenue in FY17).
Revenue increased to INR1,202.97 million in FY17 (FY16: INR508.9
million) largely due to improved market conditions and
operationalization of the higher margin biomass business
(contributed 24.3% to the total revenue in FY17). This resulted
in an improvement in the EBITDA margins to 6.51% in FY17 (FY16:
negative 2.86%). Consequently, the credit metrics improved, with
interest coverage (operating EBITDA/gross interest expense) of
2.9x in FY17 (FY16: negative 0.62) and net leverage (total
adjusted net debt/operating EBITDAR) of 3.11x (negative 16.69x).
The ratings, however, are supported by NNGMPL's comfortable
liquidity position as reflected by 53.59% average maximum
utilization of its fund-based facilities during the 12 months
ended January 2018. The ratings benefit from around a decade of
experience of the company's promoters in the coal trading
business.
RATING SENSITIVITIES
Positive: An improvement in revenue while maintaining the
profitability and credit metrics at FY17 levels will lead to
positive rating action.
Negative: A decline in revenue or profitability leading to
deterioration in the credit metrics from FY17 level will lead to
negative rating action.
COMPANY PROFILE
NNGMPL, incorporated in 2009, has been engaged in the coal
trading business in Chandrapur (Maharashtra) since FY12. In March
2016, the company also started the biomass business. The
company's current directors are Inshipal Singh Bhatia and
Charanpreet Kaur Bhatia.
POPULAR AUTO: CARE Assigns B+ Rating to INR10cr LT Loan
-------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of
Popular Auto Distributors (PAD), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 10 CARE B+; Stable Assigned
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of PAD are tempered
by Small scale and short track record of operations with
partnership nature of entity, financial risk profile marked by
thin profitability margins, leveraged capital structure with weak
debt coverage indicators, working capital intensive nature of
business operations, volume driven business with intense
competition in the industry and fortunes lined to TVS Motors.
However, the ratings derive comfort from experienced promoters in
auto dealership business and association with TVS which hold
comfortable market position in two wheeler market segment.
Going forward, ability of the firm to scale up the operations
while managing its working capital requirements and improving its
capital structure shall remain key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Small scale and short track record of operations with partnership
nature of entity: PAD was established in June, 2016. During its 9
months of operations, ending on March 31, 2017, it generated
revenue of INR30.67 crore with low net worth base of INR3.44
crore. The small scale limits the firm's financial flexibility in
times of stress and deprives it from scale benefits.
PAD, 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. Moreover, partnership firm business has restricted
avenues to raise capital which could prove a hindrance to its
growth.
Financial risk profile marked by thin profitability margins,
leveraged capital structure with weak debt coverage
Indicators: The firm has thin profitability margins due to low
bargaining power with TVS Motors Limited as well as low value
addition associated with trading of spare parts and lubricants of
two-wheeler vehicles. The PBILDT margin of the firm for FY17
stood at 3.18% and the PAT margin, in line with PBILDT margin
stood at 1.01%. The capital structure of the firm stood leveraged
with debt profile consisting of only working capital borrowings
of INR8.28 crore, while the tangible net worth of the firm stood
at INR3.44 crore. The overall gearing and total debt to gross
cash accruals of the firm are 2.40x and 16.61x as on March 31,
2017. The interest coverage ratio for FY17 stood at 2.18x.
Working capital intensive nature of business operations: PAD
purchases spares and lubricants from TVS motors against advance
payment, resulting in low creditors' period during FY17. The
sales to customers are made mostly on credit basis resulting in
an average collection period of around 29 days. Due to low
creditors period and high collection period, the operating cycle
remained moderate at 39 days during FY17 despite having a low
inventory period of 11 days. The firm's average working capital
utilization remained high at 90% during the last 12 months ending
November, 2017. The current ratio and the quick ratio remained
moderate at 1.37x and 1.09x owing to higher amount of short term
debt as against the cash/bank balances.
Volume driven business with intense competition in the industry:
The automobile spare parts industry is highly competitive in
nature as there are large numbers of small to medium players
operating in the market. The demand for the spares is also
subjected to the market conditions prevailing for the two
wheelers. Thus, the firm functions on thin profitability margins
in order to increase the sale of units.
Fortunes linked to TVS: As an authorized dealer, PAD's business
risk profile is directly linked to the terms and conditions
guided by TVS motors. The firm is not authorized to deal in spare
parts of any other two-wheeler manufacturer which further
restricts its growth prospects.
Key Rating Strengths
Experienced promoters in auto dealership business: PAD is a part
of Popular Group which has been in the business of auto parts
dealership for over 17 years. The partners, Mr. Deepak Singh
Kohli and Mr Rajesh Kumar, have about two decades of experience
auto dealership business. One of its associate concerns, Popular
Scooters Private Limited (Assigned CARE BB/Stable in August,
2017) which is also an authorized spares parts stockiest of TVS
Motors Limited has been in the similar line of business for over
17 years and has established its presence in automobile spare
parts segment in Tamil Nadu.
Encouraging demand outlook for two-wheeler auto industry: The
two-wheeler market has emerged as the most vibrant and
transforming segment of the overall Indian automobile industry,
witnessing an unprecedented growth. Rising rural demand and fuel
efficiency are among the major factors boosting the growth in the
market. Despite the economic slowdown, the Indian automobile
industry has been performing consistently well, compared to other
major markets of the world. The Indian two-wheeler market
possesses a significant
potential, and is anticipated to grow at 8-10% in FY18. The
growth of two-wheeler segment will also have its effect on the
connected ancillary industries like spare parts and services.
Thus, the growing demand for two-wheeler segment is an
encouraging sign for PAD who could gain from rise in demand for
the spare parts.
Association with TVS which hold comfortable market position in
two wheeler market segment: PAD is an authorized spare parts
dealer of TVS Motor Company. The performance of TVS Motor Company
has been
encouraging with the company achieving a sale of 29.27 lakh units
and becoming second largest two Wheeler Company in Indian two
wheeler market segments with a revenue growth of 9.6% during
FY17. The revenue of PAD is directly linked with the performance
of TVS and it benefits from latter's strong position in the two-
wheeler segment.
Madurai based Popular Auto Distributors (PAD) is a partnership
firm established in 2016 by its partners Mr Deepak Singh Kohli,
Mr Gobind Singh Kohli, Mr P Rajesh Kumar and Mr Assish Kumar
Jain. It is a part of Chennai based Popular Group which consists
of Popular Scooters Private Limited (assigned CARE BB/Stable),
Popular Motor Cycle Company, and Popular Honda Parts. Currently,
the firm is the authorized parts stockiest of TVS Motors Limited
in Madurai, Dindugal, Theni, Virudhunagar, Sivagangai, and
Ramanathapuram. The group company, Popular Scooters Private
Limited has been an authorized dealer for sale of two wheeler
spare parts and lubricants of TVS Motors Limited for over 17
years. From September, 2017, the firm has also been the
authorized dealer for Ceat Tyres Limited in Kanyakumari and
Tirunelveli. Currently, Mr. Rajesh Kumar manages day to day
operations of the firm.
RITESH TRADEFIN: Ind-Ra Migrates BB Rating to Non-Cooperating
-------------------------------------------------------------
India Ratings and Research (Ind-Ra) has migrated Ritesh Tradefin
Limited's (RTL) 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:
-- INR75 nil. Fund-based limits (cash credit facilities)
migrated to Non-Cooperating Category with IND BB (ISSUER
NOT COOPERATING) rating;
-- INR55 mil. Fund-based limits (overdraft against book debt
facilities) migrated to Non-Cooperating Category with IND A4+
(ISSUER NOT COOPERATING) rating; and
-- INR1 mil. Non-fund-based limits migrated to Non-Cooperating
Category with IND A4+ (ISSUER NOT COOPERATING) rating.
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
December 26, 2016. Ind-Ra is unable to provide an update, as the
agency does not have adequate information to review the ratings.
COMPANY PROFILE
RTL was incorporated in January 1993 as a private limited company
by Mr. Shankar Lal Agarwal and Mr. Naresh Kumar Agarwal. In 1999,
the company started manufacturing of sponge iron with an initial
installed capacity of 15,000MTPA and was converted into a public
limited company.
ROHIT ENTERPRISES: Ind-Ra Migrates BB- Rating to Non-Cooperating
----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has migrated Rohit
Enterprises' 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:
-- INR250 mil. Fund-based working capital limit migrated to
Non-Cooperating Category with IND BB- (ISSUER NOT
COOPERATING)/IND A4+ (ISSUER NOT COOPERATING) ratings.
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
January 5, 2017. 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, Rohit Enterprises is a wholesale liquor
distributor.
S.K. MARKETING: CARE Assigns B+ Rating to INR6cr LT Loan
--------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of S.K.
Marketing (SKM), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 6.00 CARE B+; Stable Assigned
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of SKM is constrained
on account of modest and fluctuating scale of operations, low and
fluctuating profit margins, leveraged capital structure, weak
debt protection metrics and working capital intensive operations.
The rating is also constrained on account of its presence in
highly competitive industry and constitution of the entity as a
proprietorship firm.
The rating however, derives strength from experienced proprietor,
considerable track record of operations and reputed yet
concentrated suppliers.
Ability of SKM to increase its scale of operations and improve
its profitability and capital structure amidst competition and
efficient working capital management are the key rating
sensitivities.
Detailed description of Key rating drivers
Key rating Weakness
Modest and fluctuating scale of operations: The scale of
operations stood modest marked by total operating income and
gross cash accruals of INR20.58 crore and INR0.17 crore
respectively during FY17(Prov.). Further, the firm's net worth
base stood small at INR1.79 crore as on March 31, 2017. The small
scale limits the firm's financial flexibility in times of stress
and deprives it from scale benefits. Further, the total operating
income of the firm has declined during FY17 as compared to FY16
(TOI of INR25.42 crore) on account of non-agreement on certain
terms & conditions with the supplier and customers thereby
interrupting the supplies and orders respectively in turn
resulting into lower sales realization.
Low and fluctuating profit margins: Being trading nature of
operations, the firm operates at thin profit margins and its
margins have shown a fluctuating trend over the past mainly due
to change in contribution attributable to the variation in the
proportion of different products from the standard mix. However,
profit margins have improved during FY17 over previous year on
account of higher target incentives received along with higher
sales realization from better margin products.
Leveraged capital structure & weak protection metrics: The
capital structure of the company stood leveraged in past owing to
higher reliance on external debt and low net worth base. However,
the capital structure has marginally improved as compared to
previous accounting year on account of higher accretion of
profits into
net worth base and lower debt level owing to repayment of car &
home loan and lower utilization of working capital borrowings.
Furthermore, the debt service coverage indicators also stood weak
in past due to high debt level leading to high interest charges
along with low profitability.
Working capital intensive nature of operation: Operations of SKM
are working capital intensive mainly on account of funds being
blocked in inventory and receivables resulting in high
utilization of working capital limits.
Proprietorship constitution of firm: SKM being a proprietorship
entity, the risks associated with withdrawal of proprietor'
capital exists. The entity is exposed to inherent risk of
proprietor' capital being withdrawn at time of personal
contingency as also it has limited ability to raise capital and
poor succession planning may result in dissolution of entity. Due
to the proprietorship constitution, it has restricted access to
external borrowing where net worth as well as credit worthiness
of proprietor is the key factor affecting credit decision of
lenders. Further, there have been instances of withdrawal in the
past.
Presence in competitive industry: The cosmetic industry is highly
competitive and at times changes rapidly due to consumer
preferences and industry trends. The products face, and will
continue to face, competition for consumer recognition and market
share with products that have achieved significant national and
international brand name recognition and consumer loyalty. The
competitors typically devote substantial resources to promote
their brands through mass marketing methods, because of which
they may achieve higher visibility and recognition. In addition,
the players in the industry may duplicate their marketing
strategy and distribution model to increase the breadth of their
product sales. Advertising, promotion, merchandising and
packaging, and the timing of new product introductions and line
extensions have a significant impact on consumers' buying
decisions and, as a result, the SKM's net sales. These factors,
as well as demographic trends, economic conditions and discount
pricing strategies by competitors, could result in increased
competition and could harm SKM's net sales and profitability.
Key rating Strengths
Experienced proprietor and long track record of operations: The
proprietor of the firm i.e. Mrs. Deepa Shailesh Haria holds an
experience of around a decade in cosmetic industry through her
association with SKM. Over a decade of track record of operation,
SKM has developed strong association with the suppliers as well
as
customers thus, enabling it to garner regular orders from them.
Reputed yet concentrated suppliers: The firm has been dealing
with the reputed suppliers in the industry for over a decade
thereby ensuring the uninterrupted supply of quality cosmetics
and skin care products. However, Richfeel Health & Beauty
Private Limited contributed to around 70% of the total purchase
vis-Ö-vis
the contribution of the top five suppliers in the total purchase
which is around 95% thereby indicating the dependency on a single
supplier to major extent, however the comfort can be derived from
the fact that the company has longstanding relationship with the
same supplier. Since these suppliers are reputed suppliers
therefore they have high bargaining power.
S. K. Marketing (SKM) was established in 2006 as a proprietorship
firm by Mrs. Deepa Shailesh Haria. The firm is primarily engaged
in wholesale trading of cosmetics and skin care products such as
shampoos, creams, facial kits, cleansers, oils, lotions,
conditioners, moisturizers, nourishers, styling gels and creams,
face wipes etc. for the brands namely Richfeel (CARE SME 2)
(accounting for 70% of total purchases in FY17), L'Oreal, O3+,
Aryanveda etc. The firm sells its products across Maharashtra.
SARAN ALLOY: CARE Assigns B+ Rating to INR6.35cr LT Loan
--------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Saran
Alloy Private Limited (SAPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 6.35 CARE B+; Stable Assigned
Detailed Rationale and key rating drivers
The rating assigned to the bank facilities of SAPL is constrained
by its small scale of operations with low profit margins,
volatility in raw material prices, working capital intensive
nature of business, leveraged capital structure with moderate
debt coverage indicators, intensely competitive industry with
sluggish growth in end user industries and cyclical industry. The
aforesaid constraints are partially offset by the extensive
experience of the promoters and long track of operations.
Going forward, ability of the company to increase its scale of
operations with improvement in profit margins, capital structure
and efficient management of its working capital will be the key
rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Small scale of operations with low profit margins: The scale of
operations of the company remained small marked by total
operating income of INR27.42 crore (Rs.24.69 crore in FY16) with
a PAT of INR0.03 crore (INR0.10 crore in FY16) in FY17. The
profit margins of the company remained low marked by PBILDT
margin of 5.61% and PAT margin of 0.47% in FY17. Furthermore, PAT
margin also deteriorated in FY17 in line with the PBILDT margin.
During HIFY18, the company has booked revenue of INR12.50 crore.
Volatility in raw material prices: The company does not have
backward integration for its basic raw-materials (iron ore, coal
etc.) and it procures the same from open market at spot prices.
Since the raw-material is the major cost driver and the prices of
which are volatile in nature, the profitability of the company is
susceptible to fluctuation in raw-material prices.
Working capital intensive nature of business: The operations of
the company remained working capital intensive marked by high
collection period. Due to delay by its customers, it stretches
its creditors which mitigate its working capital requirement to a
certain extent. Further, the company maintains adequate level of
raw material inventory for smooth running of its production
process. The average utilization of fund based limit remained on
the higher side at about 90% during last twelve months ending on
December 31, 2017.
Leveraged capital structure with moderate debt coverage
indicators: The capital structure of the company remained
leveraged marked overall gearing ratios of 3.18x (4.10x as on
March 31, 2016) as on March 31, 2017. The debt coverage
indicators of the company remained moderate marked by interest
coverage of 1.63x and total debt to CGA of 12.20x in FY17.
Intensely competitive industry with sluggish growth in end user
industries and cyclical industry: SAPL is engaged in the
manufacturing of iron and steel products which is primarily
dominated by large players and characterized by high
fragmentation and competition due to the presence of numerous
players in India owing to relatively low entry barriers. High
competitive pressure limits the pricing flexibility of the
industry participants which induces pressure on profitability.
The fortunes of companies like SAPL from the iron & steel
industry are heavily dependent on the automotive, engineering and
infrastructure industries. Steel consumption and, in turn,
production mainly depends upon the economic activities in the
country. Construction and infrastructure sectors drive the
consumption of steel. Slowdown in these sectors may lead to
decline in demand of steel& alloys. Furthermore, all these
industries are susceptible to economic scenarios and are cyclical
in nature.
Key Rating Strengths
Experienced promoters with long track record of operations: SAPL
is into manufacturing of MS ingots since 2008 and thus has around
a decade of track record of operations. Being in the same line of
business since long period, the promoters have built up
established relationship with its clients and the company is
deriving benefits out of this. Mr. Sobhi Nath Rai has more than
two decade of experience in the same line of business through his
associates company, looks after the day to day operations of the
company.
SAPL was incorporated on July 17, 2008, promoted by Mr. Sobhi
Nath Rai and Mr. Aniket Gaurav of Durgapur, West Bengal. Since
its inception, SAPL has been engaged in manufacturing of MS
ingots. The manufacturing facility of the company is located at
industrial area, Durgapur, West Bengal with an installed capacity
of 24,000 metric tonnes per annum (MTPA).
SARASWATI EDUCATIONAL: Ind-Ra Moves BB Ratings to Non-Cooperating
-----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has migrated Saraswati
Educational Charitable Trust's (SECT) bank loans ratings 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:
-- INR358.2 mil. Term loan due on March - June 2022 migrated
to Non-Cooperating Category with IND BB (ISSUER NOT
COOPERATING) rating;
-- INR300 mil. Proposed term loan migrated to Non-Cooperating
Category with Provisional IND BB (ISSUER NOT COOPERATING)
rating; and
-- INR20 mil. Working capital facility migrated to Non-
Cooperating Category with IND BB (ISSUER NOT COOPERATING)
rating.
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
February 9, 2017. Ind-Ra is unable to provide an update as the
agency does not have adequate information to review the rating.
COMPANY PROFILE
SECT has colleges situated near Lucknow. It also has an aviation
academy, a medical college and a 410-bed hospital. Saraswati
Aviation Academy is duly approved by the Directorate General of
Civil Aviation, government of India. It has a fleet of six
aircrafts and a 1.8 km airstrip. Saraswati Hospital and Research
Centre is approved by the state government and Medical Council of
India. The medical college began operations in FY17 with an
intake capacity of 150 students.
SCC PROJECTS: Ind-Ra Assigns B- LT Issuer Rating, Outlook Stable
----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has assigned SCC Projects
Private Limited (SCCPPL) a Long-Term Issuer Rating of 'IND B-'.
The Outlook is Stable. The instrument-wise rating actions are:
-- INR90 mil. Fund-based working capital limits assigned with
IND B-/Stable rating;
-- INR1.13 mil. Term loans due on June 2019 assigned with
IND B-/Stable rating; and
-- INR80 mil. Non-fund-based limits assigned with
IND A4 rating.
KEY RATING DRIVERS
The ratings reflect SCCPPL's small scale of operations and weak
credit metrics as its work orders are limited to state government
entities in Madhya Pradesh. Revenue has been declining since FY15
(FY17: INR183 million, FY16: INR250 million, FY15: INR399
million) due to slow completion of work orders attributed to work
order complexity, leading to building up of inventory. EBITDA
margins declined to 16% in FY17 (FY16: 22.5%) due to an increase
in material cost. Consequently, interest coverage (operating
EBITDA/gross interest expense) deteriorated to 1.2x in FY17
(FY16: 2.0x) and net leverage (total adjusted net debt/operating
EBITDA) to 6.9x (4.0x).
The ratings are also constrained by SCCPPL's tight liquidity
position with near full average peak utilization of its fund-
based limits during the 12 months ended January 2018. Net working
capital cycle elongated to 378 days in FY17 (FY16: 344 days) due
to the increase in inventory holding period to 369 days (182
days).
However, the ratings benefit from the promoters' three decades of
experience in the civil contracting business.
RATING SENSITIVITIES
Positive: A significant increase in revenue leading to an
improvement in the credit metrics could result in a positive
rating action.
Negative: A further stress on the liquidity position could result
in a negative rating action.
COMPANY PROFILE
Started as a partnership firm, Shree Construction Company, in
1985, SCCPPL was converted into a private limited company in
2008. The company is mainly constructs roads in Madhya Pradesh.
Purshottam Modani, Damodar Modani and Jagdish Modani Bhatia are
the promoters.
SHRI OM: CARE Reaffirms B+ Rating on INR9.47cr LT Loan
------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Shri Om Sai Auto (SOSA), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank
Facilities 9.47 CARE B+; Stable Reaffirmed
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of SOSA continues to
be constrained by its partnership nature of constitution, nascent
stage of operation, small scale of operations, risk of non-
renewal of dealership agreement from principles, pricing
constraints and margin pressure arising out of competition from
other auto dealers in the market and working capital intensive
nature of operation. The rating, however, continues to draw
comfort from experienced partners and authorised dealership of
Hero Motocorp Ltd with integrated nature of business.
Going forward, the ability of the firm to increase the scale of
operations 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
Partnership nature of constitution: SOSA, being a partnership
firm, is exposed to inherent risk of partner's capital being
withdrawn at time of personal contingency and firm being
dissolved upon the death/retirement/insolvency of the partners.
Moreover, partnership firms have restricted access to external
borrowing as credit worthiness of partner would be the key
factors affecting credit decision for the lenders.
Nascent stage of operation: The firm has started its operation
from April 2016 and having a short track record of operation of
around 2 years. According to the management, the firm has earned
INR23.55 crore during 9MFY18. Small scale of operations: The
scale of operations remained small as compared to its peers with
a net loss of INR0.26 crore on total operating income of INR24.02
crore during FY17. Further, the total capital employed of the
firm also remained low at INR13.87 crore as on Mar.31, 2017.
Furthermore, the firm have achieved the turnover of INR23.55
crore during 9MFY18.
Risk of non-renewal of dealership agreement from principles: SOSA
has entered into a dealership agreement with HMC (rated CRISIL
AAA/A1+) in October, 2014. The dealership agreement with the
principle generally renews at the discretion of HMC. Furthermore,
the agreements may get terminated at any time on violation of
certain clauses.
Pricing constraints and margin pressure arising out of
competition from other auto dealers in the market: SOSA faces
aggressive competition on account of established presence of
authorized dealers of other two wheelers manufacturers like
Bajaj, TVS, Honda, and Yamaha etc. Considering the existing
competition, SOSA is required to offer better terms like
providing discounts on purchases to attract new customers. Such
discounts offered to customers create margin pressure and may
negatively impact the revenue earning capacity of the firm.
Furthermore, the revenues of SOSA would also be governed by
launch of newer models by HMC, and acceptance of the products in
the market.
Working capital intensive nature of operation: The business of
automobile dealership is having inherent high working capital
intensity due to high inventory holding period. The firm has to
maintain the fixed level of inventory for display and to guard
itself against supply shortages. Furthermore, HMC, with whom SOSA
is having its association, demands payment in advance, resulting
in higher working capital requirements. Accordingly, the average
fund based working capital utilisation remained moderately high
at 95% during the last 12 months ended January 31, 2018.
Key Rating Strengths
Experienced partners: The firm is managed by Mr. Sidhi Nath with
the help of other partner, namely Mrs. Urmila Sharma (wife of Mr
Sidhi Nath). The managing partner is having over two decades of
experience in automobile dealership business through its
associate concern M/s Siddhartha Tractors (dealership of Mahindra
& Mahindra).
Authorised dealership of Hero Motocorp Ltd with integrated nature
of business: SOSA is an authorised dealer of HMC and has started
its association since 2014. The firm has one showroom located at
Gaya in Bihar. SOSA is getting a competitive advantage of being
one of the two dealers of Hero vehicles for Gaya. Hero has been
one of market leaders in the two wheelers segment for decades and
has a wide & established distribution network of sales and
service centres across India, providing it a competitive
advantage over its peers.
Shri Om Sai Auto (SOSA) is a partnership firm established in
August 2014 by one Mr Sidhi Nath of Gaya along with other
partners Mrs Urmila Sharma. Afterwards the firm started to
initiate an auto dealership business and has setup a selling
and servicing facility at Gaya in Bihar. The firm has taken
dealership authority from Hero Motocorp Ltd for selling and
servicing two wheelers. The firm has started commercial operation
from April 2016.
The day-to-day affairs of the firm are looked after by Mr. Sidhi
Nath (Managing Partner) with adequate support from other partner
and a team of experienced personnel.
SHRINI SOFTEX: Ind-Ra Affirms BB Rating on INR43.80MM Loan
----------------------------------------------------------
India Ratings and Research (Ind-Ra) has affirmed Shrini Softex
India Ltd.'s (SSIL) Long-Term Issuer Rating at 'IND BB'. The
Outlook is Stable. The instrument-wise rating actions are as
follows:
-- INR43.80 (reduced from INR74.20) mil. Term loan due on March
2020 affirmed with IND BB/Stable rating; and
-- INR200.0 mil. Fund-based working capital facilities affirmed
with IND BB/Stable/IND A4+ rating.
KEY RATING DRIVERS
The affirmation reflects SSIL's continued moderate credit profile
owing to intense competition. Revenue increased to INR639 million
in FY17 from INR549 million in FY16, driven by an increase in
orders. SSIPL booked INR510.2 million in revenue for 10MFY18. As
of February 2018, SSIL had outstanding orders worth INR31.1
million that will be executed within a month.
Ind-Ra expects EBITDA interest coverage to improve in FY18, given
it improved to 3.2x in 1HFY18, driven by a rise in EBITDA margin
to 8.9%. In FY17, EBITDA interest coverage (operating
EBITDA/gross interest expense) was 1.9x (FY16: 2.4x) and net
leverage (Ind-Ra-adjusted net debt/operating EBITDAR) was 6.7x
(4.8x). The deterioration in the credit metrics was primarily
driven by a fall in EBITDA (FY17: INR48 million; FY16: INR62
million) and an increase in other debt.
EBITDA margin fluctuated between 7.5% and 15.5% during FY14-FY17
owing to a volatile cotton price movement. EBITDA margin
recovered to 8.9% in 1HFY18 (FY17: 7.5%; FY16: 11.4%), as SSIL
entered high-margin product manufacturing. The fall in EBITDA
margin in FY17 was due to a high attrition level during the
demonetization period, as SSIL sold final products at lower
prices.
The ratings, however, continue to be supported by a comfortable
liquidity position, indicated by about 78% utilization of the
cash credit limits during the 12 months ended January 2018.
The ratings also continue to be supported by the founders'
experience of over four decades in cotton yarn manufacturing.
RATING SENSITIVITIES
Negative: A substantial decline in EBITDA margin leading to
deterioration in the credit metrics on a sustained basis could be
negative for the ratings.
Positive: A substantial improvement in revenue and a rise in
EBITDA margin leading to an improvement in the credit metrics on
a sustained basis could be positive for the ratings.
COMPANY PROFILE
SSIL started commercials operations in 2012. The company has a
12,000-spindle capacity. It manufactures ring spun combed yarn,
carded yarn, compact and double yarn in the count ranges of Ne
30/1-Ne 50/1.
SHRIRAMKRUPA FIBRES: Ind-Ra Gives B+ Rating to INR24.23MM Loan
--------------------------------------------------------------
India Ratings and Research (Ind-Ra) has assigned Shriramkrupa
Fibres (SF) a Long-Term Issuer Rating of 'IND B+'. The Outlook is
Stable. The instrument-wise rating actions are given below:
-- INR75 mil. Fund-based working capital limit assigned with
IND B+/Stable rating; and
-- INR24.23 mil. Term loan due on September 2021 assigned with
IND B+/Stable rating.
KEY RATING DRIVERS
The ratings reflect SF's small scale of operations and weak
credit profile due to its limited operational track record as it
commenced commercial operations in January 2015. The company
reported revenue of INR417 million in FY17 (FY16: INR297
million); revenue increased due to an increase in sales volume.
SF's EBITDA margin declined slightly to 4.5% in FY17 (FY16: 5%)
due to an increase in the cost of raw material consumed; the
company's interest coverage (operating EBITDA/gross interest
expense) was 1.78x (1.91x) and net leverage (total adjusted net
debt/operating EBITDAR) was 5.43x (5.7x).
The ratings further reflect SF's moderate liquidity position as
the average maximum utilization of its working capital limit was
81% during the 12 months ended December 2017.
The ratings, however, are supported by more than a decade of
experience of the firm's founder in trading of raw cotton, cotton
bales and other agro commodities.
RATING SENSITIVITIES
Positive: A sustained improvement in revenue along with credit
metrics could be positive for the ratings.
Negative: Deterioration in the overall credit metrics from the
present level could be negative for the ratings.
COMPANY PROFILE
Incorporated in June 2013 as a proprietorship firm, SF is engaged
in ginning and pressing of raw cotton. Its plant is located at
Wardha (Maharashtra), with a total production capacity of 250
cotton bales per day.
SRI LAXMI: CARE Moves D Rating to Not Cooperating Category
----------------------------------------------------------
CARE Ratings has been seeking information from Sri Laxmi
Enterprises to monitor the rating(s) vide e-mail communications
sent from June 19, 2017 to January 9, 2018 and numerous phone
calls. However, despite CARE's repeated requests, the firm has
not provided the requisite information for monitoring the
ratings. In line with the extant SEBI guidelines, CARE has
reviewed the rating on the basis of the publicly available
information which however, in CARE's opinion is not sufficient to
arrive at a fair rating. The rating on Sri Laxmi Enterprises's
bank facilities will now be denoted as CARE D; ISSUER NOT
COOPERATING/CARE D; ISSUER NOT COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 9.14 CARE D; ISSUER NOT COOPERATING;
Facilities Based on best available
Information
Short-term Bank
Facilities 5.00 CARE D; ISSUER NOT COOPERATING;
Based on best available
Information
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating(s).
The ratings take into account delays in debt servicing.
Detailed description of the key rating drivers
At the time of last rating on July 14, 2017, the following were
the rating strengths and weaknesses:
Delays in debt servicing: There are delays in servicing of debt
obligations by Sri Laxmi Enterprises on account
of stretched liquidity position of the company.
Sri Laxmi Enterprises (SLE) has been incorporated by Mr Om
Prakash Agarwal and his family members in the year 2003. The firm
is engaged in cotton ginning and pressing with installed capacity
of 750 MT per annum. The firm primarily sources its raw material,
Kapas, from local farmers in Telangana and sells its finished
product in the states of Telangana, Maharashtra, Madhya Pradesh
and Tamil Nadu.
SRI SRINIVASA: Ind-Ra Migrates 'B+' Rating to Non-Cooperating
-------------------------------------------------------------
India Ratings and Research (Ind-Ra) has migrated Sri Srinivasa
Delinters' (SSD) 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 action is:
-- INR70 mil. Fund-based working capital limit migrated to
Non-Cooperating Category with IND B+ (ISSUER NOT
COOPERATING)/IND A4 (ISSUER NOT COOPERATING) ratings.
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
February 16, 2017. Ind-Ra is unable to provide an update, as the
agency does not have adequate information to review the ratings.
COMPANY PROFILE
Incorporated in 1985, SSD is a partnership firm engaged in the
processing of cotton seed, cotton linters, cotton cellulose,
chemical cotton, cotton bales, raw cotton, cotton seeds oil, seed
oils, cotton ore, cattle feed and others. It obtains linters and
hulls as by-products. Its 100-tonne-per-day manufacturing site is
in Chowdavaram, the Guntur district. SSD's promotors are K
Ravindra Babu, Ragunatha Rao, YV Prasad and Y Sridevi.
SRI VEERANJANEYA: CARE Assigns B Rating to INR6cr LT Loan
---------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Sri
Veeranjaneya Eco-Bricks Private Limited (SVEBPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 6 CARE B; Stable Assigned
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of SVEBPL are
tempered by small scale of operations with fluctuation total
operating income and net losses, leveraged capital structure and
moderate debt coverage indicators, working capital intensive
nature of operations, highly fragmented industry with intense
competition from other players, The ratings are, however,
underpinned by the satisfactory track record and experience of
the promoters, satisfactory PBILDT margin and thin PAT Margin and
favorable demand outlook for AAC block industry.
Going forward, the ability of the company to increase its scale
of operations and improve profitability margins in competitive
environment, ability of the company to improve its capital
structure while managing its working capital requirements
efficiently would be the key rating sensitivities.
Detailed Description of the key rating drivers
Key Rating Weaknesses
Small scale of operations with fluctuation total operating
income:
SVEBPL was incorporated in the year 2011. However, the scale of
operations of the company marked by total operating income (TOI)
remained small at INR8.10 crore in FY17 coupled with low net
worth base of INR1.51 crore as on March 31, 2017 as compared to
other peers in the industry.
The total operating income (TOI) of the entity increased from
INR7.92 crore in FY15 to INR9.56 crore in FY16 due to increase in
orders from regular customers. However, TOI declined to INR8.10
crore in FY17 due to slowdown in the market. During 9MFY18
(Provisional), the company achieved sales of INR11.90 crore.
Leveraged capital structure and moderate debt coverage
indicators:
The debt equity ratio of the company deteriorated from 2.31x as
on March 31, 2015 to 3.80x as on March 31st 2016, due to decrease
in tangible networth at the back of carry forward of accumulated
net losses. However, it is improved to 2.85x as on March 31st
2017 due to repayment of term loan .The overall gearing ratio of
the company deteriorated from 3.41x as on March 31st FY15 to
6.40x as on March 31st 2016 due to higher utilization of working
capital bank borrowings. However it is improved to 5.38x as on
March 31, 2017 due to repayment of term loan and unsecured loans.
Furthermore, the debt coverage indicators also stood moderate
during the review period. The total debt/GCA improved from 29.41x
in FY15 to 5.59x in FY17 due to increase in gross cash accruals
coupled with decrease in total debt at the back of repayment of
term loans. The PBILDT interest coverage ratio improved from
1.26x in FY15 to 2.04x in FY17 due to increase in PBILDT in
absolute terms.
Working capital intensive nature of operations: The operations of
the company are working capital intensive marked by elongated
operating cycle period. The operating cycle of the company
stretched from 302 days in FY15 to 362 days in FY17 as the
company had high inventory days at 476 days in FY17 against 256
in FY16 on account of high closing stock at the end of closing
balance sheet date FY17 coupled with low cost of sales.
Generally, the company receives the payment from customers within
70-80 days. The company makes the payment to its suppliers within
70-90 days. The company maintains the high inventory days to meet
customer requirements in order to mitigate the price fluctuation.
The average utilization of fund based working capital limits of
the company was 65% during the last 12 months period ended
December 31, 2017.
Highly fragmented industry with intense competition from other
players: The company is engaged in manufacturing of AAC blocks,
which is fragmented industry due to presence of large number
of organized and unorganized players in the industry resulting in
huge competition.
Key Rating Strengths
Experience of the promoter for two decades in brick manufacturing
industry: SVEBPL is managed by Mr. Srinivasa Rao (Managing
Director) along with his family and friends. He has qualified
graduate and he have two decades of experience in cement
manufacturing industry. Mr. Srinivasa Rao has 6 years' experience
in the manufacturing of Autoclaved Aerated Concrete (AAC) blocks.
Satisfactory profitability margins and thin PAT margin. The
profitability margin of the company has been satisfactory,
however, fluctuating during review period. The PBILDT margin of
the company increased from 20.89% in FY15 to 30.79% in FY16 due
to decrease in material cost and employee cost.
The company has incurred net loss in FY15 and FY16 due to under
absorption of overheads (fright and forwarding charges) coupled
with high depreciation cost and financial expenses. Furthermore,
the company has turnaround from loss to profit and achieved PAT
margin of 0.64% due to decrease in financial expenses.
Favorable demand outlook for AAC block industry: The market size
of conventional bricks in India currently amounts to
approximately INR50,000 crore which is completely unorganized;
whereas AAC block industry is of around INR500 crore only, which
is just 1% of the total brick industry. Hence, the AAC block
industry is highly underpenetrated which provides huge potential
to grow further for players like RPL. Furthermore, features like
light weight, high strength, low breakages, and price parity with
conventional bricks in certain markets, will make AAC blocks the
user choice in the coming years. However, the capacity expansion
being undertaken by the players in the industry will keep the
profitability margins under pressure in the near term.
Telangana based, Sri Veeranjaneya Eco-Bricks Private Limited
(SVEBPL) was incorporated in the year 2011 by Mr. Srinivasa Rao
(Managing Director) and Mr. Purnachandra (Director). The company
is engaged in manufacturing of Autoclaved Aerated Concrete Blocks
(AAC) light weight blocks under various sizes. The AAC blocks are
light weighted which is used as a substitute of the conventional
red clay bricks in residential, commercial and industrial
construction activities. The AAC blocks manufacturing process
involves raw material preparation, dosing and mixing, casting,
rising and pre-cutting and remolding and cutting. The main raw
materials used in the AAC manufacturing are cement, fly ash, lime
and gypsum. The company purchased raw material from Rajasthan and
Bhopal.
SRISHTI BUILDERS: CARE Reaffirms B+ Rating on INR9cr LT Loan
------------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Srishti Builders (SRB), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 9.00 CARE B+; Stable Reaffirmed
Detailed Rationale & Key rating Drivers
The rating assigned to the bank facilities of SRB is continue to
remain constrained on account of project implementation risk
associated with its ongoing real estate residential project and
salability risk associated with the remaining units in the highly
cyclical real estate sector which is witnessing downturn. The
ratings, however, derive strength from the experienced promoters
in the real estate industry.
The ability of the firm to successful completion of its on-going
real estate project within its envisaged cost and timely receipt
of booking advance would be the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weakness
Project implementation and saleability risk associated with the
remaining flats: The firm started construction of residential
project named "Royal Artena" from June 2015, which is expected to
be completed by the end of March, 2018. Hence, timely completion
of the project without any cost overrun would be the key rating
sensitivity. Further, there is saleability risk is also
associated with the un-booked units.
Subdued outlook for the cyclical real estate sector: The real
estate industry in India is highly fragmented with most of the
real estate developers having a city-specific or region-specific
presence. Further, in light of the on-going economic downturn,
the sector is facing issues on many fronts.
Key Rating Strengths
Experienced promoters in the real estate industry: The firm is a
part of Srishti group which is one of the major groups of Kota,
engaged in the wide range of real estate projects. The group
started real estate business in 2005 and then the group expanded
its business in construction of residential projects.
Moderate booking status: The project has 32 units, out of which,
it has booked 12 flats (37.50% of total units) till January 31,
2018 and hence, reflecting moderate booking status of the
project.
Kota (Rajasthan) based Srishti Builders (SRB) was formed in
February, 2015 by Mr. Sanjay Khatri and Mr. Ajay Khatri.
Subsequently, in June, 2015, there is change in the partnership
deed with introduction of 3 partners. The firm is a part of
Srishti group which is engaged in the wide range of projects in
real estate industry.
SRB is mainly engaged in the real estate development activities
and is currently working on one residential project namely 'Royal
Artena' in Kota with total saleable area of 87,102 Square Feet
(Sq Ft) consisting of basement plus ground floor plus 12 floors.
STARSHINE ENGINEERING: Ind-Ra Moves B+ Rating to Non-Cooperating
----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has migrated Starshine
Engineering (India) Private Limited's (SEIPL) 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:
-- INR100 mil. Proposed non-fund-based limits migrated to Non-
Cooperating Category with Provisional IND A4 (ISSUER NOT
COOPERATING) ratings.
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
January 17, 2017. Ind-Ra is unable to provide an update, as the
agency does not have adequate information to review the ratings.
COMPANY PROFILE
Incorporated in 2008, SEIPL is engaged in the trading of iron and
steel, and the manufacturing of parts on an order basis. SEIPL is
managed by Satish Ladhania and Jagdish Prasad Kachhwal.
SUPER HYGIENE: Ind-Ra Assigns BB- Issuer Rating, Outlook Stable
---------------------------------------------------------------
India Ratings and Research (Ind-Ra) has assigned Super Hygiene
Products Pvt. Ltd. (SHPPL) a Long-Term Issuer Rating of 'IND BB-
'. The Outlook is Stable. The instrument-wise rating actions are
as follows:
-- INR75 mil. Fund-based working capital limits assigned with
IND BB-/Stable rating;
-- INR150 mil. Term loans due on June 2023 assigned with
IND BB-/Stable rating; and
-- INR25 mil. Non-fund-based limit assigned with IND A4+ rating.
KEY RATING DRIVERS
The ratings are constrained by SHPPL's limited operational track
record as it commenced operations in October 2017. As of November
2017, the company booked revenue of INR13.83 million and had an
order book of INR9.2 million, to be executed in FY18.
However, the ratings benefits from the plant's locational
advantage in Indore in terms of raw material availability.
The ratings also draw comfort from the promoter's experience of
over three decades in the textile industry.
RATING SENSITIVITIES
Positive: Stabilization of operations and achievement of revenue
as projected by Ind-Ra could lead to a positive rating action.
Negative: Failure to stabilize operations and achieve revenue as
projected by Ind-Ra could lead to a negative rating action.
COMPANY PROFILE
Incorporated on June 3, 2015, SHPPL manufactures baby diapers -
both open and pant style, and sanitary napkins.
SUPREME GLAZES: Ind-Ra Gives 'BB' Rating to INR100MM Loan
---------------------------------------------------------
India Ratings and Research (Ind-Ra) has assigned Supreme Glazes
Private Limited (SGPL) a Long-Term Issuer Rating of 'IND BB-'.
The Outlook is Stable. The instrument-wise rating actions are
given below:
-- INR100 mil. Fund-based limits assigned with IND BB-
/Stable/IND A4+ rating; and
-- INR10 mil. Term loans due on March 2020 assigned with
IND BB/Stable rating.
KEY RATING DRIVERS
The ratings reflect SGPL's moderate scale of operations and
credit metrics due to working capital intensive nature of the
business. Revenue declined to INR574.75 million during FY17
(FY16: INR747.64 million) owing to lower inflow of orders in
4QFY17, as a result of demonetization. The company achieved a
turnover of INR470 million as of end-January 2018, and had an
order book of INR60.00 million, to be executed by end-February
2018. However, EBITDA margins expanded to 7.4% in FY17 (FY16: 5%)
primarily on account of a decline in fuel costs, which account
about 15% of its total input costs. The company was able to
reduce its fuel expenses as it switched to a more economical
natural gas supplier. Hence, Ind-Ra expects the margins to remain
moderate in the near term.
Net financial leverage (total adjusted net debt/operating EBITDA)
deteriorated to 7.57x in FY17 (FY16: 7.37x) and interest coverage
(operating EBITDA/gross interest expense) to 1.63x (1.85x) due to
higher utilization of working capital limits and the resultant
increase in interest costs. Ind-Ra expects the credit metrics to
improve in the near term owing to partial debt repayments and
absence of major debt-led capex plans.
The ratings also factor in SGPL's moderate liquidity position as
indicated by 97% average utilization of its fund-based limits
during the 12 months ended January 2018. Net cash conversion
cycle has historically remained high. During FY17, the net cash
conversion cycle elongated to 199 days (FY16: 121 days) on
account of an increase in debtor days, resulting from the
demonetization.
However, the ratings derive support from the promoters'
experience of more than a decade in the manufacturing of frits.
RATING SENSITIVITIES
Positive: A substantial improvement in revenue and EBITDA
margins, along with an improvement in the working capital cycle
leading to a sustained improvement in the overall credit metrics
will be positive for the ratings.
Negative: Any decline in revenue and EBITDA margins and a further
stretch in the working capital cycle, leading to deterioration in
the overall credit metrics will be negative for the ratings.
COMPANY PROFILE
Established in 2004 in Bharuch (Gujarat), SGPL manufactures
ceramic glaze frits used for providing glaze in ceramic tiles.
The unit has an installed frit production capacity of 21,170MTPA;
presently, it is operating at about 95% capacity. Mr. Kalpesh B
Patel, Mr. Jigar B Patel, Mr. Dashrath B Patel and Mr. Shailesh B
Patel are the promoters.
TRADING ENGINEERS: Ind-Ra Lowers LT Issuer Rating to 'D'
--------------------------------------------------------
India Ratings and Research (Ind-Ra) has downgraded Trading
Engineers (International) Limited's (TEIL) Long-Term Issuer
Rating to 'IND D' from 'IND B+'. The Outlook was Negative. The
instrument-wise rating actions are as follows:
-- INR435 mil. Non-fund-based working capital limits (long- and
short-term) downgraded with IND D rating; and
-- INR492.5 mil. Fund-based working capital limits (long- and
short-term) downgraded with IND D rating
KEY RATING DRIVERS
The downgrade reflects delays in debt servicing and continuous
overdrawing of the fund-based limits for a period greater than 30
days during January to February 2018.
RATING SENSITIVITIES
Positive: Timely servicing of debt obligations for at least three
consecutive months could result in a positive rating action.
COMPANY PROFILE
TEIL is an associate company of Unitech Machines Limited. It was
formed as a partnership firm in 1949 and was reconstituted as a
limited liability company in 1972. The company was taken over by
Unitech Machines Group in 2001. TEIL has a fully integrated
manufacturing facility for diesel gensets of up to 2,000kVA in
Bhagwanpur, Uttarakhand.
VARDHMAN ROLLER: CARE Assigns B+ Rating to INR31.90cr LT Loan
-------------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of
Vardhman Roller Flour Mills (VRFM), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank
Facilities 31.90 CARE B+; Stable Assigned
Detailed Rational & Key Rating Drivers
The ratings of the bank facilities of VRFM are constrained by
working capital intensive nature of operations, limited margins
due to highly competitive nature of industry and highly leveraged
capital structure with low cash accruals. The ratings however
derive its strength from its experienced promoters, established
customer base.
Going forward, company's ability to improve its profitability by
continually increasing its scale of operations along with
achieving a healthy capital structure shall remain key rating
sensitivities.
Detailed Description of the key rating drivers
Key Rating Weakness
Working capital intensive nature of operations: The operations of
the company are working capital intensive in nature as reflected
by operating cycle of 83 days in FY17 (PY: 96 days). The decrease
in working capital cycle was largely on account of decrease in
inventory levels and receivables days.
Low margins due to highly competitive Industry: The players of
the industry face stiff competition owing to the small players
operating in same area. PBILDT margin was on a lower side at
3.08% in FY17 (PY: 3.87%) mainly due to higher procurement cost
and incapability of VRFM to pass increased cost to its customers.
Highly leveraged and low cash accruals: Lack of fund infusion
from promoters in past years and increase in total debt (in FY17)
has led to high overall gearing at 4.95x as on March 31 2017 (PY:
5.28x). Adding to that lower profitability and lower GCA the
Total Debt to GCA has also eroded to 22.72x as on March 31st,
2017 (PY: 18.84x).
Key Rating Strengths
Experienced promoters: The promoters of the company have an
extensive experience of more than three decades in flour mills
industry. The extensive experience of the promoters and the
company's long track record of operations provide the necessary
technical expertise and established relationships with various
stakeholders for growing its business.
Established customer base: VRFM directly sells to its diversified
customer base which includes big brands in food processing
industry. The company has long association with these customers
and maintains healthy relationship with them.
Vardhman Roller Flour Mills Private Limited (VRFM), originally
promoted by Mr. Ashok Kumar Jain was incorporated on Feb 27,
1997. The company is engaged in manufacturing of maida, suji,
atta &
bran and sells with name "Double Kalash". It has two
manufacturing facilities with one located at Mohkampur Industrial
Area and other at Faridpur, Bareilly. VRFM have total installed
capacity of 75000MT for manufacturing atta, maida, suji and
others.
=================
I N D O N E S I A
=================
KAWASAN INDUSTRI: Shutdown Won't Affect 2018 Earnings, Fitch Says
-----------------------------------------------------------------
Fitch Ratings says Indonesia's PT Kawasan Industri Jababeka Tbk
(Jababeka; B+/Stable) power plant reserve shutdown is not
expected to affect its 2018 earnings. However, any contract
renegotiation at Jabebeka's fully owned subsidiary, PT Bekasi
Power (BP), could affect its recurring EBITDA base and
subsequently its recurring interest coverage ratio. Nevertheless,
Fitch does not believe this will hurt the company's overall
credit profile in the near term.
Jababeka's credit profile, and subsequently its rating, may be
affected by potential risks surrounding contingent liabilities
stemming from possible contract renegotiation with PT Perusahaan
Listrik Negara (Persero) (PLN; BBB/Stable), a state electricity
company, by exerting pressure on BP's recurring EBITDA base.
Details on this aspect remain unclear, and Fitch will monitor the
company's position to determine any impact on recurring EBITDA,
and subsequently, recurring EBITDA interest cover.
BP, which started operating in 2013, owns and operates a gas-
fired combined cycle power plant and has a 20-year power purchase
agreement with PLN. In early 2018 PLN requested BP to stop
providing electricity, a state known as 'reserve shutdown', due
to oversupply in the Java-Bali region. Based on the existing
power purchase agreement, PLN will compensate BP for the capacity
charge based on take-or-pay of the power plant's availability,
although some components of total tariffs will not be reimbursed.
Jababeka has also successfully renegotiated its gas supply
contract with PT Perusahaan Gas Negara Tbk (BBB-/Stable),
changing the nature of the contract to provide Jababeka with
greater flexibility in managing its gas input and output.
Jababeka is also in the process of making similar changes to its
gas supply contract with PT Bayu Buana Gemilang, which is due to
expire in March 2018. Fitch believes that the impact on
Jababeka's recurring EBITDA generation in the near term should be
fairly limited, and its consolidated recurring EBITDA interest
cover should be maintained at around 1.0x in the short to medium
term, which is above the threshold at which Fitch would consider
a negative rating action.
=========
J A P A N
=========
SOFTBANK GROUP: S&P Affirms BB+ LT CCR, Alters Outlook to Neg.
--------------------------------------------------------------
S&P Global Ratings said it has revised to negative from stable
its outlook on its long-term corporate credit rating on Japan-
based telecommunications and internet company SoftBank Group
Corp. S&P has affirmed its 'BB+' long-term corporate credit
rating and all of its issue ratings on the company.
S&P said, "The outlook revision reflects our view that SoftBank
has adopted a more aggressive financial policy, as demonstrated
by its tolerance of accelerated investment in its fund business,
SoftBank Vision Fund. Because of this shift, we see a greater
likelihood of key financial ratios for the company deteriorating
more substantially than we had assumed. The outlook also reflects
our view of the fund business' impact on SoftBank, and we have
newly incorporated this into our rating, given the business'
importance to the company's growth strategy. We believe downward
pressure on the company's credit quality might grow through
continued investment in the fund business over the long run and
increased weight of the business in the company's business
portfolio. We believe the fund business carries higher risk than
the company's other existing businesses because of its focus on
unlisted stocks with low liquidity. Meanwhile, we affirmed our
ratings on SoftBank because we believe it can somewhat lessen its
debt burden through sales of noncore assets bearing large
unrealized capital gains.
"Profits in SoftBank's domestic mobile communications business
are likely to decline year-on-year in fiscal 2017 (ending March
31, 2018) because of investments to acquire and retain
subscribers amid progressing market maturation. These
investments, though, will enable the business to keep profits
around current levels in fiscal 2018 and beyond, in our view. Its
U.S. mobile communications business, Sprint Corp., has a weak
position in the highly competitive U.S. telecommunications
market, but we believe its profitability will rise gradually
through cost reductions and improvements in network quality. As a
result, we think SoftBank will increase overall profits, albeit
gradually. In addition, SoftBank has good business diversity,
including as a leading internet business. Accordingly, we
continue to assess SoftBank's business risk profile as
satisfactory.
"SoftBank's fund business has been accelerating investments and
the company has poured in far more capital than we had assumed.
We believe adjusted debt to EBITDA for SoftBank (on a
consolidated basis and excluding its captive finance business and
its fund business; the same applies to all financial metrics
hereafter) as of March 31, 2018, will worsen to about 5.0x from
4.4x the previous year, taking into account bridge investments
SoftBank plans to transfer to the fund business. We do not expect
the fund business' pace of investments to change next fiscal year
and beyond. Therefore, unless SoftBank lessens the burden that
its contributions to the fund business produce, for example by
selling assets, debt to EBITDA is likely to hover around 5x for
the next one to two years, in our view. We continue to assess
SoftBank's financial risk profile as aggressive, but we see
narrowing room to maintain this assessment. Our rating on
SoftBank incorporates our view that it can lessen its debt burden
with the sale of noncore assets bearing large unrealized capital
gains. Such noncore assets include its stake in China-based e-
commerce company Alibaba Group Holding Ltd.
"We believe SoftBank will extend a degree of some form of support
to the fund business if it comes under financial stress because
the business is highly important to the company's growth
strategy, it shares the same brand and name with the company, and
it makes huge investments. These factors lead us to incorporate
the fund business into our rating on SoftBank. To do so, we
analyzed the fund business separately from the company's other
existing businesses because it is an essentially different
business. We then combined the analytical results for the other
existing businesses with those for the fund. We determined the
weighting between the fund and other businesses according to the
debt of each: debt excluding the fund business for other existing
businesses, and the fund business' debt plus third-party
interests in the business. We adjusted downward the proportion of
the fund business' debt to account for its nonrecourse and
equity-like characteristics.
"SoftBank's fund business carries more risk than its existing
communications and internet businesses, in our view. This is
because the fund business focuses on unlisted stocks with low
liquidity. In addition, some third-party interests call for fixed
distributions, making them debt-like in nature. We expect the
total amount of third-party interests in the business, which
makes rapid investments, to reach JPY6 trillion in the next two
years or so. The fund business is likely to continue making
additional investments, given its importance to SoftBank's growth
strategy. If the high-risk business' weight in SoftBank's
business portfolio increases, it is likely to negatively affect
our ratings on the company. Furthermore, the business has the
potential to impair SoftBank's assets. Therefore, if the value of
any of the business' investments declines, SoftBank's
capitalization could deteriorate, in turn potentially hurting its
refinancing efforts.
"We assess SoftBank's liquidity as adequate and expect its
liquidity sources to remain about 1.2x its uses over the next 12
months. The company's debt is huge, but we believe it secures
ample cash and cash equivalents. It also maintains solid business
relationships with financial institutions, can sell assets as
needed, and has room to cut capital expenditures. We believe
these factors support its liquidity."
S&P's base-case scenario for SoftBank assumes the following:
-- In 2018 and 2019, Japan's real GDP will grow 1.2% annually;
in the U.S., it will grow 2.6% and 1.9% respectively.
-- Revenue will stay flat in fiscals 2017 and 2018, primarily
because of maturation of the domestic market and price
competition in the U.S.
-- Profitability will slip slightly in fiscal 2017 because of
investments in the domestic mobile communications business to
acquire and retain subscribers, and it will improve a little
in fiscal 2018 thanks to benefits from these investments and
cost reductions, mainly at Sprint.
-- Capital expenditures will remain high over the next one to
two years, primarily to strengthen Sprint's network.
-- Total investment will be about JPY1.6 trillion in fiscal
2017, including in SoftBank's fund business and bridge
investments it plans to transfer to the fund business;
investment will total about JPY700 billion in fiscal 2018,
mainly contributions to the fund business.
-- The fund business will use all available committed capital in
the next two years or so.
-- This scenario does not take into account the planned public
listing of SoftBank's domestic telecommunications business
subsidiary or the large amount of proceeds it might receive
from the listing.
Under this scenario, S&P expects the following key financial
metrics for SoftBank:
-- An EBITDA margin of about 32% in fiscal 2017 and about 33% in
fiscal 2018;
-- Debt to EBITDA of about 5x in fiscals 2017 and 2018; and
-- Funds from operations to debt of 13%-15% in fiscals 2017 and
2018.
S&P said, "The negative outlook reflects our view that
consolidated financial metrics such as debt/EBITDA are likely to
deteriorate and remain at such levels for a prolonged period
because of SoftBank's aggressive financial policy to allow
accelerated investments in its fund business. Further, the fund
business itself is riskier than SoftBank's existing businesses,
and the company is likely to continue large investments through
the fund in the long term.
"We would downgrade SoftBank in the next 12 months or so if we
were to believe its debt to EBITDA was likely to exceed 5x and
unlikely to recover, as a result of further accelerated
investments in its fund business, a delay in collection of bridge
investments, or a larger deterioration in Sprint's FOCF than we
expect. A downgrade is also likely if we believe it will
excessively pursue its growth strategy under a highly aggressive
financial policy even if its debt to EBITDA remains below 5x as a
result of asset disposals.
"Conversely, we would change the outlook back to stable if the
company reduced debt materially through asset disposals or a
public listing of its domestic telecom subsidiary and kept its
debt to EBITDA sufficiently below 5x on a prolonged basis even
after incorporating the possibility of more acquisitions or
investments for growth.
"Our issue rating on SoftBank's long-term senior unsecured bonds-
-a portion of which we rate--is equal to the long-term corporate
credit rating on the company. This is because the ratio of the
issuer's total secured debt plus its subsidiaries' debt to the
issuer's total debt (priority debt ratio) stands below 50%, the
threshold for us to consider notching down the issue rating. We
rate SoftBank's subordinated debt 'B+', three notches below the
long-term corporate credit rating, to reflect the issuer's option
to defer interest payments as well as the subordination of the
securities."
====================
N E W Z E A L A N D
====================
MAD BUTCHER: Sale Fair to Veritas Shareholders, Adviser Says
-------------------------------------------------------------
BusinessDesk reports that Veritas Investment's proposed sale of
the Mad Butcher franchisor to chief executive Michael Morton for
$8 million is fair to non-associated shareholders, avoiding "more
dire" consequences if it doesn't go ahead, the independent
adviser on the transaction said.
According to BusinessDesk, the company's shareholders will vote
on the transaction at a special meeting in Auckland on March 16,
and the food and beverage investor's independent directors
unanimously recommended the deal, the notice of meeting said.
BusinessDesk relates that Independent adviser Simmons Corporate
Finance said the NZ$8 million price tag falls within its
estimated value of between NZ$7.2 million and NZ$9.4 million and
that the transaction is fair to shareholders not associated with
Morton and if it doesn't proceed could see lender ANZ Bank New
Zealand appoint receivers to the company.
"The consequences of the Mad Butcher transaction not proceeding
may be more dire for the non-associated shareholders than if the
transaction did proceed," the report, as cited by BusinessDesk,
said. "Under either a receivership or liquidation scenario, we
estimate that there would be no financial return to the company's
shareholders."
BusinessDesk notes that Veritas has been selling assets to repay
debt it took on to buy a series of businesses since embarking on
a strategy of building a food and beverage business with the
backdoor listing of the Mad Butcher business five years ago. The
company paid NZ$40 million for Mad Butcher, half in cash and the
rest in scrip, raising NZ$25 million to help fund the deal.
If approved, the proceeds will go to repaying NZ$27 million owed
to ANZ and leave the Better Bar Co as Veritas's remaining asset,
BusinessDesk says.
"The company's strategic focus may change to solely operating
hospitality businesses (rather than being a wider investment
company) and it may seek to pursue mergers and acquisitions in
the sector," the report said, BusinessDesk relays. "In addition,
Veritas would be a more attractive acquisition target as it would
hold a single sector investment compared with its current
portfolio of a hospitality business and a meat franchisor
business which have limited synergies between them."
Veritas reported its first-half result on Feb. 27, which showed
Better Bar Co's earnings before interest, tax, depreciation and
amortisation rose 1.9 percent to NZ$3.1 million in the six months
ended Dec. 31. on an equivalent increase in revenue to NZ$12.2
million, BusinessDesk discloses.
According to BusinessDesk, the adviser's report notes Mr. Morton
will get to buy back the business for less than what he sold it
for, although it's "contracted significantly" since then.
Chair Tim Cook said the board is still in active discussions with
"a number of parties" on a potential sale or merger of the Better
Bar Co business, or finding alternative finance arrangements,
BusinessDesk relays. Keeping ANZ's extension of credit "will be
helpful in securing the best possible outcome," he said.
The shares were unchanged at 5 cents, valuing the company at
NZ$2.2 million, BusinessDesk discloses.
TAI POUTINI: West Coast Polytechnic Gets NZ$33MM Bailout
--------------------------------------------------------
Radio New Zealand reports that the West Coast's Tai Poutini
Polytechnic has no hope of repaying its debts and will get a $33
million bailout, Education Minister Chris Hipkins has announced.
Radio NZ relates that the announcement accompanied the revelation
the polytechnic conducted NZ$21.2 million less teaching than it
was paid for between 2010 and 2015 in 13 courses -- the biggest
case of under-delivery yet discovered.
According to the report, Mr. Hipkins said the Tertiary Education
Commission would write off the debt as well as a further NZ$3.65
million Tai Poutini should repay because it enrolled fewer
students than expected in 2016.
He said the government would give the institute NZ$8.5 million so
it could stay open this year and into next year, the report
relays.
"Effectively TPP [Tai Poutini Polytechnic] is in a receivership
situation, but the Crown is continuing to provide support because
it is critical for tertiary education provision on the West
Coast," the report quotes Mr. Hipkins as saying in a Cabinet
paper.
"TPP will never be in a position to repay the total NZ$24.878
million owed due to its ongoing deficit position and its small
size," he said.
Radio NZ says Tai Poutini had been struggling for several years.
In 2015, it made a NZ$1.6 million deficit, most of its governing
council resigned in 2016 and 2017, and a Crown manager was
appointed in late 2016, the report recalls.
Last year the polytechnic received the Qualifications Authority's
lowest possible quality rating, the first such rating for a
public institution, and the Auditor-General refused to confirm
the institute was a going concern, according to Radio NZ.
Radio NZ relates that the institute formerly had more than 2000
equivalent full-time students, but Mr. Hipkins' cabinet document
said it was now funded for 750, with only 350 of those based on
the West Coast.
It said that since historical under-delivery had been dealt with
the polytechnic's off-coast courses no longer provide enough
profit to subsidise its West Coast operations.
"TPP has been having long-term governance and management problems
which mean it is under serious financial strain and is no longer
viable," he said in the paper, Radio NZ relays.
According to Radio NZ, Mr. Hipkins said Tai Poutini could merge
with another institution or continue as a Crown institute with
local support. However, he said he would defer a decision on the
polytechnic's future until the completion of work on the wider
polytechnic sector.
Radio NZ adds that the Tertiary Education Commission's monitoring
and Crown ownership manager, Dean Winter, said Tai Poutini
Polytechnic had delivered far fewer hours than required across
courses including scaffolding, search and rescue, and other areas
including quarrying, mining, crane operations, and occupational
safety and health.
"In some of the scaffolding programmes, students were receiving
as little as 10 percent of the teaching hours they were meant to.
That means that in a course where students were expected to
receive nearly 200 hours of training, they only did 20," the
report quotes Mr. Winter as saying.
Tai Poutini Polytechnic's chief executive Alex Cabrera said the
government's financial support was great news for the future of
tertiary education on the West Coast, the report relays.
He said the institute was working on new ways of providing
education in the region, adds Radio NZ.
*********
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 2018. All rights reserved. ISSN: 1520-9482.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding,
electronic re-mailing and photocopying) is strictly prohibited
without prior written permission of the publishers.
Information contained herein is obtained from sources believed
to be reliable, but is not guaranteed.
TCR-AP subscription rate is US$775 for 6 months delivered via e-
mail. Additional e-mail subscriptions for members of the same
firm for the term of the initial subscription or balance
thereof are US$25 each. For subscription information, contact
Peter Chapman at 215-945-7000.
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