/raid1/www/Hosts/bankrupt/TCRAP_Public/180517.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, May 17, 2018, Vol. 21, No. 097
Headlines
A U S T R A L I A
COMMAND BUILDING: First Creditors' Meeting Set for May 25
CUSTOM BUS: Second Creditors' Meeting Scheduled for May 23
DANFX TRADE: Supreme Court Enters Winding Up Order
FASTRACK DEALER: First Creditors' Meeting Set for May 23
JUST ADD: First Creditors' Meeting Slated for May 23
LOCAL BLUE: Second Creditors' Meeting Set for May 23
MAWSON GOLD: Second Creditors' Meeting Set for May 25
MPCD HOLDINGS: Second Creditors' Meeting Set for May 24
C H I N A
DR. PENG: Moody's Alters Outlook to Neg. & Affirms Ba2 CFR
FUTURE LAND: Moody's Assigns Ba2 Rating to Proposed USD Notes
GUANGDONG HELENBERGH: Moody's Assigns B2 CFR, Outlook Stable
GUANGDONG HELENBERGH: S&P Assigns 'B' ICR, Outlook Stable
GUANGZHOU R&F: Fitch Rates USD600M Senior Notes Final 'BB-'
SHARING ECONOMY: RBSM LLP Raises Going Concern Doubt
TONGYI INDUSTRIAL: Moody's Cuts CFR to Caa1 on Probable Default
H O N G K O N G
NOBLE GROUP: To Appoint Andrew Herd as Audit Committee Chairman
NOBLE GROUP: Net Loss Narrows to US$71.5MM in Q1 Ended March 31
I N D I A
AMAZON ENTERPRISES: CRISIL Migrates B+ Rating to Not Cooperating
AMPS ENGINEERING: CRISIL Migrates B Rating to Not Cooperating
APINDIA BIOTECH: CRISIL Lowers Rating on INR7.3MM LT Loan to C
BAJAJ SYNTHETICS: CRISIL Assigns B+ Rating to INR14.31MM Loan
BHUSHAN STEEL: NCLT Approves Tata Steel's Resolution Plan
CANARA GOODS: CARE Assigns B+ Rating to INR6MM LT Loan
DHANRAJ COTTON: CRISIL Reaffirms 'B' Rating on INR5MM Cash Loan
GANPATI ALLIED: CRISIL Migrates B Rating to Not Cooperating Cat.
J K PULSE: CRISIL Downgrades Rating on INR15MM Cash Loan to B
KAD HOUSING: CRISIL Lowers Rating on INR10.7MM Overdraft to B+
KAMAL BUILDERS: CRISIL Reaffirms B+ Rating on INR5MM Cash Loan
KAMALA BOARD: CARE Assigns B+ Rating to INR9.70cr LT Loan
KASHVI AGRITECH: CRISIL Assigns B+ Rating to INR7MM Term Loan
KPG INTERNATIONAL: CARE Assigns B+ Rating to INR4.50cr Loan
MANASA QUALITY: CRISIL Migrates B+ Rating to Not Cooperating
MATRIX ROLLER: CARE Assigns B+ Rating to INR14cr LT Loan
MITTAL OCEAN: CRISIL Assigns B+ Rating to INR3MM Cash Loan
NATURAL TECHNOFAB: CRISIL Moves B Rating to Not Cooperating
RADHAKANTA HIMGHAR: CARE Reaffirms B+ Rating on INR10.05cr Loan
RAJ VEHICLES: CRISIL Reaffirms B+ Rating on INR13MM Cash Loan
RELIANCE COMM: NCLT Admits Ericsson's Bankruptcy Bid vs. Firm
SAFESPACE WAREHOUSING: CARE Assigns B+ Rating to INR6.89cr Loan
SHUBH PLY: CARE Assigns B+ Rating to INR4.61cr LT Loan
SHYAM COAL: CRISIL Migrates B+ Rating to Not Cooperating Category
SIMPLON CERAMIC: CRISIL Migrates B Rating to Not Cooperating
SWATHI COTGIN: CRISIL Lowers Rating on INR19.8MM Loan to D
TRIDENT INFRA: CRISIL Reaffirms B+ Rating on INR40MM Term Loan
TUSHAR FABRICS: CARE Assigns B Rating to INR5.61cr LT Loan
UNIQUE TREES: CRISIL Moves B Rating to Not Cooperating Category
I N D O N E S I A
STAR ENERGY: Fitch Rates USD580MM Sr. Notes 'BB-', Outlook Stable
J A P A N
TOSHIBA CORP: Returns to Black; Avoids Delisting from TSE
V I E T N A M
HOME CREDIT: Moody's Assigns First-Time B3 CFR, Outlook Stable
X X X X X X X X
MALDIVES: Fitch Affirms 'B+' LT FC IDR, Outlook Stable
- - - - -
=================
A U S T R A L I A
=================
COMMAND BUILDING: First Creditors' Meeting Set for May 25
---------------------------------------------------------
A first meeting of the creditors in the proceedings of Command
Building Services Pty Ltd will be held at the offices of McLeod &
Partners, Hermes Building, Level 1, 215 Elizabeth Street, in
Brisbane, Queensland, on May 25, 2018, at 10:00 a.m.
Jonathan Paul McLeod of McLeod & Partners was appointed as
administrator of Command Building on May 15, 2018.
CUSTOM BUS: Second Creditors' Meeting Scheduled for May 23
----------------------------------------------------------
A second meeting of creditors in the proceedings of Custom Bus
Australia Pty Ltd, trading as Custom Bus and Custom Bus Holdings
Pty Ltd will be held on May 23, 2018, at 2:00 p.m. at:
Novotel Sydney Parramatta
Ground Floor, 350 Church Street
Parramatta NSW 2150
and
Worrells Solvency and Forensic Accountants
Suite 1103, Level 11, 147 Pine Street
Adelaide SA 5000
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 May 22, 2018, at 4:00 p.m.
Simon Cathro and Aaron Lucan of Worrells Solvency were appointed
as administrators of Custom Bus on Jan. 18, 2018.
DANFX TRADE: Supreme Court Enters Winding Up Order
--------------------------------------------------
The Supreme Court of Queensland on May 9, 2018, ordered that
three companies associated with Daniel Farook Ali and the
unregistered managed investment scheme known as "the Daniel Ali
Scheme" be wound up.
The Court has appointed Anthony Castley --
tony.castley@williambuck.com -- of William Buck Business Recovery
services as receiver of the Scheme and liquidator of the
following companies:
-- DanFX Trade Pty Ltd (ACN 613 185 345);
-- DanFX Investment Holdings Pty Ltd (ACN 614 172 842); and
-- D & S Ali Properties Pty Ltd (ACN 614 851 937)
The Court also ordered that any affidavit or report of Mr Castley
be made available to the public on ASIC's website.
The Court noted that winding up the companies and the Daniel Ali
scheme was clearly appropriate.
ASIC commenced proceedings in the Supreme Court of Queensland in
November 2017 against Mr. Daniel Ali and his related corporate
entities. ASIC alleged that Mr. Ali, through his corporate
entities, operated an unregistered management investment scheme
that had raised approximately AUD13 million from more than 200
investors.
On Jan. 29, 2018, Mr. Castley as the appointed receiver filed an
interim report which showed that there was no evidence that
sufficient funds existed to repay the investors. ASIC then sought
and was granted leave to amend its application to seek the
winding up of the entities and the unregistered scheme.
The proceeding against Mr. Ali in his personal capacity remains
listed for a two-day hearing in the week commencing July 23,
2018.
ASIC's investigations are ongoing.
FASTRACK DEALER: First Creditors' Meeting Set for May 23
--------------------------------------------------------
A first meeting of the creditors in the proceedings of Fastrack
Dealer Net Pty Ltd will be held at the offices of SV Partners,
22 Market Street, in Brisbane, Queensland, on May 23, 2018, at
11:00 a.m.
Terry Grant Van der Velde of SV Partners was appointed as
administrator of Fastrack Dealer on May 11, 2018.
JUST ADD: First Creditors' Meeting Slated for May 23
----------------------------------------------------
A first meeting of the creditors in the proceedings of Just Add
Kids Pty Ltd will be held at the offices of PKF, Level 8, 1
O'Connell Street, in Sydney, NSW, on May 23, 2018, at 12:00 p.m.
Bradley John Tonks of PKF was appointed as administrator of Just
Add on May 14, 2018.
LOCAL BLUE: Second Creditors' Meeting Set for May 23
----------------------------------------------------
A second meeting of creditors in the proceedings of Local Blue
Pages Pty Ltd has been set for May 23, 2018, at 11:30 a.m. at the
offices of Australian Institute of Company Directors, Level 26,
367 Collins Street, in Melbourne, VIC.
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 May 22, 2018, at 4:00 p.m.
Domenico Alessandro Calabretta and Grahame Ward of Mackay Goodwin
were appointed as administrators of Local Blue on May 1, 2018.
MAWSON GOLD: Second Creditors' Meeting Set for May 25
-----------------------------------------------------
A second meeting of creditors in the proceedings of Mawson Gold
N.L. has been set for May 25, 2018, at 9:15 a.m. at the offices
of DuncanPowell, Level 4, 70 Pirie Street, in Adelaide, SA.
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 May 24, 2018, at 4:00 p.m.
Christopher Robert Powell of DuncanPowell was appointed as
administrator of Mawson Gold on April 19, 2018.
MPCD HOLDINGS: Second Creditors' Meeting Set for May 24
-------------------------------------------------------
A second meeting of creditors in the proceedings of MPCD Holdings
Pty Ltd has been set for May 24, 2018, at 11:00 a.m. at
Australian Institute of Company Directors, Level 26, 367 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 May 23, 2018, at 4:00 p.m.
Domenico Alessandro Calabretta of Mackay Goodwin was appointed as
administrator of MPCD Holdings on May 3, 2018.
=========
C H I N A
=========
DR. PENG: Moody's Alters Outlook to Neg. & Affirms Ba2 CFR
----------------------------------------------------------
Moody's Investors Service has changed the outlook on the rating
of Dr. Peng Telecom & Media Group Co., Ltd. to negative from
stable and has affirmed the company's Ba2 corporate family rating
(CFR).
At the same time, Moody's has changed the outlook on Dr. Peng
Holding Hongkong Limited's rating to negative from stable, and
has affirmed the company's Ba2 senior unsecured rating.
RATINGS RATIONALE
"The change in Dr. Peng's rating outlook reflects our concern
over the weakened operating performance of its core broadband
business amid intense competition and an ongoing need to invest
in network upgrades and acquisitions, which in turn will weigh on
its cash flow generation," says Danny Chan, a Moody's Analyst and
also Moody's Lead Analyst for Dr. Peng.
Dr. Peng's underlying operating performance has weakened over the
past 6-12 months owing to intensifying price cuts by major telco
operators as the broadband market in China matures. This
increased competition has weighed on Dr. Peng's broadband
subscriber base and average revenue per user (ARPU). As a result,
Dr. Peng's broadband revenue declined by 8.1% in 2017 versus
revenue growth of around 11.9% in 2016.
Consequently, Moody's now expects the company's revenue will
decline by a mid-single digit percentage in 2018-19, which
contrasts with the steady revenue growth trajectory that Moody's
had previously expected.
Moody's also expects the company's capital requirements will
remain elevated at about RMB3 billion per annum over the next 2-3
years, owing to the need to upgrade its network infrastructure,
invest into its data center business, and pursue bolt-on,
moderate-size acquisitions. Coupled with weakened operating cash
flow due to the soft core broadband performance, Moody's projects
the company will turn free cash flow negative over the next 12-18
months.
Owing to the company's elevated debt levels to support capital
expenditure and weakened EBITDA generation, its debt leverage
increased to 1.8x in 2017 from 1.1x in 2016. Moody's expects its
leverage will weaken further to around 2.0x-2.5x over the next 12
months.
Nevertheless, the affirmation of the company's Ba2 rating
reflects its ownership of a last-mile broadband network and its
early entry.
Moody's also expects the company's adjusted EBITDA margin to stay
healthy at around 40%-45% over the next 12 to 18 months, thanks
to its cost-saving initiatives such as proactive management of
labor costs.
The company's liquidity position is strong. Its cash of RMB3.1
billion at the end of March 2018 and expected reported operating
cash inflow of RMB2.5-3.0 billion over the next 12 months are
sufficient to cover its short-term debt, dividend payments and
capital expenditure of RMB3.4 billion over the same period.
The company's funding sources are also diversified, with a good
track record of tapping the onshore equity and debt markets,
providing some buffer amid intense competition.
The ratings continue to reflect (1) intense competition from
well-sourced and large-sized rivals in a market with significant
regulatory risks; and (2) the company's expansion into overseas
markets and into lower margin businesses, heightening execution
risks.
There is no upward pressure on the rating, given the negative
outlook. However, the outlook could return to stable if the
company, on a sustained basis: (1) halts the decline in in its
sales and operating cash flow and; (2) improves its credit
profile with leverage below 1.5x-2.0x and free cash flow to debt
above 5%-10%.
The rating could be downgraded if: (1) revenue and cash flow
further weaken; (2) material adverse regulatory changes weaken
the company's business model and market share; (3) the company
undertakes an aggressive dividend policy or acquisitions which
weaken balance sheet liquidity; and/or (4) its credit metrics
weaken, with adjusted debt/ EBITDA exceeding 3.0x.
The principal methodology used in these ratings was
Telecommunications Service Providers published in January 2017.
Dr. Peng Telecom & Media Group Co., Ltd. is the fourth-largest
telecom operator and the largest private telecom operator in
China, offering broadband internet access and application
services across 26 provinces and 211 cities.
Headquartered in Beijing, Dr. Peng Telecom & Media Group Co.,
Ltd. was founded in 1985 and listed on the Shanghai Stock
Exchange (600804.CH) in 1994. At end-2017, Chairman Yang Xue Ping
and his spouse held an approximate 10.6% stake in the company.
FUTURE LAND: Moody's Assigns Ba2 Rating to Proposed USD Notes
-------------------------------------------------------------
Moody's Investors Service has assigned a Ba2 senior unsecured
rating to the proposed notes to be issued by New Metro Global
Limited, and to be guaranteed by Future Land Holdings Co., Ltd
(Ba2 stable).
The proceeds of the notes will be used mainly for Future Land
Holdings' onshore real estate project development and to repay
its existing indebtedness.
The rating on the proposed notes reflects Moody's expectation
that Future Land Holdings 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.
RATINGS RATIONALE
"The proposed notes will provide term funding for Future Land
Holdings to grow its business and improve its liquidity and debt
maturity profile," says Kaven Tsang, a Moody's Vice President and
Senior Credit Officer.
"The proposed notes will not have a material impact on the
company's credit metrics, because it will use part of the
proceeds for refinancing and as the proposed issuance is in line
with our expectations for its funding plans for this year," adds
Tsang, also Moody's Lead Analyst for Future Land Holdings.
Moody's projects that Future Land Holdings' adjusted revenue/debt
and adjusted EBIT/interest coverage -- including its share in
joint ventures -- will measure around 95%-100% and 4.0x-4.5x over
the next 12-18 months. These ratios support the company's Ba2
corporate family rating (CFR).
Future Land Holdings' Ba2 CFR reflects its strong sales execution
and growing scale, and improving credit metrics. The rating also
considers the company's improved geographic diversification into
other cities in the Yangtze River Delta over the last few years
and its growing stream of non-development revenue, which will add
stability to its earnings and debt-service ability.
In addition, the Ba2 rating is supported by its adequate
liquidity position, with its cash balance of RMB21.9 billion at
the end of 2017 covering 156% of its short-term debt.
However, the rating also factors in its exposure to the regional
economy of the Yangtze River Delta and its sizeable business
exposures to joint ventures.
Moody's has not notched down the Ba2 senior unsecured bond
rating. Although the majority of the company's claims are at the
operating subsidiary level, its diversified business profile -
with cash flow generation across a large number of operating
subsidiaries and different business segments covering property
development and property investment - mitigates structural
subordination risks.
Future Land Holdings' ratings could be upgraded if the company
sustains resilient sales through cycles, strong liquidity and
prudent financial management.
Specifically, upward rating pressure could emerge if the
company's: (1) adjusted revenue/debt - including its share in
joint ventures - exceeds 100%-105%; and/or (2) EBIT/interest
coverage stays above 4.5x-5.0x on a sustained basis.
On the other hand, downward rating pressure could emerge if the
company's contracted sales growth slows and its credit metrics
weaken, with EBIT/interest coverage falling below 3.0x or
adjusted revenue/debt falling below 80%-85%.
The principal methodology used in this rating was Homebuilding
And Property Development Industry published in January 2018.
Future Land Holdings Co., Ltd engages primarily in residential
development and was founded in 1993 by Wang Zhenhua, who is also
the chairman of the company.
Future Land Holdings is a 67.1%-owned subsidiary of Future Land
Development Holdings Limited (Ba2 stable), and the mainland-
listed holding company of Future Land Group. The company has
direct control over the group's assets, cash flow and operations.
As of the end of 2017, Future Land Holdings had a land bank
spread across in 62 cities in China, with a total land bank of
around 67.4 million square meters (sqm) of gross floor area
(GFA).
GUANGDONG HELENBERGH: Moody's Assigns B2 CFR, Outlook Stable
------------------------------------------------------------
Moody's Investors Service has assigned a first-time B2 corporate
family rating (CFR) to Guangdong Helenbergh Real Estate Group
Co., Ltd.
The rating outlook is stable.
RATINGS RATIONALE
"Helenbergh's B2 CFR reflects the company's fast turnover
business model and diversified land acquisition strategy which
support business growth and stable financial metrics," says Kaven
Tsang, a Moody's Vice President and Senior Credit Officer.
The company has a track record of acquiring land through multiple
channels, including project acquisitions and urban redevelopment,
that enables it to maintain land at reasonable costs.
Moody's estimates that the cost of Helenbergh's land bank at
around RMB2,000 per square meter at the end of December 2017.
This cost provides more pricing flexibility and supports the
company's execution of its growth plan in a challenging operating
environment over the next 12-18 months.
Helenbergh achieved strong 71% year-on-year growth in contracted
sales to RMB25.7 billion in 2017, after 24% year-on-year growth
in 2016. These strong sales support the company's liquidity and
revenue growth. The latter in turn partly mitigates the high debt
growth needed to support its expansion in the next 12-18 months.
The average selling price for contracted sales grew 42% year-on-
year in 2017 to RMB 9,772 per square meter, which supports an
improvement in its adjusted gross profit margin to around 24% in
the next 12-18 months -- from 22.6% in 2017 -- that will temper
the effect of increasing borrowing costs.
Moody's expects Helenbergh's revenue/adjusted debt will remain
largely stable at 70%-75% in the next 12-18 months from 74% in
2017. Its EBIT/interest coverage will also be largely stable at
around 2.9x over the same period, compared to 2.8x in 2017. These
ratios well position the company's CFR at the B2 level.
"The company's rating, however, is constrained by its private
company status, narrow funding access, and it high level of
outstanding trust loans and loans from asset management
companies, a situation which raises its refinancing risks", adds
Tsang, also the lead analyst of Helenbergh.
At the end of December 2017, trust loans and loans from asset
management companies accounted for more than 60% of the company's
borrowings. Out of the RMB8.8 billion in short-term debt due in
2018, Moody's estimates that the vast majority would be either
trust loans or loans from asset management companies. This
situation increases refinancing risk, given the company's narrow
funding access and the fact that the Chinese government is
tightening traditional and shadow bank lending to the property
sector.
However, Moody's draws some comfort that the company has adequate
cash to meet its near-term refinancing needs. At the end of
December 2017, it had a cash balance of RMB10 billion, which can
fully cover its short-term debt of RMB8.8 billion. Moody's also
notes that the company did not have a material amount of
committed land payments at the end of 2017.
Helenbergh's B2 CFR rating is also constrained by its private
company status as -- in this situation -- corporate transparency
and governance requirements are generally lower than those for
listed companies.
Helenbergh's rating also reflects its material exposure to low-
tier cities due to the company's strategy to focus on satellite
cities to capture the spillover demand from the major cities.
Weaker economic fundamentals in low-tier cities will make the
property markets in these cities more vulnerable in a market
down-cycle.
The stable outlook reflects Moody's expectation that the company
will maintain sufficient balance sheet liquidity and will grow
its scale, as planned, while maintaining a disciplined approach
to land acquisitions.
Helenbergh's rating could be upgraded if it can (1) achieve
planned contracted sales and revenue growth, while maintaining
its current financial profile; and (2) strengthen its liquidity
through the diversification of its funding channels and extension
of its debt maturity profile.
On the other hand, the rating could be downgraded if the company
(1) suffers from weaker contracted sales due to a market
slowdown; or (2) accelerates its land acquisitions beyond Moody's
expectations, which will weaken its financial metrics and
liquidity.
Financial metrics indicating a downgrade would be (1)
EBIT/interest coverage below 1.5-2x; or (2) liquidity position
weakens or refinancing risk escalates, such that cash/ short-term
debt falls below 1.0x.
The principal methodology used in this rating was Homebuilding
And Property Development Industry published in January 2018.
Guangdong Helenbergh Real Estate Group Co., Ltd. is a Guangdong-
based residential property developer. It offers different
products, such as apartments, high-rise residential buildings and
villas. At the end of December 2017, it had land reserves of 28
million square meters in gross floor area (GFA), including around
13 million square meters of GFA pending settlement, in 29 cities.
Its key operating cities include Huizhou, Kunming, Wuhan and
Zhaoqing.
The company was founded by chairman Huang Chiheng in 2005. He and
his son have 100% equity in the company.
GUANGDONG HELENBERGH: S&P Assigns 'B' ICR, Outlook Stable
---------------------------------------------------------
S&P Global Ratings assigned its 'B' long-term issue credit rating
to China-based property developer Guangdong Helenbergh Estate
Group Co. Ltd. The outlook is stable.
The rating on Helenbergh reflects the company's increasing
execution risk given its fast expansion, and higher information
and governance risks relative to peers due to its privately owned
status. Helenbergh also has high refinancing risk, due to its
large non-bank borrowings and a short debt-maturity profile. The
company has comparatively narrow financing channels as a non-
listed company. Nevertheless, Helenbergh's sales performance is
satisfactory and its leverage has been stable over the past few
years while it continued to expand its scale and to areas outside
of Guangdong province. Moreover, S&P believes Helenbergh has
sufficient low-cost and diversified land reserves for future
development.
Helenbergh's project execution capabilities under an enlarged
operating scale are untested. In our opinion, the company's high
growth appetite and increasing pace of expansion will likely
raise its execution risk. Over the past few years, Helenbergh
rapidly expanded land reserves and accelerated contracted sales.
Contracted sales increased to Chinese renminbi (RMB) 25 billion
in 2017, more than double the RMB9.9 billion in 2014. Helenbergh
targets to further accelerate its contracted sales to expand its
operating scale in the next one to two years. S&P believes this
expansion mode will strain its resources as well as financial
management capabilities.
S&P said, "In our view, Helenbergh's large and low-cost land
reserves can partly offset its increasing execution risk. As of
December 2017, the company had total land reserves of 15.3
million square meters. We estimate that existing reserves are
sufficient for development in the coming three to four years. A
large part of these reserves are located in the suburbs of tier-
two and tier-three cities since Helenbergh targets project
locations that are within an hour's reach from city centers. The
company has also entered into preliminary agreements to acquire
about 13 million square meters of land parcels, through mergers
and acquisitions or by engaging in urban redevelopment projects.
Considering Helenbergh's existing reserves and sales momentum, we
expect the company to maintain its spending on land acquisitions
at 30%-40% of its contracted sales in each year.
"We anticipate that Helenbergh's diversification benefits will
gradually improve as it implements its strategy to penetrate into
existing cities and expand into selected tier-two and tier-three
cities. The company started its regional expansion in 2009 when
it entered China's western regions. Over the years, Helenbergh
has developed its footprint in some cities along the Yangtze
River Delta, in the Bohai Rim, while deepening its roots in
Guangdong province. The government's tightening policies in tier-
one and certain overheating tier-two cities have had a spillover
effect on lower-tier cities. Helenbergh has benefited from the
recent market recovery, given its geographical exposure."
However, Helenbergh's product positioning targets low- to mid-
priced projects, and that somewhat constrains its profitability.
Despite a slight improvement in 2017, the company's EBITDA margin
of 20%-24% is moderately lower than the market average. Given
Helenbergh's lower price tag, the increase in input costs may be
difficult to pass through to price-sensitive buyers. Due to a
change in product mix and improving market sentiment in lower-
tier cities, Helenbergh increased its selling price to about
RMB9,770 per square meter in 2017. However, S&P believes the
increase in selling price may be slightly offset by rising land
costs, which are likely to dent the booked margin in the coming
two years.
The company's refinancing risk will likely continue to be high
with short-term borrowing accounting for about 42% of total gross
debt. S&P said, "We estimate Helenbergh's debt maturity profile
to be slightly less than two years as of December 2017. In our
view, liquidity tightening could have a larger impact on the
company than many of its rated peers, given Helenbergh's strong
reliance on trust financing and borrowings from asset management
companies, apart from bank borrowings." The availability and cost
of these funding channels can vary significantly according to
market conditions, which in recent months have been tightening
under the government's initiative to control shadow banking. To
mitigate the situation, Helenbergh is seeking alternative funding
sources to support its ongoing development, including domestic
bonds, offshore borrowings, and tapping the equity market. In
December 2017, the company obtained approval to issue domestic
bonds worth up to RMB4.0 billion. This could temper the
refinancing risk.
S&P said, "In our view, Helenbergh has lower information
transparency relative to its peers. Given its privately owned
status, the company is not compelled to disclose any material
transactions. We also believe Helenbergh faces higher key-man and
governance risk, given our expectation that Mr. Chiheng Huang has
substantial influence on all key decisions. Mr. Huang is the
founder of Helenbergh and he assumes key roles in the management
team.
"The stable outlook reflects our view that Helenbergh will
maintain its satisfactory sales performance and project execution
in the next 12 months. We expect that the ratio of debt to EBITDA
will hover at 6.0x-7.0x in the forecast period.
"We could lower the rating if Helenbergh's capital structure
continued to rely on short-term borrowings, such that the
weighted average debt maturity is below two years, while its
liquidity profile shows sources are deficient to cover uses. We
could also downgrade the company if Helenbergh's leverage
materially deteriorates. This could happen if (1) Helenbergh's
contracted sales are materially lower than our projection of
about RMB30 billion-RMB33 billion in 2018 and RMB37 billion-RMB39
billion in 2019; and (2) the company becomes more aggressive than
expected towards debt-funded expansion.
"We could raise the rating if: (1) Helenbergh controls its pace
of expansion and lowers its debt leverage such that its ratio of
debt to EBITDA consistently stays below 5x; and (2) its weighted
average debt maturity is above two years and the company's ratio
of liquidity sources is more than 1.2x.
"We may also raise the rating if the company demonstrates a
longer record of geographic and scale expansion without material
deterioration in debt leverage."
GUANGZHOU R&F: Fitch Rates USD600M Senior Notes Final 'BB-'
-----------------------------------------------------------
Fitch Ratings has assigned Guangzhou R&F Properties Co. Ltd.'s
(Guangzhou R&F; BB-/Negative) USD600 million 7% senior notes due
2021 a final 'BB-' rating. The notes are rated at the same level
as Guangzhou R&F's senior unsecured rating because they
constitute its direct and senior unsecured obligations.
The notes are issued by Easy Tactic Ltd, a subsidiary of
Guangzhou R&F. The assignment of the final rating follows the
receipt of documents conforming to information already received
and is in line with the expected rating assigned on April 17,
2018.
Guangzhou R&F's ratings are constrained by its high leverage, as
measured by net debt/adjusted inventory, which stood at 60.2% at
end-2017 and is likely to climb to around 65% in the next year or
two. Guangzhou R&F's high leverage stems from aggressive land
acquisitions in 2017, when it replenished 18 million square
metres (sq m) of attributable gross floor area of land bank for
CNY58 billion - a land acquisition/contracted sales value ratio
of 0.7x, against 0.1x-0.3x in the previous three years. Guangzhou
R&F is expected to settle more than CNY22 billion of outstanding
land premiums during 2018.
The Negative Outlook reflects limited headroom for leverage,
which is around the threshold where Fitch would consider
downgrading Guangzhou R&F's ratings. The company's pursuit of
rapid scale expansion, to CNY200 billion-300 billion of
contracted sales, from CNY82 billion in 2017, could see its land
acquisition pace increase above Fitch's expectations, which could
push leverage beyond 65%.
KEY RATING DRIVERS
Sustained High Leverage: Fitch expects Guangzhou R&F's leverage,
as measured by net debt/adjusted inventory, which stood at 60.2%
at end-2017 - above its negative threshold of 60.0% - to rise to
65.0% in the next year or two, as the company must settle CNY22
billion of outstanding land premiums during 2018. The company
also plans to spend 30%-40% of contracted sales proceeds on land
acquisitions in 2018-2019 and accelerate its construction
expenditure to support growth in contracted sales scale towards
CNY200 billion-300 billion by 2020. Guangzhou R&F's accelerated
land acquisitions have raised its net debt by 45% yoy, to above
CNY112 billion at end-2017 (end-2016: CNY77 billion).
Wanda Acquisition Substantially Completed: Guangzhou R&F
confirmed that it completed its acquisition of 69 hotels and one
office building from Dalian Wanda, paying total consideration of
CNY18 billion in 2017, according to its circular dated 19 March
2018 and 2017 results announcement. Another Wanda hotel was
completed and transferred in January 2018, while three Wanda
hotels are pending transaction completion by end-2019.
Higher Non-Development EBITDA: The company's hotel and rental
income revenue surged by 45% yoy to CNY3.3 billion in 2017 (2016:
CNY2.3 billion), with the newly acquired Wanda hotels
contributing around two months of revenue. Fitch expects
Guangzhou R&F's non-property development revenue to reach CNY8.1
billion in 2018 with full-year contributions. The company's non-
property development EBITDA/gross interest expense ratio is
likely to improve moderately to 0.24x in 2018-2019, from 0.17x in
2017, on lower profit margins and higher operating costs
following the migration to the newly acquired Wanda hotels.
Stabilising Margins: Fitch expects Guangzhou R&F's EBITDA margin
to fall to 24%-25% in 2018-2019. It had an EBITDA margin of 26%
and a gross profit margin of 35% in 2017, improved from 21% and
28%, respectively, in 2016. The margins will be supported by the
company's unrecognised property sales of CNY45 billion, which
carried a gross profit margin of 38% as at February 2018 (2017
booked property sales gross profit margin: 37%). These sales will
be recognised over the next year or two, together with a
contracted average selling price that recovered to CNY13,278 per
sq m in 2M18, from CNY12,961 in 2016.
DERIVATION SUMMARY
Guangzhou R&F's geographical diversification is comparable with
'BB+' and 'BB' rated peers. Its homebuilding scale in contracted
sales is comparable with CIFI Holdings (Group) Co. Ltd.'s
(BB/Stable) CNY104 billion in 2017 and is higher than the CNY40
billion-70 billion of 'BB-' rated peers, such as Yuzhou
Properties Company Limited's (BB-/Stable) CNY40 billion.
However, Guangzhou R&F's ratings are constrained by its weakening
financial profile, following the substantial completion of hotel
and office asset acquisitions from Dalian Wanda, as well as its
aggressive land acquisitions. The company's leverage ratio, as
measured by net debt/adjusted inventory, of 60% at end-2017 is at
the higher range of peers rated 'B+' and above. Guangzhou R&F
will also need to maintain a land bank of five to six years to
support its expansion in contracted sales, which could limit room
for de-leveraging in the next two to three years. Fitch expects
the company's leverage to reach 65% in 2018-2019.
No Country Ceiling, parent/subsidiary or operating environment
aspects affect the rating.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Attributable contracted sales to reach CNY131 billion in
2018 and CNY167 billion in 2019 (2017: CNY82 billion)
- EBITDA margin of 24%-25% in 2018-2019, slightly lower than
the 26% in 2017 due to higher operating costs from Wanda
asset migration
- Hotel and property rental revenue to reach CNY8 billion-9
billion in 2018-2019
- Land bank life reduced to and sustained at four to five
years, from a high of almost eight years at end-2017
RATING SENSITIVITIES
Developments that May Lead to the Outlook being changed to Stable
include:
- Net debt/adjusted inventory sustained below 65% (2017: 60%)
Developments that May, Individually or Collectively, Lead to
Negative Rating Action
- Continued decline in property contracted sales
- Net debt/adjusted inventory at over 65% for a sustained
period
LIQUIDITY
Sufficient Liquidity: Guangzhou R&F had a cash balance of CNY32
billion, including restricted cash of CNY13 billion as at end-
2017, sufficient to cover short-term debt of CNY28 billion and
the CNY767 million yet to be settled on the Wanda hotel
acquisitions. However, the cash/short-term debt ratio declined to
1.1x at end-2017, from 1.4x at end-2016.
SHARING ECONOMY: RBSM LLP Raises Going Concern Doubt
----------------------------------------------------
Sharing Economy International Inc. filed with the U.S. Securities
and Exchange Commission its annual report on Form 10-K,
disclosing a net loss of $12.93 million on $13.52 million of
revenues for the fiscal year ended December 31, 2017, compared to
a net loss of $11.68 million on $17.36 million of revenues for
the year ended in 2016.
RBSM LLP in New York, NY, states that the Company had a loss from
continuing operations for the year ended December 31, 2017 and
expects continuing future losses, and has stated that substantial
doubt exists about the Company's ability to continue as a going
concern.
The Company's balance sheet at December 31, 2017, showed total
assets of $70.55 million, total liabilities of $9.39 million, and
a total stockholders' equity of $61.17 million.
A copy of the Form 10-K is available at:
https://is.gd/WOUo0q
About Sharing Economy International
Sharing Economy International Inc. manufactures textile
machinery. The Jiangsu, China-based Company designs,
manufactures, and distributes proprietary high and low
temperature dyeing and finishing machinery to the textile
industry.
TONGYI INDUSTRIAL: Moody's Cuts CFR to Caa1 on Probable Default
---------------------------------------------------------------
Moody's Investors Service has downgraded the corporate family
rating of Tongyi Industrial Group Co., Ltd. to Caa1 from B3.
At the same time, Moody's has withdrawn the B3 senior unsecured
notes rating and stable outlook of Tongyi (BVI) Limited.
The rating outlook for Tongyi Industrial Group Co., Ltd. is
changed to negative from stable.
RATINGS RATIONALE
"The downgrade of Tongyi's corporate family rating to Caa1
reflects the high probability of a default on its short-term debt
and on the onshore corporate bond obligations puttable in the
next 12-18 months, as the company faces limited financial
flexibility and tight funding market conditions," says Stephanie
Lau, a Moody's Vice President and Senior Analyst.
Tongyi's limited financial flexibility is underpinned by its
inadequate liquidity and high refinancing needs in the next 12-18
months. The company also faces high refinancing risk, as it has
yet to complete the proposed offshore bond issuance announced on
April 18, 2018.
As of the end of 2017, the company's RMB829 million of
unrestricted cash and expected RMB500-550 million operating cash
flow were insufficient to cover its debt obligations maturing
over the next 12 months, including RMB1.5 billion in short-term
borrowings and RMB1.0 billion private onshore bonds puttable in
2018. It also has another RMB1.0 billion of public onshore bonds
puttable in 2019. Its weak liquidity profile more appropriately
positions it at the Caa1 rating category.
Moody's estimates that Tongyi's default risk has increased
because its access to the domestic bond and loan markets has been
negatively affected by the tight credit conditions in China,
which are likely to persist.
The negative outlook reflects Tongyi's increased refinancing risk
and probability of default on its debt obligations.
The rating could be downgraded if the company defaults on its
payment obligations.
The rating could be upgraded if Tongyi is able to refinance a
substantial portion of its 12-month maturing debt by lengthening
its maturity profile on satisfactory terms and conditions.
The principal methodology used in these ratings was Chemical
Industry published in January 2018.
Established in 1997, Tongyi Industrial Group Co., Ltd. is a
private chemical company that engages in the production and
trading of commodity petroleum chemicals. The company is based in
Fushun, Liaoning Province. Tongyi's major manufactured products
include liquefied petroleum gas (LPG), methyl tertiary butyl
ether (MTBE) and propylene. Its trading products include LPG,
ethylene glycol and C4.
The company generated RMB13.5 billion in revenue in 2017 and had
a total asset size of around RMB10 billion at the end of 2017.
As of December 31, 2017, Song Tieming, chairman of the company,
owned around 34% of the company and his wife, Li Yuan, owned 66%.
================
H O N G K O N G
================
NOBLE GROUP: To Appoint Andrew Herd as Audit Committee Chairman
---------------------------------------------------------------
The Strait Times reports that Noble Group independent director
Andrew Herd will be appointed chairman of its audit committee
from June 1, the company said in a release to the Singapore
Exchange on May 16.
He will take over from Paul Brough, who steps down as chairman of
the audit committee but will remain a member. Mr Brough is also
chairman of Noble's board, the report relates.
Hong Kong-based Noble Group Limited (SGX:N21) --
http://www.thisisnoble.com/-- engages in supply of agricultural,
industrial and energy products. The Company supplies agricultural
and energy products, metals, minerals and ores. Agriculture
products include grains, oilseeds and sugar to palm oil, coffee,
and cocoa. Energy business includes coal, gas and liquid energy
products. In metals, minerals and ores (MMO), it supplies iron
ore, aluminum, special ores and alloys. The Company operates
nearly in 140 locations. It supplies growth demand markets in
Asia and Middle East. Alcoa World Alumina and Chemicals is the
subsidiary of this company.
As reported in the Troubled Company Reporter-Asia Pacific on
March 23, 2018, S&P Global Ratings lowered its long-term issuer
credit rating on Noble Group to 'D' from 'CC'.
S&P said, "We lowered the ratings because Noble has missed the
principal and coupon payment for its 2018 notes due March 20,
2018. Noble also missed the coupon payment on its 2022 notes due
March 9, 2018. In addition, the company said it would not make
the payments despite being given 30-day grace periods to meet
both obligations. The failure to make these payments will
trigger cross-defaults on the company's other obligations. We do
not expect Noble to meet any outstanding obligations as the
company preserves its assets during the restructuring process."
Noble is undergoing a debt restructuring, which management
expects to be completed by the end of July. S&P will conduct
another review the company's credit profile after the
restructuring is complete.
NOBLE GROUP: Net Loss Narrows to US$71.5MM in Q1 Ended March 31
---------------------------------------------------------------
The Business Times reports that constraints on liquidity and
availability of trade finance continued to dampen Noble's
performance in its first quarter.
The group's net loss shrank to US$71.5 million, from a net loss
of US$129.3 million in the previous year, it said in a Singapore
Exchange (SGX) filing on May 15, BT relays.
For the three months ended March 31, revenue tumbled 39 per cent
to US$1.21 billion from the preceding year. The decrease in
revenue was due to financing constraints even as global commodity
prices strengthened in the quarter, it said.
According to BT, the group noted that about 85 per cent of
existing senior creditors have acceded to the restructuring
support agreement, which proposes to halve its debts but leaves
shareholders with only 15 per cent of the restructured entity.
Chairman Paul Brough told analysts and media over an earnings
call that the next key dates for its restructuring would be the
publication of its circular to shareholders, and the convening of
a special general meeting for shareholders to vote on the matter,
the report says.
Asked for the expected timeline, Mr Brough said that he hopes to
have it sent out by the end of May, but the timeline will depend
on the approval of regulators, BT relates. The group has
submitted early drafts of the circular to the SGX.
Hong Kong-based Noble Group Limited (SGX:N21) --
http://www.thisisnoble.com/-- engages in supply of agricultural,
industrial and energy products. The Company supplies agricultural
and energy products, metals, minerals and ores. Agriculture
products include grains, oilseeds and sugar to palm oil, coffee,
and cocoa. Energy business includes coal, gas and liquid energy
products. In metals, minerals and ores (MMO), it supplies iron
ore, aluminum, special ores and alloys. The Company operates
nearly in 140 locations. It supplies growth demand markets in
Asia and Middle East. Alcoa World Alumina and Chemicals is the
subsidiary of this company.
As reported in the Troubled Company Reporter-Asia Pacific on
March 23, 2018, S&P Global Ratings lowered its long-term issuer
credit rating on Noble Group to 'D' from 'CC'.
S&P said, "We lowered the ratings because Noble has missed the
principal and coupon payment for its 2018 notes due March 20,
2018. Noble also missed the coupon payment on its 2022 notes due
March 9, 2018. In addition, the company said it would not make
the payments despite being given 30-day grace periods to meet
both obligations. The failure to make these payments will
trigger cross-defaults on the company's other obligations. We do
not expect Noble to meet any outstanding obligations as the
company preserves its assets during the restructuring process."
Noble is undergoing a debt restructuring, which management
expects to be completed by the end of July. S&P will conduct
another review the company's credit profile after the
restructuring is complete.
=========
I N D I A
=========
AMAZON ENTERPRISES: CRISIL Migrates B+ Rating to Not Cooperating
----------------------------------------------------------------
CRISIL has been consistently following up with Amazon Enterprises
Private Limited (AEPL) for obtaining information through letters
and emails dated March 22, 2018, April 13, 2018 and April 18,
2018 among others, apart from telephonic communication. However,
the issuer has remained non cooperative.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 7.95 CRISIL B+/Stable (Issuer Not
Cooperating; Rating Migrated)
Proposed Long Term .47 CRISIL B+/Stable (Issuer Not
Bank Loan Facility Cooperating; Rating Migrated)
Term Loan 3.58 CRISIL B+/Stable (Issuer Not
Cooperating; Rating Migrated)
The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed
with the suffix 'ISSUER NOT COOPERATING'. These ratings lack a
forward looking component as it is arrived at without any
management interaction and is based on best available or limited
or dated information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of Amazon Enterprises Private
Limited, which restricts CRISIL's ability to take a forward
looking view on the entity's credit quality. CRISIL believes
information available on Amazon Enterprises Private Limited is
consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BB' rating
category or lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of Amazon Enterprises Private Limited to CRISIL
B+/Stable Issuer not cooperating'.
AEPL was incorporated by Mr M Kamalnath and Mr K Radhkrishana in
2013. It collects, sorts, and grades waste paper, and sells to
paper mills in Telangana and Andhra Pradesh. The company has
processing capacity of 500 tonne per annum (tpa) in Moosapet,
Telangana, and is setting up 2000-tpa capacity in Suraram,
Telangana.
AMPS ENGINEERING: CRISIL Migrates B Rating to Not Cooperating
-------------------------------------------------------------
Due to inadequate information, CRISIL, in line with Securities
and Exchange Board of India guidelines, had migrated the ratings
on the bank facilities of Amps Engineering and Equipments Private
Limited (Amps) to 'CRISIL B/Stable/CRISIL A4; Issuer not
cooperating'. However, the management has subsequently started
sharing the requisite information for carrying out a
comprehensive review of the ratings. Consequently, CRISIL is
migrating the ratings from 'CRISIL B/Stable; Issuer not
cooperating' to 'CRISIL B/Stable/CRISIL A4'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Bank Guarantee 4.8 CRISIL A4 (Migrated from
'CRISIL A4 Issuer Not
Cooperating')
Cash Credit 4.0 CRISIL B/Stable (Migrated from
'CRISIL B/Stable Issuer Not
Cooperating')
Proposed Long Term .62 CRISIL B/Stable (Migrated from
Bank Loan Facility 'CRISIL B/Stable Issuer Not
Cooperating')
The ratings continue to reflect a below-average financial risk
profile, and a small scale of operation along with working
capital-intensive nature of operations. These weaknesses are
partially offset by the extensive experience of the promoters in
the bulk material handling industry.
Key Rating Drivers & Detailed Description
Weakness
* Below-average financial risk profile: The networth was small at
INR2.61 crore and the gearing high at of 1.82 times as on
March 31, 2017. The debt protections metrics were low with
interest coverage and net cash accrual to total debt ratios of
1.56 times and 0.06 time, respectively, for fiscal 2017. The
financial risk profile is expected to be weak over the medium
term on account of low profitability and muted accretion to
reserve.
* Small scale of operations: Revenue was modest at INR10.37 crore
in fiscal 2017. Threat from capacity additions in large
integrated players will continue to constrain growth.
* Working capital-intensive operation: Gross current assets were
high at 233 days, mainly driven by large inventory of 155 days,
as on March 31, 2017. Operations are likely to remain working
capital intensive over the medium term due to large raw material
inventory.
Strengths
* Extensive industry experience of the promoters: The promoters
had an experience of several years in the business of industrial
equipment, before venturing into the bulk material handling
business. The experience of more than two decades has helped to
establish a presence in this industry and should continue to
support the business.
Outlook: Stable
CRISIL believes AMPS will maintain its stable business risk
profile over the medium term, supported by the industry
experience of its promoters. The outlook may be revised to
'Positive' in case of significant improvement in the capital
structure and debt protection metrics, while there is steady
revenue growth and profitability are maintained. The outlook may
be revised to 'Negative' if the financial risk profile
deteriorates due to large debt-funded capital expenditure or a
significant decline in revenue or profitability.
Incorporated in 2004, AMPS is currently managed by Mr Raju and
his family members. The company manufactures bulk material
handling equipment such as rollers, idlers, and pulleys at its
unit in Jamshedpur, Jharkhand.
APINDIA BIOTECH: CRISIL Lowers Rating on INR7.3MM LT Loan to C
--------------------------------------------------------------
CRISIL has been consistently following up with APIndia Biotech
Private Limited (ABPL; part of the MB group) for obtaining
information through emails and letters dated September 20, 2017
and October 10, 2017 among others, apart from telephonic
communication. However, the issuer has remained non-cooperative.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 4.5 CRISIL C (Issuer Not
Cooperating; Migrated
from 'CRISIL BB+/Negative
Issuer Not Cooperating')
Proposed Long Term 7.3 CRISIL C (Issuer Not
Bank Loan Facility Cooperating; Migrated
from 'CRISIL BB+/Negative
Issuer Not Cooperating')
Term Loan 1.2 CRISIL C (Issuer Not
Cooperating; Migrated
from 'CRISIL BB+/Negative
Issuer Not Cooperating')
The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed
with the suffix 'ISSUER NOT COOPERATING'. These ratings lack a
forward looking component as it is arrived at without any
management interaction and is based on best available or limited
or dated information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of APIndia Biotech Private
Limited. This restricts CRISIL's ability to take a forward-
looking view on the credit quality of the entity. CRISIL believes
that the information available for APIndia Biotech Private
Limited is consistent with 'Scenario 1' outlined in the
'Framework for Assessing Consistency of Information with CRISIL
BB' rating category or lower. Based on the last available
information, CRISIL has Migrated the rating to 'CRISIL C Issuer
Not Cooperating' from 'CRISIL BB+/Negative Issuer Not
Cooperating'.
Analytical Approach
For arriving at the ratings, CRISIL has combined the business and
financial risk profiles of APBPL and Madhya Bharat Phospate Pvt
Ltd (MBPPL). This is because the two companies together referred
to as the MB group, have strong business linkages as they are
engaged in the same line of businesses; APBPL has been supplying
raw material (rock phosphate) to MBPPL since July 2012.
Furthermore, MBPPL has a shareholding of 99.99 per cent in APBPL
and has provided loans and advances of Rs.5.2 crore to the
company to support its working capital requirements.
MBPPL was originally incorporated in 1998 as Omni Seeds and Farms
(India) Pvt Ltd, promoted by Mr. Pawan Agrawal; the name was
changed to the current one in 2003. The company manufactures SSP
fertilisers. It has two manufacturing facilities, one each in
Raisen and Meghnagar (both in Madhya Pradesh).
APIndia Biotech Pvt Ltd is the raw material supplier for MBPPL.
BAJAJ SYNTHETICS: CRISIL Assigns B+ Rating to INR14.31MM Loan
-------------------------------------------------------------
CRISIL has assigned its 'CRISIL B+/Stable/CRISIL A4' ratings to
the bank facilities of Bajaj Synthetics Mills Private Limited
(BSMPL).
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Term Loan 14.31 CRISIL B+/Stable (Assigned)
Proposed Long Term
Bank Loan Facility .19 CRISIL B+/Stable (Assigned)
Bank Guarantee 1.50 CRISIL A4 (Assigned)
Cash Credit 6.00 CRISIL B+/Stable (Assigned)
The ratings reflect the company's exposure to project
stabilisation-related risks and to timely commensurate ramp-up in
sales during the initial phase of operations. The ratings also
factor in expectation of an average financial risk profile
because of the debt-funded project and susceptibility to
volatility in raw material prices and competition. These
weaknesses are partly offset by the extensive experience of the
promoters in the textile industry, long tenure repayment of term
loan and eligibility of fiscal benefits supporting liquidity in
the initial phase of operations and proximity to a textile
processing hub.
Analytical Approach
For arriving at the ratings, CRISIL has treated unsecured loans
extended by the promoters and their relatives as neither debt nor
equity as they are expected to remain in the business over the
medium term.
Key Rating Drivers & Detailed Description
Weakness:
* Exposure to risks related to timely project stabilisation
The textile weaving facility is expected to commence commercial
operations from May 2018. Timely stabilisation, and commensurate
ramp-up in sales during the initial phase of operations will
remain critical, and hence, be monitored closely.
* Average financial risk profile: Financial risk profile may
remain average on account of debt-funded capital expenditure;
project gearing is expected at about 1.66 times.
* Competition and susceptibility to volatility in raw material
prices: Competition is intense in the textile weaving industry
due to low entry barriers on account of limited capital and
technology requirements and little differentiation in end
products. Moreover, revenue and profitability will remain
susceptible to fluctuation in the prices of raw material: cotton
and yarn.
Strengths:
* Extensive experience of the promoters: Benefits from the
promoters' experience of three decades in the textile industry
through group entities should support business.
* Long tenure term-loan repayment structure and eligible for
fiscal benefits: The long tenure of the term debt (7.5 years)
repayment structure, coupled with eligibility for fiscal benefits
under the Technology Upgradation Fund Scheme and Gujarat State
Textile Policy will support liquidity in the initial phase of
operation. However, timely realisation of the fiscal benefits
will remain a monitorable.
* Proximity to a textile processing hub: The company's weaving
facility is located near Ahmedabad, Gujarat, which is close to
several textile processing units. This gives easy access to a
large customer base.
Outlook: Stable
CRISIL believes BSMPL will benefit from the extensive experience
of its promoters. The outlook may be revised to 'Positive' if
timely stabilisation of the project leads to anticipated revenue,
profitability, and cash accrual during the initial phase of
operations. The outlook may be revised to 'Negative' if delay in
stabilisation of the project leads to lower revenue and cash
accrual, or stretch in working capital cycle weakens financial
risk profile, especially liquidity.
Incorporated in 1983, BSMPL is establishing a green field project
to weave yarn to produce grey fabric for denim, suiting and
shirting at its facility near Ahmedabad. Mr Anand Bajaj, Mr
Naresh Bajaj, Mr Punamchand Bajaj and Mr Suresh Bajaj are the
promoters. Commercial operations of weaving facility is expected
to commence from May 2018.
BHUSHAN STEEL: NCLT Approves Tata Steel's Resolution Plan
---------------------------------------------------------
The Hindu BusinessLine reports that the National Company Law
Tribunal (NCLT) on May 15 approved the INR32,500-crore resolution
plan submitted by Tata Steel for debt-ridden Bhushan Steel.
The tribunal also imposed a penalty of INR1 lakh each on Larsen
and Toubro and on Bhushan Steel employees, the report says.
While the employees had filed an appeal against Tata Steel's bid,
L&T, which has outstanding dues of INR900 crore from Bhushan
Steel, had appealed to the Tribunal to reclassify it as secured
creditor so that it can recover more money from the insolvency
resolution, the BusinessLine relates.
The Bench, comprising NCLT President Justice MM Kumar and SK
Mohapatra, also dismissed Bhushan Energy's plea to direct Tata
Steel, the new owners of Bhushan Steel, to continue with its
power purchase agreement, according to the BusinessLine.
With the deal now approved by NCLT, Tata Steel will add 5.6
million tonnes per annum to its existing capacity of 13 mtpa and
emerge as the largest steel producer in the country, ahead of JSW
Steel, the report notes.
The BusinessLine adds that Bhushan Steel's committee of creditors
(CoC) had approved Tata Steel's resolution plan, which includes
an allotment of 12.27 per cent equity in the company to
creditors. The company, which was admitted for insolvency
proceedings last February, had defaulted on its INR56,000-crore
loan.
As it found a new suitor in Tata Steel, the Bhushan Steel scrip
was locked at 5 per cent in the upper circuit at INR23.95 on
May 15. This will be the second resolution for stressed assets to
receive final NCLT approval, the report says.
Earlier, Vedanta had bagged Electrosteel Steels with its
resolution plan, which involved a cash payout of about INR5,300-
crore and a haircut of 60 per cent to lenders, the report adds.
India-based Bhushan Steel -- http://www.bhushan-group.org/--
manufactures auto-grade steel.
Bhushan Steel is one of the 12 non-performing assets referred by
the Reserve Bank of India for National Company Law Tribunal
(NCLT) proceedings.
NCLT admitted the bankruptcy plea against the steel company filed
by State Bank of India on July 26, 2017.
Bhushan Steel's total debt stood at around INR42,355 crore as of
March 31, 2017.
CANARA GOODS: CARE Assigns B+ Rating to INR6MM LT Loan
------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Canara
Goods Transport (CGT), 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 CGT are tempered
by small scale of operations with declining total operating
income, net losses in FY16, fluctuating and thin profitability
margins, leveraged capital structure and weak debt coverage
indicators, working capital intensive nature of operations,
highly fragmented industry with intense competition from large
number of players and constitution of the entity as a partnership
firm. The ratings are, however, underpinned by the experienced
partners with established track record of the entity, reputed and
established customer base and stable demand for transport and
logistics industry.
Going forward, ability of the firm to increase its scale of
operations, improve the profitability margins in competitive
environment and improve the capital structure with efficient
management of working capital borrowings would be the
key rating sensitivities.
Detailed Description of the key rating drivers
Key Rating Weaknesses
Small scale of operations: The total operating income of the firm
decreased from INR 11.56 crore in FY15 to INR 10.29 crore in FY17
due to impact of GST. In FY18 the firm was achieved total
operating income of INR 11 crore.
Fluctuating and thin profitability margins during review period
The firm has fluctuating PBILDT margins during review period. The
PBILDT margin of the firm declined from 10.49% in FY15 to 8.91%
in FY16 due to increase in other expenses (Repairs and
maintenance, lubricant charges, etc.,) and overheads. However,
the PBILDT margin marginally increased to 9.15% in FY17 due to
decrease in overheads. The firm has incurred net losses in FY16
due to increase in overhead expenses. However, despite increase
in interest cost, the firm has turnaround from loss to profit in
FY17 and PAT margin stood at 3.13%.
Leveraged capital structure and weak debt coverage indicators The
capital structure of the firm remained leveraged during review
period. The debt equity ratio of the firm deteriorated from 0.99x
as on March 31, 2015 to 1.06x as on March 31, 2016 due to
availment of vehicle loan and decrease in tangible networth.
However its improved to 0.97x March 31, 2017 due to repayment of
term loan. The overall gearing ratio of the firm deteriorated
from 2.33x as on March 31, 2015 to 2.64x as on March 31, 2017 due
to high utilization of the working capital bank borrowings.
CGT has weak debt coverage indicators during review period. Total
debt/ GCA of the firm deteriorated from 7.93x in FY15 to 18.25x
in FY16 due to increase in total debt levels coupled with low
cash accruals. However it improved to 15.83x in FY17 due to
marginal increase in cash accruals. The PBILDT interest coverage
ratio of the firm deteriorated from 2.12x in FY15 to 1.54x in
FY17 due to increase in interest cost.
Working capital intensive nature of operations and elongated
operating cycle: The firm is operating in working capital
intensive nature of business. The firm receives payment from its
customers within 45-60 days from the date of raising the bill.
However the collection period increased from 59 days to 84 due to
long term relationship with customers, the firm extend credit
period to its customers around 90 days. The firm makes payment to
its creditors with 20-30 days after receiving the payment from
the debtors the average working capital utilization was 90% for
the last 12 months ended April 30, 2018. They have taken new term
loan for purchasing vehicle (Lorry) Constitution of the entity as
a partnership firm with inherent risk of withdrawal of capital.
The firm being a partnership firm is exposed to inherent risk of
capital withdrawal by the partners, due to its nature of
constitution. Further, any substantial withdrawals from capital
account would impact the networth and thereby the financial
profile of the firm. The partners has withdrawn amount of INR
0.02 crore in FY16 and INR 0.26 crore in FY17.
Highly fragmented industry with intense competition from large
number of players: The firm is engaged in providing
transportation services which is highly fragmented industry due
to presence of large number of organized and unorganized players
in the industry the firm faces huge competition.
Key Rating Strengths
Long track record and experience of the partners for more than
three decades in transportation sector: CGT was established in
1968 and has been in the transportation business for more than
three decades. The firm is managed by Mr. M Madhavraya Pai along
with his family members. The partners have an experience of more
than three decades in transportation sector. Due to long term
presence in the transportation business, the partners have
developed good relations with suppliers and customers.
Reputed and established customers: The customer base of the firm
is well established, as the partners has been in this line of
business for more than three decades, as a result of which, it
has developed good contacts with the customers. The price is
based on the tonnage of material transported and the destinations
covered. The major customers are The Mangalore Ganesh Beedi Works
Cables, Bharath Beedi Works Private Limited, Baliga Fishnets and
Amara raja Batteries Limited, among others, Stable demand for
transportation and logistics.
In the wake of globalization, the importance of logistics is
increasing as more and more, both national and multi-national
companies are sourcing, manufacturing and distributing their
products and services on a global scale. Thus, the recognition of
performance of logistics industry would become prime importance
of economic development for India in long term. The Indian
logistic industry has been gaining traction, with e-commerce
penetration, economy revival, proposed GST implementation and
government initiatives like "Make in India", National Integrated
Logistic Policy, 100% FDI in warehouses and food storage
facilities, etc. Some of the aforementioned initiatives during
FY12-FY16 (refers to the period April 1 to March 31) have led to
significant improvement in functioning and operations of
logistics companies in India which is reflected in multiple
notching up of India's logistic performance index (LPI) rank by
19 places to 35th position from 54th position as per LPI 2016
report by World Bank. Furthermore, with respect to India's GDP
growth the logistics industry is expected to grow at 1-1.5x as
logistics business is directly correlated with economic activity.
Considering the aforementioned aspect the Indian logistic
industry is projected to grow at a CAGR of 15-20% during
FY16~FY20.
Mangaluru based, Canara Goods Transport (CGT) was established as
a transport service provider in 1968 by Mr. M Madhavraya Pai
along with his family. CGT is primarily engaged in providing
transport facilities for reputed corporates located in Mangaluru.
CGT provides its services to various states like Karnataka
Maharashtra and Tamil Nadu. Once the CGT procures a contract, it
manages the end-to-end transporting requirements of the
companies. CGT has reputed customers which includes Mangalore
Ganesh Beedi works, Finolex cables limited, Bharath Beedi Works
Private Limited, Baliga Fishnets). The firm is not responsible
for the risk of loss/damage of goods as the goods (transported by
CGT) are covered under insurance. CGT has 69 own vehicles to
transport the products; apart from this they also undertake fleet
for rental purpose from local transporters. The payment will be
made to local transporters based on the quantity and the point of
delivery. Moreover, CGT has 32 branches, around Tamil Nadu,
Maharashtra and Karnataka.
DHANRAJ COTTON: CRISIL Reaffirms 'B' Rating on INR5MM Cash Loan
---------------------------------------------------------------
CRISIL's rating on the bank facilities of Dhanraj Cotton
Industries - Mehsana (DCI) continues to reflect its modest scale
of operations, and working capital intensity in, operations in
the intensely competitive cotton ginning industry. These rating
weaknesses are partially offset by benefits the firm derives from
the extensive industry experience of its promoters and from
proximity to the cotton-growing belt.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 5 CRISIL B/Stable (Reaffirmed)
Term Loan 2.88 CRISIL B/Stable (Reaffirmed)
Key Rating Drivers & Detailed Description
Weakness
* Modest scale of operations in intensely competitive industry:
DCI's scale of operations is expected to be limited in a highly
competitive industry. Entry barriers are low on account of low
capital and technology requirements and low end product
differentiation, leading to high fragmentation and low
profitability. CRISIL believes that DCI will be subject to risks
related to direct competition from several unorganized players in
Gujarat, and thus will have limited pricing power and a modest
scale of operations in the near term.
* Working capital intensive operations: DCI's operations could
remain highly working capital intensive with an increase in
inventory and debtors during crop season. CRISIL believes that
DCI will report gross current assets (GCAs) of around 60 days.
CRISIL believes that firm will extensively depend on external
borrowings to meet its working capital requirements. Effective
working capital management will remain a rating sensitivity
factor.
Strengths
* Extensive industry experience of its promoters and from
proximity to the cotton-growing belt: DCI is owned by 15 partners
who have varied industry experience such as elastic tapes, re-
rolling mill, cotton ginning, and black board manufacturing. The
promoters are now engaged in ginning cotton. DCI is expected to
continue to benefit from the promoters' understanding of local
market dynamics and established relationships with suppliers and
customers. CRISIL believes that DCI will continue to benefit from
its promoter's extensive industry experience, over the medium
term.
Outlook: Stable
CRISIL believes DCI will continue to benefit over the medium term
from its promoters' extensive industry experience. The outlook
may be revised to 'Positive' if ramp-up in scale of operations
and improved profitability and capital structure strengthen key
credit metrics. Conversely, the outlook may be revised to
'Negative' if profitability reduces because of volatility in
cotton prices; or financial risk profile, particularly liquidity,
declines because of stretch in working capital cycle or sizeable
debt-funded capital expenditure.
Incorporated in 2014, DCI is a partnership firm based at Mehsana,
Gujarat. The firm gins and presses cotton, and commenced
operations in December 2014.
GANPATI ALLIED: CRISIL Migrates B Rating to Not Cooperating Cat.
----------------------------------------------------------------
CRISIL has been consistently following up with Ganpati Allied
Works Private Limited (GAWPL) for obtaining information through
letters and emails dated February 23, 2018, April 13, 2018 and
April 18, 2018 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 5.7 CRISIL B/Stable (Issuer Not
Cooperating; Rating Migrated)
Term Loan .3 CRISIL B/Stable (Issuer Not
Cooperating; Rating Migrated)
The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed
with the suffix 'ISSUER NOT COOPERATING'. These ratings lack a
forward looking component as it is arrived at without any
management interaction and is based on best available or limited
or dated information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of Ganpati Allied Works Private
Limited, which restricts CRISIL's ability to take a forward
looking view on the entity's credit quality. CRISIL believes
information available on Ganpati Allied Works Private Limited is
consistent with 'Scenario 2' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BBB' rating
category or lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of Ganpati Allied Works Private Limited to CRISIL
B/Stable Issuer not cooperating'.
GAWPL manufactures and trades in galvanized iron wires, hard
black wires, barbed wires, and binding wires. The company is
promoted by the Bhilai, Chhattisgarh-based Gupta family and has
its manufacturing facility in Bhilai. Mr Ashish Gupta and Mr
Sunil Kumar Gupta are directors of GAWPL. The operations are
primarily managed by Mr Ashish Gupta, who has experience of more
than a decade in the steel wires segment.
J K PULSE: CRISIL Downgrades Rating on INR15MM Cash Loan to B
-------------------------------------------------------------
CRISIL has downgraded its rating on the bank facilities of J K
Pulse Manufacturers Private Limited to 'CRISIL B/Stable' from
'CRISIL BB-/Stable'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 15 CRISIL B/Stable (Downgraded
from 'CRISIL BB-/Stable')
Proposed Cash 2.5 CRISIL B/Stable (Downgraded
Credit Limit from 'CRISIL BB-/Stable')
The downgrade reflects unprecedented decline performance in JK
Pulse's business risk profile during fiscal 2018 due to the price
crash in the domestic pulses market due to overproduction. The
revenue booked by the company in fiscal 18 was lower by more than
50 percent than that in previous fiscal. Fiscal 18 saw the
company booking INR62 cr in revenue against INR122 cr in fiscal
17; lower margin is leading to lower-than-expected accruals. This
has subsequently led to weakening in financial risk profile with
the net worth estimated at INR2.31 cr as on March 2018 as against
INR3.9 cr as on March 2017; consequently the gearing is estimated
at 13 times in FY 18 against 8.5 times in FY 17. Additionally,
there was a deterioration in the working capital management
leading to higher reliance on bank lines.
The rating continues to reflect the benefits that JK Pulse
derives from its promoters' extensive experience in the pulses
trading business. The rating also reflects the company's moderate
scale of operation and efficient working capital management.
These rating strength are partially offset by weak financial risk
profile, marked by weak capital structure and debt protection
metrics; exposure to intense market completion; and adverse
changes in government regulations.
Key Rating Drivers & Detailed Description
Strengths:
* Established promoter's experience: JK Pulse is owned and
managed by Mr. Radheshyam Agarwal and family. The promoters'
family has been involved in the pulses trading business for about
50 years. Over the period, the promoters have developed strong
supplier and customer relationships.
* Moderate scale of operations: JK Pulse has moderate a scale of
operations reflected in revenue of INR122 cr in FY 17 and INR62
cr in FY 18. Operating profitability was thin on account of low
value addition in the nature of operations and intense
competition in the industry thereby limiting pricing power with
suppliers and customers.
Weaknesses:
* Modest scale of operations: Financial risk profile is marked by
a low networth, high gearing and weak debt protection metrics.
Networth and gearing were around INR2 cr, and 13 times,
respectively, estimated as on March 31, 2018. Debt protection
metrics were weak, as reflected in the estimate interest coverage
of below unity as on March 31, 2018. Debt protection metrics may
continue to be weak because of low cash accrual and moderate
working capital debt.
* Exposure to intense competition in the fragmented industry.
Intense competition in the agro-commodities trading business,
because of the large presence of unorganized players, puts
pressure on the company's low operating margin. As a result of
the low value addition in the nature of business; company's
operating margin is low thereby restricting the pricing power
available with the company.
Outlook: Stable
CRISIL believes JK Pulses will benefit from its promoters'
extensive industry experience over the medium term. The outlook
may be revised to 'Positive' if there is significant and
sustained improvement in the company's cash accrual and,
consequently, its debt protection metrics and liquidity.
Conversely, the outlook may be revised to 'Negative' if its
financial risk profile, especially liquidity, deteriorates
further due to lower-than-expected cash accrual or a stretch in
its working capital cycle.
JK Pulses was taken over by Mr. Radheshyam Agarwal and his family
members in 2008, and trades and processes pulses, largely urad
dal. JK Pulse is a part of JK group of companies based in Indore
(Madhya Pradesh), which trades and processes pulses and also has
warehousing facilities.
KAD HOUSING: CRISIL Lowers Rating on INR10.7MM Overdraft to B+
--------------------------------------------------------------
CRISIL has downgraded ratings on the bank facilities of KAD
Housing Private Limited (KAD) to 'CRISIL B+/Stable/CRISIL A4'
from 'CRISIL BB-/Stable/CRISIL A4+'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Bank Guarantee 1.3 CRISIL A4 (Downgraded from
'CRISIL A4+')
Overdraft 10.7 CRISIL B+/Stable (Downgraded
from 'CRISIL BB-/Stable')
The downgrade in the rating reflects weakening of the financial
and business risk profile. With continuous increase in the bank
borrowing for funding the capex leverage of the company along
with repayment of the other loans, Total outside liability to
adjusted networth (TOLANW) of the company has remained high at
11.95 times as on March 31, 2017. There has been continuous
decline in the promoters funding as well over the last four
years. Further liquidity is stretched marked by tightly matched
net cash accruals against repayment along with moderate bank
limit utilisation of around 94 percent during the last 6 months
ended March 2018.
Rating reflects leveraged capital structure along with below
average debt protection metrics. Further business is exposure to
cyclicality inherent to hospitality industry. These weaknesses
are partially offset by business risk profile supported by
healthy growth prospects of its hotel due to locational
advantages and association with Carlson Group along with
promoter's extensive experience in real estate industry.
Analytical Approach
Unsecured loan of INR32.45 crore (as on March 31, 2017) from the
promoter has been treated as debt.
Key Rating Drivers & Detailed Description
Weaknesses:
* Leveraged Capital structure: KAD`s leveraged capital structure
is marked by high total outside liability by adjusted networth
(TOLANW) of around 11.95 times as on March 31, 2017 which was
11.82 times as on March 31, 2016. The TOLANW is expected to
improve on account of improvement in networth driven by healthy
accretions to reserves over the medium term.
* Exposure to cyclicality inherent to hospitality industry: The
hotel industry is vulnerable to changes in the domestic and
international economies. Typically the industry follows a six-
year cycle. It witnesses a reversal trend in the wake of
international slowdown due to the global financial turmoil.
During weak periods the revenue per available room for premium
hotels is expected to be affected more significantly than for
midscale or economy hotels. On the other hand, costs remain high
for premium properties even during downward shifts in demand;
cash flows from these properties are therefore more susceptible
to downturns.
* Below average debt protection metrics: Debt protection metrics
of the KHPL has remained below average, with interest coverage
and net cash accrual to adjusted debt ratios of 1.3 times and
0.03 time, respectively, for fiscal 2017. Metrics are likely to
remain muted over the medium term.
Strengths
* Business risk profile supported by healthy growth prospects of
its hotel due to locational advantages and association with
Carlson Group: KAD has never executed a hotel project; however,
the promoters' have tied up with Carlson Group and has taken
their brand 'Radisson Blu' for their project. Carlson Group is
amongst the largest hotel chains of the world and owns large
number of brands like Radisson, Radisson Blu and Park Plaza. KAD
will use their premium hotel brand, Radisson Blu, for their
project and the hotel will also run under their management, which
along with their experience is expected to benefit KAD in terms
of break-even ARRs and occupancy levels in initial years of
operations.
* Promoters experience in the real estate industry and funding
support: The promoter has been in the real estate business for
over two decades and has developed both commercial and
residential projects in Delhi and the National Capital Region.
This has enabled him to sell majority of the commercial property
constructed under KAD.
Outlook: Stable
CRISIL believes that KAD will maintain a stable business risk
profile over the medium, backed by the promoters' extensive
experience in the real estate industry. The outlook may be
revised to 'Positive' if higher occupancy and/or tariff for the
rooms lead to better-than-expected cash accruals for KAD along
with maintaining profitability. Conversely, the outlook may be
revised to 'Negative' if low occupancy and/or tariff or delays in
customer advances constrain the company's cash accruals and
liquidity.
Incorporated in 2004 and promoted by Mr. Digamber Prasad Jain,
KAD operates a 147-room hotel and has also developed a commercial
space in Kaushambhi at a total cost of INR300 crore. Majority of
the commercial space has been sold and the hotel has begun
operations.
KAMAL BUILDERS: CRISIL Reaffirms B+ Rating on INR5MM Cash Loan
--------------------------------------------------------------
CRISIL has reaffirmed its 'CRISIL B+/Stable/CRISIL A4' ratings on
the bank facilities of Kamal Builders (KB).
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Bank Guarantee 8 CRISIL A4 (Reaffirmed)
Cash Credit 5 CRISIL B+/Stable (Reaffirmed)
Proposed Long Term
Bank Loan Facility 2 CRISIL B+/Stable (Reaffirmed)
The ratings continue to reflect the firm's weak liquidity because
of large working capital requirement, and exposure to intense
competition and to risks inherent in its tender-based business.
These weaknesses are partially offset by its partners' extensive
experience in the construction industry and its moderate capital
structure.
Key Rating Drivers & Detailed Description
Weakness
* Large working capital requirement: KB had gross current assets
of 126 days as on March 31, 2017, mainly due to sizable
receivables of 66 days and security deposits and earnest money,
resulting in weak liquidity with high bank limit utilisation.
* Susceptibility to risks inherent in tender-based business and
to competition in fragmented industry: The civil construction
industry has many small, medium, and organised players. Also,
ability to procure tenders and projects depends on turnover and
scale of operations.
Strengths
* Partners' extensive industry experience: The partners'
experience of around three decades in the civil construction
industry has helped the firm establish a strong customer base in
Uttar Pradesh, Madhya Pradesh, Rajasthan, and Delhi.
* Moderate capital structure: KB's moderate capital structure is
indicated by low gearing of 0.41 time as on March 31, 2017, and
above-average debt protection metrics with interest coverage of
6.08 times and net cash accrual to total debt ratio of 0.2 time
in fiscal 2017.
Outlook: Stable
CRISIL believes KB will continue to benefit from its partners'
extensive experience in the construction industry and its
improving order book. The outlook may be revised to 'Positive' if
liquidity improves because of large cash accrual and improved
working capital management. The outlook may be revised to
'Negative' if cash accrual falls, or working capital cycle
lengthens, weakening the financial risk profile.
KB was set up in 1984 by the late Mr S S Jalan and his sons. It
is owned and managed by his sons Mr Kamal Kumar Jalan and Mr Hari
Kishan Jalan. KB operates in the road and civil construction
industry, mainly in Madhya Pradesh and Uttar Pradesh. The firm is
a registered contractor with urban municipal bodies.
KAMALA BOARD: CARE Assigns B+ Rating to INR9.70cr LT Loan
---------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Kamala
Board Box Private Limited (KBBPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 9.70 CARE B+; Stable Assigned
Short-term Bank
Facilities 0.21 CARE A4 Assigned
Detailed Rationale and key rating drivers
The ratings assigned to the bank facilities of KBBPL are
constrained by its small scale of operations with low profit
margins, exposure to volatility in raw material prices, working
capital intensive nature of operations, highly competitive
fragmented nature of the industry and moderate capital structure
with moderate debt coverage indicators. The aforesaid constraints
are partially offset by the experienced promoters and long track
record of operations, favorable demand outlook for packaging
products and reputed clientele.
Ability to increase its scale of operations with improvement in
profit margins and ability to manage working capital effectively
are the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Moderate scale of operations with low profit margins: The scale
of operations of the company remained small marked by total
operating income of INR19.75 crore with a PAT of INR0.14 crore.
Further, the net worth base and total capital employed also
remained low at INR6.49 crore and INR19.59 crore, respectively,
as on March 31, 2017. During 11MFY18, the company has booked
turnover of INR20.00 crore. The profitability margins of the
company remained low marked by PBILDT margin of 7.03% (8.07% in
FY16) and PAT margin of 0.72% (0.44% in FY16) in FY17.
Exposure to volatility in raw material prices: The primary raw
materials required by KBBPL are board, adhesive, ink, varnish
film etc. (constituting about 72% of the cost of sales in FY17),
the prices of which are highly volatile. Further, the company
does not have any long term contracts with the domestic suppliers
for the purchase of raw materials. Hence, the profitability
margins of the company could get adversely affected with any
sudden spurt in the raw material prices. Working capital
intensive nature of business: The operations of the company
remained working capital intensive as the company maintains
adequate inventory of raw materials for smooth running of its
production process and to mitigate price fluctuation risk.
Accordingly the average utilization of fund based limits was
around 90% during last twelve months ended in February 28, 2018.
Highly competitive and fragmented nature of the industry: The
paper packaging is highly fragmented with a large number of small
to medium scale organized and unorganized players owing to low
entry barriers with no visible differentiators in product
profile. High competition in the operating spectrum and small
size of the company limits the scope for margin expansion.
Comfortable capital structure with moderate debt coverage
indicators: The capital structure of the firm remained moderate
marked by debt equity ratio of 0.90x and overall gearing ratio at
1.99x as on March 31, 2017. The debt coverage indicators of the
firm also remained moderate marked by interest coverage of 1.18x
and total debt to GCA of 22.44x in FY17.
Key Rating Strengths
Experienced promoters and long track record of operations: KBBPL
is into manufacturing of corrugated boxes since 1984 and thus has
more than three decades of track record of operations. Moreover,
the key promoter Mr. Subrata Das (aged, 54 years) has around
three decades of experience in the same line of business, looks
after the day to day operations of the company. He is supported
by other director Mrs. Ispita Das (aged, 53 years) who also have
around three decades of experience in this line of business and a
team of experienced professionals.
Favorable demand outlook for packaging products: India's
packaging industry has witnessed a growth over the last 3 years
driven by favourable demographic profile, rising income levels,
changing spending patterns, increased retail penetration to Tier
II & Tier III cities and increasing consumerism. The long term
fundamental drivers for growth in demand for packaging products
remain favourable even as near term uncertainties prevail due to
slowdown in economic growth and its dampening impact on consumer
sentiment.
Reputed clientele: KBBPL has been associated with a number of
reputed customers since its inception and has marked a remarkable
presence as a supplier of packaging materials. The firm is a
vendor of Britannia Industries Limited, Flipkart, G D
Pharmaceuticals Private Limited, etc.
KBBPL was initially set up as a proprietorship firm 'Kamala Board
Box' in the year 1984 by Mr. Subrata Das and Mrs. Ispita
Das. Subsequently, it was converted into private limited company
with effect from February 23, 2006 and the name of the company
changed to its present name. The company has been engaged in
manufacturing of corrugated board boxes, used for packaging
products. The manufacturing facility of the company is located at
Kolkata, West Bengal.
KASHVI AGRITECH: CRISIL Assigns B+ Rating to INR7MM Term Loan
-------------------------------------------------------------
CRISIL has assigned its 'CRISIL B+/Stable' rating to the bank
facilities of Kashvi Agritech Private Limited (KAPL). The ratings
reflect KAPL's exposures to risks associated with stabilisation
phase and initial stages of operations, a below average financial
risk profile and vulnerability to risks inherent in the poultry
industry. These rating weaknesses are partially offset by
considerable entrepreneurial experience and financial flexibility
of promoters.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Proposed Term Loan 5 CRISIL B+/Stable
Term Loan 7 CRISIL B+/Stable
Key Rating Drivers & Detailed Description
Weaknesses
* Initial stages of operations: KAPL commenced commercial
operations from April 2017 only and hence is yet to establish its
market position and demonstrate a track record of generating
profitability and prudent working capital management. The
business profile is currently constrained because of KAPL being
in stabilisation phase and the fact that it is likely to face
initial teething problems. CRISIL believes that stabilization of
the company's operations at the earliest would be a key factor
for improving the business risk profile of the company.
* Below average financial risk profile: KAPL had a small net
worth of around INR1.17 crore as on March 31, 2017. The same
though may improve on account of equity infusion of around INR2
crores in fiscal 2018 is likely to remain constrained on account
of the expected net losses driven by high depreciation and
interest cost during the initial stages. KAPL had a high gearing
of around 5.33 times as on 31st March 2017. The gearing, though
has improved with equity infusion made in fiscal 2018 is likely
to remain high and may deteriorate marginally from current levels
on account of the proposed new term loan of INR5 crores for
capacity enhancement.
* Vulnerability to risks inherent in poultry industry and intense
competition: The poultry industry is driven by regional demand
and supply, because of transportation constraints and the
perishable nature of the products. Low entry barriers in the form
of low capital requirement facilitate entry of unorganized
players. Also, limited brand recall intensifies competition from
unorganized players on a regional basis. The poultry industry is
also vulnerable to outbreaks of diseases, which could lead to
decline in sales volume and selling price. Diseases can also
impact production of healthy chicks. The inherent industry risks
will, however, continue to be a constraint for players in the
poultry industry.
Strengths
* Considerable entrepreneurial experience and financial
flexibility of promoters: KAPL is promoted by Odisha based Mr
Debebrata Behera along with his wife, Ms Susmita Behera. Mr
Behera, a civil engineer, is well-established in Keonjhar with
diverse business interests - hotel industry (M/s Kashvi
International), real estate as well as logistics business (D.B.
Roadways), commercial mall iron ore trading (Kashvi Power and
Steel Pvt Ltd; rated 'CRISIL BB-/Stable/CRISIL A4+'). Over the
years, they have developed strong relations and liaison with the
administrative people in Keonjhar which augurs well for the
business profile. The promoters also have an ability to infuse
funds into KAPL as and when required. The same has been witnessed
in group companies also.
Outlook: Stable
CRISIL expects KAPL will maintain its business risk profile over
the medium term backed by healthy demand for eggs in Odisha. The
outlook may be revised to 'Positive' if there is a substantial
and sustained increase in its scale of operation and cash accrual
along with efficient working capital management leading to
improvement in its financial risk profile. Conversely, the
outlook may be revised to 'Negative' in case of lower than
expected accruals, stretch in working capital cycle, or if KAPL
undertakes any large debt funded capex, leading to deterioration
in its overall financial risk profile, particularly liquidity.
Incorporated in 2011, KAPL operates a poultry layer farm in
Keonjhar, Odisha. Mr Debabrata Behera and Ms Susmita Behera are
the directors of the company. The unit commenced commercial
operations from April 2017 onwards.
KPG INTERNATIONAL: CARE Assigns B+ Rating to INR4.50cr Loan
-----------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of KPG
International Private Limited (KPG), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 4.50 CARE B+; Stable Assigned
Short-term Bank
Facilities 4.00 CARE A4 Assigned
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of KPG are primarily
constrained by the short track record & small scale of operations
with low net worth base, thin profitability margins, leveraged
capital structure, and highly fragmented and competitive
industry. The ratings, however, draw comforts from the
experienced directors. Going forward; ability of the company to
profitably increasing its scale of operations while improving its
capital structure shall be the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Short track record and small scale of operations with low net
worth base: The company has started its commercial operations
from December, 2016 and has a relatively short track record of
operations as compared to other established players. The scale of
operations has stood small marked by a total operating income and
gross cash accruals and stood at INR5.87 crore and INR0.14 crore
respectively in the first 4 months of operations during 4MFY17
(4MFY refers to the period December 1 to March 31). Further, the
company's net worth base stood low at INR1.17 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 company has achieved total operating income of ~Rs23.5 crore
for 10MFY18 (refers to period April 1 to January 31; based on
provisional results).
Thin profitability margins and leveraged capital structure: The
profitability margins stood thin in FY17 mainly on account of
initial year of operations with lower economies of scale coupled
with high finance and depreciation expense. As on March 31, 2017;
the capital structure of the firm stood leveraged marked by
overall gearing of 3.22x on account of low net worth base coupled
with high reliance on external borrowings to meet working capital
requirement. Further, the working capital limits remained fully
utilized for the 12 months period ended January, 2018.
Highly fragmented and competitive industry: The textile related
products industry is characterized by numerous small players and
is concentrated in the northern part of India. Low entry barriers
and low investment requirement makes the industry highly
lucrative and thus competitive. Smaller companies in general are
more vulnerable to intense competition due to their limited
pricing flexibility, which constraints their profitability as
compared to larger companies who have better efficiencies and
pricing power considering their scale of operations.
Key Rating Strengths
Experienced Promoters: The company is collectively managed by Mr.
R.C. Mahendru and Mr. Gaurav Mahendru, having experience of
around two decades and seven years and one and a half decades
respectively in their individual capacity.
Delhi based, KPG International Private Limited (KPG) was
incorporated in October, 2016 and commenced its commercial
operations in December, 2016. The company is currently being
managed by Mr. Gaurav Mahendru and Mr. RC Mahendru.
KPG is engaged in manufacturing and trading of garments. The
company procures its raw material i.e. fabric from domestic and
overseas manufacturers (import constitutes 25% of purchases). KPG
sells the product in the brand name 'Howzat' to wholesalers and
retailers located in Delhi.
MANASA QUALITY: CRISIL Migrates B+ Rating to Not Cooperating
------------------------------------------------------------
CRISIL has been consistently following up with Manasa Quality
Enterprises Limited (MQEL) for obtaining information through
letters and emails dated March 13, 2018, April 13, 2018 and
April 18, 2018 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Export Packing 45 CRISIL B+/Stable (Issuer Not
Credit Cooperating; Rating Migrated)
Proposed Long Term 3 CRISIL B+/Stable (Issuer Not
Bank Loan Facility Cooperating; Rating Migrated)
The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed
with the suffix 'ISSUER NOT COOPERATING'. These ratings lack a
forward looking component as it is arrived at without any
management interaction and is based on best available or limited
or dated information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of Manasa Quality Enterprises
Limited, which restricts CRISIL's ability to take a forward
looking view on the entity's credit quality. CRISIL believes
information available on Manasa Quality Enterprises Limited is
consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BB' rating
category or lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of Manasa Quality Enterprises Limited to CRISIL
B+/Stable Issuer not cooperating'.
MQEL was incorporated in 2012, promoted by Mr D Veerabhadra Reddy
and his family. The company processes rice, maize, and broken
rice.
MATRIX ROLLER: CARE Assigns B+ Rating to INR14cr LT Loan
--------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Matrix
Roller Mills Private Limited (MRM), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 14.00 CARE B+; Stable Assigned
Detailed Rational and key rating drivers
The rating assigned to the bank facilities of MRM is primarily
constrained by the modest scale of operations, low profitability
margins and leveraged capital structure. The rating is further
constrained by susceptible to volatility in raw material prices,
and its presence in highly competitive industry. The ratings,
however, draws comfort from experienced promoters and moderate
operating cycle.
Going forward; ability of the company to profitably increase its
scale of operations in highly competitive market while
improvement in its capital structure shall be the key rating
sensitivities.
Key description and key rating drivers
Key rating weakness
Modest though growing scale of operations: The company's scale of
operations has remained modest marked by total operating income
(TOI) and gross cash accruals of INR57.08 crore and INR1.20 crore
respectively in FY17 (refers to the period April 1 to March 31)
as against relatively low tangible net worth of INR6.91 crore as
on March 31, 2017. Modest scale of operations limits the
company's financial flexibility in times of stress and deprives
it from scale benefits. However, the risk is partially mitigated
by the fact that the scale of operation is growing continuously.
For the period FY15-FY17, MRM's total operating income grew from
INR24.93 crore in FY15 to INR57.08 crore in FY17 reflecting a
compounded annual growth rate (CAGR) of 51% mainly on account of
higher quantity sold. In 10FY18 (refers to the period April 1,
2017 to January 31, 2018; based on provisional results), the
company has achieved the total operating income of approximately
INR56.00 crore.
Low profitability margins and leveraged capital structure: The
profitability margins of the company stood low with PBILDT margin
witnessing declining trend during last three years FY15-FY17 as
the company compromised on its margins to garner market share.
Apart from this, high financial charges and depreciation has
further restricted the net profitability of the company.
Capital structure of the company marked by debt equity and
overall gearing stood leveraged as on past three balance sheet
dates ending March 31, '15 - '17 mainly on account of high
dependence on external borrowings for managing working capital
requirements of the business coupled with debt funded capex
undertaken in past. Overall gearing stood at 1.92x as on March
31, 2017. The working capital limits remained fully utilized for
the 12 months period ended February, 2018.
Susceptible to volatility in raw material prices: The main raw
material is wheat; prices of which are subjected to government
intervention. Various restrictions including minimum support
price, wheat procurement policies for maintenance of buffer
stocks etc. are imposed to regulate the price of wheat in the
market. The price of wheat is also influenced by the supply
scenario which is susceptible to the agro-climatic conditions.
Thus any volatility in wheat prices can have direct impact on the
profitability margins of the company.
Fragmented and competitive nature of industry: The commodity
nature of the product makes the industry highly fragmented with
numerous players operating in the unorganized sector with very
less product differentiation. In addition, launch of innovative
strategy (such as competitive pricing, aggressive advertisement
campaign, celebrity endorsements, etc.) by large multinationals
to gain market share has increased the competition intensity as
well. This results in limited flexibility over product pricing
for the players in the industry.
Key rating strengths
Experienced Promoters: MRM is currently being managed by Mr.
Bhupendra Kumar Agrawal, Mr. Ajit Jain, Mr. Anmol Jain, and Mr.
Nikhil Agrawal. Mr. Bhupendra Kumar Agrawal has an overall
experience of around two decades in processing of wheat through
his association with M/s Balaji Grih Udyog along with his
extensive experience in manufacturing and trading industry
through his association with M/s Maa Mahamaya Alloys Pvt Ltd. Mr.
Ajit Jain has an experience of more than a decade in wheat
processing through his association with M/s Goberdhan Agri Flour
Mills Pvt ltd and Swatik Grain Products Pvt Ltd. They both are
well supported by other two directors Mr. Anmol Jain and Mr.
Nikhil Agrawal in managing day-to-day activity of the company.
Moderate operating cycle: The operating cycle of the company
stood moderate at 33 days for FY17. MRM maintains inventory of
raw materials and finished goods for smooth production process
and to meet the immediate demand of its customers which has led
to an average inventory period of around 16 days for FY17.
Furthermore, the company offers reasonable credit period to its
customers which resulted in average collection period of around
33 days for FY17. On the contrary, the procurement of raw
material is both on cash/ credit basis with average credit period
stood at around 10-20 days from its suppliers.
Demand is relatively insulated from economic cycles: The flour
milling industry has witnessed consistent growth in the past few
years, largely driven by FMCG companies and dictated by the
lifestyle changes in the urban and semi-urban regions of the
country, people are being exposed to the wheat-based western
cuisines, in place of rice-based local cuisines. This is expected
to act as a steady and sustained growth driver for the wheat
flour milling industry. Also, since the industry mainly caters to
the basic needs of the consumer, the industry is relatively
insulated from the economic cycles.
Varanasi, Uttar Pradesh based MRM (erstwhile M/S Matrix Realtech
Developers Private Limited) was incorporated in December 2010. In
July, 2012 the name changed to present one. The company is
currently being managed by Mr. Bhupendra Kumar Agrawal, Mr. Ajit
Jain, Mr. Anmol Jain, and Mr. Nikhil Agrawal. MRM is engaged in
the processing of wheat into Atta, Suji, Maida & Bran. The plant
is located in Chandauli, Uttar Pradesh with installed capacity of
300 Tons per day (TPD) as on March 31, 2017. The company procures
its raw material directly from farmers and traders located in
Azamgarh, Jonpur (Uttar Pradesh). MRM sells the products under
the brand name of 'My Farm' to dealers located in Uttar Pradesh,
West Bengal, Bihar and Orissa.
Maa Mahamaya Alloys Private Limited (CARE BB-; Stable/CARE A4) is
an associate concern of MRM incorporated in 2004, engaged in
manufacturing of mild steel (MS) ingots and Thermo Mechanically
Treated (TMT) Bars.
MITTAL OCEAN: CRISIL Assigns B+ Rating to INR3MM Cash Loan
----------------------------------------------------------
CRISIL has revoked the suspension of its rating on the long-term
facility of Mittal Ocean Trade Private Limited (MOTPL) and
assigned 'CRISIL B+/Stable/CRISIL A4' ratings to it. CRISIL had
suspended the rating on December 28, 2015 as the company had not
provided the information required for a rating review. MOTPL has
now shared the requisite information enabling CRISIL to assign
the rating.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 3 CRISIL B+/Stable (Assigned;
Suspension revoked)
Letter of Credit 9.5 CRISIL A4 (Assigned;
Suspension revoked)
The ratings reflect the extensive experience of MOTPL's promoters
in the timber trading business. This strength is partially offset
by the moderate scale of operations, average financial risk
profile and debt protection metrics.
Key Rating Drivers & Detailed Description
Strength:
* Extensive experience of the promoters: Benefits from the
promoters' experience of over four decades and established
presence in northern and western regions should support the
business.
Weaknesses:
* Moderate scale of operations: Business profile is constrained
by the small scale of operations with revenue of INR40 crore in
fiscal 2017. Revenue growth is expected to remain stable over the
medium term.
* Average financial risk profile: Networth was moderate at
INR4.26 crore as on March 31, 2017 while total outside
liability/total networth (TOL/TNW) and gearing are 3.77 times and
2.34 times (times), respectively. Debt protection metrics are
average with net cash accrual/total debt (NCA/TD) at 0.02 times
in fiscal 2017 and interest coverage at 1.32 times.
Outlook: Stable
MOTPL's business will continue to benefit from its long standing
presence in timber industry. Its financial risk profile is likely
to remain constrained over the medium term on account of high
TOL/TNW and weak debt protection measures.
Upside scenario
* Improvement in profitability leading to high cash accrual
* Increase in networth
Downside scenario
* Significant increase in working capital requirement
* Any large debt-funded capex weakens financial risk profile.
Incorporated in 1992, MOTPL imports high quality pine wood, pine
wood timber, pine timber, Malaysian hard wood, sal wood, meranti
wood, MLH wood and soft wood and supplies to various players
across India.
NATURAL TECHNOFAB: CRISIL Moves B Rating to Not Cooperating
-----------------------------------------------------------
CRISIL has been consistently following up with Natural Technofab
(NTF) for obtaining information through letters and emails dated
March 26, 2018, April 13, 2018 and April 18, 2018 among others,
apart from telephonic communication. However, the issuer has
remained non cooperative.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 3.75 CRISIL B/Stable (Issuer Not
Cooperating; Rating Migrated)
Long Term Bank 4.73 CRISIL B/Stable (Issuer Not
Facility Cooperating; Rating Migrated)
Proposed Long .52 CRISIL B/Stable (Issuer Not
Term Bank Loan Cooperating; Rating Migrated)
Facility
The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed
with the suffix 'ISSUER NOT COOPERATING'. These ratings lack a
forward looking component as it is arrived at without any
management interaction and is based on best available or limited
or dated information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of Natural Technofab, which
restricts CRISIL's ability to take a forward looking view on the
entity's credit quality. CRISIL believes information available on
Natural Technofab is consistent with 'Scenario 1' outlined in the
'Framework for Assessing Consistency of Information with CRISIL
BB' rating category or lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of Natural Technofab to CRISIL B/Stable Issuer not
cooperating'.
Established in 2016 as a partnership firm by Mr. Jagdish Panara
and Mr. Hitesh Gandhi, NTF is setting up a plant in Gujarat to
manufacture polythene woven sacks bags with capacity of 4320
tonne per annum. Production is expected to start from March 2017.
RADHAKANTA HIMGHAR: CARE Reaffirms B+ Rating on INR10.05cr Loan
---------------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Radhakanta Himghar Private Limited (RHPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 10.05 CARE B+; Stable Reaffirmed
Detailed Rationale and key rating drivers
The rating assigned to the bank facilities of RHPL is continues
to remain constrained by short track record and small scale of
operations, regulated nature of industry, leveraged capital
structure with moderate debt coverage indicators, seasonality of
business with susceptibility to vagaries of nature and
competition from local players. The ratings, however, derive
comfort from experienced promoters, satisfactory profitability
margins and proximity to potato growing area. Ability of the
company to grow its scale of operations, sustain current
profitability margins and efficient management of working capital
would be the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Short track record and small size of operations: RHPL has started
its commercial operations since March 2017 and thus has very
short operational track record. Furthermore, the size of
operations of the company remained small marked by total
operating income of INR3.37 crore with a PAT of INR0.48 crore in
FY18. The tangible net worth of the company was also low at
INR3.28 crore as on March 31, 2018.
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.
Leveraged capital structure with moderate debt coverage
indicators: The capital structure of the company remained
leveraged marked by both debt equity ratio and overall gearing
ratio at 1.55x as on March 31, 2018. The debt coverage indicators
also remained moderate marked by interest coverage of 3.50x and
total debt to GCA of 3.87x in FY18.
Seasonality of business with susceptibility to vagaries of
nature: RHPL'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 starts at 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.
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: RHPL is managed by Mr. Dilip Kumar Pal who
has more than two decades of experience in the same industry
through his family business, looks after the day to day
operations of the company. He is being duly supported by the
other directors Mr. Anath Bandhu Pal.
Satisfactory profitability margins: The profitability margins of
the company remained satisfactory marked by PBILDT margin of
59.64% and PAT margin of 14.12% in FY18. Proximity to potato
growing area: RHPL's storage facility is situated at Hooghly,
West Bengal which is one of the major potato growing regions of
the state. The favorable location of the storage unit, in close
proximity to the leading potato growing areas provides it with a
wide catchment and making it suitable for the farmers in terms of
transportation and connectivity.
Incorporated in December 2015, Radhakanta Himghar Private Limited
(RHPL) was promoted by Mr. Dilip Kumar Pal and Mr. Anath Bandhu
Pal to set up cold storage facility in the state of West Bengal
with an aggregate storing capacity of 200000 quintal. The company
has setup its cold storage unit with an aggregate cost of INR9.00
crore funded at debt equity of 2.00x and the company has started
its commercial operations from March 2017.
RAJ VEHICLES: CRISIL Reaffirms B+ Rating on INR13MM Cash Loan
-------------------------------------------------------------
CRISIL has reaffirmed its 'CRISIL B+/Stable/CRISIL A4' ratings on
the bank facilities of Raj Vehicles Private Limited (RVPL).
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 13 CRISIL B+/Stable (Reaffirmed)
Inventory Funding
Facility 11.5 CRISIL A4 (Reaffirmed)
Proposed Short Term
Bank Loan Facility .5 CRISIL A4 (Reaffirmed)
The ratings continue to reflect the company's modest scale of
operations in the highly competitive car dealership business, low
operating margin, and weak financial risk profile weak because of
low interest coverage ratio. These weaknesses are partially
offset by the promoters' extensive experience in the car
dealership business and strong relationship with Mahindra and
Mahindra Ltd (M&M).
Key Rating Drivers & Detailed Description
Weaknesses
* Weak financial risk profile: Debt protection metrics were weak,
with interest coverage of 1.4 times in 2017. However, networth
was moderate at INR10.4 crore as on March 31, 2017, and return on
capital employed was comfortable at 16.5% in fiscal 2017.
Networth is estimated at INR12 crore as on March 31, 2018, and
interest coverage at 1.6 times in fiscal 2018. Low profitability
will continue to constrain the financial risk profile over the
medium term.
* Low operating margin due to intense competition: Though RVPL is
the sole dealer for M&M in the districts it operates in, the
company faces intense competition from dealers of other original
equipment manufacturers such as Hyundai Motor India Ltd ('CRISIL
A1+') and Tata Motors Ltd ('CRISIL AA/Positive/CRISIL A1+').
These companies, which manufacture a variety of utility and
passenger vehicles, are encouraging more dealerships to improve
penetration and sales, thereby increasing competition.
Furthermore, the stability of business will depend on M&M's
business risk profile. RVPL's profitability is likely to remain
under pressure over the medium term because of competition in the
automobile industry and low bargaining power with M&M.
Strengths
* Established relationship with M&M: The company has a
relationship of over 10 years with M&M, and will continue to
benefit from the strong relationship over the medium term. The
exclusivity of the dealership in the districts of Punjab that
RVPL operates in supports the stability of its business risk
profile.
* Extensive experience of the promoters in the automobile
dealership business: The promoters have been in this business for
more than a decade, and have expanded the number of showrooms to
Patiala, Sangur, and Barnala in Punjab.
Outlook: Stable
CRISIL believes RVPL will continue to benefit from the extensive
industry experience of its promoters. The outlook may be revised
to 'Positive' if financial risk profile improves because of
better operating profitability and cash accrual, or significant
capital infusion. The outlook may be revised to 'Negative' if the
financial risk profile weakens because of large, debt-funded
capital expenditure, or substantial increase in working capital
requirement.
RVPL was incorporated in 2007, promoted by Mr Rajvinder Singh and
his family. The company is an authorised dealer for M&M's entire
range of passenger vehicles, utility vehicles, and two-wheelers
in Patiala, Sangrur, and Barnala. It operates four showrooms in
the sales, service, and spares format'two in Patiala, and one
each in Barnala and Sangrur.
RELIANCE COMM: NCLT Admits Ericsson's Bankruptcy Bid vs. Firm
-------------------------------------------------------------
The Economic Times reports that the dedicated bankruptcy court
has admitted three insolvency petitions filed against Reliance
Communications and its subsidiaries, by telecom gear maker
Ericsson, dealing a severe blow to the telco's plans of selling
most of its wireless units to Reliance Jio Infocom (Jio).
ET relates that the decision, which came after nearly eight
months since the Swedish telecom equipment maker moved the
National Company Law Tribunal's (NCLT) Mumbai bench to recover
INR1150 crore in dues, effectively makes the Anil Ambani owned
carrier bankrupt, the second such after Chennai-based Aircel.
"All three petitions have been admitted and Ericsson has to
suggest the name of the interim resolution professional (IRP) as
things stand, none of the bankers, secured or unsecured creditors
can get anything from RCom as the company can no longer sell its
assets. "Now they cannot do any business, litigation or sell any
of its assets . . . at times there are orders that directors
cannot leave the country," ET quotes a person aware of the
process as saying.
RCom was aiming to sell its towers, fibre, spectrum and nodes to
Jio for about INR18,000 crore, ET notes. According to sources in
the courtroom, this case will finally head Supreme Court since
neither side will back down.
Reliance Infratel, the tower subsidiary of Rcom, is also battling
HSBC Daisy Investments and other minority shareholders opposing
the sale of the tower assets, ET states.
For the Anil Ambani owned telco, this would be second time in
last two years that its attempt to bring down debt is thwarted,
due to legal hurdles, according to ET. Last year, courtroom
battles were one of the main reasons why its merger deal with
Aircel did not go through. Because of the broken deal, asset
management company Brookfield, did not pick up RCom's towers as
well, the report relates.
During its many arguments, both representatives of RCom and 28
banks led by SBI had put forth to the bench that if the petition
is admitted, it would stop the sale leading to a big loss for the
financial lenders and also hurt public interest, says ET.
However, Ericsson had argued that it was unfair that operational
creditors like them are taken advantage of and told that if the
sale goes through then it is lenders who get the money while
creditors are left at large, the report relates. Ericsson had
argued that it has had 9,000 employees working on RCom and its
subsidiaries and despite many promises and re-negotiations on
payment schedules, dues were not cleared.
There is also an arbitration case on between these two firms on
similar lines, ET notes.
Based in Mumbai, India, Reliance Communications Ltd (BOM:532712)
-- http://www.rcom.co.in/Rcom/personal/home/index.html-- is a
telecommunications service provider. The Company operates through
two segments: India Operations and Global Operations. India
operations segment comprises wireless telecommunications services
to retail customers through global system for mobile
communication (GSM) technology-based networks across India;
voice, long distance services and broadband access to enterprise
customers; managed Internet data center services, and direct-to-
home (DTH) business. Global operations comprise Carrier,
Enterprise and Consumer Business units. It provides carrier's
carrier voice, carrier's carrier bandwidth, enterprise data and
consumer voice services. The Company owns and operates Internet
protocol (IP) enabled connectivity infrastructure, comprising
over 280,000 kilometers of fiber optic cable systems in India,
the United States, Europe, Middle East and the Asia Pacific
region.
SAFESPACE WAREHOUSING: CARE Assigns B+ Rating to INR6.89cr Loan
---------------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of
Safespace Warehousing (India) Private Limited (SWPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 6.89 CARE B+; Stable Assigned
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of SWPL is primarily
constrained on account of its small scale of operations with weak
solvency position and moderate liquidity position. The rating,
further, constrained on account of its presence in the highly
competitive and fragmented warehousing industry. The rating,
however, drives strength from experienced management with reputed
clientele base and healthy profitability. The ability of the
company to increase in the scale of operations with improvement
in the solvency position and efficient management of working
capital would be the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Small scale of operations in a highly competitive and fragmented
industry: The scale of operations of SWPL stood small with Total
Operating Income (TOI) and PAT of INR2.25 crore and INR0.30 crore
respectively in FY17 and tangible net-worth of INR2.96 crore as
on March 31, 2017 in a highly competitive and fragmented
warehousing industry.
The warehousing industry is characterized by highly fragmented
and competitive in nature as evident by the presence of numerous
unorganized and few organized players. Due to this, the players
in the industry do not have any pricing power. The entry barriers
in this industry are very low on account of low capital
investment and technological requirement.
Weak solvency position and moderate liquidity position: The
capital structure of the company stood leveraged with an overall
gearing of 4.27 times as on March 31, 2017 owing to low net-worth
base and high long-term debt. The debt coverage indicators of the
company stood weak with total debt to GCA of 17.21 times as on
March 31, 2017, improved from 18.39 times as on March 31, 2016
mainly due to higher increase in GCA as against increase in total
debt.
Liquidity position of the company stood moderate with working
capital cycle of 23 days. Current ratio and quick ratio stood
below unity at 0.65 times in FY17. However, cash flow from
operating activities declined from INR1.93 crore in FY16 to
INR1.64 crore mainly on account of high advance tax paid by the
company.
Experienced management with reputed clientele base: Mr. Rahul
Parashar, Managing Director, doctorate by qualification, has
around six years of experience in the warehousing industry and
looks after overall affairs of the company. He is supported by
Mr. Dharm Vir Singh who has experience of around 6 years in the
warehousing industry. Further, they are assisted by second tier
management. Further, the client of the company includes LG
Electronics India Limited, Asian Paints Limited, Life Care
Logistics Private Limited, Hi Logistics India Private Limited and
Division Flying Squad etc.
Key Rating Strengths
Experienced management with reputed clientele base: Mr. Rahul
Parashar, Managing Director, doctorate by qualification, has
around six years of experience in the warehousing industry and
looks after overall affairs of the company. He is supported by
Mr. Dharm Vir Singh who has experience of around 6 years in the
warehousing industry. Further, they are assisted by second tier
management. Further, the client of the company includes LG
Electronics India Limited, Asian Paints Limited, Life Care
Logistics Private Limited, Hi Logistics India Private Limited and
Division Flying Squad etc.
Healthy profitability: The profitability of the company stood
healthy with PBILDT margin and PAT margin of 87.73% and 13.18%
respectively in FY17.
Indore (Madhya Pradesh) based SWPL was incorporated in July 2012
by Mr. Rahul Parashar and Mr. Dharam Vir Singh.
SWPL is operating a warehouse at Indore having storage space of
around 3.06 Hectare.
SHUBH PLY: CARE Assigns B+ Rating to INR4.61cr LT Loan
------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Shubh
Ply and Veneers Private Limited (SPVPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 4.61 CARE B+; Stable Assigned
Short-term Bank
Facilities 10.00 CARE A4 Assigned
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of SPVPL are
constrained on account of its modest scale of operations coupled
with thin profit margins, leveraged capital structure, weak debt
coverage indicators and working capital intensive nature of
operations. The ratings are further constrained on account of
susceptibility of profit margins to volatility in raw material
prices and its presence in highly fragmented and competitive wood
processing industry.
The ratings, however, derives comfort from experienced directors
and established track record of the company along with locational
advantage available to the entity.
Ability to increase its scale of operations and improvement in
profitability along with solvency position and efficient
management of working capital management would remain the key
rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Modest scale of operations coupled with thin profit margins:
During FY17 the Total Operating Income (TOI) of the company
improved by 13.02% and stood at INR31.08 crore as against
INR27.50 crore during FY16 on account of improved demand from its
regular customers. During FY17, the PBILDT margin stood
moderately comfortable at 7.57% as compared to 5.76% during FY16.
However, PAT margin stood low at 0.75% during FY17 owing to high
depreciation and interest costs.
Leveraged capital structure and weak debt coverage indicators: As
on March 31, 2017, the capital structure of SPVPL stood leveraged
as marked by an overall gearing ratio of 6.12x owing to higher
debt level and low net worth base. The debt coverage indicators
also stood weak marked by an interest coverage ratio of 1.18x
which has deteriorated as against 1.24x during FY16 while total
debt to GCA of 77.50x as on March 31, 2017 as against 71.19x as
on March 31, 2016 owing to very low level of cash accruals
against that of debt level.
Working capital intensive nature of operations: As on March 31,
2017 the current ratio of the company marginally deteriorated
over the previous year and stood moderate at 1.56x as against
1.60x as on March 31, 2016. Working capital cycle of APVPL
elongated to 116 days during FY17 as against 116 days during
FY16, mainly on account of increase in receivables period and
inventory period.
Susceptibility of profit margins to volatility in raw material
price: SPVPL is engaged in the business of manufacturing plywood,
block boards, flush doors and veneers for which it imports timber
logs from Malaysia for manufacturing few of its products. Also,
timber prices are volatile in nature. Hence, the profitability of
the company is susceptible to the fluctuations in timber prices
and any adverse fluctuation in the raw material price will have
direct impact on the operating margins of the company.
Presence in highly fragmented and competitive wood processing
industry: SPVPL operates in highly fragmented and unorganized
market of wood processing industry marked by large number of
small sized players. The industry is characterized by low entry
barrier due to minimal capital requirement and easy access
to customers and suppliers.
Fortunes linked to real estate sector and hence, exposed to
inherent risk of cyclicality: The products that SPVPL
manufactures are commonly used as inputs in furniture
manufacturing, construction and interior decoration, which derive
their demand largely from the real estate/infrastructure sector
and furniture industry. As end application of the products is in
the real estate and infrastructure industry, the company is
exposed to cyclicality risk.
Key Rating Strengths
Experienced directors and established track record of the
company:
The directors of the company are holding an average experience of
more than one and half decades in same line of business. Due to
vast experience and history of successful operations, the
directors have developed good reputation in the market as well
good relationship with its suppliers and customers.
Locational advantage available to the entity: SPVPL's
manufacturing facilities are located at Kutch, which is near to
Kandla port, which enjoys good road & rail connectivity leading
to better lead-time and facilitates delivery of finished products
in a timely manner.
Gandhidham (Gujarat) based Shubh Ply and Veneers Private Limited
(SPVPL) was incorporated in 2007 as a private limited company by
Mr. MohanlalLalwani and family, which is engaged into
manufacturing of plywood, block board, flush doors and veneers.
SHYAM COAL: CRISIL Migrates B+ Rating to Not Cooperating Category
-----------------------------------------------------------------
CRISIL has been consistently following up with Shyam Coal
Corporation (SCC) for obtaining information through letters and
emails dated March 26, 2018, April 13, 2018 and April 18, 2018
among others, apart from telephonic communication. However, the
issuer has remained non cooperative.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 14 CRISIL B+/Stable (Issuer Not
Cooperating; Rating Migrated)
The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed
with the suffix 'ISSUER NOT COOPERATING'. These ratings lack a
forward looking component as it is arrived at without any
management interaction and is based on best available or limited
or dated information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of Shyam Coal Corporation, which
restricts CRISIL's ability to take a forward looking view on the
entity's credit quality. CRISIL believes information available on
Shyam Coal Corporation is consistent with 'Scenario 1' outlined
in the 'Framework for Assessing Consistency of Information with
CRISIL BB' rating category or lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facility of Shyam Coal Corporation to CRISIL B+/Stable Issuer not
cooperating'.
Established in 2013 as a partnership firm, Shyam Coal Corporation
(SCC) is engaged in the grading and trading of Indonesian coal.
The firm's plant is situated in Morbi, Gujarat. The firm is
managed by Mr. Pravinbhai Bariya.
SIMPLON CERAMIC: CRISIL Migrates B Rating to Not Cooperating
------------------------------------------------------------
CRISIL has been consistently following up with Simplon Ceramic
Private Limited (SCPL) for obtaining information through letters
and emails dated March 26, 2018, April 13, 2018 and April 18,
2018 among others, apart from telephonic communication. However,
the issuer has remained non cooperative.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Bank Guarantee 1 CRISIL A4 (Issuer Not
Cooperating; Rating Migrated)
Cash Credit 2 CRISIL B/Stable (Issuer Not
Cooperating; Rating Migrated)
Proposed Long Term 1.5 CRISIL B/Stable (Issuer Not
Bank Loan Facility Cooperating; Rating Migrated)
Term Loan 7 CRISIL B/Stable (Issuer Not
Cooperating; Rating Migrated)
The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed
with the suffix 'ISSUER NOT COOPERATING'. These ratings lack a
forward looking component as it is arrived at without any
management interaction and is based on best available or limited
or dated information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of Simplon Ceramic Private
Limited, which restricts CRISIL's ability to take a forward
looking view on the entity's credit quality. CRISIL believes
information available on Simplon Ceramic Private Limitedis
consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BB' rating
category or lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the ratings on bank
facilities of Simplon Ceramic Private Limited to CRISIL
B/Stable/CRISIL A4 Issuer not cooperating'.
Incorporated in February 2015 and promoted by Mr. Ashvin
Bhoraniya and others, SCPL has set up a facility to manufacture
digital wall tiles.
SWATHI COTGIN: CRISIL Lowers Rating on INR19.8MM Loan to D
----------------------------------------------------------
CRISIL has downgraded its rating on the long-term bank facilities
of Swathi Cotgin (Tmc) Private Limited (SCPL) to 'CRISIL D' from
'CRISIL B/Stable'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 19.8 CRISIL D (Downgraded from
'CRISIL B/Stable')
Long Term Loan 8.2 CRISIL D (Downgraded from
'CRISIL B/Stable')
Proposed Long Term 5.0 CRISIL D (Downgraded from
Bank Loan Facility 'CRISIL B/Stable')
The downgrade reflects delays in servicing of principal on term
debt for a period of more than 30 days in the last 3 months ended
April 2018. Delay in servicing of term debt is on account of
stretch liquidity with insufficient net cash accrual against term
debt repayment obligation. Stretch liquidity due to high debtor.
The rating continues to reflect a modest scale of operations, a
weak financial risk profile because of a modest net worth, high
gearing, and below-average debt protection metrics. The rating
also factors in the susceptibility of profitability to volatility
in cotton prices and changes in government regulations. These
rating weaknesses are partially offset by the extensive
experience of the promoters in the cotton industry and an
established customer relationship.
Key Rating Drivers & Detailed Description
Weakness
* Modest scale of operations: With revenue of INR69.99 crore and
operating margin of 5.0% in fiscal 2017, the scale remains modest
in the intensely competitive cotton ginning industry.
* Susceptibility of profitability to volatility in cotton prices:
Raw cotton, the major raw material, accounts for about 90% of the
production cost; hence, operating profitability is highly
susceptible to volatility in raw cotton prices.
* Weak financial risk profile: The net worth was modest at
INR10.31 crore as on March 31, 2017, against total debt of
INR26.6 crore; hence, gearing was high at 2.58 times. Debt
protection metrics were below average because of a small scale of
operations and hence modest cash accrual. The financial risk
profile is expected to remain below average over the medium term.
Strengths
* Extensive industry experience of the promoters has resulted in
a strong relationship with customers and suppliers, which will
continue to benefit the company over the medium term.
SCPL was incorporated in 2013, promoted by Mr Boggavarapu Ankamma
Rao and Ms Prathipati Teene Venkayamma. The company, based in
Guntur, Andhra Pradesh, gins cotton and processes cotton seed
oil.
TRIDENT INFRA: CRISIL Reaffirms B+ Rating on INR40MM Term Loan
--------------------------------------------------------------
CRISIL has reaffirmed its ratings on the long term bank
facilities of Trident Infra Homes Private Limited (TIH) at
'CRISIL B+/Stable'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Term Loan 40 CRISIL B+/Stable (Reaffirmed)
The rating reflects susceptibility to cyclicality inherent in the
real estate industry and geographical concentration. The above
weaknesses are partially offset by extensive experience of
promoters and moderate booking and realizations.
Key Rating Drivers & Detailed Description
Weaknesses
* Susceptibility to cyclicality inherent in the real estate
industry: TIH operates in the real estate industry which is
susceptible to cyclical movements. TIH is susceptible to changes
in real estate industry.
* Geographical concentration: TIH is currently executing a single
project in Noida. Exposure to a single project makes it
susceptible to location specific risks.
Strengths
* Extensive experience of the promoters: The promoters have
around a decade of industry experience. Their experience helps
them maintain good relations with all stakeholders in the
industry
* Moderate bookings and realisation: TIH has achieved 60% booking
till fiscal 2018. They have started giving possession for flats
in March 2018. Their bookings are expected to pick up in the
medium term
Outlook: Stable
CRISIL believes TIH will continue to benefit over the medium term
from the promoter's experience. The outlook may be revised to
'Positive' if significant improvement in business and financial
risk profiles backed by higher-than-expected customer advances
and timely implementation of the ongoing project lead to larger
than anticipated cash accrual. Conversely, the outlook may be
revised to 'Negative' if there is a time or cost overrun in the
project or liquidity is constrained by delays in receiving
customer advances, thus restricting revenue and profitability.
TIH was incorporated in 2010 by Mr S K Narvar. The company
develops residential and commercial real estate projects. It is
currently developing a residential project, Trident Embassy, at
Noida Extension (Uttar Pradesh).
TUSHAR FABRICS: CARE Assigns B Rating to INR5.61cr LT Loan
----------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Tushar
Fabrics (TFB), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 5.61 CARE B; Stable Assigned
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of TFB is constrained
on account of its small scale of operations, low profitability,
leveraged capital structure, weak debt coverage indicators,
modest liquidity position and elongated operating cycle in FY17
(refers to the period of April 1 to March 31). The rating is
further constrained on account of susceptibility of operating
margins to volatility in raw material prices & foreign exchange
fluctuations along with its presence in highly fragmented and
competitive textile industry. The rating, however, derives
strength from experienced partners of the firm along with
location advantage available to the firm.
The ability of TFB to increase its scale of operations coupled
with improvement in profitability, capital structure along
with efficient management of its working capital requirements are
the key rating sensitivities.
Key Rating Weaknesses
Constitution as a partnership firm: TFB, being a partnership
firm, is exposed to inherent risk of partners' capital being
withdrawn at time of personal contingency, and firm being
dissolved upon the death/retirement/insolvency of partners.
However, partners have not withdrawn any amount of capital during
FY17.
Small scale of operations coupled with low profitability margins:
The scale of operations of the firm remained small marked by
total operating income stood at INR15.42 crore during FY17 as
compared to INR15.23 crore during FY16 mainly on account of
stable level of demand from the domestic market. The
profitability margins of the firm remained low marked by the
PBILDT margin of 5.27% during FY17 as against 5.82% during FY16
on account of higher cost of raw material. Further, the PAT
margin of the firm also declined and remained low at 0.17% during
FY17 as against 0.19% during FY16 on account of lower PBILDT of
the firm.
Leveraged capital structure & weak debt coverage indicators: As
on March 31, 2017, an overall gearing ratio stood leveraged at
2.02 times as against 2.36 times as on March 31, 2016, mainly on
account of increase in the tangible net worth of the firm. The
debt coverage indicators of the firm stood weak marked by total
debt to GCA stood at 35.04 years as on March 31, 2017 as against
27.10 years as on March 31, 2016 on account of high debt level
coupled with low GCA level of the firm in FY17. Further, the
Interest coverage ratio of the firm stood at 1.26 times during
FY17 as against 1.29 times during FY16 on account of lower PBILDT
of the firm during FY17.
Modest liquidity position along with elongated operating cycle:
The liquidity position of the firm stood modest marked by current
ratio and quick ratio stood at 1.28 times and 1.00 times as on
March 31, 2017 as against 1.18 times and 0.57 times respectively
as on March 31, 2016 on account of decreased in the current
liabilities due to lower balance of creditors as on March 31,
2017. Further, the operating cycle of the firm for FY17 remained
elongated at 130 days during FY17 on account of higher collection
and inventory period of the firm.
Susceptibility of profit margins to volatility in raw material
price & foreign exchange fluctuations: TFB is engaged in the
business of manufacturing of grey fabric and major raw material
is yarn which is imported from Japan, China and Germany.
Therefore, prices of raw material remain volatile in nature. The
firm does not have any hedging policy to manage its foreign
exchange fluctuations risk. Hence, the profitability of the firm
is susceptible to the fluctuations in raw material prices and
foreign exchange fluctuations which will have direct impact on
the operating margins of the firm.
Presence in highly fragmented and competitive textile industry
TFB operates in highly fragmented, organized and unorganized
market of textile industry marked by large number of small sized
players. The industry is characterized by low entry barrier due
to minimal capital requirement and easy access to customers and
supplier. Also, the presence of big sized players with
established marketing & distribution network results into intense
competition in the industry.
Key rating strengths
Experienced partners
TFB was promoted in 2007 by two partners i.e. Mr Jatin Madrasi &
Mrs Vandana Madrasi. Mr Jatin Madrasi, aged 41 years and has an
experience of around two decade in the same nature of business.
Mrs Vandana Madrasi, aged 37 years and has an experience of
around decade in the same line of business. Thus, long experience
of promoters helps firm for the growth of the firm.
Locational advantage: TFB operates in Surat city of Gujarat,
which is considered as hub for textile industry in India. The
region comprises of a large number of textile manufacturing and
processing units. Availability of raw materials and customers
help in establishing business in textile sector.
Surat (Gujarat) based Tushar Fabrics (TFB) was established as a
Partnership Firm in 2007 by two partners i.e. Mr Jatin Madrasi &
Mrs Vandana Madrasi. TFB is involved in processing & knitting of
grey fabrics at its manufacturing facilities located at Khatodara
(Surat) with a total installed capacity of 38.81 lakhs meters per
annum as on March 31, 2018 and the company operated at 100% of
its installed capacity during FY18.
UNIQUE TREES: CRISIL Moves B Rating to Not Cooperating Category
---------------------------------------------------------------
CRISIL has been consistently following up with Unique Trees
Private Limited (UTPL) for obtaining information through letters
and emails dated March 13, 2018, April 13, 2018 and April 18,
2018 among others, apart from telephonic communication. However,
the issuer has remained non cooperative.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 0.2 CRISIL B/Stable (Issuer Not
Cooperating; Rating Migrated)
Long Term Loan 6.6 CRISIL B/Stable (Issuer Not
Cooperating; Rating Migrated)
Proposed Cash
Credit Limit 1.6 CRISIL B/Stable (Issuer Not
Cooperating; Rating Migrated)
Proposed Long Term
Bank Loan Facility 5.0 CRISIL B/Stable (Issuer Not
Cooperating; Rating Migrated)
The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed
with the suffix 'ISSUER NOT COOPERATING'. These ratings lack a
forward looking component as it is arrived at without any
management interaction and is based on best available or limited
or dated information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of Unique Trees Private Limited,
which restricts CRISIL's ability to take a forward looking view
on the entity's credit quality. CRISIL believes information
available on Unique Trees Private Limited is consistent with
'Scenario 1' outlined in the 'Framework for Assessing Consistency
of Information with CRISIL BB' rating category or lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of Unique Trees Private Limited to CRISIL B/Stable
Issuer not cooperating'.
Incorporated in 2010, promoted by Mr. R Ramdev Rao and Ms. R
Srilakshmi, UTPL is engaged in the production of hardy nursery
stock. The company owns 6 nurseries in Shankarpally district of
Telangana.
=================
I N D O N E S I A
=================
STAR ENERGY: Fitch Rates USD580MM Sr. Notes 'BB-', Outlook Stable
-----------------------------------------------------------------
Fitch Ratings has assigned a 'BB-' rating to Star Energy
Geothermal (Wayang Windu) Ltd's (SEG) USD580 million fully
amortising 6.75% senior secured notes due 2033. The Outlook is
Stable.
The final rating is in line with the expected rating assigned on
February 28, 2018 for an issuance of up to USD650 million. The
assignment of the final rating follows a review of final
documentation materially conforming to the draft documentation
previously reviewed.
The company plans to use the proceeds from the note issue to
repay existing senior debt facilities and pay for transaction
costs.
KEY RATING DRIVERS
The project benefits from long-term contracts to use geothermal
resources and sell electricity to the Indonesian state-owned
power company PT Perusahaan Listrik Negara (Persero) (PLN;
BBB/Stable). The take-or-pay nature of the electricity sales
contract with PLN eliminates most volume and merchant price
risks. Fitch expects the supply of geothermal resource to be
reliable, subject to appropriate and timely well maintenance and
drilling of new wells.
SEG's financial profile under the Fitch rating case shows an
average debt service coverage ratio (DSCR) of 1.29x and a minimum
of 1.10x. The low level of excess cash generation could limit
SEG's ability to fund necessary capital expenditures if they
needed to be accelerated, or other unexpected costs. The metrics
are appropriate for a 'BB-' rated facility of this type under
Fitch's Renewable Energy Project Rating Criteria.
Robust Operating Track Record, yet Fully Exposed to Cost
Overruns: Operation Risk - Weaker
SEG has ample operating experience and a strong track record with
very high average availability and capacity factors (greater than
97%, excluding the 2015 outage) for both generation units since
they started operations. However, SEG is exposed to the risks of
cost overruns and operational underperformance because it
operates the geothermal power plant itself.
The power plant suffered an extended outage in 2015 due to a
landslide that damaged a steam pipeline, although SEG has made
considerable changes to reduce the probability of such an event
recurring.
Routine operating costs have generally been decreasing over the
past few years, although this is partly driven by the
depreciation of the Indonesian rupiah against the US dollar. SEG
has a detailed capital investment plan for drilling new wells and
maintaining existing wells over the next 15 years, which the
external technical consultant GeothermEx has reviewed and is
satisfied with. However, GeothermEx has also advised that given
the nature of the geothermal assets, there is considerable
uncertainty regarding the timing of the capex.
The lack of a detailed operating cost analysis by a third-party
technical advisor constrains Fitch's assessment. For major
drilling programmes (capex exceeding USD100 million over two
years) a reserve account will prefund for 25% of the well
drilling costs, for each half-year period, over the next two
years. The reserve account will also provide for the next six
months of planned maintenance costs.
Well-Supported Production Forecast: Revenue Risk - Volume -
Midrange
While the volatility and decline in steam supply inherent in the
geothermal resource introduces supply risk to electricity
generation and steam depletion rate has been higher than
expected, SEG managed to maintain the steam supply through well
intervention programme and drilling of make-up wells. The
existing geothermal resources are sufficient to support 280MW of
electricity generation for 30 years or 390MW of electricity
generation for 20 years, according to GeothermEx's technical
report in February 2018.
Curtailment risk is limited by the take-or-pay nature of the
electricity sales contract (ESC) under which PLN is required to
pay for 95% of the rated capacity of each of the two generators
if it is not dispatched.
Supportive Long-Term Power Purchase Agreement: Revenue Risk -
Price - Midrange
The electricity tariffs are largely fixed under the ESC. The
price for electricity produced by Unit 1 may be renegotiated
after 2030, but SEG would be required to add an additional USD50
million to the debt reserve account from 2028, which will provide
a cash cushion should the renegotiation does not yield a similar
or better term.
The tariffs are indexed using straightforward, broad-based
publicly available indexation formulas. The tariffs are
denominated in US dollars but partially indexed to the dollar-
rupiah exchange rate, such that SEG's revenues in dollars will
decline if the Indonesian rupiah depreciates against the US
dollar. SEG does not enter into foreign-exchange hedges, leaving
it exposed to exchange-rate risk.
Fully Amortising Debt: Debt Structure - Midrange
The seniority, full amortisation and fixed coupon of the USD580
million bonds are features of a debt structure that would be
assessed as Stronger. The issuance of additional debt to fund the
development of Unit 3 could expose SEG to higher rates at that
time, although the new debt would be required to meet a projected
DSCR of 1.3x. If this additional debt is structured as a new debt
tranche instead of additional notes issued from the current
tranche, the existing notes may not have security over the new
assets and may not have access to the cash flows from Unit 3 for
debt service.
The six-month debt service reserve account (DSRA) is a feature of
a Midrange debt structure. Although the DSRA is not fully funded
at financial close, Fitch notes that the company could not pay
any dividend if the account is not filled. The lock-up regime at
1.1x look-back DSCR is better than the 1.0x look-back DSCR Fitch
assumed for its expected rating, although not particularly robust
and weaker than some peers. The full amortisation that starts in
year 1 results in steady deleveraging, but the annual cash flows
and DSCRs are volatile. Overall, Fitch assesses the debt
structure as Midrange.
Financial Profile
Underperformance of the geothermal resource, higher-than-expected
capex and reduced operational efficiency could impair SEG's
ability to service its debt payments. SEG has an average DSCR of
1.42x and a minimum DSCR of 1.25x under the Fitch base case.
The Fitch rating case, in which Fitch applies stresses on the
capacity factor, availability, opex and capex, results in an
average DSCR of 1.29x and a minimum DSCR of 1.10x. The achieved
coverage level is below the 1.40x (BBB-) concentrated solar power
(CSP) threshold in Fitch's "Renewable Energy Projects Rating
Criteria" but above the 'BB-' threshold of 1.20x.
PEER GROUP
Fitch has rated other geothermal projects below investment grade
mainly due to uncertainty about resource depletion and lack of
substitute fuel, and/or volatile pricing mechanisms. In
particular, the default of Coso Geothermal Power Holdings LLC
highlights the resource depletion risk inherent in geothermal
projects. OrCal Geothermal LLC's (senior bonds rated BB/Stable)
standalone DSCRs average below 1.0x in the Fitch ratings cases,
but the rating is based on the continuing capital contribution by
the sponsor to fund discretionary capital expenditures.
SEG has a better price risk attribute than peers as a result of
its long-term take-or-pay power purchase agreement with PLN, and
its resources have been validated through studies by external
consultants. The DSCR projections in Fitch's rating case indicate
a robust coverage averaging 1.29x over the debt term.
RATING SENSITIVITIES
Future Developments That May, Individually or Collectively, Lead
to Negative Rating Action:
- The projected average DSCR dropping below 1.25x in Fitch's
rating case as a result of production declines or interruptions,
operating difficulties, additional debt, or other factors.
Future Developments That May, Individually or Collectively, Lead
to Positive Rating Action:
- Repayment of debt faster than planned, resulting in projected
average DSCR above 1.35x in Fitch's rating case.
TRANSACTION SUMMARY
The transaction is the issuance of USD580 million fully
amortising 6.75% senior secured notes. The proceeds are to be
used to repay SEG's existing senior debt and pay for transaction
costs.
Fitch Cases
The Fitch base case assumes a capacity factor of 97% for both
units, and uses management's forecast for operating expenses and
capex.
The Fitch rating case assumes a capacity factor of 95% for both
units, which is equal to the lowest level in recent years. Fitch
also assumes that major overhauls of the power plants are
performed every three years (as they have been historically),
compared with every four years in the management's assumptions.
Fitch's rating case also applies a 15% stress to management's
assumptions for operating expenses and a 5% stress to capex.
Asset Description
SEG is part of the Star Energy Group, the largest geothermal
energy producer in Indonesia and the third largest in the world.
SEG has the exclusive right to use geothermal resources in the
Wayang Windu area, located in West Java, Indonesia, about 40km
south of the city of Bandung. SEG operates two power generation
units with a combined gross installed capacity of 227MW. Unit 1
is 110MW and began commercial operations in June 2000, while Unit
2 is 117MW and started in March 2009.
VARIATION FROM PUBLISHED CRITERIA
The analysis includes a variation from the "Renewable Energy
Project Rating Criteria". The criteria currently do not specify
indicative base and rating cases as well as rating thresholds for
geothermal projects. Like CSP projects, geothermal plants use
thermal power technology.
Therefore Fitch considers the indicative DSCR threshold for CSP
projects to apply to geothermal projects as well. The production
forecast in Fitch's rating case considers the production estimate
provided by GeothermEx, which is deemed to be aligned with the
P90 production level typically used for wind and solar projects.
A 2% haircut on the capacity factor is aligned with the energy
production haircuts indicated to be applied for solar projects
with a Midrange Revenue Risk assessment.
=========
J A P A N
=========
TOSHIBA CORP: Returns to Black; Avoids Delisting from TSE
---------------------------------------------------------
Japan Today reports that Toshiba Corp. said May 15 it had bounced
back into the black after a disastrous year and will avoid a
humiliating delisting from the Tokyo stock exchange.
According to the report, the firm said it had booked a record net
profit of JPY804.0 billion ($7.3 billion), compared with a loss
of JPY965.7 billion a year earlier.
Japan Today relates that the bottom line was helped by one-off
revenue from tax cuts linked to its sale of its nuclear units.
However, operating profits dropped 21.9 percent to JPY64.1
billion while sales declined 2.4 percent to JPY3.95 trillion.
Japan Today notes that Toshiba had been on the ropes after the
disastrous acquisition of US nuclear energy firm Westinghouse,
which racked up billions of dollars in losses before being placed
under bankruptcy protection.
Those losses came to light as the group was still reeling from
revelations that top executives had pressured underlings to cover
up weak results for years after the 2008 global financial
meltdown.
In order to survive and avoid delisting, the cash-strapped group
has decided on the multibillion-dollar sale of its prized chip
business to a consortium led by Bain Capital.
For the current year to March 2019, Toshiba expects a net profit
of JPY1.07 trillion, up 33.1 percent from the previous year, on
sales of JPY3.6 trillion, down 8.8 percent, it said, Japan Today
relays.
About Toshiba Corp
Toshiba Corporation (TYO:6502) -- http://www.toshiba.co.jp/-- is
a Japan-based manufacturer involved in five business segments.
The Digital Products segment offers cellular phones, hard disc
devices, optical disc devices, liquid crystal televisions, camera
systems, digital versatile disc (DVD) players and recorders,
personal computers (PCs) and business phones, among others. The
Electronic Device segment provides general logic integrated
circuits (ICs), optical semiconductors, power devices, large-
scale integrated (LSI) circuits for image information systems and
liquid crystal displays (LCDs), among others. The Social
Infrastructure segment offers various generators, power
distribution systems, water and sewer systems, transportation
systems and station automation systems, among others. The Home
Appliance segment offers refrigerators, drying machines, washing
machines, cooking utensils, cleaners and lighting equipment. The
Others segment leases and sells real estate.
As reported in the Troubled Company Reporter-Asia Pacific on
Jan. 24, 2018, S&P Global Ratings said it has raised two notches
to 'CCC+' from 'CCC-' both its long-term corporate credit and
senior unsecured debt ratings on Japan-based capital goods and
diversified electronics company Toshiba Corp. S&P said, "We also
placed the ratings on CreditWatch with positive implications. We
have kept our 'C' short-term corporate credit and commercial
paper program ratings on Toshiba on CreditWatch with positive
implications."
The TCR-AP on Dec. 15, 2017, reported that Moody's Japan K.K.
affirmed Toshiba Corporation's Caa1 corporate family rating and
senior unsecured debt ratings, and its Ca subordinated debt
rating. Moody's has also changed the ratings outlook to stable
from negative. At the same time, Moody's has affirmed Toshiba's
commercial paper rating of Not Prime.
=============
V I E T N A M
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HOME CREDIT: Moody's Assigns First-Time B3 CFR, Outlook Stable
--------------------------------------------------------------
Moody's Investors Service has assigned a first-time B3 corporate
family rating (CFR) to Home Credit Vietnam Finance Company
Limited (HCV).
The outlook on the rating is stable.
RATINGS RATIONALE
HCV's B3 CFR incorporates the company's standalone credit profile
of b3, and reflects its exposure to the high credit risk inherent
in Vietnam's rapidly growing unsecured consumer finance market.
Moreover, HCV's funding and liquidity are vulnerable to
disruptions in case of market and/or credit shocks. The rating
also incorporates the company's good market position, high
profitability and good capital buffer.
HCV provides its customers with small unsecured consumer loans
with high interest rates. Its exposure to credit risk is high, as
highlighted by loan loss provisions to average gross loans of
7.7% at the end of 2017, and nonperforming and written-off loans
of 7.8% of gross loans as of the same date.
While asset quality has improved in recent years, due to stricter
credit underwriting, asset quality is prone to rapid
deterioration if the operating environment in Vietnam weakens.
Adding to credit risk is the very rapid gross loan growth of 52%
in 2017 and the 40% average during 2014-2017. Loan growth is
likely to slow in the coming years, due to rising competitive
pressure.
High interest rates offered on consumer finance loans translate
into very high profitability. HCV posted a return on assets of 9%
at the end of 2017 and return on equity of 44% as of the same
date. Moody's expects profitability to decrease over the next two
years, due to decreasing loan yields.
HCV as a finance company is not allowed to accept customer
deposits, and relies on wholesale funding. Its funding base is
split between loans from banks and certificates of deposits, with
the former concentrated on single names. The share of debt
maturing in 2018 as a proportion of total debt stood at 64% at
the end of 2017, indicating refinancing risk. HCV runs a negative
liquidity gap in its one-to-three months bucket. Such a situation
could worsen significantly, in the case of much higher customer
defaults.
The company's capital buffer is good at 19.6% at the end of 2017,
based on tangible common equity to total managed assets. Despite
high cash dividends and rapid growth, HCV's high profitability
will allow the company to maintain a good capital buffer over the
next two years.
The stable rating outlook reflects Moody's expectation that HCV
will maintain stable credit fundamentals over the next 12-18
months.
HCV's rating does not include any uplift for parental or
government support.
Upward rating pressure is possible if the company improves its
funding and liquidity, while maintaining stable asset quality and
capital.
The rating could be downgraded if solvency and liquidity
significantly deteriorate.
The principal methodology used in these ratings was Finance
Companies published in December 2016.
Headquartered in Ho Chi Minh City, Home Credit Vietnam Finance
Company Limited (HCV) held total assets of VND17.5 trillion at
the end of 2017, according to audited financial statements
prepared under International Financial Reporting Standards
(IFRS). HCV served 7.8 million customers in Vietnam, via its
network of 9,469 point of sale (POS) outlets in 63 cities and
provinces across the country. The company employs more than
10,000 staff.
HCV has operated in Vietnam since 2009, and is the fully-owned
subsidiary of Home Credit Group, an international consumer
finance provider with operations in 11 countries. Home Credit
Group is in turn controlled by PPF Group. HCV benefits from
extensive technological and management support from Home Credit
Group.
===============
X X X X X X X X
===============
MALDIVES: Fitch Affirms 'B+' LT FC IDR, Outlook Stable
------------------------------------------------------
Fitch Ratings has affirmed the Maldives' Long-Term Foreign-
Currency Issuer Default Rating (IDR) at 'B+' with a Stable
Outlook.
KEY RATING DRIVERS
The 'B+' rating balances the Maldives' strong GDP growth, high
government revenue generated by a prosperous tourism sector and
favourable structural indicators, such as per capita GDP, against
a high government debt burden and low foreign-reserve buffers.
The country's high dependence on the tourism sector leaves the
country vulnerable to domestic and external shocks that could
undermine prospects for the industry, including from changes in
perceptions of safety.
Economic growth in the Maldives is strong, as illustrated by a
five-year average real GDP growth of 6.0% compared with the
median of 3.4% for peers in the 'B' rating category. However, the
Maldives' growth is relatively volatile given its strong
dependence on tourism. Near-term prospects for tourism in the
Maldives have become more uncertain following a state of
emergency imposed between 5 February and 22 March 2018 in
response to protests over the government's defiance of a Supreme
Court order to release political prisoners. The country's
infrastructure capacity to accommodate tourist arrivals will
increase significantly in the coming years, but the perception of
the Maldives' stability may have been damaged by precautionary
travel advisories issued by the governments of several key
markets after the announcement of the state of emergency.
Available data on foreign arrivals and tourism-related government
revenue do not yet indicate any negative effect on tourism
earnings. There is a significant distance between the luxury
resorts and the capital island Male, where most of the political
agitation normally takes place and which many tourists never
visit. A delayed impact could still occur, however, as changed
tourist preferences may show up in future bookings rather than
through cancelations of expensive pre-paid bookings.
On a net basis Fitch expects a slight dent in the growth of
tourism earnings in 2018, resulting in real GDP growth of 4.5% in
2018 and 5.0% in 2019, down from the official estimate of 6.9%
for 2017. Uncertainty surrounding these forecasts is significant
and, in the coming months, data on tourism arrivals should
provide more clarity on the lasting impact of the state of
emergency. A sudden sharp drop in tourism is not Fitch's base
case, but the potential impact of such an event on the Maldives'
economy would be large, as the experience with the tsunami of
2004 illustrates, when the economy went from 6% expansion in one
year to a 13% contraction in the next. The tourism sector
accounts for 25% of GDP directly and much more if the indirect
contribution is included.
Real GDP growth should continue to be supported by the
construction of new resorts and large infrastructure projects
initiated by the government. These include a new runway and
terminal at the main airport, the construction of a bridge
linking the capital to population centres, an advanced medical
centre and new housing. Execution of many large projects at the
same time has posed serious fiscal challenges, leading the
government to drastically cut its fiscal deficit to 2.0% of GDP
in 2017 from 10.4% in 2016 ('B' median: deficit of 4.1% of GDP)
through cuts in its recurrent expenditure. Fitch expects the
deficit to rise again to 4.5% of GDP in 2018 on the back of a
slight drop in revenues from tourism and increased spending
related to presidential elections in September. The government's
infrastructure push has increased general government debt to
66.1% of GDP in 2017, according to Fitch estimates ('B' median:
60.6% of GDP) and caused a rapid rise in government guarantees
extended to state-owned enterprises for current or future
borrowing to 28.5% of GDP.
Recent issuance of two US dollar-denominated bonds, maturing in
2022 and 2023, show the Maldives has access to international
markets, but also gives rise to heightened refinancing risk. The
government's external debt service amounts to USD395 million in
2022, more than half the Maldives Monetary Authorities' foreign-
exchange reserves at end-March 2018 of USD723.9 million and one
and a half times its usable reserves of USD244.6 million, defined
as gross reserves minus short-term foreign liabilities. The
refinancing risk will be mitigated to the extent the government
follows through on its aim to set aside enough US dollar revenue
on a yearly basis in a sovereign wealth fund to pre-fund the
repayment of the bonds.
Persistent large current account deficits (16.6% of GDP in 2018)
are only partially financed by foreign direct investment, but
risks to the external balances are mitigated by the tourism
sector, where earning and spending are in US dollars. This
implies that tourism-related outflows should also fall in the
case of a sudden drop in tourism-related inflows. However, the
timing of the impact on inflows and outflows could differ,
implying a risk of a liquidity squeeze and debt servicing
difficulties in the event of a loss of confidence in the rufiyaa
peg to the US dollar, and especially in the case of a prolonged
disruption to tourism.
Fitch considers the sovereign's exposure to banking-sector risk
to be relatively low. Private credit represents only 33% of GDP
and the banking system is well-capitalised, with a reported Tier
1 capital/risk-weighted asset ratio of 36.3% in 2017, and a
significant proportion is foreign-owned. Non-performing loans
were high, at 10.5% of total loans, but are on a declining trend
from a peak of 20.9% in 2012.
SOVEREIGN RATING MODEL (SRM) and QUALITATIVE OVERLAY (QO)
Fitch's proprietary SRM assigns Maldives a score equivalent to a
rating of 'BB-' on the Long-Term Foreign-Currency IDR scale.
Fitch's sovereign rating committee adjusted the output from the
SRM to arrive at the final Long-Term Foreign-Currency IDR by
applying its QO, relative to rated peers, as follows:
- External Finances: -1 notch to reflect low reserve coverage
in combination with high dependence on one sector - tourism - and
an accumulation of external debt from the execution of large
infrastructure projects.
Fitch's SRM is the agency's proprietary multiple regression
rating model that employs 18 variables based on three-year
centred averages, including one year of forecasts, to produce a
score equivalent to a Long-Term Foreign-Currency IDR. Fitch's QO
is a forward-looking qualitative framework designed to allow for
adjustment to the SRM output to assign the final rating,
reflecting factors within its criteria that are not fully
quantifiable and/or not fully reflected in the SRM.
RATING SENSITIVITIES
The Stable Outlook reflects Fitch's assessment that upside and
downside risks to the ratings are balanced. However, the main
factors that could lead to negative rating action are:
- Balance-of-payment pressures; for instance, a fall in
foreign-exchange reserves or a higher-than-Fitch-expected
increase in external debt.
- A significant rise in general government debt or government
guarantees to state-owned enterprises.
- An economic, political or natural shock that negatively
affects the country's tourism industry.
The main factors that could lead to positive rating action are:
- Strengthening of external buffers through accumulation of
foreign-exchange reserves.
- Policy initiatives that lower general government debt.
- Diversification of the economy by developing sectors other
than tourism; for example, facilitated by implementing structural
reforms that enhance the business environment.
KEY ASSUMPTIONS
- The world economy performs broadly in line with Fitch's
latest Global Economic Outlook (March 2018).
The full list of rating actions is as follows:
Long-Term Foreign-Currency IDR affirmed at 'B+'; Outlook Stable
Long-Term Local-Currency IDR affirmed at 'B+'; Outlook Stable
Short-Term Foreign-Currency IDR affirmed at 'B'
Short-Term Local-Currency IDR affirmed at 'B'
Country Ceiling affirmed at 'BB-'
Issue ratings on long-term senior unsecured foreign-currency
bonds affirmed at 'B+'
*********
Tuesday's edition of the TCR-AP delivers a list of indicative
prices for bond issues that reportedly trade well below par.
Prices are obtained by TCR-AP editors from a variety of outside
sources during the prior week we think are reliable. Those
sources may not, however, be complete or accurate. The Tuesday
Bond Pricing table is compiled on the Friday prior to
publication. Prices reported are not intended to reflect actual
trades. Prices for actual trades are probably different. Our
objective is to share information, not make markets in publicly
traded securities. Nothing in the TCR-AP constitutes an offer
or solicitation to buy or sell any security of any kind. It is
likely that some entity affiliated with a TCR-AP editor holds
some position in the issuers' public debt and equity securities
about which we report.
A list of Meetings, Conferences and Seminars appears in each
Wednesday's edition of the TCR-AP. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com
Friday's edition of the TCR-AP features a list of companies with
insolvent balance sheets obtained by our editors based on the
latest balance sheets publicly available a day prior to
publication. At first glance, this list may look like the
definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical
cost net of depreciation may understate the true value of a
firm's assets. A company may establish reserves on its balance
sheet for liabilities that may never materialize. The prices at
which equity securities trade in public market are determined by
more than a balance sheet solvency test.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Asia Pacific is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez,
Julie Anne L. Toledo, Ivy B. Magdadaro and Peter A. Chapman,
Editors.
Copyright 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.
*** End of Transmission ***