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T R O U B L E D C O M P A N Y R E P O R T E R
A S I A P A C I F I C
Monday, October 22, 2018, Vol. 21, No. 209
Headlines
A U S T R A L I A
AGB GROUP: First Creditors' Meeting Set for Oct. 29
BYRNES MJ: Second Creditors' Meeting Set for Oct. 29
COLTON COAL: First Creditors' Meeting Set for Oct. 29
CORRIDORS COLLEGE: First Creditors' Meeting Set for Oct. 29
J M KELLY: First Creditors' Meeting Set for Oct. 29
KAWANA JOINERY: First Creditors' Meeting Set for Oct. 29
MADDEN INTERIORS: Second Creditors' Meeting Set for Oct. 29
MAX BRENNER: Loses Lifeline as Tozer Deal Falls Through
MODSCAPE PTY: First Creditors' Meeting Set for Oct. 29
QUINTIS LTD: Dissident Sandalwood Growers Face Court Setback
C H I N A
ZHAOJIN MINING: Fitch Publishes BB LT IDR, Outlook Stable
ZHAOJIN MINING: S&P Assigns 'BB+' ICR, Outlook Stable
I N D I A
ADARSH NOBLE: CARE Lowers Rating on INR21.25cr LT Loan to D
AMALTAS EDUCATIONAL: Ind-Ra Maintains B Rating in Non-Cooperating
ASTRA LIGHTING: CARE Migrates D Rating to Not Cooperating
ELECTROMECH MARITECH: CARE Hikes Rating on INR18.23cr Loan to B
ESSAR STEEL: ArcelorMittal Picked as Preferred Bidder
MEHADIA AND SONS: CARE Lowers Rating on INR7.8cr Loan to C
MERCATOR LTD: CARE Lowers Rating on INR653.97cr Loan to D
NEELKANTH SWEETS: CARE Assigns B+ Rating to INR10cr LT Loan
PLASTOMATIC INDUSTRIES: CARE Cuts Rating on INR7.80cr Loan to B+
PONDICHERRY TINDIVANAM: CARE Reaffirms B INR210.94cr Loan Rating
R J TRADELINKS: CARE Lowers Rating on INR8.40cr Loan to C
SCHOLARS INT'L: Ind-Ra Maintains 'D' LT Rating in Non-Cooperating
SRI RAGHURAMACHANDRA: CARE Reaffirms B+ Rating on INR6.78cr Loan
VASAVI SOLAR: CARE Hikes Rating on INR20.31cr Loan to B
I N D O N E S I A
GREENWOOD SEJAHTERA: Fitch Cuts National LT Rating to BB(idn)
S I N G A P O R E
INTERPLEX HOLDINGS: Moody's Assigns Ba3 CFR, Outlook Stable
S O U T H K O R E A
SKINFOOD: Court Placed Firm Under Court Receivership
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A U S T R A L I A
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AGB GROUP: First Creditors' Meeting Set for Oct. 29
---------------------------------------------------
A first meeting of the creditors in the proceedings of AGB Group
Pty Ltd will be held at Rydges Hotel, Cnr Gheringhap & Myers
Street, in Geelong, Victoria, on Oct. 29, 2018, at 2:30 p.m.
Nathan Deppeler and Matthew Jess of Worrells Solvency & Forensic
were appointed as administrators of AGB Group on Oct. 17, 2018.
BYRNES MJ: Second Creditors' Meeting Set for Oct. 29
----------------------------------------------------
A second meeting of creditors in the proceedings of Byrnes. M. J.
Pty Ltd has been set for Oct. 29, 2018, at 2:00 p.m. at the
offices of Chifley Advisory, Suite 19.03 Level 19, 31 Market
Street, in Sydney, NSW.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the
Company be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by Oct. 26, 2018, at 4:00 p.m.
Gavin Moss of Chifley Advisory was appointed as administrator of
Byrnes. M. J. on Oct. 5, 2018.
COLTON COAL: First Creditors' Meeting Set for Oct. 29
-----------------------------------------------------
A first meeting of the creditors in the proceedings of Colton
Coal Pty Ltd and Northern Energy Corporation Limited will be held
at the offices of Grant Thornton Brisbane, Level 18, 145 Ann
Street, in Brisbane City, on Oct. 29, 2018, at 11:00 a.m.
Said Jahani and Shaun Christopher McKinnon of Grant Thornton
Australia were appointed as administrators of Colton Coal on Oct.
17, 2018.
CORRIDORS COLLEGE: First Creditors' Meeting Set for Oct. 29
-----------------------------------------------------------
A first meeting of the creditors in the proceedings of Corridors
College Ltd, trading as Corridors Secondary Vocational College,
will be held at Level 8, 235 St George's Terrace, in Perth, WA,
on Oct. 29, 2018, at 10:30 a.m.
Clint Peter Joseph, Matthew David Woods and Hayden Leigh White of
KPMG were appointed as administrators of Corridors College on
Oct. 17, 2018.
J M KELLY: First Creditors' Meeting Set for Oct. 29
---------------------------------------------------
A first meeting of the creditors in the proceedings of J M Kelly
Builders Pty Ltd will be held at Leichhardt Hotel, Bolsover St &
Denham St, in Rockhampton City, Queensland, on Oct. 29, 2018, at
10:00 a.m.
Derrick Craig Vickers and Michael Andrew Owen of
PricewaterhouseCoopers were appointed as administrators of J M
Kelly on Oct. 17, 2018.
KAWANA JOINERY: First Creditors' Meeting Set for Oct. 29
--------------------------------------------------------
A first meeting of the creditors in the proceedings of Kawana
Joinery Co. Pty Ltd will be held at Leichhardt Hotel, Bolsover St
& Denham St, in Rockhampton City, Queensland, on Oct. 29, 2018,
at 10:00 a.m.
Derrick Craig Vickers and Michael Andrew Owen of
PricewaterhouseCoopers were appointed as administrators of Kawana
Joinery on Oct. 17, 2018.
MADDEN INTERIORS: Second Creditors' Meeting Set for Oct. 29
-----------------------------------------------------------
A second meeting of creditors in the proceedings of Madden
Interiors Pty Ltd has been set for Oct. 29, 2018, at 4:00 p.m. at
the offices of Worrells Solvency & Forensic Accountants, Suite 1,
Level 15, 9 Castlereagh Street, in Sydney, NSW.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the
Company be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by Oct. 26, 2018, at 5:00 p.m.
Simon Cathro of Worrells Solvency was appointed as administrator
of Madden Interiors on Sept. 21, 2018.
MAX BRENNER: Loses Lifeline as Tozer Deal Falls Through
-------------------------------------------------------
Miriam Fisher at The West Australian reports that a last-minute
deal to save Max Brenner's Australian chocolate and coffee shops
from liquidation has fallen through, with investment company
Tozer and Co. confirming it has been left with no choice but to
walk away.
"We had a plan and a vision to restore the chain to profitability
and to save the jobs of staff, but the commercial roadblocks and
impediments were insurmountable," the report quotes managing
director David Tozer as saying.
"In the short time of our involvement we were working to welcome
those employees into our family and do everything needed to bring
Max back to its former glory.
"We thought we were very close to an agreement with the
liquidators on Thursday morning, but the requirements changed as
the day progressed such that we were unfortunately left with no
alternative but to move on."
"At a time when the Australian retail industry is under enormous
pressure to retain commercial viability, it's extremely
disappointing that this deal couldn't proceed," Mr. Tozer said.
About Max Brenner
Max Brenner Australia operated 37 company owned stores across
Australia and a head office/distribution centre at
Alexandria (NSW), and employed approximately 600 staff.
McGrathNicol partners; Barry Kogan, Kathy Sozou and Jason Preston
were appointed Voluntary Administrators of Max Brenner Australia
by a resolution of its Directors on Sept. 30, 2018.
The Directors of Max Brenner Australia resolved to appoint
Voluntary Administrators due to escalating costs and tighter
retail trade.
Only 16 of the company's 37 stores remain in operation in
Australia as the country's retail industry struggles to stay
afloat, according to The West Australia.
MODSCAPE PTY: First Creditors' Meeting Set for Oct. 29
------------------------------------------------------
A first meeting of the creditors in the proceedings of Modscape
Pty Ltd will be held at the offices of Cor Cordis, Level 29,
360 Collins Street, in Melbourne, Victoria, on Oct. 29, 2018, at
11:00 a.m.
Barry Wight and Rachel Burdett-Baker of Cor Cordis were appointed
as administrators of Modscape Pty on Oct. 17, 2018.
QUINTIS LTD: Dissident Sandalwood Growers Face Court Setback
------------------------------------------------------------
Sean Smith at The West Australian reports that the fight goes on
for dissident Quintis sandalwood growers, despite a setback in
the Federal Court.
The Sandalwood Growers Co-op has called a new meeting of
investors in the collapsed Quintis' 2003 management investment
scheme after the court invalidated a July 23 vote transferring
management of the sandalwood project to the co-op, the report
says.
According to the report, Justice Craig Colvin upheld a challenge
by Quintis' receivers from McGrathNicol, ruling that the 2003
growers could not vote on resolutions before the Australian
Securities and Investments Commission had approved Huntleys as a
new responsible entity for the scheme.
Costs were awarded against the chairman of the July meeting,
former Quintis director Graeme Scott, the report relates.
With ASIC having since approved the appointment of Huntleys in
place of Quintis, the co-op has already called another meeting of
the 2003 growers for November 12 to install the firm as the new
RE and the co-op as the new manager, according to the West
Australian.
The report says the co-op, whose board includes Quintis founder
and former chief executive Frank Wilson, wants to roll up other
Quintis schemes to secure the harvesting and sale rights to
thousands of hectares of sandalwood plantations across northern
Australia.
Bondholders led by Blackrock are in the process of taking control
of the company's operations via a deed of company arrangement
that preserves jobs and recapitalises the business, the West
Australian discloses. The deed was endorsed by the Federal Court
two weeks ago and is expected to take effect next week, the West
Australian notes.
About Quintis
Quintis Ltd. -- https://quintis.com.au/ -- is Australia's largest
sandalwood forestry management company and manages 17 separate
managed investment schemes.
Quintis employs approximately 500 staff at various locations
throughout Australia. Quintis manages nearly 13,000 hectares of
sandalwood plantations in northern Australia and owns a
distillery and pharmaceutical company to process the sandalwood
for the cosmetics, well-being and pharmaceutical industries. The
company was formed in 1997 and listed in 2007.
KordaMentha Restructuring partners Richard Tucker, Scott Langdon,
and John Bumbak were appointed as Voluntary Administrators of the
Quintis Group on Jan. 20, 2018 after Asia Pacific Investments DAC
exercised an option requiring Quintis to acquire 400 hectares of
plantations at a pre-determined price of AUD37 million, with
settlement required totake place on Feb. 2, 2018. Quintis did
not have the financial resources to pay the put option.
As a result of the appointment of Administrators on Jan. 23,
2018, the secured bondholders appointed Jason Preston, Shaun
Fraser and Robert Brauer of McGrathNicol as Receivers and
Managers.
Quintis Ltd. and its affiliated companies filed voluntary
petitions seeking relief under Chapter 15 of the Bankruptcy Code
(Bankr. S.D.N.Y. Lead Case No. 18-12739) on Sept. 12, 2018.
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C H I N A
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ZHAOJIN MINING: Fitch Publishes BB LT IDR, Outlook Stable
---------------------------------------------------------
Fitch has published Zhaojin Mining Industry Company Limited's
Long-Term Issuer Default Rating and senior unsecured rating of
'BB'. The Outlook is Stable.
Fitch has also assigned a 'BB(EXP)' expected rating to the
proposed US dollar senior notes to be issued by Zhaojin Mining
International Finance Limited, a wholly owned subsidiary of
Zhaojin Mining. The notes are guaranteed by Zhaojin Mining and
are rated at the same level as Zhaojin Mining's senior unsecured
rating as they constitute its direct and senior unsecured
obligations. The final rating is subject to the receipt of final
documentation conforming to information already received.
Zhaojin Mining is an integrated gold producer and the fourth-
largest of its kind in China with annual gold production of about
16 tonnes in 2017. Zhaojin Mining is based in the gold-rich
region of Zhaoyuan in eastern Shandong province, and has high-
quality gold assets as well as production costs in the first
quartile on the global cost curve.
Zhaojin Mining's ratings are derived from Fitch's assessment of
the consolidated credit profile of Zhaojin Mining's immediate
parent, Zhaojin Group Company Limited (Zhaojin Group), which is
wholly owned by the Zhaoyuan municipality. Fitch assesses Zhaojin
Group's ratings based on four factors set out in its Government-
Related Entities Rating Criteria. As a result, Fitch takes a top-
down approach to the rating and notches down Zhaojin Group's
profile from its internal assessment of the credit profile of
Zhaoyuan municipality.
Zhaojin Mining's rating is equalised with the credit profile of
Zhaojin Group as Fitch assesses the linkage between the two
entities as strong, underpinned by solid strategic and
operational ties, as per Fitch's Parent and Subsidiary Rating
Linkage criteria.
KEY RATING DRIVERS
Strong State Control and Support: Fitch assesses Zhaojin Group's
status, ownership and control by Zhaoyuan as 'Strong' as the
company is economically and strategically important to the city.
Zhaojin Group is wholly owned by the Zhaoyuan municipality and is
the largest producer in a city where gold is a major economic
contributor. Fitch assesses Zhaojin Group's support record as
'Moderate'. Zhaojin Mining has received financial subsidies from
the municipality in the past, but the group's financial profile
remains weak.
Strong Incentive to Support: Fitch assesses the socio-political
effect of a default by Zhaojin Group on Zhaoyuan as 'Strong'
because Zhaojin Group is the largest gold producer in the city
and accounts for 80% of Zhaoyuan's gold refining capacity and
100% of its processing capacity. Fitch also assesses that the
financial implications of default by Zhaojin Group on Zhaoyuan to
be 'Very Strong' because Zhaojin Group accounts for around 70% of
the state-owned assets in Zhaoyuan and it is the largest debt
issuer in the city.
Strong Parent Subsidiary Linkage: Zhaojin Mining is 33.74% owned
by Zhaojin Group and holds the majority of the group's core
assets. It is also the group's only publicly listed subsidiary.
Zhaojin Mining accounts for over 90% of Zhaojin Group's EBITDA
and shares key board members and senior management. Zhaojin Group
also guarantees some of Zhaojin Mining's bonds issued on the
domestic market.
Low-Cost Gold Producer: Zhaojin Mining's gold mining business has
cash costs in the first quartile on the global cost curve, with
average cash cost of about USD660/oz, thanks to its high-quality
assets. Zhaojin Mining's gold profitability is comparable to that
of highly rated gold peers such as Goldcorp Inc. (BBB/Stable),
Kinross Gold Corporation (BBB-/Stable) and Yamana Gold Inc. (BBB-
/Stable), and is higher than the gold business of domestic peer
Zijin Mining Group Co., Ltd (BBB-/Stable). This has contributed
to Zhaojin's strong EBITDA margin of 42% in 2017.
High Leverage, Healthy Coverage: Zhaojin Mining's standalone
credit profile is constrained by its high financial leverage,
which is driven by its large capex. Fitch expects Zhaojin
Mining's FFO-adjusted net leverage to remain high at around 5.6x
between 2018 and 2019, compared with 6.0x in 2017. However, the
company's interest coverage is ample at around 4.0x due to its
low cost of funding.
Haiyu Mine to Boost Output: In 2015 Zhaojin Mining acquired 53%
of the Haiyu gold mine for CNY2.7 billion. Haiyu is the largest
undersea gold mine in China, with estimated reserves of around
500 tonnes. Fitch expects commercial production to commence
around 2021, which will add around 14 tonnes of annual gold
production to the group's existing 20 tonnes, significantly
boosting the size of its gold mining business. Fitch has not
factored in contribution from the Haiyu mine in its financial
forecasts for 2018-2021, as Fitch does not expect commercial
production to begin in the near term.
DERIVATION SUMMARY
Zhaojin Mining's rating is equalised with the credit profile of
Zhaojin Group, based on strong linkage between the two entities
as per Fitch's Parent and Subsidiary Rating Linkage criteria.
Zhaojin Group's profile is notched down two times from Fitch's
internal assessment of the credit profile of Zhaoyuan
municipality, due to high likelihood of support from Zhaoyuan as
per Fitch's Government-Related Entities Rating Criteria.
Zhaojin Group's notching from its parent is similar to that of
steel producer HBIS Group Co., Ltd.'s (BBB+/Stable) from Hebei
State-owned Assets Supervision and Administration Commission.
HBIS is the largest steelmaker in Hebei and steel is a major
economic driver for the province, accounting for 40% of the total
assets of state-owned enterprises in the province. Similarly,
Zhaojin Group is the largest gold miner in Zhaoyuan, where gold
production is a significant contributor to economic activity.
Zhaojin Group accounts for 70% of Zhaoyuan's total state-owned
assets.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Gold gross margin to remain at around 40% between 2018 and
2021 (2017: 40%)
- Gold price to maintain at around USD1,200/oz between 2018 and
2021.
- Capex of CNY2.2 billion each year between 2018 and 2021
(2017: CNY1.5 billion)
- Dividend pay-out ratio of around 20%-30% in the future.
RATING SENSITIVITIES
Developments that May, Individually or Collectively, Lead to
Positive Rating Action
- An upgrade of Fitch's internal assessment of the
creditworthiness of Zhaoyuan
- Increase in the likelihood of support from the Zhaoyuan
government
- Stronger standalone credit profile of Zhaojin Group, which
may be evident from interest coverage ratios at the group
holding company level exceeding 2.0x on a sustained basis.
(2017: 1.5x)
Developments that May, Individually or Collectively, Lead to
Negative Rating Action
- A downgrade of Fitch's internal assessment of the
creditworthiness of Zhaoyuan
- Weakening of likelihood of support from the Zhaoyuan
government
- Weaker standalone credit profile of Zhaojin Group, which may
be evident from liquidity issues.
LIQUIDITY
As of end-2017, Zhaojin Mining had around CNY13.5 billion in
unused credit facilities and CNY1.8 billion in cash, against
around CNY10.8 billion in short-term debt. Zhaojin Mining also
has access to offshore equity markets and domestic bond markets,
and maintains good relationships with major domestic financial
institutions.
ZHAOJIN MINING: S&P Assigns 'BB+' ICR, Outlook Stable
-----------------------------------------------------
S&P Global Ratings assigned its 'BB+' long-term issuer credit
rating to Zhaojin Mining Industry Co. Ltd. (Zhaojin Mining). The
outlook is stable. Zhaojin Mining is a gold miner based in
China's Shandong province.
S&P said, "We also assigned our 'BB+' long-term issue rating to
the company's proposed guaranteed senior unsecured notes. Zhaojin
Mining International Finance Ltd., a wholly owned subsidiary of
Zhaojin Mining, will issue the notes.
"The rating on Zhaojin Mining reflects our expectation that the
company will remain a core subsidiary of Shandong Zhaojin Group
Co. Ltd. (Zhaojin Group). We believe Zhaojin Mining will receive
timely and sufficient support from Zhaojin Group if needed. We
therefore equalize the rating on the company with the credit
profile of Zhaojin Group.
"We anticipate that Zhaojin Group will maintain its majority
shareholding in Zhaojin Mining. In our view, Zhaojin Mining will
remain integral to the overall development strategy of the group,
being the latter's only gold mining subsidiary. Zhaojin Group's
other businesses, including downstream gold fabrication,
processing, and retail, further integrate Zhaojin Mining into the
group. We also expect Zhaojin Mining to remain the major profit
contributor for the group over the next few years. The group's
other businesses generate much smaller profit than the mining
business due to low margins. As a result, we believe that Zhaojin
Group has similar business strengths as those of Zhaojin Mining.
"We believe Zhaojin Mining will maintain its single commodity
focus, exposing it to the cyclical fluctuations in gold prices.
We also expect the company to remain less geographically
diversified as compared with some of its peers. We anticipate
that Zhaojin Mining's operations will continue to be concentrated
in China over the next one to two years, given that the company
is cautious in investing overseas. Specifically, around 55% of
its mined gold production will continue to come from Shandong
province.
"At the same time, we believe that Zhaojin Mining will maintain
its competitive advantages of sufficient mine reserves, high
volume growth, and low production costs over the next one to two
years. The company has a mine life of 29 years, providing
visibility for long-term production. It also has strong organic
growth prospects. Its Haiyu mine is set to commence production in
2020 and will lift the company's mined gold production
significantly. Zhaojin Mining's unit cash cost of Chinese
renminbi (RMB) 107 per gram (or roughly US$494/ounce) for mined
gold placed it in the first quartile of the global cost curve in
2017. Its cost advantage mainly derives from its high ore grade,
good geological conditions, and advanced technology, which helps
it to improve the metal recovery rate.
"In our view, Zhaojin Mining's leverage will remain high and edge
up in 2018-2019. We forecast that the company will generate
steady operating cash flows in 2018-2019, based on our
assumptions of stable sales volume and gold prices. However, we
expect sizable capital expenditures over the period, mainly for
mining capacity expansion. This will keep Zhaojin Mining's debt
high and constrain its financial strength. We expect meaningful
deleveraging in 2020 when the Haiyu mine kicks off.
"We believe Zhaojin Group's leverage will move in tandem with
that of Zhaojin Mining. The group has higher leverage as compared
with Zhaojin Mining due to its higher capital spending and
therefore elevated debt. We believe that deleveraging will happen
in 2020 with incremental profit contribution from the Haiyu mine.
Other measures including mixed ownership reform should also
support deleveraging, but we haven't factored these in our base
case, given the uncertainty. Meanwhile, we expect the group to
maintain EBITDA interest coverage above 2.0x, adequate liquidity,
and solid banking relationships over the next 12-24 months.
"We assigned a positive comparable rating analysis to Zhaojin
Mining. This is because the company receives ongoing support
including government subsidies and also support in securing good
quality gold mines in Shandong province. Moreover, we view the
group to have an integrated business model and exposure to the
full value chain of the gold industry with large downstream
operations. The above gives Zhaojin Mining a better competitive
advantage than peers."
Zhaojin Group is a state-owned enterprise (SOE) that the Zhaoyuan
municipal government controls. Zhaoyuan is a county-level city
under the jurisdiction of Yantai city in Shandong province. S&P
said, "In our view, Zhaoyuan's economy benefits from its rich
gold endowment, which has led to GDP per capita of more than
twice the national average. Zhaoyuan has a moderate debt burden
and high contingent liabilities. Mitigating these risks are the
city's high operating balance and exceptional liquidity that can
fully cover its next 12 months' principal and interest payments.
We expect the city to maintain a modest budget deficit, given the
government's record of financial management."
In S&P's view, Zhaojin Group has a very high likelihood of
receiving extraordinary support from the Zhaoyuan government in
case of financial distress. This view is based on the following
company characteristics:
-- Very strong link with the government. Zhaoyuan government
owns 100% of Zhaojin Group. S&P said, "We believe that the
government will not contemplate privatization in the next two
to three years at least. Zhaoyuan State-owned Assets
Supervision and Administration Commission appoints Zhaojin
Group's board members and senior management. In our view, the
local government has strong influence on the company's
strategy and business plans, and it has processes in place to
continuously monitor the company. We believe that a
considerable deterioration in the creditworthiness of Zhaojin
Group would significantly affect the reputation of the
Zhaoyuan government." It may also hurt the ability of other
government-related entities that are controlled by the local
government to access debt capital markets.
-- Very important role to the government. The gold sector is a
pillar industry in Zhaoyuan and one of the most important
industries in Shandong province. Zhaojin Group is the largest
gold producer in Zhaoyuan, the second-largest in Shandong,
and the fourth-largest in China. It's also designated by the
local government to be the consolidator of the gold industry.
S&P believes credit stress or a default by the company would
not only have an important impact on the local gold sector,
but also a systemic impact on the local economy.
S&P said, "The stable outlook reflects our view that Zhaojin
Mining and Zhaojin Group can withstand a moderate decline in gold
prices over the next 12 months if industry conditions were to
deteriorate. We also anticipate that Zhaojin Mining will remain a
core subsidiary of Zhaojin Group, and that the parent will have a
very high likelihood of receiving extraordinary government
support in case of financial distress.
"We could lower the rating on Zhaojin Mining if Zhaojin Group's
EBITDA interest coverage falls below 2.0x for a sustained period.
This may happen if: (1) gold prices are 15%-20% below our
expectation; or (2) the company sees significant overruns in its
production costs or capital spending, or prolonged delays in
commencement of the Haiyu mine.
"We could also downgrade Zhaojin Mining if the credit strength of
the Zhaoyuan government deteriorates.
"We may upgrade Zhaojin Mining if Zhaojin Group's financial
metrics improve meaningfully for a sustained period. An
indication of such improvement would be Zhaojin Group's debt-to-
EBITDA ratio falling below 4.0x. This could happen if the
company's cash flow improves on higher gold prices or lower
capital spending. We see limited upside potential in the near
term."
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ADARSH NOBLE: CARE Lowers Rating on INR21.25cr LT Loan to D
-----------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Adarsh Noble Corporation Limited (ANCL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank 21.25 CARE D Revised from CARE BB+;
Facilities Positive
Short term Bank 3.75 CARE D Revised from CARE A4+
Facilities
Detailed Rationale & Key Rating Drivers
The revision in the rating assigned to the bank facilities of
ANCL takes into account the invocation of non-fund based limits
which remains unpaid for more than 30 days.
Detailed description of the key rating drivers
Key Rating Weaknesses
Invocation of non-fund based limits: The non-fund based limits
are invoked which remains unpaid for more than 30 days on a
continuous basis. This was mainly due to stretched liquidity
position of the company.
Adarsh Noble Corporation Limited was incorporated in 2006 by
Bhubaneswar-based by Mr. M. K. Acharya. Prior to setting up of
ANCL, the promoters were engaged in construction business through
a partnership firm, named A. P. Construction since 1997. ANCL is
engaged in Engineering, Procurement and Construction (EPC) in the
field of construction and maintenance of petrochemical storage
tanks, equipment erection, etc. Majority contribution to revenue
of the company is from public sector entities in the oil & gas
sector and large players in the aluminum & steel sector.
AMALTAS EDUCATIONAL: Ind-Ra Maintains B Rating in Non-Cooperating
-----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has maintained Amaltas
Educational Welfare Society's bank facilities' ratings in the
non-cooperating category. The issuer did not participate in the
rating exercise despite continuous requests and follow-ups by the
agency. Therefore, investors and other users are advised to take
appropriate caution while using the ratings. The ratings will
continue to appear as 'IND B (ISSUER NOT COOPERATING)' on the
agency's website.
The instrument-wise rating actions are:
-- INR370 mil. Term loan maintained in Non-Cooperating Category
with IND B (ISSUER NOT COOPERATING) rating; and
-- INR100 mil. Bank guarantee maintained in Non-Cooperating
Category with IND B (ISSUER NOT COOPERATING) rating.
Note: ISSUER NOT COOPERATING: The rating was last reviewed on
October 26, 2016. Ind-Ra is unable to provide an update, as the
agency does not have adequate information to review the rating.
COMPANY PROFILE
Amaltas Educational Welfare Society has been registered as a
society under the Society Registration Act, 1860. It was
established on 18 December 2013 and has a registered office in
Manoramaganj, Indore. It provides medical services through its
hospital and education via its medical school. Both facilities
are in the Bangar village, Madhya Pradesh.
ASTRA LIGHTING: CARE Migrates D Rating to Not Cooperating
---------------------------------------------------------
CARE Ratings has migrated the rating on bank facility of Astra
Lighting Limited (ALL) to Issuer Not Cooperating category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank 10.73 CARE D; Issuer not cooperating;
Facilities Based on best available
Information
Short term Bank 0.74 CARE D; Issuer not cooperating;
Facilities Based on best available
information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from ALL to monitor the
rating(s) vide e-mail communications/letters dated September 24,
2018 and numerous phone calls. However, despite CARE's repeated
requests, the company has not provided the requisite information
for monitoring the ratings. In line with the extant SEBI
guidelines, CARE has reviewed the rating on the basis of the best
available information which however, in CARE's opinion is not
sufficient to arrive at a fair rating. The rating on Astra
Lighting Limited's bank facilities will now be denoted as CARE D;
Stable ISSUER NOT COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating(s).
The rating takes into account ongoing delays in debt servicing
and company's presence in a fragmented and competitive nature of
industry.
Detailed description of the key rating drivers
At the time of last rating on July 5, 2017 the following were the
rating strengths and weaknesses (updated for information
available).
Key Rating Weaknesses
Ongoing delays in debt servicing: There are on-going delays in
servicing the debt obligations. The delays are on account
of weak liquidity as the company is unable to generate sufficient
funds on timely manner.
Highly competitive and fragmented industry: The electrical
industry is extremely fragmented and competitive in nature
and there is competition from unorganized sector, besides
presence of other large players.
Astra Lighting Limited (ALL) was incorporated in 1997 with
promoters and directors: Mr Paramjit Singh Chahal, Mr Parmeet
Singh Chahal and Mrs Gurbir Kaur. The company is engaged in the
manufacturing of High Intensity Discharge (HID) lamps used in
infrastructure projects, floodlighting of monuments, stadiums,
lighting of streets, highways and parking areas at its
manufacturing unit located at Solan, Himachal Pradesh with total
installed capacity of 15 lakh units per annum as on March 31,
2015. ALL procures raw material which mainly includes arc lights,
glass shells directly from manufacturers located in the near
vicinity. The company sells its products i.e. HID lamps directly
to various original equipment manufacturers (OEMs) such as Bajaj
Electricals Limited, OSRAM India Private Limited and Wipro
Enterprises Limited etc.
ELECTROMECH MARITECH: CARE Hikes Rating on INR18.23cr Loan to B
---------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Electromech Maritech Private Limited (EMPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank 18.23 CARE B; Stable Revised from
Facilities CARE D
(Term Loan-I)
Long term Bank 9.50 CARE B; Stable Revised from
Facilities CARE D
(Term Loan-II)
Detailed Rationale & Key Rating Drivers
The revision in the ratings of the bank facilities availed by
EMPL takes into account the delay free track record of more than
three months in servicing of debt obligations by the company. The
rating continues to derive strength from long-term off take
arrangement in the form of Power Purchase Agreement (PPA) with
NTPC Vidyut Vyapar Nigam Limited (NVVNL), track record of timely
payment and project's operational track record of more than six
years. However, the ratings are constrained by subdued
operational performance in the current year, weak financial risk
profile and exposure to climatic conditions and technological
risks.
Going forward, the ability of the company to improve its Capacity
Utilization Factor (CUF) and replenishment of DSRA with lenders
as a result of surplus cash generation shall remain the key
rating sensitivities.
Detailed description of the key rating drivers
Key Rating Strengths
Regularity in debt servicing: As confirmed by the lenders, the
company has been servicing its debt obligation on time since
March 2018. As per the management, the delays in debt servicing
prior to this was largely on account of delay in transfer of
payment from TRA account.
Long term power off take arrangement with low counterparty risk
EMPL has low sales risk by virtue of PPA of 25 years tenor (from
COD) with NVVNL for the entire 5MW installed groundmounted
solar PV capacity at INR11.60 per unit. Moreover, payment track
of the power off-taker has been timely in the past and EMPL has
also been allowing discount on billing to NVVNL on account of
payment within stipulated time.
Key Rating Weaknesses
Subdued operational performance: CUF of the plant had declined
from 19.46% in FY17 to 17.93% in FY18. Moreover, on account of
unfavourable weather conditions in Jaisalmer area coupled with
non-functioning of one of the inverters of 1 MW, gross generation
has been lower in the current year. CUF during YTD-Aug '18 stood
at 15.32% as against 18.15% during similar period previous year.
The stipulated debt obligation against lower revenue has also led
to cash deficit in the current year. As a result, a portion
of its DSRA (which was 3 quarters of principal and interest) has
been liquidated to meet the shortfall in repayment obligation for
FY19. The company expects to replenish its DSRA with improvement
in generation going forward, which shall be crucial from credit
perspective.
Weak financial risk profile
The company continues to have a below average financial risk
profile characterized by leveraged capital structure and low debt
coverage indicators. The leveraged capital structure is largely
due to high debt and low net worth which stood eroded largely due
to accumulated losses. The interest coverage ratio and TDGCA of
the company though improved from FY17 levels but remained
moderate at 1.89x and 9.89x during FY18 (PY: 1.84x and 10.22x
respectively).
Climatic & Technological Risks: The achievement of desired CUF is
subject to changes in climatic conditions, amount of degradation
of modules as well as other technological risks.
EMPL, a 51:49 joint venture between Golden Infraprojects Pvt Ltd
(GIPL) and Lanco Solar Energy Private Limited (LSEPL),
was incorporated on January 2, 2008. Both GIPL and LSEPL are
companies of Lanco group.
LSEPL was established in June 2009 and is engaged in providing
design & engineering, procurement of equipment and complete
construction of solar power projects. The company has executed
turnkey EPC contracts for ~250 MW solar power projects located
majorly in Rajasthan, Gujarat and Maharashtra.
EMPL is a 5 MW solar energy project located at Askandra Village,
Jaisalmer district, Rajasthan. The project was funded in debt
equity ratio of 63:37. The project achieved Commercial Operations
Date (COD) on January 10, 2012. The company has signed a long
term PPA with NVVNL for 25 years at a fixed tariff rate of
INR11.60/kwh in January 2011. Also, the project has operations
and maintenance in place with LSSPL for next five years i.e.
January 2022.
ESSAR STEEL: ArcelorMittal Picked as Preferred Bidder
-----------------------------------------------------
BloombergQuint reports that the committee of creditors tasked
with the resolution process of Essar Steel Ltd. has picked
ArcelorMittal as H1 Resolution Applicant, or preferred bidder,
for the insolvent asset. The final bid price will be negotiated
over the weeks to come, the Luxembourg-based company said in a
statement.
The company will now enter into further final negotiations with
the CoC, the report says.
BloombergQuint notes that this comes two weeks after the Supreme
Court directed both Numetal Mauritius and ArcelorMittal to pay up
past debts to be eligible to bid for insolvent Essar Steel Ltd.
Of the two, only one met the Supreme Court directive -
ArcelorMittal. Numetal failed to do so within the two-week
deadline laid down by the apex court, which expired Oct. 19.
According to BloombergQuint, ArcelorMittal said in an earlier
statement on Oct. 17 that it has approved a payment of Rs 7,469
crore (approx. $1 billion) to the financial creditors of Uttam
Galva Steels Ltd. and KSS Petron Pvt. Ltd. to clear overdue debts
so that the offer it submitted for Essar Steel India on April 2,
2018 is eligible. The Supreme Court had found ArcelorMittal to be
promoter of both these non-performing assets and hence eligible
to bid for Essar Steel only if their dues were paid.
BloombergQuint relates that Numetal, led by Russian financial
group VTB, was required to pay Rs 49,000 crore -- the amount owed
by Essar Steel to its debtors. This was because the apex court,
after examining the past and present ownership of Numetal, had
concluded that "the looming presence of Shri Rewant Ruia has been
found all along, from the date of incorporation of Numetal, till
the date of submission of the second resolution plan".
Rewant Ruia is the son of Ravi Ruia, one of the two brothers who
promoted the Essar Group.
A person aware of the matter at Numetal confirmed that no dues
had been repaid, BloombergQuint says. The company said it
wouldn't issue a formal statement.
Interestingly, earlier last week VTB Capital approached the
Supreme Court to seek permission to bid alone for the asset,
BloombergQuint adds citing a report in the Economic Times
newspaper. That matter has yet to be heard, BloombergQuint
states.
With Numetal out of the race the CoC had to pick between Lakshmi
Mittal's ArcelorMittal and Anil Agarwal's Vedanta Group.
As reported earlier by BloombergQuint, the global steel major had
bid Rs 42,000 crore, the most among the three players in the
second round of bidding. Numetal had bid Rs 37,000 crore and
Vedanta had offered Rs 35,000 crore, reported Bloomberg.
Two officials familiar with the process said, on condition of
anonymity, that price negotiations will continue with
ArcelorMittal before the resolution plan is put to vote by the
CoC. It needs 66 percent of votes in favour as per the recently
amended Insolvency and Bankruptcy Code, 2016.
According to the Supreme Court order, the Essar Steel CoC now has
eight weeks to accept the resolution plan, BloombergQuint notes.
About Essar Steel
Incorporated in 1976, Essar Steel India Ltd. is a part of the
Essar Group and is having 10 MTPA integrated steel manufacturing
facilities at Hazira, Gujarat and iron ore beneficiation and
pelletisation facilities in Paradeep, Odisha (12 mtpa) and Vizag,
Andhra Pradesh (8 mtpa). The company also owns and operates two
iron ore slurry pipelines -- one each in Odisha (Dabuna to
Paradip) and Andhra Pradesh (Kirandul-Vizag), which transport the
iron ore slurry from the beneficiation plant (located near the
iron ore mines in Dabuna and Kirandul) to the pellet plant
(located near the Paradip and Vizag ports). A large portion of
the iron ore pellets produced are intended for captive
consumption by ESIL's steel plant at Hazira for cost
optimization.
Essar Steel is among the first 12 non-performing assets that RBI
had directed banks to take to insolvency resolution in June 2017.
The company's lenders, led by State Bank of India, filed an
insolvency petition in July 2017. The National Company Law
Tribunal (NCLT) - Ahmedabad Bench admitted Essar Steel's
insolvency case on Aug. 2, 2017.
Satish Kumar Gupta of Alvarez and Marsal India has been appointed
as interim resolution professional upon the suggestion of State
Bank of India (SBI).
Essar Steel owes more than INR45,000 crore to lenders, of which
INR31,671 crore had already been declared as non-performing as of
March 31, 2016, The Economic Times disclosed. The SBI-led
consortium of 22 creditors accounts for 93% of this amount. Essar
Steel owes $450.67 million to Standard Chartered Bank (SCB) in
debt.
MEHADIA AND SONS: CARE Lowers Rating on INR7.8cr Loan to C
----------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Mehadia and Sons C and F Divission (MCF), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank 7.80 CARE C; Stable, Issuer not
Facilities cooperating; Revised from
CARE B+; Stable on the basis
of best available information
Short term Bank 0.20 CARE A4; Issuer not
Facilities cooperating; Revised from
CARE A4 on the basis of best
available information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from MCF to monitor the
rating(s) vide e-mail communications/letters dated August 16,
2018, August 8, 2018, July 23, 2018 and numerous phone calls.
However, despite CARE's repeated requests, the MCF has not
provided the requisite information for monitoring the ratings. In
line with the extant SEBI guidelines, CARE has reviewed the
rating on the basis of the best available information which
however, in CARE's opinion is not sufficient to arrive at a fair
rating. The rating on MCF's bank facilities will now be denoted
as CARE C; Stable; ISSUER NOT COOPERATING/CARE A4; ISSUER NOT
COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above ratings.
The ratings have been revised on account of delays in servicing
of interest resulting in overdrawals in cash credit facility.
Further, the ratings takes in to account the small scale of
operations with thin profit margins due to trading nature of
business, leveraged capital structure, weak debt coverage
indicators and working capital intensive nature of operations,
its presence in highly fragmented and competitive industry and
constitution of entity as a partnership firm limiting financial
flexibility in times of stress. The above constraints outweigh
the comfort derived from the experience of the promoters, long
track record of operations of entity, diversified revenue stream,
synergistic association from group entities and association with
established brand name.
Detailed description of the key rating drivers
At the time of last rating on September 20, 2017 the following
were the rating strengths and weaknesses.
Key Rating Weaknesses
Relatively small scale of operations with thin profitability
margins: The operations of the entity remained small with total
operating income of INR24.59 crore in FY16 (Audited) and low net
worth base of INR1.73 crore as on March 31, 2016 thus limiting
financial flexibility of the entity in times of stress. Since the
entity is into trading business which is inherently a low value
additive and volume driven nature of business its operating
profit margins remained low.
Leveraged capital structure with weak debt service coverage
indicators: The relatively low net worth base of the entity led
to increased reliance on working capital borrowings to support
its business operations, resulting in leveraged capital
structure. Moreover, with low profitability and high debt
profile, the debt coverage indicators of the company remained
weak.
Working capital intensive nature of operations: Operations of the
entity remained working capital intensive with high inventory
holding period and low credit period received from suppliers. The
working capital requirements are met by the cash credit facility
utilization of which stood high.
Presence in highly fragmented and competitive industry: The
Indian trading industry is highly unorganized & fragmented in
nature. Due to low entry barriers, the trading Industry in the
country is flooded with many unorganized players. This has led to
high level of competition in the industry and players work on
wafer-thin margins. The cost of goods purchased is the major cost
component for the trading industry, accounting for about 93-94%
of the sales. Availability of goods is not an issue for the
industry but procuring these goods at competitive prices poses a
challenge to maintain margins. Demand prospects of the trading
industry continue to be further constrained to a large extent by
the influence of the economic cycle.
Partnership nature of constitution: Being a partnership firm, MCF
is exposed to the risk of withdrawal of capital by partners due
to personal exigencies, dissolution of firm due to retirement or
death of any partner and restricted financial flexibility due to
inability to explore cheaper sources of finance leading to
limited growth potential. This also limits the firm's ability to
meet any financial exigencies.
Key Rating Strengths
Long and established track record of the entity with experienced
partners: MCF has an established track record of around two and
half decades in the trading of pharmaceutical products. The
promoters have an average industrial experience of two and half
decades, through associate concerns (MS and RJT) engaged in
similar line of business. The entity is likely to be benefited
due to wide experience of the promoters in the same field.
Diversified revenue stream along with association with
established brand name: MCF is engaged in trading of
pharmaceutical products and fabrics and act as clearing and
forwarding agents for "Peter England". The diversified revenue
stream and association with established brand helps entity in
times of stress and fortifies its business profile.
Synergistic association from group entities: MCF derives
synergistic advantage from its association with group concern,
RJT and MS, having common suppliers and customers, which aids in
easy procurement of traded goods and further disbursement of same
through established network.
Established in the year 1981, MCF, is a partnership firm promoted
by Mrs. Sharda Ramshankar Mehadia, Mrs. Nisha Pradeep Mehadia,
Mrs. Sunita Kamal Agarwal and Mrs. Sarita Vimal Agarwal. The firm
is engaged in diverse trading business namely trading of
pharmaceuticals medicines and fabrics. The firm also acts as
clearing and forwarding agent for 'Peter England'. The entity
procures fabric (cotton and polyester) and pharmaceutical product
(medicines) from wholesalers based in Maharashtra. The firm
belongs to the Mehadia group which has three entities including
MCF namely Mehadia and Sons, MS (established in 1997) and R.J
Tradelinks, RJT (established in 1999), which are engaged in
trading of Pharmaceuticals medicines, fabrics and are
distributors for Madura Garments.
MERCATOR LTD: CARE Lowers Rating on INR653.97cr Loan to D
---------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Mercator Ltd. (ML), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
(i) Long term 653.97 CARE D Revised from CARE BBB;
Bank Facilities- Negative
Term Loan
(ii) Long term 50.00 CARE D Revised from CARE BBB;
Bank Facilities- Negative
Cash Credit
(iii) Long term 255.56 CARE D Revised from CARE BBB;
Bank Facilities- Negative
Letter of Credit
(iv) Short term 150.00 CARE A4 Revised from CARE A3
Bank Facilities
Detailed Rationale & Key Rating Drivers
The revision in the rating assigned to the bank facilities
[serial no. (i) above] of ML is on account of ongoing
delays/defaults in debt servicing on the terms loans rated by
CARE, due to cash flow mismatch. Consequently ratings of other
bank facilities were also revised. The ability of the company to
ramp up production in oil segment and raise funds as envisaged on
the oil asset to meet the cash flow mismatch, and continue
deploying its shipping assets at remunerative rates so that there
is an improvement in its profitability are the key rating
sensitivities. Sustaining the operations in the coal segment as
well as improvement in order book of dredging segment will also
be critical to improve the profitability. In addition to these,
improvement in the repayment profile and liquidity are the other
key monitorables.
Detailed description of the key rating drivers
Key Rating Weakness
Ongoing delays/default in debt servicing: As a part of CARE's due
diligence process, CARE had obtained 'Default if any' statement
from the company which indicated delays/default in debt servicing
(both principal and interest) on the terms loans rated by CARE.
The delays/default is ongoing since September 2018. As per the
management, the delays/default on the term loans is on account of
temporary cash flow mismatch arising primarily due to non-
disbursal of sanctioned limits pending fulfilment of conditions
precedent to the disbursal.
Update on oil business: The company has commenced production in
its oil blocks (Jyoti-1) from September 19, 2018 (as against the
earlier envisaged date of August 2018). The current drawing from
Jyoti-1 is around 200 barrels per day. The company is targeting
to commence production from Jyoti-2 discovered well in Q3FY19
which is expected to scale up total production to around 1000-
1100 barrels per day in Q3FY19. The company expects to increase
its production to around 5,500 barrels per day by Q4FY19. Oil
business is expected to generate average free cash flows of about
INR200 crore annually from the current discovery alone starting
FY20. The oil asset has a debt of INR160 crore. The company has
initiated discussions to raise additional funding against the oil
asset to fund residual capex requirements and cure the short term
liquidity mismatch in the group and expects the same to get
completed within 2-3 months.
Analytical approach: Consolidated
CARE has analysed ML's credit profile taking into account the
consolidated business profile and financial statements of
the company owing to the strong operating and financial linkages
between the parent (India operations) and subsidiaries
(global operations).
ML along with its subsidiaries is a diversified group engaged in
shipping (dry bulk, wet bulk and dredging), gas, coal mining
and E&P activities. ML commenced business as a shipping company
in 1984 (taken over by present promoters in FY89) and has over
the years, through its subsidiaries, diversified into various
other sectors like coal mining, trading and logistics, E&P and
dredging.
During February 2018, the company has announced de-merger of the
dredging segment of the company into another listed entity. The
merger is subject to shareholders' and various other regulatory
approvals and is expected to be completed in FY19.
NEELKANTH SWEETS: CARE Assigns B+ Rating to INR10cr LT Loan
-----------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of
Neelkanth Sweets Private Limited (NSPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank
Facilities 10.00 CARE B+; Stable Assigned
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of NSPL is primarily
constrained by small scale of operations with low net worth base,
highly leveraged capital structure and NSPL's presence in highly
competitive nature of industry. The rating, however, draws
comfort from experienced directors, moderate profitability
margins and
moderate operating cycle.
Going forward; ability of the company to profitably increase its
scale of operations while improving its capital structure
shall be the key rating sensitivity.
Detailed description of the key rating drivers
Key rating weaknesses
Small though growing scale of operations: The scale of operations
as marked by total operating income and gross cash accrual stood
small at INR22.70 crore and INR1.08 crore for FY18 (FY refers to
period April 1 to March 31; based on provisional results).
Further, the net worth base of the company stood low at INR1.18
crore as on March 31, 2018. The small scale of operations limits
the company's financial flexibility in times of stress and
deprives it of scale benefits., Though, the risk is partially
mitigated by the fact that the scale of operation is growing
continuously. For the period FY16- FY18, NSPL's total operating
income grew from INR10.51 crore to INR22.70 crore reflecting a
compounded annual growth rate (CAGR) of 29.26% owing to on
account of higher quantity sold. Further, the company has
achieved total operating income of ~INR6.5 crore for 5MFY19
(refers to period April 1 to August 31; based on provisional
results).
Highly leveraged capital structure: The capital structure of the
company marked by overall gearing stood highly leveraged at above
6x as on past three balance sheet dates ending March 31, '16-'18
owing to debt funded capex incurred in past along with low net
worth base.
Presence in highly competitive nature of industry: The Indian
snacks market industry is driven by strong regional tastes and
preferences. Major growth drivers for the segment are attributed
to changing lifestyle, growing urbanization, increase in the
nuclear families and rise in disposable income. The industry is
also prone to the vagaries of price fluctuations in the commodity
that they utilize and is highly fragmented with presence of
several regional players apart from few national level players.
With presence of various players, the same limits bargaining
power which exerts pressure on its margins.
Key rating strengths
Experienced directors: The overall operations of the company are
managed by Mr Virendra Kumar Gupta. He has an experience of more
than three decades in hospitality and food & food products
industry through his association with NSPL. Further, he is
supported by other directors namely Mr Mayank Gupta, Mr Vishnu
Gupta, Mr Vivek Gupta and Mr Vinay Gupta, in managing in the day
to day operation of the company. They have experience varied up
to a decade in the industry through their association with NSPL.
Moderate profitability margins: The company has moderate
profitability margins for the company stood moderate for
the past three financial years, i.e. FY16-FY18. PBILDT margin
stood above 10% for the past three financial years. Further,
PAT margin improved from 0.16% in FY16 to 1.90% for FY18 owing to
lower interest and depreciation expense.
Moderate operating cycle: The operating cycle of the company
stood moderate at 17 days in FY18. The company maintains
inventory of around 20-30 days in form of raw material i.e. dry
fruits, packed foods, packing products etc. The company mainly
sells the goods on cash and advance basis and credit period of
10-15 days is allowed to the corporate customers. Further, the
company receives a credit period of ~15-30 days from its
suppliers owing to long standing relationship.
Lucknow, Uttar Pradesh based Neelkanth Sweets Private Limited
(NSPL) was incorporated in 2011. It has succeeded an erstwhile
proprietorship firm established in year 1992. The company is
managed by Mr Virendra Kumar Gupta, Mr Mayank Gupta, Mr Vishnu
Gupta, Mr Vivek Gupta and Mr Vinay Gupta. NSPL is engaged in
manufacturing of sweets, snacks and namkeens under the brand name
'Neelkanth Sweets'. Further, the company operates a multi cuisine
restaurant and a banquet hall under the name of 'Green Restras'
and 'Green Banquet' respectively.
PLASTOMATIC INDUSTRIES: CARE Cuts Rating on INR7.80cr Loan to B+
----------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Plastomatic Industries (PI), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 7.80 CARE B+; Stable Revised from
Facilities CARE BB-;Stable
Detailed Rationale & Key Rating Drivers
The revision in the rating assigned to the long term bank
facilities of PI factors in the deterioration in the solvency
position and stretched collection period resulting in a starched
liquidity indicators as at the end of FY18 (Provisional; refers
to the period from April 1 to March 31). The rating further
continues to be constrained on account of the small scale of
operations with low capitalization, low profitability which is
susceptibility to changes in material prices, working capital
intensive nature of operations, presence in highly competitive &
fragmented industry and the partnership nature of constitution.
The ratings, however, draw support from the experience of the
partners and moderately diversified and reputed customer base.
The ability of the firm to increase its scale of operations and
improve profitability and capital structure with efficient
management of working capital requirements remain the key rating
sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Small scale of operation with low profitability: The scale of
operations of the firm though improved remained small with total
operating income of INR13.41crore in FY18 (Provisional) and total
capital employed of INR13.41 crore as on March 31, 2018
(Provisional), thus limiting financial flexibility of the firm in
times of stress. The TOI improved at a y-o-y growth rate of
20.27% in FY18 (Provisional) owing to higher execution of orders
during the year. Further, the profitability margins of the firm
remained low with operating margin in the range of 9.52%-12.93%
and PAT margin in the range of 0.25%- 0.40% during the past three
financial years ending FY18 (provisional).
Weak solvency position: The capital structure of the entity
further deteriorated and remained leveraged with debt to equity
and overall gearing ratio of 1.93x and 4.07x respectively as on
March 31, 2018 (Provisional) owing to high dependence on external
borrowings. Moreover, with low accruals and leveraged gearing
levels, the debt coverage indicators of the firm stood weak.
Working capital intensive nature of operations: The operations of
the entity remained working capital intensive with gross current
asset of 223 days during FY18 with funds mainly blocked in
receivables. The working capital requirements of the entity are
met by the cash credit facility and the average utilization of
the CC limit remains on the higher side.
Susceptibility to profit margins due to changes in material
prices: The major raw materials required for manufacturing of
plastic viz Low-density polypropylene (LDP), High-density
polypropylene (HDP) etc. prices of which are fluctuating in
nature and move in tandem with global demand-supply factors.
Furthermore, the firm does not have any long-term contracts for
purchase of material thus it exposes to any adverse fluctuation
in raw material price.
Presence in highly competitive & fragmented industry: PI operates
in a highly competitive & fragmented industry with a large number
of players in the unorganized sector, which accounts for high
share of the total domestic turnover. Due to low technological
inputs and easy availability of standardized machinery for the
production, plastic manufacturing industry in India is remained
highly competitive.
Partnership nature of constitution: Being partnership nature of
constitution, the firm is exposed to the risk of withdrawal
of capital by partners due to personal exigencies, dissolution of
firm due to retirement or death of any partner and restricted
financial flexibility due to inability to explore cheaper sources
of finance leading to limited growth potential.
Key Rating Strengths
Long track record of operations with experienced promoters: PI
has an established operational track record of more than two
decades in manufacturing of various plastic products and is
currently managed by Mr. Nand Kumar Kothari and Mr. Shailbala
Kothari who have an average experience of 30 years in the
relevant line of business through their association with the
firm. The extensive experience of the promoters in the industry
has enabled the firm to establish long standing relationships
with its customers and suppliers.
Moderately diversified customer base: The firm is dealing with
various industries like textile, packaging, furniture, food
and beverage industries with which it has established long
standing relationships. Further, the firm receives regular
orders from the customers over the years.
PI was established in the year 1989 as partnership firm. However,
the firm commenced its operations from 1990. The firm
is engaged in manufacturing of strapping rolls, plastic bags,
lamination films, stretch films and water & milk pouches. The
firm has its manufacturing unit located at Nagpur, Maharashtra
with an installed capacity of 1400 metric tones per
annum.
PONDICHERRY TINDIVANAM: CARE Reaffirms B INR210.94cr Loan Rating
----------------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Pondicherry Tindivanam Tollway Limited (PTTL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 210.94 CARE B; Stable Re-affirmed
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of PTTL is constrained
by the weak financial risk profile with continued erosion of
networth and stretched liquidity position of the company at the
back of continuous losses, traffic risk associated with a toll-
based project owing to the uncertainty in traffic and in turn
revenue and Operations and Maintenance (O&M) risk with absence of
fixed-price major maintenance contract. The rating is, however,
underpinned by the experienced promoters, various forms of
supports committed by the sponsors, increased toll revenue and
commercial importance of the stretch albeit presence of alternate
routes. The rating also factors in sufficient cash balance as on
account closing date to meet the operational expenses and service
debt obligation. The ability of the company to achieve the
envisaged toll revenue, overall effective cash flow management
and /or occurrence of force majeure events are viewed as the key
rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Presence of alternate route on the stretch: The project road
forms part of a route connecting Pondicherry to Chennai
(combination of NH-45 and project road). A major portion of the
traffic plying on the project road is originating from
Pondicherry or Chennai. However, there is a two lane road, ECR
connecting Pondicherry and Chennai which traverses along with the
coast of Tamil Nadu and has many tourist spots; hence some
portion of tourist traffic is passing through ECR currently.
Operations & Maintenance (O&M) Risk: As per the concession
agreement, PTTL is responsible for operating and maintaining the
project stretch. The company undertakes regular O&M works on its
own and is therefore exposed to risk of increasing prices. PTTL
has not entered into fixed priced contract for Major Maintenance
(MM) and is therefore, exposed to the risk of increasing material
prices during its major maintenance. Besides, the company has not
undertaken MM work since completion of project stretch.
Weak financial risk profile: The toll traffic has been on the
lower side which has resulted in lower profitability & cash
accruals vis-a-vis debt servicing obligation. The company
continued to report net loss of INR27.9 crore during FY18 thus
eroding the net worth.
PTTL entered into Bilateral Restructuring with lenders as per
which 89% of the interest obligation is being converted into
FITL till FY19. With the FITL creating ending in FY19, PTTL would
require sponsor support for meeting the debt servicing
liability going forward.
Key Rating Strengths
Experienced promoters: PTTL was originally promoted by Maytas
Infra Limited (MIL) and NCC Limited (NCC). Later in 2009, Terra
Projects Private Ltd (TPPL), one of the sub-contractors and a
group company of Nagpur-based Jayaswal Neco Industries Ltd.
acquired 26.10% stake in PTTL. Currently, Infrastructure Leasing
& Financial Services, NCC, TPPL and NCC Infrastructure Holdings
limited (NIHL) are the shareholders of PTTL.
Commercial importance of the stretch: The project stretch on NH-
66 starts at Indira Gandhi Square in the Union Territory of
Pondicherry and extends upto Krishnagiri in Tamil Nadu. Around
3.60 km of the project road lies in the Union Territory of
Pondicherry and the remaining 35.00 km length of the project road
lies in Villupuram district of Tamil Nadu State. The project road
passes through the busiest and congested localities of
Pondicherry.
Sponsor support Agreement: In October 2014, Axis Bank as the
facility agent and security trustee has entered in to sponsor
support agreement with NIHL and IL&FS. Accordingly, sponsors have
given undertaking for Debt Service Coverage Ratio (DSCR) support,
repayment support, termination payment support and Major
Maintenance support in the event of any shortfall. Furthermore,
in addition to the above mentioned supports, sponsors have also
agreed to bring in INR33.95 crore during FY20-FY22, INR86.16
crore on or before March 31, 2023, and INR62.50 crore from FY24-
FY28.
Increase in toll revenue during FY18: During FY18, the total
revenue increased by 7.63% in FY18 y-o-y FY17 due to revised toll
rates from September 1, 2017. During Q1FY19, the toll revenue was
INR3.91 crore (as against INR3.78crore during Q1FY18).
Pondicherry Tindivanam Tollway limited (PTTL) is a Special
Purpose Vehicle (SPV) incorporated on March 27, 2007 to undertake
the construction, operation, maintenance of National Highways in
Tamil Nadu. It is promoted by the consortium of Nagarjuna
Construction Company Limited (NCC) along with its fully owned
subsidiary NCC Infrastructure Holdings Ltd, Infrastructure
Leasing & Financial Services Engineering constructions Ltd (ILFS)
and Terra-Projects Limited. The SPV is involved in strengthening
of four-lane road of 37.92 kms stretch on the Pondicherry-
Tindivanam section of NH-66, in the state of Tamil Nadu.
The Concession Agreement (CA) was executed between PTTL and
National Highways Authority of India (NHAI) on July 19, 2007 for
a concession period of 30 years from the date of financial
closure, including the construction period of 30 months. The
Commercial Operation Date (COD) or Scheduled Project Completion
Date (SPCD) of the project was July 14, 2010. However, on account
of delay by NHAI in handing over the land, the construction could
not be completed within the scheduled time. The company had
managed to receive an extension of Time (EOT) for COD till April
27, 2011, from NHAI. The project received Provisional COD and has
commenced tolling on December 12, 2011. The actual cost incurred
in the project was INR361.96 crore as against estimated cost of
INR314.62 crore.
R J TRADELINKS: CARE Lowers Rating on INR8.40cr Loan to C
---------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
R J Tradelinks (RJT), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank 8.40 CARE C; Stable, Issuer not
Facilities cooperating; Revised from
CARE B+; Stable on the
basis of best available
information
Short term Bank 0.10 CARE A4; Issuer not
Facilities cooperating; Revised from
CARE A4 on the basis of best
available information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from RJT to monitor the ratings
vide e-mail communications/letters dated August 16, 2018,
August 8, 2018, July 23, 2018 and numerous phone calls. However,
despite CARE's repeated requests, the RJT has not provided the
requisite information for monitoring the ratings. In line with
the extant SEBI guidelines, CARE has reviewed the rating on the
basis of the best available information which however, in CARE's
opinion is not sufficient to arrive at a fair rating. The rating
on RJT's bank facilities will now be denoted as CARE C; Stable;
ISSUER NOT COOPERATING/CARE A4; ISSUER NOT COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above ratings.
The ratings have been revised on account of delays in servicing
of interest resulting in overdrawals in cash credit facility.
Further, the ratings take into account its relatively small scale
of operations with thin profit margins due to trading nature of
business, leveraged capital structure and weak debt coverage
indicators. The ratings also continue to be undermined by its
presence in highly fragmented and competitive industry and
constitution of entity as a partnership firm limiting financial
flexibility in times of stress. The above constraints outweigh
the comfort derived from the experience of the promoters, long
track record of operations of entity, diversified revenue stream,
synergistic association from group entities and association with
established brand name.
Detailed description of the key rating drivers
At the time of last rating on September 20, 2017 the following
were the rating strengths and weaknesses.
Key Rating Weaknesses
Relatively modest scale of operations with thin profitability
margins: The operations of the entity remained small with total
operating income of INR28.96 crore in FY16 (Audited) and low net
worth base of INR1.48 crore as on March 31, 2016 thus limiting
financial flexibility of the entity in times of stress. Since the
entity is into trading business which is inherently a low value
additive and volume driven nature of business its operating
profit margins remained low.
Leveraged capital structure with weak debt service coverage
indicators: The relatively low net worth base of the entity
led to increased reliance on working capital borrowings to
support its business operations, hence resulting in leveraged
capital structure. Moreover, with low profitability and high debt
profile, the debt coverage indicators of the entity remained
weak.
Working capital intensive nature of operations: Operations of the
entity remained working capital intensive with high inventory
holding period and low credit period received from suppliers. The
working capital requirements are met by the cash credit facility
availed by the entity utilization of which remained high.
Presence in highly fragmented and competitive industry: The
Indian trading industry is highly unorganized & fragmented in
nature. Due to low entry barriers, the trading Industry in the
country is flooded with many unorganized players. This has led to
high level of competition in the industry and players work on
wafer-thin margins. The cost of goods purchased is the major cost
component for the trading industry, accounting for about 93-94%
of the sales. Availability of goods is not an issue for the
industry but procuring these goods at competitive prices poses a
challenge to maintain margins. Demand prospects of the trading
industry continue to be further constrained to a large extent by
the influence of the economic cycle.
Partnership nature of constitution: Being a partnership firm, RJT
is exposed to the risk of withdrawal of capital by partners due
to personal exigencies, dissolution of firm due to retirement or
death of any partner and restricted financial flexibility due to
inability to explore cheaper sources of finance leading to
limited growth potential. This also limits the firm's ability to
meet any financial exigencies.
Key Rating Strengths
Long and established track record of the entity with experienced
partners: RJT has an established track record of around two
decades in the trading of garments, pharmaceutical products and
fabric. The promoters have an average industrial experience of
two and half decades, through associate concerns (MS and MCF)
engaged in similar line of business. The entity is likely to be
benefited due to wide experience of the promoters in the same
field.
Diversified revenue stream along with association with
established brand name: RJT is engaged in trading of
pharmaceutical products and fabrics and act as clearing and
forwarding agents for "Peter England". The diversified revenue
stream and association with established brand helps entity in
times of stress and fortifies its business profile.
Synergistic association from group entities: RJT derives
synergistic advantage from its association with group concern,
RJT and MS, having common suppliers and customers, which aids in
easy procurement of traded goods and further disbursement of same
through established network.
Established in the year 1999, RJT is a partnership firm promoted
by Mr. Ramshankar Mehadia, Mr. Pradeep Mehadia, Mr. Kamal Motilal
Agrawal, Mr. Vimal Motilal Agrawal and Mrs Kalawati Motilal
Agrawal. RJT belongs to Mehadia Group, which has three entities
including R.J Tradelinks, Mehadia and Sons (MS, established in
1997) and Mehadia and Sons C and F Division (MCF, established in
1981). The entity is engaged in diverse trading business
(distributor for Madura garments and traders for pharmaceutical
medicines and fabrics) whereby it serves wholesalers and dealers
based in Maharashtra. RJT is distributor for Madura Garments, and
trades the garments of brand name "Peter England" from Aditya
Birla Nuvo Limited and supplies it to various retailers in and
around Nagpur.
SCHOLARS INT'L: Ind-Ra Maintains 'D' LT Rating in Non-Cooperating
-----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has maintained Scholars
International Educational Foundation's bank loans' ratings in the
non-cooperating category. The issuer did not participate in the
rating exercise despite continuous requests and follow-ups by the
agency. Therefore, investors and other users are advised to take
appropriate caution while using the ratings. The ratings will
continue to appear as 'IND D (ISSUER NOT COOPERATING)' on the
agency's website.
The instrument-wise rating actions are:
-- INR97.61 mil. Term loan (long-term) maintained in Non-
Cooperating Category with IND D (ISSUER NOT COOPERATING)
rating; and
-- INR12.5 mil. Working capital facility (long-term) maintained
in Non-Cooperating Category with IND D (ISSUER NOT
COOPERATING) rating.
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
October 24, 2016. Ind-Ra is unable to provide an update, as the
agency does not have adequate information to review the ratings.
COMPANY PROFILE
Scholars International Educational Foundation is regulated under
the Societies Registration Act, 1861. It offers undergraduate and
postgraduate courses in engineering, management, teaching and
polytechnic.
SRI RAGHURAMACHANDRA: CARE Reaffirms B+ Rating on INR6.78cr Loan
----------------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Sri Raghuramachandra Rice Industries (SRRI), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 6.78 CARE B+ Reaffirmed
Detailed Rationale& Key Rating Drivers
The ratings assigned to the bank facilities of SRRI are tempered
by small scale of operations along with low net worth base and
thin profitability, leveraged capital structure and weak coverage
indicators, seasonal availability of paddy resulting in working
capital intensive nature of operations and constitution of entity
as a proprietorship firm with inherent risk of withdrawal of
capital. The ratings are, however, underpinned by moderate track
record and experience of proprietor in the rice milling industry,
stable growth in total operating income and fluctuating PBILDT
margin albeit remained comfortable during the review period and
healthy demand outlook of rice. The ratings also take into
account the increase in total operating income during FY18
(Prov.), improvement in operating margins and capital structure
and elongation in operating cycle during FY18 (Prov.).
Going forward, ability of the firm to increase its scale of
operations and improve its profitability margins in competitive
environment, ability of the firm to improve its capital structure
and manage the working capital requirements effectively would be
key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Small scale of operations along with low net worth base and thin
profitability: SRRI has a track record of around seven years in
the milling and rice processing industry. The total operating
income of the firm stood at INR24.67 crore in FY18 with low net
worth of around INR2.07 crore as on March 31, 2018 as compared to
other peers in the industry. However the entity has shown an
improvement and TOI has increased by 13.06% and net worth has
improved by 12.5% in FY18.
The PAT margins of the entity has decreased during the review
period from 1.79% in FY17 to 1.62% in FY18 on account of increase
in depreciation, interest and finance charges, however still
remained thin.
Leveraged capital structure and weak coverage indicators: The
capital structure of the firm remained leveraged as on March 31,
2018 marked by overall gearing ratio of 4.05x on account of high
amount of total debt which combine secure loan, working capital
borrowing and unsecured loans. However the debt equity and
overall gearing has improved from 1.39X and 4.86x respectively as
on March 31, 2017 to 0.81x and 4.05x respectively as on March 31,
2018 due to repayment of term loan and accretion of profits to
business. The debt coverage indicators of the firm remained
moderate in FY18 marked by total debt/GCA and interest coverage
at
10.61x and 1.92x respectively as on March 31, 2018 due to high
total debt levels, low PBILDT margins and low cash profits.
However total debt/ GCA has improved from 14.47x in FY17 to
10.61x in FY18 due to increase in scale of operations and
subsequent increase in profits and cash accruals.
Seasonal availability of paddy resulting in working capital
intensive nature of operations: The paddy is procured from the
farmers generally against cash payments or with a minimal credit
period of one week while the millers have to extend credit to the
wholesalers and distributors around 20-30 days. Furthermore the
entity need to stock its raw material (paddy) in a bulk quantity
because of the seasonal availability resulting in high inventory
holding days of 99 days, which leads to high working capital
utilization reflecting working capital intensity of business. The
average utilization of fund based working capital limits of the
firm was utilized 70%-80% during the last 12 months period ended
August 31, 2018.
Constitution of entity as a proprietorship firm with inherent
risk of withdrawal of capital: With the entity being partnership
firm, there is an inherent risk of instances of capital
withdrawals by partners resulting in lesser of entity's net
worth. Further, the partnership firms are attributed to limited
access to funding.
Key Rating Strengths
Moderate track record and experience of proprietor in the rice
milling industry: SRRI was established in 2011 by Mr. Raghuram
Ambati. He is a qualified MBA and has around six years of
experience in the rice milling and processing industry.
Stable growth in total operating income and fluctuating PBILDT
margin albeit remained comfortable during the review period: The
total operating income of the firm increased from INR20.36 crore
in FY15 to INR24.67 crore in FY18 with an CAGR of 5% on account
of continuous demand from existing customers along with addition
of new customers. The firm has moderately comfortable PBILDT
margins during review period. The PBILDT margin of the firm has
increased from 5.73% in FY17 to 6.67% in FY18 due to decrease in
other manufacturing expenses such as power & fuel cost.
Healthy demand outlook of rice: Rice is consumed in large
quantity in India which provides favorable opportunity for the
rice millers and thus the demand is expected to remain healthy
over medium to long term. India is the second largest producer of
rice in the world after China and the largest producer and
exporter of basmati rice in the world. The rice industry in India
is broadly divided into two segments - basmati (drier and long
grained) and non-basmati (sticky and short grained). Demand of
Indian basmati rice has traditionally been export oriented where
the South India caters about one-fourth share of India's exports.
However, with a growing consumer class and increasing disposable
incomes, demand for premium rice products is on the rise in the
domestic market. Demand for non-basmati segment is primarily
domestic market driven in India. Initiatives taken by government
to increase paddy acreage and better monsoon conditions will be
the key factors which will boost the supply of rice to the rice
processing units. Rice being the staple food for almost 65% of
the population in India has a stable domestic demand outlook. On
the export front, global demand and supply of rice, government
regulations on export and buffer stock to be maintained by
government will determine the outlook for rice exports.
Karnataka based, Sri Raghuramachandra Rice Industries (SRRI) was
established in 2011 as proprietorship firm by Mr. Raghuram
Ambati. SRRI is engaged in milling and processing of rice. The
rice milling unit of the firm is located at Raichur, Karnataka.
Apart from rice processing, the firm is also engaged in selling
off its by-products such as broken rice, bran and husk. The main
raw material paddy is directly procured from local farmers
located in and around Raichur, Karnataka and sells its finished
products of rice and other by-products in the open market
Karnataka, Tamil Nadu and Andhra Pradesh. Currently the firm is
processing around 3 tons of rice in an hour.
VASAVI SOLAR: CARE Hikes Rating on INR20.31cr Loan to B
-------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Vasavi Solar Power Private Limited (VSPPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank 20.31 CARE B; Stable Revised from
Facilities CARE D
(Term Loan-I)
Long term Bank 11.88 CARE B; Stable Revised from
Facilities CARE D
(Term Loan-II)
Detailed Rationale & Key Rating Drivers
The revision in the ratings of the bank facilities availed by
VSPPL takes into account the delay free track record of more than
three months in servicing of debt obligations by the company.
The rating continues to derive strength from long-term off take
arrangement in the form of Power Purchase Agreement (PPA) with
NTPC Vidyut Vyapar Nigam Limited (NVVNL), track record of timely
payment and project's operational track record of more than six
years. However, the ratings are constrained by subdued
operational performance in the current year, weak financial risk
profile and exposure to climatic conditions and technological
risks.
Going forward, the ability of the company to improve its Capacity
Utilization Factor (CUF) and replenishment of DSRA with lenders
as a result of surplus cash generation shall remain the key
rating sensitivities.
Detailed description of the key rating drivers
Key Rating Strengths
Regularity in debt servicing: As confirmed by the lenders, the
company has been servicing its debt obligation on time since
March 2018. As per the management, the delays in debt servicing
prior to this was largely on account of delay in transfer of
payment from TRA account.
Long term power off take arrangement with low counterparty risk:
VSPPL has low sales risk by virtue of PPA of 25 years tenor (from
COD) with NVVNL for the entire 5MW installed groundmounted solar
PV capacity at INR11.65 per unit. Moreover, payment track of the
power off-taker has been timely in the past and VSPPL has also
been allowing discount on billing to NVVNL on account of payment
within stipulated time.
Key Rating Weaknesses
Subdued operational performance: CUF of the plant had declined
from 21.53% in FY17 to 18.33% in FY18. Moreover, on account of
unfavorable weather conditions in Jaisalmer area coupled with
non-functioning of one of the inverters of 1 MW, gross generation
has been lower in the current year. CUF during YTD-Aug '18 stood
at 14.83% as against 20.84% during similar period previous year.
The stipulated debt obligation against lower revenue has also led
to cash deficit in the current year. As a result, a portion
of its DSRA (which was 3 quarters of principal and interest) has
been liquidated to meet the shortfall in repayment obligation for
FY19. The company expects to replenish its DSRA with improvement
in generation going forward, which shall be crucial from credit
perspective.
Weak financial risk profile
The company continues to have a below average financial risk
profile characterized by leveraged capital structure and low debt
coverage indicators. The leveraged capital structure is largely
due to high debt and low net worth which stood eroded largely
due to accumulated losses. The interest coverage ratio and TDGCA
of remained moderate at 1.56x and 14.84x during FY18 (PY: 1.69x
and 11.89x respectively).
Climatic & Technological Risks: The achievement of desired CUF is
subject to changes in climatic conditions, amount of degradation
of modules as well as other technological risks.
VSPPL, a 51:49 joint venture between Vasavi Power Services
Private Limited (VPSPL) and Lanco Solar Energy Private Limited
(LSEPL), was incorporated on June, 29, 2010. LSEPL, a Lanco group
company, was established in June 2009 and is engaged in providing
design & engineering, procurement of equipment and complete
construction of solar power projects. The company has executed
turnkey EPC contracts for ~250 MW solar power projects located
majorly in Rajasthan, Gujarat and Maharashtra. VSPPL is a 5 MW
solar energy project located at Askandra Village, Jaisalmer
district, Rajasthan. The project was funded in debt equity ratio
of 67:33. The project achieved Commercial Operations Date (COD)
on January 9, 2012. The company has signed a long term PPA with
NVVNL for 25 years at a fixed tariff rate of INR11.65/kwh in
January 2011. Also, the project has operations and maintenance in
place with LSSPL for next five years i.e. January 2022.
=================
I N D O N E S I A
=================
GREENWOOD SEJAHTERA: Fitch Cuts National LT Rating to BB(idn)
-------------------------------------------------------------
Fitch Ratings Indonesia has downgraded Indonesia-based property
developer PT Greenwood Sejahtera Tbk's National Long-Term Rating
to 'BB(idn)' from 'BBB(idn)'. The Outlook is Stable. The agency
has also downgraded the rating on the company's IDR72 billion
senior unsecured bond to 'BB(idn)' from 'BBB(idn)'.
The downgrade reflects the company's inability to generate
meaningful presales, which resulted in a presales/gross debt
ratio of less than 15% since 2016. The downgrade also reflects
Greenwood's declining rental revenue despite the company's strong
investment portfolio and recurring dividend inflow. Fitch expects
the level of recurring interest cover to weaken significantly as
leverage is expected to rise in conjunction with the execution of
its development pipeline.
'BB' National Ratings denote an elevated default risk relative to
other issuers or obligations in the same country. Within the
context of the country, payment is uncertain to some degree and
capacity for timely repayment remains more vulnerable to adverse
economic change over time.
KEY RATING DRIVERS
Sustained Weak Presales: Fitch expects presales to remain weak
for the remainder of 2018 and into 2019. The slow demand in the
residential-property sector had a pronounced effect on Greenwood
due to its premium segment. Greenwood's presales were also
affected by the oversupply of commercial space. Greenwood's
presales fell to IDR24 billion in 2017 from IDR33 billion in 2016
and it reported no presales in 1H18. The company's presales/gross
debt ratio fell to 7.7% in 2017, its lowest since 2014.
Debt-Funded Project Construction: Greenwood plans to be more
aggressive in developing its Capital Square project, a luxurious
mixed-use building in Surabaya city that targets the upper
segment, with completion scheduled by 2020. Fitch projects the
company will spend around IDR1.4 trillion on construction capex
in the next three years. Its rating case also assumes weak
presales from the project due to Indonesia's challenging
environment and political uncertainty that may deter consumers
from big-ticket purchases, such as property, and lead to lower-
than-expected presales.
The company's weak presales have adversely affected its cash
generation and it may need to rely on external debt to finance
the planned construction cost for its ongoing and new projects.
Fitch estimates that leverage, defined as net debt/net inventory,
will increase to around 25%.
Rising Leverage Weakens Recurring Cover: The higher leverage is
in line with its rating although the company's recurring
coverage, which is supported by recurring revenue from its
investment properties as well as dividends from those run by its
associated entities, will fall below 1.0x in 2019-2021 (2017 and
1H18: 4.5x). Greenwood's rent revenue decreased by 31% and 50%
yoy in 2017 and 1H18, respectively, due to the rental reversion
of its main office tenant in 2H17. Fitch thinks recurring revenue
will not recover significantly in 2018-2019 due to the oversupply
of office space in Jakarta's central business district (CBD).
Small Scale, Limited Diversification: Greenwood's rating reflects
its small development scale. The company has a single project and
its portfolio largely consists of high-rise developments in CBDs,
aiming for the premium apartment and commercial segments. The
limited diversification exposes Greenwood to higher demand risk
relative to township developer peers with large low-cost land
banks that are aimed at the low-to-middle market, where there is
current real demand.
DERIVATION SUMMARY
Greenwood's rating is comparable with other Indonesian property
developers rated at the national scale such as PT PP Properti Tbk
(PPRO; BBB+(idn)/Stable) and PT Lippo Karawaci TBK
(BBB+(idn)/Rating Watch Negative). PPRO's rating incorporates a
one-notch uplift from its standalone credit profile due to its
linkage with its parent, PT PP (Persero) Tbk (PTPP). PPRO's scale
is significantly larger and more diversified than that of
Greenwood with 39 projects across a number of Indonesia's large
cities and attributable presales of around IDR3 trillion at end-
2017. PPRO is focused in the low-middle income segment, which is
the main driver of Indonesian housing demand. PPRO's larger
scale, greater diversification, and better market position
account for the three-notch rating difference between PPRO's
standalone credit profile and Greenwood's rating.
Fitch believes Lippo has a stronger credit profile than Greenwood
as it has a larger property inventory and land bank that result
in higher attributable presales and EBITDA scale. Lippo's rating
is on Rating Watch Negative to reflect its heightened liquidity
risk, but Fitch thinks Lippo has sufficient assets to sell that
could improve its liquidity. Lippo's larger scale and asset
availability compensate for its higher leverage and thus warrant
a rating for Lippo that is multiple notches higher than that of
Greenwood.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Presales of around IDR400 billion in 2019 and around IDR200
billion-300 billion in 2020-2021
- Weak recurring income to continue until 2019
- Capital Square construction to be completed in 2020 with
total capex of around IDR1.4 trillion
- New office project will start construction and will be
launched in 2020
- Additional bank funding of around IDR400 billion to fund
construction of project in 2018
- Dividends from associates of around IDR90 billion in 2018-
2021
RATING SENSITIVITIES
Developments That May, Individually or Collectively, Lead to
Positive Rating Action
- Presales exceeding IDR500 billion on a sustained basis
- EBITDA plus dividend from associates to interest expense
above 1.0x on a sustained basis
Developments That May, Individually or Collectively, Lead to
Negative Rating Action
- Weakening liquidity that results in the inability to service
debt obligations and to finance ongoing and future projects.
LIQUIDITY
Adequate Short-Term Liquidity: Greenwood had IDR175 billion in
cash at end-2017 against current year maturities of IDR70
billion, of which IDR12 billion is a short-term loan that can be
rolled over. Fitch believes Greenwood will be able to roll over
the loan given its track record. Greenwood has unused facilities
of IDR248 billion for the construction of its Capital Square
project. It also has recurring dividends from associates to
support its operational cash flow. However, Fitch thinks the
company would need to rely on external debt to finance the
Capital Square project if it fails to achieve meaningful sales in
2018-2020 and there may be a liquidity issue if Greenwood is
unable to secure the financing or if it is unable to defer the
development.
=================
S I N G A P O R E
=================
INTERPLEX HOLDINGS: Moody's Assigns Ba3 CFR, Outlook Stable
-----------------------------------------------------------
Moody's Investors Service has assigned a first-time Ba3 corporate
family rating to Interplex Holdings Pte. Ltd.
At the same time, Moody's has assigned a (P)Ba3 rating to the
company's proposed multicurrency medium-term note (MTN) program.
Notes issued under the proposed MTN program will be
unconditionally and irrevocably guaranteed by Interplex's major
operating subsidiaries, other than restricted subsidiaries
organized under the laws of the People's Republic of China.
The outlook on the ratings is stable.
The notes proceeds will be used for the refinancing of the
company's existing acquisition debt facility.
RATINGS RATIONALE
"The Ba3 CFR reflects Interplex's solid market position in the
design and manufacture of customized interconnect solutions,
sensors and other precision products, as well as its balanced
credit profile, with adjusted debt/EBITDA expected to remain
below 4.0x; low but consistent EBITDA margins; and an adequate
liquidity profile," says Brian Grieser, a Moody's Vice President
and Senior Credit Officer.
Interplex's Ba3 rating is also supported by the company's long-
term customer relationships, well-diversified geographical
footprint and end-market exposures, contractual pass-through of
commodity price fluctuations, and high barriers to entry.
Interplex's core markets - automotive, data and
telecommunications, and medical and life sciences - are
experiencing a shift towards electrification, automation and
miniaturization of component parts.
Moody's expects these shifts to increase the content requirement
on customer products for the mechanical and electromechanical
products manufactured by suppliers like Interplex.
Moody's believes the company is well-positioned to capture the
increasing level of demand for customized connector solutions,
given its broad product portfolio and embedded relationships with
customers.
Interplex maintains a strong pipeline of repeat business with its
top customers, and the average length of these relationships is
close to 20 years.
As such, there is nominal customer concentration risk as its
largest customer contributes around 10% of revenue.
Moody's believes customer concentration risk is balanced by the
lengthy qualification processes, which can span 1-2 years, for
many of its products and solutions. Consequently, Interplex is
the sole supplier of products that account for 80% of revenue
from its top 30 customers and benefits from customer co-
investments in tooling and automation.
Interplex's customer base spans multiple industries worldwide,
thereby reducing its exposure to a downturn in a particular
industry or country. It also benefits from its limited exposure
to global distributors of products, whose inventory management
decisions tend to exacerbate industry downturns for other global
connector businesses.
Interplex's Ba3 rating is also supported by margin stability,
owing to its ability to pass-through fluctuations in commodity
prices on certain contractual agreements with customers.
Over the next 12-18 months, Moody's expects EBITDA margins to be
sustained at their current levels of 11% - 14%. While its
contract structures are viewed positively, there are no minimum
purchase requirements, exposing Interplex to changes in the
underlying demand for and trade flows of its customers' products.
"Interplex's rating also reflects its exposure to customers who
serve cyclical end-markets, which we believe can result in
production delays and volatility in revenue, EBITDA and cash
flows over time" says Grieser, who is also Moody's Lead Analyst
for Interplex.
With Interplex currently deriving around 35% of its revenue from
the automotive segment, any downturn in production levels in this
sector would weigh on Interplex's financial performance.
That said, Moody's expects the increasing trend towards higher
electronic content in vehicles, as well as exposure to more
stable end-markets, such as telecommunications and medical and
life sciences, to temper the effects of any economic slowdown.
The proceeds from issuance under the proposed medium term note
program are expected to be used to refinance existing debt raised
primarily to fund Baring Private Equity Asia's leveraged buyout
of Interplex in 2016.
The rating outlook is stable, reflecting Moody's expectation that
Interplex will carry out its growth in a prudent manner, while
maintaining financial metrics within its rating parameters over
the next 12-18 months.
Interplex's ratings are unlikely to be upgraded over the next 12-
18 months, given the state of its financial profile and its
exposure to general global economic conditions. However, credit
metrics that will support a ratings upgrade include EBITDA
margins of around 18-20%, debt/EBITDA below 3.0x, and positive
free cash flow generation over a sustained period.
The ratings could be downgraded if there was an increase in
Interplex's leverage, driven either by debt-funded acquisitions
or dividend recapitalization, such that (1) debt/EBITDA is
maintained above 4.0x for an sustained period; or (2)
EBITA/interest expense is maintained below 2.0x for an sustained
period.
The principal methodology used in these ratings was Global
Manufacturing Companies published in June 2017.
Interplex Holdings Pte. Ltd. designs, develops and manufactures
customized interconnect solutions and specialized high precision
products for global automotive, medical and life sciences, and
data and telecommunication customers. The company is domiciled in
Singapore and was acquired by Baring Private Equity Asia in 2016
for a total transaction value of USD679 million through a
delisting from the Singapore Exchange.
====================
S O U T H K O R E A
====================
SKINFOOD: Court Placed Firm Under Court Receivership
---------------------------------------------------- Yonhap News
Agency reports that a Seoul court on Oct. 19 placed Skinfood
under its receivership in a move that could help the troubled
South Korean cosmetics firm pick up speed for its normalization,
the company said.
Yonhap relates that the decision by the Seoul Bankruptcy Court
came about a week after the cosmetics maker filed for a court-led
restructuring scheme, saying that it is having a temporary
difficulty in securing liquidity due to excessive debt.
As of the end of 2017, the company's liquid liabilities exceeded
liquid assets by KRW16.9 billion (US$14.9 million), Yonhap
discloses citing Skinfood's regulatory filing.
Some of the measures to be carried out are to reduce the range of
products the company produces to save costs and to push for sales
of its stakes in its Chinese or U.S. units, which it wholly owns,
Skinfood said, Yonhap relays.
"As we have confirmed through various routes the demands from our
stakeholders and consumers to continue production, we will focus
on normalizing our financial structure and the supply of products
as soon as possible," Yonhap quotes a company official as saying.
The cosmetic brand is currently present in 15 foreign markets,
including the United States, China and Japan.
Skinfood's sales came to KRW126.9 billion in 2017, down 25
percent from the previous year, with an operating loss of
KRW98 billion on a consolidated basis, it said, adds Yonhap.
*********
Tuesday's edition of the TCR-AP delivers a list of indicative
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latest balance sheets publicly available a day prior to
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*********
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-
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Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez,
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Editors.
Copyright 2018. All rights reserved. ISSN: 1520-9482.
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