/raid1/www/Hosts/bankrupt/TCRAP_Public/200408.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
A S I A P A C I F I C
Wednesday, April 8, 2020, Vol. 23, No. 71
Headlines
A U S T R A L I A
AUSTRALASIA WEALTH: Wind Up Order Obtained by ASIC
AUSTRALIAN TAILINGS: First Creditors' Meeting Set for April 17
BIONIC VISION: First Creditors' Meeting Set for April 20
CONSTRUCTIVE RECRUITMENT: 1st Creditors' Meeting Set for April 16
CORONADO GLOBAL: S&P Alters Outlook to Negative & Affirms 'B+' ICR
GLENVINE PTY: First Creditors' Meeting Set for April 20
C H I N A
CAR INC: Moody's Lowers CFR & Senior Unsecured Rating to B2
GUANGZHOU R&F: Moody's Places Ba3 CFR on Review for Downgrade
LUCKIN COFFEE: Chairman Defaults on Loan, Surrenders Shares
SHANDONG SANXING: S&P Affirms 'B' ICR, Outlook Negative
H O N G K O N G
LIFESTYLE INTL: Fitch Withdraws 'BB+' LongTerm Foreign Currency IDR
SOUTH SHORE: Bank Demands Full Payment of HK$2.48 Billion Loan
I N D I A
AGRIFEM INDUSTRIES: CARE Lowers Rating on INR5.18cr LT Loan to B-
B.D TEXTILE: Ind-Ra Maintains BB Issuer Rating in Non-Cooperating
BELL FINVEST: CARE Keeps D on INR150cr Loans in Not Cooperating
BEND-N-FAB ENGINEERING: CARE Reaffirms B+ Rating on INR9.25cr Loan
CAIRN INDIA: Fitch Lowers LongTerm IDR to B+, Outlook Stable
EPISTEL IMPEX: CARE Lowers Rating on INR12cr LT Loan to B+
HI-TECH AGRO: CARE Assigns 'B+' Rating to INR8.25cr LT Loan
HRIDAY FINCORP: CARE Cuts Rating on INR4.50cr NCD Issue to B+
IDBI BANK: Moody's Affirm 'Ba2' Deposit Ratings
IL&FS: Reaches Out to SG Bondholders as COVID-19 Delays Asset Sale
INDIAN SURGICAL: CARE Reaffirms B+ Rating on INR2.94cr LT Loan
INDORE TABLE: Ind-Ra Cuts Rating on Bank Loans to D/Not Cooperating
J M J CHARITABLE: Ind-Ra Affirms 'BB' on INR182-Mil. Bank Loans
JAYA HUME: CARE Lowers Rating on INR5cr LT Loan to B+
KSP INC: Ind-Ra Places 'BB' Issuer Rating on Watch Negative
LAVISH EXIM: Ind-Ra Maintains 'D' Loan Rating in Non-Cooperating
LAXMI SOPAN: CARE Lowers Rating on INR3.80cr LT Loan to B-
LOKESH INDUSTRIAL: CARE Cuts Rating on INR10cr LT Loan to B-
MBC INFRA-SPACE: CARE Keeps 'C' on INR4.5cr Loans in NonCooperating
PANCHAMRUT PROPERTIES: CARE Keeps 'B' Rating in Not Cooperating
PANCHANAN COLD: CARE Lowers Rating on INR10.66cr Loan to 'D'
PLASMA METAL: CARE Keeps 'D' on INR31.7cr Loans in Not Cooperating
PUREWAL STONE: CARE Lowers Rating on INR9.67cr LT Loan to 'B'
RAJLUXMI ENTERPRISES: CARE Cuts Rating on INR7cr LT Loan to B+
RAVI SHEET: CARE Lowers Rating on INR9.75cr Loan to 'B'
RAYALSEEMA EXPRESSWAY: Ind-Ra Keeps BB Rating in Non-Cooperating
SAIDRISTI SUITINGS: CARE Reaffirms B+ Rating on INR4.61cr Loan
SAKI AUTO: CARE Lowers Rating on INR3.80cr LT Loan to B-
SHIKHAR CONSTRUCTIONS: CARE Keeps D Debt Rating in Not Cooperating
SHYAMSHREE RESIDENCY: CARE Cuts Rating on INR0.70cr Loan to B-
SURAJ ISPAT: CARE Keeps B- on INR6cr Loans in Not Cooperating
SURAJ VALUE: CARE Keeps 'D' on INR10cr Loans in Not Cooperating
TUSCAN AGROW: CARE Keeps D on INR13.3cr Debt in Not Cooperating
I N D O N E S I A
LIPPO MALLS: Fitch Alters Outlook on BB LT IDR to Negative
N E W Z E A L A N D
FE INVESTMENTS: S&P Lowers ICRs to 'D' Over Receivership
NETBALL MAINLAND: Faces Liquidation Amid COVID-19 Pandemic
VIRGIN AUSTRALIA: Shuts Down NZ Operations; 600 Jobs Axed
S I N G A P O R E
GLOBAL A&T: Fitch Cuts IDRs to CCC+ & $665MM Secured Notes to B-
S O U T H K O R E A
KDB LIFE: Fitch Alters Outlook on BB+ IDR to Negative
MAGNACHIP SEMICONDUCTOR: Moody's Alters Ratings Outlook to Stable
V I E T N A M
NATIONAL POWER: Fitch Affirms 'BB' LT Foreign Currency IDR
- - - - -
=================
A U S T R A L I A
=================
AUSTRALASIA WEALTH: Wind Up Order Obtained by ASIC
--------------------------------------------------
The Federal Court of Australia in Melbourne has ordered that the
following companies be wound up and that liquidators be appointed:
Company Liquidator appointed
------- --------------------
Australasia Wealth Services Michael Hill and Katherine Sozou
and Management Pty Ltd of McGrathNicol
Marigold Falconer Matthew Caddy and Robert Smith
International Pty Ltd of McGrathNicol
My Wealth Adviser Pty Matthew Caddy and Robert Smith
Ltd of McGrathNicol
On Feb. 20, 2020, the Australian Securities and Investments (ASIC)
applied to have Marigold Falconer and My Wealth wound up.
On March 6, 2020, ASIC applied to have AWSM wound up.
ASIC commenced the proceedings to protect the public in
circumstances where it holds concerns about the conduct of the
affairs of those companies and their solvency.
ASIC's investigations into each of the companies are ongoing.
AUSTRALIAN TAILINGS: First Creditors' Meeting Set for April 17
--------------------------------------------------------------
A first meeting of the creditors in the proceedings of Australian
Tailings Group Pty Limited will be held on April 17, 2020, at 3:00
p.m. via telephone conference facilities.
Nicholas James Crouch of Crouch Amirbeaggi was appointed as
administrator of Australian Tailings on April 6, 2020.
BIONIC VISION: First Creditors' Meeting Set for April 20
--------------------------------------------------------
A first meeting of the creditors in the proceedings of Bionic
Vision Technologies Pty Ltd will be held on April 20, 2020, at 3:30
p.m. via virtual meeting.
Gideon Isaac Rathner and Matthew Brian Sweeny of Lowe Lippmann were
appointed as administrators of Bionic Vision on April 7, 2020.
CONSTRUCTIVE RECRUITMENT: 1st Creditors' Meeting Set for April 16
-----------------------------------------------------------------
A first meeting of the creditors in the proceedings of Constructive
Recruitment Pty Ltd will be held on April 16, 2020, at 10:00 a.m.
at the offices of Jirsch Sutherland, Level 27, 259 George Street,
in Sydney, NSW.
Trent Andrew Devine and Peter John Moore of Jirsch Sutherland were
appointed as administrators of Constructive Recruitment on April 2,
2020.
CORONADO GLOBAL: S&P Alters Outlook to Negative & Affirms 'B+' ICR
------------------------------------------------------------------
S&P Global Ratings, on April 6, 2020, revised its outlook on
Australia-based metallurgical coal company Coronado Global
Resources Inc. to negative from stable. At the same time, S&P
affirmed the 'B+' long-term issuer credit rating on Coronado.
S&P said, "We revised the outlook on Coronado to negative to
reflect our view that the fallout from the COVID-19 pandemic is
uncertain and potentially significant for the company. The fallout
from the COVID-19 pandemic on the global economy is evolving and
S&P Global Ratings expects a global economic recession in 2020.
Coronado has already decided to temporarily idle its three U.S.
mines (Buchanan, Logan, and Greenbrier) in light of its weakening
operating environment. The company expects to fulfil its customers'
contractual commitments through its inventory of approximately
750,000 tonnes in the interim, and could restart operations if
market conditions improve in the coming weeks.
"While this decision will lower Coronado's near-term operating
costs, we believe demand conditions could continue to soften or
supply-side disruptions could result in weaker cash generation.
This could constrain Coronado's capacity to reduce debt. That said,
we note that the company's outstanding debt balance is currently
modest.
"Idling of its three U.S. mines is likely to be short term. In the
interim, we believe the reliance on the company's Australian
Curragh mine as the primary earnings generator elevates Coronado's
concentration risk. If operating conditions are not conducive to
reactivating these U.S. mines in the near term, we believe that
Coronado is materially exposed to any adverse event at Curragh. We
believe that government restrictions are currently not affecting
Curragh's operations, and that the mine supplies thermal coal to
Stanwell Corp., which is Queensland's largest electricity
generator.
"Nevertheless, we believe Coronado has some financial flexibility
to manage disruptions to its operations over the next 12 months.
Coronado benefits from its conservative capital structure and
financial policies, which include about US$330 million of
outstanding debt and an adjusted debt-to-EBITDA ratio of 0.9x as of
Dec. 31, 2019. In our view, the company has sufficient liquidity
with US$220 million of undrawn debt facilities, about US$26 million
of cash as of Dec. 31, 2019, and no debt maturities until February
2023.
"We would expect the company to continue adhering to its
conservative financial policies and take actions to preserve
capital and liquidity in the coming months. This includes a focus
on reducing non-essential capital expenditure and operating costs,
and suspending dividends while the macroeconomic uncertainty
persists.
"The negative outlook reflects our expectations that a likely
global recession could significantly disrupt Coronado's operations
and end-markets over the next 12 months.
"We could lower the ratings if we forecast adjusted debt to EBITDA
will materially exceed 1.0x beyond the year ending June 30, 2020.
This could occur if Coronado curtails its operations for an
extended period due to a lack of product demand or supply-side
disruptions.
"We could revise the outlook to stable if global macroeconomic
conditions improve and metallurgical coal markets normalize such
that we no longer believe the company's cash flow generation and
earnings are at risk. Prudent financial management will support
upside potential, including suspending dividend payments, deferral
of non-essential capital expenditure, and a focus on debt
reduction."
GLENVINE PTY: First Creditors' Meeting Set for April 20
-------------------------------------------------------
A first meeting of the creditors in the proceedings of Glenvine
Pty. Limited will be held on April 20, 2020, at 10:00 a.m. via
virtual meeting.
Damien Hodgkinson -- damien.hodgkinson@demasiagroup.com -- of DEM
Asia Group was appointed as administrator of Glenvine Pty on April
6, 2020.
=========
C H I N A
=========
CAR INC: Moody's Lowers CFR & Senior Unsecured Rating to B2
-----------------------------------------------------------
Moody's Investors Service has downgraded CAR Inc.'s corporate
family rating and senior unsecured rating to B2 from B1, and has
placed the ratings on review for further downgrade.
The outlook is changed to ratings under review from negative.
The rating action follows the April 2, 2020 announcement by Luckin
Coffee Inc. on an internal investigation into misconduct, including
fabricated transactions [1]. The chairman of Luckin Coffee's board
of directors, Charles Zhengyao Lu, is also the chairman of the
board of CAR.
RATINGS RATIONALE
"The downgrade and review for further downgrade reflect its concern
that Luckin Coffee's announcement could impair CAR's access to
funding and operations," says Gerwin Ho, a Moody's Vice President
and Senior Credit Officer.
The action also factors in the potential challenge facing CAR's
senior management in implementing its corporate strategy, since
Luckin Coffee and CAR share the same chairmanship.
CAR's liquidity position is already weak, and is particularly
vulnerably given the current challenging operating and funding
environment.
Moody's credit assessment also takes into account the following
environmental, social and governance considerations.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety. Its action reflects the impact on CAR of the breadth
and severity of the shock, and the broad deterioration in credit
quality and shifts in market sentiment it has triggered.
Independent directors make up a minority of CAR's board, although
the company is a listed and regulated entity. The company also has
a diversified shareholder base that includes major shareholders
such as Legend Holdings Corporation. Nevertheless, its action
factors in potential governance concerns given the common
chairmanship of Luckin Coffee and CAR.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Moody's review will focus on the impact of Luckin Coffee's
announcement on CAR's reputation, and in turn on the company's
access to funding and its business operations.
The principal methodology used in these ratings was Equipment and
Transportation Rental Industry published in April 2017.
CAR Inc., founded in 2007 and headquartered in Beijing, provides
car rental services, including car rentals and fleet rentals in
China. CAR listed on the Hong Kong Stock Exchange in September
2014.
GUANGZHOU R&F: Moody's Places Ba3 CFR on Review for Downgrade
-------------------------------------------------------------
Moody's Investors Service has placed the Ba3 corporate family
rating of Guangzhou R&F Properties Co., Ltd. and the B1 CFR of R&F
Properties Company Limited on review for downgrade.
The outlooks on the two companies are changed to rating under
review from stable.
R&F HK is a wholly-owned subsidiary of Guangzhou R&F.
RATINGS RATIONALE / FACTORS THAT COULD LEAD TO AN UPGRADE OR
DOWNGRADE OF THE RATINGS
"The review for downgrade of Guangzhou R&F's CFR reflects its
concerns over its high debt leverage and increased liquidity risk,
given its sizable refinancing needs in the next 12-18 months," says
Josephine Ho, a Moody's Vice President and Senior Analyst.
Guangzhou R&F has a total of RMB62 billion in debt maturing over
the next 12 months, including RMB21 billion of maturing and
puttable bonds, RMB28 billion in bank loans, and RMB13 billion in
trust loans. In addition, the company has declared a dividend
payment of RMB1.28 per share, or RMB4.5 billion, which will be paid
in the second quarter of 2020.
The company's cash holdings of RMB38 billion at the end of 2019,
together with its contracted sales proceeds after deducting basic
operating cash flow items, are not sufficient to cover these
payments, and it will need to raise new debt to repay its maturing
debt.
In addition, Moody's expects Guangzhou R&F's debt leverage, as
measured by revenue/adjusted debt, will remain weak at 44%-46% in
the next 12-18 month, compared with 44% at the end of 2019. This
ratio is weak when compared with its Ba-rated Chinese property
peers, and reduces its financial flexibility.
While Guangzhou R&F has a track record of refinancing maturing debt
both onshore and offshore, the current volatile funding environment
is creating uncertainty.
To help address its refinancing needs, Guangzhou R&F recently
received a RMB4 billion quota for onshore bond issuance and RMB5
billion quota for private placement note in the first quarter of
2020.
The company in March 2020 also repaid $325 million of its $700
million offshore bond due in January 2021.
The review for downgrade of R&F HK's B1 CFR reflects the weakened
ability of its parent to provide financial and operating support in
times of need, and the potential deterioration in its standalone
credit quality in view of the challenging operating environment for
its hotel business.
Moody's review will focus on (1) Guangzhou R&F's refinancing and
liquidity management plan, (2) its ability to access funding to
refinance its maturing debt, including puttable bonds, (3) its
ability to meet its contracted sales plan and to deleverage over
the next 12 months, and (4) its ability to provide support to R&F
HK.
Moody's expects to close the review in the near future.
In terms of environmental, social and governance (ESG) factors,
Moody's has considered the concentrated ownership by Guangzhou
R&F's key shareholders, its high dividend payouts and aggressive
financial management. In addition, Moody's has considered the rapid
and widening spread of the coronavirus outbreak and the potential
impact on China's property sector. Moody's regards the coronavirus
outbreak as a social risk under its ESG framework, given the
substantial implications for public health and safety.
The principal methodology used in these ratings was Homebuilding
and Property Development Industry published in January 2018.
Established in 1994 and listed on the Hong Kong Stock Exchange in
2005, Guangzhou R&F Properties Co., Ltd. is a large developer in
China's residential and commercial property sector. At the end of
2019, the company's land bank totaled 57.9 million square meters
(sqm) in attributable saleable area, spread across 97 cities in
China and 6 cities overseas, including Australia, the UK, Malaysia,
Korea, and Cambodia. Mr. Li Sze Lim and Mr. Zhang Li are the
company's co-founders and owned 30.99% and 29.52% equity interests,
respectively, as of December 31, 2019.
R&F Properties (HK) Company Limited (R&F HK) and its subsidiaries
are principally engaged in the development and sale of properties,
property investments and hotel operations in China. The company was
established in Hong Kong on 25 August 2005. It serves as an
offshore funding vehicle and holding company for some of Guangzhou
R&F's property projects in China.
LUCKIN COFFEE: Chairman Defaults on Loan, Surrenders Shares
-----------------------------------------------------------
Reuters reports that Luckin Coffee Chairman Charles Zhengyao Lu and
Chief Executive Jenny Zhiya Qian have handed over shares in the
embattled Chinese coffee chain to lenders after a company
controlled by Lu's family defaulted on a $518 million margin loan,
one of the banks said on
April 6.
According to Reuters, the default comes after Luckin, a major rival
to Starbucks in China, said last week that much of its 2019 sales
were fabricated, sending its shares plunging as much as 82% in U.S.
trading and sparking an investigation by China's securities
regulator.
Some 515,355,752 class B shares and 95,445,000 class A shares of
Luckin had been pledged to secure the loan, including shares
additionally pledged by the family trust of Qian, one of the banks
on the loan, Goldman Sachs Group Inc, said in a note to clients on
April 6 proposing a sale of the shares, Reuters relays.
The other banks on the loan are Morgan Stanley, Credit Suisse,
Haitong, CICC and Barclays, according to people familiar with the
matter, adds Reuters.
If all the shares pledged under the $518 million loan are sold, Lu
Zhengyao's voting interest in Luckin Coffee would not decrease,
while Qian's beneficial and voting interests would decrease
significantly, Goldman Sachs said, without quantifying the size of
the reduction.
The class B shares will be converted into American Depositary
Shares (ADSs), the report notes.
SHANDONG SANXING: S&P Affirms 'B' ICR, Outlook Negative
-------------------------------------------------------
S&P Global Ratings, on April 6, 2020, affirmed its 'B' long-term
issuer credit rating on Shandong Sanxing Group Co. Ltd. and its 'B'
long-term issue rating on the company's outstanding guaranteed
senior unsecured notes. At the same time, S&P removed all the
ratings from CreditWatch, where they were placed with negative
implications on Feb. 14, 2020.
S&P believes Sanxing has made meaningful progress in its
refinancing plans.
The company has made significant headway in refinancing its 2020
bullet maturities of Chinese renminbi (RMB) 1.5 billion, and is
still working on several financing plans to cover its 2021
maturities. Separately, the company has secured some third-party
loans at the parent level, which shows a degree of market support.
Cash resources at the parent level are tight against bullet
maturities of RMB3.4 billion in the next 12 months. Sanxing faces
bullet maturities of RMB1.5 billion between September and October
2020 (of which RMB600 million is puttable) and RMB1.9 billion in
January 2021, including RMB1.4 billion worth of offshore bonds at
the parent level. S&P estimates cash balance at the parent level to
be RMB700 million–RMB800 million. Even if the parent is able to
dissuade bondholders from exercising their put options, Sanxing
still faces a significant shortfall and will be reliant on external
financing to meet upcoming maturities.
Still some degree of uncertainty surrounds the refinancing of the
2021 maturities. While S&P believes Sanxing has a solid
refinancing plan for its 2020 bullet maturities, it has less
visibility on the refinancing plans for the 2021 maturities. The
company is working on several financing options, including new bank
loans and trust financing. Sanxing's creditworthiness will face
pressure if the refinancing plan for its US$200 million notes due
in January 2021 is not lined up in a timely manner. On the other
hand, Sanxing has fairly good banking relationships and large
unencumbered assets estimated at RMB1.7 billion, which should
provide some support to its refinancing.
The negative outlook reflects the execution risks relating to
Sanxing's refinancing plans. If the company is unable to execute
the plan, its liquidity position would deteriorate.
S&P said, "We would lower the rating if the refinancing plans for
the 2020 maturities runs into further delays. Additionally, we
could lower the rating if Sanxing's refinancing plans for the 2021
bullet maturities is not lined up in a timely enough manner.
"We could revise the outlook to stable if we believe Sanxing will
be able to refinance its upcoming 2020 and 2021 maturities with a
minimal degree of execution risk."
=================
H O N G K O N G
=================
LIFESTYLE INTL: Fitch Withdraws 'BB+' LongTerm Foreign Currency IDR
-------------------------------------------------------------------
Fitch Ratings has withdrawn Lifestyle International Holdings
Limited's Long-Term Foreign-Currency Issuer Default Rating of 'BB+'
with a Negative Outlook. Fitch has also withdrawn Lifestyle's
senior unsecured rating and the rating on its outstanding bonds.
Fitch is withdrawing the ratings as Lifestyle has stopped
participating in the rating process. Therefore, Fitch no longer has
sufficient information to maintain the ratings. Accordingly, Fitch
will no longer provide ratings or analytical coverage for
Lifestyle.
KEY RATING DRIVERS
Fitch revised Lifestyle's Outlook to Negative from Stable on 23
December 2019. The Outlook revision reflects the increased
uncertainty in the company's cash flow generation. The impact of
unrest in Hong Kong since June 2019 on the retail sector has been
meaningful and Fitch believes it resulted in a revenue decline in
2H19. Free cash flow generation may also be affected, but the
degree would depend on the pace of capex and the dividend payout.
RATING SENSITIVITIES
Rating sensitivities are no longer relevant given its withdrawal.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
ESG issues are credit neutral or have only a minimal credit impact
on the entity(ies), either due to their nature or the way in which
they are being managed by the entity(ies).
SOUTH SHORE: Bank Demands Full Payment of HK$2.48 Billion Loan
--------------------------------------------------------------
Inside Asian Gaming reports that South Shore Holdings Ltd said it
has applied to its bank for a "standstill" to prevent enforcement
of security over THE 13 Hotel in Macau and liquidation of the
company after the bank issued a demand for immediate payment of
HK$2.48 billion owing under its facility agreement.
The report relates that the demand, which covers the entire
principal amount plus interest, comes after the company was unable
to pay HK$470 million due on March 31, 2020, which it had
previously anticipated would be sourced from the disposal of a 50%
interest in Uni-Dragon Ltd, the subsidiary that beneficially owns
THE 13. That disposal has yet to be completed.
On April 6, South Shore said neither its "borrowing entity nor the
company can repay at this time" and that it has instead applied to
the bank for a standstill, "in essence seeking assurances from the
bank that it will not take imminent steps either to enforce its
security over THE 13 Hotel or to liquidate the Company, and
envisages working closely with the bank to achieve an orderly
divestment of the Company's interests in THE 13 Hotel," the report
relays.
According to the report, South Shore also revealed it has reached
agreement with the prospective buyers of the 50% stake in THE 13 to
extend the long-stop date from April 14, 2020 to June 14, 2020 in
order to ensure fulfilment of certain conditions under the Sale and
Purchase Agreements. The company cited the "severe adverse effect
of the COVID-19 pandemic on the state of the market, in Macau and
generally," as a reason for recent delays.
It was October last year when South Shore first revealed it was
planning to sell up to a 50% stake in its embattled THE 13 project
for HK$750 million and November when it released details of the
agreement, involving a trio of Hong Kong companies, IAG recalls.
Shortly afterwards, South Shore reported a loss of HK$506.7 million
for the six months to Sept. 30, 2019, 15% higher than the prior
year period due to increased costs at THE 13 Hotel.
Located south of the Cotai Strip, THE 13 Hotel opened on Aug. 31,
2018 following a series of delays due to funding problems, the
report notes. However, a number of rooms remain unfinished and the
company has made no attempt to apply for a gaming license despite
having space for 66 gaming tables under a potential "service
agreement" arrangement it previously reached with Macau
concessionaire Melco Resorts and Entertainment, the report says.
=========
I N D I A
=========
AGRIFEM INDUSTRIES: CARE Lowers Rating on INR5.18cr LT Loan to B-
-----------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Agrifem Industries (AFI), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 5.18 CARE B-; Stable; ISSUER NOT
Facilities COOPERATING; Revised from
CARE B; Stable on the basis
of best available information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from AFI to monitor the ratings
vide e-mail communications/letters dated January 6, 2020, February
13, 2020 and March 4, 2020, March 16, 2020 and numerous phone
calls. However, despite CARE's repeated requests, AFI 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.
Further, AFI has not paid the surveillance fees for the rating
exercise as agreed to in its Rating Agreement. The rating on AFI's
bank facilities will now be denoted as CARE B-; 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 assigned to the bank facilities of AFI is primarily
constrained on account of its weak financial risk profile marked by
net loss in FY18 (FY refers to the period April 1 to March 31),
weak solvency position and stressed liquidity position. The rating
is, further, constrained on account of project implementation risk
associated with debt funded project, its presence in the highly
competitive industry, vulnerability of margins to fluctuations in
the raw material prices and constitution as a partnership concern.
The rating however derives strength from experienced management.
Detailed description of the key rating drivers
At the time of last rating on March 12, 2019, the following were
the rating strengths and weaknesses.
Key Rating Weakness
* Nascent stage of operations with weak financial risk profile
marked by net loss, weak solvency position and stressed liquidity
position: The firm started commercial operations from September,
2017 and within 8MFY18, it has registered Total Operating Income of
INR2.59 crore along with net loss of INR0.04 crore due to high
depreciation and interest and finance costs in initial years of
operations. However, PBILDT margin of the firm stood comfortable at
19.30% and gross cash accruals stood at INR0.26 crore in FY18. Till
February 28, 2019, the firm has achieved turnover of INR6.00 crore.
The capital structure of AFI stood weak marked by overall gearing
of 6.72 times as on March 31, 2018. Further, debt coverage
indicators of the firm stood weak with total debt to GCA stood at
14.98 times and the interest coverage stood moderate at 2.09 times
as on March 31, 2018. The liquidity position of the firm stood
weak marked by maximum utilization of 95% of its working capital
bank borrowings during last twelve months ended February, 2019.
Further, the current ratio stood low at 1.14 times as on March 31,
2018 whereas quick ratio stood below unity level at 0.67 times as
on March 31, 2018. The cash and bank balance stood at INR0.48 crore
as on March 31, 2018.
* Project implementation risk: The firm has taken a project for
expansion of manufacturing of HDPE pipes and envisaged total cost
of the project of INR1.60 crore to be funded through term loan of
INR1.40 crore and balance through unsecured loan from relatives of
promoters. The project has envisaged to be completed till March,
2019.
* Presence in highly competitive industry and vulnerability of
margins to fluctuations in the raw material prices and constitution
as a partnership concern: AFI operates in the pipe manufacturing
industry that is marked by intense competition owing to the
presence of large number of organized and unorganized players. The
highly fragmented nature of the industry restricts the pricing
flexibility and bargaining power of the players in the market.
Further, the raw material prices are extremely volatile in nature
with the prices of PVC resins & chemicals driven by crude oil
prices. Since the raw material cost is the major cost, any upward
movement in raw material price would escalate the cost of sales
with no change in sales realization would put pressure on the
profit margins. Given that the firm is a small scale player, it has
low bargaining power with the suppliers & it is difficult for the
company to pass on rise in input prices. Further, its constitution
as a partnership concern restricts its overall financial
flexibility in terms of limited access to external funds for any
future expansion plans. Further, there is inherent risk of
possibility of withdrawal of capital and dissolution of the firm in
case of death/insolvency of partners.
Key rating strengths
* Experienced management with established presence of group: Mr.
Anoop Agrawal, Partner, MBA by qualification, has more than seven
years of experience in the industry and looks after overall affairs
of the firm. Further, Mr. Ashutosh Agrawal, Partner, graduate by
qualification, has more than three decades of experience in the
cotton ginning industry and promoted KK Fibers. They are assisted
by a staff of well qualified and experienced employees for smooth
functioning of the firm. The company belongs to "KK Group" and
group includes KK Fibers, KK Finecot Private Limited and Agro
Leader Pipes & Products Private Limited.
Khargone (Madhya Pradesh) based AFI was formed in November, 2015 as
a partnership concern by Mr. Sanjay Agrawal, Mr. Anoop Agrawal and
Mr. Ashutosh Agrawal sharing profit and loss in the ratio of
50:25:25. However, the firm started commercial operations form
September, 2017. AFI is mainly engaged in the manufacturing of HDPE
pipes and Sprinkler Pipes. The firm sales HDPE pipes and sprinkler
pipes under the brand name of "Agrifem".
B.D TEXTILE: Ind-Ra Maintains BB Issuer Rating in Non-Cooperating
-----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has maintained B.D Textile
Mills Pvt Ltd's Long-Term Issuer Rating of 'IND BB (ISSUER NOT
COOPERATING)' in the non-cooperating category and has
simultaneously withdrawn it.
The instrument-wise rating action is:
-- INR230 mil. Fund-based facilities* maintained in non-
cooperating category and withdrawn.
*Maintained at 'IND BB (ISSUER NOT COOPERATING)' / 'IND A4+
(ISSUER NOT COOPERATING)' before being withdrawn
KEY RATING DRIVERS
The ratings have been maintained in the non-cooperating category
because the issuer did not participate in the rating exercise
despite continuous requests and follow-ups by Ind-Ra.
Ind-Ra is no longer required to maintain the ratings, as the agency
has received a no-objection certificate from the lenders. This is
consistent with the Securities and Exchange Board of India's
circular dated March 31, 2017, for credit rating agencies.
COMPANY PROFILE
B.D Textile Mills was incorporated in 1988 and is a promoter-driven
company. It is engaged in the processing and marketing of woven
fabric.
BELL FINVEST: CARE Keeps D on INR150cr Loans in Not Cooperating
---------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Bell
Finvest (India Limited) continues to remain in the 'Issuer Not
Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Proposed Long 150 CARE D; ISSUER NOT COOPERATING;
Term Bank Based on best available
Facilities information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from Bell Finvest to monitor the
rating vide e-mail communications/ letters dated March 13, 2020,
March 12, 2020, March 11, 2020, March 9, 2020 and March 5, 2020.
However, despite CARE's repeated requests, the company has not
provided the requisite information for monitoring the ratings. In
the absence of minimum information required for the purpose of
rating, CARE is unable to express opinion on the rating. In line
with the extant SEBI guidelines, CARE's rating on debt instruments
of Bell Finvest (India) Limited will now be denoted as CARE D;
ISSUER NOT COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating(s).
Detailed description of the key rating drivers
Delays in Debt Servicing: There have been continuing delays in
servicing of debt obligations to the lenders.
Bell Finvest (India) Ltd (BFIL), incorporated in 2008, is RBI
registered NBFC-ND- Non-SI Company. The company provides term loans
and working capital loans to SME customers. Mr. Bhupesh Rathod is
the promoter and CEO of the company who looks after the operations
of the company. He is supported by his son Mr. Chirag Rathod,
Director, who looks after the financial operations of the company.
BEND-N-FAB ENGINEERING: CARE Reaffirms B+ Rating on INR9.25cr Loan
------------------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Bend-N-Fab Engineering Private Limited (BNF), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 9.25 CARE B+; Stable Reaffirmed
Facilities
Long-term/Short- 2.50 CARE B+; Stable/CARE A4
Term Bank Reaffirmed
Facilities
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of BNF continue to
remain constrained by small scale of operations with fluctuations
over last 4 years ended FY19 (refers to the period April 1 to March
31), leveraged capital structure & weak debt coverage indicators,
highly working capital intensive nature of operations, moderately
low order book position, and presence in competitive & fragmented
industry with high dependence on core sectors. The ratings,
however, continue to derive strengths from the company's long track
record of operations coupled with highly experienced promoter in
manufacturing & fabrication of industrial equipment, established
relationship with reputed albeit concentrated clientele &
suppliers, and healthy albeit fluctuating profit margins with
susceptibility to volatile raw material prices.
Rating Sensitivities
Positive Factors
* Increase in the scale of operations with the total operating
income exceeding INR20 crore with tangible networth base exceeding
INR10 crore on a sustained basis
* Improvement in the capital structure with the overall gearing
reaching below unity level
* Improvement in the debt coverage indicators with the total
debt/GCA reaching below 10 times and interest coverage reaching
above 2 times on a sustained basis
* Improvement in the liquidity position with operating cycle
reaching below 250 days on a sustained basis
Negative Factors
* Deterioration in the PBILDT margin reaching below 20% on a
sustained basis
* Any un-envisaged aggressive debt-funded acquisition/capital
expenditure and its impact on the financial and liquidity profile
of the company
Detailed description of the key rating drivers
Key Rating Weaknesses
* Small scale of operations with fluctuations over last 4 years:
The scale of operations of BNF stood small with the total operating
income ranging from INR2.65-6.57 crore over FY16-FY19. Moreover,
the same has been fluctuating over the same period owing to
fluctuating demand from the customers, given the capital goods
nature of its products; coupled with prevailing competition in the
market. Given this, the tangible net-worth base also stood small,
thereby limiting the financial flexibility of the company to a
greater extent.
* Leveraged capital structure & weak debt coverage indicators: The
capital structure of BNF stood leveraged with the overall gearing
ranging from 0.86-1.63 times the past four balance sheet dates
ended March 31, 2019 given the high reliance on working capital
bank borrowings and unsecured loans from promoters & relatives.
Given this, coupled with low profitability & cash accruals, the
debt coverage indicators also stood weak with the total debt/GCA
and interest coverage ranging from 8.40-21.56 times and 1.39-2.56
times during FY16-FY19.
* Highly working capital intensive nature of operations marked by
long production cycle: The operations of BNF are highly working
capital intensive in nature with a majority of funds of over
411-839 days blocked in inventory given the long production cycle
of over 6 months of fabrication of industrial equipment and over
62-92 days blocked in debtors. Given this, the operating cycle also
stood elongated at 337-777 days over FY16-FY19. Given this, the
average working capital utilization in the last 12 months ended
February 2020 stood high at ~81%.
* Moderately low order book position: The order book position of
BNF stood moderately low with 5 open orders totaling to INR2.63
crore of pending execution value as on March 11, 2020, of which
INR0.09 crore is expected to be executed by March 2020 thereby
providing low revenue visibility in short-term.
* Presence in competitive & fragmented industry coupled with high
dependence on core sectors: BNF operates in a highly competitive &
fragmented industry with a number of organized & unorganized
players engaged in job-work activities of fabrication of various
industrial products. Moreover, with the increasing exposure to own
sales, the company is also exposed to competitive bidding that
needs to be undertaken for tender-driven nature of orders from
reputed customers. Furthermore, the business of the company is
highly dependent on the capital expenditures planned & undertaken
by various core sector industries, since such products carry an
average life of over 10-20 years.
Key Rating Strengths
* Long track record of operations coupled with highly experienced
promoter in manufacturing & fabrication of industrial equipment:
BNF possesses a long track record of over 22 years of operations in
manufacturing & fabrication of industrial equipment. The company
operates through two of its manufacturing facilities located
adjacent to each other at Mahape in Navi Mumbai, Maharashtra.
Moreover, the company also possesses various quality certifications
for viz. ASME (American Society of Mechanical Engineers),
Certificate of Authorization from The National Board of Boiler &
Pressure Vessel Inspectors, ISO 9001:2015, etc. The overall
operations of BNF are looked after by the promoter - Mr. Chandrahas
Shetty, who possesses a total experience of over 39 years in
manufacturing & fabrication of industrial equipment. He has gained
the majority of his requisite experience in the due course of his
association with BNF.
* Established relationship with reputed albeit concentrated
clientele & suppliers: BNF has established long-term relationships
with various reputed customers across various sectors viz. oil &
gas, petroleum, fertilizers, sugar, power generation &
transmission, marine, cement, engineering, etc. However, the
customer profile of the company is concentrated with the top 5
customers comprising 72.17% of the net sales in FY19 (vis-à-vis
87.46% in FY18). Moreover, the supplier profile of the company is
also concentrated with the top 5 suppliers comprising 63.71% of the
total purchases in FY19 (vis-à-vis 48.56% in FY18).
* Healthy albeit fluctuating profit margins with susceptibility to
volatile raw material prices: The PBILDT margin of BNF stood
healthy in the range of 22.53-36.72% over FY16-FY19, given the
majority of job-work nature of operations of fabrication of various
industrial equipment, coupled with more focus on low-volume &
high-margin products. However, the same has been fluctuating over
the same period owing to fluctuations in realizations garnered from
different types of orders, coupled with changing mix of own sales &
job-work sales. The PBILDT margin is also susceptible to volatility
in steel prices of various types of steel viz. carbon steel, low
alloy steel, stainless steel, duplex stainless steel, etc. However,
owing to high interest and depreciation cost, the PAT margin stood
moderate in the range of 0.27-2.10% over the aforementioned
period.
Liquidity: Stretched
The liquidity is marked by tightly matched accruals to repayment
obligations. The average utilization of working capital limits
stood high at 81.19% during past 12 months ended February 2020. the
cash and bank balance stood INR0.07 crore as on March 31, 2019. The
current ratio stood and quick ratio stood at 2.12 times and 0.46
times respectively as on March 31, 2019 (vis-à-vis 1.79 times and
0.61 times respectively as on March 31, 2018), whereas the net cash
flow from operating activities stood positive at INR1.57 crore in
FY19 (vis-à-vis negative at INR0.63 crore in FY18).
Incorporated in 1994 by Mr. Chandrahas Shetty, Bend-N-Fab
Engineering Private Limited (BNF) is engaged in manufacturing &
fabrication of various industrial equipment viz. coolers,
condensers, heat exchangers, pressure vessels, water heaters,
boilers, kiln shells, chaser piles, stack & dryer jacket, columns &
structures, etc. finding a wide range of varied industrial
applications across various sectors viz. oil & gas, petroleum,
fertilizers, sugar, power generation & transmission, marine,
cement, engineering, etc. The products manufactured by the company
are majorly catered to the engineering companies across various
parts of India, for whom the company undertakes job-work activities
(job-work income comprised 45.52% of the net sales in FY19 as
against 73.41% in FY18), and also to some of the reputed players in
the aforementioned industries, thereby implying own sales. On the
other hand, the primary raw materials viz. plates, seamless pipes &
tubes, flanges, plate material, welding electrodes, grinding &
cutting wheels, and other consumables are procured from the
domestic manufacturers & suppliers of the same from Gujarat,
Maharashtra, Delhi, Uttar Pradesh, etc.
CAIRN INDIA: Fitch Lowers LongTerm IDR to B+, Outlook Stable
------------------------------------------------------------
Fitch Ratings has downgraded the Long-Term Issuer Default Rating of
Cairn India Holdings Limited to 'B+' from 'BB-'. The Outlook is
Stable.
The downgrade follows a revision of its forecast for weaker
economic growth stemming from the coronavirus pandemic, which is
likely to pressure commodities. Fitch has revised down its price
assumptions for zinc, aluminum and, most notably, oil and gas
(O&G), which together contribute about 90% of Vedanta Resources
Limited's (VRL, previously known as Vedanta Resources PLC) EBITDA;
VRL is the parent of Vedanta Limited (VLTD), India's largest
private upstream O&G producer, which fully owns CIHL. CIHL's rating
is aligned with the credit profile of VLTD, reflecting strong
linkages in line with Fitch's Parent and Subsidiary Rating Linkage
criteria.
The Stable Outlook reflects its expectation that VLTD's credit
profile should remain steady, with consolidated coverage (operating
EBITDA/ (interest paid)) remaining above 2.0x from the financial
year ending March 2022 (FY22).
Fitch assesses CIHL's Standalone Credit Profile (SCP) at 'b+' due
to its concentrated and small operating scale, which is
counterbalanced by its low-cost position and strong standalone
financial profile.
KEY RATING DRIVERS
Rating Aligned with Parent: Fitch assesses the operating and
strategic linkages between CIHL and its parent, VLTD, as 'Strong'.
VLTD fully owns CIHL and both entities hold equal 35% shares in the
group's largest (O&G) block in the north Indian state of Rajasthan.
VLTD operates the Rajasthan block, in which Oil and Natural Gas
Corporation Limited (ONGC) holds the remaining 30% stake. VLTD's
O&G business is its second-largest contributor to EBITDA, after the
Indian zinc operation. Fitch believes O&G will remain strategically
important to VLTD due to its low-cost operation and significant
earnings contribution.
Weakening Credit Metrics: Fitch expects VLTD's consolidated
coverage, at 1.8 in FY21 and 2.1x in FY22, to be weaker than its
previous expectations. This reflects a cut of 39% and 21% in its
crude-oil price assumptions, a cut of 11% and 10% in its aluminum
LME price assumptions and a cut of 15% and 7% in its Zinc LME price
assumptions over FY21 and FY22, respectively.
However, Fitch expects the company's operations to improve over
FY21-FY22 on cost rationalization at VLTD's zinc and aluminum
businesses and volume ramp-up post any temporary weakness due to
the coronavirus pandemic, cushioning the effect of weaker prices.
Fitch forecasts the cost of VLTD's aluminum production to fall to
below USD1,500/ton (t) over the next two years. VLTD's low-cost
operations across key commodities should help it to defend its
margins during the currently weak industry conditions; this
underpins its Stable Outlook. Cash flow volatility is further
lowered by VLTD's commodity diversification, with zinc, O&G and
aluminum contributing 47%, 32% and 9%, respectively, to FY19
EBITDA.
O&G Weakness: Fitch expects the EBITDA contribution from the O&G
business to drop by about 45% in FY21 and 20% in FY22 from its
previous estimates due to falling oil prices and volume growth.
Fitch expects the lower oil prices to be partly offset by decreased
operating expenses, as the cost of some raw materials is linked to
the oil price. CIHL also expects further cost cuts, as contractor
prices are typically negotiated lower in case of a persistent low
oil-price environment.
Capex Flexibility: VRL has the ability to defer capex for some of
its O&G and other mineral projects to mitigate a drop in cash flow
from the low-price environment. Fitch does not expect the company
to proceed with certain big-ticket O&G projects till the trajectory
of oil prices reverses. The company also has flexibility in
adjusting exploration capex. Nonetheless, its overall capex is
still substantial, which, along with lower profitability from key
business segments, is likely to result in neutral to negative free
cash flow over the medium term.
'b+' SCP: CIHL's production scale - based on its 35% share of the
Rajasthan O&G block, where all fields are producing - is small, at
about 60,000 barrels of oil equivalent per day (boepd). This is
comparable with that of O&G producers in the 'B' category. Fitch
takes into consideration only CIHL's share in the Rajasthan block
in assessing its SCP and does not factor in any benefit from VLTD's
shares in and role as the operator of the block.
CIHL, however, benefits from the low-cost structure of the
Rajasthan block, with sustainable operating costs of around
USD7.5/barrel (bbl) and finding and development costs of about
USD5.0-6.0/bbl, with further flexibility to cut costs during a
low-price environment. The cost position is significantly lower
than that of peers and underpins CIHL's positive free cash flow,
despite its forecast for lower oil prices, and its strong financial
profile with a net cash position.
ESG - Governance Structure: CIHL has an ESG Relevance Score of '4'
for Governance Structure. Its assessment reflects the group's
complex shareholding structure and the risk of cash leakage other
than dividend distributions to parties outside of its ultimate
parent, VRL. Its assessment does not factor in any cash leakage,
aside from the dividends to VRL, but Fitch is monitoring whether
any group entities are further supporting Volcan Investment
Limited, a shareholder of VRL. This follows a CIHL's investment in
a Volcan structured product in January 2019, although the
investment was subsequently unwound profitably in August 2019. VRL
has since committed to abstain from similar transactions.
DERIVATION SUMMARY
CIHL's ratings have been aligned to that of its parent, VLTD.
Similarly, the rating on Thailand's PTT Exploration and Production
Public Company Limited (BBB+/Stable) is equalized with that of its
parent, PTT Public Company Limited (BBB+/Stable), reflecting
Fitch's assessment of strong operating and strategic linkages
between the two companies. Fitch also aligns India-based Hindustan
Petroleum Corporation Limited's (BBB-/Stable) rating with the
credit profile of its largest shareholder, ONGC, with the linkages
between the two entities assessed as strong.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
Commodity prices to average as below in FY21, FY22 and FY23:
- Zinc at USD1,925/t, USD2,000/t and USD2,000/t, respectively,
and aluminum at USD1,570/t, USD1,650/t and USD1,825/t
- 62 Fe CFR benchmark iron ore price to average at USD71/t,
USD60/t and USD59/t, respectively
- Brent crude to average at USD36/bbl, USD46/bbl and USD52/bbl,
respectively
Sales:
- Zinc sales in India of 708 thousand tons (kt) in FY20, 786kt in
FY21 and 913kt in FY22 as shaft commissioning at the Rampur Agucha
mine supports a higher production run-rate.
- Zinc sales in Gamsberg, South Africa, of 128kt in FY20, 200kt
in FY21 and 235kt in FY22, as the quarterly production run-rate is
ramping up to 45kt in 4QFY20, from around 25kt in 1QFY20.
- Aluminum sales of 1,936kt in FY20, 2,003kt in FY21 and 2,063kt
in FY22, supported by commissioning of new electrolysis pots and
capacity ramp-up.
- Per day oil production from Rajasthan block at 160,000 boepd
for FY21 and FY22. Gas production from Rajasthan block of 130
million standard cubic feet per day (mmcfd) in FY21 and 187mmcfd in
FY22. This reflects a gradual ramp-up of production at the
projects, which have almost completed construction.
Around a 29% EBITDA margin in FY20-FY22, as structural improvement
in the cost of production at some minerals offsets the weakness in
commodity prices.
Capex of USD1.0 billion in FY21 at VRL, which is lower than its
previous expectation of USD1.8 billion due to the coronavirus
pandemic. Capex of USD1.4 billion in FY22 is unchanged.
RATING SENSITIVITIES
Factors That Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
- An improvement in VLTD's credit profile, provided the linkage
between CIHL and VLTD remains strong, could result in the Outlook
being revised to Stable
Factors That Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
- Weakening of linkages between CIHL and VLTD
- Deterioration in VLTD's credit profile, liquidity and debt
structure
BEST/WORST CASE RATING SCENARIO
Ratings of non-financial corporate issuers have a best-case rating
upgrade scenario (defined as the 99th percentile of rating
transitions, measured in a positive direction) of three notches
over a three-year rating horizon; and a worst-case rating downgrade
scenario (defined as the 99th percentile of rating transitions,
measured in a negative direction) of four notches over three years.
The complete span of best- and worst-case scenario credit ratings
for all rating categories ranges from 'AAA' to 'D'. Best- and
worst-case scenario credit ratings are based on historical
performance.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity Position: Fitch expects CIHL to maintain
sufficient liquidity to repay its amortizing loan due at the
subsidiary level with internal cash flow without any refinancing
support. Free cash flow should remain positive and sufficient to
take care of the loan's repayment schedule, given the deferment of
capex in FY21, even during the low oil-price environment.
CRITERIA VARIATION
Fitch applied its Parent and Subsidiary Rating Linkage criteria to
derive the credit profile of VLTD. Where Fitch assesses 'Strong' or
'Moderate' linkages between a weaker parent and stronger
subsidiary, the criteria establishes that the IDRs for both are
likely to be based on the consolidated credit profile. VRL's fully
consolidated financials reflect cash leakages to significant
minority shareholders in its key assets, notably VLTD. Fitch
believes that VLTD's creditors have better access to its operating
cash flow as compared with VRL and there are some limits on cash
leakages. These support VLTD's credit profile being assessed as
better than the consolidated group profile.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
CIHL has an ESG Relevance Score of 4 for Governance Structure,
which reflects issues related to overall board structure and
composition and effective management control.
Except for the matters, the highest level of ESG credit relevance,
if present, is a score of 3. This means ESG issues are
credit-neutral or have only a minimal credit impact on the
entity(ies), either due to their nature or to the way in which they
are being managed by the entity(ies).
EPISTEL IMPEX: CARE Lowers Rating on INR12cr LT Loan to B+
----------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Epistel Impex Private Limited (EIPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 12.00 CARE B+; Stable; ISSUER NOT
Facilities COOPERATING; Revised from
CARE BB-; Stable on the basis
of best available information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from EIPL to monitor the ratings
vide e-mail communications/letters dated December 12, 2019, March
16, 2020, and March 17, 2020 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 publicly available information which however, in CARE's
opinion is not sufficient to arrive at a fair rating. The rating on
EIPL's bank facilities will now be denoted as CARE B+; 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 ratings.
The revision in the rating takes into account the non-availability
of information and no due-diligence conducted with banker due to
non-cooperation by EIPL with CARE'S efforts to undertake a review
of the outstanding rating.
Detailed description of the key rating drivers
At the time of last rating in March 6, 2019, the following were the
rating weaknesses and strengths:
Key Rating Weaknesses
* Small size of operations: The scale of operations of the company
remained relatively small marked by total operating income of
INR39.04 crore (Rs.30.20 crore in FY17) with a PAT of INR0.23 crore
(Rs.0.18 crore in FY17) in FY18. Furthermore, the total capital
employed remained moderate at INR11.60 crore (Rs.10.44 crore as on
March 31, 2017) as on March 31, 2018.
* Inherently low margins trading nature of operations: The trading
segment is largely a volume driven low margin sector with low value
addition. In view of the same, despite quick ramp up in the
company's scale of operations its profitability remained low over
the past years. The absolute profit levels though improved during
the past years remained on the lower side. Furthermore, the profit
margins also remained low during the same period. However, the
operating margin improved year on year during last three years
(FY16-FY18) on account of better operational efficiency and the
same stood at 3.03% (2.87% in FY17) in FY18. Furthermore, the PAT
margin also improved in FY18 on account of higher increase in
PBILDT level vis-a-vis increase in capital charges and the same
stood at 0.60% (0.59% in FY17) in FY18.
* Exposure to volatility in prices of traded materials and exposure
to vagaries of nature: The cultivation of food grains and pulses
happens seasonally and the same is stored for the consumption
throughout the year. The prices of food grains and pulses remain
lower in the harvesting season whereas in off season the price of
the same goes up as per the demand and supply in the market. As the
company procures its traded materials i.e. food grains and pulses
throughout the year as per its requirement and therefore the
company is exposed to volatility in prices of traded material.
Also, agro products cultivation is highly dependent on monsoons,
thus exposing the fate of the company's operation to vagaries of
nature.
* Leveraged capital structure with moderate debt coverage
indicators: The capital structure of the company remained
leveraged marked by debt equity ratio of 0.05x (0.07x in FY17) and
overall gearing ratio of 4.79x (4.90x as on March 31, 2017) as on
March 31, 2018. However, the overall gearing ratio has deteriorated
as on March 31, 2018 due to higher utilization of working capital
limit. Furthermore, the debt coverage indicators also remained
moderate marked by interest coverage of 1.45x and total debt to GCA
of 35.62x in FY18. The interest coverage ratio slightly decreased
in FY18 due to increase in interest expenses as compare to increase
in PBILDT level. However, due to increase cash accruals, the total
debt to GCA improved to 35.62x in FY18 from 41.14x in FY17.
* Working capital intensive nature of operations: The operations
of the company remained working capital intensive as reflected by
its high operating cycle mainly due to high collection period. The
company allows around two month credit to its customers whereas it
pays upfront to its suppliers which make its operations working
capital intensive. Furthermore, it keeps adequate stock of traded
goods for timely supply of its customers demand. Accordingly the
average utilization of fund based limit was around 95% during last
12 month ended on January 31, 2019.
* Fragmented and competitive nature of industry: Trading of food
grains and pulses is highly fragmented due to presence of small
players owing to low entry barrier and low technology and capital
requirement. Furthermore, low product differentiation also resulted
in high competition in the industry. Considering the fragmented and
competitive nature of industry, the company has low pricing power.
Key Rating Strengths
* Satisfactory track record of operations and experienced
promoters: EIPL is into wholesale trading of food grains and
pulses since 2011 and thus has satisfactory track record of
operations. Prior to setting up this company, Mr. Uma Shankar
Singhal was into wholesale trading of food grains and pulses in his
own name and he has more than three decades of experience in the
same industry. He looks after the overall management of the company
supported by his son Mr. Vivek Tekriwala who is associated with the
company since its inception.
Incorporated in August 2011, Epistel Impex Private Limited (EIPL)
was promoted by Mr. Vivek Tekriwala and Mr. Uma Shankar Singhal.
Since its inception, the company has been engaged in wholesale
trading of food grains and pulses.
HI-TECH AGRO: CARE Assigns 'B+' Rating to INR8.25cr LT Loan
-----------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Hi-Tech
Agro Food Private Limited (HAFPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank 8.25 CARE B+; Stable Assigned
Facilities
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of HAFPL is tempered by
small scale of operations with fluctuating total operating income
and thin profitability margins, leveraged capital structure albeit
improved and weak debt coverage indicators, working capital
intensive nature of operations, regulation by governments in terms
of minimum support price, seasonality associated with the agro
commodities in highly fragmented and competitive nature of
industry. However, the rating derives strengths from experienced
promoters with established track record in rice milling industry,
location advantage and healthy demand outlook for rice.
Rating Sensitivities
Positive Factors
* Increase in scale of operations marked by total operating income
above INR40.00 crore.
* Improvement in capital structure marked by overall gearing below
2.50x.
Negative Factors
* Elongation in inventory holding days beyond 150days
Detailed description of the key rating drivers
Key Rating Weaknesses
* Small scale of operations with fluctuating total operating income
and thin profitability margins: The scale of operations of the
company marked by total operating income was fluctuating and
remained small during the review period. The total operating income
of the decreased from INR37.35 crore in FY17 to INR20.76 crore in
FY18 due to decrease in orders coupled with adverse climatic
conditions in Tamil Nadu, and further increased and stood at
INR25.86 crore in FY19 due to increased orders and favourable
demand in the market. The profitability margins of the company
marked by PBILDT margin has fluctuated in the range of 3.36%-6.38%
during FY17-19 due to fluctuation in scale of operations coupled
with volatility of paddy prices during the review period. Further,
PAT margin of the firm improved marginally and stood at 0.17%
during FY19 as compared to 0.02% in FY17 due to decrease in
interest and finance costs.
* Leveraged capital structure albeit improved and weak debt
coverage indicators: The capital structure of the company marked
by overall gearing ratio though improving year on year remained
leveraged at 2.82x as on March 31, 2019 compared to 3.51x as on
March 31, 2018 due to decrease in total debt levels on back of
lower amount outstanding in working capital borrowings. The debt
profile of the company consists INR7.37 crore of working capital
borrowings and interest free unsecured loans of INR1.93 crore from
directors. The debt coverage indicators of the company marked by
interest coverage ratio has improved marginally stood weak at 1.30x
in FY19 as compared to 1.26x in FY18 due to decrease in interest
cost albeit decrease in PBILDT.
* Working capital intensive nature of operations: HAFPL operates
in working capital intensive nature of operations as the rice
millers have to stock rice by the end of each season to next season
as the price and quality of paddy is better during the harvesting
season. Due to this, inventory holding period of the company stood
at 121 days during FY19. The company procures paddy from farmers in
Tanjavur, Karnataka and Andhra Pradesh by making immediate payments
and sells across the country by giving credit period of 30-90 days
to its customers. Further, the company's average utilization of
working capital stood at 75% during last 12 months ended February
29, 2020.
* Regulation by governments in terms of minimum support price: The
government of India has been announcing Minimum Support Price (MSP)
for certain crops (includes paddy) to avoid sharp price
fluctuations. These supportive prices help farmers from excessive
price falls. However, these prices affects rice millers adversely
by limiting the bargaining power of rice millers over farmers. In
addition, state governments are also offering additional base price
to minimum support price resulting to increase in price of paddy.
Increased raw material cost would limit the profitability margins
of rice millers. Currently, The MSP of paddy has increased by the
government of India during the crop year 2019-20 to INR1815 per
quintal from INR1750 per quintal in 2018-19. Further, the state
government of Tamil Nadu announced additional base price of INR50
per quintal. With this, the procurement price of paddy is INR1865
per quintal which is varying with the rest of other states in
India. However, the company procures paddy also from Karnataka and
Andhra Pradesh for mitigating the risk of MSP to some extent.
* Seasonality associated with the agro commodities in highly
fragmented and competitive nature of industry: As the company is
engaged in the business of trading and processing of agriculture
commodities, the prices of agriculture commodities remained
fluctuating and depend on production yield, demand of the
commodities and vagaries of weather. The rice milling industry is
characterized by limited value addition, highly fragmented and
competitive in nature as evident by the presence of numerous
unorganized and few organized players. The entry barriers in this
industry are very low on account of low capital investment and
technological requirement. Due to this, the players in the industry
do not have any pricing power.
Key Rating Strengths
* Experienced promoters with established track record in rice
milling industry: Hi-Tech Agro Food Private Limited was
established in 2005 and has been engaged in milling and trading of
non-basmati rice. As director's ancestors also been into the same
business, all the directors of the company have more than three
decades of experience in rice milling industry. Mr D Ravi (Joint
MD) looks after day to day operations of the company.
* Location advantage: The company's processing facility is
situated at Trichy, Tamil Nadu which is located near Tanjavur
district, one of the largest producers of paddy in India. Its
presence in the region gives additional advantage over the
competitors in terms of easy availability of the raw material as
well as favorable pricing terms. HAFPL owing to its location is
also in a position to cut on the freight component to certain
extent of incoming raw materials.
* Healthy demand outlook for 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.
Liquidity: Adequate-Liquidity is characterised by moderately
utilized bank limits (75%) with no long term repayment obligations
and cash balance of INR0.88 crore (includes FD of INR0.86 crore
with CBI) with above unity current ratio of 1.36x as on March 31,
2019.
Trichy (Tamil Nadu) based Hi-Tech Agro Food Private Limited (HAPL)
was incorporated on May 26, 2005 by Mr B Rajendran, Mr P A V
Arumugam, Mr. D Ravi along with their family members. The company
is engaged in milling and trading of non-basmati rice such as raw
rice, boiled rice and broken rice etc. with processing capacity of
43000 Metric tonnes per annum. Mr B Rajendran (Managing Director)
and Mr D Ravi (Joint MD), having more than three decade of
experience in the rice milling industry, looks after the day to day
operations of the company along with other directors who have rich
experience in the similar line of business. HAPL procures paddy
directly from farmers and small paddy agents in Tanjavur, Karnataka
and Andhra Pradesh.
HRIDAY FINCORP: CARE Cuts Rating on INR4.50cr NCD Issue to B+
-------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Hriday Fincorp Pvt. Ltd. (HFPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Non-convertible 2.06 CARE B+; Stable; Issuer Not
debenture issue Cooperating; revised from
CARE BB; Stable on the basis
of best available information
Non-convertible 4.50 CARE B+; Stable; Issuer Not
debenture issue Cooperating; revised from
CARE BB; Stable on the basis
of best available information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from HFPL to monitor the rating
vide e-mail communications/letters dated February 6, 2020, February
10, 2020, February 12, 2020 and March 13, 2020 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 Hriday Fincorp Private's instruments will now
be denoted as CARE B+; ISSUER NOT COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
The ratings are revised mainly on account of deterioration in
assets quality during FY19 as well as non-availability of
operational information for FY19 and 9MFY20.
Key rating weaknesses
* Small, albeit growing scale of operations with regional
concentration: HFPL started its operations in 2012 and has very
small size of business. During FY19, the loan portfolio has
increased from INR10.49 crore as on March 31, 2018 to INR12.13
crore as on March 31, 2019, however it continued to remain small.
HFPL has regional concentration with majority of outstanding
portfolio in Rajasthan as on March 31, 2018.
* Concentrated resource base: HFPL has sanctioned term loans and
working capital limits from banks. Apart from this, It also has
raised the NCDs which were subscribed by eligible investors. Going
forward, expansion of resource base to fund portfolio would be
crucial.
* Moderate earnings profile: HFPL's net interest margin has
marginally deteriorated from 11.24% in FY18 to 11.08% in FY19
mainly due to decrease in yield on advances in FY19 as compared
with FY18. Further ROTA has improved from 2.38% in FY18 to 4.16% in
FY19 due to decline in operating expenses. Operating expenses to
average total asset has improved from 7.65% in FY18 to 4.80% in
FY19.
* Moderate liquidity position: HFPL has moderate liquidity
position with average fund based working capital limit utilization
stood at around 41% for the last 12 months ending Jan 31, 2019.
Further, around 33% of total assets are funded by the networth and
unsecured loans. Further, HFPL has raised the NCDs which are having
tenor of 3 to 5 years matching with the product profile.
Key Rating strengths
* Experienced Promoters along with operational support from group
companies: HFPL has been promoted by the Jain family represented
by Mr. Vinod Jain and Mr. Rajesh Jain, who looks after the overall
management of the company. Mr. Rajesh Jain has an overall
experience of more than one decade in different businesses such as
transport, finance and construction and has been associated with
HFPL since inception. The promoters have also promoted SRG Housing
Finance Ltd. which is a Housing finance company engaged in the
financing of housing and mortgage loans as well as SRG Securities
Finance Ltd. which is into financing of equipment loans, vehicle
loans and business loans.
* Secured and diversified nature of products: HFPL's product
profile is diversified as it offers mortgage loans, Business loans
and Vehicle loans. In the case of Business loans, the company
provides loans to the corporate customers against immovable
properties (Loan against property) which are mortgaged by it in
order to secure the said loan. In case of vehicle loans, loans are
secured by the hypothecation of the vehicle. HFPL's outstanding
loans of INR12.13 crore which are classified as Secured loans and
advances as per audited results as on March 31, 2019.
* Moderate asset quality and moderate capital adequacy: HFPL's
asset quality has deteriorated in FY19 marked by increase in Gross
NPA ratio from 3.78% as on March 31, 2019 as compared with NIL as
on March 31, 2018. Further, Net NPA to Networth stood at 14.64% as
on March 31, 2019 as compared to NIL as on March 31, 2019. HFPL's
overall gearing improved from 3.96 times as on march 31, 2018 to
3.78 times as on March 31, 2019. HFPL has reported Capital Adequacy
Ratio (CAR) of 22.85% as on March 31, 2019 against 19.84% as on
March 31, 2018.
Hriday Fincorp Pvt. Ltd. (HFPL) was initially incorporated as
Satkar Finance Pvt. Ltd. on June 30, 1994 and got registered with
RBI in 2000 as non-deposit taking Non-Banking Finance Company
(NBFC). In 2012, name was changed to the present HFPL. HFPL is part
of SRG group and has common promoters, SRG group has business
activities in Rajasthan and Maharashtra and has diversified product
portfolio which includes housing finance, loan against property,
vehicle Financing etc. HFPL is primarily engaged in financing small
and medium enterprises for working capital and growth, loans for
purchase and construction of commercial property, Vehicle
financing, home purchase & home improvement loans, loans against
property, gold loans etc.
IDBI BANK: Moody's Affirm 'Ba2' Deposit Ratings
-----------------------------------------------
Moody's Investors Service has affirmed the deposit ratings of ICICI
Bank Limited and Axis Bank Ltd at Baa3, and of IDBI Bank Ltd at
Ba2.
Moody's has also placed IndusInd Bank Limited's domestic and
foreign currency issuer ratings of Baa3/P-3 under review for
downgrade. The bank's ba1 baseline credit assessment (BCA) and
adjusted BCA have also been placed under review for downgrade.
The baseline credit assessment (BCA) and adjusted BCA of ICICI and
Axis are affirmed at ba1. The BCA and adjusted BCA of IDBI has also
been affirmed at b2.
Moody's has also downgraded the counterparty risk assessments (CR
assessments) of Axis and ICICI to Baa3(cr)/P-3(cr) from
Baa2(cr)/P-2(cr), and the local currency counterparty risk rating
(CRR) of Axis and ICICI to Baa3/P-3 from Baa2/P-2.
At the same time, the outlooks for ICICI and Axis are revised to
negative from stable, and for IDBI to stable from positive.
RATINGS RATIONALE
The rapid and widening spread of the coronavirus outbreak
deteriorating global economic outlook, falling oil prices, and
asset price declines are creating a severe and extensive credit
shock across many sectors, regions and markets. The Indian
financial system has been one of the sectors affected by the shock,
especially given the already weakening operating environment.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety. Its action reflects the impact on the four financial
institutions listed above of the breadth and severity of the shock,
and the deterioration in credit quality it may trigger.
CHANGE IN OUTLOOK ON ICICI, AXIS AND IDBI DRIVEN BY POTENTIAL
DETERIORATION IN ASSET QUALITY
Moody's expects the economic shock, resulting from the nationwide
lockdown will exacerbate existing negative pressure on asset
quality from the already deteriorating operating environment prior
to the outbreak. The Indian government announced a 21-day
nationwide lockdown to slow the spread of the coronavirus on March
25.
Given the limited liquidity buffers small and medium-sized
enterprises (SMEs) maintain, Moody's expects the quality of loans
to these segments by ICICI and Axis will deteriorate. Additionally,
the asset quality of retail loans, and in particular unsecured
retail loans will deteriorate as borrowers' incomes are lost or
reduced during the lockdown.
Large corporates are also not immune from the outbreak, with the
outbreak having the potential to reverse the improving trend in
credit metrics.
For IDBI, the incremental impact on asset quality will be cushioned
by its very low new business origination over the last few years.
However, its weaker underwriting increases asset quality risks in
this environment.
AFFIRMATION OF BCA AND DEPOSIT RATINGS OF ICICI, AXIS AND IDBI
REFLECTS STRONG BUFFERS
Both ICICI and Axis maintain strong capital, with a common equity
tier 1 (CET1) ratio of 13.2% and 13.8% respectively at the end of
December 2019. The two banks also have high core profitability,
providing them with capacity to absorb higher credit costs. Their
funding has a high contribution from stable retail deposits and
will remain resilient even in an environment of increased risk
aversion. Given the above factors, there will have to be a
significant deterioration in asset quality to erode these buffers.
IDBI's solvency has improved significantly over the last year,
because of large capital infusions from its controlling
shareholder, Life Insurance Corporation (LIC), and from the
government of India (Baa2 negative). Its provision coverage ratio
was 87% at the end of December 2019, one of the highest among rated
Indian banks. And at 10.0%, the bank's CET1 ratio is consistent
with its BCA of b2.
The bank's funding profile has also improved significantly, with
the proportion of funding from retail deposits significantly
increased. The bank's casa ratio was 48% at the end of December
2019, compared to 38% at the end of March 2018, while the share of
bulk deposits declined to 17% from 33% over the same period.
DOWNGRADE OF CRR AND CRA OF ICICI AND AXIS REFLECTS LOWERED
ASSUMPTION OF SUPPORT
Moody's has lowered its assumption of systemic support for ICICI
and Axis to 'moderate' from 'high', resulting in a one-notch
downgrade of their CRRs and CRAs. This change incorporates Moody's
expectation, based on bailout of Yes Bank Limited (Caa1 Positive,
ca), that government support for private sector banks will not be
as forthcoming and timely as was being previously assumed.
In the case of Yes Bank, support was provided after the imposition
of a moratorium on the bank, which is an event of default. This
points to institutional constrains in providing timely support. In
addition, the quantum of support extended was also not high as,
even post the bailout, the bank's credit metrics remain weak.
Also, Moody's has assigned foreign currency CRR of Baa3/P-3 to
ICICI and Axis and their respective subsidiaries wherever it was
not previously assigned. The foreign currency CRR are at the same
level as the local currency CRR of their respective subsidiaries as
the risk profile of these obligations are similar. For ICICI Bank
Limited, Bahrain Branch, Moody's has assigned foreign currency CRR
of Ba2/NP, in line with the subsidiary's local currency CRR.
Moody's continues to assume a very high level of systemic support
for IDBI, given its continued strong links with the government.
This is reflected in its ownership structure, with the 100%
government-owned LIC holding a 51% controlling stake, and the
government of India holding 47%. The track record of large capital
infusions from the government and LIC also support Moody's
assumption of a very high level of support.
REVIEW FOR DOWNGRADE OF INDUSIND REFLECTS RISKS TO ASSET QUALITY
The review for downgrade of IndusInd's ratings reflects the
downside risks to asset quality amid the deteriorating
macroenvironment and financial market volatility.
The bank's loan portfolio includes a relatively higher proportion
of micro finance and vehicle finance loans than its peers, which
are at high risk of being negatively impacted by the economic shock
as customers in these segments tend to have limited buffers to
withstand economic stress.
IndusInd's funding is weak when compared to other rated Indian
banks, as reflected by its high deposit concentration and low share
of retail deposits. This weaker funding makes the bank more
susceptible to the dislocations in the financial markets, including
on wholesale funding sources.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
WHAT COULD CHANGE THE RATINGS UP
ICICI, AXIS:
Given the negative outlook on ICICI and Axis, the ratings of these
two banks are unlikely to be upgraded over the next 12-18 months.
The outlook could return to stable if asset quality remains steady
despite the deteriorating macro environment, or if the impact from
the coronavirus outbreak on the macro environment is not as severe
as Moody's currently anticipates.
IDBI:
Moody's could upgrade IDBI's BCA if it improves profitability on a
sustained basis, keeping credit costs at relatively low levels.
The final ratings could be upgraded if the bank's BCA is upgraded.
INDUSIND:
Given the review for downgrade, Moody's is unlikely to upgrade the
ratings over the next 12-18 months.
Moody's could confirm IndusInd's ratings if (1) high-quality retail
deposits continue to grow at around the same rate at they were till
the end of December 2019 and (2) leading indicators of asset
quality remain stable.
WHAT COULD CHANGE THE RATINGS DOWN
ICICI, AXIS:
The BCA could be downgraded if (1) there is a significant weakening
in asset quality, with in turn negative implications on capital and
profitability, and (2) there are indications of weakening funding,
as reflected by the trend in retail deposits.
A downgrade of the BCA will lead to a downgrade of the final
rating. Any indication of diminishing government support for the
banks could also lead to a downgrade of their final ratings.
IDBI:
The BCA could be downgraded if asset quality further weakens,
pushing the bank into making losses driven by higher credit costs.
A downgrade of the BCA will lead to a downgrade of the final
rating. Any indication of diminishing government support for the
banks could also lead to a downgrade of their final ratings.
INDUSIND:
IndusInd's BCA and Adjusted BCA could be downgraded if (1) there is
no meaningful improvement in growth in stable sources of funding,
(2) asset quality weakens, such that either NPL ratios or credit
costs increase significantly from current levels, and (3) there is
a reduction in profitability at the PPI level.
IndusInd's final ratings could be downgraded if (1) its BCA is
downgraded, or if (2) the sovereign rating is downgraded.
The principal methodology used in these ratings was Banks
Methodology published in November 2019.
ICICI Bank Limited is headquartered in Mumbai, and reported total
assets of INR 10.1 trillion at December 31, 2019.
Axis Bank Ltd is headquartered in Mumbai, and reported total assets
of INR 8.2 trillion at December 31, 2019.
IDBI Bank Ltd is headquartered in Mumbai, and reported total assets
of INR 3.0 trillion at December 31, 2019.
IndusInd Bank Limited is headquartered in Pune, and reported total
assets of INR 3.1 trillion at December 31, 2019.
IL&FS: Reaches Out to SG Bondholders as COVID-19 Delays Asset Sale
------------------------------------------------------------------
Press Trust of India reports that faced with a winding up petition
in a Singapore court, an overseas subsidiary of an IL&FS group
entity has told its bondholders to defer the plea as a proposed
asset sale in China has got delayed due to the COVID-19 outbreak.
The company said it wants to engage in a consensual discussion with
them regarding its obligations.
According to the report, ITNL Offshore PTE Ltd (IOPL), the
Singapore-based subsidiary of IL&FS-owned ITNL, has urged its
bondholders to defer the winding up petition and allow its group
Company, IIPL, to complete the sale of stake in a Chinese
Expressway project to resolve around INR2,500 crore debt and pay
its secured and unsecured creditors.
PTI relates that the company said it is 'committed to engaging in
consensual discussion with trustees with regard to its obligations
under the Notes and distribution of any recoveries from repayment
of loan'. But, its proposed asset sale has got delayed due to the
COVID-19 pandemic in China and worldwide.
HSBC has filed the winding up petition in a Singapore court against
the subsidiary of IL&FS Transport Services Ltd (ITNL) for recovery
of its dues. The plea was filed by HSBC as a trustee of the
bondholders, the report notes.
In the first such case against a group entity of crisis-hit
Infrastructure Leasing and Financial Services Ltd (IL&FS) Group,
the Hongkong and Shanghai Banking Corporation (HSBC) is seeking to
recover its funds parked in bonds worth INR1,000 million (over
INR1,050 crore) maturing in 2021, which were issued by IOPL,
according to the report.
The case was last heard on March 20 and deferred to April 17, 2020,
PTI notes.
About IL&FS
Infrastructure Leasing & Financial Services Limited (IL&FS) --
https://www.ilfsindia.com/ -- is an infrastructure development and
finance company based in India. It focuses on the development and
commercialization of infrastructure projects, and creation of value
added financial services. The company operates in Financial
Services, Infrastructure Services, and Others segments.
As reported in the Troubled Company Reporter-Asia Pacific on Oct.
3, 2018, the Indian Express said that the Indian government on Oct.
1, 2018, stepped in to take control of crisis-ridden IL&FS by
moving the National Company Law Tribunal (NCLT) to supersede and
reconstitute the board of the firm which has defaulted on a series
of its debt payments. This was said to be an attempt to restore the
confidence of financial markets in the credibility and solvency of
the infrastructure financing and development group.
INDIAN SURGICAL: CARE Reaffirms B+ Rating on INR2.94cr LT Loan
--------------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Indian Surgical Equipment Company Private Limited (ISEPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 2.94 CARE B+ Stable Reaffirmed
Short-term Bank
Facilities 5.00 CARE A4 Reaffirmed
Detailed Rationale & Key Rating Drivers
The ratings to the bank facilities of ISEPL continue to remain
constrained by small and fluctuating scale of operation, leveraged
capital structure and elongated working capital cycle. The rating
is further constrained by foreign exchange fluctuation risk and
risk associated with government regulations in the industry. The
ratings, however, draws comfort from experienced promoters with
long track record of operations, moderate profitability margins
association with reputed customer and supplier base.
Key Rating Sensitivities
Positive Factors
* Increase in scale of operations as marked by total operating
income of above INR30.00 crore on sustained basis.
* Improvement in capital structure as marked by overall gearing
ratio below unity on sustained basis.
Negative Factors
* Decline in profitability margins as marked by PBILDT margins
below 5.00%.
* Deterioration in the coverage indictors as marked by interest
coverage ratio below 1.15x on sustained basis.
Detailed description of the key rating drivers
Key Rating Weakness
* Small and fluctuating scale of operations: The scale of
operations continue to remains small as marked by total operating
income and gross cash accruals of INR9.09 crore and INR0.28 crore
respectively during FY19 (FY refer to April 1 to March 31) as
against INR8.05 crore and INR0.25 crore during FY18. Furthermore,
the net worth base also continue to remain relatively small at
INR2.11 crore as on March 31, 2019. The small scale limits the
company's financial flexibility in times of stress and deprives it
from scale benefits. The scale has been fluctuating over the past
three financial years that is FY17-FY19. The total operating income
increased by 12.92% in FY19 over the previous year. Though, the
scale of operation declined to INR8.05 crore in FY18 from INR8.80
crore in FY19 owing to reduction in sales volume due to
discontinuation of association with one of their key supplier from
Germany. In 11MFY20, the company has achieved total operating
income (TOI) of INR9.50 crore in (period refers to April 1 to
February 28; based on provisional results).
* Leveraged capital structure: The capital structure of the
company continue to remain leveraged as marked by overall gearing
ratio of 2.11x as on March 31, 2019 as against 1.19x as on March
31, 2018. The slight deterioration in capital structure was on
account of higher dependence on external borrowings to meet its
working capital requirement. Further the overall gearing ratio
stood at 2.04x as on September 30, 2019.
* Elongated working capital cycle: ISEPL normally allow credit
period of around 2-3 months to its customers, there are many
projects which require installation at multiple sites and ISEPL
receives payments only after successful installation at all the
sites. Further, the customer base also comprises of government
bodies/departments where there is normally a delay in realization
of payment due to procedural issues and also due to slow allocation
of budget in health sector by government resulting into payment
getting delayed. The company normally maintains inventory of around
one month in form of traded goods to meets the immediate
requirements of its customers. Furthermore, the company buy the
product on cash/ advance basis from their suppliers. Though,
working capital borrowings remain utilized around 95% for the past
12 month's period ending on February 28, 2020.
* Foreign exchange fluctuation risk: The company is also importing
material from United Kingdom, Germany, and USA. Though the
proportion of imports vary according to the type of orders. The
final products manufactured by the company are sold in the domestic
market, with initial cash out flow occurring in foreign currency
and the realization taking place in domestic currency. Further,
company doesn't hedge for any foreign currency transaction thus,
exposing company's profitability margins to foreign currency
fluctuation risk.
* Risk associated with the government regulations in the industry:
In India, the Central Drugs Standard Control Organization is the
main regulatory body for Notified Medical equipment. Hence, any
violation is punishable and the authority can also make provisions
for penalizing the manufacturing units in terms of suspension or
cancelling of license. Any adverse change in policies of government
can affect business.
Key Rating Strengths
* Experienced promoters with long track record of operations: The
overall operations of the company are managed by Ms. Sneha Rajpal,
who is graduate by qualification and have vast experience of around
three decade in dealing with medical equipment. She is associated
with ISEPL since inception, Further she is supported by Mr. Abhinav
Rajpal who is post graduate by qualification and looks after sales
and service part of medical equipment.
* Moderate profitability margins and interest service coverage
indictors: ISEPL offers installation and annual maintenance
servicing facility of the medical equipment's; which requires
specialized technical know-how. The profitability margins of the
company continue to remain moderate as marked by PBILDT margin of
9.10% in FY19 as against 9.15% in FY18.The PAT margin continue to
remain below unity for the last three financial year FY17-19 on
account of high interest cost. Further in 6MFY20 (Provisional:
refers to the period from April 01 to September 30, 2019) the
PBILDT and PAT margin stood at 8.65% and 0.67% respectively.
Further, the interest coverage indicators also continue to remain
moderate owing to moderate profitability; as marked by interest
coverage ratio of 1.70x for FY19 as against 1.59x for FY18.
* Association with reputed customer and supplier base: Owing to
its presence in trading of medical equipment for the last three
decades coupled with extensive experience of key managerial
personal in same field, ISEPL enjoys good relation with various
reputed customer and suppliers in the medical field. ISEPL is
authorized dealer of "Thermo Fisher Scientific" medical equipment
in North and east India along with this it is also PAN India
distributor. The company also enjoys long standing relation with
various reputed customer from government and Private health care
facility like AIIMS, Shri Ganga Ram hospital among other. This
long-term and close relationship with its clients is reflective of
the company's demonstrated ability to provide quality products and
results in higher revenue visibility and increased presence in the
market.
Liquidity: Stretched- Liquidity is marked by tightly matched
accruals to repayment obligations, highly utilized bank limits
around 95% and modest cash balance of INR0.53 crore.
Indian Surgical Equipment Company Private Limited (ISEPL) was set
up on August 04, 1981 as a proprietorship concern which got
converted into private limited company in 1987.It is currently
managed by Ms Sneha Rajpal and Mr. Abhinav Rajpal. ISEPL is engaged
in the trading of medical equipment across India and mostly deals
in Life science & diagnostic equipment like Operation table,
Anesthesia Machine, surgical instruments etc. ISEPL have also
started manufacturing Warm blanket and the same is sold under brand
name "Therma". The company imports the equipment from Germany and
USA and caters to hospitals such as All India Institute of Medical
Sciences, Shri Ganga Ram hospital and various government hospital.
INDORE TABLE: Ind-Ra Cuts Rating on Bank Loans to D/Not Cooperating
-------------------------------------------------------------------
India Ratings and Research (Ind-Ra) has downgraded Indore Table
Tennis Trust's bank loans to 'IND D (ISSUER NOT COOPERATING)' from
'IND B (ISSUER NOT COOPERATING)'. The issuer did not participate in
the rating exercise despite continuous requests and follow-ups by
the agency. Thus, the rating is based on the best available
information. Therefore, investors and other users are advised to
take appropriate caution while using these ratings.
The instrument-wise rating actions are:
-- INR72.2 mil. Term loans (long-term) due on April 2019
downgraded with IND D (ISSUER NOT COOPERATING) rating; and
-- INR0.54 mil. Working capital facility (long-term) downgraded
with IND D (ISSUER NOT COOPERATING) rating.
Note: ISSUER NOT COOPERATING: Issuer did not cooperate; based on
the best available information
KEY RATING DRIVERS
The downgrade reflects the irregularities in Indore Table Tennis
Trust's loan accounts resulting in it being recorded as a
non-performing assets, according to the information available in
the public domain.
COMPANY PROFILE
Indore Table Tennis Trust was formed in December 1994. It runs the
Abhay Prashal Sports Club, which provides table tennis and other
indoor game facilities.
J M J CHARITABLE: Ind-Ra Affirms 'BB' on INR182-Mil. Bank Loans
---------------------------------------------------------------
India Ratings and Research (Ind-Ra) has affirmed J M J Charitable
Education Society's (JMJCES) proposed bank facilities as follows:
-- INR182.20 mil. (reduced from INR400 mil.) Proposed bank loans*
affirmed with Provisional IND BB/Stable rating.
*The proposal is in the final stage of sanction. The final rating
will be assigned upon receipt of the sanction letter.
KEY RATING DRIVERS
The ratings reflect the continued volatility in JMJCES's operating
margins (including rent) during FY14-FY19. The operating margin
declined to 11.41% in FY19 (FY18: 12.39%) due to 1.77% YoY growth
in key operating expenses. The society reported a net deficit of
INR0.17 million in FY19 against a net surplus of INR1.57 million in
FY18, mainly due to an increase of 8.95% YoY in staff costs.
The rating also reflects JMJCES's small scale of operations, as
reflected by the total income of INR191.30 million in FY19 (FY18:
INR190.08 million). Despite a fall in student headcount to 1,675 in
FY19 (FY18: 1,763), the society's revenue remained stable on the
back of 6.68% YoY growth in the average fee per student. Tuition
fee income continues to dominate the revenue profile, with a
contribution of 91.68% in FY19 (FY18: 91.04%). As of March 2020,
1,696 students were studying in JMJCES. Ind-Ra expects the
society's revenue to grow only marginally in FY20 as it reported
only slight growth in student headcount.
The rating factor in society's low debt burden. The debt (rent)/
current balance before interest, depreciation, and rents (CBBIDR)
ratio remained comfortable at 0.77x in FY19 (FY18: 0.74x) due to
flat growth in total debt (represents only lease obligations). The
society has postponed the plan to start a new school in North
Bengaluru to FY22. However, it is proceeding with the CAPEX for the
construction of a new campus in Chikkaballapur, Bengaluru,
entailing a total cost of INR300 million, over FY20-FY21, which
will be funded through a mix of debt (INR182.20 million) and
internal accruals/unsecured loans. The management has expended
INR80 million towards the CAPEX plan through its own funds in FY20.
The bank funds are likely to be released in April 2020, as they are
in the final stage of the process. Ind-Ra expects the debt burden
to increase significantly in FY21, due to debt incurred towards the
CAPEX plan.
The ratings are supported by the society's comfortable debt
servicing capabilities. The fixed charge coverage ratio declined
slightly to 1.29x in FY19 (FY18: 1.35x) as the CBBIDR fell by 7.28%
YoY to INR21.83 million. The society's only debt servicing
obligation is lease rent.
Liquidity Indicator – Adequate: JMJCES does not have any long
term debt from banks/financial institutions. The society's
available funds (cash and unrestricted investments) declined by
13.18% YoY to INR64.73 million in FY19 due to assets created
through own funds. As the society is debt-free, the available funds
to long-term debt (rent) remained strong, though it declined to
385.38% in FY19 (FY18: 427.78%) due to a fall in available funds.
The available funds covered 38.19% of the society's operating
expenditures in FY19 (INR169.47 million) as against 44.77% in FY18
(INR166.53 million). The collection period was nil during FY15-FY19
and the society does not have any working capital facility. In
FY20, JMJCES had funds (including the fixed deposits free from
charges) amounting to INR47.72 million against debt service
commitments (including rents) of INR17.57 million during the year.
RATING SENSITIVITIES
Positive: Events that may, individually or collectively, lead to a
positive rating action are:
- a 10% growth in student headcount
- an improvement in the operating margin to above 15% on a
sustained basis
- an improvement in the fixed charge interest coverage to above
1.5x on a sustained basis
Negative: Events that may, individually or collectively, lead to a
negative rating action are:
- a 10% fall in student headcount
- decline in the operating margin to below 10% on a sustained
basis
COMPANY PROFILE
JMJCES came into existence on May 16, 2013, under Registrar of
Societies, Rajajinagar, Bengaluru Urban district. The Acharya
Institute of Management & Sciences was initially under the
management of JMJ Education Society (debt rated at 'IND
BBB-'/Stable). Due to changes in location and in the management,
all the Acharya institutes managed under JMJES were transferred to
a new location viz, Soldevanahalli, Bengaluru; the only exception
was JMJCES, which remained in the Peenya campus, Bengaluru.
JAYA HUME: CARE Lowers Rating on INR5cr LT Loan to B+
-----------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of Jaya
Hume Pipes Private Limited (JHPPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 5.00 CARE B+; Stable Revised from
Facilities CARE BB-
Short-term Bank
Facilities 5.00 CARE A4 Reaffirmed
Detailed Rationale & Key Rating Drivers
The revision in the ratings assigned to the bank facilities of
JHPPL takes into account decreasing total operating income during
FY19, decline in profitability margins through satisfactory, short
revenue visibility from book position and elongated working capital
cycle days. The ratings continue to tempered by small scale of
operation and tender based nature of operation. However, the rating
also take into account strength from established track record and
long experience of the promoters, comfortable capital structure and
debt coverage indicators and stable outlook of pipes industry.
Key Rating Sensitivities
Positive Factors
* Consistent increase in the company's scale of operations by more
than 30% while maintain g its profitability margins leads
substantial increase in GCA
* Improvement working capital days at back of improvements
collection days coupled with inventory days.
Negative Factors
* Decline in capital structure as marked by overall gearing ratio
above 1.25x
Detailed description of the key rating drivers
Key Rating Weaknesses
* Decrease in total operating income during FY19: The total
operating income of the company has decreased by 15% from INR47.73
crore during FY18 to INR40.72 crore during FY19 on account of
decrease in receipt of tenders from government departments and
execution of orders in hand. Furthermore, the company has achieved
a total operating income of INR15.50 crore during11MFY20 (Prov.).
* Decline in profitability margins though satisfactory: The PBILDT
margin has decreased by 294 bps from 17.23% during FY18 to 14.29%
during FY19. The margin associated with each project varies with
the size and from client to client due to price competition and
tender based nature of business which involves bidding. The PAT
margin has also decreased by 164 bps from 7.81% in FY18 to 6.17% in
FY19 on account of decrease in TOI.
* Elongated working capital cycle days: The company is primarily
engaged in manufacturing of pipes and implementing irrigation and
pipeline projects and hence the operations of the company remain
working capital intensive on account of stretched collection days
and average creditor days. The company receives the payment from
Government departments within 90 days from the date of raising the
bill. However, on some occasions, the payment is received after
various technical clearances which may result in delayed receipt of
payments. Due to the above mentioned factor, the average collection
days stood at 140 days during FY19 as compared to 89 days during
FY18. Furthermore, the average creditor's period increased from 57
days during FY18 to 68 days during FY19 as the company makes
payment to its creditors within 30 days, however depending on the
realization from debtors, the company extends its payment to
creditors up to two months. Furthermore, the company normally
stocks more inventory when the prices of the materials are
favourable and low due to which the average inventory days is in
the range of 50-90 days. Owing to the aforementioned reasons, the
operating cycle of the company stood high at 141 days during FY19
when compared to 118 days during FY18. The average utilization of
cash credit was
97% for the last 12 months ended February 29, 2020.
* Short-term revenue visibility from current order book position:
The company has an order book of INR21.86 crore as on March 13,
2020 and the same is likely to be completed by FY21, thereby
reflecting short term revenue visibility to the company.
Key Rating Strengths
* Established track record and long experience of promoters in the
pipes manufacturing industry: JHPPL was incorporated in 2002 by
Ankireddy family members. Mr. Ankireddy Sambasiva Rao is a B.Com
graduate and Managing Director of the company who is having more
than two decade of experience in the manufacturing of cement pipes.
The other promoter, Mr. Anki Reddy Rangarao has more than three
decades of experience in the manufacturing of cement pipes. The
long presence of the promoters in the industry has resulted in
established relationship with suppliers and customers.
* Comfortable capital structure and debt coverage indicators: The
capital structure of the company marked by overall gearing ratio
remained comfortable and improved from 0.41x respectively as on
March 31, 2018 to 0.24x as on March 31, 2019, due to increase in
tangible net worth coupled with decrease in total debt on account
of repayment of term loan instalments and unsecured loans. However,
debt equity ratio of the company marginally deteriorated from 0.11x
as on March 31,2018 to 0.24x as on March 31,2019 due to increase in
long term loans debt on account increase in term loan for the
purpose of purchase of vehicles for transporting pipes. The debt
coverage indicators marked by total debt/GCA and PBILDT interest
coverage remained comfortable during FY19. However, The TD/GCA
marginally deteriorated from 1.19x in FY18 to 1.22x in FY19, due to
significant decrease in debt levels. Furthermore, the interest
coverage also deteriorated from 9.59x in FY18 to 6.58x in FY19 due
to decrease in PBILDT in absolute terms on account of increase in
total operating cost. Also, total debt/cash flow from operations
improved from 1.19x during FY18 to 1.22x during FY19 due to
increase in cash flow operation at back of decrease in working
capital changes by way low inventory holding as well as increase in
creditors.
Liquidity-Adequate:
Adequate liquidity characterized by sufficient cushion in accruals
vis-à-vis repayment obligations and cash balance of INR0.23 Crore
as on March 31, 2019. The Liquidity ratio of 2.32x and Quick Ratio
of 1.72x as on March 31, 2019. The average utilization of Cash
credit facility was 97% for the last 12 months ended February 29,
2020.
Guntur based, Jaya Hume Pipes Private Limited (JHPPL) was
incorporated in 2002 as a private limited company by Mr. Anki Reddy
Samba Siva Rao and his family members. JHPPL is engaged in
manufacturing of industrial pipes such as VRCC pipes, PSC pipes &
RCC pipes. Apart, the firm is also engaged in implementing pipeline
works and irrigation works related projects by undertaking tender
based contracts for the Andhra Pradesh Government. The
manufacturing unit of the company is located at Guntur district,
Andhra Pradesh. The company purchases raw materials like cement,
steel, sand and metal from local suppliers. The current installed
capacity for manufacturing cement pipes is 70 pipes per day.
KSP INC: Ind-Ra Places 'BB' Issuer Rating on Watch Negative
-----------------------------------------------------------
India Ratings and Research (Ind-Ra) has placed KSP Inc's (KSP)
Long-Term Issuer Rating of 'IND BB' on Rating Watch Negative (RWN).
The Outlook was Positive.
The instrument-wise rating action is:
-- INR150.00 mil. (increased from INR103.00 mil.) Fund-based
export-related limits placed on RWN with IND
BB/RWN/INDA4+/RWN rating.
The RWN reflects the adverse impact of the nation-wide lockdown on
the firm's execution of orders. Furthermore, given the firm's
export exposure towards the United States of America, the United
Kingdom, and Europe, Ind-Ra believes the receipt of order inflow is
highly uncertain. Additionally, the agency expects the firm's FY20
top line to have declined to owe to the loss of a major customer,
thereby creating further uncertainty on the firm's ability to
maintain a healthy order book.
KEY RATING DRIVERS
KSP's scale of operations remained medium, backed by revenue of
INR670.00 million during 9MFY20 (FY19: INR759.23 million). Ind-Ra
estimates the firm's top line to have declined in FY20 as the firm
lost one of its major customers. During FY19, the top line improved
on account of increased customer orders and the firm's switch of
focus to the manufacturing segment, from trading. The firm derived
60%-65% of FY19 revenue from the manufacturing segment and the rest
from trading. As of March 2020, KSP had total outstanding orders of
INR220 million to be executed within three to three-and-a-half
months; however, the execution of the same has been halted, owing
to the current lockdown.
Liquidity Indicator- Stretched: KSP's cash flow from operations, as
well as free cash flows, has been consistently positive for the
last four years due to low-interest burden as against the EBITDA
level. The average maximum utilization of the fund-based limits
stood at 85.43% for the 12-months ended in February 2020. However,
given the lockdown in India, as well as in the global market, the
agency expects the firm's working capital cycle to be elongated,
especially the receivable period. Further, the agency believes this
elongation of the working capital cycle, along with the anticipated
decline in profitability will hamper the cash flows of the firm in
FY21, thereby stretching the liquidity. The cash and cash
equivalents are moderate at INR20.22 million as per 9MFY20 (FY19:
INR 19.96 million).
KSP's ratings remain constrained on account of its partnership
nature of business.
The rating is, however, supported by the firm's healthy margins.
KSP's profitability improved to 22.57% in 9MFY20 (FY19: 13.31%)
owing to reduced expenses. The return on capital employed stood at
43% in 9MFY20 and FY19 (FY18: 28%).
The rating is further supported by KSP's strong credit metrics. In
9MFY20, interest coverage (operating EBITDA/gross interest expense)
improved to 21.82x (FY19:11.57x) and net leverage (total adjusted
net debt/operating EBITDA) to 0.88x (1.17x) on account of an
improvement in the absolute EBITDA at INR121.88 million (INR101.08
million). However, with the outbreak of COVID-19 and the resultant
lockdown, Ind-Ra expects the firm's operational as well as
financial performance to plunge in FY21, and gradually improve once
the situation subsides.
RATING SENSITIVITIES
The RWN indicates that the ratings may be downgraded or affirmed.
Ind-Ra will monitor the impact of the outbreak of COVID-19and the
consequent lockdown on the flow of orders. The agency will also
assess the firm's ability to recover from losing one of its major
customers. Ind-Ra will resolve RWN by June 2020.
COMPANY PROFILE
Founded in 1977, KSP is engaged in manufacturing and trading of
lawn and garden decorative items such as garden products, wrought
iron furniture, garden arches, garden fences, bird feeders,
furniture, among others. The firm exports these items to Europe,
the United Kingdom, and North America. The firm is managed by Mr.
Puneet Berry and his family.
LAVISH EXIM: Ind-Ra Maintains 'D' Loan Rating in Non-Cooperating
----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has maintained Lavish Exim
Private Limited's bank loan 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 rating. The rating will
continue to appear as 'IND D (ISSUER NOT COOPERATING)' on the
agency's website.
The instrument-wise rating action is:
-- INR51.5 mil. Term loans (long-term) due on March 2019
maintained in a non-cooperating category with IND D (ISSUER
NOT
COOPERATING) rating.
Note: ISSUER NOT COOPERATING: The rating was last reviewed on April
18, 2016. Ind-Ra is unable to provide an update, as the agency does
not have adequate information to review the rating.
COMPANY PROFILE
Incorporated on December 23, 2005, Lavish Exim operates an
international school under the name Greater Noida World School, in
Greater Noida, Uttar Pradesh.
LAXMI SOPAN: CARE Lowers Rating on INR3.80cr LT Loan to B-
----------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Laxmi Sopan Agricultural Produce Marketing Company Limited (LSCL),
as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 3.80 CARE B-; Stable; ISSUER NOT
Facilities COOPERATING; Revised from
CARE B; Stable on the basis
of best available information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from LSCL to monitor the rating
vide e-mail communications dated September 10, 2019, January 9,
2020, February 28, 2020, March 3, 2020, March 7, 2020 and numerous
phone calls. However, despite CARE's repeated requests, the company
has not provided the requisite information for monitoring the
rating. 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 LSCL bank facilities will now be CARE B-;
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.
The revision in the rating assigned to the bank facilities of LSPL
takes into account no due-diligence conducted with auditor and
non-availability of information due to non-cooperation by LSCL with
CARE'S efforts to undertake a review of the rating outstanding.
CARE views information availability risk as a key factor in its
assessment of credit risk. The rating further takes into account
its modest scale of operation along with net losses registered
during the past three financial years ended in FY18, leveraged
capital structure, stretched liquidity positions, weak debt
coverage indicators and risk of non-renewal of agreement. The
rating further continues to derive strength from strength from
experienced promoters, along with moderate occupancy rates of
leased assets.
Detailed description of the key rating drivers:
At the time of last rating on April 4, 2019, the following were the
rating strengths and weaknesses:
Detailed description of the key rating drivers
Key Rating Weaknesses
* Moderate scale of operations along with net losses registered:
The scale of operations of the company increased at a yoy growth
rate of 81.25% in FY18 and remained modest with total operating
income (TOI) of INR1.26 crore in FY18 (Audited; refers to a period
April 1 to March 31) and total net worth base of INR1.10 crore as
on March 31, 2018, thus limiting financial flexibility of the
company in times of stress. Further, during 11MFY19, the company
has registered the TOI of INR3.65 crore. The company continues to
register losses during the past three financial years ended in
FY18. However, the cash accruals remained positive during FY18.
* Leveraged capital structure and weak debt coverage indicators:
The capital structure of the company continues to remain leveraged
as reflected by debt to overall gearing ratio of 3.56x and 6.29x as
on March 31, 2018 (as against 3.68x and 7.25x as on FY17). Owing to
low accruals and high debt profile, the debt coverage indicators of
the company also continues to remain weak.
* Stretched liquidity position: The liquidity positions of the firm
remained weak as reflected by current ratio of 0.12x as on March
31, 2018.
* Risk of non-renewal of agreement: The company is exposed to the
risk of non-renewal of agreements by its customers. Moreover, the
lock in period for the agreements has lapsed which further
increases the risk of termination of agreements.
Key Rating Strengths
* Experienced promoters: The promoters have gained an experience
of around one and half decade in diverse industry through their
association with group entities. The promoters are ably supported
by experience d personnel in second-tier management.
* Moderate occupancy rates: The occupancy rate of LSCL remained
moderate in range of 60% -80% for last three years ended FY18. The
moderate occupancy rate of entity aids in revenue visibility over
medium term.
LSCL was established in 2014 and belongs to Laxmi group of Chimur.
The group is engaged in diversified businesses viz. trading of
cattle feed, providing real estate services and in trading of
agricultural stock. LSCL is engaged in the business of leasing of
real estate and providing value addition to lessee (polishing and
cold storage services).
LOKESH INDUSTRIAL: CARE Cuts Rating on INR10cr LT Loan to B-
------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Lokesh Industrial Services Private Limited (LISL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 10.00 CARE B-; Stable; ISSUER NOT
Facilities COOPERATING; Revised from
CARE B; Stable on the basis
of best available information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from LISL to monitor the rating
vide e-mail communications dated October 22, 2019, November 5,
2019, December 10, 2019, January 2, 2020, January 7, 2020,
February 4, 2020, March 12, 2020 and numerous phone calls. However,
despite CARE's repeated requests, the firm has not provided the
requisite information for monitoring the rating. 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 LISL
bank facilities will now be CARE B-; 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 ratings.
The revision in the rating assigned to the bank facilities of LISL
takes into account no due-diligence conducted with auditor and
non-availability of information due to non-cooperation by LISL with
CARE'S efforts to undertake a review of the rating outstanding.
CARE views information availability risk as a key factor in its
assessment of credit risk. The rating continues to be constrained
by modest scale of operation, moderate profit margins albeit on
declining trend, moderate solvency position and
its presence in highly competitive industry. However, the rating
continues to derive benefit from experienced promoters and reputed
customer base.
Detailed description of the key rating drivers:
At the time of last rating on March 27, 2019, the following were
the rating strengths and weaknesses:
Detailed description of the key rating drivers
* Modest scale of operations: The total operating income (TOI) of
the company has grown by 95.31% in FY18 owing to higher number of
fresh tenders executed during FY18. Furthermore, the company has
achieved INR35.23 crore till February 28, 2019 (11MFY19).
* Moderate operating profit margins albeit on declining trend: The
PBILDT margins remained in the range of 13.72% to 6.85% and PAT
margins in the range of 2.18% to 4.36% during the last three
financial years ended in FY18. The PBDILT margin of the company has
declined in FY18 on account of increase in maintenance cost.
However, net profit margins improved as on March 31, 2018 mainly
due to decrease in interest cost on account of repayment of term
loans.
* Moderate solvency position: The capital structure of the company
improved marginally and continues to remain moderate with overall
gearing of 1.17x as on March 31, 2018, on account of lower debt
level mainly owing to repayment of term loans. Further, owing to
improved cash accruals and moderate gearing levels, the debt
coverage indicators of the company stood moderate.
* Stretched liquidity position: The liquidity position of the
company remained stretched with funds being mainly blocked in
receivables as reflected by higher average gross current asset days
of 203 days during last three years ended in FY18. The same
resulted in overutilization of its cash credit limit in the past
twelve months ended in February 28, 2019; however, the same gets
regularized within 30 days.
* Dependence on construction and infrastructure sector: The
business of LISL continues to be highly dependent on construction
and infrastructure industry as 70% of revenue is from road
construction. Currently, given the high interest rates and volatile
economic environment, there has been slowdown in release of new
contracts, which has resulted in sluggish growth being witnessed by
the industry. Liquidity related concerns and execution challenges
continue to impact the sector in the country. Delays in obtaining
statutory clearances and increasing working capital needs have put
pressure on the financial profile of the companies in this sector.
This has been compounded by the inability to pass on input cost
increases which has resulted ina fall in their margins.
Key Rating Strengths
* Experienced promoters: LISL is currently being managed by Mr.
Lokesh Santosh Kumar Jain, Mr. Kartik Jain and Mr. Nipul Jain
having an average experience of around eight years in the mining
industry through their association with Lokesh Group. On account of
experience of the promoters, the company has gained reputation and
has established good relationships with its clients thereby earning
repeated orders.
* Reputed clientele: In past the company has executed contracts
for reputed private companies based in India. In light of
satisfactory work, LISL has managed to get repeat orders from these
reputed clients and also has reduced timely realization of
receivables.
LISL is a part of Lokesh Group, incorporated in 2007. LISL is
mainly engaged in material handling activities (contributing to 30%
of the revenue) and road construction (contributing to 70% of the
revenue) spread across Pan India.
MBC INFRA-SPACE: CARE Keeps 'C' on INR4.5cr Loans in NonCooperating
-------------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of MBC
Infra-Space Private Limited (MBC) continues to remain in the
'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 4.55 CARE C; ISSUER NOT COOPERATING;
Facilities Based on best available
Information
Short-term Bank 4.25 CARE A4; ISSUER NOT COOPERATING;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from MBC to monitor the rating(s)
vide e-mail communications/letters dated December 11, 2019, January
1, 2020, January 15, 2020, February 3, 2020, February 11, 2020,
March 5, 2020, March 9, 2020, March 12, 2020 and numerous phone
calls. However, despite CARE's repeated requests, the MBC 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 MBC's bank facilities will now be denoted as CARE C;
Stable/ 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 rating(s).
The rating assigned to the bank facilities of MBC are constrained
on account of its small scale of operations with thin profit
margins, leveraged capital structure and modest debt coverage
indicators and moderate order book position. Further, the ratings
are also constrained due to its tender driven nature of business
with high competitive intensity of construction industry and
volatility in material prices. The ratings, however, derives
comfort from experienced directors, reputed clientele and
diversified geographical exposure.
Detailed description of the key rating drivers
At the time of last rating on February 14, 2019 the following were
the rating strengths and weaknesses:
Key Rating Weaknesses
* Small scale of operations with thin profit margins: MBC is
engaged in the business of industrial civil construction. The scale
of operations marked by total operating income (TOI) remained small
at INR19.18 crore in FY18 as compared to INR18.24 crore during
FY17. During FY18, profitability remained thin marked by low PAT
margin of 0.39% and low cash accruals of INR0.47 crore in FY18.
* Leveraged capital structure and modest debt coverage indicators:
The capital structure of MBC remained leveraged marked by an
overall gearing ratio of 2.35x as on March 31, 2018 owing to low
networth base. Further, the debt coverage indicators of the company
also remained modest marked by an interest coverage ratio of 1.43
times and total debt to GCA ratio of 8.81 times during FY18 owing
to thin profitability.
* Moderate order book Position: MBC holds moderate order book of
INR12.10 crore as on January 10, 2019 out of which majority orders
will be executed by the end of March 2019.
* Tender driven nature of business with high competitive intensity:
MBC participates in the tenders passed by various state government
department as well as various large corporates for civil
construction work mainly pertaining to industrial civil
construction. Hence, the entire business prospects are highly
dependent on the tenders floated by corporates. Further, the
construction industry is highly fragmented in nature with presence
of large number of unorganized players and a few large organized
players. Further, the profitability also varies among the projects.
Hence, the aggressive bidding by the players in order to bag the
contracts with high competition may lead to dip in its
profitability.
* Volatility in material prices: MBC procures materials like
steel, cement and sand from local suppliers, prices of which are
highly volatile in nature. Hence, its business is exposed to
fluctuation in raw material prices i.e. steel, cement and sand. Any
adverse changes in procurement cost can have a negative impact on
its profit margins.
Key Rating Strengths
* Experience Promoters: MBC is managed by Mr. Manoj Baruah, a key
promoter, holds more than a decade of experience in civil
construction industry through his association with MB Corporation
and MBC since 1999 and looks after overall management of MBC.
* Reputed clientele: MBC is catering to the demands of the
government department of Gujarat and other various large corporates
having sound credit profile. Further, top customers contribute
almost 95% in its total sales.
* Diversified geographical exposure: MBC is increasing its
presence in the projects across segments and regions. It has 12
on-going projects with total value of INR27.86 crore which is well
diversified geographically. Currently, MBC's exposure to orders is
diversified to different places of India like Vapi, Nagpur,
Dadranagar Haveli, Chittorgarh and Karnataka etc.
Vapi (Gujarat) based, MBC was established as private limited
company in year 2012 by Mr. Manoj Barua and Mrs. Bobby Baruah. The
company is based at Vapi and is primarily involved in business of
industrial civil construction and has carried out various projects
such as civil work for construction of Industrial shed and other
industrial civil construction. Also, Mr. Manoj Baruah is also
associated with a proprietorship firm named MB Corporation since
1999.
PANCHAMRUT PROPERTIES: CARE Keeps 'B' Rating in Not Cooperating
---------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Panchamrut
Properties Private Limited (PPPL) continues to remain in the
'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 6.21 CARE B; ISSUER NOT COOPERATING;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from PPPL to monitor the
rating(s) vide e-mail communications/letters dated December 11,
2019, January 1, 2020, January 15, 2020, February 3, 2020, February
11, 2020, March 5, 2020, March 9, 2020, March 12, 2020 and numerous
phone calls. However, despite CARE's repeated requests, the PPPL
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 PPPL's bank facilities will now be denoted as
CARE B; 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 assigned to the bank facilities of Panchamrut Properties
Private Limited (PPPL) are constrained on account of highly
leveraged capital structure and weak debt coverage indicators. The
ratings also remain constrained by renewal and cancellation risk in
lease contracts. The ratings, however, derive benefit from
experienced management, medium term revenue visibility on account
of premises given on lease basis to 'Satkarya Education Trust' and
operating model mechanism leading to healthy operating
profitability.
Detailed description of the key rating drivers
At the time of last rating on May 23, 2019, the following were the
rating strengths and weaknesses (updated for information available
from Registrar of companies):
Key Rating Weaknesses
* Renewable and cancellation risk in lease contracts: PPPL has
entered into lease agreement for a period of seven years and six
months (validity from December 1, 2018 to May 31, 2026) with
Satkarya Education Trust (SET). It might have to find another
lessee in case the lease is not renewed at expiry/ cancelled by the
existing one, even at a lower rate, given the requirement to
service fixed cost associated with the premises. The company was
having lease agreement with M/s Jay Jalaram Group for running a
school which was breached before scheduled termination.
* Highly leveraged capital structure and weak debt coverage
indicators: The capital structure of PPPL, as marked by overall
gearing ratio stood highly leveraged due to high amount of debt
coupled with thin tangible net worth. As on March 31, 2019,
Tangible net worth level stood at INR0.02 crore as against INR0.03
crore as on March 31, 2018. Owing to highly leveraged capital
structure, the debt coverage indicators also remained weak marked
by total debt to GCA ratio which has improved but remained weak at
28.35 years during FY19 as against 93.46 years during FY18 and
interest coverage ratio remained at 1.29x during FY19 as against
1.08x during FY18.
Key Rating Strengths
* Experienced management: PPPL has been promoted and managed by
Patel family. Mrs. Parul Patel holds an experience of more than a
decade in same line of business and handles overall business of the
company. Also Mr. Shailesh patel, husband of Mrs. Parul Patel,
holding the experience of more than a decade and supports her in
running the business. Ms. Mansi Patel holds an experience of three
years.
Medium term revenue visibility on account of warehouses given on
lease basis to "Satkarya Education Trust" PPPL has entered into
seven year and six month agreement (validity from December 01, 2018
to May 31, 2026) with Satkarya Education Trust (SET). As per the
agreement, SET has to pay a rent of INR1.32 crore to PPPL. Also,
the parties have agreed for an escalation of 30% in the rent after
completion of every thirty months. Assuming that the agreement will
continue, PPPL is expected to generate moderate revenue providing
medium term revenue visibility. During FY19, PPPL has generated a
TOI of INR1.24 crore as against INR1.32 crore during FY18.
* Operating model mechanism leading to healthy profits: PPPL
follows the lease-based revenue model for its premises, wherein
PPPL leases out land and building and generates predetermined
rental income on a monthly basis. During FY19, PPPL has generated a
TOI of INR1.24 crore as against INR1.32 crore during FY18. Further
the company has reported PBILDT of INR1.08 crore (86.98%) during
FY19 as against INR1.02 crore during FY18 (77.23%). Further, due to
lower depreciation and interest charges, PPPL has reported net
profit of INR0.07 (5.72%) crore during FY19 as against net losses
during FY18.
Established in 2002, Gujarat based PPPL is promoted by Mr. Patel
and his family members. The company is into the activities of
constructing building and renting it on lease basis. The company
is, at present having two directors namely Mrs. Parulben Patel and
Miss. Manasi Patel. The company has given land and building
comprising of a school/office building and hostel on lease to
Satkarya Education Trust, Boriavi, Anand who Is running Takshshila
Vidyalaya, Nalanda Higher Secondary School, Kid's Land with dining
hall, admin office and hostel building.
PANCHANAN COLD: CARE Lowers Rating on INR10.66cr Loan to 'D'
------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Panchanan Cold Storage Private Ltd. (PCPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 10.66 CARE D; Issuer Not Cooperating
Facilities Revised from CARE B-; Stable;
Issuer Not Cooperating; based
on best available information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from PCPL to monitor the rating
vide letters/emails communications dated December 13, 2019,
December 20, 2019, February 4, 2020 and numerous phone calls.
However, despite CARE's repeated requests, the entity has not
provided the requisite information for monitoring the ratings. In
line with the extant SEBI guidelines, CARE has reviewed the ratings
on the basis of the publicly available information which however,
in CARE's opinion is not sufficient to arrive at fair ratings. The
Panchanan Cold Storage Private Limited's bank facilities will now
be denoted as CARE D; ISSUER NOT COOPERATING.
Users of these rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
The rating assigned to the bank facilities of Panchanan Cold
Storage Pvt. Ltd. takes into account the ongoing delays in debt
servicing.
Detailed description of the key rating drivers
Key Rating Weaknesses:
Delay in debt servicing: There are ongoing delays in repayment of
term loan and continuous overdrawal in working capital borrowings
account for more than 30 days.
Panchanan Cold Storage Private Ltd. (PCPL) was incorporated on
January 16, 1989 by Jaiswal family of Hooghly, West Bengal to
provide cold storage services with the facility being located at
village: Olipur, Hooghly, and West Bengal. However, the earlier
promoters were unable to run the management efficiently and the
current promoters Shri Ayan Samanta, Shri Sayan Samanta and Shri
Sibaram Samanta of Hooghly, West Bengal took over from the earlier
management in November, 2014. PCPL is currently engaged in the
business of providing cold storage facility at the same location
primarily for potatoes and is operating with a storage capacity of
255,000 quintals per annum. Besides providing cold storage facility
the unit also works as a mediator between the farmers and marketers
of potato, to facilitate sale of potatoes stored and it also
provides interest free advances to farmers for farming purposes of
potato against potato stored. Further, PCPL commenced trading of
potatoes from FY14 onwards. Shri Sibaram Samanta (MD) looks after
the day to day operations of the unit with the help of other
directors and a team of expert professionals who are having
relevant experience in the similar line of business.
PLASMA METAL: CARE Keeps 'D' on INR31.7cr Loans in Not Cooperating
------------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Plasma
Metal Processing Private Limited (PMPPL) continues to remain in the
'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 31.72 CARE D; ISSUER NOT COOPERATING;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from PMPPL to monitor the ratings
vide e-mail communications dated September 6, 2019, October 22,
2019, November 18, 2019, January 3, 2020, January 9, 2020,
February 8, 2020 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 PMPPL's bank
facilities will now be denoted CARE D; ISSUER NOT COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
The rating takes into account the ongoing delays in servicing of
debt obligations by PMPPL.
Detailed description of the key rating drivers
At the time of last rating on February 14, 2019, the following were
the rating strengths and weaknesses (updated for the latest
available information).
Key Rating Weakness
Delays in debt servicing: As per the banker interaction, there are
ongoing delays in repayment of interest and principal portion of
the term loan. The delays were on account of stretch in liquidity
position.
Incorporated in the year 2011, PMPL is engaged in the business for
manufacturing of plasma coated rebars, wire rods and wires. The
commercial operation started from April 2019. The manufacturing
facility of the company is located at Butibori, Nagpur with an
installed capacity to manufacture 60000 tons of rebars, wire rods
and wires per annum.
PUREWAL STONE: CARE Lowers Rating on INR9.67cr LT Loan to 'B'
-------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Purewal Stone Crusher (PSC), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 9.67 CARE B; Stable; ISSUER NOT
Facilities COOPERATING; Revised from
CARE B+; Stable on the basis
of best available information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from PSC to monitor the ratings
vide e-mail communications/letters dated December 27, 2019, January
14, 2020, February 27, 2020, March 4, 2020, March 7, 2020, March
13, 2020 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 Purewal Stone
Crusher bank facilities will now be denoted as CARE B; 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 ratings.
The rating has been revised by taking into account non-availability
of information due to non-cooperation by Purewal Stone Crusher with
CARE'S efforts to undertake a review of the rating outstanding.
CARE views information non-availability risk as a key factor in its
assessment of credit risk.
Detailed description of the key rating drivers
At the time of last rating on March 22, 2019, the following were
the rating weaknesses and strengths:
Detailed description of the key rating drivers
Key Rating Weaknesses
* Short track record with small scale of operations: The firm has
started its commercial operations from March, 2015 and has a
relatively short track record of operations. However, the partners
have considerable experience in trading industry through his
association with various corporates. The scale of operations of the
firm remained small marked by total operating income and gross cash
accruals of INR17.93 crore and INR1.94 crore respectively during
FY18. The small scale limits the firm's financial flexibility in
times of stress and deprives it from scale benefits. However, the
risk is partially mitigated by the fact that the scale of operation
is growing continuously. Purewal's total operating income grew from
INR10.51 crore in FY16 to INR17.93 crore in FY18 reflecting a CAGR
of 30.62% owing to higher quantity sold. Further, firm has achieved
TOI of 8.19 crore in 10MFY19.
* Elongated operating cycle: The operating cycle of the firm
remained elongated at 255 days for FY18 mainly on account of higher
inventory holding period. The firm crushes and processes river bed
material (RBD), boulders into stone chips, stone grits and sand
stone for which the procurement is done from October to May
resulting into higher inventory holding as on balance sheet date.
The firm allows an average credit period of around 10-15 days to
its customers resulting in an average collection period of 5 days
for FY18. The firm has average working capital utilization of
around 85% for last 12 months period ended February, 2019.
* Highly competitive nature of the industry: PSC operates in a
highly fragmented industry wherein there is presence of a large
number of players in the unorganized and organized sectors. There
are number of small and regional players catering to the same
market which has limited the bargaining power of the company and
has exerted pressure on its margins.
* Constitution of the entity being a partnership firm: PSC
constitution as a partnership firm has the inherent risk of
possibility of withdrawal of the partner's capital at the time of
personal contingency and firm being dissolved upon the
death/retirement/insolvency of partners. Moreover, partnership
firms have restricted access to external borrowing as credit
worthiness of partners would be the key factors affecting credit
decision for the lenders.
Key Rating Strengths
* Experienced partners in managing business: The firm is being
managed by Mr. Dilbag Singh. He has considerable experience of
around four decades in stone crushing industry and trading of
construction material like stone chips, stone grits and sand stone
industry through his association with various corporates and in his
individual capacity.
* Location Advantage: The firm has its manufacturing facility is
located in Ramnagar, Uttarakhand, which is in proximity to the
river bed. This ensures uninterrupted supply of raw material, along
with savings in freight cost and reduction in lead time.
* Moderate financial risk profile: The profitability margins as
marked by PBILDT and PAT margin stood moderate for the past two
financial years i.e. FY17 and FY18. PBILDT margin stood at 18.66%
in FY2018 as against 24.36 in FY2017. Further, PAT margin stood at
5.24% in FY18 as against 9.33% in FY17 mainly on account of lower
interest cost. The debt coverage indicators as marked by interest
coverage and total debt to GCA stood moderate at 3.80x and 5.13x
respectively for FY18 as against 4.20x and 4.66x respectively for
FY17. The deterioration in the interest coverage ratio is mainly on
account of rise in interest cost along with deterioration in
PBILDT. The capital structure of the firm stood leveraged as marked
by overall gearing ratio which stood at 1.43x as on March 31, 2018
as against 2.18x as on March 31, 2017. The improvement in the
capital structure was on account of lower utilization of working
capital borrowings as on the balance sheet date
Nainital, Uttarakhand based, Purewal Stone Crusher (PSC) was
established in year 2013 and the commercial operations started from
March, 2015. It is currently managed by Mr Dilbag Singh Purewal.
The firm crushes and processes river bed material (RBD), boulders
into stone chips, stone grits and sand stone that find usage in the
construction industry. The primary raw materials like boulders, and
river bed materials are procured through local suppliers like
Kulwinder Singh, Aman and the partner of the firm Mr Dilbag Singh.
RAJLUXMI ENTERPRISES: CARE Cuts Rating on INR7cr LT Loan to B+
--------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Rajluxmi Enterprises Private Limited (REPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 7.00 CARE B+; Stable; ISSUER NOT
Facilities COOPERATING; Revised from
CARE BB-; Stable on the basis
of best available information
Short-term Bank 3.00 CARE A4; ISSUER NOT
Facilities COOPERATING; Based on best
Available information
Detailed Rationale & Key rating Drivers
CARE has been seeking information from REPL to monitor the rating
vide e-mail communications/letters dated February 4, 2020, March
11, 2020, March 12, 2020, March 14, 2020 and numerous phone calls.
However, despite CARE's repeated requests, the firm has not
provided the requisite information for monitoring the ratings. In
line with the extant SEBI guidelines, CARE has reviewed the rating
on the basis of the best available information which however, in
CARE's opinion is not sufficient to arrive at a fair rating.
Further, the firm has not paid the surveillance fees for the rating
exercise as agreed to in its Rating Agreement. The rating on REPL's
bank facilities will now be denoted as CARE B+; 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 rating(s).
The rating of Rajluxmi Enterprises Private Limited (REPL) has been
revised on account of continuous modest scale of operation with
moderate profitability margins and moderate capital structure. The
ratings are, further, continued to remain constrained on account of
vulnerability of raw material prices. The ratings, however,
continue to derive strength from experienced management with strong
group support and long standing association with its reputed
clientele base and adequate liquidity position.
Detailed description of the key rating drivers
At the time of last rating on August 13, 2019, the following were
the rating strengths and weaknesses. (Updated for the part
information available from the client)
Key Rating Weakness
* Modest scale of operation with moderate profitability margins:
The scale of operation of Rajluxmi Enterprises Private Limited
(REPL) increased by 26.05% in FY19 over FY18 and stood at INR22.89
crore as against INR18.16 crore in FY18. The profitability margins
of the company stood moderate marked by PBILTD and PAT margin of
16.46% and 4.08% respectively in FY19 as against 18.79% and 3.89%
respectively in FY18. PBILTD margin of the company declined by 233
bps over FY18 owing to increase in manufacturing expanses. Further
despite of decline in PBILTD margin, PAT margin of the company
increased by 19 bps over FY18 due to decrease in interest and
finance cost.
* Moderate capital structure: The capital structure of the company
stood moderate with an overall gearing of 1.66 times as on March
31, 2019, improved from 2.42 times as on March 31, 2018 owing to
accretion of profit to reserves. The debt coverage indicators of
the company stood moderate marked by total debt to GCA of 4.08
times as on March 31, 2019, improved from 5.12 times as on March
31, 2018 owing to decline in total debt. Further interest coverage
ratio of the company stood at 3.00 times in FY19,improved from 2.47
times in FY18 owing to decline in interest and finance cost.
Key Rating Strengths
* Experienced management with strong group support: Mr. Hariom
Choudhary, director, looks after the overall affairs of the firm.
He has more than two decades of experience in the civil
construction industry and is supported by other directors. The
management have been instrumental in assisting the company to
achieve the growth strategies on account of their extensive
experience in execution of contracts in the various Government
departments. Further, management is supported by a team of
qualified employees having long standing experience in their
respective fields for executing contracts Long standing association
with its reputed clientele base REPL is an 'A' class approved
contractor with PWD, Madhya Pradesh and is eligible to participate
in contracts of any amount pertaining to construction work of
roads. Being present in the industry since 1998, it has an
established track record of operations in the civil construction
industry and has long-standing relationship with PWD, Madhya
Pradesh from where it secures its contracts.
Liquidity Position: Adequate
The liquidity position of the company stood adequate marked by
current ratio and quick ratio of 1.27 times and 1.13 times
respectively in FY19. Further operating cycle of the company stood
negative owing to higher creditor days.
Madhya Pradesh-based Rajluxmi Enterprises Private Limited (REPL)
was initially incorporated in 2007 as Rajlaxmi Enterprises Private
Limited by Mr Hariiom Choudhary along with other family members. It
is engaged in the business of civil construction with major focus
on construction of roads and buildings for government department
and also executes works for private clients. It is registered as an
'A' class approved contractor with Public Works Department, Madhya
Pradesh (PWD) and Madhya Pradesh Rural Road Development Authority
(MPRRDA).
RAVI SHEET: CARE Lowers Rating on INR9.75cr Loan to 'B'
-------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of Ravi
Sheet Processors Private Limited (RSPPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term/Short- 9.75 CARE B; Stable/CARE A4;
Term Bank Issuer Not-cooperating;
Facilities Revised from CARE B+;
Stable/CARE A4; on the
basis of best available
information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from RSPPL to monitor the
rating(s) vide e-mail communications/letters dated April 11, 2019,
May 15, 2019, June 06, 2019, July 2, 2019, August 12, 2019, October
10, 2019, November 4, 2019, December 11, 2019, January 1, 2020,
January 15, 2020, February 3, 2020, February 11, 2020, March 5,
2020, March 9, 2020, March 12, 2020 and numerous phone calls.
However, despite CARE's repeated requests, the RSPPL 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 RSPPL's bank facilities will now be denoted as CARE B;
Stable/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 rating(s).
The rating assigned to the bank facilities of RSPPL have been
revised on account of non-availability of requisite information.
The ratings factored in moderate scale of operations coupled with
low profit margins, leveraged capital structure and weak debt
coverage indicators during FY19 (April 1 to March 31). Further, the
rating also continues to remain constrained on account of
susceptibility of RSPPL's profit margins to the raw material price
fluctuations and its presence in the highly fragmented and
competitive steel processing industry. Rating further derives
strength from experience of the promoters along with the location
advantage.
Detailed description of the key rating drivers
At the time of last rating on April 4, 2019 the following were the
rating strengths and weaknesses (updated for Registrar of
the Companies):
Key Rating Weaknesses
* Moderate scale of operations with low profit margins: Scale of
operations of RSPPL has reported growth of 10.75% but remained
moderate at INR49.70 crore during FY19 as against Rs. 44.88 crore
during FY18. Profit margins have continued to remain low marked by
PBILDT and PAT Margin of 2.99% and 0.25% during FY19 respectively
as against 3.56% and 0.29% respectively during FY18.
* Leveraged capital structure and weak debt coverage indicators:
As on March 31, 2019, capital structure has marginally improved but
continued to remain leveraged marked by overall gearing ratio of
2.14x as against 2.32x as on March 31, 2018 owing to moderate high
debt level. Debt coverage indicators remained in the same line as
previous year and continued to remain weak owing to low
profitability and leveraged capital structure marked by Total debt
to GCA ratio of 46.01 years during FY19 as against 46.46 years
during FY18. Further interest coverage ratio remained at 1.21x
during FY19 as against 1.20x during FY18.
* Presence in a highly competitive and fragmented industry: The
products (Mild steel sheets) sold by RSPPL are generally used in
construction, engineering and capital goods industry which are
inherently vulnerable to economic cycles. The slowdown in these
industries may adversely affect the business operations of the
company. Moreover, entry barriers to the industry are very low
which result into very low pricing power and high competition
amongst the players and due to which profitability always remains
affected.
* Operating margins susceptible to raw material price fluctuation &
external factors: Steel prices largely determine the company's
material costs. The industry has witnessed a decline in prices of
steel and products made from steel on account of dumping from China
in last few years. So, any adverse change in steel prices and
government policies can affect the operations and profitability of
the company.
Key rating strengths
* Experienced promoters coupled with location advantage: The
promoters possess an experience of more than a decade in the steel
industry which helps the company in managing its operations in an
efficient manner. RSPPL's plant is located in Gandhinagar (nearby
Ahmedabad) which enjoys good road, rail and air connectivity. This
leads to smooth supply of goods from both suppliers and customers
in a timely manner and at an effective cost.
Ahmedabad (Gujarat) based RSPPL was incorporated in 1998 as a
private limited company. It was promoted by Mr. Narendrabhai Patel
and Ms. Jyotsnaben Patel. Mr. Tushar Patel and Mr. Saurabh Patel
became directors of RSPPL in 2004. RSSPL is managed by Mr. Tushar
Patel, Mr. Saurabh Patel and their father Mr. Narendrabhai Patel.
It is engaged in the business of processing of MS (Mild Steel)
Sheets which is used in engineering and capital goods industry. It
procures Mild Steel (MS) Coils manufactured by steel companies
directly as well as from vendors. It sells MS Sheets to the
wholesalers who then sell it to the end users. M.S. Sheets are used
in various industries such as construction, engineering, etc. for
structural, mechanical and general engineering purpose.
RAYALSEEMA EXPRESSWAY: Ind-Ra Keeps BB Rating in Non-Cooperating
----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has maintained Rayalseema
Expressway Private Limited's (REPL) bank loan rating of 'IND BB' on
Rating Watch Evolving (RWE) as follows:
-- INR7.030 bil. Senior project bank loans (long-term) maintained
on RWE with IND BB/ RWE rating.
KEY RATING DRIVERS
Ind-Ra has maintained the rating on RWE due to continued lack of
clarity regarding changes in the operation and maintenance of the
project and changes in debt terms, including undertakings by the
new sponsor - Brookfield Asset Management Inc. (Brookfield). The
signing of the amendatory agreement is still in process.
The rating reflects the moderate improvement in traffic and toll
revenue in FY20, driven by the commencement of tolling operations
for toll plaza 3 on 27 July 2019 and the receipt of provisional
commercial operation date (PCOD) for all the toll plazas. The
combined average traffic per day in terms of passenger car units
increased to about 54,647 in 9MFY20 from about 51,383 in FY19. The
average daily revenue for the four toll plazas was INR3.43 million
in 9MFY20 (FY19: INR2.91 million for three toll plazas). However,
the growth in toll and traffic post the receipt of PCOD has been
lower than expected, due to less traffic in 2QFY20 due to heavy
rains during the period. The company has applied for the final
commercial operation date, and approval from the National Highways
Authority of India (NHAI; 'IND AAA'/Stable) is awaited
As of February 2020, the revised project cost was about INR2,877
million as against the original project cost of INR1636 million. To
meet the cost overrun, Brookfield invested INR2,220 million towards
completing the works and INR2000 million towards debt reduction.
Ind-Ra expects the sponsor to continue to provide timely financial
support to the project in times of distress.
The rating is supported by Brookfield's established track record of
owning and operating infrastructure assets globally across
utilities, transportation, energy, communications infrastructure,
and sustainable resources. In the Indian road segment, Brookfield
has three toll projects, including REPL, and two annuity projects.
Brookfield acquired these projects over February 2016-November
2018.
In FY20, the cash available for debt servicing was almost equal to
the debt servicing obligation for the year. While the company has
invoked the force majeure clause for the ongoing lockdown due to
the COVID-19 outbreak, the revival in economic activity and traffic
is likely to be slow. Hence, REPL would require support for debt
servicing in FY21. Furthermore, the company plans to undertake
major maintenance activity, which would be spread over three years,
from FY21 at an estimated cost of around INR2 billion. According to
the management, the sponsor would support the entire cost for major
maintenance, with INR650 million to be expended in FY21.
The rating factors in the pending receipt of the certificate of
completion for the project. As per the management, all the punch
list items have been completed; however, minor works such as
Advanced Traffic Management System (ATMS), boundary walls, avenue
plantation, and rest area are still pending. These consisted of
work affected due to disputes, change of scope and works to be
completed as part of maintenance in the O&M period. The likely cost
will be INR 200 million and the scheduled date of completion is
four-to-six months.
The ratings are constrained by the inherent risks in toll-based
projects such as future traffic growth rate estimate, uncertainty
over regulatory changes and resistance towards toll hikes.
The ratings are constrained by a moderate debt structure. The rated
debt of INR7,030 million will be amortized over 50 structured
quarterly installments ending December 2030. The additional term
loans have a scheduled amortization up to March 2031 in 44
structured quarterly installments. The rating factors in the
reduction in REPL's additional debt by the prepayment of INR2,000
million by the sponsor, and the subsequent improvement in the
project's leverage. As of February 19, 2020, the cash balance in
the escrow account of REPL was INR88 million. The debt service
reserve account (DSRA) has not been created to date. The management
expects to refinance the loans within the next two-to-three months.
Ongoing sponsor support for improvement in the operational and
financial performance of the project will remain a key rating
sensitivity.
RATING SENSITIVITIES
The RWE indicates the ratings may be upgraded, downgraded or
affirmed. Ind-Ra will resolve the RWE once there is more clarity
about the new management's business and financial plans for REPL.
The agency will monitor timely support from sponsors towards any
shortfall in debt servicing, major maintenance activity, reserve
creation, and operating expenses.
COMPANY PROFILE
REPL is a special purpose vehicle that was incorporated to
implement a 188.75km lane expansion (two to four) on the
Kadapa-Mydukur-Kurnool part of National Highway 18 in Andhra
Pradesh, under a 30-year concession from National Highways
Authority of India ('IND AAA'/Stable).
SAIDRISTI SUITINGS: CARE Reaffirms B+ Rating on INR4.61cr Loan
--------------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Saidristi Suitings Private Limited (SSPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank
Facilities 4.61 CARE B+; Stable Reaffirmed
Detailed Rationale & Key Rating Drivers
The ratings of SSPL continue to remain constrained on account of
its modest scale of operations with declining profitability
margins, moderate solvency position and stretched liquidity
position. The ratings, further, continue to remain constrained on
account of limited presence in the textile value chain and
vulnerability of margins to volatile raw material prices in the
highly fragmented and competitive industry.
The ratings, however, continue to derive strength from experienced
promoters with established relationships with customers and
suppliers, strong marketing and distribution network and presence
in the textile cluster with ease of availability of raw material
and labor.
Rating sensitivities
Positive Factor:
* Sustained increase in scale of operations of the company beyond
INR28.00 crore with geographical and customer diversification with
repeated order in hands
* Sustained improvement/maintaining of profitability margins over a
period of time with registration of PBILDT margin beyond 5.15%
Negative Factor:
* Any debt-funded project undertaken by the company which results
in deterioration of capital structure beyond 2.50 times
* Any decrease in orders which results in deterioration in Total
Operating Income below INR23 crore
Detailed description of the key rating drivers
Key rating Weaknesses
* Modest scale of operations and declining profitability margin:
The scale of operations of SSPL as indicated by Total Operating
Income (TOI) grew at a Compounded Annual Growth Rate (CAGR) of
around 10.29% in the last three financial years ended FY19. Despite
continuous growth in scale of operations, the scale of operations
stood modest at INR25.80 crore in FY19. Further, as per provisional
result of 11MFY20, SSPL has achieved TOI of INR26.00 crore.
* Profitability margins of the company have witnessed declining
trend during past three financial years ended FY19 mainly on
account of volatility associated with its primarily raw materials
and higher cost of traded goods. The profitability of the company
declined albeit stood moderate with PBILDT and PAT margin of 4.87%
and 0.10% respectively in FY19 as against 6.07% and 0.21%
respectively in FY18. Further, the GCA level of the company
deteriorated by 4.58% over FY18 and reported GCA of INR0.50 crore
in FY19.
* Moderate solvency position: The capital structure continued to
remain leveraged with an overall gearing of 2.36 times as on March
31, 2019, deteriorated marginally from 2.24 times as on March 31,
2018; attributed to disbursement of term loan and higher
utilization of working capital bank borrowings as on balance sheet
date. Further, major portion i.e. almost 75% of total debt of the
company comprises of working capital bank borrowing, hence the
company does not have any major long term debt obligation.
Furthermore, the debt service coverage indicators of the company
stood moderate at 14.73 times as on March 31, 2019 as against 13.21
times as on March 31 2018 owing to deterioration in gross cash
accruals. Moreover, interest coverage stood moderate at 1.69 times
in FY19
* Limited presence in textile value chain and vulnerability of
margins to volatile raw material prices in highly fragmented and
competitive industry: SSPL has limited presence in the textile
value chain as it is engaged in the manufacturing of grey fabrics
from synthetic yarn and also gets the process work done on job work
basis from other processors. Further, the main raw material of SSPL
is synthetic yarn which it procures through the dealers from
various units spread across the country. The price of key raw
material has remained volatile in the past. Further, SSPL has
limited power to pass on an increase in raw material cost fully to
its customers due to its presence in a highly fragmented and
competitive industry. There are more than 12000 looms in Bhilwara
manufacturing around 75 million meter of fabric every month, of
which approx 7-9% is contributed by cotton based fabric. The
textile industry in India is highly fragmented with predominant
presence of unorganized sector.
Key Rating Strengths
* Experienced promoter with established relationships with
customers and suppliers: The management of SSPL is family centric
and the entire decision making is concentrated with Mahnot family.
Mr Amit Kumar Mahnot, director, is graduate by qualification and
has an experience of around 20 years in the textile industry. He
looks after the overall affairs of the company. Mr Amit Kumar
Mahnot, also gets assistance from his father, Mr Kamal Singh Jain,
director who has an experience of around 22 years in the textile
industry and looks after the accounting function of the company.
With the long-standing industrial experience, the promoters have
established strong relationships with the customers as well as
suppliers.
* Strong marketing and distribution network: Being present in the
industry since 2003, SSPL has established a network of 10-15 agents
which are spread across in Southern, Northern and North-Eastern
region of India. The company provides credit period of 60-90 days
to its agents.
* Presence in textile cluster with ease of availability of raw
material and labour: The main raw material of the company is
synthetic yarn. The manufacturing facility of the company is
located at Bhilwara (Rajasthan) which is one of the largest textile
clusters in India and majority of these industries are engaged in
the manufacturing of synthetic and polyester yarn accounting for
nearly 40% of India's total synthetic yarn production and nearly
50% of India's total polyester fabrics and suiting production.
SSPL's presence in the textile manufacturing region results in
benefit derived from continuous business from the textile
manufacturers, low transportation cost both on
transportation and storage, easy availability of raw materials as
well as skilled/unskilled labour and procurement of raw materials
(yarn) at effective prices.
Liquidity analysis: Stretched
The business of the company is stretched with 80-90% utilization of
its working capital bank borrowings during last 12 months ended
February, 2020. Further, the liquidity ratios of the company
remained moderate marked by current and quick ratio of 1.25 times
and 0.40 times respectively as on March 31, 2019. Cash flow from
operating activities improved from INR0.69 crore in FY18 to INR0.93
crore in FY19 due to lower working capital gap. However, the
operating cycle remained elongated at 110 days in FY19, improved
from 120 days in FY18 owing to decrease in collection period and
inventory period which is offset by increase in creditor period.
Bhilwara (Rajasthan) based SSPL was initially incorporated in the
name of Sairam Suitings Private Limited in 2003 by Mr Kamal Singh
Jain along with his son, Mr Amit Kumar Mahnot. However, in July,
2014, the name of the company changed to its current form. SSPL is
primarily engaged in the business of manufacturing of synthetic
grey fabrics from polyester yarn and outsources the processing work
required for the manufacturing of finished fabrics on job work
basis to the nearby process house located at Bhilwara. Further, the
company also does trading of grey and finished fabrics. The
manufacturing facility of SSPL is located at Bhilwara with total of
56 sulzar looms having an installed capacity of 36 Lakh Meters Per
Annum (LMPA) as on March 31, 2019. The company caters to domestic
market and sells its products through the network of its agents
located all over India under the brand name of "SSPL".
SAKI AUTO: CARE Lowers Rating on INR3.80cr LT Loan to B-
--------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of Saki
Auto Products Private Limited (SAPPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 3.80 CARE B-; Stable; ISSUER NOT
Facilities COOPERATING; Revised from
CARE B; Stable on the basis
of best available information
Detailed Rationale, Key Rating Drivers and Detailed description of
the key rating drivers
CARE has reviewed and reaffirmed the rating assigned to the bank
facilities of SAPPL at CARE B+; Stable (Single B Plus; Outlook:
Stable) and has simultaneously withdrawn it, with immediate effect.
The rating takes into account small scale of operations with low
profit margins, modest solvency position and stretched liquidity
position. The rating is further constrained by concentrated
customer base, susceptibility of margins to fluctuations in raw
material prices, linkage to the demand in automobile sector and its
presence in highly competitive auto component industry. The rating,
however, draws support from the long operational track record of
the company, significant experience of the promoter, and its
association with reputed clientele. The rating withdrawal is at the
request of client and 'No Objection Certificate' received from the
bank that have extended the facilities rated by CARE.
Detailed description of the key rating drivers
Key Rating Weaknesses
* Small scale of operation with low profit margins: The scale of
operation of the company reflected by total operating income
registered growth rate of ~13.72% to INR30.58 crore in FY19 and net
worth base of INR4.56 crore as on March 31, 2019 (Audited). The
small size restricts the financial flexibility of the company in
times of stress and deprives it from scale benefits Further the
company has reported profit during the year and PBILDT margin stood
at 5.77% in FY19. However, the PAT margin of the company stood at
0.24% during the aforementioned period.
* Moderate solvency position: The capital structure of the company
as marked by overall gearing ratio though deteriorated, continues
to stood moderate at 1.78x as on March 31, 2019. Moreover, due to
moderate gearing levels and low cash accruals, the debt coverage
indicators also remained moderate.
* Vulnerability of profitability to fluctuations in raw material
prices: The major raw materials used in manufacturing are HR sheets
and CR sheets. The raw material cost constitute major portion of
total cost of sales and the prices of the same are volatile in
nature making the profitability margins vulnerable to any adverse
change in the raw material prices.
* Linkage to the demand in automobile sector: The fortunes of the
auto ancillary sector are closely linked to auto sector. Demand
swings in any of the segments (cars, two-wheelers, commercial
vehicles) have a direct impact on auto ancillary demand. Thus,
demand is derived from original equipment manufacturers (OEM) as
well as the replacement market. As the revenue of SAPPL comes from
the automotive components, so sale of SAPPL will be depend on the
rise in demand of automobiles.
* Presence in highly competitive auto component industry: SAPPL
operates in a highly competitive industry wherein there is presence
of a large number of players in the unorganized and organized
sectors. Furthermore, the auto component industry is largely
unorganized in structure, consisting of around 45-50% of the
overall industry size. The unorganized segment mainly caters to the
replacement market and to tier II and III suppliers. The organized
segment majorly caters to the OEM segment.
Key Rating Strengths
* Long track record of the operation with significant experience of
the promoter: SAPPL has an operational track record of three
decades in the industry. Mr Suresh Yashwant Mestry, the promoter of
the company has about four decades of experience in the auto
ancillary industry. He is well supported by Mr Santosh Suresh
Mestry, Ms Priyanka Santosh Mestry and Ms Chitralekha Bhadresh
Mehta who has an average experience of more than two and a half
decades through this company, for managing overall operations of
the company. Being in the industry for such a long period helped
the promoter to gain adequate acumen about the business which will
aid in smooth operations of SAPPL.
* Long association with reputed clientele albeit concentration
risks: SAPPL is associated with reputed customers like Mahindra &
Mahindra Limited (MML), Lear Automotive India Private Limited and
Atlas Copco India Limited. The company has a revenue stream that is
concentrated with the top three customers contributing to the total
revenue of FY18. However, single customer (MML) contributed 97% to
the total operating income in FY18. The reputed clientele, the
credit risk remains low. Moreover, SAPPL has been able to get
repeat orders from these clients over the years.
* Stretched liquidity position: Liquidity remained stretched marked
by low gross cash accruals (GCA),high working capital limit
utilization and low cash balance; thus limiting the financial
flexibility of the company. GCA remained low at INR1.05 crore in
FY19, though same were sufficient to cover the repayment
obligations. The working capital utilization of the company is met
by internal accruals and packing credit which remained utilized to
the extent of 75% during last 12 months ended February 29, 2020.
The operations of the company is characterized by gross current
asset of 103 days in FY19 with funds blocked in receivables and
inventory.
Pune (Maharashtra) based SAPPL was incorporated in the year 1985
and is engaged in manufacturing of sheet metal components. The
finished products of the company include fuel tanks, air tanks &
various types of sheet metal assemblies / components. The company
has three manufacturing facilities located at Chinchwad (Pune),
Pimpri (Pune), and Butibori (Nagpur), having an aggregated
installed capacity to manufacture 95,600 numbers of products per
annum.
SHIKHAR CONSTRUCTIONS: CARE Keeps D Debt Rating in Not Cooperating
------------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Shikhar
Constructions (SC) continues to remain in the 'Issuer Not
Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 6.00 CARE D; ISSUER NOT COOPERATING;
Facilities on the basis of best available
information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from SC to monitor the rating
vide e-mail communications dated March 16, 2020, March 14, 2020,
March 13, 2020, February 26, 2020, January 15, 2020, December 27,
2019 and numerous phone calls. However, despite CARE's repeated
requests, the firm has not provided the requisite information for
monitoring the ratings. In line with the extant SEBI guidelines,
CARE has reviewed the rating on the basis of the best available
information which however, in CARE's opinion is not sufficient to
arrive at a fair rating. The rating on SC's bank facilities will
now be denoted as CARE D; ISSUER NOT COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above ratings.
The rating takes into account no due-diligence conducted due to
non-cooperation by SC with CARE'S efforts to undertake a review of
the rating outstanding. CARE views information availability risk as
a key factor in its assessment of credit risk.
The rating assigned to the bank facilities of Shikhar Constructions
takes into consideration ongoing delays in debt servicing by the
firm on account of stretched liquidity position.
Detailed description of the key rating drivers
At the time of last rating on July 5, 2019, the following were the
rating weaknesses and strengths:
Key Rating Weakness
* Ongoing delay in debt servicing: As per the banker feedback
received, the account has been classified as NPA in January
2020.The liquidity position remain tight due to the negative
profitability and high interest cost owing to excessive reliance on
external borrowings.
* Weak Financial risk profile as reflected by tight liquidity
position: The scale of operations of Shikhar Constructions have
remained small and fluctuating marked by TOI and GCA of INR2.02
crore and negative GCA respectively for FY18 (refers to period from
April to March). Furthermore, the firm's net worth base also stood
negative FY18. The small scale limits the firm's financial
flexibility in times of stress and deprives it from scale benefits.
Further, owing to negative profitability and negative net worth,
profitability and capital structure indicators also stood negative
for FY18. The liquidity position stood tight owing to negative
profitability and high interest cost as marked by current and quick
ratio of 1.51x and 0.46x as on March 31, 2018.
Key Rating Strengths
* Experienced partners with long track record of operations:
Shikhar Constructions is being promoted by Mr. Manoj Joshi, Mr. Hem
Kumar Joshi and Mr. Kamlesh Joshi, who are all graduates by
qualification and hold considerable experience in this industry
through their association with this entity since inception.
Further, they are supported by an able team that comprises of
architects, consultants, civil engineers, chartered accountants,
management professionals and experienced entrepreneurs.
Nainital (Uttarkhand) based, Shikhar Constructions (SC) was
established in the year 1992, as a partnership concern, by Mr.
Manoj Joshi, Mr. Hem Kumar Joshi and Mr. Kamlesh Joshi sharing
profits and losses in the ratio 60%, 20% and 20% respectively. The
company is engaged in development of residential projects. The
ongoing project is 'Nirvana at Sunny Lake' located at Bhimtal-
Sattal Road, Nainital, Uttarakhand. In past the partners have
developed approximately 13 lsf (lakh square feet) of built up area
to develop residential apartments, villas, cottages, townships etc.
in Nainital, Uttarkhand. Shikhar Construction is a part of Shikhar
Group (engaged in delivering residential projects since 1992), a
partnership firm that carries out all the projects under the group.
SHYAMSHREE RESIDENCY: CARE Cuts Rating on INR0.70cr Loan to B-
--------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Shyamshree Residency Private Limited (SRPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 0.70 CARE B-; Stable; ISSUER NOT
Facilities COOPERATING; Revised from
CARE B; Stable on the basis
of best available information
Short Term Bank 7.10 CARE A4; Issuer not cooperating;
Facilities based on best available
information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from SRPL to monitor the ratings
vide e-mail communications/letters dated September 9, 2019,
November 5, 2019 and November 28, 2019 and January 9, 2020 and
numerous phone calls. However, despite CARE's repeated requests,
SRPL 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. Further, SRPL has not paid the surveillance fees for the
rating exercise as agreed to in its Rating Agreement. The rating on
SRPL's bank facilities will now be denoted as CARE B-; Stable and
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 rating(s).
The ratings assigned to the bank facilities of SRPL are primarily
constrained on account of its modest scale of operations with net
and cash loss in FY18 (FY refers to the period April 1 to March
31), weak solvency position and stressed liquidity position. The
ratings, further, are constrained on account of its moderate order
book position, its presence in the highly competitive government
civil construction segment and geographical as well as customer
concentration of order book.
The ratings, however, derive strength from experienced management
with long track record of operations.
Detailed description of the key rating drivers
At the time of last rating on November 30, 2018, the following were
the rating strengths and weaknesses.
Key Rating Weakness
* Modest Scale of operations along with net and cash loss in FY18
and moderate order book position: During FY18, the scale of
operations of the company stood modest marked by Total Operating
Income (TOI) of INR14.04 crore. However, it has registered
operating loss of INR1.83 crore in FY18 owing to higher cost of
material consumed in FY18. In line with losses at operating level,
SRPL registered net loss of INR2.51 crore and cash loss of INR2.37
crore in FY18. Till November 27, 2018, the company has achieved
turnover of INR10.66 crore. As on November 26, 2018, SRPL has an
outstanding order book position of about INR7.59 crore which
consists of 2 orders which will be executed in next 12 months.
Further, all the contracts have price escalation clause thus
mitigating the risk arising out of adverse movement in the raw
material price.
* Weak solvency position and stressed liquidity position: The
solvency position of SRPL stood leveraged marked by negative
overall gearing as on March 31, 2018. Further, debt coverage
indicators of the company also stood weak marked by negative Total
debt to GCA and negative interest coverage ratio as on March 31,
2018 owing to negative PBILDT and GCA level. The liquidity position
of the company stood stressed marked by maximum utilization of 80%
of its working capital bank borrowings during last twelve months
ended October, 2018. The current ratio and quick ratio stood
comfortable at 1.25 times and 0.63 times as on March 31, 2018 as
against 1.82 times and 0.96 times as on March 31, 2017 owing to
higher inventory as on balance sheet date. Further, the operating
cycle of the company stood at 95 days during FY18. The firm
receives payment from customers within 100-105 days and makes
payment to its suppliers within 205-210 days.
* High competitive intensity in the government civil construction
segment and geographical as well as customer concentration of order
book: The construction industry is highly fragmented in nature
with presence of large number of unorganized players and a few
large organized players which coupled with the tender driven nature
of construction contracts poses huge competition and
puts pressure on the profitability margins of the players. The
client base of the company is skewed towards government departments
in Madhya Pradesh with firm generating majority of its income from
this institution. Moreover, the firm being a regional player and
all the projects are executed in Madhya Pradesh only, also reflects
geographical concentration risk.
Key Rating Strengths
* Long track record of operations and experienced management:
Being present in the industry since 2006, it has more than a decade
of experience in the construction industry. Mr. Saket Agarwal,
Director, has around 15 years of experience in the industry and
looks after overall functions of the company. They are assisted by
a staff of 40 qualified and experienced employees for smooth
functioning of the company.
Bhubaneswar (Orissa) based Shyamshree Residency Private Limited
(SRPL) was incorporated in 2006 by Mr. Saket Agarwal along with his
family members. The company is engaged in the business of erection
and commissioning of transmission and distribution of electrical
lines for government departments such as Madhya Pradesh Poorv
Kshetra Vidyut Vitaran Company Limited (MPPKVVCL) and also
manufactures PCC poles. The company has installed capacity to
manufacture 660 PCC poles per day as on Mrach 31, 2018. It is
registered A class contractor with MPPKVVCL.
SURAJ ISPAT: CARE Keeps B- on INR6cr Loans in Not Cooperating
-------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Suraj Ispat
(SI) continues to remain in the 'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 6.00 CARE B-; ISSUER NOT COOPERATING;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from SI to monitor the ratings
vide e-mail communications dated November 1, 2019, December 24,
2019, January 3, 2020, January 13, 2020, February 14, 2020 and
numerous phone calls. However, despite CARE's repeated requests,
the firm has not provided the requisite information for monitoring
the ratings. In line with the extant SEBI guidelines, CARE has
reviewed the rating on the basis of the best available information
which however, in CARE's opinion is not sufficient to arrive at a
fair rating. The rating on SI's bank facilities will now be denoted
as CARE B-; 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 ratings.
The rating takes into account modest scale of operations, product
concentration risk with low profitability, weak debt coverage
indicators, cyclical nature of the steel industry and stretched
liquidity position. The rating is further constrained on account of
susceptibility of margins to fluctuation in traded good prices and
constitution as a proprietorship firm. The ratings, however, derive
strength from the extensive experience of the promoters and
adequate warehousing and stocking facilities.
Detailed description of the key rating drivers
At the time of last rating on March 29, 2019, the following were
the rating strengths and weaknesses
Key Rating Weaknesses
* Modest scale of operations and negative net worth: The total
operating income of the firm has shown a de-growth to INR99.54
crore in FY18 (as against INR111.64crore in FY17) owing to decrease
number of orders executed during the year. However, In11MFY19, the
firm has registered the TOI of INR110 crore. Further, the net worth
base of the firm was completely eroded owing to withdrawal of
capital by the proprietor. Product concentration risk with low
profitability: The product portfolio of the firm is concentrated
with Galvanized Corrugated Sheets (GCS) accounting to 75% of the
total revenue generated during FY18. Further, the profitability
margins of the firm declined and remained low owing to trading
nature of business.
* Weak debt coverage indicators: The debt coverage indicators
stood weak during FY18 due to high debt profile and low accruals.
* Cyclical nature of the steel industry: Steel is highly capital
intensive industry and cyclical in nature. Its growth is
intertwined with the growth of the economy at large and, in
particular, user industries such as automobile, housing,
infrastructure and others.
* Stretched liquidity position: The liquidity positions of the
firm remains stretched as reflected by current ratio of 0.99x in
FY18 (P.Y:0.85). Further, the operations of SI continue to remain
working capital intensive in nature due to high collection period.
The working capital requirements of the entity are met by the cash
credit facility, the utilization of which remained on higher side
for last twelve months ended February 2020.
* Susceptibility of margins to fluctuation in traded good prices:
The SI purchases goods from well reputed domestic suppliers and
local steel manufacture prices. The prices of the same are highly
volatile, exposing the margins to raw material price fluctuation
risk.
* Constitution as a proprietorship firm: SI, being a
proprietorship concern, is closely held and is subject to limited
disclosure norms, it is exposed to the risk of withdrawal of
capital as well as long-term existence of business operations under
the entity.
Key Rating Strengths
* Experienced proprietor: The proprietor has an experience of
around five years in the business of trading of steel. Being in the
industry for five years has helped the proprietor to gain adequate
acumen about the business which aids in the smooth operations of
SI.
* Adequate warehousing and stocking facility: The SI has adequate
infrastructure facility at its registered address for storage of
steel products. The firm can store the material up to 5000 MT in
its warehouse. This enables SI to cater to the regular demand for
its customers located in and around Nanded.
SI was established by Late Mr. Vishwambhar Parsewar. In the year
2017 proprietorship of SI was transferred to Mr. Rahul R. Parsewar.
SI belongs to the Suraj group of Nanded. The group has diversified
business in the areas of steel trading, manufacturing of
fertilizers and polymers.
SURAJ VALUE: CARE Keeps 'D' on INR10cr Loans in Not Cooperating
---------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Suraj Value
Infrastructures Private Limited (SVIPL) continues to remain in the
'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 10.30 CARE D; ISSUER NOT COOPERATING;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from SVIPL to monitor the ratings
vide e-mail communications dated November 1, 2019, December 24,
2019, January 3, 2020, January 13, 2020, February 14, 2020 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 SVIPL's bank facilities will
now be denoted CARE D; ISSUER NOT COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above ratings.
The rating takes into account the ongoing delays in servicing of
debt obligations by SVIPL.
Detailed description of the key rating drivers
At the time of last rating on March 29, 2019 the following were the
rating strengths and weaknesses (Updated for the information
available from Registrar of companies filings).
Key Rating Weakness
* Delays in debt servicing: As per the banker interaction, there
are continuous overdrawals in cash credit facility for more than 30
days on account of stretch in liquidity position.
SVPL is a part of the Nanded-based (Maharashtra) Suraj group. The
company was previously known as 'Suraj Tubes India Private Limited'
and later on April 23, 2015, was renamed as 'Suraj Value
Infrastructures Private Limited'. The group has presence in various
business segments such as steel trading, manufacturing and trading
of fertilizers and polymers, etc.
TUSCAN AGROW: CARE Keeps D on INR13.3cr Debt in Not Cooperating
---------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Tuscan
Agrow (TA) continues to remain in the 'Issuer Not Cooperating'
category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 13.30 CARE D; Issuer Not Cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information TA to monitor the rating vide
e-mail communications/letters dated August 28, 2019, to February 6,
2020 and numerous phone calls. However, despite CARE's repeated
requests, the firm has not provided the requisite information for
monitoring the rating. In line with the extant SEBI guidelines,
CARE has reviewed the rating on the basis of best available
information which however, in CARE's opinion is not sufficient to
arrive at fair rating. The rating on Tuscan Agrow bank facilities
will now be denoted as CARE D; ISSUER NOT COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
Detailed Rationale& Key Rating Drivers
The rating assigned to the bank facilities of Tuscan Agrow
continues to be tempered by ongoing delays in servicing debt
obligations due to stressed liquidity position.
Detailed description of the key rating drivers
Key Rating Weaknesses
* Ongoing delays in servicing debt obligations due to stressed
liquidity position: There are ongoing delays in servicing debt
obligations on time due to net losses and stressed liquidity
position on back of high dependence on working capital borrowings
and coupled with absolute increase in inventory.
* Short track record and small scale of operations: The firm was
established in 2014 and commercial operations were started in FY15.
Further, the scale of operations stood small INR8.71 crore in FY19
as compared to INR4.98 crore in FY18 Decline in the profitability
margins during the review period The profitability margins declined
significantly marked by PBILDT margin and PAT margin stood at
50.55% and 32.42% in FY19 as compared to 104.18% and 68.63% in FY18
due to increase in the material costs coupled with decline in
PBILDT in absolute terms.
* Working capital intensive nature of operations: The operating
cycle of the firm stood elongated at 222 days as on March 31,
2019.
Key Rating Strengths
* Experienced management: Tuscan Agrow (TA) is family based
business firm which was established by Mr. Sathyamoorthy
Vasudevanwho is the managing Partner of the firm and Mrs. Priya
Vasudevan, partner and wife of Mr. Sathyamoorthy Vasudevan. The
managing partner is a graduate i.e. B.A in Architecture and Mrs.
Priya Vasudevan is graduate (M.A. English), both the promoters have
more than two decades of business experience of the field of real
estate business. With significant amount of business exposure and
high networth capacity of the promoters, they have acquired huge
amount of land at Chikmaglur and started growing of coffee, pepper
and related products. The promoters are is well supported by Mr.
Tanveer(friend of Mr. Sathyamoorthy Vasudevan) who has more than
two decade of experience in agriculture sector and is actively
involved in managing the day to day activities of the firm.
* Significant amount of net worth with comfortable capital
structure: The net worth of the firm increased and stood high at
INR81.25 crore as on March 31, 2019 as compared to INR77.23 crore
as on March 31, 2018 on back of accretion of profits to net worth
and coupled with infusion of capital INR1.19 crore by the partners.
The capital structure of the firm marked by overall gearing stood
at 0.19x in FY19 as compared to 0.18x in FY18 on account of
increase in the net worth. Further the TD/GCA deteriorated and
stood at 5.32x in FY19 as compared to 3.99x in FY18 due to increase
in the term loan
Tuscan Agrow (TA) was established in the year 2014 as a partnership
firm by Mr. Sathyamoorthy Vasudevan and Mrs. Priya Vasudevan. The
commercial operations of the firm were started from 2015. The
entity has its registered and administrative office located at
Bangalore and is engaged in growing of coffee seeds and allied
products, and yielding about 300 tons of coffee and 30MT of pepper
along with other allied crops every year.
=================
I N D O N E S I A
=================
LIPPO MALLS: Fitch Alters Outlook on BB LT IDR to Negative
----------------------------------------------------------
Fitch has revised the Outlook on Lippo Malls Indonesia Retail
Trust's Long-Term Foreign-Currency Issuer Default Rating to
Negative from Stable due to the coronavirus pandemic and has
affirmed the rating at 'BB'.
The Negative Outlook reflects Fitch's expectation that the pandemic
will dampen operating earnings, with the average occupancy rate
dropping to around 50% in 2020. This is likely to see FFO fixed
charge coverage fall to below 1.5x, the level at which Fitch would
consider negative rating action.
The affirmation reflects its belief that LMIRT has headroom for
coverage to weaken without significantly exceeding the negative
rating sensitivity for a prolonged period.
KEY RATING DRIVERS
Temporary Closures due to Pandemic: Fitch estimates that the
temporary closure of LMIRT's shopping malls and retail spaces will
lead to around a 50% decline in revenue and 60% fall in EBITDA for
2020, compared with around 20% and 5% growth, respectively, in
2019. This is based on the assumption that the pandemic will
persist throughout 2Q20 to be followed by a slow recovery. The
self-isolating measures introduced by the government have led to
the closure of non-essential stores, with largely only supermarkets
and pharmacies remaining open. The subsequent drop in consumer
spending exposes retail properties to the outbreak. Fitch believes
LMIRT has rating headroom to tolerate a short-term closure, but
prolonged disruption will pressure its liquidity and financial
metrics, as reflected in the Negative Outlook.
Currency Depreciation Pressures Cash Flow: LMIRT's cash flow is
under further pressure due to Indonesian rupiah depreciation; to
date, the rupiah has depreciated by around 10% against the
Singapore dollar. LMIRT has a policy to hedge up to 80% of its cash
flow for the next 12 months, but the sharp depreciation has
rendered the hedges to be out of the money. Fitch has factored-in
the added pressure from currency depreciation to EBITDA in its
rating-case forecasts.
Acquisitions and Disposals Pending: LMIRT has further extended its
Puri mall acquisition completion date to December 2020, from June
2020. LMIRT still plans to dispose of Pejaten Village and Binjai
Supermall in May 2020, but Fitch has not included these
transactions in its rating case due to the uncertainty and
disruption caused by the pandemic.
Largest Indonesian Shopping-Mall Portfolio: LMIRT's shopping-mall
portfolio is the largest in Indonesia, with net lettable area of
914,000 square meters, more than 3,700 tenants and estimated annual
shopper traffic of 168 million as of end-2019. Fitch expects the
portfolio's normalized average occupancy rate to hover at around
91%-92%, which is above the industry average of 81%-83% due to its
well-located assets and favorable demand-supply dynamics in most of
its catchment areas.
Perpetual Securities Treated as Equity: Fitch treats LMIRT's SGD260
million of perpetual securities - issued in 2016 and 2017 - as 100%
equity due to strong going-concern and gone-concern loss-absorption
features. This also factors in LMIRT's intention to maintain the
securities as a permanent part of its capital structure by
replacing them at their next call-date with similar instruments or
common equity.
DERIVATION SUMMARY
LMIRT's Long-Term IDR can be compared with that of PT Pakuwon Jati
Tbk (BB/Stable) and Emirates REIT (BB/Stable).
Pakuwon is an Indonesia-based property company whose rating is
driven by its large investment property portfolio, which consists
of shopping malls and some office and hotel assets. Fitch believes
Pakuwon's investment properties are of better quality than those of
LMIRT, as indicated by higher occupancy and rent per square foot.
This, coupled with Pakuwon's conservative capital structure, leads
to an overall stronger financial profile compared with LMIRT.
However, Pakuwon has higher exposure to the riskier
property-development business and the robust regulatory framework
for Singapore-listed REITs compensates for LMIRT's weaker financial
profile. As a result, Fitch rates both companies at the same
level.
Emirates REIT is based in the United Arab Emirates. It has a
resilient portfolio of office and school properties in Dubai. The
company has higher leverage and lower portfolio occupancy than
LMIRT, but its portfolio includes stable long-term education assets
and the government's 38% ownership and a position on its board
support Emirates REIT's overall business portfolio. As such, Fitch
rates both Emirates REIT and LMIRT at the same level.
KEY ASSUMPTIONS
- Occupancy of around 15% in 2Q20, 35% in 3Q20 and 60% in 4Q20
(4Q19 and 1Q20: around 90%).
- Occupancy to remain at around 60% in 1Q21, then gradually
improve back to around 90% from 3Q21.
- Deferral of perpetual coupon and dividends from 2Q20.
- Minimum opex of SGD4 million a month while malls are shut.
- Minimum maintenance capex of SGD7 million for 2020.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
- Outlook may revert to Stable if shopping malls resume normal
operation, as reflected in the relaxation of social distancing that
sees fixed charge coverage on track to above 1.5x by end 2021
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
- Net debt/investment property of above 35% for a sustained
period
- FFO fixed-charge coverage ratio of below 1.5x for a sustained
period
- A sustained weakening in the performance of LMIRT's
shopping-mall portfolio, as indicated by falling occupancy rates
and negative rental reversion
BEST/WORST CASE RATING SCENARIO
Ratings of non-financial corporate issuers have a best-case rating
upgrade scenario (defined as the 99th percentile of rating
transitions, measured in a positive direction) of three notches
over a three-year rating horizon; and a worst-case rating downgrade
scenario (defined as the 99th percentile of rating transitions,
measured in a negative direction) of four notches over three years.
The complete span of best- and worst-case scenario credit ratings
for all rating categories ranges from 'AAA' to 'D'. Best- and
worst-case scenario credit ratings are based on historical
performance.
LIQUIDITY AND DEBT STRUCTURE
Adequate Short-Term Liquidity: LMIRT reported an ending cash
balance of SGD110 million at end-2019, which is sufficient to cover
SGD75 million of bonds maturing in June 2020. Fitch assumes that
LMIRT will defer the coupon on its perpetual securities and
dividend distribution to conserve cash. LMIRT's next significant
maturities are SGD175 million term loans due in August 2021, which
provides the company with sufficient time to refinance by loans or
bonds once the market improves.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
ESG issues are credit neutral or have only a minimal credit impact
on the entity(ies), either due to their nature or the way in which
they are being managed by the entity(ies).
=====================
N E W Z E A L A N D
=====================
FE INVESTMENTS: S&P Lowers ICRs to 'D' Over Receivership
--------------------------------------------------------
S&P Global Ratings said it has lowered its long- and short-term
issuer credit ratings on New Zealand finance company FE Investments
Ltd. (FEI) to 'D/D' from 'CCC/C'.
The ratings on FEI prior to the action were 'CCC/Developing/C'.
These ratings highlighted S&P's view that, although the entity
could default if it were unable to effectively raise additional
capital and resolve its large nonperforming assets, a successful
capital raising and completion of its problem exposures could have
led to FEI consolidating its financial strengths.
Subsequently, additional loan loss provisions were raised against
its larger nonperforming loans, which weakened FEI's capitalization
and resulted in the company breaching its minimum regulatory
capital ratio of 8%. As a result, the trustee, Trustee Executor's
Ltd., appointed KordaMenta as receivers, with the company now
placed in receivership.
S&P therefore lowered its long- and short-term issuer credit
ratings on FEI to 'D/D', in line with its previous downside
scenario and reflecting FEI's inability to maintain capital above
the regulatory minimum of 8%. As a result of being placed in
receivership, all principal and interest payments to deposit
holders have been suspended.
NETBALL MAINLAND: Faces Liquidation Amid COVID-19 Pandemic
----------------------------------------------------------
Otago Daily Times reports that Netball Mainland is going out of
business and Netball South is cutting salaries.
The devastation wrought by Covid-19 has claimed its first major New
Zealand sporting organization, the report says.
According to ODT, Netball Mainland confirmed on April 4 it could no
longer continue trading and had recommended to its members it be
placed in voluntary liquidation.
Netball Mainland is one of five zones managing the game around New
Zealand. It is responsible for the upper South Island. The
Christchurch-based Tactix, who play in the ANZ Premiership, also
come under the umbrella of Netball Mainland.
ODT says Netball New Zealand announced it would enter into
discussions with stakeholders of the Tactix and retain the services
of head coach Marianne Delaney-Hoshek and the players.
It would work with the Netball Mainland board to ensure community
netball can continue.
According to the report, NNZ chief executive Jennie Wyllie said the
liquidation of the Netball Mainland Zone showed just what a
significant financial impact Covid-19 was having on all businesses
in New Zealand.
"Our hearts go out to the Mainland board and their staff," the
report quotes Ms. Wyllie as saying. "NNZ will now work through a
process of how the ongoing management and servicing of the game
will work. These are challenging times and businesses are having
to re-think their structures for both now and the future."
"We know our Netball Centres are well placed to maintain our
community game and we will be working with them to ensure the
future of local netball," Ms. Wyllie said.
VIRGIN AUSTRALIA: Shuts Down NZ Operations; 600 Jobs Axed
---------------------------------------------------------
Karoline Tuckey at Radio New Zealand reports that about 600 New
Zealand-based jobs have been lost with the announcement Virgin
Australia is shutting down its New Zealand operations, effective
immediately.
According to RNZ, flight attendant Kylie Halligan said staff are
devastated, and are disappointed Virgin could not be persuaded to
apply for the government's 12 week staff wage subsidies.
But she said the announcement does allow them to move on to try to
find other jobs sooner, rather than continuing to wonder if the
company would survive after the lifting of travel restrictions
introduced in March to prevent the spread of Covid-19, the report
relays.
She said the staff includes office staff, cabin crew and pilots,
and many will now be forced to look for work outside the aviation
and travel industries, relates RNZ.
"There's a lot of pain and grief for what we've lost. The Virgin
Australia bases here in New Zealand were relatively small and we
all knew everyone. The bonds formed while working and staying away
from home all the time could never be replicated in any other
profession."
While many will get a redundancy payout, about 19 staff had not
been at the firm long enough to qualify, which was very hard, Ms.
Halligan, as cited by RNZ, said.
"We're now moving into a job market that's going to be flooded with
a whole lot of other people who've just been made redundant, so
that just makes moving on to a new job so much harder."
Another staff member, who did not want to be named, said the
company could have done more to help staff in the lead-up to the
decision, reports RNZ.
"The tag line of the Covid-19 pandemic seems to be 'these are
unprecedented times'. This phrase has been used to justify some . .
. disappointing behaviour . . . from Virgin Australia."
RNZ adds that many of the employees had been with the company more
than a decade, or in the case of pilots had trained for more than a
decade to get qualified, they said.
"The airline industry will not be what it was before. We are
unlikely to find jobs working as crew again with much ease. My
heart is broken from the sudden upheaval for my whānau and I feel
dazed and lost."
According to the report, Rachel Mackintosh, Assistant National
Secretary of E Tū, the union representing airline staff, said that
the union is not convinced Virgin took every avenue it could have
to help staff.
"The company should have applied for the wage subsidy and done more
to ensure the continuity of employment and pay for their workers.
The global aviation industry is in a precarious state. Airlines has
been in a race to the bottom for over a decade and workers are
paying the price," RNZ quotes Ms. Mackintosh as saying.
"We are urging all employers, in aviation and beyond, to take
advantage of the government wage subsidy and not let the workers
bear the full brunt of the downturn."
International passenger flights to and from Australia were
suspended on March 30, as a result of Australian travel
restrictions. To mark the shut down, the firm released a
choreographed video of staff performing to the song "Don't Stop
Believing," the report adds.
=================
S I N G A P O R E
=================
GLOBAL A&T: Fitch Cuts IDRs to CCC+ & $665MM Secured Notes to B-
----------------------------------------------------------------
Fitch Ratings has downgraded outsourced semiconductor assembly and
test operator Global A&T Electronics Ltd's Long-Term Foreign- and
Local-Currency Issuer Default Ratings to 'CCC+' from 'B-'. Fitch
has also downgraded the rating on GATE's USD665 million 8.5% senior
secured notes due 2023 to 'B-' with a Recovery Rating of 'RR3',
from 'B+' with a Recovery Rating of 'RR2'. All of the ratings
remain on Rating Watch Evolving.
The downgrade reflects its assessment that the coronavirus pandemic
will weigh heavily on GATE's performance and force a significant
deterioration in its 100% parent UTAC Holdings Limited's (UTAC)
credit metrics in 2020 and afterwards. Fitch sees high refinancing
risk due to the longer-term business and financial impact from
measures imposed worldwide in response to the pandemic. However,
the rating is supported by its liquidity profile with no near-term
maturity.
Fitch placed the ratings on RWE following the announcement on 23
January 2020 of the planned sale of UTAC to a global private equity
firm. The ratings could be upgraded if the transaction successfully
completes and the capital structure of the group improves. However,
the ratings could be downgraded if Fitch expects a more severe
impact on UTAC's financial performance, liquidity and refinancing
risk. Fitch has no information on whether the transaction could be
affected by the virus outbreak and the business shock that
follows.
Fitch rates GATE's senior secured notes one notch above GATE's
Long-Term IDR as the recovery prospects benefit from the security
package, which covers principally all the assets of GATE and UTAC
except those in China (Shanghai), Cayman Islands and Europe. UTAC
does not have any debt outside of GATE and management intends to
keep the other entities within the group debt-free.
Fitch rates GATE based on the consolidated credit profile of the
UTAC group due to the strong legal linkages as UTAC and all the key
operating entities in the group guarantee the secured notes. UTAC
controls the board at GATE and another subsidiary UMS, and their
key operating and financial decisions. GATE will generate almost
all of the group's revenue and EBITDA, after UTAC's reorganization
in 2019.
The Rating Watch will be resolved when the transaction becomes
practically unconditional and Fitch has further information on the
proposed capital structure of the group. This may take more than
six months in the event that the transaction is delayed for longer
than the parties expect.
KEY RATING DRIVERS
Lower Demand: Fitch forecasts the UTAC group's revenue and EBITDA
to decline by double-digit percentages in its base case as the OSAT
industry faces a severe slowdown in smartphone and automobile
demand, and disruption in production due to the pandemic. Fitch
expects a slowdown in the OSAT industry for a second consecutive
year in 2020. International Data Corporation predicts an over 50%
chance that worldwide semiconductor revenue will decline by 6% in
2020. OSAT vendors are disproportionately affected in a
semiconductor industry downturn as customers tend to take on some
of the assembly and test work themselves and reduce orders to OSAT
vendors.
Worsening Leverage: Fitch forecasts UTAC's funds from operations
leverage to worsen to 7.5x-8.0x in 2020-2021 (2019: 5.9x). Fitch
forecasts UTAC's cash flow from operations to decline to
USD20million-30 million (2019: USD85 million) in 2020-2021 due to
the pandemic, insufficient to cover capex. Fitch expects UTAC to
lower its capex (2019: USD108 million) as it needs to reduce cash
outflow and preserve liquidity for coupon payment. Fitch forecasts
UTAC's free cash flow to be worse than 2019's negative USD18
million.
High Refinancing Risks: Unless the transaction proceeds, Fitch
believes it will difficult for the UTAC group to refinance the
USD665 million notes due 2023 through capital markets or bank debt
because of high leverage, pandemic-related deterioration in
business performance and the history of debt restructuring. GATE
defaulted in 2017 on its USD1.1 billion notes due 2019 and
exchanged these notes, in part, into the current USD665 million
notes through a pre-packaged plan of reorganization under Chapter
11 of the US Bankruptcy Code.
Supply Chain Disruption: Fitch expects severe supply chain
disruption to continue in coming months as countries are imposing
more movement restrictions, while some have ordered factories to
shut down in an attempt to keep workers home. Fitch understands
that the UTAC group's production in its China and Malaysia
facilities has been affected as factory resumption was slow in
China after the Chinese New Year given travel bans and stringent
quarantine measures, while Malaysia issued a movement control order
that prevented any non-essential factories from continuing
operations for at least a month. Fitch also expects that the supply
of materials for UTAC's production is likely to be affected.
Lower Forecasts by Customers: At least four of UTAC's top-ten
customers by revenue have reduced or withdrawn their revenue
forecasts. Broadcom Inc. (BBB-/Negative) and Microchip Technology
Inc. (BB+/Negative) have withdrawn their revenue forecasts for 2020
and 1Q20, respectively, while ON Semiconductor Corp. and Analog
Devices Inc. (ADI) have cut their revenue guidance for 1Q20 by
around 5%. This will dampen UTAC's hope of securing more orders and
revenue growth from customers, if any, in its view. UTAC has high
customer concentration risks, with its top-ten customers accounting
for 71% of its total revenue in 2019.
Longer-term Business Impact: Fitch expects the UTAC group to
benefit less from a recovery in the semiconductor industry after
the crisis compared with industry leaders, such as ASE Technology
Holding Co., Ltd. (ASEH, BBB/Negative), as it lacks technological
capability. The technology gap between UTAC and the top-three
industry peers is likely to widen over the medium term. The UTAC
group has limited financial flexibility to invest since its
leverage is high and Fitch expects its operating cash flow to
decline in 2020-2021. In addition, Fitch expects UTAC to reduce
capex and R&D investment and this will lead to further
deterioration of its market position in the medium term.
Recovery Rating of 'RR3': its recovery calculations assume
post-restructuring EBITDA of USD90 million, a 4.5x reorganization
multiple to produce an adjusted going-concern enterprise value
after 10% administrative claims of USD365 million. The value was
then applied to the secured notes resulting in a recovery rate
consistent with 'RR3'. Fitch has reduced its assumption on
post-restructuring EBITDA from USD140 million, as Fitch expects
UTAC's EBITDA to structurally decline because of the longer-term
business impact from the pandemic and its further weakened
financial flexibility to invest. These will hurt UTAC's
competitiveness in the medium to long term. UTAC also lost an
entire revenue stream from liquidated damages after the termination
of a take-or-pay contract with a major customer in mid-2019.
DERIVATION SUMMARY
GATE's ratings are based on the consolidated credit profile of UTAC
group, as UTAC and its subsidiaries fully and unconditionally
guarantee GATE's senior secured notes, and GATE generates almost
100% of UTAC's revenue after the group's reorganization in 2019.
UTAC group's credit profile is constrained by its significantly
weaker business-risk profile relative to larger OSAT companies.
UTAC group has significantly weaker market position, growth
prospects, technological capability and customer diversity compared
with ASEH. In an industry slowdown scenario, UTAC is also much more
vulnerable as the lower operating cash flow further limits its
ability to invest, and as such its market position is likely to
deteriorate when compared with peers. UTAC's FFO leverage is likely
to be 7.5x-8.0x, worse than ASEH's around 3.0x.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within its Rating Case for the Issuer under
its current management and capital structure include:
- UTAC group's revenue to decline by double-digit percentages in
2020 before stabilizing in 2021 (2019: -10%) under Fitch's
expectation that global smartphone shipment and automobile sales
will fall significantly due to the pandemic
- Operating EBITDA margin to decline to around 16% in 2020-2021
(2019:18%), lower than previous levels given the absence of
revenues from liquidated damages. Margins also come down when
revenue drops due to the high fixed cost nature of the industry
- Capex to decline in line with revenue in 2020-2021 (2019:
USD108 million)
- GATE will not distribute any dividends to UTAC and UTAC will
not pay dividends to its shareholders
RATING SENSITIVITIES
Developments That May, Individually or Collectively, Lead to
Positive Rating Action
- The transaction goes ahead and the capital structure improves
such that FFO leverage is forecast to be below 4.5x on a sustained
basis
Developments That May, Individually or Collectively, Lead to
Negative Rating Action
- Larger than expected deterioration in financial performance due
to the pandemic, leading to FFO interest coverage below 1.0x
- Weakening liquidity due to a higher FCF deficit than Fitch
expects due to pandemic-related poor operating performances or
higher capex
- The transaction is unsuccessful and operating performances
continue to be weak, leading to higher refinancing risks as the
bond maturity comes closer
BEST/WORST CASE RATING SCENARIO
Ratings of non-financial corporate issuers have a best-case rating
upgrade scenario (defined as the 99th percentile of rating
transitions, measured in a positive direction) of three notches
over a three-year rating horizon; and a worst-case rating downgrade
scenario (defined as the 99th percentile of rating transitions,
measured in a negative direction) of four notches over three years.
The complete span of best- and worst-case scenario credit ratings
for all rating categories ranges from 'AAA' to 'D'. Best- and
worst-case scenario credit ratings are based on historical
performance.
LIQUIDITY AND DEBT STRUCTURE
High Refinancing Risk: Fitch believes that refinancing risk on its
USD665 million secured notes due 2023 to be high due to continued
weak financial performance. However, liquidity in the next 12-18
months is adequate, if there is no further significant production
disruption, as UTAC had a cash balance of around USD191 million at
end-2019 and no short-term maturities. The only debt is the secured
notes due in 2023. UTAC has no undrawn committed bank facilities.
Fitch believes the group has no headroom to raise additional debt,
except for secured debt of USD95 million under the carve-out
conditions in the documents for the secured notes, because it has
breached its incurrence covenant of debt/EBITDA of 4.0x under the
secured-note documents.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
ESG issues are credit neutral or have only a minimal credit impact
on the entity(ies), either due to their nature or the way in which
they are being managed by the entity(ies).
=====================
S O U T H K O R E A
=====================
KDB LIFE: Fitch Alters Outlook on BB+ IDR to Negative
-----------------------------------------------------
Fitch Ratings has revised the Outlook on South Korea-based KDB Life
Insurance Co., Ltd.'s Insurer Financial Strength Rating and its
Long-Term Issuer Default Rating to Negative from Stable. Fitch has
affirmed the IFS Rating at 'BBB-' (Good) and its IDR at 'BB+'.
Fitch also has affirmed the US dollar subordinated hybrid
securities at 'BB'.
KEY RATING DRIVERS
The rating actions are being taken as part of Fitch's routine
annual review of KDB Life. The review considered Fitch's current
assessment of the impact of the coronavirus pandemic, including its
economic impact, under a set of ratings assumptions related to
interest-rate levels; declines in the market values of stocks,
bonds, derivatives and other capital market instruments typically
owned or traded by insurance companies; market liquidity; and the
magnitude of COVID-19-related claim/benefit exposures. These
assumptions were used by Fitch to develop pro-forma financial
metrics for KDB Life that Fitch compared with both rating
guidelines defined in its criteria, and relative to previously
established Rating Sensitivities.
The Outlook revision also reflects the insurer's improved-but-low
profitability and heightened investment risk in light of the rising
exposure to risky assets amid volatile financial markets, and a
decline in interest rates due to COVID-19. The ratings were
affirmed based on its 'Moderate' business profile, 'Moderately
Weak' financial performance, and sustained adequate risk-based
capitalization while financial leverage remains high.
KDB Life's exposure to risky assets - mainly alternative
investments - increased to 227% of shareholders' equity by end-2019
from 160% in 2017. This indicates that the insurer's equity base
would be increasingly sensitive to capital-market movements and
potential impairment losses in light of the less transparent and
illiquid nature of the alternative investments. Fitch expects the
higher asset risks to add pressure on its earnings down to well
below the ratio guidelines for BBB rating category, based on its
rating assumptions.
Profitability has improved, but remained low. KDB Life's return on
assets (pre-tax) and return on equity increased to 0.2% and 4.5%,
respectively, in 2019 (2018: 0.1% and -0.2%) as a result of its
restructuring plans since 2017. The insurer's bottom line may
improve on the back of its continuous product mix shift towards
protection-type policies with higher margins, but significant
improvement is unlikely in the near term. It also expects the
economic downturn driven by coronavirus to dampen its bottom-line
in the short-term period under its rating assumptions.
Fitch expects KDB Life to be adequately capitalized to support its
business in the next 12 months, based on its current assessment
with ratings assumptions. The company's regulatory risk-based
capital ratio remained stable at 215% at end-2019. Its score on
Fitch's Prism Model was also maintained at the 'Adequate' level,
despite its increased asset risks.
Its capital strength is partly offset by high financial leverage
and interest burden. Financial leverage increased to 48% by
end-2019 from 35% at end-2017 following the issuance of hybrid and
subordinated securities in 2018. Its fixed-charge coverage ratio
improved slightly to 1.1x in 2019 from 1.0x in 2018. Based on its
rating assumptions, it expects further deterioration in its
financial leverage ratio to over 50% due to its vulnerable capital
base in the face of financial market disruptions. Fitch treats
Korean hybrid securities as 100% debt for leverage calculation.
Fitch ranks KDB Life's business profile as 'Moderate' compared with
that of other Korean life insurers, underpinned by its position as
a mid-sized life insurer in the country, 'Somewhat Diversified'
business profile, and 'Moderate' business risk profile. The company
has an operating history of more than 40 years, with a market share
of about 3% in 2019 by premium income. It faces a limited business
impact from the coronavirus outbreak as its policies do not cover
the virus. Fitch therefore scores KDB Life's business profile at
'bbb' under the agency's credit-factor scoring guidelines.
RATING SENSITIVITIES
The ratings remain sensitive to any material change in Fitch's
rating assumptions with respect to the coronavirus pandemic.
Periodic updates to its assumptions are possible - given the fast
nature of changes in government actions in response to the
pandemic, and the pace with which new information is available on
the medical aspects of the outbreak.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- A significant decline in KDB Life's capital and leverage
position, with its Prism model score falling below the 'Adequate'
category or its local RBC ratio dropping to below 150%; and
financial leverage failing to move back to 45% over a sustained
period;
- A prolonged deterioration in profitability, measured by
consolidated return on assets (pre-tax) below 0.2% and fixed-charge
coverage ratio consistently below 1.9x;
- A significant decrease in parent Korea Development Bank's
(AA-/Stable) ownership in KDB Life, or other corporate actions that
may result in a weakening assessment of the parent's support for
the subsidiary
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Improvement in profitability, measured by a consolidated return
on assets (pre-tax) above 0.2%;
- Decrease in the risky-assets ratio to below 220%;
- Sustaining its capitalization, with its Prism model score
maintained well into the 'Adequate' category
BEST/WORST CASE RATING SCENARIO
Ratings of Financial Institutions issuers have a best-case rating
upgrade scenario (defined as the 99th percentile of rating
transitions, measured in a positive direction) of three notches
over a three-year rating horizon; and a worst-case rating downgrade
scenario (defined as the 99th percentile of rating transitions,
measured in a negative direction) of four notches over three years.
The complete span of best- and worst-case scenario credit ratings
for all rating categories ranges from 'AAA' to 'D'. Best- and
worst-case scenario credit ratings are based on historical
performance.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
MAGNACHIP SEMICONDUCTOR: Moody's Alters Ratings Outlook to Stable
-----------------------------------------------------------------
Moody's Investors Service has revised the outlook on MagnaChip
Semiconductor Corporation to stable from negative.
At the same time, Moody's has affirmed the company's B2 corporate
family and senior unsecured bond ratings.
RATINGS RATIONALE
"The rating action primarily reflects its expectation that
following the completion of the sale of its foundry business and
Fab 4, MagnaChip will have a solid net cash position that gives it
an adequate buffer against the challenging operating environment
amid the coronavirus outbreak," says Gloria Tsuen, a Moody's Vice
President and Senior Credit Officer.
On March 31, 2020, MagnaChip announced that it had reached a
definitive agreement to sell its foundry services group and Fab 4
-- one of its factories in Korea -- to a consortium for around $435
million, with around $345 million in cash and $90 million in
transfer of statutory severance liabilities [1]. SK Hynix Inc.
(Baa2 negative) will participate in the consortium as a limited
partner. MagnaChip expects to close the transaction in four to six
months. The rating action assumes that this transaction will be
completed without material changes in key terms.
MagnaChip plans to use the net proceeds from the transaction to
significantly reduce its debt. The transaction will therefore (1)
address the company's refinancing of its exchangeable notes and
senior notes, which total around $305 million and mature in March
and July 2021 respectively; and (2) allow the company to have a
strong net cash position with over $100 million. The company had
$152 million in cash at the end of 2019.
On the other hand, this expected improvement will be partly offset
by the fact that the company will subsequently have a smaller scale
and a higher concentration in display and power products, which
will lead to more business volatility. MagnaChip's foundry business
generated 39% of its $792 million revenues and 35% of its $181
million gross profits in 2019.
Moody's expects MagnaChip's revenue and earnings will weaken in
2020 because its key end markets, such as mobile, consumer,
automotive and industrial products, will be affected by the severe
and extensive credit shock, the deteriorating global economic
outlook and asset price declines amid the rapid and widening spread
of the coronavirus outbreak.
However, its significantly strengthened liquidity and balance sheet
will provide an adequate buffer against such external shocks.
MagnaChip's ratings continue to factor in the company's small
scale, high customer concentration, exposure to the volatile and
competitive consumer electronics industry, and changes in
end-customer demand.
These weaknesses are mitigated by its strong and growing portfolio
of display driver integrated circuits built for organic light
emitting diodes (OLED), which will drive its revenue and profit
growth in the next few years.
The ratings also take into account the following environmental,
social and governance (ESG) factors.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
In terms of governance risks, the company has limited disclosures
on its financial policy and provides limited forward-looking
guidance to investors. However, it is listed on the New York Stock
Exchange with independent directors accounting for the vast
majority of its board members (five out of six).
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Moody's could upgrade the ratings if MagnaChip significantly
increases its scale and customer base, while maintaining a healthy
balance sheet and liquidity.
On the other hand, Moody's could downgrade the ratings if the
company's (1) adjusted debt/EBITDA increases to above 4.0x, (2)
cash on hand falls below $80 million -- $100 million, or (3)
liquidity weakens.
The principal methodology used in these ratings was Semiconductor
Industry published in July 2018.
MagnaChip Semiconductor Corporation is a designer and manufacturer
of analog and mixed-signal semiconductor platform solutions for
communications, 'Internet of Things', consumer, industrial and
automotive applications.
=============
V I E T N A M
=============
NATIONAL POWER: Fitch Affirms 'BB' LT Foreign Currency IDR
----------------------------------------------------------
Fitch Ratings has affirmed Vietnam-based National Power
Transmission Corporation's Long-Term Foreign-Currency Issuer
Default Rating at 'BB' with a Positive Outlook. Fitch has also
affirmed EVNNPT's senior unsecured rating of 'BB'. EVNNPT's ratings
are based on the consolidated profile of Vietnam Electricity (EVN,
BB/Positive), which owns 100% of EVNNPT, in line with Fitch's
Parent and Subsidiary Rating Linkage criteria. EVN's ratings are
equalized with those of the sovereign under Fitch's
Government-Related Entities Rating Criteria.
EVNNPT's Standalone Credit Profile is assessed at 'bb+', stronger
than EVN's standalone assessment, as it is supported by the
company's monopolistic role in Vietnam's electricity transmission
sector, pooled counterparty risk and strong receivable position.
EVNNPT's financial position is also stronger than that commensurate
for its Standalone Credit Profile. However, the Standalone Credit
Profile will be raised only if there is a record of tariff
adjustments that reflects cost changes, along with an improvement
in the parent's credit profile.
Fitch does not expect any increase in Vietnam's retail electricity
tariff at least till the middle of this year to support economic
activities amid the coronavirus pandemic. The agency anticipates a
decline of around 20% in transmission tariffs this year to help EVN
support other business segments. The decline in the transmission
tariff will be offset by EVNNPT's accrued profit from the last
couple of years. Electricity sales volumes were not affected in the
first two months of the year, according to management. However,
Fitch assumes transmission volume growth of only 4% in 2020 in its
rating case (2019: 8.3%).
KEY RATING DRIVERS
Strong Parent and Subsidiary Linkages: EVN controls EVNNPT's key
management and approves its business and investment plans. EVN also
approves the subsidiary's financing plans, including borrowings
above certain thresholds, its organizational structure, and the
appointment of key executives and their compensation. EVN also
supervises EVNNPT's compliance with regulations. There is no
centralized treasury, but about 20% of EVNNPT's total borrowings
are channeled through EVN and its subsidiaries. There is also no
restriction on the flow of dividends to the parent from EVNNPT.
EVNNPT's Standalone Credit Profile: EVNNPT, as a monopoly in
Vietnam's electricity transmission sector, faces limited price and
volume risks under the country's regulatory framework, which
enhances its revenue and profit visibility. The company relies on
multiple counterparties, which are the five distribution companies
under EVN, and enjoys strong receivables. EVNNPT's credit profile
is constrained by the short history of the regulatory framework
that remains susceptible to political risks and the one-year period
that tariffs are set for in the framework.
Cost-Plus Transmission Tariff: The regulator fixes the electricity
transmission tariff in Vietnam annually on the principle of
ensuring EVNNPT recovers appropriate expenses and earns permissible
profits that allow the company to maintain operations and meet
investment plans. However, the final tariff remains subject to
approval by EVN and the regulator. Transmission tariffs accounted
for only 5.5% of the retail tariff in 2019 (2020E: 4.3%), which
means an increase in transmission tariff will have limited impact
on the final retail electricity tariff. Hence, EVNNPT's price risk
is lower than EVN's, in Fitch's view.
EVNNPT's Rising Capex: Fitch expects EVNNPT to incur significant
capex to address continuing increases in power demand, tackle a
shortage of power plants in the country's southern region and
improve supply services. These investments include EVNNPT's
initiatives to improve grid quality and reliability, and strengthen
regional connections. Fitch estimates EVNNPT's capex will be around
VND14 trillion in 2020 and up to VND16 trillion a year from 2021.
Fitch estimates EVNNPT's FFO adjusted net leverage will stay under
4.0x over the next three to four years, resulting in the stronger
financial profile than that commensurate for its Standalone Credit
Profile.
EVN's Strong State Linkages: Fitch sees EVN's status, ownership and
control by the Vietnam sovereign as 'Very Strong'. The state fully
owns EVN, appoints its board and senior management, directs
investments and approves tariff hikes in excess of 5%. The support
record and its expectations of state support for EVN are 'Strong',
as the company has received different forms of support, including
guarantees, step-down loans, loans from state-owned banks at
preferential rates and subsidies for strategically important
projects. Fitch expects support to be available, if needed, even
though the government intends to reduce direct support for
state-owned enterprises and contain sovereign debt levels.
Strong Incentive to Support EVN: Fitch believes the socio-political
implications of a potential EVN default are 'Strong', as it would
lead to service disruptions due to its an entrenched position
across the electricity value chain. It would also be difficult to
fund new power investments. Fitch sees the financial implications
of a potential default by EVN as 'Very Strong', as it is one of
Vietnam's main borrowers and a default would significantly affect
the availability and cost of domestic and foreign financing options
for the state and government-related entities.
EVN's Standalone Credit Profile: EVN is a monopoly in Vietnam's
electricity transmission and distribution sector, and owns and
operates 54% of the country's installed generation capacity,
including strategic hydropower assets. EVN's Standalone Credit
Profile is constrained by the absence of consistent revisions in
tariffs to reflect cost changes. EVN can increase the retail tariff
every six months in line with rising production costs, but it has
to seek approval from the ministry for increases above 5%, and
automatic tariff adjustments under 5% have been limited. EVN's
financial profile can be significantly affected if tariffs are not
adjusted regularly as it faces major hydrology, currency and demand
risks.
DERIVATION SUMMARY
EVN's IDR
PT Perusahaan Listrik Negara (Persero) (PLN, BBB/Stable, Standalone
Credit Profile: bb+) and Korea Electric Power Corporation (KEPCO,
AA-/Stable, Standalone Credit Profile: bbb) are similar to EVN as
they are also monopolies in their countries' electricity
transmission and distribution sectors, and own and operate the
majority of installed power-generation capacity. PLN's and KEPCO's
IDRs are equalized with that of their respective sovereigns -
Indonesia (BBB/Stable) and South Korea (AA-/Stable) - per Fitch's
Government-Related Entities Rating Criteria.
Fitch assesses PLN's linkages with the state and the state's
incentive to support as 'Very Strong'. Fitch assesses KEPCO's
status, ownership and control, and support record and expectations
as 'Strong', while the state's incentives to support are assessed
as 'Very Strong'. Meanwhile, Fitch assesses EVN's status, ownership
and control and financial implications of default as 'Very Strong',
while the support, support record and expectations, along with the
socio-political impact of a default, are assessed as 'Strong'.
EVNNPT's Standalone Credit Profile
Korea District Heating Corp.'s (KDHC, A+/Stable) 'bb' category
Standalone Credit Profile reflects the company's high leverage,
tempering its strong business profile. KDHC's business profile
reflects its diversification across the heating and electricity
businesses, strong market position in the heating business and the
regulatory framework, which allows cost pass-through but with a
chequered implementation record. Fitch estimates that FFO adjusted
net leverage stayed high at around 8x in 2019 (2018: 11.5x) due to
lower operating cash generation from the heating business, but
expect it to improve gradually over the medium term. The company
has strong access to capital, which supports its financial
liquidity, despite the high leverage.
EVNNPT's business profile is weaker than that of KDHC, affected by
the absence of an independent regulator in Vietnam's power sector,
but the company's much stronger financial profile compensates for
it, justifying similar standalone credit assessments in its view.
Adani Transmission Limited's (ATL, BBB-/Stable) ratings reflect a
stable and favorable regulatory environment as India's regulators
have a long track record of delivering predictable outcomes.
Revenue for four of ATL's key operating transmission assets are
based on a cost-plus tariff framework. Fitch estimates the combined
businesses accounted for about 78% of the group's adjusted cash
operating profit in the financial year ended March 2020. ATL's
headroom in its ratings is low with tight coverage metrics over
next few years. ATL's stronger business profile more than
compensates for its weaker financial profile, justifying a notch of
difference from EVNNPT's standalone credit assessment, in its
view.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within its Rating Case for the Issuer
- Return on equity of -4.4% in 2020 (2019E: 11%) and 2.3% to 3.5%
thereafter
- Tariffs to move in accordance with transmission volumes to
secure the estimated return on equity
- Volume growth to slow to 4.3% in 2020 (2019: 8.3%, 2018: 11%)
- Transmission tariff to decline by 21% in 2020 to VND80.1/kWh
- Blended interest rate of 4.8%-5.0% over 2019-2022 (2018: 4.2%)
- Capex of VND13.8 trillion in 2020 and about VND16 trillion a
year from 2021
- No dividend payouts as Fitch expects EVN to leave cash for
EVNNPT's own growth
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Positive rating action on EVN
- Fitch does not expect positive action on EVNNPT's standalone
profile in the absence of consistent implementation of the current
tariff framework and improvement in EVN's credit profile
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Negative rating action on EVN
- Fitch would lower the company's Standalone Credit Profile upon
adverse regulatory changes that result in deterioration of EVNNPT's
business profile
For EVN, the following sensitivities were outlined by Fitch in its
rating action commentary of 17 September 2019:
Developments That May, Individually or Collectively, Lead to
Positive Rating Action
- Positive rating action on the sovereign, provided the
likelihood of state support does not deteriorate significantly
Developments That May, Individually or Collectively, Lead to
Negative Rating Action
- Negative rating action on the sovereign
- Significant weakening of the likelihood of support. Fitch sees
this as a remote prospect in the medium term.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of non-financial corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: EVNNPT had VND9 trillion of cash and cash
equivalents at end-2018. Fitch expects the company to generate
VND11 trillion-14 trillion of operational cash flows per year.
Fitch believes EVNNPT's internal cash generation will be sufficient
to manage debt maturities, which will not exceed VND7 trillion a
year for the next three to four years. EVNNPT would require
external funds to manage its annual capex targets. EVNNPT also has
strong access to domestic markets and Official Development
Assistance due to its linkages with EVN and hence the state.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
EVNNPT's rating is directly linked to the credit quality of its
parent EVN. A change in Fitch's assessment of the credit quality of
EVN would automatically result in a change in the rating on
EVNNPT.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Asia Pacific is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez,
Julie Anne L. Toledo, Ivy B. Magdadaro and Peter A. Chapman,
Editors.
Copyright 2020. All rights reserved. ISSN: 1520-9482.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding,
electronic re-mailing and photocopying) is strictly prohibited
without prior written permission of the publishers.
Information contained herein is obtained from sources believed
to be reliable, but is not guaranteed.
TCR-AP subscription rate is US$775 for 6 months delivered via e-
mail. Additional e-mail subscriptions for members of the same
firm for the term of the initial subscription or balance
thereof are US$25 each. For subscription information, contact
Peter Chapman at 215-945-7000.
*** End of Transmission ***