/raid1/www/Hosts/bankrupt/TCRAP_Public/200807.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
Friday, August 7, 2020, Vol. 23, No. 158
Headlines
A U S T R A L I A
A FIFE & CO: First Creditors' Meeting Set for Aug. 17
G-STAR AUSTRALIA: Second Creditors' Meeting Set for Aug. 13
MY BEST GIFT: Second Creditors' Meeting Set for Aug. 14
SEAFOLLY PTY: Creditors Approve L Catterton Rescue Offer
WEILIN TRADE: Creditors May Get 20 Cents in the Dollar
C H I N A
CENTRAL CHINA REAL: Fitch Rates Proposed USD Senior Notes 'BB-'
CENTRAL CHINA REAL: Moody's Rates New USD Unsecured Notes 'B1'
HILONG HOLDING: Fitch Withdraws 'RD' IDR
HONG YANG: Fitch Affirms B+ Ratings, Outlook Stable
SEAZEN GROUP: Fitch Rates Proposed USD Senior Notes 'BB'
TUNGHSU: Explains Why It Was Unable to Withdraw Its Own Cash
YANAN BICON: S&P Withdraws 'CCC-' LongTerm Issuer Credit Rating
YUZHOU GROUP: Moody's Rates Senior Unsecured USD Notes 'B1'
I N D I A
AKSHAR COTTON: CARE Lowers Rating on INR10cr LT Loan to D
ASHWANI GOYAL: CARE Keeps D on INR9.38cr Debt in Not Cooperating
BHAKTI INFRACON: CARE Keeps D on INR40cr Debt in Not Cooperating
CARD PRO: CARE Keeps D Debt Ratings in Not Cooperating
CHANDRA ENGINEERS: CARE Lowers Rating on INR4.15cr Loan to D
CHETAN OVERSEAS: Ind-Ra Lowers LongTerm Issuer Rating to 'BB-'
CHHATRAPATI SAMBHAJI: Ind-Ra Affirms 'B+' LongTerm Issuer Rating
CORPORATE FASHION: CARE Keeps D Debt Ratings in Not Cooperating
ETCO DIGITAL: CARE Keeps D Debt Ratings in Not Cooperating
FIRESTAR INTERNATIONAL: Lenders Agree to Liquidate Firm
GAMMON INDIA: CARE Keeps D Debt Ratings in Not Cooperating
GUPTA TEX: CARE Keeps D Debt Ratings in Not Cooperating
HANUMAN DAL: CARE Keeps D on INR35cr Debt in Not Cooperating
HAPPY ACOUSTICS: CARE Keeps D Debt Ratings in Not Cooperating
HOUSING DEVELOPMENT: Adani Group, Suraksha, Sunteck Submit EOI
INDIAN ACOUSTICS: CARE Keeps D on INR24cr Loans in Not Cooperating
KAYNES TECHNOLOGY: Ind-Ra Assigns 'BB' LongTerm Issuer Rating
LEEL ELECTRICALS: CARE Keeps D Debt Ratings in Not Cooperating
LOKMANGAL AGRO: CARE Keeps B on INR110cr Debt in Not Cooperating
LOKMANGAL SUGAR: CARE Keeps D Debt Rating in Not Cooperating
M. RANGANATHAN: CARE Lowers Rating on INR3.40cr LT Loan to D
NATIONAL STEEL: Ind-Ra Affirms 'D' LongTerm Issuer Rating
NEXT GENERATION: Ind-Ra Lowers Term Loan Rating to 'D'
NILKANTH COTTON: CARE Keeps D on INR7.32cr Debt in Not Cooperating
PRAAGNA HOSPITALS: CARE Lowers Rating on INR8cr LT Loan to C
PRATIBHA KRUSHI: CARE Keeps D Debt Ratings in Not Cooperating
PRATIBHA MILK: CARE Keeps D on INR54.93cr Debt in Not Cooperating
PROTECH FEED: CARE Keeps D on INR10.95cr Debt in Not Cooperating
SHIVAJI CANE: CARE Keeps D on INR59cr Debt in Not Cooperating
SINTEX PREFAB: CARE Keeps D Debt Ratings in Not Cooperating
SINTEX-BAPL LIMITED: CARE Keeps D Debt Ratings in Not Cooperating
SSPT LOGISTICS: CARE Lowers Rating on INR6cr LT Loan to D
STARBIGBLOC BUILDING: Ind-Ra Affirms BB- LongTerm Issuer Rating
SUDHIR POWER: Insolvency Resolution Process Case Summary
TALWALKARS BETTER: CARE Keeps D Debt Ratings in Not Cooperating
TALWALKARS HEALTHCLUBS: CARE Keeps Debt Ratings in Not Cooperating
VENKATESWARA CONSTRUCTIONS: CARE Keeps Ratings in Not Cooperating
VIDEOCON INDUSTRIES: Lenders Mull Sending Company Into Liquidation
VISUAL AND ACOUSTICS: CARE Keeps D Debt Ratings in Not Cooperating
WADHWA BUILDCON: Insolvency Resolution Process Case Summary
J A P A N
[*] Vacancies in Tokyo Offices Up as Virus Bankruptcies Rise
N E W Z E A L A N D
ANTIPODEANS ABROAD: Schools With Cancelled Trips Band Together
P H I L I P P I N E S
PHILIPPINES: Plunges Into Recession; Cuts 2020 GDP Outlook
S O U T H K O R E A
INDUSTRIAL BANK: Moody's Confirms (P)Ba2 Rating on Preferred Stock
S R I L A N K A
DFCC BANK: Fitch Affirms B- IDRs, Then Withdraws Ratings
- - - - -
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A U S T R A L I A
=================
A FIFE & CO: First Creditors' Meeting Set for Aug. 17
-----------------------------------------------------
A first meeting of the creditors in the proceedings of A Fife & Co
Pty Ltd will be held on Aug. 17, 2020, at 11:00 a.m. at the offices
of Rodgers Reidy (NSW), Level 12, at 210 Clarence Street, in
Sydney, NSW.
Andrew James Barnden of Rodgers Reidy was appointed as
administrator of A Fife & Co on Aug. 5, 2020.
G-STAR AUSTRALIA: Second Creditors' Meeting Set for Aug. 13
-----------------------------------------------------------
A second meeting of creditors in the proceedings of G-Star
Australia Pty Ltd has been set for Aug. 13, 2020, at 2:00 p.m. via
teleconference only.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the Company
be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by Aug. 12, 2020, at 12:00 p.m.
Justin Denis Walsh, Samuel Freeman and Stewart McCallum of Ernst &
Young were appointed as administrators of G-Star Australia on May
15, 2020.
MY BEST GIFT: Second Creditors' Meeting Set for Aug. 14
-------------------------------------------------------
A second meeting of creditors in the proceedings of My Best Gift
Pty Ltd has been set for Aug. 14, 2020, at 10:00 a.m. at the
offices of JLA Insolvency & Advisory, Level 13, at 50 Margaret
Street, in Sydney, NSW.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the Company
be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by Aug. 13, 2020, at 4:00 p.m.
Jamieson Louttit of JLA Insolvency & Advisory was appointed as
administrator of My Best Gift on July 10, 2020.
SEAFOLLY PTY: Creditors Approve L Catterton Rescue Offer
--------------------------------------------------------
Sue Mitchell at Australian Financial Review reports that the
creditors of collapsed swimwear company Seafolly have voted in
favor of a "rescue" proposal by private equity firm L Catterton,
which is the owner and major creditor, following intervention by
the corporate regulator.
AFR relates that the Australian Securities and Investments
Commission (ASIC) contacted the administrators of Seafolly late
last week amid concerns from unsecured creditors about the speed of
the sale process and their likely return under a deed of company
arrangement (DOCA) proposed by L Catterton.
As reported by The Australian Financial Review last week, under the
DOCA, creditors were divided into three pools depending on their
continuing importance to Seafolly.
Pool A creditors - those deemed critical to its future - would
receive 100 cents in the dollar; pool B creditors - deemed
important to its future - would receive 50 cents in the dollar; and
pool C creditors - those considered non-essential or unlikely to
continue to trade with the company - would receive 3 cents in the
dollar.
AFR says ASIC was worried that the administrators, Scott Langdon
and Rahul Goyal from KordaMentha, were unable to clarify which
"pool" each creditor would participate in before the creditors'
meeting on Aug. 10.
ASIC was also worried that, depending on how creditors were
allocated to each pool, creditors in Pool C might receive less than
3 cents in the dollar and closer to the amount they would receive
if Seafolly were liquidated, AFR relates.
"Without further information, ASIC considers that creditors may not
be able to make a fully informed assessment about the impact of the
proposed DOCA and how to vote," the commission said in a letter
sent to the administrators on July 31.
AFR relates that the meeting went ahead after ASIC's concerns were
made clear and the DOCA was overwhelmingly approved, enabling L
Catterton to regain control over the business.
The sale back to L Catterton was also approved by Seafolly's only
secured creditor, ANZ, which was owed AUD13 million and would have
had the right to appoint receivers. ANZ was repaid in full by L
Catterton on July 31.
Small creditors contacted by the Financial Review said the DOCA was
a "stitch-up".
"The whole thing was determined a month ago [when L Catterton put
Seafolly into administration] - we call it the Australian
dry-cleaning process," one creditor said.
"The employees and L Catterton supported it and everyone else's
vote was irrelevant," another creditor said.
"It seems an unfair outcome - they [L Catterton] get out of their
leases, they pay the creditors they want to pay and move on," he
said.
Mr. Langdon defended the sale process, saying L Catterton's offer
ensured the best return to secured and unsecured creditors, and
there was strong competitive tension throughout the sale process
from trade players and private equity.
"To get the best return for employees and creditors, a good sale
process is likely to have a management interest and shareholders
interest as part of the process - you need to have maximum
competitive tension to get the best possible result," the report
quotes Mr. Langdon as saying.
If Seafolly had fallen into liquidation, unsecured creditors would
have received nothing, he said.
L Catterton Asia, a partnership between global luxury goods company
LVMH, its major shareholder Groupe Arnault and US private equity
firm Catterton, acquired a 70% stake in Seafolly in 2014 from the
founding Halas family and bought out the remaining shares two years
ago, the report notes.
About Seafolly
On June 29, 2020, Scott Langdon and Rahul Goyal of KordaMentha
Restructuring were appointed Voluntary Administrators of the
Australian swimwear and women's beachwear fashion brand, Seafolly.
The appointment includes the entities relating to the Sunburn
business.
Seafolly has a retail network of 44 stores throughout Australia and
12 stores overseas.
WEILIN TRADE: Creditors May Get 20 Cents in the Dollar
------------------------------------------------------
Andrew Marshall at Farm Weekly reports that unsecured creditors
from across the cotton industry are being warned to expect to be
repaid maybe just a fifth of their losses following the collapse of
Chinese-owned merchant Weilin Trade owing about AUD58 million.
According to Farm Weekly, latest estimates suggest about 195 cotton
growers, brokers, merchants and other service providers have lost
money after Weilin bought cotton for the 2019-20 and 2020-21
seasons for as much as AUD660 a bale - or typically about AUD15 to
AUD30 above mainstream market prices.
However, its contracts were not honored by buyers or shareholders
in China after coronavirus triggered a demand slump in
February-March.
A big portion of Weilin's 2020 crop purchases had to be re-sold
into a depressed July market for significantly less than
AUD500/bale, Farm Weekly relays.
About 40% of last year's modest 600,000 bale Australian crop is
mooted to have originally been contracted to Weilin.
Farm Weekly relates that the trader, which is registered separately
to a sister farming company at Coleambally in southern NSW, had
already rolled over a large number of undelivered 2019 crop
contracts, but also became particularly aggressive with its
post-Christmas bidding at prices above AUD650/bale.
The list of unsecured and potential unsecured creditors -
representing a veritable who's who of Australian cotton industry
names - indicates about AUD22.5 million is owed to growers, traders
and brokers to cover the gap between Weilin's promised price and
the eventual value of their cotton when it did sell, Farm Weekly
notes.
Some of the bigger sums outstanding are due to big name producers
such as the Robinson family's Australian Food and Fibre;
Murrumbidgee family farmers, Commins Enterprises; Queensland-NSW
border enterprise, Reardon Farms; the Carberry family at Narrabri;
the Statham family's Sundown Pastoral Company, and the Liverpool
Plains' Merilong Pastoral Company, according to the report.
Other industry players including Goondiwindi ginning business
Carrington Cotton, Namoi Cotton's merchant partner Louis Dreyfus,
and other traders Ecom Commodities, Agvantage Commodities and
Omnicotton Australia are also unsecured creditors, Farm Weekly
discloses.
Farm Weekly says Weilin's Australian financial backer and primary
secured creditor National Australia Bank will be entitled to about
AUD35 million when the business winds up, while Weilin's eight
employees are owed about AUD64,000 in combined outstanding
entitlements.
Liquidation firm Vincents, which took the export company into
voluntary administration last month, plans to recommend a deed of
company arrangement to ensure some dividend is paid to unsecured
creditors, the report relates.
The DOCA proposes a AUD5.5 million pool to be split among unsecured
creditors, Farm Weekly notes.
The proposal assumed a return of about 20 cents would be paid for
every dollar owed by Weiling.
According to administrator Steven Straatz, 20 cents would "exceed
the amount they would receive in liquidation of the company after
the contemplation of NAB securities".
He warned, however, Vincents' initial estimates were still subject
to final adjudication, the report adds.
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C H I N A
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CENTRAL CHINA REAL: Fitch Rates Proposed USD Senior Notes 'BB-'
---------------------------------------------------------------
Fitch Ratings has assigned Central China Real Estate Limited's
(CCRE; BB-/Stable) proposed US dollar senior notes a 'BB-' rating.
The proposed notes are rated at the same level as CCRE's senior
unsecured rating, as they represent its direct, unconditional,
unsecured and unsubordinated obligations.
CCRE's ratings are supported by the company's position as a
market-leading homebuilder in China's Henan province, and healthy
leverage. However, CCRE remains less geographically diversified and
has thinner margins than higher-rated peers, which constrains the
rating at the current level.
KEY RATING DRIVERS
Strong Presence in Henan: CCRE increased its market share in Henan
to 11.2% in 2019 from 9% in 2018, and remained the largest
developer in the province. The company has been developing
residential properties almost entirely in Henan for more than 28
years, and has projects in 18 prefecture-level cities. CCRE's lower
average selling price of CNY7,811 per sq m in 2019, compared with
peers' ASP of above CNY11,000/sq m, reflects its wide product
exposure, including projects in smaller cities.
Growth in Line with Market: CCRE aims to boost its annual
contracted sales to CNY80 billion in 2020, which should be
supported by solid demand in the province. CCRE's total contracted
sales in 2019 were CNY71.8 billion, up by 34% from 2018. This was
driven by a larger share of sales from lower-tier cities in Henan.
More Land Acquisitions: CCRE acquired 13 million sq m in
attributable gross floor area of land for CNY22.7 billion in 2019.
It achieved a land acquisition/contracted sales value ratio of
0.32x, same as that in 2018. Management budgeted land-acquisition
outflow of CNY20 billion for 2020, representing 0.33x of its
contracted sales receipts.
Lower Leverage: CCRE's leverage - defined by net debt/adjusted
inventory (including guarantees to joint ventures and associates) -
dropped to 17.2% in 2019, from 43.2% in 2018, driven by a rise in
its payables. Fitch expects the company to be flexible on its land
acquisitions as its land bank is sufficient for development over
the next four to five years.
Stabilising Gross Margin: Fitch expects CCRE's gross margin to
stabilise at 23%-25% in 2020 after narrowing to 26% in 2019, from
34.4% in 2018, due mainly to the recognition of high-margin
products in 2018.
Guarantee to Related Parties: CCRE provided a two-year CNY500
million financial guarantee to Henan Hongdao in December 2019, for
the latter to obtain a bank loan. Henan Hongdao is owned by CCRE's
chairman and largest shareholder, and its subsidiary is a supplier
to CCRE. CCRE said it is not providing additional guarantees to
related parties that focus on non-property development businesses.
Fitch would consider negative rating action if there is increased
related-party transactions and financial guarantees.
DERIVATION SUMMARY
CCRE's total contracted sales of CNY71.8 billion in 2019 are
comparable with those of 'BB-' rated peers such as Yuzhou
Properties Company Limited (BB-/Stable) and KWG Group Holdings
Limited (BB-/Stable).
CCRE's leverage ratio is lower than 'BB-' rated peers' ratio of
20%-45%, while the improvement in 2019 was driven by a rise in its
payables.
CCRE's EBITDA margin shrank to 16% in 2019 from 22% in 2018, and
was lower than the 'BB-' peers' range of 18%-25%.
CCRE is rated one-notch lower than Logan Property Holdings Company
Limited (BB/Stable), which has higher attributable contracted sales
and better margins. Logan's operations are concentrated in the
Greater Bay Area, but the concentration risk has come down after it
expanded into new areas, including the Yangtze River Delta, Hong
Kong and Singapore in the past 12-24 months. Fitch expects the
contribution from the Greater Bay Area to Logan's sales to drop to
around 50% in 2020-2021. In comparison, all of CCRE's sales are
from Henan.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within its Rating Case for the Issuer
- Total contracted sales by gross floor area to increase by 5% in
2020 and 2021
- ASP for contracted sales to remain stable in 2020 and 2021
- EBITDA margin (excluding capitalised interest) to stay at
15%-20% in 2020 and 2021
- Land-acquisition budget to be 30%-35% of total contracted sales
in 2020 and 2021
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Leverage, measured by net debt/adjusted inventory on a
proportionately consolidated basis, persistently at 30% or below,
while the company achieves diversification - with 20% of contracted
sales generated outside of Henan province
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- A decline in contracted sales for a sustained period
- Leverage at 40% or above for a sustained period
- EBITDA margin at below 18% for a sustained period
- Any increase in financial guarantees to related parties on
non-property development businesses
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
Ample Liquidity: The company had total cash of CNY30.8 billion
(including restricted cash of CNY8.1 billion) as of end-2019,
sufficient to cover short-term debt of CNY12.5 billion maturing
within one year.
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).
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.
CENTRAL CHINA REAL: Moody's Rates New USD Unsecured Notes 'B1'
--------------------------------------------------------------
Moody's Investors Service has assigned a B1 senior unsecured rating
to the proposed USD bonds to be issued by Central China Real Estate
Limited (CCRE, Ba3 stable).
CCRE will use the proceeds from the proposed bonds to refinance its
existing medium to long-term offshore debt, which is due within one
year.
RATINGS RATIONALE
"CCRE's Ba3 corporate family rating reflects its leading market
position and long operating track record in Henan province, its
growing contracted sales over the past 2-3 years and its adequate
liquidity," says Kaven Tsang, a Moody's Senior Vice President.
"At the same time, CCRE's CFR is constrained by its geographic
concentration in Henan province, the execution risks and funding
needs associated with the company's fast-growth sales plan, and its
high exposure to joint ventures (JVs)," adds Tsang.
The proposed bonds - which will be mainly used for debt refinancing
- will not have a material impact on CCRE's credit metrics, but
they will improve the company's liquidity and debt maturity
profile. Moody's expects CCRE's revenue/adjusted debt to remain at
70%-75% and EBIT/interest at 2.5x-3.0x in the next 12-18 months,
appropriately positioning the company's CFR at the Ba3 rating
level.
Moody's expects the company's contracted sales (heavy assets) to
grow modestly to around RMB80 billion in the next 12-18 months from
RMB71.8 billion in 2019, supported by its strong brand and
execution abilities, as well as the solid housing demand in its
home markets. Such growth will support the company's future revenue
growth and liquidity. In the first six months of 2020, CCRE's
contracted sales (heavy assets) grew by 8.5% to RMB30 billion
compared to the same period last year, despite the disruptions from
the coronavirus outbreak.
CCRE has good liquidity, as reflected in its unrestricted cash of
RMB22.7 billion at December 31, 2019. Its adjusted cash/short-term
debt —including amounts due to and from its JVs - was 113% at the
same date. Moody's expects CCRE's cash holdings and operating cash
flow will be sufficient to cover its short-term debt and committed
land premiums over the next 12-18 months.
CCRE's B1 senior unsecured bond rating is one notch lower than its
CFR because of the risk of structural subordination.
This subordination risk reflects the fact that most of CCRE's
claims are at the operating subsidiaries and have priority over
claims at the holding company in a bankruptcy scenario. In
addition, the holding company lacks significant mitigating factors
for structural subordination. As a result, the expected recovery
rate for claims at the holding company will be lower.
Moody's has also considered the following environmental, social and
governance factors.
Moody's regards the impact of the deteriorating global economic
outlook amid the rapid and widening spread of the coronavirus
outbreak as a social risk under its ESG framework, because of the
substantial implications for public health and safety.
In terms of governance consideration, the Ba3 CFR takes into
account the concentration of CCRE's ownership in its controlling
shareholder, Wu Po Sum, who had a 73.66% stake in the company as of
June 2020. The company's provision of financial guarantees to
related parties will also increase its contingent liabilities and
raise concerns over potential risks of fund leakage.
These concerns are mitigated by (1) the presence of special
committees - in particular the audit and remuneration committees -
that are chaired by independent nonexecutive directors to oversee
corporate governance matters, and (2) the application of the
Listing Rules of the Hong Kong Stock Exchange and the Securities
and Futures Ordinance in Hong Kong in governing related-party
transactions.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
CCRE's stable outlook reflects Moody's expectation that the company
can maintain (1) its leadership position in Henan province and
generate sales growth, (2) its adequate liquidity levels, and (3) a
disciplined approach to land acquisitions.
CCRE's ratings could be upgraded if it (1) successfully executes
its sales plans through the cycles, (2) broadens its geographic
coverage in a disciplined manner, (3) strengthens its offshore
banking relationships, and (4) maintains strong liquidity and
prudent financial management practices.
Credit metrics indicative of an upgrade include its (1)
revenue/adjusted debt exceeding 75%-80%, (2) EBIT/interest coverage
rising above 3.5x, and (3) adjusted cash/short-term debt rising
above 2.0x.
Significant reduction in contingent liabilities associated with JVs
or lower risks of providing funding support to JVs could also be
positive for the ratings. This could result from a reduced usage of
JVs or a significant improvement in the financial strength of its
JV projects.
On the other hand, Moody's could downgrade CCRE's ratings if it (1)
experiences a significant decline in contracted sales; (2) suffers
a significant decline in its profit margins; or (3) accelerates its
expansion, such that its liquidity deteriorates or its debt levels
rise significantly, or both.
Credit metrics indicative of a downgrade include (1)
revenue/adjusted debt below 60%-65% on a sustained basis; (2)
EBIT/interest consistently below 2.5x-3.0x; or (3) adjusted
cash/short-term debt below 1.0x-1.5x.
Downgrade pressure could also increase if the company's contingent
liabilities associated with JVs or the risk of providing funding
support to JVs increase significantly. This could result from a
significant deterioration in the financial strength and liquidity
of its JV projects or a substantial increase in investments in new
JV projects.
The principal methodology used in this rating was Homebuilding And
Property Development Industry published in January 2018.
Founded in 1992, Central China Real Estate Limited is a leading
property developer in China's Henan province. As of the end of
2019, the company's land bank totaled 38.58 million square meters
in attributable gross floor area. Its revenue was RMB30.8 billion
($4.4 million) in 2019.
HILONG HOLDING: Fitch Withdraws 'RD' IDR
----------------------------------------
Fitch Ratings has affirmed and withdrawn China-based Hilong Holding
Limited's Long-Term Issuer Default Rating of 'RD' and senior
unsecured rating of 'C' with a Recovery Rating of 'RR4'.
The ratings have been withdrawn for commercial reasons.
KEY RATING DRIVERS
The affirmation reflects the company's uncured payment default on
its bonds; it has not yet entered into bankruptcy filings,
administration, receivership, liquidation or other formal
winding-up procedure. The affirmation of the senior secured rating
reflects an unchanged Recovery Rating of 'RR4'.
RATING SENSITIVITIES
Rating sensitivities are no longer relevant as the ratings have
been withdrawn.
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
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).
HONG YANG: Fitch Affirms B+ Ratings, Outlook Stable
---------------------------------------------------
Fitch Ratings has affirmed the ratings on homebuilder Hong Yang
Group Company Limited and subsidiary Redsun Properties Group
Limited at 'B+' with a Stable Outlook.
Fitch rates both companies on a consolidated basis, according to
its Parent and Subsidiary Rating Linkage criteria, as Redsun
represents the group's entire exposure to the China homebuilding
business.
The affirmation reflects the group's expanded contracted-sales
scale, supported by its improved land-bank diversification and
prudent financial policy, which has kept its leverage below 50%, a
healthy level among 'B+' rated peers. The group also has a higher
level of non-development income than peers, arising from the larger
scale of its property-rental business and expanding
property-management business. The group's ratings are constrained
by its attributable sales scale, which is smaller than that of
'BB-' rated peers, and the pressure to build up its land bank to
pursue sustained sales growth.
KEY RATING DRIVERS
Sales Continue to Rise: Fitch expects the group's total contracted
sales to increase 8% to CNY70 billion in 2020, driven by its
sufficient saleable resources, mainly in Jiangsu province and other
cities in the Yangtze River Delta where demand remains strong. The
increase in the group's total contracted sales slowed to 4% in 1H20
mainly due to the coronavirus, after rising 38% to CNY65 billion in
2019. The group aims to achieve total contracted sales of CNY75
billion in 2020, representing a sell-through rate of 67% based on
saleable resources of CNY110 billion.
Moderate Leverage: Fitch believes the group's leverage, measured by
net debt to adjusted inventory that proportionately consolidates
joint ventures and associates, will be maintained at about 40%-45%
in 2020 (2019: 42%), which remains reasonable among 'B+' rated
peers. The group expects to slow its land acquisition by spending
0.5x of its contracted sales proceeds on buying land in 2020,
compared with 0.6x in 2019. The spending will allow the group to
maintain a reasonable land-bank life of around three years and
continue to diversify its land-bank portfolio.
Diversification in Land Bank: The group acquired more land in 2019,
giving it a total land bank of 16.9 million sq m, which will be
sufficient for about three years of development. The group further
diversified its land bank by reducing the proportion held in
Jiangsu province, where it is based, to 58% from 67% a year ago,
widening its exposure to 38 cities.
Margins to Stabilise: Fitch expects the group's EBITDA margins,
after adding back capitalised interest in cost of goods sold, to
remain largely stable in 2020 from 2019. The EBITDA margin fell to
22% in 2019 from 27.8% in 2018 mainly due to the recognition of
revenue from more projects as a result of expansion into new cities
beyond Jiangsu province. The group will continue to face margin
pressure as it expands outside Jiangsu, but Fitch expects its
selling and administrative expense-to-revenue ratio to drop as its
revenue recognition will increase significantly in 2020, which will
support the group's EBITDA margin.
Expanding Non-Development Businesses: The group's non-development
businesses comprise mainly investment properties and property
management. Its investment-property rental revenue is mainly from
malls for the retail and wholesale of household construction and
decoration materials in Nanjing, which enjoy nearly full occupancy.
Fitch expects faster revenue growth for the property-management
business due to a pick-up in the delivery of the group's completed
gross floor area in 2019, and potential acquisitions. The
non-development EBITDA covered cash interest by about 0.2x in 2019,
higher than the ratio at the majority of its 'B+' rated peers.
DERIVATION SUMMARY
The group's business and financial profile is similar to that of
'B+' rated peers such as Helenbergh China Holdings Limited
(B+/Stable), Hong Kong JunFa Property Company Limited (B+/Stable)
and Fantasia Holdings Group Co., Limited (B+/Stable). The group's
attributable contracted-sales scale of CNY30 billion-40 billion in
2020 is smaller than 'BB-' peers' scale of more than CNY50 billion.
The group's ratings are also constrained by its leverage (net
debt/adjusted inventory) of slightly above 40%, higher than that of
some of its 'BB-' peers such as Central China Real Estate Limited
(BB-/Stable), which has EBITDA margins of around 20%, similar to
that of Hong Yang Group.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within its Rating Case for the Issuer
- Total contracted sales by gross floor area to increase 0% in
2020, 5% in 2021 and 5% in 2022
- Contracted average selling price to increase 8% in 2020, and
rise 3% in both 2021 and 2022
- Property-development gross profit margin (after adding back
capitalised interest) of about 30% in 2020-2022
- Land-acquisition cash outflow to account for 50% of pre-sales
proceeds in 2020-2022
Recovery Rating Assumptions
- Hong Yang Group and Redsun Properties to be liquidated in a
bankruptcy as they are asset-trading companies
- 10% administration claims
- Advance rate of 70% applied to accounts receivable
- Advance rate of 70% applied to net property inventory
- Advance rate of 60% applied to property, plant and equipment
- Advance rate of 60% applied to investment properties for Redsun
Properties and 100% for Hong Yang Group excluding Redsun
Properties
- Advance rate of 100% applied to restricted and pledged cash
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Scale expands to a level that is comparable with that of 'BB-'
peers
- Leverage, measured by net debt/adjusted inventory that
proportionately consolidates joint ventures and associates,
sustained below 40%
- Available cash/short-term debt sustained above 0.8x
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- EBITDA margin, excluding capitalised interest from cost of
goods sold, sustained below 20%
- Leverage, measured by net debt/adjusted inventory that
proportionately consolidates joint ventures and associates,
sustained above 50%
(All the ratios are based on parent Hong Yang's consolidated
financial data)
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
Sufficient Liquidity: The group had a cash balance of CNY18.0
billion, including restricted cash and pledged deposits of CNY2.3
billion and CNY5.9 billion respectively, and short-term borrowings
of CNY16.4 billion at end-2019. The group had CNY5.2 billion in
onshore debt pledged against offshore cash deposits. Excluding the
CNY5.2 billion in short-term debt, which is pledged against pledged
deposits, the group's ratio of available cash, excluding restricted
and pledged cash deposits, to short-term debt was 0.9x.
Hong Yang's subsidiary, Hong Seng Limited, issued USD275 million in
9.875% senior notes due 2022 in February 2020 to refinance its
senior notes due May 2020. Redsun Properties issued USD300 million
and a tap issuance of USD155 million in 9.7% senior notes due 2023
in January and July 2020, respectively, which will be partly used
to refinance its US dollar notes due December 2020. The group's
available cash can cover the short-term debt if the proceeds from
the issuance are included.
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
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).
SEAZEN GROUP: Fitch Rates Proposed USD Senior Notes 'BB'
--------------------------------------------------------
Fitch Ratings has assigned Seazen Group Limited's (SGL, BB/Stable)
proposed US-dollar senior notes a 'BB' rating. The proposed notes
are rated at the same level as SGL's senior unsecured rating
because they will constitute its direct and senior unsecured
obligations.
The Issuer Default Ratings and Outlooks on SGL and subsidiary,
Seazen Holdings Co., Ltd. (SHCL, BB/Stable), reflect Fitch's
assessment that operational and financial risks, as well as access
to liquidity, have stabilised and have not deteriorated
significantly after the companies' founder and former chairman, Mr
Wang Zhenhua, was sentenced to five years' gaol for a crime
unrelated to the company in mid-2020. Mr Wang's son, previously a
non-executive director, has assumed the role of chairperson of the
two entities. Mr Wang senior no longer has a role at the two
entities, although he still has a 71% stake in SGL, which holds 67%
of SHCL.
Fitch uses a consolidated approach to rate SHCL based on its Parent
and Subsidiary Rating Linkage criteria.
KEY RATING DRIVERS
Funding and Liquidity Stabilised: Mr Wang's arrest temporarily
affected the group's funding access, but since August 2019, the
group has managed to obtain financing from a large number of
onshore and offshore banks. Funding access has further improved
with multiple domestic and offshore issuances in 2020. The group's
continued growth in contracted sales, project disposals and its
decision to slow land acquisitions in 2H19 have helped maintain
adequate liquidity.
The group's onshore and offshore bonds have change of control
covenants, whereby the group has to make an offer to repurchase all
outstanding notes if a change of control is accompanied by negative
rating action, a Negative Outlook or a downgrade by an onshore
rating agency for its onshore bonds or an international rating
agency for its offshore bonds. The group has not breached its bond
covenants since Mr Wang's arrest.
Sales Generation to Recover: Fitch expects SGL's sales to recover
gradually in 2H20, as it launches more projects. This follows a 20%
fall in sales in 1H20 due to less gross floor area sold amid the
coronavirus pandemic. The average selling price also fell by 4.7%
to CNY11,113/ square metre. SGL's full-year 2019 contracted sales
reached CNY271 billion, a yoy increase of 22%, slightly exceeding
its full year target. Contracted sales by gross floor area reached
24.3 million sqm, a 34% yoy increase.
Diversified, Sufficient Land Bank: Fitch estimates that the group
has sufficient land bank for more than four years of development,
although it slowed land acquisition and disposed of certain
projects in 2H19. The company aims to remain focused on the Yangtze
River Delta, where 46% of its total land bank was located at
end-2019, but has increased its land bank outside the region to
buffer against regional market uncertainty. Total land acquisition
cost in 2019 was a low CNY2,503/sqm.
Fluctuating Leverage: Fitch expects leverage to increase from the
2019 level as the company expands its contracted sales scale and
investment-property business. Fitch estimates SGL's leverage,
including proportionate consolidation of its joint ventures and
associates, fell to around 25% in 2019, from 44% in 2018, on lower
2H19 land acquisitions. SGL's business profile strength is
supported by its large business scale, diversified land bank and
expanding investment-property business that generates predictable
contractual rental income.
Increased Recurring Income: Fitch expects the group's recurring
EBITDA to continue to increase rapidly, providing strong support to
interest servicing. SGL almost doubled its rental and
property-management fee income to CNY3.9 billion in 2019 from the
operation of Wuyue Plaza-branded shopping malls, which are mainly
in third-tier cities. SGL's recurring EBITDA/interest expense
reached 0.4x in 2019.
DERIVATION SUMMARY
Fitch's consolidated approach to rating SGL and SHCL is based on
its Parent and Subsidiary Rating Linkage criteria due to SGL's 67%
stake in SHCL. The strong strategic and operational ties are
reflected by SGL representing SHCL's entire exposure to the China
homebuilding business, while SGL raises offshore capital to fund
the group's business expansion. The two entities share the same
chairman.
SGL's quick sales churn strategy contributed to the rapid expansion
of its contracted sales to a level that is higher than that of most
'BB' category peers. SGL's attributable sales reached CNY180
billion in 2019, larger than that of Sino-Ocean Group Holding
Limited (BBB-/Stable, Standalone Credit Profile: bb+), CIFI
Holdings (Group) Co. Ltd. (BB/Stable) and almost double the size of
China Aoyuan Group Limited (BB-/Positive), KWG Group Holdings
Limited (BB-/Stable) and Logan Property Holdings Company Limited
(BB/Stable). SGL has also rapidly expanded its investment
properties, which generated CNY3.9 billion of recurring income and
a recurring EBITDA/interest of 0.4x in 2019. SGL's
investment-property portfolio of around CNY66 billion is much
larger than that of all the other 'BB' rated peers and is
responsible for its higher leverage before 2019.
SGL lowered its leverage - defined by net debt/adjusted inventory
(after joint venture and associate proportionate consolidation) -
to 25% in 2019 due to lower land acquisitions. However, its
leverage of above 40% before 2019 was in line with that of 'BB'
peers, such as CIFI, but higher than Sino-Ocean Group's 35%. SGL's
recurring EBITDA/interest of 0.4x was similar to that of Sino-Ocean
Group. However, Sino-Ocean Group has a stronger and longer record
in investment-property operation, which supports its Standalone
Credit Profile at one notch above SGL's rating.
KEY ASSUMPTIONS
- Land premium representing around 50%-60% of attributable sales
proceeds in 2020-2022 (2019: 33%)
- CNY25 billion in investment property capex each year in
2020-2022 (2019: CNY17 billion-20 billion)
- Overall EBITDA margin to remain above 25% (2019: 21%, including
capitalised interest)
- SGL maintaining a controlling shareholding in SHCL and no
weakening in the operational ties between the two entities
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Net debt/adjusted inventory (after joint venture proportionate
consolidation) sustained below 40%
- Recurring EBITDA/interest paid sustained above 0.4x
- No material deterioration in funding access and pre-sales
relative to Fitch's expectation
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Weakening in funding access and material deterioration in
pre-sales relative to Fitch's expectation
- Consolidated contracted sales/total debt below 1.5x for a
sustained period (2019: 1.8x)
- Net debt/adjusted inventory (after joint venture proportionate
consolidation) above 50% for a sustained period
- EBITDA margin below 18% for a sustained period
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
Sufficient Liquidity: The group had an unrestricted cash balance of
CNY59.7 billion at end 2019, which was sufficient to cover
short-term borrowings of CNY40.8 billion. The group issued USD400
million 6.45% senior notes due 2022 in June 2020, and SHCL issued a
CNY600 million 5.1% corporate bond due 2023 in March 2020. In
addition, the company issued asset-based securities totaling CNY2.9
billion at 4.8% in early 2020, backed by four of its Wuyue malls.
Fitch expects Seazen to gradually monetise its malls to obtain
low-cost funding from 2020.
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.
TUNGHSU: Explains Why It Was Unable to Withdraw Its Own Cash
------------------------------------------------------------
Caixin Global reports that Shenzhen-listed Tunghsu Optoelectronic
Technology Co. Ltd. on Aug. 4 said it had failed to withdraw CNY7.9
billion (US$1.1 billion) of deposits put into a finance subsidiary
due to the subsidiary's liquidity issues, in a filing in response
to the Shenzhen Stock Exchange's inquiry.
At the end of last year, Tunghsu Optoelectronic, a maker of
electronic display panels, reported about CNY11.6 billion in
outstanding money funds. Among the funds, about CNY7.9 billion was
deposited into a finance company jointly set up by Tunghsu
Optoelectronic and its controlling shareholder, Tunghsu Group Co.
Ltd., but the withdrawal of the money was restricted as the finance
company faced a liquidity crisis, Tunghsu Optoelectronic claimed.
Caixin previously learned from a source at Tunghsu Optoelectronic
that the company's money stored at the finance company had actually
been taken by debt-ridden Tunghsu Group to pay its debt.
Tunghsu Optoelectronic Technology Co., Ltd. engages in the
development and sale of liquid crystal glass substrates and
equipment in China. It also offers energy buses, and single-layer
graphene and graphene-based lithium-ion battery related products;
and purchases and sells memory chip products, peripherals and
e-sports main computers, LCD screen modules, and whole machine
products. In addition, the company is involved in the development
and sale of real estate properties.
As reported in the Troubled Company Reporter-Asia Pacific on Nov.
21, 2019, Bloomberg News said Tunghsu Optoelectronic Technology
Co., a Shenzhen-listed unit of Tunghsu Group Co., failed to repay
CNY1.97 billion principal and interest on a note because of tight
liquidity after bondholders exercised a put option. It also missed
interest payment on another bond.
YANAN BICON: S&P Withdraws 'CCC-' LongTerm Issuer Credit Rating
---------------------------------------------------------------
S&P Global Ratings withdrew its 'CCC-' long-term issuer credit
rating on YanAn Bicon Pharmaceutical Listed Co. at the company's
request.
The negative outlook at the time of the withdrawal reflected the
limited time available for YanAn Bicon to refinance its upcoming
Chinese renminbi 350 million maturities due in December 2020.
YUZHOU GROUP: Moody's Rates Senior Unsecured USD Notes 'B1'
-----------------------------------------------------------
Moody's Investors Service has assigned a B1 rating to Yuzhou Group
Holdings Company Limited's (Ba3 stable) proposed senior unsecured
USD notes.
Yuzhou plans to use the proceeds from the proposed notes to
refinance its medium to long-term offshore debt.
RATINGS RATIONALE
"Yuzhou's Ba3 corporate family rating reflects its (1) track record
of developing and selling residential properties in the Yangtze
River Delta, Bohai Rim and West Strait area; (2) growing operating
scale and improved geographic diversification; and (3) good
liquidity," says Celine Yang, a Moody's Assistant Vice President
and Analyst.
"However, the company's credit profile is constrained by its weak
credit metrics and high reliance on sales from joint ventures (JVs)
and associates," adds Yang.
The proposed issuance will improve Yuzhou's liquidity profile and
will not materially affect its credit metrics, because the company
will use the proceeds to refinance existing debt.
Moody's expects Yuzhou's revenue, financial metrics and visibility
will improve as it increasingly consolidates joint ventures or
associated projects in the coming 12-18 months. Specifically, the
company's leverage, as measured by revenue/adjusted debt, will
improve to 50%-60% over the next 12-18 months from the weak level
of 33.8% recorded in 2019. At the same time, its interest coverage,
as measured by adjusted EBIT/interest, will gradually improve to
2.5x from 2.0x during the same period.
Yuzhou's gross contracted sales grew robustly at 56.0% to RMB53.9
billion in the first seven months of 2020 compared with the same
period last year, despite coronavirus-related disruptions. Moody's
expects its contracted sales to increase by around 25%-30% to reach
over RMB95 billion in 2020 from RMB 75.1 billion in 2019. The
expected strong cash collection from property sales will help
Yuzhou fund its capital expenditure.
Yuzhou's B1 senior unsecured bond rating is one notch below its CFR
because of the risk of structural subordination. This subordination
risk reflects the fact that the majority of claims are at the
operating subsidiaries and have priority over claims at the holding
company in a bankruptcy scenario. In addition, the holding company
lacks significant mitigating factors for structural subordination.
As a result, the expected recovery rate for claims at the holding
company will be lower.
Yuzhou's liquidity is good. The company's cash-on-hand of RMB35.5
billion as of December 31, 2019 covered around 233% of its
short-term debt of RMB15.3 billion. Moody's expects its cash
holdings and operating cash flow will be sufficient to cover its
maturing debt, committed land premiums and dividend payments in the
next 12-18 months.
Moody's expects that Yuzhou's sustained good liquidity buffer will
mitigate the risk of high debt leverage in the near term.
In terms of environmental, social and governance factors, Moody's
has considered the company's concentrated ownership by its
controlling shareholder, Mr. Lam Lung On, who held a 57.38% stake
in the company at December 31, 2019, and Yuzhou's relatively high
dividend payout ratio of 46.8% in 2019, compared to 35.0%-36.5% in
the previous four years.
Moody's has also considered the presence of internal governance
structures and disclosure standards, as required under the
Corporate Governance Code for companies listed on the Hong Kong
Stock Exchange. The company has three special committees; the Audit
Committee, the Remuneration Committee and the Nomination Committee,
which are all chaired by independent non-executive directors.
Moody's regards the impact of the deteriorating global economic
outlook amid the rapid and widening spread of the coronavirus
outbreak as a social risk under its environmental, social and
governance framework because of the substantial implications for
public health and safety.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
The stable outlook reflects Moody's expectation that Yuzhou will
execute its business plan and maintain good liquidity while
improving its credit metrics over the next 12-18 months.
Yuzhou's ratings could be upgraded if it (1) maintains good
liquidity, (2) executes its contracted sales growth target while
maintaining stable margins, and (3) improves its credit metrics,
with revenue/adjusted debt trending to 70%-75% and EBIT/interest
coverage exceeding 3.0x-3.5x on a sustained basis.
A material reduction in contingent liabilities associated with
joint ventures or lower risk of providing funding support to joint
ventures could also be positive for the ratings. This could be a
result of reduced usage of joint ventures or a material improvement
in the financial strengths of its JV projects.
Moody's could downgrade the ratings if Yuzhou's contracted sales
growth, liquidity, profit margins or credit metrics weaken. Credit
metrics indicative of a downgrade include (1) cash/short-term debt
below 1.5x, (2) EBIT interest coverage below 2.0-2.5x, and (3)
revenue/adjusted debt failing to trend back to 50%-60% on a
sustained basis.
Moody's could also downgrade the ratings if the company's
contingent liabilities associated with JVs or the risk of providing
funding support to JVs increases materially. This could be a result
of a material deterioration in the financial strengths and
liquidity of its JV projects or a substantial increase in
investment in new JV projects.
The principal methodology used in this rating was Homebuilding And
Property Development Industry published in January 2018.
Yuzhou Group Holdings Company Limited is a property developer that
focuses on residential housing in the Yangtze River Delta and the
West Strait Economic Zone. Yuzhou listed its shares on the Hong
Kong Stock Exchange in 2009. At December 31, 2019, Yuzhou's land
bank totaled 20.12 million square meters in saleable gross floor
area.
=========
I N D I A
=========
AKSHAR COTTON: CARE Lowers Rating on INR10cr LT Loan to D
---------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Akshar
Cotton Industries (ACI) continues to remain in the 'Issuer Not
Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 10.00 CARE D; Stable; Revised
Facilities from CARE B+
Detailed Rationale & Key Rating Drivers
The revision in the rating assigned to the bank facilities of ACI
is primarily due to irregularity in debt servicing owing to poor
liquidity position.
Rating Sensitivities
Positive Factor
* Establishing clear debt repayment track record for consecutive
three months.
Detailed description of the key rating drivers
Key Rating Weaknesses
* On-going delay in debt servicing: As per banker interaction,
there is over utilization of its cash credit limit for more than 30
days due to its poor liquidity.
Liquidity Analysis: Poor Liquidity
The liquidity of ACI remained poor mainly due to cash flow mismatch
from its operations as a result of significant blockage of funds in
inventory along with negligible realization of debtors. Further,
its cash credit limit remained over utilized for more than 30 days
ended July 23, 2020. Furthermore, ACI has not availed moratorium in
form of interest deferment in it cash
credit account.
Cash and bank balance remained low at INR0.11 crore as on March 31,
2019 (A) and GCA of ACI remained low at INR0.30 crore in FY19 (A).
However, there is no term debt repayment obligation for FY20.
Further, the cash flow from operating activity stood positive at
INR6.76 crore during FY19 (A) as against negative CFO of INR1.96
crore during FY18.
Established in 2011, Akshar Cotton Industries (ACI) is a
partnership firm. The firm was owned by three partners namely Mr.
Ashokbhai Dudhagara, Mr. Hashmukhbhai Pansuriya and Mr.
Narendrabhai Virani. Currently ACI is managed by two partners
namely Mr. Ashokbhai Dudhagara and Mr. Hashmukhbhai Pansuriya. ACI
is engaged in ginning and pressing of raw cotton. ACI's
manufacturing facility is located at Kalavad in Jamnagar District
of Gujarat. ACI has an installed production capacity of 230 cotton
bales per day (24 hours operation) as on March 31, 2019. Angel
Fibers Limited is associate entity of ACI (rated CARE D/CARE D),
which is engaged into manufacturing of carded, combed and compact
cotton yarn since 2014.
ASHWANI GOYAL: CARE Keeps D on INR9.38cr Debt in Not Cooperating
----------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Ashwani
Goyal (ASG) continues to remain in the 'Issuer Not Cooperating'
category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 9.38 CARE D; Issuer Not Cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated May 23, 2019, placed the
rating of ASG under the 'issuer noncooperating' category as ASG had
failed to provide information for monitoring of the rating. ASG
continues to be noncooperative despite repeated requests for
submission of information through e-mails, phone calls and a
letter/email dated July 14, 2020, July 10, 2020, and July 9, 2020.
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.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating(s).
At the time of last rating in May 23, 2019 the following were the
rating strengths and weaknesses:
Detailed description of the key rating drivers
Key rating Weaknesses
* Instances of delays in debt servicing: There were instances of
delays in servicing its term debt obligations.
AMP is a proprietorship firm established by Mr. Ashwani Goyal in
2004. However, the firm commenced the development of 4 Star hotel
project in 2013 with total capacity of 75 rooms and other
facilities such as bar restaurant, banquet, gymnasium and health
zone. The total project cost for setting up hotel was earlier
envisaged at INR16.85 crore. However, there is cost overrun due to
upgradation of project from 4 star hotel to 5 star hotel. The
project is now expected to be completed with total cost of INR24
crore. The hotel is run as a franchise of famous hotel brand
"Clarion Inn", a brand of Choice Hospitality India Private Limited.
The agreement for the same was signed in January, 2016. The hotel
was expected to commence commercial operations from January, 2016.
However, the firm commenced its operations in February, 2016 by
opening up of a restaurant.
BHAKTI INFRACON: CARE Keeps D on INR40cr Debt in Not Cooperating
----------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Bhakti
Infracon LLP (BIL) continues to remain in the 'Issuer Not
Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 40.00 CARE D; Issuer Not Cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated June 3, 2019, placed the
rating of BIL under the 'issuer noncooperating' category as BIL had
failed to provide information for monitoring of the rating as
agreed to in its Rating Agreement. BIL continues to be
non-cooperative despite repeated requests for submission of
information through e-mails, phone calls and a letter/email dated
April 21, 2020, April 23, 2020, April 27, 2020. 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.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above ratings.
Detailed description of the key rating drivers
At the time of last rating on June 3, 2019, the following were the
rating weaknesses:
Key Rating Weaknesses
* Ongoing delay in debt servicing: There are on-going delays in
repayment of principle and interest amount of term loan due to weak
liquidity position of the firm.
Liquidity: Poor
Liquidity position of BIL remained poor marked by lower booking
status for project 'Walk Way The Mall' of 75 units (i.e. 30% of
total units) as against 63% of total construction has already been
completed towards the said project as on January 6, 2020.
Surat (Gujarat) based, BIL was established as a partnership firm
during July 2017 named Bhakti Buildcon by Mr.Rakeshkumar Dudhwala,
Ms. Dimpleben Dudhwala, Mr. Pradipkumar Patel, Mr.Banti Sadadiwala,
Mr. Dineshbhai Patel and Mr. Jigarbhai Gajjar. In February 2018,
the firm converted to Limited Liability Partnership and named
Bhakti Infracon LLP. BIL is currently executing a commercial
project named 'Walk Way The Mall' (RERA Registration No.
PR/GJ/SURAT/SURAT CITY/SUDA/CAA02185/270318) with 250 proposed
units (223 shops, 12 food shops, a restaurant, a gym, a game zone
and a multiplex) at Surat. BIL is part of Surat based 'Bhakti
group' which has strong presence in Surat. Over the period, the
group has completed various projects of more than 11.62 lakh Sq.
feet. Currently the group has on-going projects with cost of more
than INR118.95 crore under different entities.
CARD PRO: CARE Keeps D Debt Ratings in Not Cooperating
------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Card Pro
Solutions Private Limited (CSPL) continues to remain in the 'Issuer
Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 4.84 CARE D; Issuer Not Cooperating;
Facilities Based on best available
Information
Short-term 2.30 CARE D; Issuer Not Cooperating;
Bank Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated July 18, 2019, placed the
rating(s) of CSPL under the 'issuer non-cooperating' category as
CSPL had failed to provide information for monitoring of the
rating. CSPL continues to be non-cooperative despite repeated
requests for submission of information through e-mails, phone calls
and a letter dated July 9, 2020. 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.
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 delays in the debt servicing.
Detailed description of the key rating drivers
At the time of last rating on July 18, 2019, the following were the
rating strengths and weaknesses:
Key Rating Weakness
* On-going delay in debt servicing: As per the interaction with the
banker, there were ongoing delays in debt servicing and the
account was classified as SMA 2.
Card Pro Solutions Private Limited (CSPL) incorporated in 1989 as
Kamal Offset Private Limited by Mr. Vikas Choudhary and Mr. Kishin
Gidwani and got its current name in 2010. CSPL is engaged in
business of the manufacturing of pre-paid cards and chip & non-chip
based smart cards. The products manufactured by CSPL are customized
as per the customers' demand which mainly includes telecom
companies, banks, financial institutions and others.
CHANDRA ENGINEERS: CARE Lowers Rating on INR4.15cr Loan to D
------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Chandra Engineers (CE), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 4.15 CARE D; Stable; Issuer not
Facilities cooperating; Revised from
CARE B+; Stable; ISSUER NOT
COOPERATING on the basis of
best available information
Long-term/Short- 6.15 CARE D Revised from CARE B+;
term Bank Stable/CARE A4; ISSUER NOT
Facilities COOPERATING
Detailed Rationale and key rating drivers
The rating assigned to the bank facilities of CE takes into
consideration overdraws exceeding consecutive 30 days in working
capital loan by the firm on account of weak liquidity position.
Key Rating Sensitivity
Positive Factors
* Improvement in liquidity position as reflected by the timely
payment of interest obligation
Detailed description of the key rating drivers
Key Rating Weaknesses
* Overdraws exceeding consecutive 30 days in working capital loan:
There is overutilization in CC for more than 30 days continuously
(Jan2020 and February 2020) as per the bank statements. As per the
banker, the firm has availed moratorium period of 6 months as
provided by bank in lines with RBI guidelines in wake of COVID-19
pandemic.
Liquidity: Weak
The liquidity profile of the firm remains weak. There were instance
of delay in meeting interest obligation pertaining to January 2020
remained overdue for more than 30 days. Also, there is
overutilization in CC for more than 30 days continuously (January
2020 and February 2020) as per the bank statements.
Shahdara (Delhi) based Chandra Engineers (CE) has been established
as a proprietorship firm in January, 1968 by Mr. Satish Chandra.
CHANDRA is involved in manufacturing of engineering goods i.e.
electrical stampings, laminations and sheet metal components at its
manufacturing facilities located at Manesar (Haryana) and Neemwar
(Rajasthan). The product of CE finds application in the automotive,
engineering and electronic industries. CHANDRA has been certified
as ISO 9001:2008 firm.
CHETAN OVERSEAS: Ind-Ra Lowers LongTerm Issuer Rating to 'BB-'
--------------------------------------------------------------
India Ratings and Research (Ind-Ra) has downgraded Chetan Overseas
(Delhi) Private Limited (CODPL) Long-Term Issuer Rating to 'IND
BB-' from 'IND BB (ISSUER NOT COOPERATING)'. The Outlook is Stable.
The instrument-wise rating actions are:
-- INR200 mil. Fund-based working capital limits Long-term rating
downgraded and short-term rating affirmed with IND BB-/Stable
/ IND A4+ rating; and
-- INR120 mil. Non-fund-based working capital limits* affirmed
with IND A4+ rating.
* One-way interchangeability of the non-fund-based limits (up to
INR60 million) to fund-based limits.
The downgrade reflects CODPL's weak and deteriorated credit metrics
and poor liquidity in FY20, and Ind-Ra's expectation of a further
deterioration in the credit metrics, along with weakened revenue
and EBITDA in FY21.
KEY RATING DRIVERS
CODPL's modest credit metrics deteriorated in FY20 with the
interest coverage (operating EBITDA/gross interest expenses) of
1.17x (FY19: 1.26x) and the net leverage (adjusted net
debt/operating EBITDA) of 6.26x (6.10x) due to a decline in the
absolute EBITDA to INR41.69 million (INR42.57 million) and a rise
in the interest cost on increased working capital utilization. The
ratings reflect CODPL's modest EBITDA margin of 3.82% in FY20
(FY19: 3.87%) due to the trading nature of its business. Its return
on capital employed was 10.65% in FY20 (FY19: 12.04%). Ind-Ra
expects the company's credit metrics and operating profitability to
deteriorate further in FY21 on account of reduced revenue and
increased utilization of the working capital limits owing to the
challenging COVID-19 led economic situation. FY20 financials are
provisional in nature.
Liquidity Indicator – Poor: The company's average use of its
fund-based working capital facility was 100.31% for the 12 months
ended June 2020, with several instances of overutilization. CODPL's
working capital cycle continued to be elongated at 121 days in FY20
(FY19: 126 days), mainly due to high debtor days of 107 days (106
days). CODPL's cash flow from operations turned positive to INR1.56
million in FY20 (FY19: negative INR81.57 million) due to lower
working capital requirements owing to an increase in the creditor
days to 27 (5). CODPL had cash and cash equivalents of INR1.89
million at FYE20 (FYE19: INR0.15 million).
The ratings continue to reflect CODPL's small scale of operations
with revenue declining to INR1,090.01 million in FY20 (FY19:
INR1,101 million; FY18: INR1,407.28 million) due to the fewer
number of orders received. The management has informed Ind-Ra that
it achieved revenue of INR219 million in 1QFY21. Ind-Ra expects the
FY21 revenue to be close to INR1,000 million.
The ratings, however, continue to be supported by the company's
promoters' over the three decades of experience in trading
non-ferrous metals.
RATING SENSITIVITIES
Negative: A further decline in the revenue along with sustained
deterioration in the credit metrics with the interest coverage
falling below 1.1x, or further deterioration in the liquidity, all
on a sustained basis could be negative for the ratings.
Positive: An improvement in the revenue, along with an improvement
in the credit metrics and the liquidity, all on a sustained basis,
could be positive for the ratings.
COMPANY PROFILE
CODPL was acquired by Krish Vinimay Pvt. Ltd. in June 2011. Before
the acquisition, Krish Vinimay was not engaged in any major
business operations. The company was renamed CODPL to tap the brand
- Chetan Overseas. CODPL trades non-ferrous metals.
CHHATRAPATI SAMBHAJI: Ind-Ra Affirms 'B+' LongTerm Issuer Rating
----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has affirmed Chhatrapati
Sambhaji Raje Sakhar Udyog Limited's (CSRSUL) Long-Term Issuer
Rating at 'IND B+'. The Outlook is Stable.
The instrument-wise rating actions are:
-- INR93.458 mil. (reduced from INR139 mil.) Term loans due on
May 2027 affirmed with IND B+/Stable rating;
-- INR375.542 mil. (increased from INR330 mil.) Fund-based
working capital limits affirmed with IND B+/Stable/IND A4
rating; and
-- INR30 mil. Non-fund-based working capital limits affirmed with
IND A4 rating.
KEY RATING DRIVERS
The affirmation reflects CSRSUL's continued small scale of
operations. The company's revenue declined in FY20 to INR852
million (FY19: INR984 million) owing to a decrease in the cane
crushed to 125,653 million tons per annum (283,627 million tons per
annum) and lower recovery rate of 9.95% (11.01%) from the sugar
cane crushed. The lower crushing of cane was due to one month's
delay in operational commencement due to heavy rains. The delayed
crushing led to a delay in the extraction of bagasse- the raw
material for electricity generation- and resulted in lower
electricity generation from the cogeneration plant. The company
achieved revenue of INR119.26 million in 1QFY21 from sugar and
other by-products. Ind-Ra expects the company's revenue to
marginally improve YoY in FY21 on timely commencement of operations
and above-normal rains resulting in a high recovery rate. FY20
financials are provisional in nature.
The rating factor in CSRSUL's modest EBITDA margin, which expanded
to 10% in FY20 (FY19: 2.3%) owing to lower raw material prices and
higher other operating revenue, which includes interest subsidy
from the National Bank For Agriculture & Rural Development, export
subsidy and buffer stock subsidy. The company's return on capital
employed stood at 7.5% in FY20 (FY19: 1.8%). Ind-Ra expects the
company to maintain its high margin in FY21 owing to controlled
operating expenses and the sale of high-margin sanitizers. The
company forayed into the manufacturing of sanitizers post the
outbreak of COVID-19 and has received permission from the
government for the same.
The ratings are also constrained by CSRSUL's weak credit metrics.
Its interest coverage (operating EBITDA/gross interest expense)
improved to 1.3x in FY20 (FY19: 0.4x) and net leverage (total
adjusted net debt/operating EBITDAR) to 8.7x (34.1x). The
significant improvement in credit metrics was on account of an
increase in the absolute EBITDA to INR85 million in FY20 (FY19:
INR23 million) and a reduction in the total debt to INR749 million
(INR768 million). For FY21, CSRSUL has a CAPEX plan of
manufacturing 6,000-liter molasses tank at a cost of around INR12
million, which the management believes will be 100% internally
funded. Ind-Ra expects the company's credit metrics to marginally
deteriorate in FY21 owing to an increase in the total debt.
Liquidity Indicator- Poor: The company's working capital cycle
elongated to 348 days in FY20 (FY19: 264 days) on account of an
increase in the inventory days to 332 (309) due to the one-month
delay in commencement of operations and reduction of creditor days
to 16 (74) due to early payment to suppliers. The company's cash
flows from operations improved but remained negative in FY20 to
INR119 million (FY19: negative INR234 million). The average maximum
utilization was 69.7% for its fund-based facilities over the 12
months ended June 2020. Ind-Ra expects the company's liquidity to
remain poor in FY21 on account of the high net cash conversion
cycle due to the typically high inventory holding period for sugar
companies.
The ratings, however, are supported by the company's promoters over
two decades of experience in the sugar industry.
RATING SENSITIVITIES
Positive: An improvement in the revenue along with stable EBITDA
margin, leading to interest coverage exceeding 2x, on a sustained
basis, will be positive for the ratings.
Negative: A decline in the revenue or operating profitability
leading to deterioration in the credit metrics, on a sustained
basis, will be negative for the ratings.
COMPANY PROFILE
CSRSUL, incorporated in 2000, has an integrated sugar plant for the
manufacturing of sugar and a co-generation unit of 6MW. The factory
has a crushing capacity of up to 2,200MT per day. It is located at
Aurangabad (Maharashtra).
CORPORATE FASHION: CARE Keeps D Debt Ratings in Not Cooperating
---------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Corporate
Fashion Private Limited (CFPL) continues to remain in the 'Issuer
Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 5.46 CARE D; Issuer Not Cooperating;
Facilities Based on best available
Information
Short-term Bank 0.50 CARE D; Issuer Not Cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated July 30, 2019, placed the
rating(s) of CFPL under the 'issuer non-cooperating' category as
CFPL had failed to provide information for monitoring of the rating
for the rating exercise as agreed to in its Rating Agreement. CFPL
continues to be non-cooperative despite repeated requests for
submission of information through e-mails, phone calls and an email
dated July 16, 2020. 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.
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
At the time of last rating on July 30, 2019, the following were the
rating strengths and weaknesses (Updated for the information
available for FY19 from ROC).
Key Rating Weaknesses
* Stressed liquidity position with delays in debt servicing in
past: The company registered losses at both operating as well as
net level of Rs 6.89 Crore and Rs 7.63 Crore respectively in FY19.
Further, it has registered cash loss of INR 7.39 crore in FY19. Due
to cash loss and elongated operating cycle of 218 days in FY19, the
liquidity position of the company remained stretched. Due to it,
there were delays in debt servicing in the past.
Bhilwara (Rajasthan) based Corporate Fashion Private Limited (CFPL)
was incorporated in 2011 by Mr. Vijay Pal Singh and Mr. Prateek
Sharma. CFPL is engaged in the business of manufacturing of
readymade garments mainly men's wear as well as trading of
synthetic grey and finished fabrics and other clothing accessories.
The company also does manufacturing of readymade garments on job
work basis and also gets manufactured grey and finished fabrics on
job work basis. The company markets its products under the brand
name of "Corporate Fashion". The plant of CFPL is located at
Bhilwara, Rajasthan which is a textile cluster and has 175-200
stitching machines.
ETCO DIGITAL: CARE Keeps D Debt Ratings in Not Cooperating
----------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Etco
Digital Private Limited (EDPL) continues to remain in the 'Issuer
Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 4.00 CARE D; Issuer Not Cooperating;
Facilities Based on best available
Information
Short-term 7.00 CARE D; Issuer Not Cooperating;
Bank Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated July 31, 2019, placed the
rating of EDPL under the 'issuer non-cooperating' category as EDPL
had failed to provide information for monitoring of the rating.
EDPL continues to be noncooperative despite repeated requests for
submission of information through e-mails, phone calls and a letter
dated July 9, 2020. 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.
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 delays in the debt servicing.
Detailed description of the key rating drivers
At the time of last rating on July 31, 2019 the following were the
rating strengths and weaknesses: (updated for the information
available from Registrar of Companies):
Key Rating Weakness
* On-going delay in debt servicing: As per the interaction with the
banker, there were ongoing delays in debt servicing and the account
was classified as SMA 2.
Etco Digital Private Limited (EDPL), incorporated in the year 2011,
promoted by the Etco group is engaged in the business of trading of
retail automation products, bank automation products & surveillance
products and providing service of surveillance & tacking solutions.
EDPL outsources the manufacturing of retails automation products &
bank automation products to contract manufacturers based across
India to whom the company has provided design for their products.
These products are sold under the brand name ETCO. Further, with
regard to the surveillance products (DSR, CCTV) the company imports
them mainly from China. The company also undertakes annual
maintenance contracts for the products supplied by them.
FIRESTAR INTERNATIONAL: Lenders Agree to Liquidate Firm
-------------------------------------------------------
The Economic Times reports that lenders of Nirav Modi group's
Firestar International agreed to liquidate the company on July 30
with over two thirds of banks voting in favor of a resolution that
was initially tabled at a bankers meeting in June, according to
people aware of the matter.
Punjab National Bank is the lead bank in the consortium.
ET says the lenders will now approach the National Company Law
Tribunal (NCLT) with a formal request to initiate liquidation
proceedings.
According to ET, the decision was taken after majority of the
lenders felt that an auction process for the company would be time
consuming because of the multitude of investigations running
against the fugitive diamantaire, prime accused in the over $2
billion Punjab National Bank (PNB) fraud.
The company's assets are in the custody of the Enforcement
Directorate after Modi was charged with offences under the
Prevention of Money Laundering Act and the Fugitive Offenders Act,
the report notes.
This could further complicate matters making it difficult to find a
suitor to take over the company as a going concern, banking sources
said, ET relays.
ET adds that the banks are set to appoint a liquidator for the
company, which is being administered by Ram Ratan Kanoongo, a
court-appointed interim resolution professional.
About Firestar International
Firestar International is a global diamond and jewellery company.
Firestar International is the parent firm of the Nirav Modi group
and has over a dozen subsidiaries located in various international
jurisdictions such as Japan and Belgium.
The company was admitted for insolvency proceedings on March 17,
2020, after Corporation Bank (now merged into Union Bank of India)
filed an application last year at the NCLT to recover a loan that
the company had defaulted on.
PNB has filed claims of INR11,000 crore against Firestar
International for the alleged letter of undertaking fraud,
according to The Economic Times.
GAMMON INDIA: CARE Keeps D Debt Ratings in Not Cooperating
----------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Gammon
India Limited (GIL) continues to remain in the 'Issuer Not
Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term 949.05 CARE D; Issuer Not Cooperating;
Fund-based Based on best available
facilities– Information
Cash Credit
Long/Short- 9,092.78 CARE D; Issuer Not Cooperating;
term Non- Based on best available
fund based Information
facilities–
Cash Credit
Non-Convertible 324.00 CARE D; Issuer Not Cooperating;
Debentures Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from GIL to monitor the rating
vide e-mail communications/letter dated July 20, 2020, July 16,
2020 and July 15, 2020 and numerous calls. However, despite CARE's
repeated requests, the company has not provided the requisite
information for monitoring the ratings. In the absence of minimum
information required for the purpose of rating, CARE is unable to
express opinion on the rating. In line with the extant SEBI
guidelines, CARE's rating on debt instruments of GIL 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.
The ratings take into account delays in servicing of interest on
non-convertible debentures and meeting the debt obligations on
time. The liquidity position of the company is constrained due to
delays in recoveries from customers and project execution delays
resulting in holding of high inventory, thereby blocking working
capital funds and causing cost-overruns.
Detailed description of the key rating drivers
* Delays in Debt Servicing: There are delays in servicing of debt
obligations owing to delayed execution of projects, delays in
recoveries from customers and huge debt burden leading to
constrained liquidity position of the company.
Incorporated in 1922, GIL is the flagship company of the Gammon
group and offers services covering the whole gamut of the civil and
construction activities. GIL undertakes construction of roads,
bridges, flyovers, power plants, chimneys and cooling towers,
cross-country pipelines, structures for hydro-electric power
projects, buildings and factories. The company has also been
present in the infrastructure project development space since 2001
through GIL's subsidiary Gammon Infrastructure Projects Limited
(GIPL, 74.98% stake), which executes public private partnership
based projects in the road, port and power sectors through
project-specific special purpose vehicles.
GUPTA TEX: CARE Keeps D Debt Ratings in Not Cooperating
-------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Gupta Tex
Prints Private Limited (GTPPL) continues to remain in the 'Issuer
Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 9.76 CARE D; Issuer Not Cooperating;
Facilities Based on best available
Information
Long-term/Short 7.00 CARE D; Issuer Not Cooperating;
Bank Facilities Based on best available
Information
Short-term 0.25 CARE D; Issuer Not Cooperating;
Bank Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had vide its press release dated July 11, 2019, placed the
rating(s) of GTPPL under the 'issuer non-cooperating' category as
GTPPL had failed to provide information for monitoring of the
rating for the rating exercise as agreed to in its Rating
Agreement. GTPPL continues to be non-cooperative despite repeated
requests for submission of information through phone calls and
emails dated May 25, 2020, May 29, 2020 and July 17, 2020. 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.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
Detailed description of the key rating drivers
At the time of last rating done on July 11, 2019, the following was
the rating weakness:
Key Rating Weaknesses
* Delays in debt servicing: The rating assigned to the bank
facilities of GTPPL takes into account the fact that there was a
delay in servicing its debt obligation and the account was
classified as NPA.
GTPPL was initially formed as Gupta Dyeing and Printing Mills
(GDPM), a partnership firm in 1979 by Gupta family of Surat. Later
on in 2007, GDPM was converted into a private limited company.
GTPPL is primarily engaged in fabric processing (bleaching,
printing, dyeing & embroidery) and also does the job work
activities as well as trading of grey yarn and finished fabric. The
fabric processed by GTPPL is primarily used for making sarees&
ladies dress material. The finished fabric is marketed under the
brand name of 'Gupta Sarees'. GTPPL has an installed capacity of
1.25 lakh meters per day for processing of grey fabric at its sole
processing unit located in Surat (Gujarat).
HANUMAN DAL: CARE Keeps D on INR35cr Debt in Not Cooperating
------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Hanuman Dal
Industries Private Limited (HDIPL) continues to remain in the
'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 35.00 CARE D; Issuer Not Cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated May 20, 2019, placed the
rating of HDIPL under the 'issuer non-cooperating' category as
HDIPL had failed to provide information for monitoring of the
rating and had not paid the surveillance fees for the rating
exercise as agreed to in its Rating Agreement. HDIPL continues to
be non-cooperative despite repeated requests for submission of
information through e-mails, phone calls and email dated July 14,
2020. 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.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
Detailed description of the key rating drivers
At the time of last rating on May 20, 2019, the following were the
rating weaknesses (updated for audited result of FY19 available
with Registrar of Companies)
Key Rating Weaknesses
* Delays in Debt Servicing: As per the feedback received from the
bankers, there are delays in debt servicing since March 2019 and
ongoing overdrawing in cash credit facility for more than 30 days.
The account is classified as Non-Performing Asset from
February 29, 2020.
HDIPL was incorporated in the year 2015 and it belongs to the Bolla
Group of Nagpur. The group is promoted by the Bolla family and is
currently managing eight entities including HDIPL. HDIPL is
promoted by Mr. Raman Bolla and Mrs. Vijayalaxmi Bolla. The
company has set up a tur-dal and gram dal processing unit at
Nagpur, Maharashtra, with a proposed processing capacity of 150
MTPD.
HAPPY ACOUSTICS: CARE Keeps D Debt Ratings in Not Cooperating
-------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Happy
Acoustics Private Limited (HAPL) continues to remain in the 'Issuer
Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 1.50 CARE D; Issuer Not Cooperating;
Facilities Based on best available
Information
Long-term Bank 36.50 CARE D; Issuer Not Cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated May 3, 2019, continues to
place the ratings of HAPL under the 'Issuer Not Cooperating'
category as the company had failed to provide the requisite
information required for monitoring of the ratings as agreed to in
its rating agreement. Happy Acoustics Private Limited continues to
be non-cooperative despite repeated requests for submission of
information through phone calls and a letter/email dated July 13,
2020. 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 ratings on bank facilities of Happy Acoustics Private
Limited are 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.
Detailed description of the key rating drivers
CARE could not contact the banker and no other information is
available. However, at the time of last review, the rating took
into account the irregularities in the bank facilities.
HAPL was incorporated on March 16, 2012 by Mr. Amarjit Singh Kalra
and his wife, Ms. Surinder Kaur Kalra. The company is involved in
the manufacturing and assembling of public address (PA) systems and
components, including loud speakers, amplifiers, microphones, and
woofers, and related electronic and electrical equipment. The
company commenced operations in September, 2012 and its
manufacturing facility is located in Delhi. HAPL belongs to the 5
core group, based in New Delhi. The 5 core group was established in
1983 and apart from HAPL, the group has six other companies namely,
Indian Acoustics Private Limited, 5 Core Acoustics Private Limited,
Visual & Acoustics Corporation LLP, EMS & Exports, Five Core
Electronics Limited and Digi Export Venture Private Limited which
are all involved in the same line of business.
HOUSING DEVELOPMENT: Adani Group, Suraksha, Sunteck Submit EOI
--------------------------------------------------------------
BloombergQuint reports that Adani Properties, Suraksha Asset
Reconstruction and Sunteck Realty are among six players that have
shown initial interest to acquire debt-laden Housing Development
and Infrastructure Ltd. (HDIL) through the insolvency resolution
process, according to a regulatory filing.
Adani Properties and Suraksha Group had participated in the
insolvency resolution process of Jaypee Infratech, which eventually
was acquired by state-owned NBCC, according to BloombergQuint.
HDIL is under corporate insolvency resolution process pursuant to
the provisions of the Insolvency and Bankruptcy Code, 2016. The
invitation for expressions of interest for resolution applicants
was first published in February and subsequently revised several
times.
In a regulatory filing, HDIL shared the provisional list of
prospective resolution applicants. "Submission of EOI was closed on
July 31, 2020. The Resolution Professional has received 6 EOI from
interested parties," the filing said, BloombergQuint relays.
According to BloombergQuint, International Asset Reconstruction
Company, NS Software and Harsha Vardhan Reddy have also submitted
the EOI, but were found ineligible.
BloombergQuint relates that International Asset Reconstruction
Company had not submitted the undertaking under section 29A of the
IBC in the required format on stamp paper duly signed, stamped and
notarised. It would become eligible once the required undertaking
is furnished on or before August 8.
NS Software and Harsha Vardhan Reddy did not meet the criteria of
having minimum net worth (INR500 crore) or asset under management
(INR2,000 crore) or committed funds (INR250 crore) at the end of
March 2019.
Housing Development & Infrastructure Limited (HDIL) is real estate
development company. The Company's services include residential,
commercial, and retail real estate development.
HDIL's affairs, business and assets are being managed by the
Resolution Professional Abhay N Manudhane appointed by National
Company Law Tribunal, Mumbai Bench, vide order dated August 20,
2019.
At present, promoters of HDIL Rakesh and Sarang Wadhawan are in
jail for alleged involvement in the Punjab and Maharashtra
Cooperative Bank scam case, BloombergQuint notes.
INDIAN ACOUSTICS: CARE Keeps D on INR24cr Loans in Not Cooperating
------------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Indian
Acoustics Private Limited (IAPL) continues to remain in the 'Issuer
Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 3.54 CARE D; Issuer Not Cooperating;
Facilities Based on best available
Information
Short-term Bank 24.00 CARE D; Issuer Not Cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated May 3, 2019, continues to
place the ratings of IAPL under the 'Issuer Not Cooperating'
category as the company had failed to provide the requisite
information required for monitoring of the ratings as agreed to in
its rating agreement. Indian Acoustics Private Limited continues to
be non-cooperative despite repeated requests for submission of
information through phone calls and a letter/email dated July 13,
2020. 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 ratings on bank facilities of Indian Acoustics Private
Limited are 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.
Detailed description of the key rating drivers
CARE could not contact the banker and no other information is
available. However, at the time of last review, the rating took
into account the irregularities in the bank facilities.
IAPL was incorporated on June 21, 2010 by Mr. Amarjit Singh Kalra
and his wife, Ms. Surinder Kaur Kalra. The company is involved in
the manufacturing and assembling of public address (PA) systems and
components, including loud speakers, amplifiers, microphones, and
woofers, and related electronic and electrical equipment. The
company commenced operations in November,2011 and its manufacturing
facility is located in Noida. IAPL belongs to the 5 core group,
based in New Delhi. The 5 core group was established in 1983 and
apart from IAPL, the group has six other companies namely, Happy
Acoustics Private Limited, 5 Core Acoustics Private Limited, Visual
& Acoustics Corporation LLP, EMS & Exports, Five Core Electronics
Limited and Digi Export Venture Private Limited which are all
involved in the same line of business.
KAYNES TECHNOLOGY: Ind-Ra Assigns 'BB' LongTerm Issuer Rating
-------------------------------------------------------------
India Ratings and Research (Ind-Ra) has assigned Kaynes Technology
India Private Limited (KTIPL) a Long-Term Issuer Rating of 'IND BB'
while simultaneously placing it on Rating Watch Evolving (RWE).
The instrument-wise rating actions are:
-- INR1.117 bil. Fund-based facilities assigned; placed on RWE
with IND BB/RWE/IND A4+/RWE rating;
-- INR150 mil. Non-fund-based facilities assigned; placed on RWE
with IND A4+/RWE rating; and
-- INR170 mil. Non-convertible debentures ISIN INE918Z07019
issued in July 2018 15% coupon rate due on March 2023 with
IND BB / RWE rating.
Assigned; placed on RWE
The RWE follows the signing of a term sheet between KTIPL and a
private equity investor for infusing capital amounting to INR950
million, whose first tranche is expected by the management by
end-August 2020 and INR400 million in the next tranche. The
management has informed Ind-Ra that this investment will be
primarily used for the expansion of new business, working capital
requirements, and deleveraging of its balance sheet.
KEY RATING DRIVERS
Liquidity Indicator - Stretched: KTIPL's average peak utilization
of fund-based facilities was 97.9% and non-fund-based facilities
were 48.6% for the 12 months ended June 2020. The company's cash
flow from operations deteriorated to negative INR226 million in
FY19 (FY18: negative INR37 million). The agency estimates the
company's cash flow from operations to have been under stress in
FY20 due to elongation in the working capital cycle to 199 days
(FY19: 170 days) owing to increased inventory days. The company has
scheduled repayments of term loans worth INR209 million in FY21.
KTIPL has availed of the Reserve Bank of India-prescribed
moratorium from March-August 2020. Furthermore, the company has
infused compulsorily-convertible preference shares and equity
shares amounting to INR120 million in June 2020, which the
management has said will be used for business expansion. The cash
and cash equivalents at end-FY20 were INR122 million (end-FY19:
INR73 million). FY20 financials are provisional in nature.
The ratings are constrained by the company's medium scale of
operations. Its revenue was almost flat at INR3,582 million in FY20
(FY19: INR3,528 million). As of May 15, 2020, KTIPL had an order
book worth INR3,158 million to be executed in FY21. The total
revenue booked during over April-May 2020 was INR296 million. The
management expects revenue of INR4,320 million in FY21 on the
addition of two new international customers to its clientele.
Furthermore, based on the orders received in FY21, the management
expects increased revenue from the railways segment (contributed
35% to FY20 revenue); the segmental revenue breakup was 35% from
the medical segment and 30% from the defense, aerospace and
industrial segments. The medical segment's contribution to revenue
increased to 35% in FY20 (FY19: 7%) due to the outbreak of
COVID-19, which led to increased demand for ventilators and
respirator systems.
The rating factor in the company's average margins, which expanded
to 10.9% in FY20 (FY19: 9.8%) owing to decreased raw material
expenses. The company's return on capital employed was 13% in FY20
(FY19: 14%). The agency expects the company's FY21 margins to be in
line with previous years (8%-10% over FY16-FY20).
The ratings are also constrained by the company's weak credit
metrics. In FY20, KTIPL's gross interest coverage (operating
EBITDA/gross interest expense) improved slightly to 1.9x (FY19:
1.8x) and net leverage (total adjusted net debt/operating EBITDA)
to 3.4x (3.8x) due to an increase in the absolute EBITDA to INR389
million (INR344 million) coupled with a slight decrease in debt to
INR1,442 million(INR1,556 million). The agency expects the credit
metrics to improve from FY21 owing to the equity infusion from the
private equity investor.
The ratings, however, are supported by the promoters' experience of
three decades in the electronics manufacturing services industry,
which has enabled the promoters to develop new products and
designs. KTIPL caters to reputed companies namely Siemens Ltd,
Larsen & Toubro Ltd ('IND AAA'/Stable), and TVS Electronics Ltd.
RATING SENSITIVITIES
The RWE indicates that the ratings may be affirmed, downgraded, or
upgraded upon resolution. Ind-Ra will continue to closely monitor
the developments and will resolve the RWE once KTIPL receives
equity infusion till August-end 2020.
COMPANY PROFILE
Established in 1988 and incorporated in 2008, KTIPL manufactures
printed circuit boards, and other electronic assemblies, having
applications in aerospace, defense, railways, automotive,
information technology, peripheral, industrial, and medical
electronics.
LEEL ELECTRICALS: CARE Keeps D Debt Ratings in Not Cooperating
--------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of LEEL
Electricals Limited (LEEL) continues to remain in the 'Issuer Not
Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 455.00 CARE D; Issuer Not Cooperating;
Facilities Based on best available
Fund Based Information
LT/ST Bank 595.00 CARE D/CARE D; Issuer Not
Facilities– Cooperating
Non Fund Based
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated May 30, 2019, continues to
place the ratings of LEEL under the 'Issuer Not Cooperating'
category as the company had failed to provide the requisite
information required for monitoring of the ratings as agreed to in
its rating agreement. LEEL Electricals Limited continues to be
non-cooperative despite repeated requests for submission of
information through phone calls and a letter/email dated July 13,
2020. 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 ratings on bank facilities of LEEL Electricals Limited
are 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.
Detailed description of the key rating drivers
CARE has not received any information from the company. However,
the company is under corporate insolvency resolution process in
NCLT.
LEEL was incorporated in 1987 and operates in HVAC segment. It is
engaged in the manufacturing of condenser and evaporator coils and
contract manufacturing for Air Conditioners (ACs) for various
brands. LEEL was also into retailing of ACs and consumer durable
products like LCD/ LED TVs, washing machines, freezers, etc. The
Company, however had sold its Consumer Durable Business comprising
of business of importing, trading, marketing, exporting,
distribution, sale of air conditioners, televisions, washing
machines and other household appliances and assembling of
televisions under the brand "LLOYD" and all of the rights, title,
interest, licensees, contracts, assets, continuing employees,
intellectual property including the brand, logo, trade mark "LLOYD"
as a going concern on slump sale basis to Havells India Ltd.
Pursuant to the transaction, the Company has also changed its name
to 'LEEL Electricals Ltd.' LEEL has six manufacturing/ assembly
units located at Rajasthan, Himachal Pradesh, Tamil Nadu, Haryana
and Uttarakhand.
LOKMANGAL AGRO: CARE Keeps B on INR110cr Debt in Not Cooperating
----------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Lokmangal
Agro Industries Limited (LAIL) continues to remain in the 'Issuer
Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 110.00 CARE B; Issuer Not Cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated March 30, 2018 placed the
rating(s) of LAIL under the 'issuer non-cooperating' category as
LAIL had failed to provide information for monitoring of the
rating. NSIL continues to be non-cooperative despite repeated
requests for submission of information through e-mails, phone calls
and a letter dated July 8 , 2020 and July 13, 2020. 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.
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
At the time of last rating on July 22, 2019, the following were the
rating strengths and weaknesses:
Key Rating Weaknesses
* Financial risk profile marked by declining TOI yet improving
margins and comfortable gearing levels: During the year FY18
(refers to period April 17 – March 18) LAIL registered y-o-y
de-growth of ~41% to INR111.25 crore vis-à-vis INR192.37 crore in
FY17. However on account of declining cost of sales PBILDT margin
stood at 20.61% (PY 12.09%). registering profit of INR3.02 crore
during FY18 against loss of INR0.31 crore during FY17. The overall
gearing and debt to equity ratios of the company stood stable at
0.96x (PY 0.95x) and 0.35x (PY 0.46x) respectively as on March 31,
2018
* Cyclicality and agro-climatic risk of the industry: Sugarcane is
the key raw material used for the manufacture of sugar and
sugar-related products. The availability and yield of sugarcane
depends on factors like rainfall, temperature and soil conditions,
demand-supply dynamics, government policies etc. The production of
sugarcane and hence sugar is cyclical in nature, wherein production
of sugarcane is on an uptrend for two years and then declines over
the next two years, before trending up again.
* Working capital intensiveness due to long inventory holding
period: The production of sugar in India is highly seasonal in
nature, with more than 80% of the sugar being produced during the
period of October to March and sold in a staggered manner over the
year on account of regulatory control of the government via the
sugar release quota. This results in high finished goods inventory
carrying cost leading to working capital intensiveness. The
inventory period for the LAIL Improved from 271 days in FY15 to 190
days in FY16 led by liquidation of sugar inventory to the tune of
1.35 lakh MT in FY16. The high working capital requirement is met
through the working capital bank borrowings and the average monthly
utilization over the period of past 12 months (ended on
December 2016) stood at ~87%.
Key Rating Strengths
* Part of the Lokmangal group and established track record of
promoters in sugar business: The promoters, through their other
ventures under the group (i.e. Lokmangal Mauli Industries Limited
(LMIL) and Lokmangal Sugar Ethenol and Co-generation Industries
Limited (LSECL)), have been engaged into sugar & sugar related
business since last 15 years since 1998. The group is involved in
varied activities including agro industries, banking & finance,
education, healthcare, construction and real estate development.
Mr. Subhash Deshmukh, has been engaged in active politics for the
last 21 years. Mr. Mahesh Deshmukh has completed his Chemical
Engineering and M.S. in Industrial Engineering from USA and is
actively involved into day to day operations of the company. Mr.
Ravikant Patil (General Manager) of LAIL and Managing Director (MD)
of LMIL & LSECL, is a Science graduate in horticulture and has more
than 19 years of experience in sugar industries acting as Chief
Agricultural Officer with other sugar factories prior joining the
Lokmangal group. Mr. Manish Deshmukh, Executive Director of LMIL &
Director in LSECL is a mechanical engineering graduate and an MBA
(Finance) from USA the respective functions looked after by them.
The top management of LAIL is ably supported by a qualified and
experienced second tier management who look after the various
functions and division of the company.
* Fully integrated business operations in sugar business providing
diversification: LAIL has an installed capacity of 2,500 TCD for
sugar crushing, 4 MW of co-generation unit and 160 KLPD (largest in
Maharashtra) of distillery unit operations. All the cane processing
plants of the various group concerns of the group, collectively
make for a fully integrated cane processing facilities (by
providing backward & forward integration benefits) thereby giving
the advantage of diversification and economies of scale.
* Locational advantage and cane development & procurement
initiatives: LAIL has setup a fully integrated cane processing
plant operations in Solapur in proximity to Sina river, the water
from which is distributed to the agriculture lands and industries
in the region through the Sina Dam. The constant supply of water
results in better quality of sugarcane having a better recovery
rate.
LAIL is the only group entity having a distillery which enables it
to have molasses from 4 sugar factories of the Lokmangal group
entities having a combined installed capacity of 14,500 TCD.
LAIL was incorporated in year 1998 to undertake sugar and sugar
related production by Mr. Subhash Deshmukh (Founder) and Mr. Mahesh
Deshmukh (Executive Director) with an installed capacity of 1,250
Tonnes of Cane Crushed Per Day (TCD). In the year 2006-07, LAIL
increased its installed crushing capacity to the tune of 2,500 TCD.
To mitigate the seasonal and cyclical nature of sugar industry,
LAIL has also installed a co-generation unit of 8.5 Mega-Watt (MW)
and distillery unit of 160 Kilo Liters Per Day (KLPD). The sugar
factory of LAIL is located in Solapur (Maharashtra).
LOKMANGAL SUGAR: CARE Keeps D Debt Rating in Not Cooperating
------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Lokmangal
Sugar Ethanol and CoGeneration Industries Limited (LSECIL)
continues to remain in the 'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 174.71 CARE D; Issuer Not Cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated March 30, 2018, placed the
rating(s) of LSECIL under the 'issuer non-cooperating' category as
LSECIL had failed to provide information for monitoring of the
rating. LSECIL continues to be non-cooperative despite repeated
requests for submission of information and No Default Statements
(NDS) through various phone calls, e-mails dated July 8, 2020, and
July 13, 2020. 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.
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
At the time of last rating on July 15, 2019 the following were the
rating strengths and weaknesses:
Key Rating Weaknesses
* Delays in the repayment of bank Loan (as per AR18 (A) source:
ROC): There are delays in servicing of its debt obligations of
bank facilities by LSECIL for the period of 243 days.
Lokmangal Sugar Ethanol & Cogeneration Industries Limited (LSECL),
was incorporated in year 2003 to undertake sugar and sugar related
production by Mr. Subhash Deshmukh (Founder Chairman), Mr. Mahesh
Deshmukh (Present Chairman) and Mr. Manish Deshmukh (Executive
Director) with an installed capacity of 2,500 Tonnes of Cane
Crushed Per Day (TCD). In the year 2009-10 LSECL increased its
installed crushing capacity to the tune of 6,000 TCD. To mitigate
the seasonal and cyclical nature of sugar industry, LSECL has also
installed Co-generation unit of 31.5 Mega-watt (MW). The partially
integrated sugar factory of LMIL is located in Bhandarkawathe, Tal.
South Solapur, Dist. Solapur - 413 221.
M. RANGANATHAN: CARE Lowers Rating on INR3.40cr LT Loan to D
------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of M.
Ranganathan (M.R), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 3.40 CARE D; Issuer not cooperating;
Facilities Revised from CARE B; Stable; on
the basis of best available
information
Short-term Bank 1.50 CARE D; Issuer not cooperating;
Facilities Revised from CARE A4; based on
best available information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated May 27, 2019, placed the
rating(s) of M.R under the 'Issuer noncooperating' category as M.R
had failed to provide information for monitoring of the rating. M.R
continues to be noncooperative despite repeated requests for
submission of information through e-mails, phone calls and email
dated July 20, 2020. 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.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
Detailed description of the key rating drivers
The revision in the ratings assigned to the bank facilities of M.
Ranganathan takes into account the ongoing delays in the servicing
of debt obligations.
Key Rating Weakness
* Ongoing delays in debt servicing: The firm is unable to generate
sufficient cash flows leading to strained liquidity position
resulting in on-going delays in meetings debt obligations.
Established in 2004, M. Ranganathan (MR) is a proprietorship
concern engaged in providing civil construction service. Mr. is
registered as Class-I civil contractor with State Highways
Department in 2004 and with Chennai Corporation in 2011. The entity
constructs roads and highways mainly for quasi Government entities
like the Chennai Corporation & State Highway Department and
municipalities.
NATIONAL STEEL: Ind-Ra Affirms 'D' LongTerm Issuer Rating
---------------------------------------------------------
India Ratings and Research (Ind-Ra) has affirmed National Steel and
Agro Industries Limited's (NSAIL) Long-Term Issuer Rating at 'IND
D'.
The instrument-wise rating actions are:
-- INR2.006 bil. Fund-based working capital limits (long term)
affirmed with IND D rating;
-- INR89.4 mil. Term loans (long-term) issued on April 1, 2019
affirmed with IND D rating; and
-- INR11.995 bil. Non-fund-based working capital limits (short-
term) affirmed with IND D rating.
KEY RATING DRIVERS
The affirmation reflects NSAIL's continued delays in debt servicing
and the devolvement of letters of credit during FY20 because of a
tight liquidity position, resulting from the continued net losses
incurred by the company.
RATING SENSITIVITIES
Positive: Timely debt servicing for at least three consecutive
months would result in a positive rating action.
COMPANY PROFILE
NSAIL manufactures cold-rolled sheet (capacity: 300,000 metric tons
per annum (mtpa)), galvanized plain and corrugated sheets
(330,000mtpa) and color-coated sheets and coils (170,000mtpa) at
its plant in the Dhar district of Madhya Pradesh. Moreover, it
trades steel products, and has a captive 6MW gas-based power
plant.
NEXT GENERATION: Ind-Ra Lowers Term Loan Rating to 'D'
------------------------------------------------------
India Ratings and Research (Ind-Ra) has downgraded Next Generation
Charitable Trust's (NGCT) term loan rating to 'IND D (ISSUER NOT
COOPERATING)' from 'IND BB- (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 detailed rating action is:
-- INR53.11 mil. Term loan (long-term) due on March 2019
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 NGCT's delays in debt servicing, the details
of which are not available.
RATING SENSITIVITIES
Positive: Timely debt servicing for at least three consecutive
months will be positive for the ratings.
COMPANY PROFILE
NGCT was established in 2013 by Mr. Chandan Agarwal. The trust
established its first school G.D. Goenka Public School in
collaboration with G. D. Goenka Private Limited in Bareilly.
NILKANTH COTTON: CARE Keeps D on INR7.32cr Debt in Not Cooperating
------------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Nilkanth
Cotton Industries (NCI) continues to remain in the 'Issuer Not
Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 7.32 CARE D; Issuer Not Cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated July 8, 2019, placed the
ratings of NCI under the 'Issuer non-cooperating' category as NCI
had failed to provide information for monitoring of the ratings as
agreed to in its Rating Agreement. NCI continues to be
non-cooperative despite repeated requests for submission of
information through phone calls and emails dated May 25, 2020, June
3, 2020 and July 17, 2020. In line with the extant SEBI guidelines,
CARE has reviewed the ratings on the basis of the best available
information which however, in CARE's opinion is not sufficient to
arrive at a fair rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
Detailed description of the key rating drivers
At the time of last rating done on July 8, 2019, the following was
the rating weakness:
Key Rating Weaknesses
* Delays in debt servicing: The rating assigned to the bank
facilities of NCI takes into account the fact that the account of
NCI had become NPA on the back of delays in its debt servicing due
to weak liquidity position.
Jangvad, Jasdan-based (Rajkot) NCI was established as a partnership
firm in 2014 by six partners. The partners of NCI include mainly
Mr. Hareshbhai H Tadhani and Mr. Chandubhai H Tadhani. The firm is
engaged into the activity of cotton ginning, bailing and cleaning.
The main products of NCI includes cotton seeds, cotton bales,
cotton cake and cotton wash oil. The firm has an installed capacity
of 18144 Metric Ton per annum for raw cotton processing and 2160
Metric Ton per annum for cotton seeds processing as on March 31,
2016. The firm's manufacturing facilities are equipped with 24
ginning machines, 1 pressing machine and 5 expellers for crushing
of cotton seeds. The firm operated at 90% capacity utilization for
the year ending on March 31, 2016. The firm has an established
selling network for selling the products outside Gujarat i.e. Tamil
Nadu and Rajasthan.
PRAAGNA HOSPITALS: CARE Lowers Rating on INR8cr LT Loan to C
------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of Sree
Praagna Hospitals Private Limited (SPHPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 8.00 CARE C; Stable; Issuer not
Facilities cooperating; Revised from
CARE B; Stable; ISSUER NOT
COOPERATING on the basis of
best available information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated May 13, 2019, placed the
rating(s) of SPHPL under the 'issuer not cooperating' category as
SPHPL had failed to provide information for monitoring of the
rating exercise as agreed to in its Rating Agreement. SPHPL
continues to be non-cooperative despite repeated requests for
submission of information through e-mails dated July 16, 2020 to
July 21, 2020 and numerous phone calls. In line with the extant
SEBI guidelines, CARE has reviewed the rating on the basis of
publicly available information which however, in CARE's opinion is
not sufficient to arrive at a fair rating.
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 ratings assigned to the bank facilities of Sree
Praagna Hospital Private Limited (SPHPL) takes into account small
scale of operations, highly fragmented industry coupled with
competition from existing and upcoming hospitals and project
implementation risk. The rating is, however, underpinned by
experienced promoters with more than one decade in healthcare
industry with specialization in ENT and Oncology, statutory
approvals in place and stable demand outlook for healthcare
industry.
Detailed description of the key rating drivers
Key Rating Weakness
* Small scale of operations: The total operating income of the
company remained small at INR0.6 crore in FY19 and FY18.
* Highly fragmented coupled with competition from existing and
upcoming hospitals: The healthcare sector is highly fragmented with
few large players in the organized sector and numerous small
players in the unorganized sector leading to high level of
competition. However, one of the major competitor for super
specialty hospital is located at Puttaparthi with a bed capacity of
300. Despite of the competition, the SPHPL is expected to manage
the competition with presence of highly qualified doctors with more
than one decade experience in the medical profession. Considering
intense competition, SPHPL's prospects would depend upon its
ability to profitably scale up the operations and success rate in
treatment of complex cases, to attract patients and increase
occupancy.
* Project implementation risk: SPHPL hospital is planning to open a
super specialty hospital in Ananthapur, Andhra Pradesh with 100 bed
capacity. The total proposed cost of project is INR13.60 crore
which is proposed to be funded by bank term loan of INR8.84 crore
and equity share capital of INR4.76 crore. As on November 10, 2016,
the hospital has incurred expenses of INR1.75 crore (around 13% of
the total project cost) towards advance payment of purchase of
medical equipment's and construction of building (Ananthapur), and
the same was funded by the equity share capital brought in by the
promoters. Further, financial closure for the project is achieved.
The ability of the hospital to complete the project without any
cost or time over run will remain critical from credit risk
perspective.
Key Rating Strengths
* Experienced promoters with more than one decade in healthcare
industry with specialization in ENT and Oncology: SPHPL is
promoted by Dr. B.J Prasad (Managing Director) an ENT specialist
and Dr. Syamala Sridevi (Director) is specialized in
Oncology, and both of them has more than one decades of experience
in medical profession.
* Statutory approvals in place: SPHPL's hospital is located in
Ananthapur district of Andhra Pradesh, and got all statutory
approvals like DM&HO (District Medical & Health Officers),
pollution board, municipal and others approvals.
* Stable demand outlook for healthcare industry: The overall Indian
healthcare market is worth around US$ 100 billion and is expected
to grow to US$ 280 billion by 2020, a Compound Annual Growth Rate
(CAGR) of 22.9 per cent. Healthcare delivery, which includes
hospitals, nursing homes and diagnostics centres, and
pharmaceuticals, constitutes 65 per cent of the overall market.
There is a significant scope for enhancing healthcare services
considering that healthcare spending as a percentage of Gross
Domestic Product (GDP) is rising. Rural India, which accounts for
over 70 per cent of the population, is set to emerge as a potential
demand source.
Sree Praagna Hospitals Private Limited (SPHPL) was incorporated in
2015 with trade name as 'S V American Hospitals', promoted by Dr
B.J Prasad (Managing Director), an ENT specialist and Dr Syamala
Sridevi (Director) is specialised in Oncology. SPHPL has got
approvals from DM&HO (District Medical & Health Officers) in the
year 2016 for setting up the hospitals and also planning to empanel
for 'Aarogyasri Scheme', sponsored by government of Andhra Pradesh.
SPHPL is planning to be managed by a team of experts from all
related fields like Oncology, ENT and Cancer treatment with all
types of Surgeries.
PRATIBHA KRUSHI: CARE Keeps D Debt Ratings in Not Cooperating
-------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Pratibha
Krushi Prakriya Limited (PKPL) continues to remain in the 'Issuer
Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 202.78 CARE D; Issuer Not Cooperating;
Facilities Based on best available
Information
Short-term 5.00 CARE D; Issuer Not Cooperating;
Bank Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated June 6, 2019, placed the
ratings of PKPL under the 'issuer non-cooperating' category as PKPL
had failed to provide information for monitoring of the rating and
had not paid the surveillance fees for the rating exercise as
agreed to in its Rating Agreement. PKPL continues to be
non-cooperative despite repeated requests for submission of
information through e-mails, phone calls and email dated July 14,
2020. 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.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above ratings.
Detailed description of the key rating drivers
At the time of last rating on June 06, 2019 the following were the
rating weaknesses
Key Rating Weaknesses
* Delays in Debt Servicing: As informed by the banker, there are
delays in debt servicing and the account has been classified as
NPA.
Analytical approach: Combined
CARE has taken a combined view of Pratibha Krushi Prakriya Limited
(PKPL), Dhanvantari Milk Products Private Limited (DMPPL), Pratibha
Milk Industries (PMI) and Shree Baalaji Milk and Milk Products
(SBMMP), herein referred to as Chavan Group. CARE has considered
combined view including business and financials of group companies
PKPL, DMPPL, PMI, SBMMP on account of having same management,
similar business operations and financial linkages.
The Chavan Group has its presence in the milk business since 2002,
and was majorly engaged in trading of milk and milk products and
government contract business till 2009. PKPL started commercial
production from December 18, 2011. It is a closely held public
limited company incorporated in 2010 by Mr. Satish Chavan and his
wife Mrs. Ashwini Chavan, it is the flagship company of the group.
The company manufactures various milk based products like Ultra
High Temperature (UHT) milk, lassi, cheese, yoghurt, paneer,
butter, ghee, Skimmed Milk Powder (SMP), etc. These products are
sold in the region of Maharashtra, Goa and parts of Karnataka. The
group consists of four entities including PKPL, PMI, SBMMPL and
DMPPL which are also engaged in the same line of business of
processing of milk and manufacturing of milk products.
PRATIBHA MILK: CARE Keeps D on INR54.93cr Debt in Not Cooperating
-----------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Pratibha
Milk Industries (PMI) continues to remain in the 'Issuer Not
Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 54.93 CARE D; Issuer Not Cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated June 6, 2019, placed the
rating of PMI under the 'issuer non-cooperating' category as PMI
had failed to provide information for monitoring of the rating. PMI
continues to be non-cooperative despite repeated requests for
submission of information through e-mails, phone calls and email
dated July 14, 2020. 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.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
Detailed description of the key rating drivers
At the time of last rating on June 06, 2019 the following were the
rating weaknesses
Key Rating Weaknesses
* Delays in Debt Servicing: As informed by the banker, there are
delays in debt servicing and the account is classified as NPA.
Analytical approach: Combined
CARE has taken a combined view of Pratibha Krushi Prakriya Limited
(PKPL), Dhanvantari Milk Products Private Limited (DMPPL), Pratibha
Milk Industries (PMI) and Shree Baalaji Milk and Milk Products
(SBMMP), herein referred to as Chavan Group. CARE has considered
combined view including business and financials of group companies
PKPL, DMPPL, PMI, SBMMP on account of having same management,
similar business operations and financial linkages.
PMI is a partnership firm of Mr. Satish Chavan and his wife Mrs.
Ashwini Chavan. The group has its presence in milk business since
2002, and has been majorly engaged in trading of milk and milk
products and government contract business till 2009. The group
consists of four entities including PKPL, PMI, SBMMPL and DMPPL
which are also engaged in the same line of business of processing
of milk and manufacturing of milk products.
PROTECH FEED: CARE Keeps D on INR10.95cr Debt in Not Cooperating
----------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Protech
Feed Private Limited (PFPL) continues to remain in the 'Issuer Not
Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 10.95 CARE D; Issuer Not Cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from PFPL to monitor the ratings
vide letters/emails dated July 6, 2020, July 8, 2020, July 10, 2020
and numerous phone calls. However, despite 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 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 PFPL's bank facilities will
now be denoted as CARE B-; Stable; ISSUER NOT COOPERATING.
Users of these ratings (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above ratings.
Detailed description of the key rating drivers
At the time of last rating in May 24, 2019 the following were the
rating strengths and weaknesses
Key Rating Weaknesses
* Presence in the highly competitive and fragmented industry with
risk of outbreaks of bird flu and highly price sensitive consumer
segment: The chick farming sector is exposed to inherent risks
associated with the industry, like bird flu, extreme weather
conditions and contamination by pathogens. The outbreak of bird flu
leads to a fall in demand and consequent sharp crash in chick's
prices. This apart, egg is the major raw material for chick
farming, the price of which is volatile as the price of the egg is
derived by National Egg Co-ordination Committee (NECC) on daily
basis based on the demand-supply dynamics. On the other hand,
poultry feed industry is highly price sensitive on account of its
intensely competitive and fragmented nature due to presence of many
regional unorganized players. This apart, availability of cheaper
substitutes (like cotton seedcake, copra etc.) further induce
pricing and profitability pressures.
Key Rating Strengths:
* Experienced promoters: Mr. Sanjay Kumar Choudhury (Managing
Director) has over two decades of experience in the similar line of
business, looks after the overall management of the company
supported by other three directors.
* Satisfactory demand outlook for chicks and feed products: The
demand for chicks has been driven by the rapidly changing food
habits of the average Indian consumer, dictated by the lifestyle
changes in the urban and semi-urban regions of the country. The
demands for poultry products are sustainable and accordingly, the
kind of industry is relatively insulated from economic cycle.
Moreover, India is currently among the largest livestock-producing
countries in the world. PFPL is engaged in processing of poultry
feed. The poultry feed is the largest segment in the cattle feed
industry and includes both broiler feed and layer feed. Poultry
feed is given to chicken as a better substitute of traditional
feeds (i.e. Oil cakes, Cereals etc). Accordingly, the growth in the
livestock industry coupled with increase in level of education of
farmers will have a positive impact on the poultry feed industry.
PFPL was initially incorporated in July 17, 2007 in the name of
Protech Biosciences Pvt Ltd. Subsequently in June 2010, the name of
the company was changed to the current one. The company was
promoted to set up an integrated chicks farming and poultry feed
processing unit at industrial area Hajipur, Bihar with processing
capacity of 60,000 MTPA. Currently the company is managed by Mr.
Sanjay Kumar Choudhury (Managing Director), Mr. Santosh Kumar
Ishwar (Director), Mr. Sanjay Kumar Pandey (Director) and Mr.
Sujeet Singh (Director). PFPL has commenced operation of chicks
farming unit from February 2012 and poultry feed unit from January
2013.
SHIVAJI CANE: CARE Keeps D on INR59cr Debt in Not Cooperating
-------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Shivaji
Cane Processor Limited (SCPL) continues to remain in the 'Issuer
Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 59.00 CARE D; Issuer Not Cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had vide its press release dated May 24, 2019, placed the
rating of SCPL under "Issuer non-cooperating" category as SCPL has
failed to provide information for monitoring the rating. SCPL
continues to be non–cooperative despite repeated request for
submission of information through mail, phone calls and a letter
dated July 20, 2020. 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 a
fair rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
Detailed description of the key rating drivers
At the time of last rating on May 24, 2020 the following were the
rating weaknesses (updated for the information available from
Registrar of Companies).
Key Rating Weaknesses
* Delays in debt servicing: There are ongoing delays in debt
servicing and the account has been classified as Non-Performing
Asset.
SCPL was incorporated by Mr.Shivajirao Yashwantrao Naik, Founder
Director in 2013 to undertake manufacturing activity of sulphur-
less khandsari and jaggery powder with its operational facility
located at Shirala, Sangli District, and Maharashtra. SCPL's sugar
facility is partially integrated with Sugarcane crushing Capacity
of 1000 Metric tons per day. The command area
of SCPL largely derives irrigation from the Krishna and Warana
rivers and Morana dams. The company sells khandsari and jaggery
powder in the brand name of "Puro".
SINTEX PREFAB: CARE Keeps D Debt Ratings in Not Cooperating
-----------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Sintex
Prefab and Infra Limited (SintexPrefab) continues to remain in the
'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 50.00 CARE D; Issuer Not Cooperating;
Facilities Based on best available
Information
Non-Convertible 21.67 CARE D; Issuer Not Cooperating;
Debentures-I Based on best available
(ISIN-INE972T07019) Information
Non-Convertible 86.50 CARE D; Issuer Not Cooperating;
Debentures-II Based on best available
(ISIN-INE972T07043) Information
Non-Convertible 250.00 CARE D; Issuer Not Cooperating;
Debentures-III Based on best available
(ISIN-INE972T07035) Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated August 12, 2019, placed the
ratings of SintexPrefab under the 'issuer not-cooperating' category
as Sintex-Prefab had failed to provide information for monitoring
of the ratings. CARE had further reviewed the ratings of
Sintex-Prefab under the 'issuer non-cooperating' category vide its
press release dated September 12, 2019. Sintex-Prefab continues to
be non-cooperative despite repeated requests for submission of
information. 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.
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 of the bank facilities and instruments of Sintex-Prefab
continues to be constrained due to ongoing delays and defaults in
debt servicing arising out of its stressed liquidity.
Detailed description of the key rating drivers
Key Rating Weaknesses
* Continuing delay and defaults in debt servicing obligation: As
per the quarterly disclosure on stock exchange dated July 7, 2020,
the company has informed that there are a defaults in debt
servicing. Further, as per the stock exchange filling dated July 8,
2020, the company has informed that Sintex-Prefab has defaulted in
interest payments of INR5.87 crore on NCD (ISIN: INE972T07035)
which was due on July 8, 2020. Further, as per the latest monthly,
default, if any statement dated January 2, 2020 submitted by the
company, there are on-going delays in debt servicing of certain
bank facilities (which are not rated by CARE) as well as on-going
delays/defaults in interest and principal payments on NCDs.
The above-mentioned delays/defaults in debt servicing indicate
stress on Sintex-Prefab's liquidity arising from its weak
operational and financial performance. As per the latest financial
results for H1FY20 (FY; refer to period April 1 to March 31), the
company has reported total operating income of INR20 crore which
remained lower by 96% on y-o-y basis. Further, the company has
reported operating losses of INR8 crore during the same period.
Analytical Approach: Standalone
Sintex-Prefab is a wholly owned subsidiary of Sintex Plastics
Technology Limited (SPTL) and generates its revenue and cash flows
from its prefabricated business, monolithic construction and
execution of infrastructure projects. None of the debt raised by
Sintex-Prefab is with recourse to SPTL and hence, a standalone
approach has been considered for analysis.
Incorporated in November 2009, as Sintex Infra Projects Limited
(SIPL), the name of the company was changed to SintexPrefab in
March 2017. Sintex-Prefab was initially promoted by Sintex
Industries Limited [SIL; rated: CARE D; Issuer not cooperating],
however, under the composite scheme of arrangement, SIL has
divested its holdings in Sintex-Prefab to SPTL with effect from
April 1, 2016.
Sintex-Prefab is engaged in the execution of infrastructure
projects such as affordable housing with monolithic construction,
various centre and state sponsored infrastructure projects and
power projects. Moreover, under the demerger scheme of arrangement
within the Sintex group, SIL has transferred its monolithic
construction business and prefabricated business to Sintex-Prefab.
However, Sintex-Prefab decided to discontinue its monolithic
construction business from FY18 except the completion of on-going
orders. As on March 31, 2018, Sintex-Prefab has an installed
capacity of 76,800 Metric Tonnes (MT) per annum of prefabricated
structure manufacturing located at Kalol near Ahmedabad, Bhachau
(Kutch) and Daman.
SINTEX-BAPL LIMITED: CARE Keeps D Debt Ratings in Not Cooperating
-----------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Sintex-BAPL
Limited (Sintex-BAPL) continues to remain in the 'Issuer Not
Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 810.68 CARE D; Issuer Not Cooperating;
Facilities Based on best available
Information
Short-term Bank 250.00 CARE D; Issuer Not Cooperating;
Facilities Based on best available
Information
Non-Convertible 200.00 CARE D; Issuer Not Cooperating;
Debentures Based on best available
(NCD -ISIN: Information
INE631U07019)
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated May 10, 2019, placed the
ratings of Sintex-BAPL under the 'issuer not-cooperating' category
as Sintex-BAPL had failed to provide information for monitoring of
the ratings. CARE had further reviewed the ratings of Sintex-BAPL
under the 'issuer non-cooperating' category vide its press release
dated June 17, 2019, August 19, 2019 and August 29, 2019.
Sintex-BAPL continues to be non-cooperative despite repeated
requests for submission of information. In line with the extant
SEBI guidelines, CARE has reviewed the ratings on the basis of the
best available information which, however, in CARE's opinion is not
sufficient to arrive at a fair rating.
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 of the bank facilities and NCD issue of Sintex-BAPL
continues to be constrained due to on-going delays/defaults in debt
servicing arising out of its stress liquidity.
Detailed description of the key rating drivers
Key Rating Weaknesses
* Continuing delay/ default in debt servicing obligation: As per
the quarterly disclosure on stock exchange dated July 7, 2020, the
company has informed about the defaults in debt servicing. Further,
as per the auditor's report for the financial year ended March 31,
2020, the company has defaulted in interest and principal payments
for the outstanding NCD and bank facilities.
The above-mentioned delay/default in debt servicing indicates
stress on Sintex-BAPL's liquidity arising from its weak operational
and financial performance during FY20 (FY refers to period April 1
to March 31). On a standalone basis, the company's revenue de-grew
by 50% on y-o-y basis and stood at INR853 crore during FY20.
Further, the company has reported net loss of INR1,281 crore
(including loss of INR800 crore pertaining to impairment of brand
value, 'Sintex') during FY20. Furthermore, due to losses, tangible
net-worth of the company eroded and turned negative as on March 31,
2020. As per the latest audit report for the year ended March 31,
2020 (standalone), Sintex-BAPL is in active negotiations with the
lenders for an appropriate debt resolution plan, and is also
considering options of monetizing other assets of custom moulding
and auto division.
Analytical approach: Consolidated; while assessing the credit risk
profile of the company, CARE has considered the consolidated
financials of Sintex-BAPL. List of entities considered for
consolidated analysis is as per annexure 3.
Originally incorporated in December 2007 as Bright Autoplast
Private Limited, the name of the company was changed to Sintex-BAPL
in September 2015. Subsequent to incorporation, Sintex-BAPL
acquired automotive business of Bright Brothers Limited which was
engaged in automotive business since 1975. Sintex-BAPL was earlier
a wholly owned subsidiary of Sintex Industries Limited (SIL; CARE
D; Issuer not cooperating). However, under the composite scheme of
arrangement amongst various Sintex group companies, SIL divested
its 100% ownership to Sintex Plastics Technology Limited (SPTL).
Sintex-BAPL is engaged in manufacturing of various engineering
plastic components for automobile Original Equipment Manufacturers
(OEMs), tier-I auto ancillaries and electrical goods manufacturers
in the domestic market. Moreover, subsequent to the transfer of
custom moulding business (both domestic and overseas), the product
portfolio of SintexBAPL has expanded significantly. Presently,
Sintex-BAPL's portfolio includes various kinds of moulded plastic
based products like water tanks, sheet-moulding casting (SMC),
industrial products, doors, section and interiors, power
transmission & distribution accessories, FRP storage tanks and
automobile and electrical components. The company has its
manufacturing facilities located at 12 places across India with an
aggregate installed capacity of 84,800 Metric Tons Per Annum (MTPA)
as on March 31, 2018. During FY20, the company sold entire equity
holding in its step-down wholly owned subsidiary i.e. Sintex-NP
SAS, France at a consideration of Euro 155 million.
SSPT LOGISTICS: CARE Lowers Rating on INR6cr LT Loan to D
---------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of SSPT
Logistics (SSPTL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 6.00 CARE D; Issuer not cooperating;
Facilities Revised from CARE B+; Stable; on
the basis of best available
information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated May 27, 2019 placed the
rating(s) of SSPTL under the 'Issuer noncooperating' category as
SSPTL had failed to provide information for monitoring of the
rating. SSPTL continues to be noncooperative despite repeated
requests for submission of information through e-mails, phone calls
and email dated July 17, 2020. 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.
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 ratings assigned to the bank facilities of SSPT
Logistics takes into account of ongoing delays in the servicing of
debt obligations.
Key Rating Weakness
* Ongoing delays in meeting debt obligation: The firm was unable to
generate sufficient cash flows leading to strained liquidity
position resulting in ongoing delays in meeting its debt
obligations in time.
SSPTL was incorporated in January 2013 as a partnership firm by Mr.
P. Maruthavel and his brother Mr. P. Jayavel with their family
members. The firm is engaged in logistics services, i.e. speed
parcel and cargo services.
STARBIGBLOC BUILDING: Ind-Ra Affirms BB- LongTerm Issuer Rating
---------------------------------------------------------------
India Ratings and Research (Ind-Ra) has affirmed Starbigbloc
Building Material Private Limited's (Starbigbloc) Long-Term Issuer
Rating at 'IND BB-'. The Outlook is Stable.
The instrument-wise rating actions are:
-- INR117 mil. (reduced from INR140 mil.) Term loan due on March
2022 affirmed with IND BB-/Stable rating; and
-- INR35 mil. Fund-based limits affirmed with IND BB-/Stable/IND
A4+ rating.
Analytical Approach: Ind-Ra continues to take a consolidated view
of Starbigbloc and its parent Bigbloc Construction Limited
(Bigblog) to arrive at the ratings, on account of the strong
operational, financial, legal and strategic linkages between them.
Bigbloc has extended a corporate guarantee towards Starbigbloc's
bank debt and an unsecured loan, which will be used mainly for
meeting the latter's working capital requirement.
KEY RATING DRIVERS
The affirmation reflects the group's medium scale of operations. On
a consolidated basis, revenue increased to INR1,191 million in FY20
(FY19: INR1,002 million), mainly due to an increase in
Starbigbloc's revenue. On a standalone basis, Starbigbioc's revenue
surged to INR413 million in FY20 (FY19: INR232 million), driven by
a rise in capacity utilization as FY20 was the first full year of
operations.
The ratings continue to factor in the group's modest EBITDA margin
of 8.9% in FY20 (FY19: 7.0%) with a return on capital employed of
7% (5%). The increase in margin was due to lower revenue
contribution from the low-margin trading business of the parent. On
a standalone basis, the company reported a positive EBITDA of INR22
million in FY20 (FY19: negative INR38 million) with an EBITDA
margin of 5.3%. The increase in EBITDA was on account of a decline
in the cost of raw materials.
The ratings also continue to reflect the group's modest credit
metrics. On a consolidated basis, net leverage (total adjusted
debt/operating EBITDA) improved to 5.1x in FY20 (FY19: 7.4x) and
interest coverage (operating EBITDA/gross interest expense) to 2.4x
(1.6x) due to an increase in absolute EBITDA to INR106 million
(INR70 million). On a standalone basis, net leverage (total
adjusted debt/operating EBITDA) was 12.2x in FY20 and interest
coverage (operating EBITDA/gross interest expense) was 1.0x.
Liquidity Indicator – Stretched: The company's average maximum
use of the fund-based limits was 97% during the 12 months ended
June 2020. The cash flow from operations declined to INR74 million
in FY20 (FY19: INR85 million) on account of unfavorable changes in
working capital. However, the company's working capital cycle
improved to 67 days in FY20 (FY19: 96 days), driven by a decline in
debtor days to 75 days (FY19: 90 days). Ind-Ra expects the working
capital cycle to elongate in the near term, owing to an increase in
debtor days due to the COVID-19 led lockdown, which caused business
disruptions. Starbigbloc's cash balance stood at INR3 million at
FYE20 (FYE19: INR6 million). The group has scheduled debt
repayments of INR22 million and INR38 million in FY21 and FY22,
respectively. The company has availed the Reserve Bank of
India-prescribed moratorium for interest and principal payments on
its term loan for March-August 2020.
However, the ratings are supported by Starbigbloc's promoter's
decade-long experience in the autoclaved aerated concrete (AAC)
block manufacturing business.
RATING SENSITIVITIES
Positive: A significant increase in the consolidated revenue and
margins, leading to the consolidated net leverage reducing below
3.5x, while maintaining the liquidity position, all on a sustained
basis, would lead to positive rating action.
Negative: Weakening of support from the parent and a substantial
decline in the consolidated revenue, leading to deterioration in
the credit metrics on a sustained basis, would lead to negative
rating action.
COMPANY PROFILE
Starbigbloc manufactures AAC blocks at its Ahmedabad facility with
a total capacity of 0.2 million cubic meters.
Bigbloc manufactures AAC blocks at its manufacturing unit in
Umargaon. In 2016, the company demerged itself from Mohit
Industries Limited. In September 2018, it acquired Ahmedabad-based
Hiltop Concrete Private Limited. In November 2018, the Hiltop
Concrete's name was changed to Starbigbloc.
SUDHIR POWER: Insolvency Resolution Process Case Summary
--------------------------------------------------------
Debtor: Sudhir Power Projects Limited
Registered office:
507, International Trade Tower
Nehru Place, New Delhi 110019
Corporate office:
Plot No. 1, Sector-34
Gurgaon, Haryana 122001
Insolvency Commencement Date: July 28, 2020
Court: National Company Law Tribunal, New Delhi Bench
Estimated date of closure of
insolvency resolution process: January 24, 2021
(180 days from commencement)
Insolvency professional: Sanjay Agrawal
Interim Resolution
Professional: Sanjay Agrawal
Sanjay Monika & Associates
Plot No. 39, Pocket-1
Jasola, New Delhi 110025
Tel: 011-49868255
Mobile: 9810376790
E-mail: ska9001@gmail.com
- and -
Sanjay Monika & Associates
A-102, Dronagiri Apartments
Sector-11, Vasundhra
Ghaziabad (UP) 201012
Tel: 0120-3558259
E-mail: cirp.sppl@gmail.com
Last date for
submission of claims: August 11, 2020
TALWALKARS BETTER: CARE Keeps D Debt Ratings in Not Cooperating
---------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Talwalkars
Better Value Fitness Limited (TBVFL) continues to remain in the
'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 84.20 CARE D; Issuer Not Cooperating;
Facilities- Based on best available
Term Loan Information
Non-Convertible 105.00 CARE D; Issuer Not Cooperating;
Debenture Issue Based on best available
information
Proposed Non 25.00 CARE D; Issuer Not Cooperating;
Convertible Based on best available
Debenture Issue information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from TBVFL to monitor the ratings
vide e-mail communications July 9, 2020, July 8, 2020, July 7,
2020, July 6, 2020, June 3, 2020, June 1, 2020, May 29, 2020, May
26, May 14, 2020, May 6, 2020, April 30, 2020, April 16, 2020,
April 7, 2020, April 1, 2020, March 6, 2020 and numerous phone
calls.. However, despite 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 TBVFL's bank facilities and instruments 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).
CARE has considered combined financials of Talwalkars Better value
Fitness Limited (TBVFL) and Talwalkars Healthclubs Limited (THL,
Erstwhile Talwalkars Lifestyle Limited) for analysis referred as
TBVFL (combined) due to business and financial linkages along with
common management.
The rating takes into account ongoing delays in debt servicing by
the company.
Detailed description of the key rating drivers
Key Rating Weaknesses (As per PR dated Aug 02, 2019)
* Deteriorating debt coverage indicators; asset monetisation
remains key rating monitorable: As on March 31, 2019 (UA), the
total outstanding debt stood at INR~759 crore an increase of
45.30%. The debt was primarily on account of to fund its various
expansion plans, predominantly for the David Lloyd Club in Pune.
Consequently, the debt coverage metrics also deteriorated. As of
March 31, 2019 (UA), the interest coverage ratio stood at 4.99x as
against 7.10x as of March 31, 2018. Similarly, overall gearing as
well as total debt to gross cash accruals deteriorated to 1.05x and
5.33x as against 0.89x and 3.91x respectively. Furthemore, TBVFL
(combined) has invested in other complementing ventures in the
lifestyle segment such as 'Sarva'. As these investments are taking
longer than expected to generate material returns, adjusting for
the same (including goodwill), the overall gearing ratio as on
March 31, 2019 stands at 1.57x as against 1.11x as on March 31,
2018. The management is looking to raise funds by the end of
calendar year 2019 through various avenues such as sale of equity,
sale of stake in joint ventures/associate companies and to monetise
some of its gym properties by entering in a sale and lease back
transaction to partially retire its debt. The ability of the
company to timely raise funds and subsequent debt reduction is a
key rating monitorable.
* Reduced financial flexibility: The financial flexibility of TBVFL
(combined) has reduced on account of significant reduction in
market capitalisation along with increase in promoters' pledged
shares. The promoters' stake pledged has increased to 76.11%
(TBVFL) and 77.30% (THL) as on June 30, 2019. The ability of the
promoters' to reduce quantum of pledged shares continues to remain
a key rating monitorable.
* Relatively moderate scale of operations: TBVFL's scale of
operations are moderate and seasonal in nature as second quarter
and fourth quarter of the fiscal year together contribute almost
61% of its overall consolidated revenues in FY19. Hence, any
adverse impact on the business in the peak season may adversely
impact the profitability.
* On-going significant capex towards existing line of business as
well as towards newer business segments which have not generated
returns in line with expectation: During FY19, on a combined basis,
the company had incurred capex of INR173.03 crore of which, INR111.
18 crore was for gym business and INR61.84 crore was for the
lifestyle business. The company's ability to improve its asset
turnover and increasing turnover of higher value added segment is
crucial to improve its credit profile. Further, the company is
setting up a club in Pune in collaboration with David Lloyd Leisure
Limited which got delayed and is expected to start operation
shortly. The performance in terms of member addition remains a
rating sensitivity.
Key Rating Strengths
* Long track record and extensive experience of the promoters in
the fitness industry: TBVFL and THL, promoted jointly by the
Talwalkar and Gawande families in 2003 has well-established track
record of operating gyms/fitness centres of over a decade and half
in the fitness industry with presence across the country. The brand
"Talwalkars" is in existence since 1932. The promoters, Mr.
Madhukar Talwalkar and Mr. Prashant Talwalkar, have more than four
decades of experience in various segments/aspects of fitness
industry.
* Diversified product portfolio; albeit higher dependence on
revenues from gym services: TBVFL (combined) have a diversified
product portfolio offering multiple products spanning from basic
gym services to aerobics, yoga, diet-based weight reduction
programs, massage, spa, and health counselling. While the
contribution from its value added services is increasing the
company continues to derive major share of revenues from basic gym
services across its outlets.
Liquidity: Poor
There are ongoing delays in company's debt service obligations
Analytical approach: Combined Financials of THL and TBVFL have been
considered for analysis; given the strong operational
synergies along with common management.
Incorporated in 2003, Talwalkars Better Value Fitness Limited
(TBVFL) was jointly promoted by Mr. Madhukar Talwalkar, Mr.
Prashant Talwalkar and Mr. Anant Gawande. The company is one of the
leading fitness chains in India offering a wide range of services
like weight loss, weight gain, and other fitness programs like body
sculpting, shaping, general fitness, massage, spa and health
counselling under the brand "Talwalkars". The company offers
various value added fitness programs in its bouquet of fitness
programs like Zumba (dance inspired fitness program), NuForm
(Electric Muscle Simulation based Technology fitness program),
Reduce (weight loss diet program), Transform (holistic fitness
program). TBVFL (combined) operates gyms/fitness centre on three
models viz directly managed gyms, franchisee route and subsidiary
model (wherein TBVFL enters into an agreement with a master
franchise, and TBVFL owns around 51% equity and the brand). Over
the last seven years, TBVFL has grown rapidly from operating 63
gyms/fitness centres as on March 31, 2010, to 272 gyms/fitness
centres as on March 31, 2019.
TBVFL has split its operations into lifestyle business and gym
business and form two separate entities in the following
manner:
a) Lifestyle business: This business is housed under TBVFL. The
business including various joint ventures/associate companies
comprises of Nuform, Zumba Fitness, Mickey Mehta, Sarva (Yoga),
Group X, Reduce, and sports club. As on March 31, 2019, there are
116 centers of Reduce, 80 centers of Nuform, 85 centers of Sarva
Yoga and 19 centers of Mickey Mehta.
b) Gym Business: This business is housed under Talwalkar
Healthclubs Limited (THL); erstwhile Talwalkars Lifestyle Limited
(TLL).
TALWALKARS HEALTHCLUBS: CARE Keeps Debt Ratings in Not Cooperating
------------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Talwalkars
Healthclubs Limited (THL) continues to remain in the 'Issuer Not
Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 280.74 CARE D; Issuer Not Cooperating;
Facilities- Based on best available
Term Loan Information
Non-Convertible 163.34 CARE D; Issuer Not Cooperating;
Debenture Issue Based on best available
information
Proposed Non 25.00 CARE D; Issuer Not Cooperating;
Convertible Based on best available
Debenture Issue information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from THL to monitor the ratings
vide e-mail communications July 9, 2020, July 8, 2020, July 7,
2020, July 6, 2020, June 3, 2020, June 1, 2020, May 29, 2020, May
26, May 14, 2020, May 6, 2020, April 30, 2020, April 16, 2020,
April 7, 2020, April 1, 2020, March 6, 2020 and numerous phone
calls.. However, despite 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 THL's bank facilities and instruments 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).
CARE has considered combined financials of Talwalkars Better Value
Fitness Limited (TBVFL) and Talwalkars Healthclubs Limited (THL,
Erstwhile Talwalkars Lifestyle Limited) for analysis referred as
TBVFL (combined) due to business and financial linkages along with
common management.
The rating takes into account ongoing delays in debt servicing by
the company.
Detailed description of the key rating drivers
Key Rating Weaknesses (As per PR dated Aug. 2, 2019)
* Deteriorating debt coverage indicators; asset monetisation
remains key rating monitorable: As on March 31, 2019 (UA), the
total outstanding debt stood at INR~759 crore, increase of 45.30%.
The debt was primarily on account of to fund its various expansion
plans, predominantly for the David Lloyd Club in Pune.
Consequently, the debt coverage metrics also deteriorated. As of
March 31, 2019 (UA), the interest coverage ratio stood at 4.99x as
against 7.10x as of March 31, 2018. Similarly, overall gearing as
well as total debt to gross cash accruals deteriorated to 1.05x and
5.33x as against 0.89x and 3.91x respectively. Furthemore, TBVFL
(combined) has invested in other complementing ventures in the
lifestyle segment such as 'Sarva'. As these investments are taking
longer than expected to generate material returns, adjusting for
the same (including goodwill), the overall gearing ratio as on
March 31, 2019 stands at 1.57x as against 1.11x as on March 31,
2018. The management is looking to raise funds by the end of
calendar year 2019 through various avenues such as sale of equity,
sale of stake in joint ventures/associate companies and to monetise
some of its gym properties by entering in a sale and lease back
transaction to partially retire its debt. The ability of the
company to timely raise funds and subsequent debt reduction is a
key rating monitorable.
* Reduced financial flexibility: The financial flexibility of TBVFL
(combined) has reduced on account of significant reduction in
market capitalisation along with increase in promoters' pledged
shares. The promoters' stake pledged has increased to 76.11%
(TBVFL) and 77.30% (THL) as on June 30, 2019. The ability of the
promoters' to reduce quantum of pledged shares continues to remain
a key rating monitorable.
* Relatively moderate scale of operations: TBVFL's scale of
operations are moderate and seasonal in nature as second quarter
and fourth quarter of the fiscal year together contribute almost
61% of its overall consolidated revenues in FY19. Hence, any
adverse impact on the business in the peak season may adversely
impact the profitability.
* On-going significant capex towards existing line of business as
well as towards newer business segments which have not generated
returns in line with expectation: During FY19, on a combined basis,
the company had incurred capex of INR173.03 crore of which, INR111.
18 crore was for gym business and INR61.84 crore was for the
lifestyle business. The company's ability to improve its asset
turnover and increasing turnover of higher value added segment is
crucial to improve its credit profile. Further, the company is
setting up a club in Pune in collaboration with David Lloyd Leisure
Limited which got delayed and is expected to start operation
shortly. The performance in terms of member addition remains a
rating sensitivity.
Key Rating Strengths
* Long track record and extensive experience of the promoters in
the fitness industry: TBVFL and THL, promoted jointly by the
Talwalkar and Gawande families in 2003 has well-established track
record of operating gyms/fitness centres of over a decade and half
in the fitness industry with presence across the country. The brand
"Talwalkars" is in existence since 1932. The promoters, Mr.
Madhukar Talwalkar and Mr. Prashant Talwalkar, have more than four
decades of experience in various segments/aspects of fitness
industry.
* Diversified product portfolio; albeit higher dependence on
revenues from gym services: TBVFL (combined) have a diversified
product portfolio offering multiple products spanning from basic
gym services to aerobics, yoga, diet-based weight reduction
programs, massage, spa, and health counselling. While the
contribution from its value added services is increasing the
company continues to derive major share of revenues from basic gym
services across its outlets.
Liquidity: Poor
There are ongoing delays in company's debt service obligations.
Analytical approach: Combined Financials of THL and TBVFL have been
considered for analysis; given the strong operational synergies
along with common management.
Incorporated in 2003, Talwalkars Better Value Fitness Limited
(TBVFL) was jointly promoted by Mr. Madhukar Talwalkar, Mr.
Prashant Talwalkar and Mr. Anant Gawande. The company is one of the
leading fitness chains in India offering a wide range of services
like weight loss, weight gain, and other fitness programs like body
sculpting, shaping, general fitness, massage, spa and health
counselling under the brand "Talwalkars". The company offers
various value added fitness programs in its bouquet of fitness
programs like Zumba (dance inspired fitness program), NuForm
(Electric Muscle Simulation based Technology fitness program),
Reduce (weight loss diet program), Transform (holistic fitness
program). TBVFL (combined) operates gyms/fitness centre on three
models viz directly managed gyms, franchisee route and subsidiary
model (wherein TBVFL enters into an agreement with a master
franchise, and TBVFL owns around 51% equity and the brand). Over
the last seven years, TBVFL has grown rapidly from operating 63
gyms/fitness centres as on March 31, 2010, to 272 gyms/fitness
centres as on March 31, 2019.
TBVFL has split its operations into lifestyle business and gym
business and form two separate entities in the following manner: a)
Lifestyle business: This business is housed under TBVFL. The
business including various joint ventures/associate companies
comprises of Nuform, Zumba Fitness, Mickey Mehta, Sarva (Yoga),
Group X, Reduce, and sports club. As on March 31, 2019, there are
116 centers of Reduce, 80 centers of Nuform, 85 centers of Sarva
Yoga and 19 centers of Mickey Mehta.
VENKATESWARA CONSTRUCTIONS: CARE Keeps Ratings in Not Cooperating
-----------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Sri
Venkateswara Constructions Private Limited (SVCPL) continues to
remain in the 'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 14.00 CARE D; Issuer Not Cooperating;
Facilities Based on best available
Information
Short-term 24.00 CARE D; Issuer Not Cooperating;
Bank Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated May 8, 2019, placed the
rating(s) of SVCPL under the 'issuer not cooperating' category as
SVCPL had failed to provide information for monitoring of the
rating exercise as agreed to in its Rating Agreement. SVCPL
continues to be non-cooperative despite repeated requests for
submission of information through e-mails dated July 16, 2020 to
July 21, 2020 and numerous phone calls. 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.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
Detailed description of the key rating drivers
At the time of last rating on May 8, 2019, the following were the
rating strengths and weaknesses:
Key Rating Weakness
* On-going delays in servicing interest: There are ongoing delays
in servicing the debt obligation on time due to shortage of funds
during the period under review on account of insufficient cash
accruals and stressed liquidity position.
* Tender based nature of operations: The company receives 100% work
orders from government organizations. All these are tender-based
and the revenues are dependent on the company's ability to bid
successfully for these tenders. Profitability margins come under
pressure because of competitive nature of the industry. However,
the promoter's long industry experience of two decades mitigates
this risk to some extent. Nevertheless, there are numerous
fragmented & unorganized players operating in the segment which
makes the civil construction space highly competitive.
Key Rating Strengths
* Experience of the promoters for more than two decades in
construction industry: SVCPL was promoted by Mr. S Srinivasa Reddy
and Mr. K Bhaskar Kumar Babu. Both the directors are qualified
graduates and have more than two decades of experience in civil
construction business. Due to long term presence in the market, the
company has good relations with suppliers and customers.
Andhra Based, Sri Venkateswara Constructions (SVC) was established
in the year 2006 as partnership firm. Later on, in the year 2012,
SVC change its constitution to current nomenclature Sri
Venkateswara Construction Private Limited (SVCPL). The company is
engaged in Civil construction works includes construction of
bridges for railway track, fabrication work, earth work,
construction of buildings to government organization, transmission
lines and canal works among others. The company purchase the raw
material like cement, steel, sand and concrete etc. within Andhra
Pradesh.
VIDEOCON INDUSTRIES: Lenders Mull Sending Company Into Liquidation
------------------------------------------------------------------
Business Standard reports that Videocon Industries (VIL) is now
staring at liquidation, as bidders worry about the company's
prospects and look to conserve cash in times of Covid.
The company was admitted for debt resolution in June 2018 under the
Insolvency and Bankruptcy Code (IBC) after it started defaulting on
its INR40,000-crore debt, Business Standard notes. According to a
source close to the development, bankers considered sending the
company into liquidation at a meeting on July 29, the report
relates.
About Videocon Industries
Videocon Industries sells consumer products like color televisions,
washing machines, air conditioners, refrigerators, microwave ovens
and many other home appliances in India.
On June 6, 2018, National Company Law Tribunal (NCLT), Mumbai
bench, admitted a petition for initiating insolvency resolution
process against the company under the Insolvency and Bankruptcy
Code, 2016.
According to Videocon's FY17 annual report, the company is liable
to repay the liability of other group companies to the extent of
INR5,082 crore as on March 31, 2017. The company's total debt stood
at INR19,506 crore as of March 2017.
VISUAL AND ACOUSTICS: CARE Keeps D Debt Ratings in Not Cooperating
------------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Visual and
Acoustics Corporation LLP (VACL) continues to remain in the 'Issuer
Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 1.50 CARE D; Issuer Not Cooperating;
Facilities Based on best available
Information
Long-term Bank 11.50 CARE D; Issuer Not Cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated May 3, 2019, continues to
place the ratings of VACL under the 'Issuer Not Cooperating'
category as the company had failed to provide the requisite
information required for monitoring of the ratings as agreed to in
its rating agreement. Visual and Acoustics Corporation LLP
continues to be non-cooperative despite repeated requests for
submission of information through phone calls and a letter/email
dated July 13, 2020. 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 ratings on bank facilities of Visual
and Acoustics Corporation LLP are 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.
Detailed description of the key rating drivers
CARE could not contact the banker and no other information is
available. However, at the time of last review, the rating took
into account the irregularities in the bank facilities.
VACL was incorporated on November 26, 2009 by M. Amarjit Singh
Kalra and his wife Ms. Surinder Kaur Kalra. The firm is involved in
the manufacturing and assembling of public address (PA) systems and
components, including loud speakers, amplifiers, microphones, and
woofers, and related electronic and electrical equipment. The firm
commenced operations in November, 2009 and its manufacturing
facility is located in Mundka based (Delhi). VACL belongs to the 5
core group, based in New Delhi. The 5 core group was established in
1983 and apart from VACL, the group has six other companies namely,
Indian Acoustics Private Limited, EMS and Exports, 5 Core Acoustics
Private Limited, Five Core Electronics Limited, Happy Acoustics
Private Limited and Digi Export Venture Private Limited which are
all involved in the same line of business.
WADHWA BUILDCON: Insolvency Resolution Process Case Summary
-----------------------------------------------------------
Debtor: Wadhwa Buildcon LLP
104, First Floor, A Wing
Wadhwa Meadows
Opp B Ward Kalyan
Thane MH 421301
IN
Insolvency Commencement Date: July 28, 2020
Court: National Company Law Tribunal, Mumbai Bench
Estimated date of closure of
insolvency resolution process: January 24, 2021
Insolvency professional: Rakesh Kumar Tulsyan
Interim Resolution
Professional: Rakesh Kumar Tulsyan
B-4, Vinay Tower
Kranti Nagar
Lokhandwala
Kandivali East
Mumbai 400101
E-mail: tulsyanrk@gmail.com
rp.wadhwabuildcon@gmail.com
Classes of creditors: Financial crediotrs in a class
Insolvency
Professionals
Representative of
Creditors in a class: Mukesh Khathuria
6B/1105 Sapphire Heights
Lokhandwala Township
Akurli Road, Kandivali-East
Mumbai 400101
E-mail: khathuria@hotmail.com
Vakati BalaSubramanyam Reddy
C-1205, Galaxy Apartments
Near Bhantara Bhavan
Qureshi Nagar, Kurla East
Mumbai City
Maharashtra 400070
E-mail: vbsreddy7@gmail.com
Baisani Rajendra Prasad
Flat D104, Block D
Indu Aranya Pallavi Apt.
Bandlaguda (Near Nagole)
Hyderabad 500068
Telangana State
E-mail: rajendra.baisani@gmail.com
Last date for
submission of claims: August 11, 2020
=========
J A P A N
=========
[*] Vacancies in Tokyo Offices Up as Virus Bankruptcies Rise
------------------------------------------------------------
Gearoid Reidy at Bloomberg News reports that vacancies at offices
in central Tokyo rose by the most on record in July as the economic
impact of the coronavirus pandemic continued to spread and
virus-related bankruptcies in the capital reached 100.
Office vacancies in five of Tokyo's major business districts
increased for a record fifth consecutive month, rising to 2.77%
from 1.97% in June, real estate brokerage Miki Shoji Co. said on
Aug. 5, Bloomberg relates. It was the largest one-month gain on
record, beating a high set in 2009 in the aftermath of the global
financial crisis.
According to Bloomberg, the data came on the same day as the
announcement of the 100th company in Tokyo to go bankrupt as a
result of the pandemic. Aquamarine, a maker of figurines and
character goods, saw its orders drop amid the pandemic, having
earlier experienced delays in shipments from China, research firm
Teikoku Databank said. Nationwide, 400 companies have folded as a
result of the outbreak, it said in a report on Aug. 3.
Vacancies rose in all five central areas of Tokyo surveyed by Miki
Shoji, with the jump most pronounced in Minato ward, home to the
Shinagawa station hub, which saw a 1.19 percentage point increase,
Bloomberg discloses. Rents, however, continued to rise. Shares in
Mitsubishi Estate Co. extended their decline to 2.4% after the
announcement.
Bloomberg says vacancies in Tokyo had fallen almost unrelentingly
for the seven years since Prime Minister Shinzo Abe came to power
in late 2012. That trend was halted by the pandemic, which has made
prospective tenants reluctant to sign leases and raised questions
worldwide about the future of the office.
=====================
N E W Z E A L A N D
=====================
ANTIPODEANS ABROAD: Schools With Cancelled Trips Band Together
--------------------------------------------------------------
Grant Miller at Otago Daily Times reports that up to 20 schools
have clubbed together to get to the bottom of whether their pupils
are entitled to refunds for cancelled education trips.
Antipodeans Abroad, which organised tours for pupils from schools
such as Otago's Kavanagh College and Taieri College, went into
liquidation in New Zealand and Australia last month, ODT
discloses.
According to ODT, the first liquidation report for the New Zealand
operation provided little cause for hope for families wanting their
money back but the news could be more positive for those who have
taken their fight to the Australian Financial Complaints
Authority.
ODT relates that Kapiti College principal Tony Kane, who is leading
the media response for schools, said he was cautiously optimistic.
"It's looking pretty positive," the report quotes Ms. Kane as
saying.
The Otago Daily Times is aware of at least one positive result.
Antipodeans Abroad was in a dispute with its insurer, 360 Accident
and Health.
The insurance company had refused to pay out but the ODT
understands at least one challenge to that has been successful.
ODT says 19 pupils from Kavanagh College were to travel to Cambodia
this year but the tour was called off because of Covid-19.
About 30 Taieri College pupils were to travel to Nepal next year
and that trip, too, was called off.
Many pupils had worked part-time or took on fundraising activities
before their planned trips.
Each family in Otago had paid thousands of dollars.
Liquidator Nexia New Zealand said in its report released last week
that their money was held in a New Zealand bank account.
Customers affected by cancelled trips were not considered
creditors, Nexia's report said, ODT relays.
=====================
P H I L I P P I N E S
=====================
PHILIPPINES: Plunges Into Recession; Cuts 2020 GDP Outlook
----------------------------------------------------------
Claire Jiao and Cecilia Yap at Bloomberg News report that the
Philippine economy suffered its deepest contraction on record in
the second quarter and revised down its forecast for the year amid
one of Asia's strictest lockdowns against the coronavirus.
Gross domestic product shrank 16.5% from a year ago, according to
the national statistics agency, the worst reading in a data series
going back to 1981, Bloomberg discloses. The median forecast in a
Bloomberg survey of 21 economists was for a 9.4% contraction. GDP
declined for a second consecutive quarter on a quarter-on-quarter
basis, down 15.2%, implying the economy is in recession.
According to Bloomberg, the country’s economic managers said they
now expect the economy to shrink 5.5% this year -- down from
earlier estimates for a 2% to 3.4% decline -- before rebounding
strongly next year.
"The economic cost of trying to contain the virus is leaving large
scars to household and corporate balance sheets, which will weigh
heavily on demand for many months to come," Capital Economics
analyst Alex Holmes wrote in a note after the release, Bloomberg
relays. "A failure to contain the virus, continued restrictions to
movement and inadequate policy support mean the Philippines is also
likely to experience one of the region’s slowest recoveries."
The benchmark stock index gave up earlier gains of as much as 0.5%
and was largely unchanged at mid-day, Bloomberg notes. The peso was
at 49.065 per dollar as of 11:55 a.m., on Aug. 6, near its
strongest level since November 2016.
Bloomberg notes that President Rodrigo Duterte imposed a stringent
quarantine that shut most businesses and suspended public transport
from March to May. A surge in Covid-19 infections prompted the
government on Aug. 4 to reimpose a lockdown in the capital region
and surroundings.
Record-high unemployment and a steep decline in money sent home by
Filipinos have weighed on private consumption, which drives roughly
two-thirds of GDP, Bloomberg says. Exports suffered double-digit
annual drops from March to June as the lockdown restricted
production and snarled supply chains.
According to Bloomberg, the number of Covid-19 cases has risen more
than sixfold since restrictions were eased in June, making the
Philippine outbreak the second-largest in Southeast Asia.
Bloomberg notes that other highlights from the release, compared to
year-ago figures are:
* Consumer spending dropped - 15.5%
* Industrial production declined - 22.9%
* Services contracted - 15.8%
* Government spending rose - 22.1%
Lawmakers are still deliberating a spending plan and a proposed
corporate income tax cut that Duterte is hoping can support
families and businesses hit hard by the pandemic, Bloomberg
relates. The amount of support the Senate has proposed -- PHP140
billion ($2.9 billion) -- is far less than what governments
elsewhere in Southeast Asia are providing, relates Bloomberg.
"This is likely to be the worst economic contraction across
regional peers, and should serve as a huge wake-up call to fiscal
authorities that a support package needs to be urgently implemented
with a size that is more comparable to what we see in other
countries," Bloomberg quotes Euben Paracuelles, an economist at
Nomura Holdings Plc in Singapore, as saying.
=====================
S O U T H K O R E A
=====================
INDUSTRIAL BANK: Moody's Confirms (P)Ba2 Rating on Preferred Stock
------------------------------------------------------------------
Moody's Investors Service has confirmed Industrial Bank of Korea's
Baseline Credit Assessment and Adjusted BCA of baa2. At the same
time, Moody's has confirmed IBK's foreign currency preferred stock
non-cumulative MTN rating of (P)Ba2 and foreign currency preferred
stock non-cumulative rating of Ba2 (hyb).
The rating outlook on IBK is stable.
At the same time, Moody's has confirmed the A1 foreign currency
long-term issuer rating and P-1 short-term issuer rating of IBK
Securities Co., Ltd., and changed the outlook to stable from
ratings under review.
Its rating action concludes the review for downgrade initiated on
March 24, 2020.
RATINGS RATIONALE
Industrial Bank of Korea
The confirmation of IBK's ratings and assessments takes into
account Moody's expectation that (1) asset quality will remain
relatively stable; (2) economic capitalization will recover in the
next 2-3 years after a temporary deterioration, because loan growth
should normalize from the second half of 2020; and (3) earnings
will remain low but stable without a significant increase in credit
costs.
The negative impact from lower global demand and domestic
consumption has been somewhat offset by the substantial liquidity
support provided by the Korean government (Aa2 stable) via fiscal
and financial policies to aid small and medium-sized enterprises
and other borrowers affected by the coronavirus pandemic. For
example, IBK offered new loans, maturity extensions and reduced
interest rates to borrowers directly affected by the outbreak on
its existing loans and guarantees.
Fiscal policy measures included a supplementary budget to support
hospitals, businesses and low-income households. The Bank of Korea
also cut its base rate to a historically low level, lowering
funding costs for SMEs and sole proprietor business loan borrowers.
These measures in turn supports the asset quality and profitability
of IBK which has high exposures to SMEs at 79% of its total loans.
Moody's does not expect a material asset quality deterioration even
after the expiration of above support measures because around 80%
of IBK's SME loan portfolio was secured by either collateral or
credit guarantees, as of the end of June 2020. Additionally, a
gradual recovery in global demand and lower debt servicing burden
amid a low interest rate environment will also support IBK's asset
quality.
Finally, despite the Financial Services Commission's easing of
regulatory funding and liquidity requirements, Moody's expects the
banks to keep their funding and liquidity stable at levels close to
the original regulatory requirements, because the relaxation is
only temporary until the end of June 2021.
The stable outlook reflects the reduced downside risk facing IBK
relative to Moody's earlier expectation when it placed the bank's
ratings under review for downgrade in March 2020. IBK's current BCA
well-captures Moody's expectation that its financial metrics will
remain broadly stable over the next 12-18 months. Nevertheless, a
key downside risk to the stable outlook is that of prolonged
disruptions to domestic and external activity related to the
coronavirus pandemic, which would pressure asset quality and
profitability.
IBK's baa2 BCA reflects its (1) stable funding profile; (2)
adequate asset quality, which is in line with the Korean banking
system average; and (3) weak capitalization when compared to the
industry average, although supported by a series of capital
injections from the Korean government. The Korean government
injected KRW676.5 billion in April 2020, KRW107.8 billion in June
2020, and KRW484.5 billion in July 2020.
Its Adjusted BCA, which incorporates no affiliate support, is at
the same level as its BCA.
IBK's Aa2 rating incorporates a six-notch uplift from its BCA of
baa2. This uplift is based on the strong links between the bank and
the Korean government (Aa2 stable), given IBK's role as a policy
bank. In the context of Moody's Banks Methodology, Moody's applies
a "government-backed" level of support to IBK's ratings based on
(1) a de facto deficiency guarantee under Article 43 of the IBK
Act; (2) the government's majority ownership of the bank; and (3)
the bank's important policy mandate to support Korea's SMEs, new
industries and the high-tech sector.
IBK's long-term/short-term counterparty risk ratings are positioned
at Aa2/P-1, and the bank's long-term/short-term counterparty risk
assessment is positioned at Aa2(cr)/P-1(cr). Korea does not have an
operational bank resolution regime. Moody's therefore applies a
basic Loss Given Failure approach in rating Korean banks. The
starting point for the CRR and CRA are one notch above the bank's
Adjusted BCA, to which Moody's then adds the government support
uplift. The CRR and CRA benefit from five notches of government
support.
IBK Securities Co., Ltd.
The confirmation of IBKS' issuer ratings reflect Moody's assessment
that the ability of its parent -- IBK -- to support the bank will
remain intact. This is reflected in a one-notch uplift incorporated
in IBKS' issuer rating on a very high level of affiliate support
from IBK.
At the same time, the confirmation of IBKS' ratings takes into
account (1) Moody's expectation of slower risk asset growth as a
result of various prudential regulatory measures recently
implemented or under discussion by the Financial Supervisory
Service; (2) the company's stable liquidity and funding position
maintained through the recent market volatility in March and April;
and (3) its relatively stable profitability even amid the
coronavirus-led market volatility.
New regulations that were introduced to reign in risk-taking by
securities firms include:
(1) regulations effective since July to limit securities firms'
contingent liabilities stemming from real estate projects; and
(2) guidelines that mandate stricter internal controls on the sale
of complex investment products such as private equity funds and
structured financial products. In addition, regulators have also
announced plans to enhance monitoring of key risk areas such as
equity linked securities.
The company's assigned standalone assessment of Baa3 reflects its
(1) strong funding profile and relatively low leverage among its
rated Korean peers because of available credit lines from Korea
Securities Finance Corporation (KSFC, Aa2 stable); (2) modest
earnings and stable earnings volatility; and (3) relatively lower
risk appetite compared to the larger securities firms Moody's rates
given its limited exposure to internally hedged equity linked
securities (ELS) and its holdings of high quality bond portfolio.
Offsetting this is the risk from the firm's concentrated exposures
to contingent liabilities such as corporate guarantees and real
estate projects which is large relative to its small equity base.
IBKS' issuer ratings incorporate a four-notch uplift based on
Moody's expectation of a very high level of government support via
its parent IBK, in times of need. This reflects Moody's view that
IBKS plays a vital role in executing IBK and the government's
policy initiatives of supporting Korea's SME sector.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
WHAT COULD MOVE THE RATINGS UP - IBK
IBK's long-term senior unsecured debt ratings are currently placed
at Aa2, in line with the government's rating of Aa2. Therefore, an
upgrade of IBK's ratings is unlikely unless the government's rating
is upgraded.
IBK's BCA could be upgraded if (1) its tangible common equity (TCE)
capital ratio exceeds 11.0%; (2) the three-year average of its net
income/tangible assets exceeds 1.5%, without any sustained
deterioration in its asset quality.
WHAT COULD MOVE THE RATINGS DOWN - IBK
IBK's ratings may be downgraded if (1) the government support
clause in the IBK Act is weakened and the bank's importance to the
government is weakened, or (2) if the government's rating is
downgraded.
IBK's BCA could be downgraded if (1) its TCE capital ratio falls
below 9.5%; (2) the three-year average of its net income/tangible
assets falls below 0.5% on a sustained basis because of a sharp
increase in credit losses; (3) its problem loan ratio rises above
2.0%.
WHAT COULD MOVE THE RATINGS UP - IBKS
IBK Securities' ratings could be upgraded if (1) IBK's rating is
upgraded, or if there is more explicit support from IBK or the
government; (2) a combination of an improvement in the company's
liquidity profile, less volatile profitability, and an increase in
its long-term funding, on a sustained basis.
WHAT COULD MOVE THE RATINGS DOWN - IBKS
Moody's could downgrade ratings if (1) the willingness and ability
of the government to provide support weaken, (2) the strategic
importance of IBKS to IBK weakens, and (3) the status of IBK as a
policy bank changes.
Moreover, any indications of control or risk management failures, a
marked increase in IBK Securities' risk appetite, or a sharp
increase in earnings volatility could put downward pressure on the
company's standalone assessment. Nevertheless, Moody's notes that
the impact of such a development on its ratings could be limited,
due to the high likelihood of affiliate and government support.
The principal methodology used in rating Industrial Bank of Korea
was Banks Methodology published in Novemnber 2019.
Industrial Bank of Korea is headquartered in Seoul with total
assets of KRW322.1 trillion (USD264.6 billion) at the end of March
2020.
IBK Securities Co., Ltd., is headquartered in Seoul and reported
total consolidated assets of KRW4.8 trillion ($4.0 billion) at the
end of March 2020.
LIST OF AFFECTED RATINGS
Issuer: Industrial Bank of Korea (Lead Analyst: Tae Jong Ok)
Adjusted Baseline Credit Assessment, Confirmed at baa2
Baseline Credit Assessment, Confirmed at baa2
Pref. Stock Non-cumulative MTN (Foreign Currency), Confirmed at
(P)Ba2
Pref. Stock Non-cumulative (Foreign Currency), Confirmed at Ba2
(hyb)
Issuer: IBK Securities Co., Ltd. (Lead Analyst: Young Kim)
Long-term Issuer Rating (Foreign Currency), Confirmed at A1
Short-term Issuer Rating (Foreign Currency), Confirmed at P-1
Outlook, Changed to Stable from Ratings under Review
=================
S R I L A N K A
=================
DFCC BANK: Fitch Affirms B- IDRs, Then Withdraws Ratings
--------------------------------------------------------
Fitch Ratings has affirmed and withdrawn DFCC Bank PLC's Long-Term
Foreign- and Local-Currency Issuer Default Ratings of 'B-' with a
Negative Outlook and its Viability Rating of 'b-'.
This withdrawal does not affect DFCC 's National Long-Term Rating,
which has been affirmed at 'A+(lka)' with a Stable Outlook.
Fitch has chosen to withdraw DFCC's IDRs, VR, Support Rating and
Support Rating Floor for commercial reasons.
KEY RATING DRIVERS
IDRS and VIABILITY RATING
DFCC's IDRs are driven by its standalone profile, as represented by
its VR. The VR is highly influenced by its assessment of the
operating environment for banks in Sri Lanka at 'b-' with a
negative outlook. The operating environment remains challenging.
Fitch expects GDP to contract by 1.3% in 2020 due to the impact
from the coronavirus pandemic. Fitch forecasts GDP growth of 4.2%
in 2021, although growth prospects will depend in part on how the
pandemic develops in Sri Lanka and globally.
The outlook on the operating environment assessment remains
negative to reflect the possibility that the effects of the
pandemic are more pronounced or persist. The operating environment
for Sri Lankan banks has a high influence on the banks' ratings, as
it is likely to constrain their intrinsic credit profiles through
its effect on financial and non-financial key rating factors.
DFCC's VR also reflects its assessment of the bank's financial
metrics, with all those scores remaining on negative outlook to
reflect the pressure from the operating environment.
The outlook on the risk appetite assessment has been revised to
negative from stable to reflect the potential increase in the
bank's risk appetite in relation to credit exposures due to the
weak operating environment.
The bank's asset-quality score of 'b-' with negative outlook
reflects the pressure on DFCC's asset quality. Fitch expects asset
quality metrics to worsen in the near to medium term as a result of
the pandemic, which exacerbates the already weak operating
environment even though relief measures in the form of moratoriums
on loan repayments will delay recognition of impaired loans. DFCC's
impaired-loans (stage 3) ratio increased to 8.4% by end-2019 from
5.8% at end-2018, driven by loans to government institutions where
the facilities carry a full Treasury guarantee (56% of the
incremental stage 3 loans in 2019).
DFCC's earnings and profitability score of 'b-' with negative
outlook reflects its view that its profitability metrics are weaker
than peers' with only modest buffers to absorb a sizeable increase
in credit costs. Reclassification of DFCC's trading stake in
Commercial Bank of Ceylon PLC (AA+(lka)/Negative) back to fair
value through other comprehensive income on January 1, 2020 and
lower forex losses helped improve DFCC's pre-impairment operating
profits/average assets to 2.3% in 1Q20 from 1.6% in 2019. However,
Fitch expects a decline in operating profits/risk weighted assets
in the near term as a result of thinner net interest margins and
credit losses.
DFCC's capitalisation and leverage score was revised to 'b-' from
'b' and the outlook remains negative as Fitch believes the benefit
to the bank from its stake in the Commercial Bank of Ceylon has
reduced. This is because the weak performance of the Sri Lankan
stock market weighs on the realisable gains from the stake in the
near to medium term. DFCC's common equity Tier 1 ratio declined to
10.3% by end-1Q20 from 11.3% at end-2019 following the
reclassification of part of its 13.5% stake in Commercial Bank of
Ceylon and gross loan growth of 7.1% in 1Q20 and 9.2% in 2019.
DFCC's funding and liquidity score is 'b-' with negative outlook
reflects its weaker deposit franchise and a higher loan-to-deposit
ratio than larger and more established peers. DFCC is funded mainly
by deposits, but its share of wholesale funding is higher compared
to larger peers. The bank also has a significant amount of
foreign-currency funding, which accounted for 20% of total funding
at end-2019 (13% in deposits and 7% in wholesale funding). Fitch
believes that the access to such foreign-currency wholesale funding
could become more challenging and its cost increase due to the
higher country risks.
SUPPORT RATING AND SUPPORT RATING FLOOR
The Support Rating of '5' and Support Rating Floor of 'No Floor'
reflect Fitch's assessment that state support may be possible but
timely sovereign support cannot be relied upon in light of the
sovereign's weakened financial ability, which is reflected in Sri
Lanka's rating of 'B-' with Negative Outlook. Furthermore, the
bank's franchise is small with market share of around 3% of system
assets against 8%-11% for the larger private banks.
NATIONAL RATING
DFCC's National Long-Term Rating reflects its standalone profile,
including pressure on the bank's capital buffers from deteriorating
asset quality, weak earnings and increased operating
environment-related risks.
The Sri Lanka rupee-denominated senior debt is rated at the same
level as its National Long-Term Rating as the debentures rank
equally with other senior unsecured obligations.
SUBORDINATED DEBT
DFCC's Basel II- and Basel III-compliant Sri Lanka
rupee-denominated subordinated debt is rated two notches below its
National Long-Term Rating. The notching includes only two notches
for loss severity, which reflects poor recovery expectations
compared with senior unsecured instruments due to the notes'
subordinated status. The notes would convert into equity upon the
occurrence of a trigger event, as determined by the Monetary Board
of Sri Lanka. Fitch has not applied additional notching to the
notes for non-performance risk, as they have no going-concern
loss-absorption features, in line with Fitch's criteria.
RATING SENSITIVITIES
IDR, VIABILITY RATING, SUPPORT RATING AND SUPPORT RATING FLOOR
Rating sensitivities are no longer relevant as the IDRs, VR,
Support Rating and Support Rating Floor have been withdrawn.
NATIONAL RATING
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
An upgrade of DFCC's rating is contingent upon the bank's credit
profile improving relative to the rated universe of Sri Lankan
entities. This could result from achieving a sustained and
significant improvement in its capitalisation relative to peers
that can help it withstand higher operating environment-related
risks.
The senior and subordinated debt ratings will be upgraded if DFCC's
National Long-Term Rating if upgraded.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
DFCC's rating would be downgraded if loss-absorption buffers
deteriorate further, either through aggressive loan book growth or
a greater share of unprovisioned NPLs.
The senior and subordinated debt ratings will be downgraded if the
bank's National Long-Term Rating is downgraded.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions and
Covered Bond 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
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).
DFCC Bank PLC
- LT IDR B-; Affirmed
- LT IDR WD; Withdrawn
- ST IDR B; Affirmed
- ST IDR WD; Withdrawn
- LC LT IDR B-; Affirmed
- LC LT IDR WD; Withdrawn
- Natl LT A+(lka); Affirmed
- Viability b-; Affirmed
- Viability WD; Withdrawn
- Support 5; Affirmed
- Support WD; Withdrawn
- Support Floor NF; Affirmed
- Support Floor WD; Withdrawn
- Senior unsecured; Natl LT A+(lka); Affirmed
- Subordinated; Natl LT A-(lka); Affirmed
- Subordinated; Natl LT A-(EXP)(lka); Affirmed
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Asia Pacific is a daily newsletter co-
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Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez,
Julie Anne L. Toledo, Ivy B. Magdadaro and Peter A. Chapman,
Editors.
Copyright 2020. All rights reserved. ISSN: 1520-9482.
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