/raid1/www/Hosts/bankrupt/TCRAP_Public/200814.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 14, 2020, Vol. 23, No. 163
Headlines
A U S T R A L I A
AFS INTERCULTURAL: Second Creditors' Meeting Set for Aug. 21
FAIRVIEW ARCHITECTURAL: Administrators Formally Receive DOCA
GASCOYNE RESOURCES: Launches AUD85MM Recapitalisation Raising
PALM BEACH: Second Creditors' Meeting Set for Aug. 24
SPEEDCAST INT'L: Receives US$395 Million Equity Commitment
VIRGIN AUSTRALIA: Co-Founder Breaks Silence Over Role in Bid
B A N G L A D E S H
BANGLADESH: S&P Affirms 'BB-/B' Sovereign Credit Ratings
C H I N A
CHINA SOUTH CITY: S&P Ups Issuer Credit Rating to B, Outlook Stable
CHINA: Restructuring Looms in Shanxi's Scandal-Hit Banking Sector
LANDSEA GREEN: S&P Affirms B Issuer Credit Rating, Outlook Stable
I N D I A
AGARWALLA TEAK: Ind-Ra Keeps B+ LT Issuer Rating in NonCooperating
ARUNODAY SALES: CARE Keeps D on INR13cr Loans in Not Cooperating
BAALAJI MILK: CARE Keeps D on INR50.29cr Loans in Not Cooperating
BALAJI ROADLINES: ICRA Withdraws B Rating on INR25cr Term Loan
BESTVIEW INFRACON: CARE Lowers Rating on INR33.80cr Loan to B
D S DEVELOPERS: CARE Lowers Rating on INR15cr Loan to B
DHANVANTARI MILK: CARE Keeps D on INR20.5cr Loans in NonCooperating
DIGITAL FACTORY: CARE Lowers Rating on INR6.25cr LT Loan to D
ERA INFRA: Unlikely to See Resolution This Year
IND SWIFT: ICRA Withdraws D Rating on INR610.89cr Term Loan
JALANNAGAR DEVELOPMENT: ICRA Hikes Rating on INR6.46cr Loan to C
KUMAR BROTHERS: CARE Reaffirms B+ Rating on INR37cr LT Loan
MECHATRONICS SYSTEMS: CARE Cuts Rating on INR30cr LT Loan to B+
MISHRILAL ASSOCIATES: CARE Moves B- Ratings From Not Cooperating
MY AUTO WORLD: CARE Moves B Debt Rating From Not Cooperating
MY CAR NEXA: CARE Moves B on INR26cr Loans From Not Cooperating
NIKHIL ADHESIVES: ICRA Withdraws MB+ Rating on INR3.50cr Debt
PRAKASH STEELAGE: CARE Keeps D on INR220cr Loans in Not Cooperating
RAGHUVANSHI COTTON: CARE Keeps D on INR69cr Loans in NonCooperating
RAJARAMBAPU PATIL: CARE Lowers Rating on INR500cr Loan to B
RIBA TEXTILES: Ind-Ra Keeps BB LT Issuer Rating in Non-Cooperating
SAVALIA COTTON: CARE Keeps D on INR44.22cr Loans in Not Cooperating
SRINIVASA FEED: CARE Lowers Rating on INR8cr LT Loan to B
SVM OIL: CARE Keeps B on INR14cr Loans in Not Cooperating Category
TATA CHEMICALS: NCLAT Dismisses Bid to Initiate Insolvency Process
TEXOOL LIMITED: CARE Lowers Rating on INR1.20cr LT Loan to B
VARDHMAN POLYTEX: ICRA Keeps D on INR514cr Loans in Not Cooperating
WARORA KURNOOL: CARE Keeps C Debt Ratings in Not Cooperating
ZENITH EXPORTS: ICRA Reaffirms B+/A4 Rating on INR22cr Loan
I N D O N E S I A
PT JAPFA: S&P Affirms BB- ICR on Parent Support, Outlook Negative
J A P A N
TOSHIBA CORP: Posts JPY11.35MM Net Loss at June Quarter
T H A I L A N D
THAI AIRWAYS: Must Pay THB5.4 Billion in Pensions
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A U S T R A L I A
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AFS INTERCULTURAL: Second Creditors' Meeting Set for Aug. 21
------------------------------------------------------------
A second meeting of creditors in the proceedings of AFS
Intercultural Programs Australia has been set for Aug. 21, 2020, at
11:00 a.m. via webinar facilities.
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. 20, 2020, at 4:00 p.m.
Andrew Thomas Sallway and Duncan Edward Clubb of BDO were appointed
as administrators of AFS Intercultural on July 17, 2020.
FAIRVIEW ARCHITECTURAL: Administrators Formally Receive DOCA
------------------------------------------------------------
Wide Format Online & Inkjet News reports that Fairview
Architectural administrators Grant Thornton have formerly received
a Deed of Company Arrangement (DOCA) proposal from FVA Group -
staffed by former management of Fairview Architectural, under which
creditors will be paid in full and all 52 jobs preserved.
At least 10 other concerns are expected to tender their offers, the
report says. If any one exceeds the FVA Group offer, sources
indicate what is known as an 'Embarassment Clause' can be invoked,
giving FVA Group the opportunity to increase its offer, according
to Wide Format Online.
The company said in a statement: "Bids to buy the Fairview
Architectural business have included a fully funded rescue package
by FVA Group (which includes key managers from Fairview), who
currently holds the licence to supply and honour specific
warranties for Fairview's range of products.
"A number of entities have expressed an interest in acquiring
Fairview - and its broad product portfolio - which is currently
operating under the administration of Grant Thornton.
"FVA Group has now formally submitted a binding Deed of Company
Arrangement (DOCA) that includes undertakings to pay every genuine
company creditor in full, save all of the company's 52 regional
jobs, as well as plans for future acquisition and growth.
"Grant Thornton may wish to extend its administration period of the
company - by three to eight weeks - to permit full due diligence on
the Fairview business, by key stakeholders and creditors," the
company added.
Fairview Architectural specialises in the design, manufacture and
supply of cladding and composite panel products to the construction
sector. Based in Lithgow, Fairview Architectural employs 52 people
in Australia. Fairview Architectural shares a licence agreement
with brands in the UK and NZ to supply some products, however all
companies are independently owned.
On July 7, 2020, John McInerney and Said Jahani of Grant Thornton
were appointed voluntary administrators of Fairview Architectural
Pty Ltd by its director.
GASCOYNE RESOURCES: Launches AUD85MM Recapitalisation Raising
-------------------------------------------------------------
Australian Financial Review reports that under administration,
Gascoyne Resources has launched its AUD85 million recapitalisation
raising to get back on the Australian Securities Exchange (ASX).
AFR relates that the company - and lead manager on the deal
Canaccord Genuity - blasted terms of the raising to funds on Aug.
13.
According to the report, the mooted deal was split between a AUD35
million placement and a AUD50 million two-for-one pro rata
accelerated non-renounceable entitlement offer.
The offer was priced at 2.5¢ a share, which represented a 35.9 per
cent discount to Gascoyne's last traded price, once the company's
consolidation was taken into account, which would turn every 20
shares held into one share, AFR discloses.
Bridge Street Capital Partners and Foster Stockbroking were
co-managers on the raising, the report notes.
Funds were told the money raised would go towards repaying
Gascoyne's existing lenders AUD40 million and for general working
capital, according to AFR.
In addition, AUD10 million was pegged for establishing a minimum
cash reserve to meet the new requirements of a new AUD40 million
bank finance facility signed with Investec Bank.
The term sheet said Gascoyne expected to resume trading on the ASX
in late September, AFR relays.
AFR relates that one thorn in Gascoyne's side is a Federal Court
proceeding brought against it by activist investor Habrok, which
bought AUD616,000 of unsecured debt off an existing creditor this
month.
AFR says Habrok is seeking an order to terminate the deed of
company arrangement entered into by Gascoyne in June and orders to
effect that Gascoyne be wound up. Gascoyne said on Aug. 13 that the
matter was listed for a hearing on Aug. 25 and Aug. 26.
About Gascoyne Resources
Gascoyne Resources Limited is a mineral exploration and development
company. The Company is engaged in the exploration for gold and
evaluation of the development options for its Australian gold
projects. The Company holds mining leases and exploration licenses
and applications totaling approximately 4,000 square kilometers in
the Gascoyne and Murchison regions of Western Australia. Its
Dalgaranga gold project is located approximately 70 kilometers
Northwest of Mt Magnet in the Murchison gold mining region of
Western Australia. Its Glenburgh gold project is located in the
Southern Gascoyne Province of Western Australia approximately 250
kilometers east of Carnarvon. The Glenburgh gold project consists
of a gold mineralized system hosted in interpreted remnants of
Archaean terrain in a Proterozoic mobile belt. Its Egerton project
consists of approximately two granted mining leases and over three
granted exploration licenses.
The company employs 87 staff at Dalgaranga and 15 at its head
office in Perth.
In June 2019, Gascoyne Resources moved into administration due to
an expected material cash shortfall. The announcement was made via
FTI Consulting, which revealed that Michael Ryan, Kathryn Warwick
and Ian Francis assumed the role as voluntary administrators.
The company's creditors in late June approved a deed of company
arrangement (DOCA) as part of a broader recapitalisation and
relisting plan for the gold miner.
PALM BEACH: Second Creditors' Meeting Set for Aug. 24
-----------------------------------------------------
A second meeting of creditors in the proceedings of Palm Beach
Developments Pty Ltd has been set for Aug. 24, 2020, at 10:00 a.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. 21, 2020, at 4:00 p.m.
Christopher John Baskerville of Jirsch Sutherland was appointed as
administrator of Palm Beach on July 20, 2020.
SPEEDCAST INT'L: Receives US$395 Million Equity Commitment
----------------------------------------------------------
Speedcast International Limited on Aug. 13, 2020, announced that it
has received a US$395 million equity commitment from Centerbridge
Partners, L.P. and its affiliates, one of its largest lenders. The
commitment would support a plan of reorganisation, which has the
support of both Centerbridge and the Company's Official Committee
of Unsecured Creditors.
Centerbridge's proposed US$395 million equity investment provides
the opportunity for Speedcast's existing secured lenders to
participate in the equity commitment on a fully pro-rata basis to
support Speedcast's emergence from its reorganisation under Chapter
11 of the US Bankruptcy Code. During the completion of the Chapter
11 process and under the new ownership structure, Speedcast remains
focused on supporting the connectivity needs of its customers and
fully intends to continue its global operations uninterrupted.
The proposed plan would enable the Company, under the leadership of
both Peter Shaper, Speedcast's Chief Executive Officer, and Joe
Spytek, Speedcast's President and Chief Commercial Officer, to
continue to execute on the transformation plan to refocus the
business, which they initiated earlier this year after joining the
organisation in executive leadership roles. Both Shaper and Spytek
have extensive background in the communications and service
provider sectors, each previously serving as chief executive for
leading remote communications businesses.
Centerbridge has also committed to providing, if needed,
debtor-in-possession (DIP) financing of up to US$220 million on
favourable economic terms. The Centerbridge DIP financing, if
drawn, would be utilised to refinance the Company's existing DIP
financing, to fund the Company's Chapter 11 plan process, and to
ensure the Company can continue to meet its financial commitments
while it works toward confirmation of the plan of reorganisation.
The plan will provide for cash payments to holders of secured
claims. A number of the Company's trade creditors are critical to
its future, and the plan will provide to those relevant trade
creditors a partial cash payment for their unsecured claims.
Unsecured creditors generally will share in recoveries from a
litigation trust, noting there is no certainty that any action
would be undertaken or payment made from this trust. The plan does
not contemplate any recovery for existing shareholders, and
existing shareholders would no longer have an equity interest in
the reorganised Speedcast Group.
Completion of the equity investment is subject to confirmation of
the plan of reorganisation and a number of other conditions,
including various regulatory approvals and waivers.
Proceedings under chapter 11 of the US Bankruptcy Code, including
the plan of reorganisation process, are broadly analogous to the
administration and deed of company arrangement process in
Australia.
Speedcast announced its decision to recapitalise its business
through voluntary Chapter 11 proceedings on April 23, 2020.
About SpeedCast International
Headquartered in New South Wales, Australia, SpeedCast
International Limited and its affiliates provide remote and
offshore satellite communications and information technology
services. SpeedCast's fully-managed service is delivered to more
than 2,000 customers in 140 countries via a global, multi-access
technology, multi-band and multi-orbit network of more than 80
satellites and an interconnecting global terrestrial network,
bolstered by on-the-ground local support from more than 40
countries. Speedcast services customers in sectors such as
commercial maritime, cruise, energy, mining, government, NGOs,
enterprise and media.
SpeedCast International and its affiliates sought protection under
Chapter 11 of the Bankruptcy Code (Bankr. S.D. Tex. Lead Case No.
20-32243) on April 23, 2020. At the time of the filing, Debtors
each had estimated assets of between $500 million and $1 billion
and liabilities of the same range.
Judge David R. Jones oversees the cases.
The Debtors tapped Weil, Gotshal & Manges, LLP as bankruptcy
counsel; Herbert Smith Freehills as co-counsel with Weil; Moelis
Australia Ltd. as financial advisor; FTI Consulting Inc. as
restructuring advisor; and Kurtzman Carson Consultants LLC as
claims agent.
The Office of the U.S. Trustee appointed a committee to represent
unsecured creditors in Debtors' bankruptcy cases. The committee is
represented by Hogan Lovells US, LLP.
VIRGIN AUSTRALIA: Co-Founder Breaks Silence Over Role in Bid
------------------------------------------------------------
Patrick Hatch at The Sydney Morning Herald reports that Virgin
Australia co-founder Rob Sherrard has broken his silence over his
role in a push by bondholders to take ownership of the bankrupt
airline and revealed he has enlisted the help of other former
Virgin executives.
SMH says hedge funds Broad Peak Investment Advisors and Tor
Investments are trying to upend the sale of Virgin to US private
equity firm Bain Capital and want ownership instead handed to
bondholders owed a combined AUD2 billion.
SMH relates that Mr. Sherrard, who founded the airline as Virgin
Blue almost 20 years ago, has been advising the group and on Aug.
13 revealed he was also working with former Virgin chief financial
officer Manny Gill, former network operations manager Andrew
Lillyman, founding HR manager Bruce Highfield and its former PR
boss Heather Jeffery.
"In simple terms, we are proud investors and supporters of Virgin
Australia and its people," SMH quotes Mr. Sherrard as saying in a
statement. "We believe in the airline, firmly support the vision
of management and are confident that Virgin can return to being a
successful airline."
According to SMH, Virgin's administrators Deloitte has said the
bondholders' plan cannot be considered because it has already
signed a binding sale deed with Bain. Despite that, the bondholder
are taking court action to try and force Deloitte to put their
alternative proposal to a vote at its second creditors' meeting on
September 4, the report says.
Bondholders, which include around 30 major institutional investors
and around 6000 retail investors, would swap their debts for shares
in Virgin, which would remain listed on the ASX, and contribute to
a AUD800 million capitalisation under the plan, SMH states.
"We also want to be very clear that we don't want to run the
airline," the report quotes Mr. Sherrard as saying. "That is the
job of the existing management team. We are focused on rebuilding
our airline through a solid recapitalisation proposal."
"We firmly believe our 'Founders and Bondholders' proposal will
result in the best return for all creditors and employees."
According to SMH, Bain accused the bondholder group earlier this
week of trying to destabilise Virgin's future with a proposal that
is "not credible . . . conditional, incomplete, indicative and
non-binding".
Broad Peak and Tor, who fear they will receive less than AUD30
million of the AUD300 million they are owed if the Bain sale goes
ahead, revealed in court documents this week that major investors
including Credit Suisse, Deutsche Bank and UBS were supporting
their proposal, SMH discloses. In total, creditors owed AUD800
million were backing the push, they said.
Virgin owes AUD6.8 billion in total to creditors including banks,
aircraft lessors and around 9,000 employees.
Last week, Virgin outlined its re-launch plan under Bain's
ownership. It included axing a third of its workforce, or around
3000 jobs; drastically reducing its fleet, pausing long-haul flying
and closing its budget arm Tigerair.
About Virgin Australia
Brisbane, Queensland-based Virgin Australia is Australia's
second-largest airline. It commenced services in 2000 as Virgin
Blue, wholly owned by the Virgin Group.
Virgin Australia Holdings Ltd. was the first Asian airline to
succumb to the challenges of the coronavirus pandemic. The airline
carrier collapsed into voluntary administration in April 2020.
Richard John Hughes, John Greig, Vaughan Strawbridge and Sal Algeri
of Deloitte were appointed as administrators of Virgin Australia,
et al., on April 20. The administrators were tasked to restructure
and find new owners for the airline. The airline's frequent flyer
program is a separate company and is not in administration.
At the time of its collapse, Virgin Australia continued to operate
some flights for essential workers, freight and the repatriation of
Australians.
The company owes AUD6.8 billion to lenders, bondholders, aircraft
lessors, trade creditors and employees.
On April 29, 2020, Virgin Australia and more than 30 of its
affiliates filed petitions pursuant to Chapter 15 of the Bankruptcy
Code in the U.S. Bankruptcy Court for the Southern District of New
York. Vaughan Strawbridge, Richard Hughes, John Greig, Salvatore
Algeri were tapped as foreign representatives. Renee M. Dailey,
Esq. of Akin Gump Strauss Hauer & Feld LLP serves as counsel to the
Foreign Representatives.
In June 2020, administrator Deloitte agreed to sell the airline
carrier to American private equity giant Bain Capital. The size of
the bid for the airline has not been revealed.
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B A N G L A D E S H
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BANGLADESH: S&P Affirms 'BB-/B' Sovereign Credit Ratings
--------------------------------------------------------
S&P Global Ratings affirmed its 'BB-' long-term and 'B' short-term
sovereign credit ratings on Bangladesh. The outlook remains
stable.
Outlook
S&P said, "The stable outlook reflects our expectation that
Bangladesh's solid growth path will continue raising average income
and prevail over risks associated with the COVID-19 pandemic in the
next 12 months.
"We may raise the ratings if the government materially improves its
fiscal outcomes, including its very low revenue generation and
increasing fiscal deficit.
"We may lower the ratings if fiscal and external debt metrics
weaken further. We could also lower the ratings if external debt
and financing metrics worsen materially, such that narrow net
external debt surpasses 50% of current account receipts plus usable
reserves, and gross external financing needs exceed 100% of current
account receipts plus usable reserves, on a sustained basis."
Rationale
The ratings on Bangladesh reflect the country's low economic
development and diminished fiscal flexibility owing to a
combination of limited revenue-generation capacity, elevated
debt-servicing costs, and rising spending to address public
service, infrastructure, and stimulus needs amid the COVID-19
pandemic. Administrative and institutional weaknesses represent
additional rating constraints. S&P said, "We weigh these factors
against a sound external position, reflecting support from
substantial donor engagement, large remittances from overseas
Bangladeshi citizens back to the country, and a globally
competitive garment sector. Despite stout near-term economic
hurdles, we expect Bangladesh to continue to achieve a
higher-than-average rate of economic growth compared with its
peers."
Institutional and economic profile: Economic resilience to be
tested by COVID-19 downturn
-- The Bangladesh economy decelerated significantly in the final
quarter of the fiscal year ended June 2020, and will remain under
pressure in the first half of fiscal 2021.
-- However, Bangladesh has exhibited strong economic resilience
over the past 10 years, and we expect growth to recover from the
second half of fiscal 2021 onward.
-- Bangladesh's political landscape constrains the effectiveness
of institutions and impedes sound policymaking.
Bangladesh's economy has decelerated because of the COVID-19
pandemic, with a government-mandated lockdown from March-May
significantly undermining activity in the April-June quarter.
External demand, critical to Bangladesh's long-term growth
prospects, has also fallen dramatically amid the pandemic, and may
only recover gradually following an initial stabilization in June
and July. Trade flows and associated employment in
external-oriented industries, such as garment manufacturing, have
been hit particularly hard. Garment shipments fell by 18.1% in
fiscal 2020, with an aggressive decline in volumes in the
April-June period. Employment in the garment industry is also
likely to have suffered a serious blow over the same period,
although recovering orders from June onward have likely led to
rehiring by some firms.
After very strong growth in the first nine months through March
2020, preliminary estimates for the last quarter suggest a more
modest expansion of 5.2% in fiscal 2020, the lowest in more than 10
years. S&P said, "We believe the drag on growth will persist in
fiscal 2021, as external demand for Bangladeshi-made goods recovers
at only a gradual pace. We have therefore lowered our real GDP
growth forecast to 4.7% from 7.5% previously."
Low economic development, as represented by per capita GDP of about
US$2,000 for 2020, remains one of Bangladesh's main rating
constraints. This income level offers a weak and narrow revenue
base, in turn limiting the fiscal and monetary flexibility needed
to respond to exogenous shocks.
Despite the low income level and numerous structural impediments,
particularly in infrastructure, Bangladesh's weighted average real
per capita GDP growth of about 5.5% over 2014-2023 indicates
consistently strong real economic growth. S&P assesses its economic
performance as being much stronger than sovereigns at similar
income levels.
Bangladesh's economy has proven its resilience through a variety of
political and financial crises over the past two decades, and S&P
expects its strong trend growth performance to remain largely
intact. The country's garment industry remains highly competitive
on a global basis, with low unit labor costs and ample supply of
labor. Demographics continue to favor the Bangladesh economy, and
the government is working on strengthening access to key external
markets ahead of its expected graduation from least developed
country (LDC) status in 2024.
Bangladesh's domestic political conditions distract from stable
policymaking, and this can hamper policy implementation. The
confrontational stance between the ruling Awami League and
opposition Bangladesh Nationalist Party (BNP) harbors the potential
for conflict. Given weak institutional settings, infrastructure
deficiencies, and difficult business environment, Bangladesh's
foreign direct investment has remained persistently low.
The country's polarized political landscape has evolved into a
highly centralized decision-making environment, which could make
future policy responses unpredictable. The Awami League-led
coalition swept the elections held in 2018, winning more than 80%
of the parliamentary seats. A period of uncertainty followed the
election results with allegations of voting irregularities by the
BNP. The opposition's subsequent decision to join parliament has
brought some stability to the fractious environment.
That said, the opposition's representation in parliament remains
extremely small, limiting checks and balances on the government.
Nevertheless, strikes and politically motivated violence have not
been overly disruptive to overall economic growth in the past.
Flexibility and performance profile: Pandemic will exacerbate
government's weak revenue base and high cost of borrowing
-- Garment exports and worker remittances hurt by depressed
consumer goods demand, lower oil prices, and a weak global labor
market.
-- Fiscal revenue remains low despite value-added tax (VAT)
revisions in 2019, and a slower economy entails further downward
pressure.
-- Higher fiscal deficits and lower economic growth will push net
general government indebtedness above 30% of GDP over the next
three years.
Bangladesh is likely to run higher fiscal deficits as the pandemic
undermines revenue generation and expenditure needs rise. S&P
forecasts the change in net general government debt will average
5.5% of GDP annually over fiscals 2021-2023 (ending June 30),
materially higher than our pre-pandemic projection of 4.2%.
The Bangladesh government has introduced a variety of measures
aimed at mitigating the impact of the pandemic on individuals and
businesses. These measures include direct cash assistance to
vulnerable segments of society, lending schemes for exporters, and
working capital facilities and interest subsidies for businesses.
Thus far, these measures total approximately US$13.1 billion (4.0%
of GDP), although most of that will not be direct government
spending. Despite higher pandemic spending and continued efforts to
boost capital expenditure over recent years, many basic social and
infrastructure needs in Bangladesh remain unmet, implying higher
outlays.
S&P expects Bangladesh's higher fiscal deficits in fiscals 2020 and
2021 to lead to a material rise in net general government debt,
which we project at 33.0% of GDP by the end of fiscal 2021, versus
an estimated 29.3% in the prior year.
The government continues to fund itself partially through the
issuance of costly national savings certificates (NSCs), with
interest rates above the market rate. While we expect the
government to continue its recent shift toward less costly bank
borrowing, the outstanding NSC stock, and ongoing issuance of the
same, will keep its debt servicing costs above 20% of its revenues
over the next few years.
Bangladesh's narrow revenue base constrains the government's
flexibility to mitigate economic downturns or other potential
shocks. The introduction of additional fiscal stimulus would be
difficult, in S&P's view, owing to the very limited scale of the
government's revenue program.
Bangladesh has only approximately 5 million registered taxpayers
(out of a population of approximately 160 million). General
government revenue was less than 10% of GDP in fiscals 2018 and
2019--among the lowest of rated sovereigns globally. The government
has outlined numerous initiatives to expand the tax base,
culminating most notably with the introduction of new VAT rules in
July 2019. The program has different VAT rates for imports,
depending on economic classification, contrary to initial proposals
for a single, harmonized rate.
S&P said, "We do not expect significant revenue increases from the
initiatives to expand the tax base. In our assessment, contingent
liabilities from financial institutions have a limited risk. The
banking sector remains small with assets less than 100% of GDP,
which informs our view of the contingent risk it poses. We classify
Bangladesh's banking sector in group '9' under our Banking Industry
Credit Risk Assessment (with '1' being the highest assessment and
'10' being the lowest)."
Although the private sector banks are in better shape, significant
risks reside in state-owned commercial banks (SOCBs). SOCBs account
for about 30% of total banking sector assets, and their
nonperforming loans ratio is considerably higher than that of peer
commercial banks.
Bangladesh's credit profile benefits from low external borrowings.
The country has large remittance inflows and an internationally
competitive garment export sector, resulting in a gradual decline
in its current account deficit over recent years.
However, Bangladesh faces important risks to its external profile
related to the COVID-19 pandemic. These risks include the weak
state of the global labor market, and depressed external demand
conditions. High global unemployment could undermine the generation
of overseas Bangladeshi remittances back into the country. This
risk is particularly acute in the Gulf states, where many
Bangladeshi overseas workers reside, following the steep decline in
oil prices this year. In addition, the long-running construction
booms in locations such as Qatar and Dubai are nearing completion.
S&P said, "Although we expect export momentum to stabilize and
improve after a very difficult March-June quarter, demand for
Bangladeshi exports may not recover fully until 2021. Nevertheless,
concomitant import compression, especially of intermediate and
capital goods, should keep help to rein in the current account
deficit. We forecast Bangladesh's current account deficit to remain
roughly stable this fiscal year at nearly 1.5% of GDP.
"In our view, Bangladesh's external balance sheet and liquidity
will remain key credit-supporting factors. We expect gross external
financing needs to stabilize around 87% of current account receipts
plus usable reserves over 2020-2023.
"This implies that the gap between the country's external debt and
its liquid external assets is unlikely to reduce. Likewise, we
project Bangladesh's narrow net external debt to average
approximately 47.6% of current account receipts throughout the
forecast period. Much lower oil prices, and an expected rebound in
export demand from 2021 onward, should mitigate the gradual erosion
of Bangladesh's external buffers."
Bangladesh's external profile draws substantial donor support,
ensuring that the bulk of public external debt is low-cost
borrowing with long maturity. Additionally, donors and multilateral
lenders have in the past provided some degree of direct budgetary
support, which may carry conditions for policy formulation. Since
the onset of the pandemic, Bangladesh has secured considerable
official creditor financing, including US$732 million in emergency
assistance under the IMF's Rapid Credit Facility and Rapid
Financing Instrument facilities.
S&P said, "We view Bangladesh's monetary assessment as a neutral
factor to the rating. The central bank's limited independence,
multiple mandates, and underdeveloped capital markets hamper
monetary flexibility. We consider Bangladesh's exchange rate regime
as a managed float, which provides some flexibility to mitigate
external shocks." However, despite gradual depreciation in the
exchange rate since 2015, Bangladesh's real effective exchange rate
(REER) has been rising, reflecting the currency depreciation of its
trading partners.
Should the REER continue to rise, it could strain the competiveness
of the country's export garment sector. Bangladesh's central bank
has made progress in managing inflationary expectations. Since
2015, inflation has generally remained below 6% annually.
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the methodology
applicable. At the onset of the committee, the chair confirmed that
the information provided to the Rating Committee by the primary
analyst had been distributed in a timely manner and was sufficient
for Committee members to make an informed decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts.
The committee's assessment of the key rating factors is reflected
in the Ratings Score Snapshot above.
The chair ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision. The
views and the decision of the rating committee are summarized in
the above rationale and outlook. The weighting of all rating
factors is described in the methodology used in this rating
action.
Ratings List
Ratings Affirmed
Bangladesh
Sovereign Credit Rating BB-/Stable/B
Transfer & Convertibility Assessment BB-
=========
C H I N A
=========
CHINA SOUTH CITY: S&P Ups Issuer Credit Rating to B, Outlook Stable
-------------------------------------------------------------------
S&P Global Ratings, on Aug. 12, 2020, raised its long-term issuer
credit rating on China South City Holdings Ltd. (CSC) to 'B' from
'B-', and its long-term issue rating on the company's outstanding
senior unsecured notes to 'B-' from 'CCC+'.
S&P said, "We raised the rating because CSC's shift to fast-churn
property sales is having positive operating and financial effects.
We believe that CSC is now better positioned to maintain a
satisfactory scale and sustainable sales inflow from multipurpose
commercial properties and residential projects over the next two
years. The company's recurring income, mostly linked to trade
center operations, will also maintain stable growth, supported by
increasing population inflow from improving infrastructure as well
as more completion of residential properties in the vicinity of
trade centers.
"We continue to assess CSC's liquidity as less than adequate.
Liquidity sources only just cover uses due to a large short-term
debt balance of about HK$14.9 billion, as of March 2020. That said,
we believe that CSC should be able to manage its suboptimal
liquidity profile as 40% of its short-term debt is backed by
investment properties, which should make it reasonably straight
forward to roll over at longer tenors. The company has drawn a
number of long-tenor bank loans, which has helped lift the weighted
average maturity of its debt to slightly above two years as of
March 2020.
"We consider that offshore financing will remain a large proportion
of borrowing for CSC, and will be a rating constraint for the
company given the size and related high interest payments. In
addition, despite the initial success of CSC's business model
transition, its market position, especially in the residential
segment, is a lot less established than most of its peers. This
presents operating risks and an additional rating constraint for
CSC.
"We consider CSC's recurring income to have high "stickiness" and
stability for the company. Although some sources are not
traditional rental income and could be based on turnover rent, its
property rentals, property management, warehousing, and logistics
and outlet mall operations are all very sticky, with CSC being the
major service provider for tenants in its project sites. We expect
recurring income will remain a significant source--that can cover
60% of CSC's interest payments--even if we exclude
property-management fees for fiscal 2021 and 2022."
CSC's government grants also support its cash flow and earnings,
although the size is diminishing given the declining investment in
trade center operations.
"We believe that the development of multipurpose commercial
properties (known as "gongyu") will contribute increasingly to the
company's contracted sales over the next two years. This comes as
CSC's residential land bank shrinks moderately, although it remains
sufficient for development for slightly above two years. These
commercial properties may be subject to policy risk, investment
demand, and lower sell-through rates, but CSC has gained some track
record of such sales over the past two to three years. As of March
2020, we estimate CSC had saleable resources of between HK$50
billion and HK$55 billion of gongyu spanning mainly provincial
capital cities such as Nanchang, Zhengzhou, and Xi'an.
"We believe CSC's high profit margin will slip given the change in
product mix, with increasing sales of lower-margin commercial
land-use gongyu products. We estimate its overall gross margin to
decline slightly to 40%-42% in 2021 and 2022. We expect
profitability to remain high and see a further decline as unlikely
given that CSC still acquires land at very low cost in its project
sites.
"In our view, satisfactory sales and growing recurring income,
coupled with controlled land acquisitions, should result in
moderately positive operating cash flow for CSC, which should allow
it to trim its debt over the next two years. Supported by almost
HK$16 billion contract liabilities, CSC's revenue growth should
also help the company to continue to deleverage. We estimate that
CSC's leverage, as measured by debt to EBITDA, will remain high but
mildly improve to 7.4x-7.9x in fiscals 2021 and 2022, compared with
8.7x-9.5x in fiscals 2020 and 2019.
"The stable outlook reflects our view that CSC will continue to
record modest but stable growth in contracted sales and recurring
income over the next one to two years. We also believe that the
company will be disciplined in land replenishment as it does not
aim to become a pure developer. In our base case, we expect the
company's debt-to-EBITDA ratio to stay at 7.0x-8.0x over the next
one to two years.
"We could lower the rating on CSC if the company's debt-to-EBITDA
ratio stays above 9.0x without signs of improvement or EBITDA
interest coverage falls significantly below 1.5x. This could be the
result of contracted sales or project delivery slippage as well as
large debt-funded acquisitions.
"We could also lower the rating if CSC's liquidity sources over
uses weakens to below 1x, or its weighted average maturity stays
below 2.0 years. A downgrade could also occur if CSC faces
difficulties refinancing its large short-term debt maturities."
Rating upside is limited in the next 12 months. But we could
upgrade CSC if (1) the company's contracted sales and operating
performance strengthens such that its scale is more comparable to
that of 'B+' peers; and (2) CSC's leverage, as measured by
debt-to-EBITDA improves to close to 5x, while its liquidity also
further improves to comfortably above 1.2x liquidity sources to
uses.
CHINA: Restructuring Looms in Shanxi's Scandal-Hit Banking Sector
-----------------------------------------------------------------
Zhu Liangtao and Han Wei at Caixin Global reports that the banking
sector in China's coal-rich Shanxi province is expecting a major
revamp following a series of graft investigations shaking the
northern region's financial system.
According to Caixin, four midsized city commercial lenders in
Shanxi disclosed plans over the weekend to hold extraordinary
shareholder meetings in late August to discuss restructuring. They
include Jincheng Bank and Jinzhong Bank. Both said the meetings
were to discuss mergers and restructuring. The two others are
Yangquan Commercial Bank and CZ Bank, which said the sessions would
discuss mergers and new business establishment, Caixin discloses.
Caixin relates that the simultaneous announcements sparked
expectations that the four regional banks would be combined in a
major overhaul of Shanxi's banking sector. The four banks are among
six city commercial banks operating in the province, along with
bigger rival Datong Bank and Hong Kong-listed Jinshang Bank. The
banks didn't comment on the matter, the report notes.
LANDSEA GREEN: S&P Affirms B Issuer Credit Rating, Outlook Stable
-----------------------------------------------------------------
S&P Global Ratings, on Aug. 12, 2020, affirmed its 'B' long-term
issuer credit rating on Landsea Green Properties Co. Ltd., a
developer of green residential properties in China. S&P also
affirmed its 'B-' long-term issue rating on the company's senior
unsecured notes.
S&P affirmed the rating because of Landsea's small scale, low
attributable sales growth, and strong land replenishment needs. The
company's expansion appetite hampers its ability to maintain a
recent improvement in leverage following the sale of an asset to
its parent, Landsea Group Co. Ltd.
The rating on Landsea remains constrained by the group's high
leverage given the debt tied to this asset has moved to the Group.
We expect Landsea Group's leverage to remain high because of its
lease commitments on long-term rental apartments transferred from
Landsea to the Group.
In S&P's view, Landsea will continue to have a strong need to
replenish its land bank for expansion, especially in the U.S.,
where the company does not operate an asset-light model. S&P
expects Landsea to spend 50%-60% of its attributable contracted
sales proceeds on land replenishment over the next two years. This
will drive its adjusted debt higher by 15%-20% in 2020 and 2021.
S&P said, "We expect Landsea's consolidated ratio of debt to EBITDA
to mildly increase to 3.9x-4.1x in 2020 and 4.4x-4.6x in 2021,
after improving to 3.4x in 2019 following the asset disposal. On a
see-through basis, we forecast Landsea's debt-to-EBITDA ratio to
follow a similar trend and moderately rise to 3.4x-3.6x in 2020 and
3.9x-4.1x in 2021, from 3.0x in 2019. We have revised our
assessment of Landsea's financial risk profile to aggressive from
highly leveraged.
“However, we see potential for volatility in leverage due to
Landsea's small scale and lower attributable ratio in projects,
compared with larger peers'." This factor will weigh on its
consolidated revenue booking in the coming years. The company's
attributable ratio for its contracted sales in China was only about
36% in 2019, a drop from about 41% in 2018. This has led to a 8%
dip in attributable scale for the year, despite total contracted
sales in China growing 7%.
S&P said, "The Landsea management expects profit to plummet in the
first half of 2020 due to operational disruptions in U.S. projects
amid the COVID-19 pandemic. Inventory impairments further cast a
shadow on margins; we expect the company's overall EBITDA margin to
dip to 23%-25% in the next two years, compared with 26.1% in 2019.
We reflect risks relating to Landsea's shorter record of stable
operating performance in the U.S. market in a one-notch negative
adjustment in our comparable ratings analysis."
Landsea has a more diversified and balanced capital structure than
similar rated peers. The company has onshore and offshore bank
borrowings, senior notes, and EB-5 loans (alternative funding) for
its U.S. projects. It also receives shareholders' loans from
Landsea Group, which has access to the domestic corporate bond
market. Furthermore, Landsea's ample cash balance fully covers its
short-term maturities as of end-2019 and bolsters its liquidity.
S&P said, "We continue to assess Landsea as a core subsidiary of
Landsea Group; the company generated more than 60% of the group's
revenue in 2019. We expect this ratio to gradually increase as the
group completes and delivers its legacy projects. The group's new
property development projects have been undertaken by Landsea since
its listing in 2013. Landsea is 50.1%-owned by Landsea Group, and
we expect Landsea to remain the primary driver of the group credit
profile.
"The stable outlook reflects our expectation that Landsea will
moderately increase its leverage on both a see-through and
consolidated basis to fund expansion over the next 12 months. We
expect the company to have steady sales growth with stable margins
due to stronger contributions from project management services
income.
“We may lower the rating if Landsea's leverage deteriorates over
the next 12 months, such that the see-through and consolidated
debt-to-EBITDA ratios worsen to above 7x on a sustained basis. This
could happen if: (1) the company's EBITDA contribution from joint
venture (JV) projects is weaker than we expect; or (2) its
debt-funded expansion is more aggressive than we anticipate."
The rating on Landsea is constrained by Landsea Group's credit
profile. We could raise the rating on Landsea if Landsea Group's
see-through and consolidated debt-to-EBITDA ratios reduce to below
5x on a sustained basis. This could happen if: (1) Landsea's
stand-alone leverage further improves such that Landsea Group's
debt-to-EBITDA ratio falls materially; or (2): Landsea Group's
non-listed segments significantly deleverage.
S&P may raise its assessment of Landsea's stand-alone credit
profile if the company demonstrates a record of stability and
growth in both its China and U.S. businesses while maintaining
see-through and consolidated debt-to-EBITDA ratios below 5x over
the next one to two years.
=========
I N D I A
=========
AGARWALLA TEAK: Ind-Ra Keeps B+ LT Issuer Rating in NonCooperating
------------------------------------------------------------------
India Ratings and Research (Ind-Ra) has maintained Agarwalla Teak
International Pvt Ltd.'s Long-Term Issuer Rating of 'IND B+ (ISSUER
NOT COOPERATING)' in the non-cooperating category and has
simultaneously withdrawn it.
The instrument-wise rating actions are:
-- INR40 mil. Fund-based working capital limits* maintained in
non-cooperating category and withdrawn; and
-- INR570 mil. Non-fund-based working capital limits** maintained
in non-cooperating category and withdrawn.
* Maintained at 'IND B+ (ISSUER NOT COOPERATING)'/'IND A4 (ISSUER
NOT COOPERATING)' before being withdrawn
**Maintained at 'IND A4 (ISSUER NOT COOPERATING)' before being
withdrawn
KEY RATING DRIVERS
The ratings have been maintained in the non-cooperating category
because the issuer did not participate in the rating exercise
despite continuous requests and follow-ups by Ind-Ra.
Ind-Ra is no longer required to maintain the ratings, as it has
received a no-objection certificate from the lender. This is
consistent with the Securities and Exchange Board of India's
circular dated March 31, 2017, for credit rating agencies.
COMPANY PROFILE
Incorporated in 2005, Agarwalla Teak International is engaged in
the imports and wholesale trading of logs, and timber and timber
products.
ARUNODAY SALES: CARE Keeps D on INR13cr Loans in Not Cooperating
----------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Arunoday
Sales (AS) continues to remain in the 'Issuer Not Cooperating'
category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank 13.00 CARE D; Issuer not cooperating;
Facilities Based on best available
information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated July 26, 2019, placed the
rating of AS under the 'issuer noncooperating' category as AS had
failed to provide information for monitoring of the rating. AS
continues to be noncooperative despite repeated requests for
submission of information through e-mails, phone calls and a
letter/email dated July 15, 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 July 26, 2019, the following was the
rating weakness
Key Rating Weakness
As per the banker interaction, the account is categorized as
Non-performing asset (NPA)
AS was incorporated as a partnership firm in March 2011 by Mr.
Pushpak Agrawal and his sons - Mr. Pankaj Agrawal and Mr. Pravin
Agrawal as partners sharing profit and loss in the ratio of
34:33:33. The firm is engaged in the business of trading of yarn.
The partners have been individually engaged in the yarn trading
business since last 16 years through proprietorship concerns namely
Kanchan Weaving Mills, Supreme Mills and Shriram Cottex
respectively. On commencement of Arunoday Sales from April 1, 2011,
the other three entities were closed down. Arunoday commenced
commercial operations from FY12 (refers to the period of April 1 to
March 31).
BAALAJI MILK: CARE Keeps D on INR50.29cr Loans in Not Cooperating
-----------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Shree
Baalaji Milk & Milk Products (SBMMP) continues to remain in the
'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank 50.29 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
ratings of SBMMP under the 'issuer non-cooperating' category as
SBMMP had failed to provide information for monitoring of the
rating for the rating exercise as agreed to in its Rating
Agreement. SBMMP continues to be non-cooperative despite repeated
requests for submission of information through e-mails, phone calls
and email dated July 15, 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 6, 2019, the following were the
rating weaknesses
Key Rating Weaknesses
* Delays in Debt Servicing: As informed by the banker there have
been delays in debt servicing and the account has been classified
as NPA since March 2019.
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 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.
SBMMP is a partnership firm of Mr. Satish Chavan and his wife Mrs.
Ashwini Chavan. The company started with its commercial production
from December 18, 2011. 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.
BALAJI ROADLINES: ICRA Withdraws B Rating on INR25cr Term Loan
--------------------------------------------------------------
ICRA has withdrawn the ratings on certain bank facilities of Shree
Balaji Roadlines (SBR), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund based- 25.00 [ICRA]B (Stable); Withdrawn
Term Loan
Rationale
The long-term rating of [ICRA]B with a stable outlook assigned to
the bank limits of INR25.00-crore of SBR have been withdrawn in
accordance with ICRA's policy on withdrawal and suspension and
based on the request of the firm and no objection certificate
provided by its banker. However, ICRA does not have information to
suggest that the credit risk has changed since the time the rating
was last reviewed.
Key rating drivers
Key rating drivers has not been captured as the rated instruments
are being withdrawn.
Liquidity position
Liquidity position has not been captured as the rated instrument is
being withdrawn.
Rating sensitivities
Rating sensitivities have not been captured as the rated instrument
is being withdrawn.
Established in 1999 by Mr. Vijay Gaikwad, Shree Balaji Roadlines
has been providing a range of logistic services since 2004. It
provides logistics solutions through road transportation for
various entities in the cement and steel sectors, with presence
across India. It also provides carrying and forwarding services and
rake handling services to its clients. The entity's corporate
office is at Laxmi Park, Pune, Maharashtra, and operates from four
branches in Chhattisgarh, Madhya Pradesh, Rajasthan and Maharashtra
to carry out all forwarding operations.
BESTVIEW INFRACON: CARE Lowers Rating on INR33.80cr Loan to B
-------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Bestview Infracon Limited (BIL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Non-Convertible 33.80 CARE B; Stable; Issuer not
Debentures-Type B cooperating: Revised from
CARE B+; Stable on the basis
of best available information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from BIL to monitor the ratings
vide e-mail communications/letters dated July 27, 2020, July 23,
2020, July 20, 2020, July 9, 2020 and numerous phone calls.
However, despite CARE's repeated requests, the company has not
provided the requisite information for monitoring the ratings. In
line with the extant SEBI guidelines, CARE has reviewed the rating
on the basis of the best available information which however, in
CARE's opinion is not sufficient to arrive at a fair rating. The
rating on BIL's bank facilities will now be denoted as CARE B;
Stable; ISSUER NOT COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above ratings.
The rating has been revised by taking into account no due-diligence
conducted due to non-cooperation by BIL with CARE'S efforts to
undertake a review of the rating outstanding. CARE views
information availability risk as a key factor in its assessment of
credit risk. The rating assigned to BIL continues to remain
constrained on account project execution risk coupled with
saleability risk and subdued industry scenario. The ratings,
however, draw comfort from favorable location of the project and
experienced promoters with established track record of operations.
Detailed description of the key rating drivers
Key Rating Weaknesses
* Project Execution Risk coupled with saleability risk: The
project is at a very nascent stage of execution with only 32% of
the total project cost has been incurred till March 31, 2019 with
major portion of project has been incurred on land acquisition.
With construction of only INR4cr i.e. ~4% out of the total
estimated construction cost of INR104cr, the project remains
exposed to significant amount of execution risk.
* Subdued industry scenario: The real estate sector during the
recent years witnessed a slowdown owing to various government
reforms.
* Demonetization & GST implementation were some of the factors
which even though aimed at curbing the black money menace, hit the
sector hard through sale stagnation leading to a dip in prices.
However, with the introduction of the RERA Act, it forced the
builders in timely completion and delivery of projects which is in
the interest of both consumers as well as for real estate sector.
Key Rating Strengths
* Experienced promoters with established track record of
operations: BestView Infracon Ltd (BIL) incorporated in 2008 is
into real estate development. It is part of the Eldeco Group which
was established in 1985 and has extensive track record in real
estate industry. The group has successfully executed more than 150
projects in UP and Delhi NCR with a total saleable area of over 400
lacs square feet. The ongoing projects of EIPL include 8 projects
with a total saleable area of 161.7 lacs square feet across NCR,
Uttarakhand, UP, Punjab and Rajasthan.
* Favorable location of the project: The project is located at
Malviya Nagar Metro Station which is in proximity to two prominent
areas of Saket and Malviya Nagar in South Delhi. The site is on the
main road on the land above the Malviya Nagar Metro Station.
BestView Infracon Ltd (BIL) was incorporated in 2008 is into real
estate development. It is part of the Eldeco Group which was
established in 1985 and has more than 30 years of experience in
real estate industry. BIL is a 100% subsidiary of Eldeco
Infrastructure and Properties Ltd (EIPL). The group has
successfully executed a number of residential and commercial
buildings projects in UP and Delhi NCR. The ongoing projects of
EIPL include 8 projects with a total salable area of 161.7 lsf. BIL
is currently planning to develop a commercial complex project
located in Malviya Nagar Metro Station, New Delhi with a total
salable area of 1.31 lsf.
D S DEVELOPERS: CARE Lowers Rating on INR15cr Loan to B
-------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of D S
Developers (DSD), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 15.00 CARE B; Stable; Issuer Not
Facilities Cooperating; Revised from
CARE B+; Stable on the basis
of best available information
Detailed Rationale & Key rating Drivers
CARE has been seeking information from DSD to monitor the ratings
vide e-mail communications dated April 7, 2020, April 21, 2020,
April 25, 2020, April 30, 2020 , May 4, 2020, May 12, 2020, May 14,
2020, May 25, 2020, June 10, 2020, June 30, 2020, July 15, 2020 and
July 28, 2020 and numerous phone calls. However, despite CARE's
repeated requests, the firm has not provided the requisite
information for monitoring the ratings. In line with the extant
SEBI guidelines, CARE has reviewed the rating on the basis of the
best available information which however, in CARE's opinion is not
sufficient to arrive at a fair rating. The rating on DSD bank
facilities will now be denoted as CARE B; Stable ISSUER NOT
COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating(s).
The ratings have been revised on account of non-availability of
requisite information. The rating, further, continue to remain
constrained on account of project implementation risk with
saleability risk for unbooked units, subdued outlook for the
cyclical real estate sector and constitution as a partnership
concern. The rating, however, favorably takes into account
experienced partners, good infrastructure and premium amenities as
well as moderate booking status.
Detailed description of the key rating drivers
At the time of last rating on June 12, 2019, the following were the
rating strengths and weaknesses:
Key Rating Weakness
* Project implementation risk and saleability risk for un-booked
units: DSD is constructing a residential project, Ayodhiya Raj
having 82 units. It started construction work on project from
February 2012 and envisaged that project to be completed by March
2018. However, the project was delayed for more than one year and
envisaged to be completed by November 2019. The firm has envisaged
total project cost of INR35.31 crore towards the project to be
funded through Partner's capital of INR6.87 crore, OD against
tangible security (ODTS) of INR15.00 crore and balance through
customer advances.
As on April 30, 2019, DSD has incurred total cost of INR30.86 crore
towards the project which is funded through Partners capital of
INR3.33 crore, ODTS of INR15.00 crore, and unsecured loans of
INR0.20 Crore and customer advances of INR12.33 crore. The project
is envisaged to be completed by November 2019 and hence, project
implementation risk is associated with DSD to complete the project
within envisaged time and cost parameters. Further, saleability
risk is also associated with unbooked units of 45 units.
* Subdued outlook for the cyclical real estate sector: The real
estate industry in India is highly fragmented with most of the real
estate developers having a city-specific or regionspecific
presence. Real estate investments worldwide have been driven by one
or several themes based on the economic growth. The major drive in
India is expected to come from housing, organized retailing,
hospitality etc. Strong economic growth, huge population, large
skilled workforce, growing employment and increasing purchasing
power has kick-started the growth in real estate market in India.
The risks associated with real estate industry are - cyclical
nature of business (linked to economic cycle), interest rate risk,
roll back of income tax benefits etc. Further, in light of the
on-going economic downturn, the sector is facing issues on many
fronts. These include subdued demand, curtailed funding options,
rising costs, restricted supply due to delays in approvals etc.
thereby resulting in stress on cash flows. Further, the banks have
already taken a cautious approach to the real estate lending and
reduced their exposure to the sector and hence, most developers now
rely on the private players for the project funding.
* Constitution as a partnership concern: Further, its constitution
as a partnership concern with low net worth base restricts its
overall financial flexibility in terms of limited access to
external fund for any future expansion plans. Furthermore, there is
an inherent risk of possibility of withdrawal of capital at the
time of retirement of any partner and dissolution of the firm in
case of death/insolvency of partners.
Key Rating Strengths
* Experienced Promoters: The partners of the firm are actively
involved in day-day affairs of the firm. Mr. Naresh Jajra and Mr.
Rajesh Jajra have experience of more than a decade in the real
estate industry. They have prior experience in land development
projects and construction of bungalows.
* Good infrastructure and premium amenities: Ayodhiya Raj contains
premium amenities and recreational facilities including Building
Features & Common Services, Security Systems and Club house
containing facilities such as Pair of ultra-modern towers,
Exclusive Planned 3 BHK Apartments, Children play zone, Jogging
track, Plant Avenue, Water Body, Air conditioned e ntrance hall, 24
hrs water supply, Rain water harvesting, DTH connection with set
top box, Earthquake resistant framed structure, Ample car parking,
Power-back up for common areas and emergency services, High speed
passenger elevators with services elevator etc.
* Moderate booking status: The project has 82 units which includes
78 units of 3BHK and 4 units of 5BHK in two towers. It has booked
37 units (45% of total units) till April 30, 2019 and hence,
reflecting moderate booking status of the project. Further, it has
received booking advances of INR12.33 crore till April 30, 2019
which is 91.74% of envisaged booking advances and hence, the status
of booking appears to be moderate to the duration of the project
and cost incurred in this regard.
Jodhpur (Rajasthan) based, D S Developers (DSD) was formed as a
partnership concern in 2012 by Mr. Rajesh Jajra, Mr. Suresh Jajra,
Mr. Naresh Jajra, Mr. Vijay Kumar Agarwal, Maharaja Dalip Singh ,
Mr. R.K Veer Vikram Singh , Mr. Sunil Bhandari and Smt. Neelam Vyas
as a partners. However, in 2014, last four partners retired and the
remaining continued as partners with sharing equal profit & loss of
the firm.DSD is currently executing a residential project named
Ayodhiya Raj (RERA Registration No. RAJ/P/2017/573) with 82 units
in 2 blocks (78 flats of 3BHK and 4 Penthouses of 5BHK) at 1 PWD
Road, Jodhpur Rajasthan consisting total area under development of
9049.72 square metres.
DHANVANTARI MILK: CARE Keeps D on INR20.5cr Loans in NonCooperating
-------------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Dhanvantari
Milk Products Private Limited (DMPPL) continues to remain in the
'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank 20.51 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
ratings of DMPPL under the 'issuer non-cooperating' category as
DMPPL had failed to provide information for monitoring of the
rating for the rating exercise as agreed to in its Rating
Agreement. DMPPL continues to be non-cooperative despite repeated
requests for submission of information through e-mails, phone calls
and email dated July 15, 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 6, 2019, the following were the
rating weaknesses
Key Rating Weaknesses
* Delays in Debt Servicing: As informed by the banker there have
been delays in debt servicing in its group companies and the
account has been classified as NPA.
Analytical approach: Combined
CARE has taken a combined view of Pratibha Krushi Prakriya Limited
(PKPL), 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. DMPPL started commercial
production from December 18, 2011. DMPPL is a private company held
by Mr. Satish Chavan and his wife Mrs. Ashwini Chavan is engaged in
the processing of milk. The manufacturing facility of the company
is located at Nipani, Karnataka. It undertakes milk procurement
activity and operates milk chilling plants.
DIGITAL FACTORY: CARE Lowers Rating on INR6.25cr LT Loan to D
-------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Digital Factory (DF), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 6.25 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 June 18, 2019, placed the
ratings of DF under the 'issuer noncooperating' category as company
had failed to provide information for monitoring of the rating. The
company continues to be non-cooperative despite repeated requests
for submission of information through e-mails, phone calls and
email dated January 31, 2020 to July 31, 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
As confirmed by the banker the account has been classified as NPA.
At the time of last rating dated June 18, 2019, the following were
the rating strengths and weaknesses
Key rating weaknesses
* Delays in debt servicing: Digital Factory has been facing
liquidity issues due to which the firm is unable to service the
debt obligation. The banker has confirmed that the account has been
classified as NPA.
* Constitution of the entity as Proprietorship firm:
Constitution as a partnership firm has the inherent risk of
possibility of withdrawal of the partners' capital at the time of
personal contingency which can affect its capital structure.
Further, partnership concern has restricted access to external
borrowing which limits their growth opportunities to some extent.
Key Rating Strengths
* Experienced partners with reputed clientele: DF was
established in the year 2013, promoted by Mr. Ankinedu Chowdary. He
is a qualified Graduate and has five years of experience in the
Furniture Industry. He is actively involved in the day to day
operations of the firm. The firm has reputed clientele i.e Narayana
Educational Society, Ravindra Bharti Educational Society, Andhra
Pradesh Education Welfare & Infrastructure Development Corporation
(APEWIDC) and Telangana education and welfare infrastructure
Development Corporation (TEWIDC).
Digital Factory (DF) was established in the year 2013, promoted by
Mr Prasad Nannapaneni. The firm is engaged in manufacturing of iron
and wooden furniture. The firm gets the orders from private and
government entities. The firm makes products like Tables, Chairs,
Racks, and other interior works which is being manufactured for its
well know customer.
ERA INFRA: Unlikely to See Resolution This Year
-----------------------------------------------
Business Today reports that the insolvency case of Era Infra
Engineering, one of the 12 large loan default cases referred to
National Company Law Tribunal (NCLT) for insolvency proceedings by
Reserve Bank of India (RBI), is unlikely to see any resolution this
year, sources involved with the resolution process said.
The Era Infra case was referred to NCLT in June 2017 with 11 other
cases including the likes of Essar Steel, Bhushan Steel, Lanco
Infratech and Jaypee Infra, the report says. While all other cases
were admitted immediately by NCLT, it took 11 months more for
insolvency proceedings of Era Infra to begin because of pending
winding up petitions against the company at Delhi High Court,
Business Today relates. And now after three years, while all other
cases have seen either resolution or liquidation, Era Infra case
has not reached any form of closure.
According to the report, sources said the committee of creditors
(CoC) is yet to approve either of the two resolution plans that the
resolution professional has received so far - the reason being lack
of clarity in terms of the legality of the resolution plans
submitted.
Business Today says Era Infra has received two bids - one from
Suraksha ARC and another from a small-time EPC contractor.
According to sources both the resolution applicants want to bid for
Era Infra and the six special purpose vehicles (SPVs) that it had
for contracts given by the government departments.
Era Infra is an EPC company, and EPC companies are fundamentally
services companies and they don't have any assets. Typically, as an
EPC company when Era gets contact for a project, they create an
SPV, and the lenders fund the SPVs. And because of these
inter-linkages a large part of values are stuck in special purpose
vehicles (SPVs).
"So when we went to the market, we realised that there was no
interest in Era Infra as an EPC company on a standalone basis. They
buyers want both the holding company as well as the SPVs. Even if
there was some interest from some ARCs, it was primarily to milk
the arbitration claim," says a source privy to the proceedings.
Another issue that is delaying the resolution is the fact that in
Era Infra all the value is in disputed receivables and all those
disputed receivables have gone into arbitration.
Sources told Business Today that INR23,000 crore worth of
receivables are stuck in arbitration, and it has got INR1,200 crore
arbitration award during the insolvency period. The CoC expects Era
Infra to get a total of INR11,000-12,000 crore in arbitration
award.
However, the legal issue that CoC now faces with regard to the
resolution plans that they have received is whether the former has
the legal right to bunch SPVs with the holding company and sell it
to either of the bidders.
Technically, it is the holding company - Era Infra Engineering -
that is under insolvency proceedings, and SPVs are separate legal
entities. The CoC has now moved an application seeking clarity on
that matter at NCLT.
Business Today relates that the matter was heard by NCLT two-three
times early this year and the next date for hearing on the matter
was on March 25, but on March 25, NCLT was closed.
The sources mentioned earlier told Business Today, even if the NCLT
gives clarity on issue tomorrow, it will take 3-4 months for the
CoC to approve one of the resolution plans. Given the lack of legal
clarity, the CoC has not even entered into any negotiations on the
commercial aspect of the resolution plan.
So, unless the CoC approves one of the resolution plans, it can't
ask NCLT for its final approval, Business Today notes.
Besides, there are niggling issues like attachment of properties of
Era Infra by Enforcement Directorate. The NCLT is still hearing
that case. Therefore, in all likelihood any resolution in the case
of Era Infra can only happen in the next calendar year.
Era Infra and its SPVs together owe around INR17,000 crore to
financial creditors and INR777 crore to operational creditors, the
report discloses.
Business Today adds that the sources said that neither of the
resolution applicants is committing any upfront payment, but they
are saying that they will fight the arbitration cases, and whatever
arbitral awards the company gets would be shared with the financial
creditors.
About Era Infra
Era Infra Engineering Limited engages in the execution of
construction contracts involving engineering, procurement and
construction projects across a range of sectors, such as roads and
highways, power, railways, metro, aviation, industrial,
institutional and related segments. Its principal business
activities are to carry on the business of builders, civil
contractors, and sanitary engineers, architects, town planners and
to submit tenders for the aforesaid business; to layout, develop,
construct, build, erect, demolish, re-erect, repair, remodel,
execute or do any other work in connection with any industrial
complex/parks, flyovers, ports, airports, highways, roads,
railways, irrigation, dam and canals, among others, and to act as
manufacturer, trader, dealer, importer, exporter, buyer, seller of
all any type/kind of material used in the construction/
infrastructure industry, including setting up of ready mix plant in
India or abroad.
Eighteen winding-up petitions filed by various operational and
financial creditors against Era Infra Engineering are pending
before the Delhi High Court, Livemint.com reported. Union Bank of
India is not among them. Era Infra Engineering owes more than
INR10,000 crore to its creditors.
Era is one of the 12 bad loan accounts that have been directed by
the central bank to be referred under IBC, Livemint.com said.
IND SWIFT: ICRA Withdraws D Rating on INR610.89cr Term Loan
-----------------------------------------------------------
ICRA has withdrawn the ratings on certain bank facilities of Ind
Swift Laboratories Limited (ISLL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Term Loan 610.89 [ICRA]D ISSUER NOT COOPERATING;
Withdrawn
Fund-based 303.41 [ICRA]D ISSUER NOT COOPERATING;
Working Capital Withdrawn
Facilities
Non-fund Based 265.00 [ICRA]D ISSUER NOT COOPERATING;
Working Capital Withdrawn
Facilities
Unallocated 34.27 [ICRA]D ISSUER NOT COOPERATING;
Limits Withdrawn
Rationale
The rating assigned to Ind Swift Laboratories Limited (ISLL) has
been withdrawn at the request of the company and based on the no
objection certificate received from the banker, and in accordance
with ICRA's policy on withdrawal and suspension. ICRA is
withdrawing the rating and that it does not have information to
suggest that the credit risk has changed since the time the rating
was last reviewed.
Key rating drivers
The key rating drivers have not been captured as the rated
instrument(s) are being withdrawn.
Liquidity position
Liquidity position has not been captured as the rated instruments
are being withdrawn.
Rating sensitivities
Rating sensitivities have not been captured as the rated
instruments are being withdrawn
ISLL, part of the Ind-Swift Group based at Chandigarh, was promoted
in 1995 by Ind-Swift Limited in joint venture with the Punjab State
Industrial Development Corporation Limited (PSIDC). ISLL went
public in 1997 and subsequently in FY2003, PSIDC exited from ISLL.
ISLL is a medium sized manufacturer of Active Pharmaceuticals
Ingredients (APIs) and Advanced Intermediates with presence
mostly in domestic markets and certain semi-regulated markets. The
company develops, manufactures and supplies bulk drugs to various
domestic formulations companies and leading generic players across
semi-regulated markets (with predominant presence in East European
Markets).
JALANNAGAR DEVELOPMENT: ICRA Hikes Rating on INR6.46cr Loan to C
----------------------------------------------------------------
ICRA has revised the ratings on certain bank facilities of
Jalannagar Development Pvt. Ltd. (JDPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based–
working capital
facilities 6.46 [ICRA]C; upgraded from [ICRA]D
Fund-based–
term loan 1.55 [ICRA]C; upgraded from [ICRA]D
Unallocated
limit 1.99 [ICRA]C; upgraded from [ICRA]D
Rationale
The rating upgrade primarily factors in the regularisation of debt
servicing by JDPL post March 2019, aided to an extent by a moderate
amount of free cash balance (INR2.58 crore as on
March 31, 2019) and unsecured loans. ICRA also notes the
significant experience of JDPL's management in the tea industry.
The rating, however, is constrained by a deterioration in JDPL's
operational efficiency, leading to a significant decline in
production and average realisations of tea in FY2020 and the
company's continuing losses, adversely impacting its financial
profile. The company's tea production in the current fiscal is also
likely to be adversely impacted by the recent flood in Assam and
the Covid-19 pandemic and would affect both its turnover and
profitability. The rating also considers the risks associated with
tea for being an agricultural commodity due to dependence of both
the volume and quality of the harvest on agro-climatic conditions.
Besides, inherent cyclicality of the fixed-cost intensive tea
industry leads to variability in profitability and cash flows of
bulk tea producers. ICRA also notes that Indian tea is essentially
a price taker in the international market and hence global
supply-demand dynamics would continue to have a bearing on domestic
price levels, to an extent. Additionally, JDPL's small scale of
operations and geographical concentration of tea estates in Assam
intensify its operational risks.
Key rating drivers and their description
Credit strengths
* Regularisation of debt servicing: The company's debt servicing
has been regular post March 2019, aided to some extent by a
moderate free cash balance (INR2.58 crore as on March 31, 2019) and
unsecured loans. JDPL has availed moratorium due to the pandemic,
which has eased its debt servicing obligation to some extent.
Nevertheless, an improvement in the liquidity position will remain
important for regular servicing of debt, going forward.
* Experience of the management in the tea industry: JDPL is a
relatively small player in the tea industry, however, the promoters
have long experience in the business. The promoters have been able
to establish JDPL as a producer of crush, tear, curl (CTC) variety
of tea of acceptable quality.
Credit challenges
* Deterioration in operational efficiency, as reflected by a
significant decline in production and average realisations of tea
in FY2020: The company's tea production declined by around 24% to
5.85 lakh kg in FY2020 from 7.74 lakh kg in FY2019 Although the age
profile of the bushes remains favorable with over 80% of the bushes
in the productive age group of 6-50 years, adverse weather
conditions and a deterioration in operational efficiency, as
reflected by a decline in the average realisations, had a bearing
on the company's overall performance in FY2020.
* Adverse financial risk profile, as reflected by continuing
losses: JDPL registered continuous operating and net losses from
FY2016 to FY2019 due to deterioration in productivity, a
significant increase in input costs and unfavorable market prices
of tea. This resulted in a significant erosion of its tangible net
worth and depressed debt coverage metrics. ICRA notes that
production as well as average realisation of the company's tea have
declined in FY2020, translating into an estimated net loss and
depressed debt coverage metrics in the year. The company's tea
production in the current fiscal is also likely to be adversely
impacted by the recent flood in Assam as well as the Covid-19
pandemic and would affect its financial performance.
* Risks associated with tea for being an agricultural commodity:
The profitability and cash flows of bulk tea producers remain
volatile owing to the risks associated with tea for being an
agricultural commodity as the production volume and quality of tea
depend on agro-climatic conditions. Such risk is accentuated
because of the presence of both the gardens of the company in the
Upper Assam region.
* Prices of Indian tea, in spite of its better quality, remain
vulnerable to price fluctuation in the international market:
Prices of domestic tea, despite its better quality, are impacted by
international prices to some extent. Hence, the demand-supply
situation in the global tea market, in ICRA's opinion, would
continue to have a bearing on the profitability of Indian players,
including JDPL.
Liquidity position: Poor
JDPL's liquidity position is poor. Its cash flow from operations is
likely to remain negative in the current fiscal. A very high
average working capital utilisation (around 98% during July 2019 to
June 2020) and the existing long-term debt repayment obligation are
likely to keep the company's liquidity under pressure. However, the
company has availed moratorium for debt servicing due to the
pandemic, which is likely to render some comfort in the short
term.
Rating sensitivities
Positive triggers - ICRA may upgrade the company's rating if its
liquidity position improves on a sustained basis, aided by an
improvement in sales volumes and realisations.
Negative triggers - Irregularities in debt servicing and/or
increased losses may lead to a downgrade of the company's rating.
Jalannagar Development Private Limited (JDPL), incorporated in
April 1950, has two tea estates – Chota Tingrai Tea Estate and
Tingamira Tea Estate – located in Tinsukia and Doomdooma
districts of Assam, respectively. The tea estates cover an area of
around 421 hectares under cultivation. JDPL primarily produces CTC
variety of black tea, which accounted for 94% of the company's
total tea production of 5.85 lakh kg in FY2020. In July 2016, JDPL
commenced production of green tea. The production of green tea
stood at around 0.34 lakh kg in FY2020 (0.36 lakh kg in FY2019) and
the same contributed only 6% to the company's total tea production
in the said year.
KUMAR BROTHERS: CARE Reaffirms B+ Rating on INR37cr LT Loan
-----------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of Kumar
Brothers Chemists Private Limited (KBCPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 37.00 CARE B+; Stable Reaffirmed
Short-term Bank
Facilities 0.25 CARE A4 Reaffirmed
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of KBCPL continue to be
constrained by the small and declining scale of operations in FY20
(Prov.), elongated operating cycle, weak solvency position, highly
competitive & fragmented industry. The ratings, however, derive
strength from experience of promoters in trading pharmaceutical
products, moderate profitability margins and advantage of strategic
location & long association with reputed pharmaceutical companies.
Rating Sensitivities
Positive rating sensitivities
* Increase in scale of operations with total operating income of
more than INR100.00 crore on a sustainable basis
* Improvement in capital structure marked by overall gearing
ratio below 1.50x on a sustained basis
* Improvement in debt coverage indicators as marked by interest
coverage ratio and total debt to GCA ratios above 2.00x and below
10.00x, respectively, on a sustained basis
* Shortening of operating cycle marked by operating cycle below
200 days, on a sustained basis
Negative rating sensitivities
* Decline in scale of operations by more than 20%, on sustained
basis
* Deterioration in profitability margins marked by PBILDT margins
below 8.00x on sustained basis
Key Rating Weakness
* Small and declining scale of operations: The scale of
operations of KBC remained small and declined on a year-on-year
basis to INR47.82 crore in FY20 owing to closed OPD's and decline
in prices of medicines which led to lower sales realization. The
small scale of operations limits the company's financial
flexibility in times of stress and deprives it from scale
benefits.
* Weak overall solvency position: The overall gearing ratio of
the company stood leveraged at 2.92x as on March 31, 2020 on
account of company's high reliance on external borrowings to fund
various requirements of business. The same improved marginally from
3.52x as on March 31, 2019 owing to increase in net worth base of
the company on account of accretion of profits into net worth
coupled with repayment of term loans. The debt coverage indicators
of the company stood weak marked by interest coverage ratio of
1.34x in FY20 and total debt to GCA of 35.26x for FY20.
* Highly fragmented and competitive industry: KBC operates in
market cluttered with many small and wholesale players having
better customer reach. This may reduce the market share ultimately
affecting the top line of company. Further, the company provides
additional discount to the institutional players thereby impacting
the profitability of the company.
Key Rating Strength
* Experienced promoters in trading of pharmaceutical products:
Mr. Ashwani Kumar Singla (Managing director) and Mr. Pramod kumar
(Director) have 36 and 26 years of experience respectively in
trading of pharmaceutical products. The promoters' contacts in the
market have helped KBC to improve institutional sales backed by
more tie-ups with private hospitals for supplying medicines.
* Moderate profitability margins: The profitability margins of
the company stood moderate marked by PBILDT margin of 13.17% and
PAT margin of 2.37% in FY20. The PBILDT margin remained at almost
the same level of last year (13.08% in FY19 as compared to 12.13%
in FY18). The PAT margin, however, increased marginally from 1.57%
in FY18 to 1.89% in FY19. The gross cash accruals of the company
stood at INR1.20 crore in FY19 as compared to INR1.19 crore in
FY18.
* Advantage of strategic location and long association with
reputed pharmaceutical companies: KBC has one shop located near
CMC hospital and other located close to PGI hospitals, which are
the prime medical institutes in Chandigarh. Further company also
has contracts with major pharmaceutical companies such as Ranbaxy
laboratories Limited, Pfizer etc. to purchase products directly.
With bulk and direct purchase KBC avails around 20% discount which
is then extended to the wholesale and retail customers.
* Stretched liquidity analysis: The operating cycle of the
company stood elongated at 404 days for FY20 (358 days for FY19).
The cash credit limit remained fully utilized for the last 12
months period ended June-20. The company has free cash and bank
balance amounting to INR0.72 crore as on March 31, 2020. The
liquidity position of the company stood moderate marked by current
ratio of 1.44x and quick ratio of 0.45x as on March 31, 2020. The
company has availed moratorium from its banks in light of COVID-19,
as per the extant Reserve Bank of India (RBI) guidelines.
Kumar Brothers (Chemists) Private Limited (KBC) was originally
constituted as a partnership firm named as M/s. Kumar Brothers in
the year 1980 and later on was converted into private limited
company in the year 1998. KBC is engaged in retail and wholesale
trade of pharmaceutical products such as medicines, surgical
equipment's, cosmetics and other related items through distribution
contracts with pharmaceutical companies which are renewed annually.
Apart from over-the-counter sales (retail), the company also
supplies medicines to private as well as government institutions
namely Post Graduation Institute of Education & Research (PGI,
Chandigarh), various government hospitals and commando hospitals.
Currently, KBC operates through one shop at Chandigarh and another
one at Delhi. The shop at Delhi is exclusively for dealing with
Army Hospitals.
MECHATRONICS SYSTEMS: CARE Cuts Rating on INR30cr LT Loan to B+
---------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Mechatronics Systems Private Limited (MSPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 30.00 CARE B+; Stable; Issuer not
Facilities cooperating; Revised from
CARE BB-; Stable; Issuer not
cooperating On the basis of
best available information
Short Term Bank 30.00 CARE A4; Issuer not
Facilities cooperating; Based on best
available information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated June 27, 2019, placed the
ratings of MSPL under the 'issuer non-cooperating' category as MSPL
had failed to provide information for monitoring of the rating for
the rating exercise as agreed to in its Rating Agreement. MSPL
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.
The revision in the ratings to the bank facilities of MSPL is on
account of non-availability of information for FY20 (refer to the
period April 1, 2019 to March 31, 2020), the impact of the outbreak
of Covid-19 on the current operations of the company and its effect
on the company's liquidity position. Further the revision factors
in the moderation in financial risk profile of FY19 as reflected by
decline in income, deteriorated solvency position, and elongated
operating cycle.
Detailed description of the key rating drivers
At the time of last rating on June 27, 2019 the following were the
rating weaknesses and strengths (updated for the audited result of
FY19 available with Registrar Of Companies)
Key Rating Weaknesses
* Financial profile marked by small scale of operations, moderate
profitability & weak capital structure: The total operating income
in FY19 deteriorated and stood at INR33.85 crore as against
INR40.61 crore in FY18. The PBILDT margin improved and stood at
22.27% during FY19 as against 15.34% during FY18. PAT margin also
improved and stood at 6.88% in FY19 as against 4.53% in FY18.
Further the overall gearing stood at 1.49x as on March 31, 2019 as
against 1.13x as on March 31, 2018. The PBILDT interest coverage
marginally improved and stood at 1.83x in FY19 as against 1.76x in
FY18.
* Working Capital Intensive nature of operation: The operating
cycle elongated further during FY19 and stood at 351 days as
against 212 days in FY18. The same is on account of increase in
average collection period of the company to 293 days in FY19 as
against 231 days in FY18. The cash and cash equivalents stood at
INR1.07 crore as on March 31, 2019 as against INR0.27 crore as on
March 31, 2018.
Key Rating Strengths
* Experienced promoters and company's track record in execution
of turnkey irrigation projects: The promoter of the company Mr.
Ashok Karva is having over two decades of experience in the
irrigation project execution. MSPL is supported by qualified and
professional management team.
MSPL a Pune based ISO 9001:2008 Certified Company was incorporated
in 1991 as a partnership concern in the name and style of
Mechatronics. The firm was converted to Private Limited in 1996 and
its nomenclature changed to MSPL. The company is engaged in
comprehensive Turnkey, Technology driven, cost-effective, Real-time
Automation and Management solutions for Water Resources, Dams,
Canals, Water Treatment Plant, Pumping Stations, Lift Irrigation
Schemes and Water Supply Schemes has successfully completed various
projects in India and abroad. The company is spearheaded by Mr.
Ashok Karva a first generation entrepreneur and is currently has
executed projects in Narayanpur, Pune, Hoshangabad, Amravati,
Tehri, Bhopal, Agra, Rajkot, Goa, Phalodi, Alighar & Shimla.
MISHRILAL ASSOCIATES: CARE Moves B- Ratings From Not Cooperating
----------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Mishrilal Associates Private Limited (MAPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 15.00 CARE B-; Stable; Revised from
Facilities CARE B-; Stable; Issuer not
cooperating On the basis of
best available information
Long-term/Short- 15.00 CARE B-; Stable/CARE A4
Term Bank Revised from CARE A4; ISSUER
Facilities NOT COOPERATING
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of MAPL continue to
remain constrained by its small and declining scale of operations,
low net profit margin, leveraged capital structure and weak debt
coverage indicators. The ratings, further, continue to remain
constrained by risk associated with elongated operating cycle,
highly competitive nature of industry along with business risk
associated with tender-based orders. The ratings, however,
continue to draw comfort experienced management coupled with long
track record of operations.
Rating Sensitivities
Positive Factors
* Improvement in scale of operations as marked by total operating
income of above INR60 crore over the medium term on sustained
basis.
* Improvement in the capital structure as marked by overall
gearing ratio of below 1.50 times.
Negative Factors
* Decline in profitability margins as marked by PBILDT and PAT
margin below 8.00% and 1.00% respectively.
Detailed description of the key rating drivers
Key Rating Weaknesses
* Small and declining scale of operations: MAPL is a small
regional player mainly involved in executing electrical contracts.
The ability of the company to scale up to larger-sized contracts
having better operating margins is constrained by its comparatively
small capital base of INR6.11 crore as on March 31, 2020 and total
operating income of INR28.84 crore in FY20 (refers to the period
April 1 to March 31; based on provisional results). Moreover, the
company's total operating income has been declining over the past
three years from INR106.56 crore in FY18 to INR28.84 crore in FY20
on account of lower orders received for execution. The small scale
of operations in a competitive industry limits the bidding
capability, pricing power and benefits of economies of scale.
* Low net profit margin: The profitability margins of the
company have remained low during past three financial years
(FY18-FY20) as the profitability largely depends upon nature of
contract executed. However, PBILDT margin of the company improved
and stood at 13.48% in FY20 as against 10.36% in FY19 mainly on
account of execution of contracts having higher profitability
margins. Further, PAT margin of the company declined and stood at
1.38% in FY20 as against 2.95% in FY19 mainly on account of
increase in interest expenses.
* Leveraged capital structure and weak debt coverage indicators:
The capital structure of the company stood leveraged as on past
three balance sheet dates ending March 31, '18-'20 on account of
high debt levels against low net worth base. Overall gearing ratio
deteriorated and stood at 4.25x as on March 31, 2020 as against
4.08x as on March 31, 2019 mainly on account of higher utilization
of working capital borrowings as on balance sheet date. Further,
owing to high finance cost due to high debt levels; the debt
coverage indicators as marked by interest coverage and total debt
to GCA continue to remain weak and stood at 1.22x and 47.15x
respectively, during FY20.
* Elongated operating cycle: The operating cycle of the company
continue to remain elongated as marked by operating cycle of 139
days for FY20. The firm raises bills on milestone basis i.e., on
the completion of certain percentage of work and thereon which gets
acknowledge by customer after necessary inspection of work done.
The entire process takes around 2-3 months. Furthermore, there is
normally a procedural delays in relation being customers are mainly
public sector undertakings. Thus, the average collection period
stood elongated for FY20. The company maintains minimum inventory
in the form of raw materials at different sites for smooth
execution of contracts resulting into average inventory holding
period of around 70 days for FY20. Further, the company has an
agreement with it suppliers and normally makes payment to its
suppliers once the same gets realized from its debtors. Thus, the
average utilization of fund-based working capital limits remained
almost 90% utilized for past 12 months ending June, 2020.
* Highly competitive nature of industry: MAPL faces direct
competition from various organized and unorganized players in the
market. There are number of small and regional players catering to
the same market which has limited the bargaining power of the
company and has exerted pressure on its margins. Further, the award
of contracts are tender driven and lowest bidder gets the work.
Hence, going forward, due to increasing level of competition and
aggressive bidding, the profits margins are likely to be under
pressure in the medium term.
* Business risk associated with tender-based orders: The company
majorly undertakes government projects, which are awarded through
the tender-based system. The company is exposed to the risk
associated with the tender-based business, which is characterized
by intense competition. The growth of the business depends on its
ability to successfully bid for the tenders and emerge as the
lowest bidder. Further, any changes in the government policy or
government spending on projects are likely to affect the revenues
of the company.
Key Rating Strengths
* Experienced management coupled with long track record of
operations: Mr. Abhishek Agarwal, Mrs. Babita Agarwal, Mr. Kapil
Agarwal, Mr. Abhilash Agarwal and Mrs. Pooja Khandelwal are the
directors of the company. Mr. Abhishek Agarwal is graduate by
qualification and Mrs. Babita Agarwal is post graduate by
qualification. They both have around nearly a decade of experience
in electrical contracting business through their association with
MAPL and they collectively look after the overall operations of the
company. Prior to this, Mr. Abhishek Agarwal has an experience of
around a decade in manufacturing of electrical equipment like
conductors, transformers etc. in his individual capacity and
through his association with other family concerns.
Liquidity: Stretched
MAPL has stretched liquidity position evident from elongated
operating cycle owing to delay in realization of receivables from
its debtors in timely manner. However, the cash and bank balances
stood modest at INR1.18 crore as on March 31, 2020 and has GCA of
INR0.55 crore during FY20. Its working capital limits are utilized
to the extent of 90% during the past 12 months ending June, 2020.
Further, in line with RBI guidelines in wake of COVID-19 pandemic,
the company has availed moratorium period for its facilities
provided by the bank.
Analytical approach: Standalone
Bareilly, Uttar Pradesh based Mishrilal Associates Private Limited
(MAPL) was incorporated in November, 2011 as a private limited
company. The currents directors of the company are namely; Mr.
Abhishek Agarwal, Mrs. Babita Agarwal, Mr. Kapil Agarwal, Mr.
Abhilash Agarwal and Mrs. Pooja Khandelwal. The company undertakes
electrical contracts on turnkey basis wherein it is engaged in
supply, erection and installation of power sub-stations, laying of
underground cables and transmission lines of 33 KV and 11 KV,
distribution & power transformers, switchyard, bus ducts, etc.
mainly for government departments like Uttarakhand Power
Corporation Limited (UPCL), Uttar Pradesh Power Transmission
Corporation Limited (UPPTCL), Paschimanchal Vidyut Vitaran Nigam
Limited (PVVNL), Madhyanchal Vidyut Vitaran Nigam Limited (MVVNL)
and South Bihar Power Distribution Company Limited (SBPDCL).
MY AUTO WORLD: CARE Moves B Debt Rating From Not Cooperating
-------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of My
Auto World (Kanpur) Private Limited (MAWKPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 20.00 CARE B; Stable; Revised from
Facilities CARE B; Stable; Issuer not
cooperating On the basis of
best available information
Short Term Bank 6.30 CARE A4; Issuer not
Facilities cooperating; Based on best
available information
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of My Auto World Kanpur
Private Limited continues to remain constrained mainly on account
of declining scale of operations with low networth base, weak
financial risk profile marked by low profitability margins,
leveraged capital structure, stressed debt service coverage
indicators, working capital intensive nature of operations along
with pricing constraints and margin pressure arising out of
competition from various auto dealers in the market. However, the
ratings derive strength from experienced promoters and the company
association with reputed brands as its
authorised dealer.
Rating Sensitivities
Positive Factors
* Sustained improvement in the scale of operations beyond INR200
crores while having EBIDTA margin of above 3.5% on sustainable
basis.
* Increase in the net-worth base of the company, thereby, leading
to improvement in the overall gearing ratio below 1x.
Negative Factors
* Decline in the scale of operations of the company below INR100
crores, thus impacting profitability margins
* Decline in the net-worth base of the company, thereby leading
to further deterioration in the overall gearing ratio.
Detailed description of the key rating drivers
Key Rating Weaknesses
* Declining Scale of Operations and low net-worth base: The
scale of operations of the company has been declining on y-o-y
basis over the past three years (FY18-FY20, FY refer to period
April 01 to March 31). The scale of operations of the company stood
modest marked by total operating income of INR139.06 crores during
FY20 (PY: INR274.75 crores). The same is on account of decline in
the sales volume during FY20. During FY20, the company sold 543
vehicles as against 1227 vehicles sold during FY19. Furthermore,
the tangible net worth stood low at INR7.57 crores as on March 31,
2020. The small scale limits the company's financial flexibility in
times of stress and deprives it from scale benefits.
* Weak financial risk profile: The financial profile of the
company stood weak marked by moderate profitability margins along
with leveraged capital structure. An automotive dealer's revenues
are primarily driven by volumes, while the profits are driven by
the sale of spares and service income, as the latter fetches higher
profit margins. The company has limited negotiating power with
manufacturers and has no control over the selling price of the
vehicles as the same is fixed by the manufacturers. Thus, the
PBILDT and PAT margins of the company stood at 3.42% and 0.56%
respectively in FY19. Due the impact on the scale of operations,
the profitability margins of the company moderated. The PBILDT
margin stood at 2.20% during FY20 (based on provisional results).
The company reported net losses in FY20.
Majority of debt comprises of working capital borrowings to fund
inventory which is inherent in the automobile dealership business
and unsecured loans from promoters. The capital structure of the
company marked by overall gearing ratio stood leveraged on account
of high dependence on external borrowing to meet the working
capital requirements of the company coupled with low net worth base
of the company. The overall gearing ratio stood highly leveraged at
4.41x (PY: 7.55x). Though improved, it continued to remain
leveraged. Further, the debt service coverage indicators of the
company remained weak owing to moderate profitability coupled with
high debt levels. Interest coverage ratio of and total debt to GCA
stood at below unity and negative (due to cash losses) respectively
in FY20 as against 1.38x and 36.90x respectively in FY19.
* Limited bargaining power and Fortunes of the company linked
with growth plans of the manufacturer: The company procures its
product directly from its principal; and is not dependent upon any
dealers/distributors for business which helps the company to avail
better pricing of purchases. Furthermore, the fortunes of the
company are directly linked to its supplier. This also exposes the
company's revenue growth and profitability to its supplier's future
growth prospects. Any impact on business and financial profile of
the manufacturer will also have an impact on the growth prospects
of the company. Moreover, dealers have less bargaining power over
principal manufacturer. In order to capture the market share, the
auto dealers' offers better buying terms like allowing discounts on
purchases. Such discounts offered to customers create margin
pressure.
Inherent competition and cyclical nature of the auto industry The
company is exposed to competition from the products of other OEM's
and dealers operating in the same region. Accordingly, the company
has to resort to offering better buying terms like allowing
discounts to capture the market share. Such discounts create margin
pressure and negatively impact the earning capacity of the company.
However, the company's association with its customers, its
established network helps it to sustain the competition and
maintain its strong market position in the region. Furthermore, the
auto industry is inherently vulnerable to the economic cycles and
is highly sensitive to the interest rates and fuel prices. The
company thus faces significant risks associated with such cyclical
nature of the auto industry.
* Industry Outlook: Due to multiple lockdowns imposed in various
states of the country in April and May 2020, economic activity in
the country came to a sudden standstill. However with gradual
relaxations on restrictions in movement of people in June 2020,
manufacturing activity witnessed an improvement during the month.
With this, automobiles production, sales as well as exports
sequentially rose in June 2020, after two consecutive months of
decline. The automobiles sector was already grappling with soft
consumer demand in FY20. Additionally, the strict enforcement of
Government rules to adopt new emission standards led to OEMs hiking
their product prices and further deferred consumers' purchases.
Against this backdrop of an existing slowdown environment, the
outbreak of Covid-19 in midMarch 2020 added to the woes of this
industry. The pandemic caused disruptions in supply chains and
brought manufacturing activity to a halt for nearly 30 days. Due to
the multiple lockdowns, various OEMs, ancillaries and dealers
located in containment zones, witnessed near nil activity in April
and few days of May 2020. The sector is expected to have slow-down
due to unfavourable customer sentiments and demand is expected to
remain muted during H1FY21. Attributed to all this, business risk
profile is expected to remain weak in the near term.
Key Rating Strengths
* Experienced Promoters: The company is incorporated and
promoted by Sh. Purshottam Das Garg, Mr. Vijay Garg and Mrs. Kavita
Garg. Sh. P.D. Garg is a qualified Chartered Accountant and has an
experience of more than 50 years. Mr. Vijay Garg is a graduate by
qualification and has an experience of around more than twenty
years in the dealership business through his association with MCNPL
and other group concerns. Mrs. Kavita Garg has an experience of
around nine years in the dealership business through her
association with MCNPL and other group concerns. Further, company
has a dedicated team of marketing and sales professionals, service
in-charge and customer relation officers, who have more than one
and half decade of experience in their respective fields.
* Association with reputed brand name: The company is the
authorized dealer of Tata Motors Limited (TML). TML has been the
market leader in commercial vehicle segment for more than five
decades.
Liquidity: Poor
The company has poor liquidity marked by lower gross cash accruals,
almost fully utilized bank limits and modest free cash and bank
balance amounting to INR0.20 crores. The company needs to stock
different models of vehicles and spares in the showrooms in order
to ensure adequate availability and visibility, which leads to
inventory holding days of around 50 days in FY19 (PY: 19 days) (the
increase in the inventory days is on account of slow-down in the
auto sector). Though the sales to customers are made on “Cash and
Carry” basis however, around 70% of the vehicles are bought on
vehicle financing basis through banks. The said phenomenon results
in a collection period of around 29 days (PY: 28 days). Besides
this, the large working capital requirements are met through bank
borrowings which remained utilized between 95 to 100% for the last
12 months ended May, 2020.
Kanpur (Uttar Pradesh) based My Auto World (Kanpur) Private Limited
(MAWKPL) was incorporated on July 27, 2012 and commenced its
commercial operations in 2013. The company is currently being
managed by Sh.Purshottam Das Garg, Mr. Vijay Garg and Mrs. Kavita
Garg. MAWKPL is an authorized dealer of Tata Motors vehicles since
2016. For Tata Motors, the company operates through its 3S (Sales,
Spare & Service) facility and is engaged in the sale of commercial
vehicle. The company manages its operations from Kanpur, Uttar
Pradesh. The company has 1 showroom (own), 2 workshops (own), 1
workshop (rented), 1 stockyard (own), and 1 Sales Office (own) and
has total 132 employees.
MY CAR NEXA: CARE Moves B on INR26cr Loans From Not Cooperating
---------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of My
Car Nexa Private Limited (MCNPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 26.00 CARE B; Stable; Revised from
Facilities CARE B; Stable; Issuer not
cooperating On the basis of
best available information
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of MCNPL continue to
remain constrained mainly on account of small and declining scale
of operations with low networth base, weak financial risk profile
marked by low profitability margins, leveraged capital structure,
stressed debt service coverage indicators, working capital
intensive nature of operations along with pricing constraints and
margin pressure arising out of competition from various auto
dealers in the market. However, the ratings derive strength from
experienced promoters and the company being authorized dealer of
Maruti Suzuki India Limited.
Rating Sensitivities
Positive Factors
* Sustained improvement in the scale of operations beyond INR100
crores.
* Increase in the net-worth base of the company, thereby, leading
to improvement in the overall gearing ratio below 1.5x.
Negative Factors
* Decline in the scale of operations below INR50 crores, thus
impacting profitability margins.
* Fall in the net-worth base of the company on account of
losses.
Detailed description of the key rating drivers
Key Rating Weaknesses
* Small and declining scale of operations with low networth base:
The company started its commercial operations in January 2016 and
its scale of operations has been declining on y-o-y basis over the
past three years (FY18-FY20, FY refer to period April 01 to March
31). The scale of operations stood modest marked by a total
operating income (TOI) of INR 47.38 crores during FY20 (PY:
INR66.67 crores). The same is on account of decline in the sales
volume during FY20. During FY20, the company sold 842 vehicles as
against 1185 vehicles sold during FY19. Furthermore, the tangible
net worth stood low at INR3.33 crore as on March 31, 2020. The
small scale limits the company's financial flexibility in times of
stress and deprives it from scale benefits.
* Weak financial risk profile: An automotive dealer's revenues
are primarily driven by volumes, while the profits are driven by
the sale of spares and service income, as the latter fetches higher
profit margins. The company has limited negotiating power with
manufacturers and has no control over the selling price of the
vehicles as the same is fixed by the manufacturers. Thus, the
PBILDT and PAT margins of the company stood at 5.46% and 0.24%
respectively in FY19. Due the impact on the scale of operations,
the profitability margins of the company moderated. The PBILDT
margin stood at 4.01% during FY20 (PY: 5.46%). The company reported
net losses in FY20 (based on provisional results). Majority of debt
comprises of working capital borrowings to fund inventory which is
inherent in the automobile dealership business and unsecured loans
from promoters. The capital structure stood leveraged with an
overall gearing of 8.25x as on March 31, 2020 (PY: 6.71x as on
March 31, 2019). The same has been primarily on account of low
networth base and high dependence on external borrowings to meet
its working capital requirements. The coverage indicators of the
company as marked by interest coverage ratio stood stressed at
below unity (PY: 1.11x) for FY20.
* Limited bargaining power and Fortunes of the company linked
with growth plans of the manufacturer: The company procures its
product directly from its principal; and is not dependent upon any
dealers/distributors for business which helps the company to avail
better pricing of purchases. Furthermore, the fortunes of the
company are directly linked to its supplier. This also exposes the
company's revenue growth and profitability to its supplier's future
growth prospects. Any impact on business and financial profile of
the manufacturer will also have an impact on the growth prospects
of the company. Moreover, dealers have less bargaining power over
principal manufacturer. In order to capture the market share, the
auto dealers' offers better buying terms like allowing discounts on
purchases. Such discounts offered to customers create margin
pressure.
* Inherent competition and cyclical nature of the auto industry:
The company is exposed to competition from the products of other
OEM's and dealers operating in the same region. Accordingly, the
company has to resort to offering better buying terms like allowing
discounts to capture the market share. Such discounts create margin
pressure and negatively impact the earning capacity of the company.
However, the company's association with its customers, its
established network helps it to sustain the competition and
maintain its strong market position in the region. Furthermore, the
auto industry is inherently vulnerable to the economic cycles and
is highly sensitive to the interest rates and fuel prices. The
company thus faces significant risks associated with such cyclical
nature of the auto industry.
* Industry Outlook: Due to multiple lockdowns imposed in various
states of the country in April and May 2020, economic activity in
the country came to a sudden standstill. However with gradual
relaxations on restrictions in movement of people in June 2020,
manufacturing activity witnessed an improvement during the month.
With this, automobiles production, sales as well as exports
sequentially rose in June 2020, after two consecutive months of
decline. The automobiles sector was already grappling with soft
consumer demand in FY20. Additionally, the strict enforcement of
Government rules to adopt new emission standards led to OEMs hiking
their product prices and further deferred consumers' purchases.
Against this backdrop of an existing slowdown environment, the
outbreak of Covid-19 in midMarch 2020 added to the woes of this
industry. The pandemic caused disruptions in supply chains and
brought manufacturing activity to a halt for nearly 30 days. Due to
the multiple lockdowns, various OEMs, ancillaries and dealers
located in containment zones, witnessed near nil activity in April
and few days of May 2020. The sector is expected to have slow-down
due to unfavourable customer sentiments and demand is expected to
remain muted during H1FY21. Attributed to all this, business risk
profile is expected to remain weak in the near term.
Key Rating Strengths
* Experienced Promoters: The company is incorporated and
promoted by Sh. Purshottam Das Garg, Mr. Vijay Garg and Mrs. Kavita
Garg. Sh. P.D. Garg is a qualified Chartered Accountant and has an
experience of more than 51 years. Mr. Vijay Garg is a graduate by
qualification and has an experience of around more than twenty one
years in the dealership business through his association with MCNPL
and other group concerns. Mrs. Kavita Garg has an experience of
around ten years in the dealership business through her association
with MCNPL and other group concerns. Further, company has a
dedicated team of marketing and sales professionals, service
in-charge and customer relation officers, who have more than one
and half decade of experience in their respective fields.
* Association with reputed brand name: MCNPL is the authorized
dealer of Maruti Suzuki India Limited (MSIL) which has been the
market leader in passenger car segment for more than three decades.
MSIL offers a wide range of cars across different segments
including 15 brands and over 150 variants. In the domestic
passenger car market, MSIL has established market position
underpinned by the strong position of its healthy presence in the
small, Hatch back, Sedan, and SUV segment in domestic market.
Liquidity analysis: Poor
The company has poor liquidity marked by lower gross cash accruals,
fully utilized bank limits and modest free cash and bank balance
amounting to INR1.19 crores. The company needs to stock different
models of vehicles and spares in the showrooms in order to ensure
adequate availability and visibility leading to higher inventory
days. The average inventory holding days of the company stood at 64
days in FY20 (PY: 59 days). The increase in the inventory days was
on account of the slowdown in the auto-sector, thus impacting the
overall demand. Though the sales to customers are made on "Cash and
Carry" basis however, around 70% of the vehicles are bought on
vehicle financing basis through banks. The said phenomenon results
in a collection period of around 52 days. Further, the company
received a credit period of around 7 days from the suppliers for
procurement. Besides this, the large working capital requirements
are met through bank borrowings which remained almost fully
utilized for the past 12 months ended June, 2020.
Kanpur (Uttar Pradesh) based My Car Nexa Private Limited (MCNPL)
was incorporated on November 05, 2015. The company is currently
being managed by Mr. Vijay Garg, Sh. Purshottam Das Garg and Mrs.
Kavita Garg. MCNPL is an authorized dealer for passenger cars
manufactured by Maruti Suzuki India Ltdfor its premium sales
channel, 'NEXA'. The showroom became operational in January 2016;
MSIL currently sells the Baleno (All variants), S-Cross, Ciaz (All
variants) and Ignis through NEXA outlets. The company manages its
operations through its 3S (Sales, spare and service) facility
located in Kanpur, Uttar Pradesh. The showroom has attached
workshop facility for the post sales services of cars.
NIKHIL ADHESIVES: ICRA Withdraws MB+ Rating on INR3.50cr Debt
-------------------------------------------------------------
ICRA has withdrawn the ratings on certain bank facilities of Nikhil
Adhesives Limited (NAL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fixed Deposits 3.50 MB+(Stable) ISSUER NOT
COOPERATING; Withdrawn
Rationale
The ratings are withdrawn in accordance with ICRA's policy on
withdrawal and suspension and completion of the period of notice of
withdrawal, as the company had requested for the withdrawal of the
rating. ICRA does not have adequate information to suggest that the
credit risk has changed since the time the ratings were last
reviewed.
Key rating drivers and their description
Key rating drivers have not been captured as the rating is being
withdrawn.
Nikhil Adhesives Limited (NAL) is engaged in the manufacturing of
industrial and consumer chemical products like emulsions,
adhesives, binders, thickeners and construction chemicals since
1992. The company is also engaged in the trading of chemicals. NAL
has three manufacturing facilities at Dahanu (Maharashtra),
Silvassa and Dahej (Gujarat). NAL is listed on the Bombay Stock
Exchange (BSE).
PRAKASH STEELAGE: CARE Keeps D on INR220cr Loans in Not Cooperating
-------------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Prakash
Steelage Limited (PSL) continues to remain in the 'Issuer Not
Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank 150.00 CARE D; Issuer not cooperating;
Facilities Based on best available
information
Short-term bank 70.00 CARE D; Issuer not cooperating;
facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from PSL to monitor the rating(s)
vide e-mail communications dated 14th July 2020, 15th July 2020,
17th July 2020, 20th July 2020, 28th July 2020, 29th July 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 of Prakash Steelage Limited bank facilities
is denoted as CARE D/CARE D; ISSUER NOT COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating(s).
Detailed description of the key rating drivers
The rating of the bank facilities of Prakash Steelage Limited is on
account of ongoing delay in servicing of its debt obligation as per
audit qualification statement of FY20.
Key Rating Weaknesses
* Delay in servicing of debt obligations: There have been delays in
servicing of its debt obligation.
PSL, incorporated on May 9, 1991, was converted into a public
limited company on August 12, 1997 and was listed in August 2010.
PSL started its business with trading in the stainless steel (SS)
sheets, coils, plates and scrap. The company now is engaged in the
manufacturing of stainless steel (seamless and welded) pipes and
tubes and trades into stainless steel sheets and coils. The company
products are used in heat exchanger, evaporators, heating elements,
fluid piping, pumps, valves, condensers and in many other
instrumentation equipment.
RAGHUVANSHI COTTON: CARE Keeps D on INR69cr Loans in NonCooperating
-------------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Raghuvanshi
Cotton Ginning and Pressing Private Limited (RCGPL) continues to
remain in the 'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank 69.44 CARE D; Issuer not cooperating;
Facilities Based on best available
information
Detailed Rationale & Key Rating Drivers
CARE had, vide press release dated March 2, 2017, placed the rating
of RCGPL under the 'Issuer Non-cooperating' category as the company
had failed to provide information for monitoring of the ratings.
RCGPL continues to be non-cooperative despite repeated requests for
submission of information through e-mails, phone calls and a
letter/e-mail dated July 15, 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 September 20, 2019, the following
were the rating weakness (updated based on the best available
information i.e. banker's feedback).
Key Rating Weakness
* On-going delays in debt servicing: Debt servicing of RCGPL is
irregular and the account has been classified as a Non Performing
Asset (NPA). Further, the lender (State Bank of India) has taken
over possessions of the properties of RCGPL u/s 13(4) of the
SARFAESI Act, 2002 as per the auction sale notice issued in
November 2017.
Incorporated in 2006 by Mr Dinesh Selani, Rajkot-based RCGPL is a
55% subsidiary of Bhadresh Trading Corporation Limited. As on March
31, 2015, RCGPL had a composite cotton ginning and pressing unit at
Rajkot with an installed production capacity of 34,732 cotton bales
(1 bale=170 kgs) per annum and 18 oil expellers having an installed
capacity of 2,721 metric tonne per annum (MTPA) at its
manufacturing facility located at Rajkot, Gujarat.
RAJARAMBAPU PATIL: CARE Lowers Rating on INR500cr Loan to B
-----------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Rajarambapu Patil Sahakari Sakhar Karkhana Limited (RPSSKL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 500.00 CARE B; Issuer not cooperating;
Facilities Revised from CARE B+; Issuer
Not cooperating Based on Best
available Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated June 11, 2019, placed the
rating of RPSSKL under the 'issuer non-cooperating' category as
RPSSKL 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. RPSSKL continues to
be non-cooperative despite repeated requests for submission of
information through e-mails, phone calls and a letter/email dated
July 15, 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 ratings have been revised on account of non-availability of
adequate information and inherent risk associated with the
industry.
Detailed description of the key rating drivers
At the time of last rating on June 11, 2019, the following were the
rating strengths and weaknesses
Key Rating Strengths
* Long track record in sugar industry along with experienced:
promoter group and diversified business profile of the promoter
Group RPSSKL, a group company of the Sangli based Rajarambapu
Group, was incorporated in 1968 to undertake sugar & sugar related
production. Starting from a small crushing capacity of 1,250 TCD in
1970, the company's crushing capacity now stood at 16,500 TCD
(licensed) as on November 30, 2016. The company has also expanded
into by-products related production like molasses, cogeneration
power, manure and bottling. The society has over five decades of
experience in the running sugar mills and has been the recipient of
numerous awards time and again.
* Large scale of operations through partially integrated standalone
units resulting in some degree of de-risking of core sugar
business: RPSSKL with an installed cane crushing capacity of 16,500
TCD, distillery of 75 KLPD and a co-generation unit of 40 MW is a
moderate sized player in the sugar industry that is majorly
dominated by large sized players. The company has 4 sugar
production units. Out of this, 1 unit is fully integrated, 1 unit
is partially integrated while the remaining two are standalone
sugar production units. The partially integrated units enables
diversification of revenue stream and company's ability to absorb
the fluctuations in the prices of raw material (sugarcane) and
finished goods and mitigate the seasonality and cyclicality
inherent to the sugar industry to an extent.
* Cordial relations with the local populace and cane development
initiatives leading to adequate procurement of cane coupled with
presence in a high recovery zone: The sugar plant of RPSSKL is
located in Sangli District of Maharashtra. The command area of
RPSSKL comprises of over 105 villages. The command area is well
irrigated over the years with consistent supply of water through
the Krushna & Warana rivers, the water from which is distributed to
agriculture lands and industries in region. Favorable climatic
condition and adequate irrigation facilities have rendered
sugar-cane with a high recovery rate ranging between 12.3%-13.5%.
Further RPSSKL's, promoters have wide acceptance among local
farmers and enjoys a cordial relationship, facilitating company's
cane procurement initiative on such a large scale. The sugar
factory also provides fertilizers to the cane producing farmers in
the industrial area.
* Improvement in the financial risk profile marked by improvement
in the profitability and healthy cash accruals: The total operating
income (TOI) of the company registered a growth of 9.49% to
INR988.21 crore during FY16 as against TOI of INR902.57 crore
during FY15. Sale of the sugar continued to be the major driver of
the revenue with sales of INR767.70 crore during FY16 (FY15:
INR674.62 crore). During FY16, RPSSKL reported PBILDT margin of
9.80% as against operating loss during FY15. In line with the
improvement in the PBILDT margin, the PAT margin of the company
also improved to 2.22% and company reported PAT of INR21.89 crore
as against PAT loss of INR78.19 crore during FY15.
Key Rating Weaknesses
* Highly leveraged capital structure coupled with weak debt
coverage indicators: Healthy accretion of profits to its networth
has resulted into augmentation of the net worth base to INR33.79
crore as on March 31, 2016. However, lower net worth base due to
past losses coupled with high debt led by recently completed debt
funded capital expenditure has led to highly leveraged capital
structure as marked by overall gearing of 22.44x as on March 31,
2016. Further, debt to equity ratio also remained high at 7.20x as
on March 31, 2016. With the improvement in the profitability, the
interest coverage ratio improved to 1.58x during FY16 while total
debt to GCA remained weak at 21.40x. Although improved, the debt
coverage indicators continue to remain modest. The total debt
outstanding to the tune of INR758.23 crore consists of term debt of
INR243.35 crore and working capital bank borrowing of INR514.88
crore as on March 31, 2016.
* Cyclicality and agro-climatic risk associated with the sugar
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.
RPSSKL was incorporated by Late Rajarambapu Patil in 1968 under
'The Maharashtra Co-operative Societies Act 1960' as 'Walwa Taluka
Sahakari Sakhar Karkhana Limited' to undertake sugar production in
Sangli (Maharashtra). The name was subsequently changed to
Rajarambapu Patil Sahakari Sakhar Karkhana Limited. RPSSKL is a
part of the Sangli based 'Rajarambapu Group' whose diversified
business profile comprises operations in sugar production,
distillery, power generation, co-operative bank (Rajarambapu
Sahakari Bank Limited), co-operative spinning mills, milk
federation, soya bean extraction plant, educational institutes and
petrol pumps.
RIBA TEXTILES: Ind-Ra Keeps BB LT Issuer Rating in Non-Cooperating
------------------------------------------------------------------
India Ratings and Research (Ind-Ra) has maintained Riba Textiles
Limited's (RTL) Long-Term Issuer Rating of 'IND BB (ISSUER NOT
COOPERATING)' in the non-cooperating category and has
simultaneously withdrawn it.
The instrument-wise rating actions are:
-- INR300 mil. Fund-based working capital limits* maintained in
non-cooperating category and withdrawn;
-- INR12 mil. Non-fund-based working capital limits* maintained
in non-cooperating category and withdrawn; and
-- INR260 mil. Term loan** due on August 31, 2022, maintained in
non-cooperating category and withdrawn.
*Maintained at 'IND BB (ISSUER NOT COOPERATING)/IND A4+ (ISSUER
NOT COOPERATING)' before being withdrawn
**Maintained at 'IND BB (ISSUER NOT COOPERATING)' before being
withdrawn
KEY RATING DRIVERS
The ratings have been maintained in the non-cooperating category
because the issuer did not participate in the rating exercise
despite continuous requests and follow-ups by Ind-Ra.
Ind-Ra is no longer required to maintain the ratings, as it has
received a no-objection certificate from the lender (prior to 30
June 2020). This is consistent with the Securities and Exchange
Board of India's circular dated March 31, 2017, for credit rating
agencies.
COMPANY PROFILE
RTL manufactures beach and bath towels for brands such as TK Maxx,
Metro Sears, BigW, Loblaws, CasaFina, Duex Fils, Hardcastle & Leeds
UK, Jaican Jax, Notting Hill, and Pashmina Cotton. The company also
supplies bathrobes and bath mats manufactured on a job-work basis.
SAVALIA COTTON: CARE Keeps D on INR44.22cr Loans in Not Cooperating
-------------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Savalia
Cotton Ginning & Pressing Private Limited (SCGPL) continues to
remain in the 'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank 44.22 CARE D; Issuer not cooperating;
Facilities Based on best available
information
Short-term Bank
Facilities 3.50 CARE D; Issuer not cooperating;
Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide press release dated March 2, 2017, placed the rating
of SCGPL under the 'Issuer Non-cooperating' category as the company
had failed to provide information for monitoring of the ratings.
SCGPL continues to be non-cooperative despite repeated requests for
submission of information through emails, phone calls and a
letter/e-mail dated July 15, 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 September 20, 2019, the following
were the rating weakness (updated based on the best available
information i.e. banker's feedback).
Key Rating Weakness
* On-going delays in debt servicing: Debt servicing of SCGPL is
irregular and the account has been classified as a Non Performing
Asset (NPA).
Incorporated in November 1999, Rajkot-based, SCGPL is promoted by
Mr Utpal Savalia and Mr Jitendra Bhalara and is engaged in cotton
ginning & pressing and trading of cotton & cotton seeds. As on
March 31, 2015, SCGPL had an installed capacity of 13,000 Metric
Tonne Per Annum (MTPA) of cotton ginning at its processing unit
located at Shapar Industrial Area near Rajkot in Gujarat.
SRINIVASA FEED: CARE Lowers Rating on INR8cr LT Loan to B
---------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Srinivasa Feed Mixing Plant (SFMP), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 8.00 CARE B; Stable; Issuer not
Facilities cooperating; Revised from
CARE B+; Stable; On the basis
of best available information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from SFMP to monitor the rating
vide e-mail communications from February 2020 to June 30, 2020 and
numerous phone calls. However, despite CARE's repeated requests,
the firm has not provided the requisite information for monitoring
the rating. In line with the extant SEBI guidelines, CARE has
reviewed the rating on the basis of the best available information
which however, in CARE's opinion is not sufficient to arrive at a
fair rating. The rating(s) on Srinivasa Feed Mixing Plant bank
facilities will now be denoted as CARE B; Stable; ISSUER NOT
COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
The revision in the rating takes into account the non-availability
of requisite information due to non- cooperation by SFMP with
CARE's efforts to undertake a review of the outstanding ratings as
CARE views information availability risk as key factor in its
assessment of credit risk profile.
At the time of last rating dated November 1, 2019, the following
were the Strengths and Weaknesses.
Key Rating Weaknesses
* Small scale of operations with fluctuating total operating income
and thin PAT margins during the review period: The scale of
operations remained small marked by a total operating income (TOI)
of INR13.93 crore in FY19 (Prov.). The TOI stood at INR9.27 crore
in FY17. Whereas in FY18 the TOI improved to INR 15.87 crore due to
the order received from Animal Husbandry Department of Animal
Husbandry. In FY19 (prov.) the total operating income declined and
stood at INR 13.93 crore due to low orders received when compared
to previous year.
* Financial risk profile marked by Leveraged capital structure and
weak debt coverage indicators: The capital structure of the firm
remained leveraged during review period. The debt equity ratio has
improved from 1.80x as on March 31, 2017 to 0.45x in FY 19(prov.)
on account of decrease in term loans. Overall gearing ratio
deteriorated from 1.83x in FY 17 to 2.51x in FY 19 (prov.) due to
increase in unsecured loans borrowed to manage the day to day
operation of the firm coupled with higher utilization of working
capital as on balance sheet date. The firm had weak debt coverage
indicators during review period. The Total debt/GCA deteriorated
from 14.68x in FY17 to 19.26x FY18 due to decrease in GCA and
increase in total debt. And the ratio improved to 14.50x in FY19
(prov.) due to increase in GCA. Interest coverage ratio
deteriorated from 1.94x in FY17 to 1.56x in FY18 due to increase in
interest expenses on account of unsecured loans. In FY19 (prov.)
the ratio improved to 1.79x due to decrease in interest expense on
account of repayment in term loan.
* Working capital intensive nature of operations: The operating
cycle of the firm deteriorated from 139 days in FY17 to 160 days in
FY19 (prov.), mainly due to high inventory period. The collection
period days increased from 17 days in FY17 to 34 days in FY19
(prov.). The firm makes payment to its creditors within 40 - 50
days. The average utilization of working capital borrowings is 95%
as on June 05, 2019.
* Highly fragmented industry with intense competition from large
number of players: The firm is engaged in manufacturing of cattle
feeds which is highly fragmented industry due to presence of large
number of organized and unorganized players in the industry
resulting in huge competition.
* Proprietorship nature of business with inherent risk of
withdrawal of capital: The firm being in a proprietorship concern
is exposed to inherent risk of capital withdrawal by proprietor due
to its nature of constitution. Any significant withdrawals from the
capital account would be impacted the net worth and thereby the
firm's capital structure.
Key Rating Strengths
* Experience of the promoter for more than a decade in cattle feed
manufacturing segment: SFMP is promoted by Mr. Syamu Bellam who is
having an experience of more than a decade in the feed
manufacturing segment. Due to long term presence in the market, the
firm has developed good relation with customers and suppliers.
* Satisfactory PBILDT margin albeit fluctuations during the review
period: The PBILDT margin of the firm stood satisfactory during
the review period. The PBILDT stood at 14.07% in FY17 and declined
to 9.18% in FY18 due to increase in raw material prices and in
FY19(prov.) the PBILDT has improved to 10.12%. Although PBILDT
margins are fluctuating during the period it remained
satisfactory.
* Stable outlook of Animal feed industry: The Indian animal feed
market was worth INR817 Billion in 2018. The market is further
projected to reach INR1,683 Billion by 2024, growing at a CAGR of
12.7% during 2019-2024. India currently represents one of the
fastest growing animal feed markets in the world. The increasing
demand for animal protein and dairy products has resulted in a
growing livestock population in India, which in turn has increased
the demand for animal feed. Modern animal feed products are
manufactured by carefully selecting and blending ingredients to
impart highly nutritional diets that both increase the quality of
its end products such as meat, milk, eggs and at the same time
maintain the health of the animal.
Ongole based Srinivasa Feed Mixing Plant (SFMP) was established in
the year 2008 as a proprietorship concern by Mr Syamu Bellam. The
promoter has more than a decade of experience in the feed
manufacturing industry. The entity is engaged in manufacturing of
cattle feed with an installed capacity of 10 TPH with an actual
capacity of 3000 TPM. SFMP sells the products to the customers
located in Kerala, Tamil Nadu, Maharashtra, Telangana and Andhra
Pradesh. The firm also supplies the products to Department of
Animal Husbandry. The firm procures maize, broken rice from farmers
in and around ongole and molasses from sugar cane factories.
SVM OIL: CARE Keeps B on INR14cr Loans in Not Cooperating Category
------------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of SVM Oil
Industries (SVM) continues to remain in the 'Issuer Not
Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank 14.00 CARE B; Stable; Issuer not
Facilities cooperating; Based on best
available information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from SVM to monitor the rating
vide e-mail communications/letters dated April 15, 2020, April 30,
2020, May 11, 2020, May 20, 2020, June 8, 2020, July 2, 2020 and
July 14, 2020 and July 28, 2020 and numerous phone calls. However,
despite CARE's repeated requests, the firm has not provided the
requisite information for monitoring the ratings. In line with the
extant SEBI guidelines, CARE has reviewed the rating on the basis
of the best available information which however, in CARE's opinion
is not sufficient to arrive at a fair rating. The rating on SVM's
bank facilities will now be denoted as CARE B; Stable; ISSUER NOT
COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
Detailed description of the key rating drivers
At the time of last rating on September 6, 2019, the following were
the rating strengths and weaknesses:
Key rating weaknesses
* Continuous decline in Total Operating Income (TOI) along with
thin profitability margins: Total Operating Income (TOI) of the
company has witnessed continuous decline during past three
financial years ended FY18. During FY18, TOI of the firm has
declined by 5.85% over FY17 however stood modest at INR72.95 crore
mainly due to lower trading activity done. Profitability margins of
the firm stood thin mainly on account of limited value addition
along with its presence in the highly fragmented and competitive
industry leading to pressure on profitability. During FY18, PBILDT
margin of the firm decreased marginally by 13 bps over FY17 on
account of higher cost of raw material consumed. However, with
decline in TOI and lower interest and depreciation cost, PAT level
of the firm remained in same line and stood at 0.08%. During FY19,
the firm has registered TOI of INR75.37 crore.
* Weak solvency position: Capital structure of the firm stood
leveraged with an overall gearing of 3.11 times as on March 31,
2018, improved from 3.54 times as on March 31, 2017 mainly on
account of scheduled repayment of term loans which offset to an
extent with increase in working capital bank borrowings. The debt
coverage indicators of the firm stood weak with total debt to GCA
of 54.21 times as on March 31, 2018, improved from 67.80 times as
on March 31, 2017 mainly on account of proportionately higher
decline in total debt which offset to an extent with decline in
GCA. Further, the interest coverage ratio of the firm remained in
line at 1.15 times in FY18 as against FY17.
* Stretched Liquidity Position: The operating cycle of the firm
stood elongated at 104 days in FY18. The firm provides credit
period of average 40-50 days to the customers whereas get 20-30
days credit period from its suppliers. The liquidity ratios stood
moderate with current ratio at 1.35 times and quick ratio of 0.76
times as on March 31, 2018 on account of higher inventory level.
Further, the average working capital utilization stood at 100%
during last twelve months ended March 31, 2019.
* Susceptibility to volatile raw material prices and intense
competition in the fragmented edible oil industry: The edible oil
industry is characterized by a large number of small sized
unorganized players having a regional presence. These players
primarily cater to regional demand to save on high transportation
cost. Due to highly fragmented nature of industry, the players have
limited flexibility to pass on raw material price increase.
* Seasonal nature of operations with easy availability of close
substitutes: Being agro based product, the availability of
oilseeds is susceptible to agro-climatic vagaries and
pests/diseases, which may affect crop output and/or quality.
Mustard/rapeseed oil is largely consumed in Eastern & North-Eastern
regions of India, whereas the major cultivating region is
Rajasthan, besides North Gujarat and Madhya Pradesh to an extent.
The key characteristic of mustard/rapeseed oil is pungency,
particularly in its pure form. Due to its peculiar properties
mustard/rapeseed oil has historically maintained its premium over
other forms of oils (such as palm oil, soybean and rice bran oil
which act as close substitutes). However, of late, the prices of
the mustard/rapeseed oil have been increasingly influenced from
other oils due to rising substitution following blending. Besides,
the other factors influencing prices are the mustard/rapeseed
cultivation.
Key Rating Strengths
* Experienced management: Mr Vishnu Kumar, partner, has experience
of more than two decades and is responsible for the overall affairs
of the firm. With more than 20 years of experience in the industry,
he has established relationship with clients and suppliers.
Further, he is supported by Mr. Mrs. Meera Devi who also has
experience of more than 2 decades in the industry.
* Favourable demand outlook for edible oils: The consumption of
edible oil in India has been rising steadily which can be
attributed mainly to economic boom resulting in better standard of
living, decline in edible oil prices and growth in demand for fried
processed food products. India's per capita consumption in edible
oils is growing and hence the domestic demand for edible oil is
estimated to move faster in the medium to long term on account of
the higher disposable income. India's annual per capita consumption
is well below the world average; thus signifying substantial growth
potential for the edible oil industry. The transition phase of this
growing demand is also triggered by rise in the branded packaged
edible oil. The Indian edible oil market continues to be
underpenetrated, and given the positive macro and demographic
fundamentals, it has a favourable demand growth outlook over the
medium-to-long term. Further, India is a major participant in the
export market for DOC and is the largest exporter of DOC from Asia.
Proximity to South-East Asian markets has provided the benefit of
cheaper freight and faster reach for Indian exporters. Moreover,
there is rising domestic demand for DOC from the poultry and cattle
feed industry in India to meet the demand for animal protein
products.
* Strategic location of manufacturing unit with close proximity to
raw material sources: SVM manufacturing facility is located at
Bharatpur (Rajasthan), strategically located in one of the largest
mustard producing regions of India which makes it easier for the
firm to access its primary raw material. SVM has developed good
business relations with the suppliers from whom it procures its
requirement of mustard seeds and mustard oil. Due to the proximity
to raw material producing region, SVM has access to mustard seeds
and mustard oil throughout the year which makes it possible for SVM
to provide oil and DOC on demand to its customers.
Bharatpur (Rajasthan) based S.V.M Oil Industries (SVM) was formed
in 2006 as a partnership concern. Initially, the firm was formed by
Mr. Vishnu Kumar, Mr. Satish Chand, Mrs. Manju Rani and Mrs. Meera,
however, in December 2012 Mr. Satish Chand and Mrs. Manju Rani has
retired from the firm. SVM is engaged in the business of extraction
of mustard oil from mustard seeds as well as mustard oil cake. The
firm is also engaged in the trading of mustard crude oil as well as
soyabean oil and rice bran oil. The company purchases raw material
mainly from Krishi Upaj Mandi. The company sells its product in the
local market as well as in all over Rajasthan, Bihar, West Bengal
and Uttar Pradesh etc. Further, the firm operates under brand
'Kavera' for mustard oil and mustard cake.
TATA CHEMICALS: NCLAT Dismisses Bid to Initiate Insolvency Process
------------------------------------------------------------------
The Economic Times reports that the National Company Law Appellate
Tribunal (NCLAT) has set aside a plea challenging an NCLT order
that rejected the petition to initiate insolvency proceedings
against Tata Chemicals for claimed operational debt of INR68.44
crore.
A three-member NCLAT bench upheld the order of the Mumbai bench of
the National Company Law Tribunal (NCLT) that dismissed the plea of
Allied Silica to initiate insolvency proceeding against the Tata
group firm.
Observing that the NCLT has rightly dismissed the plea as Allied
Silica has failed to prove the operational debt and its default and
further on the ground of pre-existing dispute, the appellate
tribunal rejected the appeal against it, ET relates.
"We are of the considered opinion that the Adjudicating Authority
(NCLT) has rightly dismissed the application filed under Section 9
of IBC," the NCLAT bench headed by Acting Chairman Justice B L Bhat
said, ET relays. "We do not find any reason to interfere with the
impugned order. There is no substance in the appeal which is
accordingly dismissed."
According to ET, Allied Silica and Tata Chemicals had entered into
a business transfer agreement (BTA) on April 7, 2018, under which
the silica business of the former was to be acquired by the Tata
group firm on a slump sale basis for a consideration of INR123
crore.
Tata Chemicals was also to acquire an existing silica plant at
Cuddalore, Tamil Nadu from Allied Silica.
According to the appellant - Allied Silica, Tata Chemicals had only
transferred INR65 crore out of INR123 crore and the balance INR58
crore was not paid and claimed to be due as unpaid operational
debt.
The sale was consummated on June 18, 2018, and on the same day, the
possession of undertaking was handed over by Allied Silica to Tata
Chemicals, ET notes.
The total outstanding was INR68.44 crore, which also includes the
interest of INR10.44 crore for the period between June 18, 2018,
and June 17, 2019, the petitioner contended.
ET relates that Allied Silica further contended that post-transfer
of the undertaking, both parties had mutually decided to continue
their respective rights and obligations to lay down the pipeline,
trial run, satisfactory operation etc with the additional scope of
work with other tranche payments, which were separate and distinct
from slump sale.
However, Tata Chemicals rebutted it and said that the appeal was
premised on the suppression of facts and information,
misrepresentation and gross misconstruction of the provision of
BTA.
According to it, the alleged debt is not an "Operational Debt" and
Allied Silica is not an "Operational Creditor" as defined under the
IBC, ET relays.
Moreover, Tata Chemical said BTA was divided into a closing balance
consideration of INR65 crore and and remaining INR58 crore was into
three tranche payments.
It has duly paid the closing balance consideration of INR65 crore
and Tranche I and Tranche II payments even upon non-completion of
conditions Precedent, had adjusted Tranche III payment against the
improvement costs borne by the company on account of non-completion
of Tranche II conditions precedent, Tata Chemicals submitted.
Consenting with Tata Chemicals' submissions, NCLAT, as cited by ET,
said, "On perusal of the documents submitted by the parties, it is
evident from the Letter dated January 8, which is signed by both
the parties, that the Applicant had failed to complete the Tranche
II Conditions Precedent as a result of which the Corporate Debtor
had exercised its right under the BTA and set-off and adjusted the
Tranche III payment.
Tata Chemicals had also disputed that the applicant is in
non-compliance of the BTA and therefore is not liable to receive
Tranche II and Tranche III payment.
"These disputes by the Corporate Debtor are raised before the
receipt of demand notices. Further, it is also pertinent to note
that the Corporate Debtor had replied to the Demand Notices within
the statutory period of ten days raising disputes with regards to
the claim of Applicant and non-compliance of the BTA by the
Applicant," said NCLAT.
Tata Chemicals Limited produces basic and industrial chemicals,
fertilizers and other consumer products. It has operations in India
and Africa. The company is headquartered in Mumbai and listed on
the Bombay Stock Exchange. Tata Chemicals is a subsidiary of Tata
Group.
TEXOOL LIMITED: CARE Lowers Rating on INR1.20cr LT Loan to B
------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Texool Limited (TL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 1.20 CARE B; Stable; Issuer not
Facilities cooperating; Revised from
CARE B+; Stable; Issuer not
cooperating On the basis of
best available information
Short Term Bank 6.00 CARE A4; Issuer not
Facilities cooperating; Based on best
available information
Long term/short 2.80 CARE B; Stable/CARE A4;
Term Bank Issuer Not Cooperating;
Facilities Revised from CARE B+;
Stable/CARE A4 Based on
Best available information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from TL to monitor the rating(s)
vide e-mail communications/letters dated July 2, 2020, April 22,
2020 and April 20, 2020 and numerous phone calls. However, despite
CARE's repeated requests, the company has not provided the
requisite information for monitoring the ratings. In line with the
extant SEBI guidelines, CARE has reviewed the rating on the basis
of the publicly available information which however, in CARE's
opinion is not sufficient to arrive at a fair rating. The rating on
Texool Limited bank facilities will now be denoted as CARE B;
Stable/ CARE A4; ISSUER NOT COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above ratings.
The ratings have been revised on account of non-cooperation by TL
and CARE's efforts to undertake a review of the ratings
outstanding. CARE views information availability risk as a key
factor in its assessment of credit risk.
Detailed description of the key rating drivers
At the time of last rating on May 14, 2019, the following were the
rating strengths and weaknesses (updated for information available
from Registrar of Companies).
Key rating Weakness
* Moderate and fluctuating scale of operations: The scale of
operations of the company has declined significantly by 11.03% to
INR13.79 crore in FY19 (A) (vis-à-vis INR15.50 crore in FY19
prov.). Moreover, the tangible net-worth of the company remained
small at INR3.99 crore as on March 31, 2019(A) vis-à-vis INR4.43
crore as on March 31, 2019 (prov.) owing to lower accretion to
reserves.
* Moderately Leveraged capital structure and weak debt coverage
indicators: The capital structure of TL stood moderately leveraged
with overall gearing stood at 2.84 times as on March 31, 2019 (A)
(vis-à-vis 1.97 times as on March 31, 2019 Prov.), owing to
additions to total debt coupled with higher dependence on working
capital bank borrowings and unsecured loans from promoters. The
debt coverage indicators continue to remain weak with total debt to
GCA stood 21.82 times in FY19(A) (vis-à-vis 8.94X in FY19 Prov.)
* Working capital intensive nature of operations: The operations
of TL are working capital intensive in nature on account of funds
being blocked in receivables. The collection period elongated
during FY19 and remained high at 304 days in FY19 A (visà-vis 284
days in FY19 prov.). In absolute terms, the receivables stood at
INR 12.00 crore in FY19 (A). The average inventory days stood high
at 168 days in FY19 A vis-à-vis 173 days in FY19 (Prov.). Further
the creditors days also reduced to 220 day in FY19(A) (via-a-vis
244 days in FY19 Prov). Hence the working capital cycle still
elongated to 252 days in FY19(A) (vis-à-vis 213 days in FY19
prov.
* Presence of the business in highly competitive and fragmented
nature of industry: TL operates in the textile industry which is
highly fragmented industry with presence of numerous independent
small-scale enterprises owing to low entry barriers leading to high
level of competition in the processing segment. The intense
competition in highly fragmented textile processing industry also
restricts ability to completely pass on volatility in input cost to
its customers, leading to lower profit margins.
* Volatility in foreign exchange rates: TL is susceptible to
foreign exchange fluctuation risk since it imports the raw material
from China, Japan and Korea. During FY18 and FY19, the company has
imported 90% of its purchases. On the other hand it also exports
about 90% of its net sales in FY19 and FY18. Hence, the company is
exposed to foreign exchange fluctuation risk and volatility in the
foreign exchange rate.
Key rating Strengths
* Established track record of operations along with experienced
promoters: TL is currently managed by Mr. Surrinder Sajdeh and Mr.
Jaideep Sajdeh. Mr. Surrinder Sajdeh (M.Com) has experience of
fifty five years through his association with TL since the
incorporation and handles the overall operations of the company. On
the other hand Mr. Jaideep Sajdeh (B.Com) holds total experience of
twenty years in the same line of business, and is engaged in the
overall marketing management and many other business operations of
the company. The directors are supported by experienced and
qualified second line of management who is technically qualified
and having experience in the same field.
* Comfortable albeit fluctuating profit margins: PBILDT margin of
the company declined significantly and stood moderate at 8.59% in
FY19 (A) vis-a-vis 10.48% in FY19 prov. on account of decrease in
material cost, other manufacturing expenses and selling expenses.
The PAT margin stood at 0.50% in FY19 (A)(vis-à-vis 3.42% in FY19
Prov).
Texool Limited (TL) was incorporated in the year 1995 by the Sajdeh
family. TL is engaged in manufacturing and export of shoddy yarns
and rendered unserviceable used clothing through recycling. It is
an export-oriented unit (EOU) with its facility in Kandla SEZ,
Gujarat with installed capacity of 2000 tonnes of yarn per annum
with utilization of 1500 tonnes of yarn per annum. The company
exports 90% of yarn (which is manufactured through shredding of old
and mutilated rags), while the rest 10% constitutes export of old
and used clothing to Africa, wherein the customer base comprises of
Spinners and Spinners Limited (Nairobi) and Kuru Industries (Kenya)
(contributing to 90% of the sales contribution in FY18 and FY19).
Its raw material viz. old and used clothes are imported from China,
Japan and Korea (contributing to 90% of the total purchases in FY18
and FY19) whereas oils and lubricants, spares and packing materials
are procured domestically.
VARDHMAN POLYTEX: ICRA Keeps D on INR514cr Loans in Not Cooperating
-------------------------------------------------------------------
ICRA said the rating for the INR514.00 crore bank facilities of
Vardhman Polytex Limited continues to remain under 'Issuer Not
Cooperating' category. The rating is denoted as "[ICRA]D/[ICRA]D
ISSUER NOT COOPERATING".
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Fund 159.31 [ICRA]D ISSUER NOT
based Facilities- COOPERATING; Rating continues
Cash Credit to remain under 'Issuer Not
Cooperating' category
Long-term Fund 232.31 [ICRA]D ISSUER NOT
based Facilities- COOPERATING; Rating continues
Term Loan to remain under 'Issuer Not
Cooperating' category
Short-term Non 50.00 [ICRA]D ISSUER NOT
fund Based COOPERATING; Rating continues
Facilities to remain under 'Issuer Not
Cooperating' category
Long-term Fund 72.38 [ICRA]D ISSUER NOT
based Facilities– COOPERATING; Rating continues
Unallocated to remain under 'Issuer Not
Cooperating' category
The company had defaulted on payment of its debt obligations to
various lenders, leading to its borrowings being classified as NPA
by the Banks, and account status remains the same. ICRA has been
trying to seek information from the entity so as to monitor its
performance, but despite repeated requests by ICRA, the entity's
management has remained non-cooperative. The current rating action
has been taken by ICRA basis best available/dated/ limited
information on the issuers' performance. Accordingly, the lenders,
investors and other market participants are advised to exercise
appropriate caution while using this rating as the rating may not
adequately reflect the credit risk profile of the entity.
Incorporated in 1981, Vardhman Polytex Limited (VPL) primarily
manufactures cotton and cotton-polyester blended spun yarn with an
installed capacity of 1.95 lakh spindles across its manufacturing
facilities in Ludhiana, Bathinda (both in Punjab) and Nalagarh
(Himachal Pradesh). VPL also has a yarn dyeing unit in Ludhiana
with an installed capacity of 15.0 tonne per day (tpd), and has a
limited presence in garmenting with an installed capacity of
manufacturing 7 lakh pieces per annum.
As per the company's Limited Audit Report for FY2020, the company
had requested its bankers for resolution of its accounts by way of
One-time settlement (OTS). OTS proposal has been approved by
~72.24% of the lenders. Further, two of the lenders have filed an
application under Section 7 of IBC with NCLT, for initiating CIRP.
The petitions have not been admitted so far.
WARORA KURNOOL: CARE Keeps C Debt Ratings in Not Cooperating
------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Warora
Kurnool Transmission Limited (WKTL) continues to remain in the
'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Bank Facilities 2,790 CARE C; Issuer Not Cooperating,
Fund-based-LT Based on best available
Term Loan Information
Bank Facilities- 105 CARE C; Issuer Not Cooperating,
LT-Performance Based on best available
Bank Guarantee Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated July 9, 2019, placed the
rating(s) of WKTL under the 'issuer non-cooperating' category as
WKTL 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. WKTL continues to be
noncooperative despite repeated requests for submission of
information through e-mails, phone calls and a letter/email dated
July 10, 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 April 1, 2019, the following were the
rating strengths and weaknesses
Key Rating Strengths
* Low revenue risk on account of fixed monthly payment mechanism
irrespective of its usage (annuity like model) without any
regulatory filings for determination/approval of tariff: As per
the Transmission Service Agreement (TSA) entered into between WKTL
and Long Term Transmission Customers (LTTCs), WKTL would receive
fixed monthly payment in the form of transmission charges (TC) from
these LTTCs, subject to normative system availability of 98%. WKTL
would receive the TC irrespective of the utilization of the line by
the LTTCs for power transmission provided the contracted
transmission system availability is maintained. Furthermore, the
charges are fixed for the entire tenure of the transmission
agreement (35 years from Scheduled Commercial Operation Date
(SCOD)), providing a good revenue visibility. Also, WKTL would not
be required to make any regulatory filings for the
determination/approval of its tariff, shielding it from adverse
changes in regulatory environment to a certain extent.
* Strong Payment Security Mechanism since PGCIL acting as the
central collecting and paying agency: The company has signed the
TSA with 13 LTTCs. However, the collection of revenue of proposed
project will not be dependent upon payment from those specific
projects only. Under the 'Point of Connection' mechanism, PGCIL
(Power Grid Corporation of India Limited, rated CARE AAA; Stable)
will collect and pool monthly transmission charges from all the
Designated ISTS Customers (DICs) across the country.
* Escrow mechanism along with creation of DSRA: Under the escrow
mechanism, an Escrow/Trust and Retention Account will be opened
into which all funds drawdown, receivables and any other
realizations from the Project including any payments from
contractors under warranties, guarantees etc. will be deposited.
The same will be utilized as per the waterfall mechanism defined in
the Escrow Account/TRA Agreement. WKTL has to maintain a Debt
Service Reserve (DSRA) amount equivalent to debt service
obligations due for the subsequent 1 quarter. The upfront DSRA
would be in Bank guarantee and post the COD of project, DSRA would
be created from Project cash flows and the BG would be released.
* Fixed Price EPC Contract and Strategy: WKTL has awarded a fixed
price, fixed time, turnkey EPC contract to Pan India Infraprojects
Private Limited ('PIIPL') for implementation of the project for a
contract value of INR3,321 crore. PIIPL shall be awarding
subcontracts to reputed EPC players. Therefore, any impact of cost
escalation is not anticipated at SPV level.
* Track record of promoters in the infrastructure segment: WKTL is
promoted by EIL (rated CARE D; Issuer Not Cooperating), part of the
Essel group, which is promoted by Dr. Subhash Chandra, Essel group
has strong presence in media & entertainment, distribution and
packaging. The group is also present in infrastructure space
through EIL which has interest in road projects, solar power
projects, urban infrastructure, power transmission projects, MSW
projects etc. EIL has completed more than 2000 lane kms of roads
and is constructing in various states such as Madhya Pradesh,
Delhi, Punjab, and Haryana. Further, in case of solar, Essel group
has commissioned 685 MW AC solar power projects. Essel group has
successfully revived the operations of power distribution
franchisee for Nagpur i.e. SND Limited. The group is also
undertaking various projects across various states in India for
municipal solid waste and water management segments.
Key Rating Weakness
* Inherent Risk related to execution of project: The project
involves permits, approvals and consents from various authorities
as project passes through river, national and state highways and
railway crossings, most of which are yet to be received. However,
as per LIE report, the project is broadly on track to meet the SCOD
provided there is no unexpected hindrance in getting any approval
and/or delay in supply of tower materials or critical equipment to
site.
* Funding Risk: The project cost is estimated at INR4,000 crore
and is financed through a Debt: Equity mix of 2.31:1. Total debt is
expected at INR2,790 crore and total equity at INR1,210 crore. WKTL
has achieved the financial closure of INR2,790 crore and has
partially infused equity of INR483.52 crore as on December 31,
2018. For the balance portion of equity, the company has mentioned
that they are in process of raising funds to meet the equity
commitment. The ability of promoter to raise the funds on time and
complete the project on time is a key monitorable.
* Interest rate risk: WKTL's project cost is structured with
debt-equity ratio of 2.31:1 exposing the company to adverse
movement in the interest rates due to the floating nature of the
rate with annual reset based on MCLR. As the revenue is
pre-decided, it could lower project returns in case of an adverse
movement in interest rates. However, WKTL proposes to create a Debt
Service Reserve Account (DSRA) for one quarter of interest and
principal repayments, and a tail period of 15 years provide enough
room for any contingency.
* O&M Risk: WTKL is yet to execute the O&M contract for the
project, as the project is still in the construction phase and the
contract terms are yet to be decided. However, the company expects
to grant the fixed price O&M contract for a period of 10 years to
one of its group companies 6 months before the COD.
Incorporated in April 2015, WKTL is a Special Purpose Vehicle (SPV)
promoted by Essel Infraprojects Limited (rated CARE D; Issuer Not
Cooperating) holding 100% equity stake to undertake the development
of power transmission system at Warora to Kurnool under Southern
Region system strengthening "Additional inter- Regional AC link for
import into Southern Region i.e. Warora-Warangal and
Chilakaluripeta - Hyderabad - Kurnool 765kV link. The company
quoted an annual levelised tariff and emerged as the successful
bidder. The project cost is estimated at INR4,000.00 crore and is
proposed to be financed through a Debt: Equity mix of 2.31:1. The
concession period is for 35 years from the SCOD, which is fixed at
40 months from the Effective Date i.e. November 5, 2019. WKTL is
responsible for build, own, operate and maintain basis, and to
provide transmission service on a long term basis to the Long Term
Transmission Customers covering Warora, Warangal, Chilakaluripeta ,
Hyderabad and Kurnool. The Project involves laying of about 941 km
of transmission line traversing through the states of Maharashtra,
Telangana and Andhra Pradesh and construction of one sub-station at
Warangal. The Transmission Service Agreement between 13 Long Term
Transmission Customers (referred to as LTTCs) and the Transmission
Service Provider (referred to as TSP) was signed on January 6,
2016. The LOA was issued to Essel infraprojects Ltd on 29th
February 2016.
ZENITH EXPORTS: ICRA Reaffirms B+/A4 Rating on INR22cr Loan
-----------------------------------------------------------
ICRA has assigned rating to the bank facilities of Zenith Exports
Limited's (ZEL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based 22.00 [ICRA]B+ (Stable)/[ICRA]A4;
working capital Reaffirmed
Rationale
The reaffirmation of the ratings considers the continuous decline
in ZEL's turnover over the last few years, leading to sustained
losses and depressed debt coverage metrics. A challenging operating
environment and weakening of demand scenario due to the Covid-19
pandemic are likely to result in a further deterioration in the
company's turnover and continuation of losses in the current
fiscal. ICRA notes that intense competition in the leather gloves
industry limits ZEL's pricing flexibility, leading to a low
profitability in the leather gloves segment, thought it had
improved to an extent in FY2020 due to a decline in raw material
prices. Additionally, low capacity utilisation in the textile
segment resulted in substantial losses from the division.
The ratings are also constrained by the high working capital
intensity of the company's operations and vulnerability of its
profits to exchange rate movements due to significant dependence on
exports. The company also remains vulnerable to the counterparty
risk as a significant portion of its exports is made against open
credit. The ratings further consider susceptibility of ZEL's profit
margins to any reduction in export incentives or other adverse
changes in government regulations.
The ratings, however, positively factor in the long presence of ZEL
in the leather and textile businesses, which along with its
diversified geographical presence support the company's market
position. The ratings also factor in the comfortable capital
structure of the company, as reflected by a low gearing of 0.11
times as on March 31, 2020 and a sizeable cash balance, supporting
its liquidity to some extent.
The Stable outlook on the [ICRA]B+ rating reflects ICRA's
expectation that ZEL will continue to benefit from its established
position in the industrial leather gloves export business and its
liquidity position is likely to remain adequate in the near to
medium term due to a sizeable cash balance, notwithstanding a
deterioration in revenues and continuous
losses.
Key rating drivers and their description
Credit strengths
* Long presence of the company in leather and textile industries:
ZEL has been involved in the production of industrial leather
gloves and other leather products, silk and velvet fabrics and
made-ups for over three decades. In FY2020, around 77% of the
company's revenues was derived from the leather division, followed
by around 11% from the textile division and the rest from trading
operations.
* Geographically diversified client base: As ZEL is an
export-oriented unit (EOU), the major portion (around 95% in
FY2019) of the company's sales is derived from exports. The company
has a geographically diversified client base and it exports to
countries like Chile, France, Germany, Lebanon, Spain, Poland, the
UK and the US. France was the highest contributor to ZEL's revenue
in FY2019 and accounted for around 22% of the company's exports.
* Conservative capital structure: ZEL's capital structure remains
conservative, as reflected by a gearing of 0.11 times as on March
31, 2020 due to a comfortable net worth vis-a-vis its limited debt
level. However, losses incurred by the company during the last few
years affected its net worth to some extent.
Credit challenges
* Continuous decline in revenue led to sustained losses and
depressed debt coverage metrices: ZEL's turnover declined
continuously from FY2015 to FY2020 due to a deterioration in the
performance of both leather and textile products divisions and
shutdown of manufacturing operations of its spinning division in
FY2016. Declining turnover and high fixed costs (despite retirement
of around 30% of the textile segment's total employees under the
voluntary retirement scheme in FY2019) led to sustained losses of
ZEL. In FY2020, its operating income declined by around 16% to
INR82.86 crore from INR98.60 crore in FY2019. Consequently, the
company continued to register losses in FY2020, though the amount
of net loss declined compared to the previous year mainly due to a
significant increase in the non-operating income, supported by
forex gain. The continuing losses also kept ZEL's debt coverage
metrics at a depressed level over the last few years. A challenging
operating environment and weakening of demand due to the Covid-19
pandemic are likely to result in a further deterioration in the
company's turnover and continuation of losses in the current
fiscal.
* High working capital intensity of operations: High inventory
levels maintained for leather gloves and textile business led to
high working capital intensity of the company's operations,
reflected by high net working capital relative to the operating
income of 50% in FY2020. This exerted pressure on the company's
liquidity.
* Exposed to foreign currency fluctuation and counterparty risks:
With high dependence on exports, most of ZEL's sales contracts are
denominated in foreign currencies, exposing its profitability to
volatility in exchange rate movements. Nonetheless, forward
contract bookings for around 60-70% of its receivables mitigate
such risk to an extent. ZEL is also exposed to the counterparty
risk as the company extends open credit to overseas customers for
most of its exports.
* Susceptibility of profitability to change in export incentives or
any adverse changes in regulations: ZEL receives a significant
amount of export incentives from the Indian Government. However,
such incentives are mostly passed on to customers due to an intense
competition in the international markets, keeping the company's
profitability susceptible to the changes in export incentives. The
company's business is likely to remain exposed to changes in
relation to export incentives or any adverse developments in
international trade policies and regulations in India and the
importing countries.
Liquidity position: Adequate
The company's liquidity position is adequate. The company does not
have any long-term debt repayment obligation. Its average
fund-based working capital utilisation remained at a moderate level
of around 55% during January 2019 to May 2020. Though ZEL's working
capital intensity of operations remained high, a significant cash
and bank balance (INR25.92 crore as on March 31, 2020) is likely to
support its liquidity. A build-up of the high cash balance was
aided by liquidation of sizeable mutual fund investments in FY2019
and release of working capital due to a decline in the scale of
operation in FY2020, as reflected by a healthy cash flow from
operations of around INR17 crore in the year, despite continuing
loss.
Rating sensitivities
Positive triggers - ICRA may upgrade ZEL's ratings if a turnaround
of the company's operations translates into profits at the
operating and net levels on a sustained basis.
Negative triggers - A significant weakening of the company's
liquidity position may lead to a rating downgrade.
ZEL was incorporated in 1981 as a public limited company. At
present, it has two separate manufacturing divisions, namely Zenith
Main Division (ZM) and Zenith Textiles (ZT), while the
manufacturing operations of another division, Zenith Spinners (ZS),
was shut down in November 2015, though it is involved in yarn
trading business at present. ZM is involved in the export of silk
fabrics, made-ups, industrial leather hand gloves and other leather
products, which are manufactured in Kolkata, West Bengal. ZT is a
100% export-oriented unit. Its manufacturing facility is located at
Nanjangud, Karnataka, which produces silk and velvet fabrics and
made-ups.
=================
I N D O N E S I A
=================
PT JAPFA: S&P Affirms BB- ICR on Parent Support, Outlook Negative
-----------------------------------------------------------------
S&P Global Ratings, on Aug. 12, 2020, affirmed its long-term issuer
credit rating on PT Japfa and the issue rating on the Indonesian
poultry producer's senior unsecured notes at 'BB-'. At the same
time, S&P lowered PT Japfa's stand-alone credit profile (SACP) to
'b+' from 'bb-' to reflect likely weaker earnings and interest
coverage ratios over the next 12 months, amid steady capital
spending.
Japfa Ltd. should maintain its consolidated credit quality over the
next 12 months given that satisfactory group performance offset
weaker earnings at PT Japfa.
Despite key Indonesian subsidiary PT Japfa reporting a 40% drop in
EBITDA to US$80.4 million for the six months ended June 2020,
consolidated EBITDA at parent Japfa Ltd. was significantly more
resilient. Japfa Ltd.'s consolidated EBITDA increased 5.9% to
US$214.4 million from US$202.5 million over the same period.
Strength at Japfa Ltd. came largely from strong business
performance at both its Vietnam swine and China dairy businesses.
In Vietnam, average selling prices and volumes continued to
increase due to shortage in pork supply arising from the African
swine fever. In China, raw milk prices continued to recover,
pushing up margins. The supply shortage and pricing trends in both
businesses will continue. S&P said, "We therefore expect growth in
these segments to continue offsetting weakness in PT Japfa for the
Japfa group for the rest of 2020. We expect Japfa Ltd.'s
debt-to-EBITDA ratio to improve to 2.2x-2.4x in 2020 and 1.7x-1.9x
in 2021, from 2.85x in 2019."
S&P said, "We view the marginally stronger credit quality of Japfa
Ltd. as positive for the rating on PT Japfa. We believe the parent
will be willing and able to provide extraordinary financial support
to PT Japfa if the company needs it.
"We regard PT Japfa as a critical part of Japfa Ltd.'s long-term
strategy to build multiple pillars of proteins in different
countries in Asia. As the second-largest integrated feed and
poultry producer in Indonesia's oligopolistic market with a
well-established record of operations and competitive position, PT
Japfa's operations are closely linked to those of the parent. PT
Japfa is a sizable contributor to the group by earnings,
contributing to about 61% of the group's EBITDA in 2019. PT Japfa
also sources a share of raw materials, especially soybean meal,
through the commodity trading arm of the parent. We expect Japfa
Ltd. to maintain a majority ownership in PT Japfa over the next few
years at least, with the name association continuing. PT Japfa
shares integrated business functions with the group, specifically
in the corporate debt financing unit where bank relationships are
based on the global lending relationship within the group.
Integrated financing resources imply close linkage to the group's
reputation and risk management, in our view. We now incorporate one
notch of extraordinary support in our ratings on PT Japfa.
"We lowered PT Japfa's SACP to 'b+' from 'bb-' to reflect the
prospects of weaker earnings and cash flow through 2021.
"Weaker demand and pricing since the beginning of 2020 affected PT
Japfa's earnings significantly more than we earlier anticipated for
the six months ended June 30, 2020. The company's EBITDA dropped to
about Indonesian rupiah (IDR) 1.2 trillion over the period with the
weakness accelerating in the second quarter. First-half EBITDA
represents just over one-third of our previous EBITDA forecast of
IDR3.5 trillion-IDR3.6 trillion for 2020. Demand weakened more than
we anticipated amid lower purchasing power and economic headwinds
due to COVID-19." An oversupply of day-old chicks and poultry led
prices to drop to their lowest point since 2014. Demand for poultry
is likely to stay weak in the second half of 2020 and into 2021, as
purchasing power remains subdued in Indonesia and consumers opt for
cheaper proteins such as eggs or tofu.
S&P said, "We now forecast PT Japfa's revenue to drop 5%-7% and
EBITDA to fall 25%-30% in 2020. This translates into a revised
EBITDA estimate of IDR3.0 trillion–IDR3.1 trillion for 2020 and
IDR3.8 trillion–IDR4.0 trillion for 2021, versus our earlier base
case of IDR4.0 trillion–IDR4.1 trillion for 2021. EBITDA is now
likely to recover to the level of 2019 only in 2022. We now
anticipate funds from operations (FFO) will decline to IDR1.9
trillion–IDR2.0 trillion in 2020 and IDR2.5 trillion–IDR2.7
trillion in 2021. This compares with our previous estimate of
IDR2.2 trillion–IDR2.3 trillion in 2020 and IDR2.5
trillion–IDR2.7 trillion in 2021."
Cash flow adequacy and interest servicing ratios are likely to
weaken through 2021 amid rising short-term debt, steady capital
spending, and growing interest costs.
Rising debt at PT Japfa is likely to exacerbate operating
weaknesses for the rest of the year. Amid an increasingly selective
financing environment in Indonesia, PT Japfa opted to increase its
short-term debt materially in order to build liquidity buffer. Net
debt increased to about IDR9.4 trillion as of June 30, 2020 (net
debt equals to total debt net off total cash), compared with net
debt of about IDR7.7 trillion as of Dec. 31, 2019. At the same
time, short-term debt increased to about IDR4.7 trillion, from
about IDR3.1 trillion. The increase in short-term debt of about
IDR1.6 trillion compared to a slower increase in cash of IDR1.3
trillion also suggests cash outflow amid capital expenditure
(capex) and working capital outflows. In addition, free operating
cash flows stayed at a materially negative about IDR1.5 trillion
over the six-month period as capex neared IDR1 trillion and working
capital outflows kept operating cash flows negative.
S&P said, "We now forecast interest expenses to grow to IDR850
billion–IDR880 billion in 2020, compared to our previous forecast
of IDR800 billion-IDR810 billion. Along with weaker cash flows, we
forecast weaker interest servicing capacity at PT Japfa. We
anticipate FFO cash interest coverage to be 3.5x-3.6x in 2020 and
3.8x-3.9x in 2021 compared to our previous expectation of 4.1x-4.2x
in 2020 and 2021. These levels are more commensurate with a 'b+'
SACP."
The negative outlook still factors in the high short-term debt at
Japfa Ltd. and PT Japfa, and a structurally ambitious growth
strategy potentially leading to higher capex amid weaker earnings.
The negative outlook reflects the limited headroom in Japfa group's
liquidity profile, as reliance on short-term debt increased while
capital spending and working capital needs remain elevated amid a
challenging operating environment.
S&P said, "The negative outlook also reflects our view that Japfa
Ltd. and PT Japfa's ambitious growth aspirations remain intact
despite more challenging operating conditions. Japfa Ltd. is
currently constructing its eighth dairy farm and a beef farm in its
second farm hub for its dairy business in China. These are likely
to be supported by both funding from banks and capital injections
from Japfa Ltd. We have considered all of these amounts in our
consolidated financial projections for the group in 2020 and 2021.
"Our forecasts for both Japfa Ltd. and PT Japfa also assume
consolidated capex will taper in 2021 and 2022, with positive
annual consolidated discretionary cash flows, stabilizing debt, and
improving cash flow adequacy in 2021. An acceleration in capital
spending in 2021 beyond our current base case of US$250 million
annually will rapidly reduce the limited headroom under our 'bb-'
assessment of the group's credit profile if it is funded with debt.
This, in turn, will put downside pressure on the ratings on PT
Japfa."
The negative outlook reflects Japfa group's tightened liquidity
profile as short-term debt increased materially both at Japfa Ltd.
and PT Japfa, and S&P expects it to stay elevated over the next 12
months. The outlook also captures potential downside pressure on
Japfa Ltd.'s consolidated cash flow adequacy and interest servicing
ratios if the company engages in further material debt-funded
capital spending amid a still challenging operating environment.
S&P may lower the ratings if one of the following scenarios
occurs:
-- The liquidity profile of PT Japfa or Japfa Ltd. weakens such
that S&P expects sources to uses of liquidity to stay below 1.2x
over a prolonged period. This could happen if short-term debt
continues to stay elevated, while the group's EBITDA weakens or
capex is higher than it expects.
-- The group's financial policy is more aggressive than S&P
expects. This could be the case if Japfa Ltd.'s consolidated
capital spending is persistently higher than its EBITDA, leading to
sustainably negative discretionary cash flows and growing debt
requirements.
-- Any signs of weakened group support from Japfa Ltd. to PT Japfa
such that S&P no longer believes the parent will provide
extraordinary support to the subsidiary under all circumstances.
-- S&P may revise the outlook to stable if both PT Japfa and Japfa
Ltd. can bolster their liquidity profile. S&P believes this would
require a substantial reduction in short-term debt maturities, a
growing cash buffer, and tapering capex and working capital
requirements.
-- S&P may raise PT Japfa's SACP if the company can sustain its
FFO cash interest coverage materially above 4x.
=========
J A P A N
=========
TOSHIBA CORP: Posts JPY11.35MM Net Loss at June Quarter
-------------------------------------------------------
The Japan Times reports that Toshiba Corp. reported Aug. 12 a net
loss of JPY11.35 billion (US$106 million) in the April-June period
due to sluggish performance in its storage device segment hit by
coronavirus-trigged disruptions.
The industrial conglomerate logged an operating loss of JPY12.64
billion and sales slumped 26.2 percent to JPY599.82 billion in the
first quarter of fiscal 2020, the report discloses.
The Japan Times says Toshiba posted a smaller net loss than the
JPY140.23 billion reported in the same period last year but the
coronavirus pandemic became a drag despite its years of
restructuring.
"We cut fixed costs but saw a negative impact of JPY49.3 billion
from the coronavirus (on an operating basis)," The Japan Times
quotes Masaharu Kamo, corporate senior vice president, as saying
during an online press briefing.
As the coronavirus spread globally, many countries imposed lockdown
measures, disrupting supply chains.
According to The Japan Times, Toshiba suffered delays in installing
semiconductor-making equipment in China, while operations at its
main hard disk drive factory in the Philippines were also affected.
Demand for semiconductors for autos and copy machines also fell.
In Japan, the company cut the number of business days in the first
quarter, during which a state of emergency was imposed between
April and May, weighing on its earnings, the report discloses.
The Japan Times says Toshiba saw the number of factories in full
operation drop to 30 percent in April but it recovered to 96
percent in July.
Toshiba retained its full-year forecasts for an operating profit of
JPY110 billion, down 15.7 percent from the previous year, on sales
of JPY3.18 trillion, down 6.2 percent, the report says.
It has not disclosed its net earnings outlook, the report states.
The Japan Times notes that Toshiba has been undergoing
restructuring to become a leaner firm with its focus on businesses
that can produce stable profits, selling its TV and laptop units.
It has exited from its U.S. nuclear power and liquefied natural gas
businesses.
About Toshiba Corp.
Toshiba Corporation (TYO:6502) -- http://www.toshiba.co.jp/--
manufactures and markets electrical and electronic products. The
Company's products include digital products such as PCs and
televisions, NAND flash memories, and system LSIs (large-scale
integrated), as well as social infrastructures such as power
generators, medical equipment, and home appliances.
As reported in the Troubled Company Reporter-Asia Pacific on July
3, 2020, Moody's Japan K.K. has affirmed Toshiba Corporation's B1
corporate family and senior unsecured ratings, as well as its Not
Prime commercial paper rating. At the same time, Moody's has
changed the outlook to stable from negative.
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T H A I L A N D
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THAI AIRWAYS: Must Pay THB5.4 Billion in Pensions
-------------------------------------------------
Bangkok Post reports that Thai Airways International (THAI) will
have to pay more than 1,600 employees pensions worth THB5.4 billion
over the next 13 years, according to a source at the airline.
According to Bangkok Post, the revelation came as THAI puts
together a debt rehabilitation plan -- which necessitates
aggressive cuts to employee salaries and other expenses -- to be
submitted to the Central Bankruptcy Court on Aug. 17. It has also
appointed six members of its board of directors to execute the
plan.
After THAI lost its status as a state-owned enterprise (SOE) when
the Finance Ministry reduced its stake in the airline to below 50%
earlier, the government system of pensions applicable to the
airline was also scrapped, the report says.
This leaves the last batch of 1,642 staff members who signed the
employment contracts while the airline was still an SOE, entitled
to the pension, Bangkok Post states.
A total of 124 employees will go into mandatory retirement at the
end of this year alone. THAI will need to set aside THB394 million
worth of pension money for them.
Bangkok Post relates that the number of retirees at the airline
will continue to rise until 2025 when 217 employees retire. The
company will have to pay them pensions to the tune of THB717
million. After that the retirees will drop to 169 in 2026 with the
pensions costing THB574 million.
In 2032, the last pension-paying year, only three employees will
collect the payment worth altogether THB10 million.
Bangkok Post adds that the source said the airline board has
reserved funds in a bank account to pay the pensions to ease many
staff concerns that THAI might run out of liquidity and thus be
unable to pay.
About Thai Airways
Thai Airways International PCL (BAK:THAI) --
http://www.thaiairways.co.th/-- is the national carrier of
Thailand. The company provides air transportation, freight and
mail services on domestic and international routes including Asia,
Europe, North America, Africa and South West Pacific. The Company
is a state enterprise which is controlled by the government and
partly owned by the public.
As reported in Troubled Company Reporter-Asia Pacific on May 21,
2020, Reuters said Thailand's cabinet approved a plan to
restructure troubled Thai Airways International Pcl's finances
through a bankruptcy court, the Southeast Asian country's prime
minister said on May 19. The plan for a court-led restructuring of
the national carrier replaces a previous proposal of a
government-backed rescue package that was heavily criticised in the
country.
Thai Airways on May 27 said it appointed board members as
rehabilitation planners in a bankruptcy court submission.
Thai Airways posted losses every year after 2012, except in 2016.
In 2019, it reported losses of THB12.04 billion.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Asia Pacific is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez,
Julie Anne L. Toledo, Ivy B. Magdadaro and Peter A. Chapman,
Editors.
Copyright 2020. All rights reserved. ISSN: 1520-9482.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding,
electronic re-mailing and photocopying) is strictly prohibited
without prior written permission of the publishers.
Information contained herein is obtained from sources believed
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firm for the term of the initial subscription or balance
thereof are US$25 each. For subscription information, contact
Peter Chapman at 215-945-7000.
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