/raid1/www/Hosts/bankrupt/TCRAP_Public/200820.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
A S I A P A C I F I C
Thursday, August 20, 2020, Vol. 23, No. 167
Headlines
A U S T R A L I A
ALL TRADES: Second Creditors' Meeting Set for Aug. 27
CRUISE & MARITIME: Second Creditors' Meeting Set for Aug. 26
GIANT POWER: Second Creditors' Meeting Set for Aug. 26
NOVACASTRIAN TRADE: First Creditors' Meeting Set for Aug. 26
ORGANIC DAIRY: Remarkable Milk Buys Company's Assets
PW KITT CO: ASIC Obtains Interim Injunctions vs. Larry Dawson, Firm
ROSEBROOK ENTERPRISES: First Creditors' Meeting Set for Aug. 26
[*] AUSTRALIA: Halting Wind-ups May Cause Insolvency Tsunami
C H I N A
LVGEM REAL: Moody's Withdraws B3 Corp. Family Rating
I N D I A
BHAWANI PRASAD: CARE Lowers Rating on INR1.85cr Loan to C
CITY PRIDE: CARE Withdraws 'B-/A4' Bank Loan Ratings
ETCO DENIM: CARE Keeps D Debt Ratings in Not Cooperating
ETCO INDUSTRIES: CARE Keeps D Debt Ratings in Not Cooperating
FREEDOM CERAMIC: CARE Lowers Rating on INR10.63cr Loan to B+
GENERAL TRADING: CARE Cuts Rating on INR22cr Loans to B
GOLDEN JUBILEE: CARE Keeps D Debt Ratings in Not Cooperating
GREEN MIRROR: CARE Keeps D on INR11.5cr Loans in Not Cooperating
GVNS TOLLWAY: Ind-Ra Keeps 'D' Bank Loan Rating in Non-Cooperating
HOTEL JALTARANG: CARE Keeps B- on INR9.75cr Loan in Not Cooperating
IL&FS: Delhi High Court Extends Interim Stay on NFRA Orders
IL&FS: NFRA Finds Deficiencies in BSR's Audit of IL&FS Financial
JAYATMA INDUSTRIES: CARE Cuts Rating on INR15cr LT Loan to B
K. C. PRINTING: CARE Lowers Rating on INR7cr LT Loan to B-
KILBURN CHEMICALS: Insolvency Resolution Process Case Summary
KPT SPINNING: CARE Keeps B- Debt Ratings in Not Cooperating
M. M. CONSTRUCTIONS: CARE Keeps B+ Debt Rating in Not Cooperating
MAHA ASSOCIATED: CARE Keeps D Debt Ratings in Not Cooperating
MANAKULA VINAYAGAR: CARE Assigns B Rating to INR14.33cr Loan
MINESH PRINTS: Insolvency Resolution Process Case Summary
NEELKANTH SWEETS: CARE Lowers Rating on INR10cr LT Loan to B
PALLA SILKS: CARE Lowers Rating on INR8cr LT Loan to C
PHTHALO COLOURS: Ind-Ra Lowers LongTerm Issuer Rating to 'D'
R. S. ENTERPRISES: CARE Lowers Rating on INR9cr LT Loan to B-
RAJNIGANDHA MARBLES: CARE Keeps B Debt Rating in Non-Cooperating
RANJEET SHIVHARE: CARE Keeps B+ on INR9cr Loans in Not Cooperating
ROSA POWER: Ind-Ra Affirms 'B' Rating on INR132-BB Rupee Term Loan
SAI SWARUPA: CARE Lowers Rating on INR8cr LT Loan to B
SAISUDHIR ENERGY: CARE Keeps D on INR146cr Loans in Not Cooperating
SAPTARISHI HOTELS: CARE Keeps D Debt Ratings in Not Cooperating
SHUBHSHREE ENGINEERING: Ind-Ra Corrects Aug. 17 Rating Release
SRIPATHI PAPER: Ind-Ra Lowers LongTerm Issuer Rating to 'D'
THERMOKING (THK): CARE Lowers Rating on INR5.50cr Loan to B
VIDEOCON INDUSTRIES: Waits for Better Offers Before Liquidation
[*] INDIA: Low Borrowing Costs Can't Save Shadow Banks in Crisis
I N D O N E S I A
SAWIT SUMBERMAS: S&P Assigns 'CCC+' LongTerm Issuer Credit Rating
M A C A U
WYNN MACAU: S&P Assigns 'BB-' Rating on New $600MM Unsecured Notes
S I N G A P O R E
KS ENERGY: OCBC's Demand is Less Then US$230MM, Company Clarifies
- - - - -
=================
A U S T R A L I A
=================
ALL TRADES: Second Creditors' Meeting Set for Aug. 27
-----------------------------------------------------
A second meeting of creditors in the proceedings of All Trades
Queensland Pty Ltd has been set for Aug. 27, 2020, at 1:00 p.m. via
electronic facilities 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. 26, 2020, at 1:00 p.m.
Joanne Emily Dunn and John Richard Park of FTI Consulting were
appointed as administrators of All Trades on July 22, 2020.
CRUISE & MARITIME: Second Creditors' Meeting Set for Aug. 26
------------------------------------------------------------
A second meeting of creditors in the proceedings of Cruise &
Maritime Voyages Pty Ltd has been set for Aug. 26, 2020, at 11:00
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. 25, 2020, at 4:00 p.m.
Marcus William Ayres and Kenneth Michael Whittingham of Duff &
Phelps were appointed as administrators of Cruise & Maritime on
July 24, 2020.
GIANT POWER: Second Creditors' Meeting Set for Aug. 26
------------------------------------------------------
A second meeting of creditors in the proceedings of Giant Power
Australia Pty Ltd has been set for Aug. 26, 2020, at 11:30 a.m. at
the offices of Hall Chadwick Chartered Accountants, Level 4, 240
Queen Street, in Brisbane, Queensland.
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. 25, 2020, at 5:00 p.m.
Ginette Muller of Hall Chadwick was appointed as administrator of
Giant Power on July 21, 2020.
NOVACASTRIAN TRADE: First Creditors' Meeting Set for Aug. 26
------------------------------------------------------------
A first meeting of the creditors in the proceedings of Novacastrian
Trade Services Pty Ltd will be held on Aug. 26, 2020, via
teleconference only.
Kathleen Vouris and Richard Albarran of Hall Chadwick were
appointed as administrators of Novacastrian Trade on Aug. 14,
2020.
ORGANIC DAIRY: Remarkable Milk Buys Company's Assets
----------------------------------------------------
Rodney Woods at CountryNews reports that Remarkable Milk Company,
which is majority owned by Kyvalley Dairy, has acquired the assets
of Organic Dairy Farmers of Australia, which went into receivership
in May.
The purchase includes the land, a processing facility and all
brands and trademarks, CountryNews says.
According to the report, Remarkable Milk Company was one of the
major customers of Organic Dairy Farmers of Australia and also had
licence agreements for its True Organic and Remarkable range of
products.
CountryNews relates that Remarkable Milk Company intends to utilise
the purchased Organic Dairy Farmers of Australia facility to invest
in further developing the skills of employees to ensure a
successful career in the Australian dairy industry.
"Our aim is to offer not just a job but a future for Geelong
families," the report quotes Remarkable Milk Company chief
executive officer Alastair McCredden as saying. "Our shareholders
are families and they understand the importance of thinking in
generations rather than just for tomorrow."
The purchase does not include the current contracted farms
supplying Organic Dairy Farmers Australia, but Remarkable Milk
Company is looking to work with these farms to provide it with a
secure source for its milk supply, the report adds.
Geelong-based Organic Dairy Farmers of Australia (ODFA) is 100 per
cent owned by 40 family dairy farms across Victoria and north-west
Tasmania. The business produces the True Organic brand of butter
and supplies milk for FiveAM Yoghurt, Lemnos, and Pure Organic
Milk. The company owns a milk bottling factory at Geelong where it
also processes butter and cream. The business employs 22 people
and nine contractors.
As reported in the Troubled Company Reporter-Asia Pacific on May
27, 2020, Australia's largest organic dairy company has been placed
into receivership with creditors and farmer-owners owed
millions. Its directors placed the company into voluntary
administration citing a downturn in the Chinese market, delayed
sales, and the impact of COVID-19 as their reasons.
PW KITT CO: ASIC Obtains Interim Injunctions vs. Larry Dawson, Firm
-------------------------------------------------------------------
Australian Securities and Investments Commission has successfully
applied to the Federal Court of Australia for urgent interim orders
against NSW-based PW Kitt Co Pty Ltd and its sole director Larry
John Dawson (the defendants).
On Aug. 7 2020, ASIC obtained urgent interim orders:
- to appoint receivers and managers to the property and assets
of the defendants;
- for the receivers to provide a report to the Court and ASIC
within 42 days regarding the affairs of the defendants;
- to stop the defendants from removing, dealing with or
diminishing the value of property or assets, including funds
in bank accounts held by the defendants; and
- to restrain Mr. Dawson from leaving Australia.
ASIC's application was based on concerns that the defendants
obtained almost AUD7 million in Australian investor funds by
cold-calling Australian consumers and operating the websites
smsfadvisory.com and pwkittco.com.
ASIC submitted to the Court that the defendants were using the same
or substantially similar company and business names to an unrelated
business SMSF Advisory Services Pty Ltd and P.W. Kitt & Co. It is
also alleged that the defendants used the Australian financial
services (AFS) licence number of another company. ASIC remains
concerned that the defendants appear to have no connection with
those businesses and hold no licence or authority to deal in
financial products or provide financial services.
Michael John Hill, Anthony Norman Connelly and Katherine Sozou of
McGrathNicol have been appointed as receivers and managers to the
property and assets of the defendants. The receivers are required
to report back to the Court concerning the affairs of the
defendants by Sept. 18, 2020.
Any person who is concerned that they have invested with the
defendants or SMSF Advisory Services Pty Ltd should contact Patrick
Cashman of McGrathNichol on (07) 3333 9800.
ASIC commenced this investigation as part of its response to the
increase in financial scam activity arising during the COVID-19
pandemic. This action demonstrates ASIC's readiness to take urgent
action to protect vulnerable consumers in the current environment.
The matter will return before the Court on Aug. 27, 2020. ASIC's
investigation is ongoing.
ROSEBROOK ENTERPRISES: First Creditors' Meeting Set for Aug. 26
---------------------------------------------------------------
A first meeting of the creditors in the proceedings of Rosebrook
Enterprises Pty Ltd, formerly Trading as "Pipeline Hydraulics",
will be held on Aug. 26, 2020, at 10:30 a.m. at the offices of Cor
Cordis, Mezzanine Level, 28 The Esplanade, in Perth, WA.
Jeremy Joseph Nipps and Clifford Stuart Rocke of Cor Cordis were
appointed as administrators of Rosebrook Enterprises on Aug. 14,
2020.
[*] AUSTRALIA: Halting Wind-ups May Cause Insolvency Tsunami
------------------------------------------------------------
Dynamic Business relates that the Australian government's measures
to prop up zombie businesses through the pandemic could actually be
harming Australian small businesses, with new data showing company
wind-ups have all but ceased in the past quarter.
Dynamic Business reports that Prushka Fast Debt Recovery revealed
through data sourced from court records that the Australian
Taxation Office (ATO) and other government agencies, typically the
largest source of company liquidations, have halted their winding
up of businesses.
In April to June, 374 businesses issued Notices of Winding Up
Applications, a decrease of 47 per cent compared to the last
quarter, and 64 per cent year-on-year, the report discloses.
Dynamic Business relates that Roger Mendelson, CEO of Prushka,
warned that while the government's initiatives to support
businesses through the COVID-19 pandemic were helping keep
companies afloat, it will cause a backlog of wind-up and bankruptcy
cases.
"From April, the government issued several temporary changes to
support financially distressed businesses, including extending the
time companies have to respond to a statutory demand from 21 days
to six months. This has caused an incredible slowdown in the debt
collection process," Dynamic Business quotes Mr. Mendelson as
saying.
"This backlog of cases could cause major economic dislocation
post-COVID in a time where we will need entrepreneurs thriving and
small business owners working towards rebuilding.
"If the government were to extend these measures, Australian SMEs
would be restricted from taking action to protect their livelihood
and it could also encourage irresponsible businesses to incur debts
they have no hope of paying."
This is reflected in Prushka's own data from its 58,000 small
businesses client base, showing SME's are referring debts much
earlier, Dynamic Business relays.
"We've seen a 64 per cent decrease in the average size of debts for
April and May this year compared to last which indicates that
Australian SMEs are focusing on cleaning up their smaller
outstanding debts to boost cash flow."
"We've also seen a 41 per cent increase in the number of debtors
seeking instalment arrangements during the pandemic compared to
2019, suggesting businesses and consumers are preserving cash in
every way possible."
According to Dynamic Business, the most recent quarter (April-June)
saw Victoria issue the largest number of wind-up applications at
169 reports, or 45 per cent of all applications. This figure was
followed by New South Wales.
Dynamic Business adds that Mr. Mendelson warns that these figures
are modest, "These figures are just the tip of the iceberg and
there would be many more companies which are technically insolvent
however may not be commercially viable to wind up. With loosening
laws on insolvent trading, I expect a significant number of
companies fall into this bucket."
=========
C H I N A
=========
LVGEM REAL: Moody's Withdraws B3 Corp. Family Rating
----------------------------------------------------
Moody's Investors Service has withdrawn LVGEM (China) Real Estate
Investment Co. Ltd.'s B3 corporate family rating and stable
outlook.
RATINGS RATIONALE
Moody's has decided to withdraw the rating for its own business
reasons.
LVGEM (China) Real Estate Investment Co. Ltd. is a commercial and
residential property developer and operator with a focus on urban
redevelopment projects in Shenzhen.
=========
I N D I A
=========
BHAWANI PRASAD: CARE Lowers Rating on INR1.85cr Loan to C
---------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Bhawani Prasad Sharma Contractor (BPSC), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 1.85 CARE C; Issuer not cooperating;
Facilities Revised from CARE B+; Stable;
ISSUER NOT COOPERATING; on the
basis of best available
information
Short Term Bank 4.25 CARE A4; Issuer not
Facilities cooperating; Based on best
available information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated August 2, 2019 placed the
ratings of BPSC under the 'issuer non-cooperating' category as BPSC
had failed to provide information for monitoring of the ratings as
agreed to in its Rating Agreement. BPSC continues to be
non-cooperative despite repeated requests for submission of
information through phone calls and emails dated June 18, 2020,
June 19, 2020 and June 23, 2020. In line with the extant SEBI
guidelines, CARE has reviewed the ratings on the basis of the best
available information which however, in CARE's opinion is not
sufficient to arrive at a fair rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above ratings.
The ratings assigned to the bank facilities of BPSC have been
revised on account of non-availability of requisite information.
Detailed description of the key rating drivers
At the time of last rating done on August 2, 2019, the following
were the rating strengths and weaknesses.
Key Rating Weaknesses
* Modest scale of operations with moderate order book position TOI
of BPSC has witnessed declining trend in last three years from
FY14-FY16 mainly on account of lower contracts received from
government departments due to elections in Madhya Pradesh. However,
in FY17, TOI of the firm increase by 37% and stood modest at
INR14.32 crore with PAT and net worth base of INR0.47 crore and
INR5.74 crore respectively. As on August 09, 2017, BPSC had an
outstanding order book position of INR17.83 crore which is 1.25
times of FY17's Total Operating Income (TOI) with twelve projects
on hand reflecting moderate order book position.
* Customer concentration as well as geographical concentration risk
and constitution as a partnership concern Client base of BPSC is
skewed towards government departments in Madhya Pradesh. Further,
BPSC is a regional player and all the projects are executed in
Madhya Pradesh only which reflects geographical concentration risk.
Further, its constitution as a partnership concern lead to limited
financial flexibility and risk of withdrawal of capital.
* High competitive intensity in the government civil construction
segment: The construction industry is highly fragmented in nature
with presence of large number of unorganized players and a few
large organized players which coupled with the tender driven nature
of construction contracts poses huge competition and puts pressure
on the profitability margins of the players. Further, as the firm
participates in tenders invited by government departments, high
competition and lower bargaining power restricts its profitability
margins.
Key Rating Strengths
* Experienced partners with established relationship with
government customers: Mr. Kishan Mudgal and Mr. Suresh Mudgal,
partners, are graduate by qualification and has around four decades
of experience in the civil construction industry. Mr. Kapil Mudgal,
Partner, is Post Graduate by qualification (Diploma in civil
engineering from London University) and has around one decade of
experience in the civil construction industry. Mr. Jitendra Mudgal
and Mr. Dharmendra Mudgal, Graduate by qualification and has around
2 decades of experience in civil construction industry. BPSC is an
approved contractor with PWD of Madhya Pradesh, Municipal
Corporation, Gwalior and it has established relationship with these
clients. Due to established relationship, BPSC has been receiving
repetitive orders from its clients.
* Moderate profitability margins: The profitability of BPSC stood
moderate with PBILDT and PAT margin of 7.74% and 3.30% respectively
in FY17. Further, in FY17, PBILDT margin has increased by 164 bps
over FY16 mainly on account of decrease in raw material cost which
offset to an extent by increase in other manufacturing expenses.
With increase in PBILDT margin, PAT margin of the firm has also
increased by 37 bps over FY16. Further, GCA level of the firm has
increased by 62.43% in FY17 over FY16 mainly due to increase in PAT
level.
* Comfortable solvency position: The capital structure of the firm
stood comfortable with an overall gearing of 0.31 times as on March
31, 2017, marginally improved from 0.33 times as on March 31, 2016
mainly on account of higher increase in net worth of the firm as
against increase in total debt of the firm. Debt service coverage
indicators of the firm stood comfortable with Total debt to GCA
stood at 2.64 times as on March 31, 2017, further improved from
4.04 times as on March 31, 2016 on account of higher increase in
GCA level of the firm as against increase in total debt. Further,
interest coverage ratio stood comfortable at 4.70 times in FY17.
Gwalior (Madhya Pradesh) based BPSC was initially formed as a
proprietorship concern by Mr. Bhawani Prasad Sharma in April 01,
1974. Further, in 2013, proprietorship firm converted into
partnership concern and run by Mr. Suresh Mudgal, Mr. Kapil Mudgal,
Mr. Dharmendra Sharma, Mrs. Ramkali Mudgal, Mrs. Rekha (Jaya)
Mishra, Mrs. Jagesh Mudgal and Mrs. Anita Mudgal. However, as on
April 1, 2014, there was change in the partnership deed, after that
Mr. Kishan Mudgal and Mr. Jitendra Mudgal has been appointed as
partners in place of Mrs. Jagesh Mudgal and Mr. Anita Mudgal with
remaining partners of the firm. BPSC is a registered and approved
contractor with Public Works Department (PWD), Madhya Pradesh and
Municipal Corporation, Gwalior. The firm takes all type of orders
related to civil construction like Road construction, Building and
bridge construction contracts etc. from government departments as
well as also takes orders on sub contract basis from other
players.
CITY PRIDE: CARE Withdraws 'B-/A4' Bank Loan Ratings
----------------------------------------------------
CARE has reviewed and reaffirmed the ratings assigned to the bank
facilities of City Pride Buildcon Private Limited to CARE B-;
Stable/CARE A4 and has simultaneously withdrawn it, with immediate
effect. The rating factors in the constraints relating to company's
small scale of operations, leveraged capital structure, weak debt
coverage indicators and moderate operating cycle. The ratings are
further constrained by project execution risk inherent in various
contracts and competitive industry with business risk associated
with tender based orders. The ratings, however, draw comfort from
experienced management, moderate profitability margins. The rating
withdrawal is at the request of City Pride Buildcon Private Limited
and 'No Objection Certificate' received from the bank that has
extended the facilities rated by CARE along with the declaration
from the company that they have not availed any facility against
the proposed facility rated by CARE.
Detailed description of the key rating drivers
Key Rating Weaknesses
* Small scale of operations: CPB is a small player involved in
executing civil contracts. The ability of the company to scale up
to larger-sized contracts having better operating margins is
constrained by its small total operating income of INR18.11 crore
and gross cash accruals of INR0.33 crores in FY19 (refers to the
period April 1 to March 31) as against INR12.55 crore and INR0.41
crore respectively in FY18. The small scale of operations in a
competitive industry limits the bidding capability, pricing power
and benefits of economies of scale. The scale of operations has
been fluctuating for the past three financial years i.e., FY17-FY19
due to tender driven nature of operations wherein the contract is
awarded to the lowest bidder.
* Leveraged capital structure and weak coverage indicators: The
capital structure of the company continue to remain leveraged for
the past three financial years, i.e., FY17-FY19 owing to higher
dependence on external borrowings to meet its working capital
requirements. The overall gearing ratio stood above 2.20x as on the
balance sheet dates of past three financial years that is
FY17-FY19. Further, owing to higher debt levels and low cash
accruals, the coverage indicators continue to remain weak as marked
by interest coverage ratio of 1.43x and total debt to gross cash
accruals of 27.08 years at the end of FY19 as against interest
coverage ratio of 1.60x and total debt to GCA of 23.28 years in
FY18.
* Moderate operating cycle: The operating cycle of the company
continue to remain moderate at 68 days in FY19 owing to high
collection period and inventory holding. The company raises bill on
the milestone basis and thereon which gets acknowledged by client
after inspection of work done by CPB. Post the inspection,
department clears the payment by deducting certain percentage of
bill raised in form of retention money, which they refund after
completion of contract resulting in a collection period of 56 days
in FY19. Moreover, the company generally maintains inventory in
form of raw material and work-in-progress of around 1-2 months
however the same depicted elongation in FY19 owing to delay in
clearances received from the respective departments. The working
capital limits remained utilized around 95% in the past twelve
months; period ended July 31, 2029.
* Project execution risk inherent in various contracts: Given the
nature of projects awarded, the company is exposed to inhernt risk
in terms of delays in certain projects undertaken by the company
due to delay in approvals and sanction from regulatory bodies, land
acquisition issues etc. thus exposing CPB towards the risk of delay
in projects resulting in a delay in the realization of revenue
growth. Also, the company's ability to execute a project in timely
manner led by its own operational efficiency and timely stage
payments received from clients exposes the company to potential
risk.
* Competitive industry with business risk associated with
tender-based orders: CPB 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
limits the bargaining power of the company and exerts 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.
Key Rating Strengths
* Experienced management: The operations of CPB are currently
being managed by Mr. Satbir Singh, Mr. Santosh Sehrawat and Mr.
Harish Kumar. Mr. Satbir Singh is a graduate by qualification and
has an experience of around two and half decades in the civil
construction. Mr. Santosh Sehrawat is an under graduate and has an
experience of one and half decade of experience in the civil
construction industry. Mr. Harish Kumar is a postgraduate by
qualification and has an experience of a decade through his
association with this company. In addition, they are assisted by a
team of managers who have requisite experience in their respective
fields. Being in the industry for more than a decade coupled with
the experience of the promoters, the company has established good
relationship with labor contractors and the material suppliers
resulting in smooth execution of projects and regular receipt of
orders from them.
* Moderate profitability margins: The profitability margins of CPB
are directly associated with technical aspect of the contract.
Further, the profitability varies with the project due to tender
driven nature of the business owing to varying margins in the
different projects undertaken by the company. The profitability
margins of CPB continue to remain moderate as marked by PBILDT
margin and PAT margin of 13.62% and 1.06% respectively in FY19 as
against 11.78% and 1.99% respectively in FY18. The PBILDT margin
improved on account of higher margin contracts coupled with lower
operating expenses. However, the PAT margins declined in FY19 as
against FY18 on account of higher interest expense incurred owing
to increased dependence on external borrowings to meet
requirements.
* Healthy Order Book: As on April 1, 2019, the unexecuted order
book position of the company is INR79.57 crore and the average
contract execution tenor varies upon the degree of technicality
involved in the project. The unexecuted order book represents 4.92x
of the total operating income of FY19 giving short to medium term
revenue visibility. The order book at present is moderate. The
company has been awarded with two major contracts of INR54.30 crore
in the last quarter of FY19 which are expected to be completed by
the end of FY20 thereby ensuring short term revenue visibility.
Hence, effective and timely execution of the orders has a direct
bearing on the margins attained. Furthermore, in the past, the
company's order book was concentrated towards few contracts and the
ability of the company to maintain relationship with steady flow of
orders from its clientele shall remain critical for the growth of
the company.
Delhi based, City Pride Buildcon Private Limited (CPB) was
incorporated in 2007 and is currently being managed by Mr. Satbir
Singh, Mr. Santosh Sehrawat and Mr. Harish Kumar. The company is
engaged in construction of buildings for government departments in
the regions of Uttar Pradesh, Madhya Pradesh and Himachal Pradesh.
The raw materials namely, cement, sand, etc., the company procures
from various domestic wholesalers and traders from the nearby
regions.
ETCO DENIM: CARE Keeps D Debt Ratings in Not Cooperating
--------------------------------------------------------
CARE Ratings said the rating for the bank facilities of ETCO Denim
Private Limited (EDPL) continues to remain in the 'Issuer Not
Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term/ 112.99 CARE D; Issuer not cooperating;
Short Term Based on best available
Bank Facilities information
Long-term Bank 246.45 CARE D; Issuer not cooperating;
Facilities Based on best available
Information
Short-term Bank 29.00 CARE D; Issuer not cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated December 6, 2017, May 21,
2019, placed the rating(s) of EDPL under the 'issuer
non-cooperating' category as EDPL had failed to provide information
for monitoring of the rating. EDPL continues to be non-cooperative
despite repeated requests for submission of information through
emails, phone calls and a letter/email dated July 22, 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).
The rating of ETCO Denim Private Limited continues to factor in
delay in servicing of bank loans by the company. The company is
being referred to the Mumbai Bench of NCLT for initiating Corporate
Insolvency Resolution Process (CIRP).
Detailed description of the key rating drivers
At the time of last rating on December 6, 2017, the following were
the rating weaknesses
Key Rating Weaknesses
* Delays in debt servicing: The Company faced considerable strain
on liquidity mainly due to delay in completion of project and
commencement of loan repayments before ramp up of commercial
operations.
EDPL was established in the year 2005 by Mr. Ramesh D Shah who is
the promoter of the company. The company is in the business of
spinning, yarn dyeing, denim fabric weaving and finishing. During
May 2013, EDPL made a capex for backward integration and
commissioned a plant for manufacturing denim from cotton bales. The
plant is located at Aliabad Industrial Area, Bijapur District,
Karnataka. The plant has a capacity of manufacturing 38.90 Mn
Metres of Denim per year. The company faced considerable strain on
liquidity mainly due to delay in completion of project and
commencement of loan repayments before ramp up of commercial
operations.
ETCO INDUSTRIES: CARE Keeps D Debt Ratings in Not Cooperating
-------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of ETCO
Industries Private Limited (EIPL) continues to remain in the
'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 140.56 CARE D; Issuer not cooperating;
Facilities Based on best available
Information
Short-term Bank 12.00 CARE D; Issuer not cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated May 21, 2019; Dec 06, 2017
placed the rating(s) of EIPL under the 'issuer non-cooperating'
category as EIPL had failed to provide information for monitoring
of the rating. EIPL continues to be non-cooperative despite
repeated requests for submission of information through emails,
phone calls and a letter/email dated July 22, 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).
The rating of ETCO Industries Private Limited continues to factor
in delay in servicing of bank loans by the company. On an
application filed by Aries Agro Limited, an "operational creditor"
of the Company, an order for initiating Corporate Insolvency
Resolution Process (CIRP) was passed by the Mumbai Bench of NCLT on
September 26, 2019.
Detailed description of the key rating drivers
At the time of last rating on May 17, 2019 the following were the
rating weaknesses
Key Rating Weaknesses
* Ongoing delays in debt servicing: Due to the operational issues
and delay in commissioning of expansion, EIPL was unable to
generate sufficient cash flows required for debt servicing. This
led to delays in debt servicing obligation.
EIPL is engaged in the business of manufacturing cotton yarn. In
2004, EIPL (formerly known as ETCO Spinners Pvt. Ltd.) took over
cotton spinning unit situated at MIDC area Parbhani, Maharashtra,
from the liquidators of Sahakari Soot Girni Ltd at a cost of
INR4.30 crore. EIPL replaced the old equipment and modernised the
set up by importing state of the art Plant and Machinery from
Germany, Italy and China at a cost of INR40 crore (46% funded by
the promoters). The unit commenced its operations from January 1,
2007. EIPL's installed capacity stood at 41,328 spindles as on
March 31, 2016.
FREEDOM CERAMIC: CARE Lowers Rating on INR10.63cr Loan to B+
------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Freedom Ceramic Private Limited (FCPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term bank 10.63 CARE B+; Stable Revised from
Facilities CARE BB-; Stable
Short-term bank 1.70 CARE A4 Reaffirmed
facilities
Detailed Rationale & Key Rating Drivers
The revision in the ratings assigned to the bank facilities of FCPL
is mainly on account of decrease in profitability with
deterioration in capital structure as well as debt coverage
indicators and stretched liquidity in FY20 (Provisional, refers to
period April 1 to March 31). The ratings are further constrained by
small scale of operations, presence of FCPL in a highly competitive
ceramic industry and fortunes linked to demand from cyclical real
estate sector along with susceptibility of operating margin to
volatility in raw material and fuel costs.
However, ratings continue to derive comfort from the experienced
promoters and locational advantage in form of easy access to raw
materials, fuel and labor.
Rating Sensitivities
Positive Factors
* Increase in scale of operation with increase in TOI by more than
40% and achieving PBILDT margin of more than 12% on sustained
basis.
* Improvement in overall gearing of less than 2 times on a
sustained basis.
* Improvement in debt coverage indicators marked by interest
coverage of more than 3 times with TDGCA of below 10 times
* Sustaining positive cash flow from operations
Negative Factors
* Increase in raw material cost by more than 5% leading putting
pressure on profitability.
* Stuck debtors led to elongation in operating cycle by more than
30 days putting pressure in liquidity
* Any major debt funded capital expenditure project led to
deterioration in financial profile of the company
* Any adverse policy lay down by government for ceramic industry.
Detailed description of the key rating drivers
Key Rating Weaknesses
* Small scale of operations with decrease in profitability in FY20:
FCPL is engaged in to business of manufacturing of porcelain floor
tiles. The scale of operations marked by total operating income
(TOI) of FCPL increased by 36% on back of increase in demand due to
stabilization of its operation during FY20, albeit it remained
small at INR34.78 crore in FY20 against INR25.50 crore in FY19.
Further, due to increase in material cost and employee cost during
the year, the operating profit (PBILDT) reduced significantly from
INR3.82 crore in FY19 to INR1.86 crore in FY20. Resultantly, with
high depreciation cost and interest cost incurred during FY20, the
company reported a net loss of INR1.58 crore during the year as
against a net profit of INR0.12 crore reported during FY19.
Consequently, gross cash accruals also decreased significantly and
remained low at INR0.73 crore in FY20 against INR2.60 crore in
FY19.
* Deterioration in capital structure and debt coverage indicators:
As a result of moderation in tangible net worth from INR4.86 crore
as on March 31, 2019 to INR3.28 crore as on March 31, 2020 due to
accretion of loss generated during the year, the capital structure
of FCPL deteriorated and remained leveraged marked by overall
gearing ratio of 3.72 times as on March 31, 2020 against 2.52 times
as on March 31, 2019. Further as a result of decrease in
profitability with deterioration in leverage position, debt
coverage indicators also deteriorated in FY20 over FY19 and
remained weak as indicated by interest coverage of 1.64 times in
FY20 against 2.69 times in FY19 and Total debt to GCA (TDGCA) of
16.81 times as on March 31, 2020 against 4.71 times as on March 3,
2019.
* Presence in a highly competitive ceramic industry and fortune
linked to demand from cyclical real estate sector: FCPL operates
in a highly competitive ceramic industry marked by low entry
barriers, presence of large number of organized and unorganized
players. This situation results in high competition which puts
pressure on the profitability of the manufacturers. Further, most
of the demand for the tiles comes from the real estate industry,
which is highly fragmented and cyclical. The real estate industry
is also highly sensitive to the interest rates and liquidity
position in market. Thus any negative impact on real estate
industry will adversely affect the prospects of ceramic tiles
industry as well as the company.
* Susceptibility of operating margin to volatility in raw material
and fuel cost: Prices of raw material i.e. clay is market driven
and volatile in nature and thus puts pressure on the margins of
tile manufacturers in case of inability of the company to pass on
the same to its customers. Another major cost component is fuel
expenses, in gas form, which is used to fire the furnace. The
profitability of FCPL remains exposed to volatile Liquefied Natural
Gas (LNG) prices, mainly on account of its linkages with the
international demand-supply of natural gas. Hence any adverse
movement in material and fuel prices impacts profitability of the
company.
Key Rating Strengths
* Resourceful and Experienced promoters: FCPL is currently managed
by three directors namely Mr. Hasmukh Karshan Bhoraniya, Mr.
Bharatbhai Bhagvanjibhai Bhoraniya and Mr. Jagdishbhai Laljibhai
Merja. All the directors of FCPL hold an average experience of more
than two decades in similar line of business activities. Also,
promoters of the company are resourceful and have infused
additional unsecured loans during FY20 to ensure timely debt
servicing.
* Location advantage: FCPL is located in Morbi, a ceramic cluster,
which provides the company with easy access to raw materials,
primary fuel and all other utilities. Further, the cluster is well
connected by a good road network which provides logistical benefits
as well.
Liquidity Analysis: Stretched
The liquidity profile of FCPL moderated and remained stretched
during FY20 marked by inadequate cash accruals of INR0.73 crore
during FY20 as against debt obligation of INR1.72 crore for FY21.
However, to meet this debt obligation, promoters have infused
additional unsecured loans. Further, unencumbered cash and bank
balance remained modest at INR0.74 crore as on March 31, 2020 as
against INR0.80 crore as on March 31, 2019 while cash flows from
operating activity also remained low at INR1.46 crore during FY20
(Rs.0.82 crore during FY19). However, Average utilization of
working capital limit remained low at around 20% for trailing 12
month period ending June 2020, aiding the liquidity to some extent.
Working capital cycle elongated from 29 days in FY19 to 45 days in
FY20 due to elongation in collection days.
To conserve its liquidity, the company has availed moratorium for
instalment and interest payment on term loan and interest payment
on CC, from March 2020 to August 2020.
Morbi (Gujarat) based Freedom Ceramic Private Limited (FCPL, CIN:
U26990GJ2017PTC096413) was incorporated in March 2017 as a Private
Limited Company by Mr. Hasmukh Karshan Bhoraniya, Mr. Bharatbhai
Bhagvanjibhai Bhoraniya and Mr. Jagdishbhai Laljibhai Merja.
FCPL completed its project for manufacturing of Porcelain Floor
Tiles and commenced full-fledged commercial operations from March
2018 onwards. FCPL is operating from its sole manufacturing unit
located in Morbi Rajkot with an installed capacity of 60,000 Metric
tonne per annum for manufacturing Ceramic Porcelain Floor Tiles, as
on March 31, 2020.
Swiss Ceramic Private Limited (engaged in to business of
manufacturing of ceramic tiles since 2014) is an associate concern
of FCPL.
GENERAL TRADING: CARE Cuts Rating on INR22cr Loans to B
-------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
General Trading Corporation (GTC), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 14.00 CARE B; Stable; Issuer not
Facilities cooperating; Revised from
CARE BB-; Stable; ISSUER
NOT COOPERATING; on the basis
of best available information
Long-term/Short- 8.00 CARE B; Stable/CARE A4; Issuer
Term Bank not cooperating; Revised from
Facilities CARE BB-; Stable/CARE A4;
ISSUER NOT COOPERATING; Based
on best available information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated December 28, 2018, placed
the ratings of GTC under the 'issuer non-cooperating' category as
GTC had failed to provide information for monitoring of the
ratings. CARE had further reviewed the ratings on the above bank
facilities of GTC under the 'issuer non-cooperating' category vide
its press release dated November 28, 2019. GTC continues to be
non-cooperative despite CARE's requests for submission of
information through e-mail and a letter dated July 22, 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).
The revision in the long-term rating assigned to the bank
facilities of GTC is on account of non-availability of requisite
information due to non-cooperation with CARE's efforts to undertake
a review of the outstanding ratings. CARE views information
availability risk as key factor in its assessment of credit risk
profile.
The ratings assigned to the bank facilities of GTC are continue to
remain constrained by its modest scale of operations in a
competitive trading industry and thin profitability, weak debt
coverage indicators and moderately leveraged capital structure. The
ratings are further constrained by its presence in the highly
fragmented and cyclical textile industry, partnership nature of its
constitution and adverse impact of Covid-19 on textile sector.
Moreover, the details regarding the moratorium are not known to
CARE due to lack of information. The ratings, however, continue to
take into account the long and established track record of the
promoters in the textile industry, GTC's location in textile
cluster and dealership of established textile players.
Detailed description of the key rating drivers
At the time of last rating on November 28, 2019, the following were
the rating strengths and weaknesses: (updated based on best
available information i.e. banker feedback).
Key Rating Weaknesses
* Modest scale of operation and thin profitability: The TOI
declined by 16% in FY17, with lower sales of one of its dealership
business and demonetization impact on overall demand in the
industry. However, profitability had improved on account of
elongated credit period availed by the customers resulting in
higher realization (higher interest component). The PBILDT and PAT
margin of GTC improved to 3.76% and 0.28% by 169 bps and 9 bps
respectively during FY17.
* Moderately leveraged capital structure and weak debt coverage
indicators: Capital structure of GTC remained moderately leveraged
marked by overall gearing of INR1.82 times as on March 31, 2017
which had deteriorated on account of higher utilization of working
capital limits to fund elongated receivable period. Debt coverage
indicators remained weak marked by interest coverage of 1.13 times
and Total Debt to GCA of 38.99 times.
* Presence in fragmented and cyclical textile industry: The textile
industry in India is highly fragmented and dominated by a large
number of medium and small scale unorganized players leading to
high competition in the industry. Smaller standalone trading and
processing units like GTC are more vulnerable to intense
competition and have limited pricing flexibility, which constrains
their profitability as compared to larger integrated textile
companies who have better efficiencies and pricing power
considering their scale of operations. Furthermore, textile is a
cyclical industry and closely follows the macroeconomic business
cycles. The prices of raw materials and finished goods are also
determined by global demand-supply scenario. Hence, any shift in
macroeconomic environment globally would have an impact on the
domestic textile industry.
* Inherent risk associated with constitution of the entity as a
partnership firm: Being a partnership firm, GTC is susceptible to
risk associated with withdrawal/transfer of capital by the partners
which may lead to deterioration in the firm's capital structure.
During FY17, partner's has withdrawn capital worth of INR0.45 crore
in addition to the profits for FY17.
* Adverse impact of covid-19 pandemic on textile sector: The whole
textile chain has been severely affected globally. The closure of
retail stores and malls on account of lockdown situation across the
nation will affect textile industry's sales. On the International
front, spread of Covid-19 in top export destinations such as Europe
and US (together accounting for about 60% of the total apparel
exports) has resulted into closure of retail stores and malls
there. Even after the lockdown is lifted, gradual and delayed
recovery is likely in consumer demand given the relatively
discretionary nature of the apparel products in the backdrop of
likely economic slowdown. There may be a cascading impact on demand
of other textile products including raw cotton, cotton yarn and
fabric. The prices of these products have already witnessed a
significant correction post Covid-19 crises. This in turn may lead
to inventory losses.
Key Rating Strengths
* Vast experience of the promoters along with established track
record: Mr. Nilesh Patel and Mr. Harish Patel are the managing
partners of GTC who have vast experience of 25 years and 39 years
respectively in textile industry. They have also promoted Gujarat
Polyfilms Limited which is engaged in manufacturing of synthetic
yarn and texturizing operations with track record of over 10 years.
Mr. Harish Patel is also director in Gujarat Embroideries Limited,
Gujarat Polyfilms Limited and T. M. Patel Processing Private
Limited. Through their associations with various above mentioned
entities and utilizing their marketing network, partners are able
to scale up operations of GTC over the period.
* Favourable location advantage and dealership of well-established
players: GTC is located in Surat which one of the major textile hub
in India especially for synthetic textile market. GTC's close
proximity to major raw material suppliers and customers results in
lower transportation costs as well as moderate inventory holding
period.
Incorporated in 2012, GTC is engaged in Yarn (Polyester and Nylon)
and Grey trading and is based in Surat, Gujarat. GTC is also
authorized distributor various textile players viz. Bhilosa
Industries Private Limited, Garden Silk Mills Limited, Shree Durga
Syntex Private Limited, Gokulanand Texturisers private limited and
Chiripal Industries Limited etc. GTC is managed
by Mr. Nilesh Patel and Mr. Harish Patel who have more than two
decades of experience in textile industry.
GOLDEN JUBILEE: CARE Keeps D Debt Ratings in Not Cooperating
------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Golden
Jubilee Hotels Pvt Ltd. (GJHPL) continues to remain in the 'Issuer
Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 495.00 CARE D; Issuer not cooperating;
Facilities Based on best available
Information
Long Term/ 50.00 CARE D/CARE D; Issuer not
Short Term cooperating; Based on best
Bank Facilities available information
Detailed Rationale& Key Rating Drivers
CARE had, vide its press release dated July 23, 2019, placed the
rating of GJHPL under the 'issuer non-cooperating' category as
GJHPL had failed to provide information for monitoring of the
rating. GJHPL continues to be non-cooperative despite repeated
requests for submission of information through e-mails, phone calls
and email dated July 17, 2020. In line with the extant SEBI
guidelines, CARE has reviewed the rating on the basis of the best
available information which however, in CARE's opinion is not
sufficient to arrive at a fair rating.
Users of these ratings (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above ratings.
Detailed description of the key rating drivers
At the time of last rating on July 23, 2019 the following were the
rating strengths and weaknesses (updated for the information
available from Registrar of Companies):
Key Rating Weaknesses
* Stretched liquidity position: On account of time overrun, the
project cost has again been revised from earlier envisaged. The COD
and the financial closure of the final revised cost will be
proposed once the revised project cost is estimated. Non-tieup of
the cost overrun has resulted in stress on liquidity.
* Cash losses driven by high interest costs: GJHL has reported
total operating income of INR97.19 crore during FY18 with PBILDT
margin of 12.36% from the operation of Trident. However, on account
of higher interest cost of INR128.79 crore, company has reported
cash loss of INR116.78 crore. Consequently, the cash flow position
is stretched resulting in delays in debt servicing.
Golden Jubilee Hotels Ltd. (GJHL) was incorporated as Golden
Jubilee Estates Ltd. in December, 1996 and remained dormant till
2004. The name of the company was changed to current nomenclature
in December, 2006. GJHL is a special purpose vehicle (SPV) formed
for development of two five Star hotel properties under the name of
Trident and Oberoi at Hyderabad. The project work of Trident
(branded as Five Star Deluxe) has been completed and the hotel
commenced operation from September 1, 2013. However, there has been
change in plan with regard to construction of The Oberoi and the
same is being replaced with a five star business hotel cum service
apartment.
GREEN MIRROR: CARE Keeps D on INR11.5cr Loans in Not Cooperating
----------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Green
Mirror Buildcon Private Limited (GMBPL) continues to remain in the
'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 11.50 CARE D; Issuer not cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated July 24, 2019, placed the
rating of GMBPL under the 'Issuer non-cooperating' category as
GMBPL had failed to provide information for monitoring of the
rating for the rating exercise as agreed to in its Rating
Agreement. GMBPL continues to be non-cooperative despite repeated
requests for submission of information through phone calls and
emails dated May 25, 2020, July 29, 2020 and 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
At the time of last rating done on July 24, 2019, the following
were the rating weaknesses:
Key Rating Weaknesses
* Delay in debt servicing: GMBPL had been irregular in servicing
its debt obligation due to weak liquidity position of the
company.
Incorporated in September 2013, Ahmedabad (Gujarat)-based GMBPL is
promoted by two promoters namely Mr. Suresh Badgujar and Mr.
Jitendra Badgujar. GMBPL is undertaking a greenfield project to
manufacture Autoclaved Aerated Concrete (AAC) blocks/bricks with
proposed installed capacity of 1,00,000 Cubic Meters per Annum
(CMPA) at its plant located at Kheda district of Gujarat.
GVNS TOLLWAY: Ind-Ra Keeps 'D' Bank Loan Rating in Non-Cooperating
------------------------------------------------------------------
India Ratings and Research (Ind-Ra) has maintained GVNS Tollway
Private Ltd's bank loan in the non-cooperating category. The issuer
did not participate in the rating exercise despite continuous
requests and follow-ups by the agency. Therefore, investors and
other users are advised to take appropriate caution while using
these ratings. The rating will continue to appear as 'IND D (ISSUER
NOT COOPERATING)' on the agency's website.
The instrument-wise rating action is:
-- INR360 mil. Senior project bank loans (long term) maintained
in non-cooperating category with IND D (ISSUER NOT
COOPERATING) rating.
Note: ISSUER NOT COOPERATING. The ratings were last reviewed on
September 25, 2018. Ind-Ra is unable to provide an update, as the
agency does not have adequate information to review the ratings.
COMPANY PROFILE
GVNS Tollway is a special-purpose vehicle owned by GVR Infra
Projects Limited, which secured a 15-year concession from the
government of Andhra Pradesh to design, finance, build, operate and
transfer a two-lane, 600-meter bridge on the Miryalaguda-Kodada
Andhra Pradesh state highway in February 2009.
HOTEL JALTARANG: CARE Keeps B- on INR9.75cr Loan in Not Cooperating
-------------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Hotel
Jaltarang Private Limited (HJPL) continues to remain in the 'Issuer
Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 9.75 CARE B-; Stable; Issuer not
Facilities cooperating; Based on best
available information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from HJPL to monitor the
rating(s) vide e-mail communications/letters dated May 22, 2019,
July 13, 2020, July 30, 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
HJPL'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.
The ratings take into account weak financial risk profile, working
capital intensive nature of operations albeit lean operating cycle,
presence in competitive, fragmented & seasonal industry,
experienced promoters with over a decade of experience in the hotel
business and healthy profit margins.
Detailed description of the key rating drivers
At the time of last rating on May 28, 2019, the following were the
rating strengths and weaknesses (updated for the information
available from Registrar of Companies):
Key Rating Weaknesses
* Weak financial risk profile: The overall scale of operations
remained small with total operating income stood in the range of
INR6.39 crore to INR6.83 crore during FY17-FY19. Further, the
tangible networth has also remained negative of INR1.97 crore as on
March 31, 2019 due to losses incurred during past thereby limiting
the financial flexibility of the company to a greater extent. Owing
to the negative tangible networth, HJPL's capital structure
remained distressed during past three balance sheet dates ended
March 31, 2019. Moreover, the debt coverage indicators also
remained weak marked by total debt to GCA and interest coverage at
26.55 times and 1.49 times respectively in FY19.
* Working capital intensive nature of operations albeit lean
operating cycle: The operations of HJPL are working capital
intensive in nature with high working capital requirements to fund
its daily expenses. However, the operating cycle of the company is
lean with low collection period and inventory holding due to
walk-in customers and perishable nature of food commodities.
However, the company primarily fund its working capital
requirements through creditors and bank borrowing and hence, HJPL's
working capital limits were almost fully utilized during the past
12 months ending July, 2020.
* Presence in competitive, fragmented & seasonal industry: HJPL
operates in a highly competitive & fragmented restaurant industry
with a large number of players engaged in the restaurant business.
Moreover, the presence of many small & medium players in the
vicinity of the religious places intensifies the already prevailing
competition in the industry. Furthermore, the operations are
seasonal in nature due to serving of mainly sea food with low
occupancy during festivals & rainy season.
Key rating Strengths
* Experienced promoters with over a decade of experience in the
hotel business: The overall operations of HJPL are looked after by
the promoters - Mr. Madhukar Sanjeeva Shetty along with his
brothers Mr. Chandrakant Sanjeeva Shetty and Mr. Sharad Sanjeeva
Shetty, who possess average experience of over 30 years in the
hotel business through their association with other group
companies. Hence, the extensive experience of the promoters enables
them to establish strong marketing connects and service process
excellence for HJPL.
* Healthy profit margins: The profit margins of HJPL remained
healthy during past three years i.e. FY17-FY19 owing to hospitality
services nature of operations. The PBILDT margin remained in the
range of 39.23%-43.80% during the said period. However, owing to
higher finance and depreciation cost, the PAT margin remained
moderate in the range of 3.62%-9.31%.
Hotel Jaltarang Private Limited (HJPL) was incorporated in 1987 as
a private limited company by Mr. Manek Harchandrai Vasandani, Mrs.
Bindu Bijlani, Shri. Jayashri Bansi and the management was taken
over in 2002 by Shetty family. Currently Mr. Madhukar Sanjeeva
Shetty, Mr. Chandrakant Sanjeeva Shetty and Mr. Sharad Sanjeeva
Shetty are the directors of the company. HJPL is engaged in
providing hospitality services viz. restaurant in the name of
Gajalee located at Juhu in Vile Parle West, Mumbai. The said
restaurant is specialized for serving sea food. HJPL has around 40
tables with 110 seating capacity. Also, it has small party hall at
the same location for 25-30 people.
IL&FS: Delhi High Court Extends Interim Stay on NFRA Orders
-----------------------------------------------------------
The Hindu BusinessLine reports that the Delhi High Court on Aug. 18
extended the interim stay on the recent separate disciplinary
orders of audit regulator National Financial Reporting Authority
(NFRA) against Deloitte, Haskins & Sells (DHS) partners in the
IL&FS Financial Services (IFIN) audit for 2017-18.
According to BusinessLine, the implementation of the NFRA orders
will be on hold till the Delhi High Court hears the writ petitions
filed by former Deloitte India CEO Udayan Sen and other two DHS
partners. The Delhi High Court at its hearing on Aug. 18 admitted
the additional petitions (modifications) to the writs already filed
by the DHS partners on this matter.
During the hearing on Aug. 18, the judge had also suggested that
three DHS partners could go ahead with the process of filing
appeals against their respective NFRA orders at the appropriate
forum, sources said, BusinessLine relates. The Delhi Court has
fixed the next date of hearing on this matter for August 28.
It may be recalled that the NFRA Rules put into effect in 2018
specifies that a disciplinary order issued for disposing a show
cause notice will not be effective until 30 days had elapsed after
the date of issue of order or unless otherwise specified in the
order with reasons for the same, according to BusinessLine. The
three orders issued so far in this IFIN case are dated on July 22
(Udayan Sen), July 23 (Rukshad Daruvala) and July 28 (Shrenik
Baid). All the three orders had said that the order would not be
given effect to till July 31.
About IL& FS
Infrastructure Leasing & Financial Services Limited (IL&FS) --
https://www.ilfsindia.com/ -- is an infrastructure development and
finance company based in India. It focuses on the development and
commercialization of infrastructure projects, and creation of value
added financial services. The company operates in Financial
Services, Infrastructure Services, and Others segments.
As reported in the Troubled Company Reporter-Asia Pacific, the
Indian Express related that the Indian government, in October 2018,
stepped in to take control of crisis-ridden IL&FS by moving the
National Company Law Tribunal (NCLT) to supersede and reconstitute
the board of the firm which has defaulted on a series of its debt
payments. This was said to be an attempt to restore the confidence
of financial markets in the credibility and solvency of the
infrastructure financing and development group.
IL&FS: NFRA Finds Deficiencies in BSR's Audit of IL&FS Financial
----------------------------------------------------------------
Business Standard reports that the National Financial Reporting
Authority (NFRA), as audit regulator, has found lapses in BSR and
Associates' audit of IL&FS Financial Services (IFIN) and said it
was not eligible to be appointed as the statutory auditor of the
firm.
In its audit quality review report released on Aug. 17, the NFRA
said BSR, a KPMG affiliate, violated the provision of non-audit
services and had business relationships with the company at the
date of its appointment, Business Standard relays.
A statement by BSR said, "We are concerned to note the conclusions
by the NFRA in the audit quality review as they do not give due
consideration to all the facts and circumstances that were
transparently shared by us with the NFRA during their review."
According to Business Standard, BSR said that it was reviewing the
report in detail and will determine its response in due course.
"Audit quality remains the cornerstone of our profession and we
recognise the challenges that lie ahead to improve audit quality
across the profession in India. We remain committed to support the
NFRA's efforts in this regard," the statement, as cited by Business
Standard, said.
Business Standard relates that the NFRA's report on the statutory
audit for 2017-2018 of IFIN said BSR and other entities in its
network de facto use the KPMG trademark and brand name for all
their audit and non-audit services, while making a "clearly futile
attempt" to show a de jure (legal) separation from KPMG.
"The non-audit services provided technically by the KPMG-labelled
entities of the network are clearly services indirectly provided by
the BSR entities, and result in gross violations of the
independence requirements for auditors laid down under the
Companies Act, as well as the Code of Ethics mandated by the
Institute of Chartered Accountants of India," the NFRA said in its
report, the report relays.
BSR did not obtain sufficient and appropriate evidence, as required
by the standards of audit, to support the numbers reported in the
financial statements, according to the review report cited by
Business Standard.
IFIN reported pre-tax profit of INR201.96 crore for 2017-18 without
providing for reversal of general contingency provision,
unjustified valuation of a derivative asset, and non-provision for
impairment in the value of investments. "The total of the three
items mentioned above alone have led to an inflation of the profits
of IFIN by INR609 crore," the NFRA said.
According to Business Standard, the report has found violations
with respect to assessment of the use of the going concern
assumption by the management and improper evaluation of the risk of
material misstatements.
Business Standard adds that the NFRA also found systemic and
structural deficiencies in the information technology processes and
platforms used by BSR ". . . (They) arise substantially from a
complete disregard for basic principles of IT security in the
software used. This renders the audit documentation completely
unfit for the intended purpose."
The NFRA also said that IFIN was not compliant with the minimum net
owned funds and capital to risk assets ratio prescribed for a
non-banking financial company of its type, as of March 31, 2018.
"BSR was convinced that the IFIN management was clearly in the
wrong. However, they went along with the wrong numbers disclosed in
the financial statements," the report said, Business Standard
adds.
About IL& FS
Infrastructure Leasing & Financial Services Limited (IL&FS) --
https://www.ilfsindia.com/ -- is an infrastructure development and
finance company based in India. It focuses on the development and
commercialization of infrastructure projects, and creation of value
added financial services. The company operates in Financial
Services, Infrastructure Services, and Others segments.
As reported in the Troubled Company Reporter-Asia Pacific, the
Indian Express related that the Indian government, in October 2018,
stepped in to take control of crisis-ridden IL&FS by moving the
National Company Law Tribunal (NCLT) to supersede and reconstitute
the board of the firm which has defaulted on a series of its debt
payments. This was said to be an attempt to restore the confidence
of financial markets in the credibility and solvency of the
infrastructure financing and development group.
JAYATMA INDUSTRIES: CARE Cuts Rating on INR15cr LT Loan to B
------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Jayatma Industries Limited (JIL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 15.00 CARE B; Stable; Issuer not
Facilities cooperating; Revised from
CARE B+; Stable; ISSUER
NOT COOPERATING; on the basis
of best available information
Long-term/Short- 14.50 CARE B; Stable/CARE A4; Issuer
Term Bank not cooperating; Revised from
Facilities CARE B+; Stable/CARE A4;
ISSUER NOT COOPERATING; Based
on best available information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated November 15, 2019, placed
the ratings of JIL under the 'issuer non-cooperating' category as
JIL had failed to provide information for monitoring of the ratings
and had not paid the surveillance fees for the rating exercise as
agreed to in its rating agreement. JIL continues to be
non-cooperative despite repeated requests for submission of
information through e-mail and a letter dated July 22, 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).
The revision in the long-term rating assigned to the bank
facilities of JIL takes into account of weakened debt coverage
indicators during FY20 over FY19 on the back of decline in gash
accruals and increase in interest cost. Moreover, the revision in
rating also factors in non-availability of requisite information
including the latest liquidity due to noncooperation of issuer with
CARE's efforts to undertake a review of the outstanding ratings.
The ratings continue to remain constrained on account of its thin
profitability in light of limited value addition in cotton ginning
business, working capital intensive operations, susceptibility of
its operating margin to volatile cotton prices and presence in
highly fragmented cotton ginning industry coupled with impact of
changes in government policy on cotton. The ratings also take
cognizance of adverse impact of covid-19 pandemic on textile
sector. Moreover, the details regarding the moratorium are not
known to CARE due to lack of information.
The ratings, however, favourably take into consideration the vast
experience of the promoters in the cotton ginning business, JIL's
strategic location within the cotton producing region of Gujarat
and its association with reputed clientele.
Detailed description of the key rating drivers
At the time of last rating on November 15, 2019, the following were
the rating strengths and weaknesses: (updated based on best
available information i.e. financial results for quarter and year
ended March 31, 2020 published on stock exchange).
Key Rating Weaknesses
* Weak financial risk profile marked by modest scale of operation
and thin profitability: TOI of JIL declined by 23% on y-oy basis
and stood modest at INR117 crore during FY20 as compared to INR151
crore during FY19 majorly due to sluggish export and domestic
demand for cotton and cotton yarn. Historically, the scale of
operation of JIL remained modest and volatile. The operating
profitability continued to remain thin primarily on account of the
company's presence in the lowest segment of the cotton textile
value-chain with limited value addition. PBILDT margin of the
company improved marginally by 61 bps and stood thin at 2.46%
during FY20 as compared to 1.86% in FY19. However, the PAT margin
declined by 18 bps and stood very thin at 0.15% in FY20 on account
of higher finance cost during FY20 as compared to FY19. Moreover,
the gross cash accruals (GCA) of the company also declined by 48%
to INR0.43 crore in FY20 over FY19. Due to decline in GCA and
increase in interest and finance cost led to deterioration in debt
coverage indicators in FY20.
* Susceptibility of operating margins to volatile cotton prices:
Raw cotton is the key raw material for ginning and pressing
activities. Prices of raw cotton are highly volatile in nature.
Cotton ginners usually procure raw materials in large volumes to
bargain bulk discount from suppliers hence, the volatility in
cotton price along with the high inventory requirements results in
high susceptibility of operating margins to cotton price
fluctuations.
* Working capital intensive operations: Due to seasonal nature of
business, JIL is required to keep minimum amount of inventory to
serve the demand in non-season period. Apart from this, having low
bargaining power with its reputed customers, JIL needs to extend
high credit which further enhances the working capital requirement.
Capital structure of the company continue to remain moderately
leveraged marked by overall gearing of 1.34 times as on March 31,
2020 largely on account of higher reliance on working capital
borrowing to support the operation coupled with relatively small
tangible net-worth.
* Presence in highly fragmented cotton ginning industry and
government regulations: Cotton ginning business involves very
limited value addition and is highly dominated by small and medium
scale units resulting in highly fragmented nature of the industry.
Moreover, the competition in the ginning industry remains stiff
restricting the profitability margins. Furthermore, Government
policies with regard to minimum support price (MSP) and
export-import policy affect cotton prices.
* Adverse impact of covid-19 pandemic on textile sector: The whole
textile chain has been severely affected globally. The closure of
retail stores and malls on account of lockdown situation across the
nation will affect textile industry's sales. On the International
front, spread of Covid-19 in top export destinations such as Europe
and US (together accounting for about 60% of the total apparel
exports) has resulted into closure of retail stores and malls
there. Even after the lockdown is lifted, gradual and delayed
recovery is likely in consumer demand given the relatively
discretionary nature of the apparel products in the backdrop of
likely economic slowdown. There may be a cascading impact on demand
of other textile products including raw cotton, cotton yarn and
fabric. The prices of these products have already witnessed a
significant correction post Covid-19 crises. This in turn may lead
to inventory losses.
Key Rating Strengths
* Vast experience of promoters in the cotton ginning business: Mr.
Nirav K Shah, Chief Executive Office & Director has over a decades
of experience in the ginning industry, actively manages the routine
operations of the company. The other directors of the JIL also have
vast experience in the cotton ginning business and co-manage the
business activities. The promoters are supported by a team of
technically qualified and experienced professionals.
* Strategically located manufacturing unit along with long standing
relationship with reputed customers: The ginning facilities of JIL
are located at Kadi in Mehsana District of Gujarat. Gujarat is one
of the largest producers of cotton in India.
JIL's presence in the cotton producing region results in benefit
derived from a lower logistic expenditure, easy availability and
procurement of raw materials at effective prices. Further, JIL has
a long standing relationship with some of the reputed clients which
includes leading textile companies like Arvind Limited and
Vardhaman Textile Limited. However, CARE does not have latest
operational details.
JIL was incorporated in September 1983, as a private limited
company and subsequently got converted into public limited company
in December 1994. JIL is engaged in cotton ginning and pressing
with an installed capacity of 300 metric tonne per day (MTPD) along
with the trading of raw cotton, ginned cotton bales, cotton yarn
and cotton seeds. JIL has also set up an oil mill with 11 oil
expellers having a combined installed capacity of 10 MTPD for
manufacturing wash oil (raw oil) and de-oiled cakes (DOC). The
manufacturing facilities of the company are located at Kadi,
Gujarat. JIL has also installed a wind turbine generator of 0.80
Mega Watt at Jamnagar.
K. C. PRINTING: CARE Lowers Rating on INR7cr LT Loan to B-
----------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of K.
C. Printing and Allied Works (KCPA), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 7.00 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 3.00 CARE A4; Issuer not
Facilities cooperating; Based on best
available information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated June 28, 2019, placed the
rating(s) of KCPA under the 'issuer non-cooperating' category as
KCPA had failed to provide information for monitoring of the
rating. KCPA continues to be non-cooperative despite repeated
requests for submission of information through phone calls and
emails dated July 30, 2020 and July 29, 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. Further, banker could
not be contacted.
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 on account of non-availability of
information and no due diligence conducted due to noncooperation by
K. C. Printing and Allied Works with CARE'S efforts to undertake a
review of the rating outstanding. CARE views information
non-availability risk as a key factor in its assessment of credit
risk. Further, the ratings take into account small scale of
operations coupled with low net worth base, leveraged capital
structure, elongated collection period and competitive nature of
industry. The ratings, however, continue to draw comfort from long
track record of operations coupled with experienced proprietor and
moderate profitability margins.
Detailed description of the key rating drivers
At the time of last rating on June 28, 2019 the following were the
rating weaknesses and strengths:
Key Rating Weaknesses
* Small scale of operations coupled with low net worth base: The
scale of operations has continued to remain small as marked by
total operating income of INR20.17 crores and net worth of INR2.80
crore for FY17 (FY refers to period April 1 to March 31). Small
scale limits the firm's financial flexibility in times of stress
and deprives it from scale benefits.
* Leveraged capital structure: The capital structure of the firm
improved; however, it continued to remain leveraged due to low
capital base and high dependence on working capital borrowing.
* Elongated collection period: KCPA customer's base normally
comprises of government boards and universities and on account of
procedural delays, there is normally delay in realization resulting
into high average collection period. The firm procures the raw
material only which is based on delivery schedules and receives
credit up to 90 days from its suppliers.
* Competitive nature of industry: KCPA faces direct competition
from various organized and unorganized players in the market. There
are number of small and regional players who are located in and
around area and catering to the same market which has limited the
bargaining power of the firm and has exerted pressure on its
margins. The firm provides gets the order through the tender-based
system. The firm 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.
Furthermore, any changes in the Government policy or Government
spending on projects are likely to affect the revenues of the
firm.
Key rating strengths
* Long track record of operations coupled with experienced
proprietor: KCPA was established in 1979 as a proprietorship firm,
by Mr. Kali Charan Agrawal. However, the business is currently
managed by Ms. Mahima Agrawal who has an experience of more than
two decades in this printing business through her association with
KCPA.
* Moderate profitability margins: Margins of the firm have
witnessed an erratic trend during last three years FY14-FY16 owing
to tender driven nature of business which pose huge competition and
pressure on the profit margins of the firm.
Mathura-based (Uttar Pradesh) KCPA, was established in 1979 as
proprietorship firm by Mr. Kali Charan Agrawal. The firm is
currently being managed by Ms. Mahima Agrawal. KCPA is engaged in
printing of books such as text books, printed answer sheets, mark
sheets, degrees and other printed education material for various
state education board and universities in Uttar Pradesh, Rajasthan,
Madhya Pradesh, Himachal Pradesh, Chhattisgarh, Bihar and Haryana.
KILBURN CHEMICALS: Insolvency Resolution Process Case Summary
-------------------------------------------------------------
Debtor: Kilburn Chemicals Limited
"Shantiniketan", 16th Floor
8, Camac Street
Kolkata 700017
West Bengal
India
Insolvency Commencement Date: August 10, 2020
Court: National Company Law Tribunal, Kolkata Bench
Estimated date of closure of
insolvency resolution process: February 6, 2021
(180 days from commencement)
Insolvency professional: Partha Pratim Ghosh
Interim Resolution
Professional: Partha Pratim Ghosh
Ghosh and Associates
Chartered Accountants
CB 108 Salt Lake
Sector 1, Kolkata 700064
E-mail: cappghosh@gmail.com
- and -
LSI Resolution (P) Ltd.
104, S.P. Mukherjee Road
Sagar Trade Cube
Kolkata 700026
E-mail: cirp.kcl@gmail.com
Last date for
submission of claims: August 24, 2020
KPT SPINNING: CARE Keeps B- Debt Ratings in Not Cooperating
-----------------------------------------------------------
CARE Ratings said the rating for the bank facilities of KPT
Spinning Mills Private Limited (KPT) continues to remain in the
'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 4.52 CARE B-; Issuer not cooperating;
Facilities Based on best available
Information
Long term/short 0.04 CARE B-; Stable/CARE A4 Issuer
term Bank not cooperating; Based on best
Facilities available information
Detailed Rationale & Key Rating Drivers
CARE has been seeking no default statement from KPT to monitor the
ratings vide e-mail communications dated July 28, 2020, and
numerous phone calls. However, despite CARE's repeated requests,
the company has not provided no default statement 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 ratings on KPT's bank facilities will
now be denoted as CARE B-; Stable/CARE A4; ISSUER NOT COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above ratings.
M. M. CONSTRUCTIONS: CARE Keeps B+ Debt Rating in Not Cooperating
-----------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of M. M.
Constructions (Mumbai) (MMC) continues to remain in the 'Issuer Not
Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 2.00 CARE B+; Issuer not cooperating;
Facilities Based on best available
Information
Short-term Bank 15.00 CARE A4; Issuer not
Facilities Cooperating; On the basis of
best available information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from MMC to monitor the rating(s)
vide e-mail communications/letters dated June 3, 2020, July 3, 2020
and August 3, 2020 and numerous phone calls. However, despite
CARE's repeated requests, the MMC has not provided the requisite
information for monitoring the ratings. In the absence of minimum
information required for the purpose of rating, CARE is unable to
express opinion on the rating. In line with the extant SEBI
guidelines CARE's rating on M. M. Constructions (Mumbai) bank
facilities will now be denoted as CARE B+; Stable; ISSUER NOT
COOPERATING/CARE A4; ISSUER NOT COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
The rating factors in the small scale of operations, leverage
capital structure and weak debt protection metrics, working capital
intensive nature of operations, customer and geographic
concentration risk, exposure to volatility in input prices, high
competitive intensity in the civil construction segment along with
tender driven nature of business, constitution of the entity as
partnership firm with inherent risk of withdrawal of capital,
experienced partners with long track record of operations,
established relationship with government customers, fluctuating yet
moderate profit margin.
Detailed description of the key rating drivers
At the time of last rating on August 16, 2019 the following were
the rating strengths and weaknesses:
Key rating Weakness
* Small scale of operations: The total operating income of MMC has
declined by 56.85% from INR30.24 crore in FY18 (A) to INR13.05
crore in FY19 (A) on account of less number of contracts being
executed. Further, during 4MFY20 (refers to period of April 01,
2019 to July 31, 2019) the firm has posted revenue of approx.
INR4.00 crore. The tangible net worth of the firm remained moderate
at INR4.92 crore as on March 31, 2019. Further, the MMC's moderate
net worth base and small scale limits the firm's financial
flexibility in times of stress and deprives it from scale
benefits.
* Leverage capital structure and weak debt protection metrics: The
capital structure of the firm stood leveraged on account of higher
reliance on external debt with moderate net worth base. The debt
service coverage indicators remained weak owing to high debt level
leading to high interest charges.
* Working capital intensive nature of operations: The operations
of the firm remained working capital intensive in nature on account
of majority of funds being blocked in receivables as the firm deals
with government entities; however the counter party risk is
mitigated to a certain extent. On the other hand it gets sufficient
credit from suppliers due to established relations ,leading to
moderately comfortable utilization of the its fund-based limit.
* Customer and geographic concentration risk: The firm is exposed
to customer and geographic concentration risk since it depends
solely on MCGM for business. Any disruption in the socio-political
environment may thus have a bearing on the activities of the firm.
* Exposure to volatility in input prices: The major inputs for any
civil contractors are bitumen, cement, bricks, asphalt, stone chips
and metals, the prices of which are highly volatile in nature, thus
any adverse volatility in the raw material prices may affect the
firm's profit margins.
* High competitive intensity in the civil construction segment
along with tender driven nature of business: The construction
industry is highly fragmented in nature with presence of large
number of unorganized players and a few large organized players
which coupled with the tender driven nature of construction
contracts poses huge competition and puts pressure on the
profitability margins of the players.
* Constitution of the entity as partnership firm with inherent risk
of withdrawal of capital: MMC, being a partnership firm, is
exposed to inherent risk of the partner's capital being withdrawn
at time of personal contingency and firm being dissolved upon the
death/retirement/insolvency of the partners. Furthermore,
partnership firms have restricted access to external borrowing as
credit worthiness of partners would be the key factors affecting
credit decision for the lenders.
Key rating Strengths
* Experienced partners with long track record of operations: MMC
is into civil construction activities since 2001 and thus has more
than one and half decade of track record of operations. Further Mr.
Mukesh Hansraj Shah having more than two decade of experience in
the civil construction industry. Moreover the firm has experience
and qualified second line of management to carry day to day
business activities.
* Established relationship with government customers: MMC is
registered Class-I (A) approved contractor with Municipal
Corporation of Greater Mumbai (MCGM), Maharashtra and due to
established relationship, MMC has been receiving repetitive orders
from its clients.
* Fluctuating yet moderate profit margin: The profitability
margins of the firm has reflected fluctuating trend during the
period FY15-19 primarily due to increase in the prices of raw
material and labour coupled with intense competition from large
number of registered contractors, leading to aggressive biddings.
Further profitability margins of the firm have remained moderate
marked by PBILDT margin of 11.11% and PAT margin of 2.12% in FY19
(vis-a-vis 7.66% and 2.61% respectively in FY18).
Liquidity position - Stretched: Liquidity is marked by tightly
matched accruals to repayment obligations, highly utilized bank
limits and modest cash balance. Further the current ratio and quick
ratio stood above unity level as on March 31, 2019.
M. M. Construction (MMC) a partnership firm established in 2001 by
Mr. Mukesh Hansraj Shah and Mrs. Dipti Jaswant Shah. Further Mrs.
Dipti Jaswant Shah has retired from the business as on April, 1,
2016 and new partner Mr. Ateet Jaswant Shah has joined the firm.
The entity is engaged in the business of execution of civil
construction projects which involve construction & maintenance of
road work, bridges, drainage system, industrial building (civil
work). The firm undertakes tender based orders from Municipal
Corporation of Greater Mumbai (MCGM). The firm procures raw
material namely bitumen, crushed stones, gravel, metal, cement etc.
from local suppliers.
MAHA ASSOCIATED: CARE Keeps D Debt Ratings in Not Cooperating
-------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Maha
Associated Hotels Pvt Ltd. (MAHPL) continues to remain in the
'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 70.00 CARE D; Issuer not cooperating;
Facilities Based on best available
Information
Long Term/ 5.00 CARE D/CARE D; Issuer not
Short Term cooperating; Based on best
Bank Facilities available information
Detailed Rationale& Key Rating Drivers
CARE had, vide its press release dated July 23, 2019, placed the
rating of MAHPL under the 'issuer non-cooperating' category as
MAHPL had failed to provide information for monitoring of the
rating. SHPL continues to be non-cooperative despite repeated
requests for submission of information through e-mails, phone calls
and email dated July 17, 2020. In line with the extant SEBI
guidelines, CARE has reviewed the rating on the basis of the best
available information which however, in CARE's opinion is not
sufficient to arrive at a fair rating.
Users of these ratings (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above ratings.
Detailed description of the key rating drivers
At the time of last rating on July 23, 2019, the following were the
rating strengths and weaknesses (updated for the information
available from Registrar of Companies):
Key Rating Weaknesses
* Stretched liquidity position: There has been cost and time
overrun in the project due to project design reconfigurations. The
funding of the cost overrun has not been fully tied up which has
resulted in stress on liquidity position and consequently delays in
IDC servicing.
Maha Associated Hotels Private Limited (MAHPL), incorporated on
December 23, 2009, is engaged in development of a three star
mid-market hotel and a hotel training facility at New Industrial
Complex, Neemrana, Alwar District, Rajasthan. The hotel is being
developed under the brand name of 'Hampton by Hilton'with Hampton
Inns International Franchise LLC (HIIL, subsidiary of international
hospitality major Hilton Worldwide LLC) as the technical partner
for the project. MAHPL has a franchise agreement with HIIL,
primarily for the use of brand name and also a program fee
agreement for marketing related activities of HIIL.
MANAKULA VINAYAGAR: CARE Assigns B Rating to INR14.33cr Loan
------------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Manakula
Vinayagar Technologies Private Limited (MVTPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank
Facilities 14.33 CARE B; Stable Assigned
Short term Bank
Facilities 1.00 CARE A4 Assigned
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of MVTPL are primarily
tempered by small scale and nascent stage of operations, leveraged
capital structure and moderately weak debt coverage indicators,
on-going debt - funded capex plan, and presence in highly
fragmented and competitive retail industry. However, the rating
continues to derive benefits prominence and experience of the
promoters, steady increase in total operating income, satisfactory
profitability margins and satisfactory operating cycle.
Rating sensitivities
Positive Factors
* Significant increase in company's scale of operations through
expansion in diversified geographies along with such stores having
profitable operations, thereby while maintaining a minimum PBILDT
margin of 5% on a sustained basis.
* Improvement in overall gearing below 2.00 times and total debt to
gross cash accruals below 3.00 times on a sustained basis.
Negative Factors
* Decrease in PBILDT margin below 5% in future.
* Any delay in execution of on-going expansion projects with
significant cost overrun
* Deterioration in overall gearing and total debt to gross cash
accruals from current level on a sustained basis.
Detailed description of the key rating drivers
Key Rating Weaknesses
* Small Scale and nascent stage of operations: The scale of
operations remains small, marked by its total operating income of
INR13.40 crore in FY19 with low networth base of INR0.49 crore,
backed by limited track record of 3 years. However, the company is
financially backed by its promoters who regularly infuse funds to
support the company's growing scale of operations.
* Leveraged capital structure and moderately weak debt protection
metrics: The capital structure of the company marked by overall
gearing stood leveraged during the review period primarily on
account of low net-worth base owing to trading nature of operations
which is in initial stage of business operations with minimal
profits being generated from the same. The overall gearing stood at
8.68x as on March 31, 2019 as against 17.66x as on March 31, 2018.
This apart, the debt coverage indicators also stood moderately weak
during the review period. As on March 31, 2019, the TD/GCA stood at
8.53x, however improved from previous fiscal of 9.60x as on March
31, 2018 owing to improvement in gross cash accruals generated. In
addition to this, with very negligible interest costs on the back
of minimal outside borrowings, the interest coverage ratio stood
healthy at 33.73x in FY19.
* On-going Debt - Funded Capex plan: The company has planned to
expand its chain of retail stores by establishing three more shops
at different locations of Chennai city.
* Presence in highly fragmented and competitive retail industry:
Super market business is a highly competitive industry with large
presence of organized and unorganized players. Being a new entrant
in the super market division, the company has to tide over the
competition from the existing large players.
Key Rating Strengths
* Prominence and experience of the promoters: The managing director
Mr. M. Dhanasekaran is the chairman of the group of educational
institutions which are famous in the regions of Puducherry and
Villupuram. Mrs. D.Geetha (wife of Mr. M. Dhanasekaran) and Mr. D.
Rajarajan (son of Mr. M. Dhanasekaran) who are the KMPs of the
company. All are actively participating in day-to day operations of
the business and are supported by experienced executive team. Mr.
M. Dhanasekaran, a post graduate is the chairman and managing
trustee holding more than two decades of experience in managing &
operating educational institutions; namely Mailam Subramaniya Swamy
Educational Trust and Sri Manakula Vinayaga Educational Trust. In
addition to that, he also has three years of industry experience in
managing and operating retail chain of supermarkets and also online
store.
* Steady increase in total operating income: The total operating
income (TOI) of the company has seen y-o-y growth driven by
expansion and increase in sales volume. During FY17, business was
commenced with single store in Villupram district of Tamilnadu.
Later in FY18 and FY19, the business was expanded with two more
retail outlets, resulting in increase in TOI to INR5.63 Crore in
FY18, from INR1.17 Crore in FY17. Further increase in TOI to
INR13.40 crore in FY19 was witnessed with more footfall mainly from
existing stores. As of May 2020, the company is operating from six
stores various in the state. Further, the company has reported
revenue from operations of INR21.84 crore in FY20 (Prov.). Thereby
registering 63% of growth compared to previous year (Rs. 13.40
Crore in FY19). This growth primarily aided by, increase of sales
in all the outlets, with a considerable portion originated from
Thoraipakkam store, followed by establishment of two new stores at
Mogappair and Santhome Chennai during the year.
* Satisfactory profitability margins: As a retailer, considering
the high rental expenses and selling expenses, the PBILDT margin of
MVTPL remained moderate in the range of 3.90% - 4.90 % for the past
three years ended FY19. Further, it has been observed to improve
gradually every year owing to expansion along with absorption of
fixed overheads with increase in sales volume. PAT margin has
dropped by 38bps in FY19, yet, stood satisfactory at 2.72% as
against 3.10% in FY18. This fall is on account of increase in
depreciation provisions on the back of addition of fixed assets
owing to expansion of its operations.
* Satisfactory Operating cycle: Being a cash and carry business,
the operating cycle of the company stood satisfactory during the
review period. In FY19, the working capital cycle stood at 6 days
on account of less collection period of 10 days. Though, it is a
cash and carry business, the extended days of more than one week is
on account of online sales, where the bill clearances will take
more than a week, and as well as credit period offered to some
customers. Further, the company is offered with credit period of 30
days for payment to its suppliers. This apart, the company is also
facilitated with cash credit facility for the purchase of goods,
and other day to day expenses.
Liquidity analysis: Stretched
Liquidity position of the company stood stretched with tightly
matched accruals as against debt obligations. However, being a cash
and carry business, the same has been partially offset to certain
extent. The company has comfortable short term liquidity position,
with operating cycle of 6 days in FY19 owing to minimum collection
days, being a retail nature of business. Though the current ratio
stood below unity at 0.40x during March 31, 2019, the same is on
account of short term unsecured loans from directors. The cash and
bank balance modest at stood at INR0.39 crore as on March 31, 2019.
The company has availed moratorium as per RBI announcement on
COVID-19 for all the term loans till August 2020.
Manakula Vinayagar Technologies Private Limited (MVTPL) was
originally incorporated in the year 2010 in the name of M/s.
Manakula Vinayagar Sugars Private Limited in Villupuram, Tamil
Nadu, intending to produce Gur (Jaggery) from sugarcane; however,
there were no operations since the date of inception. Later in
FY17, a resolution passed by the board members of the company, and
accordingly the name of the company has been changed as Manakula
Vinayagar Technologies Private Limited along with changes in its
business model. As per the resolution, MVTPL will engage in
operating retail super markets in the name "indbazaar". The first
store was established Villupuram, Tamil Nadu in December 2016.
Since then, the company expanded its retail chain and currently
operating from six locations in the state. Apart from Villupuram
corporate office, MVTPL has its corporate office at Thoraipakkam
(Chennai) and back office at Puducherry. The company also
facilitates its customers with online store services, through a
portal "www.indbazaar.in". Apart from products of top brands, the
company sells the rest of essential commodities viz rice, cereals,
pulses, dals, spices, edible oils, dry fruits & nuts etc. in its
own brand name "Indbazaar".
MINESH PRINTS: Insolvency Resolution Process Case Summary
---------------------------------------------------------
Debtor: Minesh Prints Limited
6, 2nd Fanaswadi, 1st Floor
Mumbai, MH 400002
IN
Insolvency Commencement Date: March 4, 2020
Court: National Company Law Tribunal, Mumbai Bench
Estimated date of closure of
insolvency resolution process: January 2, 2021
Insolvency professional: Mr. Mahesh Sureka
Interim Resolution
Professional: Mr. Mahesh Sureka
173, Udyog Bhavan
Sonawala Road
Goregoan East
Mumbai 400063
Mobile: 9322581414
9870944469
Email: mahesh@mrsureka.com
Last date for
submission of claims: August 15, 2020
NEELKANTH SWEETS: CARE Lowers Rating on INR10cr LT Loan to B
------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Neelkanth Sweets Private Limited (NSPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 10.00 CARE B; Stable; Issuer not
Facilities cooperating; Revised from
CARE B+; Stable; ISSUER
NOT COOPERATING; on the basis
of best available information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated June 18, 2019, placed the
rating(s) of NSPL under the 'issuer non-cooperating' category as
NSPL had failed to provide information for monitoring of the
rating. NSPL continues to be non-cooperative despite repeated
requests for submission of information through phone calls and
emails dated July 30, 2020 and July 29, 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. Further, banker could
not be contacted.
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 on account of non-availability of
information and no due diligence conducted due to noncooperation by
Neelkanth Sweets Private Limited with CARE'S efforts to undertake a
review of the rating outstanding.
CARE views information non-availability risk as a key factor in its
assessment of credit risk. Further, the ratings take into account
small scale of operations, highly leveraged capital structure and
presence in highly competitive nature of industry. The rating,
however, draws comfort from experienced directors, moderate
profitability margins and moderate
operating cycle.
Detailed description of the key rating drivers
At the time of last rating on June 18, 2019, the following were the
rating weaknesses and strengths (Updated for the information
available from the Registrar of Companies):
Key Rating Weaknesses
* Small scale of operations: The scale of operations as marked by
total operating income and gross cash accrual stood small at
INR23.75 crore and INR0.91 crore respectively for FY19 as against
INR22.65 crore and INR1.20 crore respectively for FY18 (FY refers
to period April 1 to March 31). Further, the net worth base of the
company stood low at INR1.65 crore as on March 31, 2019. The small
scale of operations limits the company's financial flexibility in
times of stress and deprives it of scale benefits.
* Highly leveraged capital structure: The capital structure of the
company marked by overall gearing stood highly leveraged at above
6x as on past three balance sheet dates ending March 31, '17 - '19
owing to debt funded capex incurred in past along with low net
worth base.
* Presence in highly competitive nature of industry: The Indian
snacks market industry is driven by strong regional tastes and
preferences. Major growth drivers for the segment are attributed to
changing lifestyle, growing urbanization, increase in the nuclear
families and rise in disposable income. The industry is also prone
to the vagaries of price fluctuations in the commodity that they
utilize and is highly fragmented with presence of several regional
players apart from few national level players. With presence of
various players, the same limits bargaining power which exerts
pressure on its margins.
Key Rating Strengths
* Experienced directors: The overall operations of the company are
managed by Mr. Virendra Kumar Gupta. He has an experience of more
than three decades in hospitality and food & food products industry
through his association with NSPL. Further, he is supported by
other directors namely Mr. Mayank Gupta, Mr. Vishnu Gupta, Mr.
Vivek Gupta and Mr. Vinay Gupta, in managing in the day to day
operation of the company. They have experience varied up to a
decade in the industry through their association with NSPL.
* Moderate profitability margins: The profitability margins for the
company stood moderate for the past three financial years, i.e.
FY17 – FY19. PBILDT margin stood above 10% for the past three
financial years. However, PAT margin declined to 0.35% for FY19
from 2.11% for FY18 owing to increase in interest and depreciation
expense.
* Moderate operating cycle: The operating cycle of the company
stood moderate at negative 56 days in FY19. The company maintains
inventory of around 20–30 days in form of raw material i.e. dry
fruits, packed foods, packing products etc. The company mainly
sells the goods on cash and advance basis and credit period of
10–15 days is allowed to the corporate customers. Further, the
company receives a credit period of ~30- 60 days from its suppliers
owing to long standing relationship.
Lucknow, Uttar Pradesh based Neelkanth Sweets Private Limited
(NSPL) was incorporated in 2011. It has succeeded an erstwhile
proprietorship firm established in year 1992. The company is
managed by Mr. Virendra Kumar Gupta, Mr. Mayank Gupta, Mr. Vishnu
Gupta, Mr. Vivek Gupta and Mr. Vinay Gupta. NSPL is engaged in
manufacturing of sweets, snacks and namkeens under the brand name
'Neelkanth Sweets'. Further, the company operates a multi cuisine
restaurant and a banquet hall under the name of 'Green Restras' and
'Green Banquet' respectively.
PALLA SILKS: CARE Lowers Rating on INR8cr LT Loan to C
------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Palla Silks Private Limited (PSPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 8.00 CARE C; Stable; Issuer not
Facilities cooperating; Revised from
CARE B+; Stable; ISSUER
NOT COOPERATING; on the basis
of best available information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated August 1, 2019, placed the
rating(s) of PSPL under the 'issuer not cooperating' category as
PSPL had failed to provide information for monitoring of 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.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
The revision in the rating assigned to the bank facilities of Palla
Silks Private Limited (PSPL) takes into account decline in
scale of operations, elongated operating cycle, improvement in
profitability margins in FY19 (refers to the period April 1 to
March 31). The rating continues to be tempered by small scale of
operations, leveraged capital structure and modest debt coverage
indicators, highly competitive industry. The rating, however,
continues to derive strength from experienced promoters in the
industry.
Detailed Rationale& Key Rating Drivers
Updated for the information available from Registrar of Company
Affairs (ROC)
Key Rating Weakness
* Small scale of operations: The scale of operations marked by the
total operating income has declined and stood small at INR35.27
crore in FY19 as compared to INR45.25 crore in FY18 and further net
worth base stood thin INR6.45 crore as on March 31, 2019.
* Leveraged capital structure and modest debt coverage indicators:
The capital structure marked by the overall gearing ratio stood
leveraged at 2.16x as on March 31, 2019 though improved from 3.08x
as on March 31, 2018. The debt coverage indicators marked by
interest coverage ratio stood at 1.28x in FY19 as compared to 1.35x
in FY18. Further, the total debt to GCA stood modest at 9.98x in
FY19 though improved from 35.07x in FY18.
* Elongated operating cycle: Operating cycle of PSPL stood
elongated at 196 days in FY19 as compared to 121 days in FY18 due
to increase in average collection period and inventory holding days
during FY19. To meet the working capital gap company highly rely on
the working capital borrowing resulted full utilization for the
last 12 months ending July 31, 2020.
* Highly competitive industry: Saree manufacturing & trading
industry is characterized by the presence of many individual
weavers and small unorganized players. Being one of the renowned
hubs of Andhra Pradesh for Saree trade, the Hindupur area houses
many saree manufacturers & traders of different size & scale
leading to intense competition for the company.
Key Rating Strengths
* Experienced promoters in the industry: The MD - promoter of the
company - Mr. Palla Ashok Kumar has around 13 years of experience
in the textile industry and his family has been in this business
for more than four decades.
* Improved profitability margins: The profitability margins marked
by the PBILDT margin has increased by 123 bps over FY18 and stood
at 6.16% in FY19. In line with PBILDT, PAT margins has increased
significantly by 291 bps and stood at 3.77% in FY19.
* Moratorium: The Company has availed moratorium on its debt
obligations from March 1, 2020 to August 31, 2020.
Palla Silks Private Limited (PSPL) was incorporated in the year
2014 by Mr. Palla Ashok Kumar and his wife Mrs. Palla Lakshmi. PSPL
is located at Hindupur, Andhra Pradesh and is engaged in the
business of trading of various types of silk sarees.
PHTHALO COLOURS: Ind-Ra Lowers LongTerm Issuer Rating to 'D'
------------------------------------------------------------
India Ratings and Research (Ind-Ra) has downgraded Phthalo Colours
& Chemicals (India) Limited's (PCCIL) Long-Term Issuer Rating to
'IND D' from 'IND BB'. The Outlook was Stable.
The instrument-wise rating actions are:
-- INR127.5 mil. Fund-based working capital limits (Long-term /
Short-term) downgraded with IND D rating; and
-- INR138.3 mil. (reduced from INR204.95 mil.) Term loan (Long-
term) due on May 2024 downgraded with IND D rating.
KEY RATING DRIVERS
The downgrade reflects delays in debt servicing by PCCIL. While the
delay is being recognized in accordance with the extant
regulations, PCCIL has submitted additional information and
reported prepayment of the existing term loan. The agency is
reviewing the ratings in light of the additional information
submitted by the company. The outcome of the analysis will be
published as soon as the review process is completed.
COMPANY PROFILE
Incorporated in 1991, PCCIL manufactures phthalocyanine pigments
such as green, alpha blue and beta blue at its plant in Vapi in
Gujarat under the Rangday brand.
R. S. ENTERPRISES: CARE Lowers Rating on INR9cr LT Loan to B-
-------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of R.
S. Enterprises (RSE), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 9.00 CARE B-; Stable; Issuer not
Facilities cooperating; Revised from
CARE B; Stable; ISSUER
NOT COOPERATING; on the basis
of best available information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated June 17, 2019 placed the
rating(s) of RSE under the 'issuer noncooperating' category as RSE
had failed to provide information for monitoring of the rating. RSE
continues to be noncooperative despite repeated requests for
submission of information through phone calls and emails dated July
30, 2020 and July 29, 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. Further, banker could not be
contacted.
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 on account of non-availability of
information and no due diligence conducted due to noncooperation by
R. S. Enterprises with CARE'S efforts to undertake a review of the
rating outstanding. CARE views information non-availability risk as
a key factor in its assessment of credit risk. Further, the rating
takes into account modest scale of operations, low profitability
margins, leveraged capital structure and weak coverage indicators
and intense competition given the highly fragmented nature of
industry. The rating, however, continues to draw comfort from
experienced partners and moderate operating cycle.
Detailed description of the key rating drivers
At the time of last rating on June 17, 2019, the following were the
rating weaknesses and strengths:
Key Rating Weaknesses
* Modest scale of operations: Despite the growth registered on
y-o-y basis in last 3 financial years (FY14-FY16) the scale of
operations stood modest at INR55.01 crore in FY16 as against
INR39.41 crore in FY15 which limits the firm's financial
flexibility in times of stress and deprives it of scale benefits.
* Low profitability margins, leveraged capital structure and weak
coverage indicators: The firm's profitability margins have been
historically on the lower side owing to the trading nature of the
business and intense market competition given the highly fragmented
nature of the industry. The PBILDT margin stood at 2.68% in FY16 as
against 3.00% in FY15. Higher interest cost further restricted the
net profitability of the firm and the same remained below 0.30% for
the past three financial years i.e. FY14-FY16. The capital
structure of the firm stood leveraged as marked by overall gearing
ratio of 2.90x as on March 31, 2016 as against 2.52x as on March
31, 2015 due to high dependence on external borrowings to meet
working capital requirements. Furthermore, coverage indicators as
marked by interest coverage ratio and total debt to GCA also stood
weak for the past three financial years i.e. (FY14-FY16) owing to
low profitability margins and low cash accruals. Interest coverage
ratio and total debt to GCA stood at 1.15x and 68.63x respectively
for FY16 as against 1.17x and 73.18x respectively for FY15.
* Intense competition given the highly fragmented nature of
industry: RSE operates in highly fragmented industry which is
dominated by the presence of large number of players in the
unorganized sector and organized sectors. There are number of small
and regional players catering to the same market which has limited
the bargaining power of the firm and has exerted pressure on its
margins.
Key Rating Strengths
* Experienced partners: The partners viz. Mr. Samir Kumar Singhal
and Mr. Achin Kumar Singhal are graduates by qualification. They
have extensive experience varied up to two decades in the fabric
trading industry through their association with this entity.
* Moderate operating cycle: The firm has to maintain inventory of
wide range, colour and designs of fabrics to cater immediate demand
of the customers. The same resulted into an average inventory
period of 57 days for FY16. The firm procures material mainly in
cash basis however, the firm allows an average credit period of
around half month to its customers on account of competitive nature
of industry.
Delhi-based R. S. Enterprises (RSE) is a partnership firm
established in 2006. RSE succeeded an erstwhile proprietorship firm
established in 1995 by Mr. Samir Kumar Singhal. The firm is
currently being managed by Mr. Samir Kumar Singhal and Mr. Achin
Kumar Singhal sharing profit and losses equally. RSE is engaged in
trading of various types of fabrics viz., Cambric dyeel, cambric
chicken print, cambric gray, and cotton gray. The firm procures
traded goods domestically from manufacturers located in Delhi,
Ahmedabad, Surat etc. RSE caters to local garment manufacturers
based mainly in North India.
RAJNIGANDHA MARBLES: CARE Keeps B Debt Rating in Non-Cooperating
----------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Rajnigandha
Marbles Private Limited (RMPL) continues to remain in the 'Issuer
Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank 1.85 CARE B; Stable; Issuer Not
Facilities Cooperating; Based on best
Available Information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from RMPL to monitor the
rating(s) vide e-mail communications dated July 3, 2020, July 14,
2020, July 22, 2020 & Letter dated August 4, 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 based on best available information which
however, in CARE’s opinion is not sufficient to arrive at a fair
rating. The rating on RMPL’s bank facilities will now be denoted
as CARE B; Stable; ISSUER NOT COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating(s).
The rating assigned to the bank facility of RMPL continues to
remain constrained on account of its small scale of operations with
moderate profitability margins. The rating, further, continue to
remain constrained on account of weak solvency position, working
capital intensive nature of operations with vulnerability of
margins to fluctuations in raw material prices and foreign exchange
rate.
The rating, however, continuous to drive strength from the
experienced management with long track record of operations and
strategic location of manufacturing units with close proximity to
raw material sources.
Detailed description of the key rating drivers
At the time of last rating on May 10, 2019, the following were the
rating strengths and weaknesses. (Updated for the information
available from ROC)
Key Rating Weaknesses
* Small scale of operations and moderate profitability margins:
During FY19, Total Operating Income (TOI) remained in line as
compared to FY18 and stood small at INR5.59 crore. Profitability
margins of the company has continuously remained volatile during
past three years however stood moderate marked by PBILDT margin of
11.54% and net loss of 0.03% during FY19 as against PBILDT and PAT
margin of 14.13% and 1.51% respectively during FY18.
* Leveraged solvency position: The capital structure of the company
improved, however stood leveraged as on March 31, 2019. The overall
gearing of the company improved marginally from 8.47 times as on
March 31, 2018 to 8.04 times as on March 31, 2019. Further, debt
coverage indicators stood weak with total debt to GCA of 14.57
times as on March 31, 2019, deteriorated from 8.95 times as on
March 31, 2018 mainly due to lower GCA level. However, interest
coverage stood moderate at 1.61 times in FY19, declined from 2.06
times in FY18 due to decline in PBILDT and increase in interest
cost.
* Working capital intensive nature of operations: The liquidity
position of the company stood weak marked by elongated operating
cycle owing to higher collection period. The company maintains
inventory of around 40-45 days and gets the payment from customers
around 90-120 days. It makes the payment to its suppliers in 30-60
days. The current ratio and quick ratio of the company stood
moderate at 1.58 times and 1.37 times as on March 31, 2019.
Further, as per banker interaction, the company has availed
moratorium from March 2020 to August 2020 as per the Reserve Bank
of India (RBI) guidelines.
* Vulnerability of margins to fluctuation in raw material prices
and foreign exchange rates and easy availability of substitute
Products: The major raw material required by RMPL is natural
stones. The profitability of the company is vulnerable to any
adverse movement in raw material prices as the company will not be
immediately able to pass on the increased price to its customer and
its elongated raw material inventory holding period. Further, RMPL
is exposed to foreign exchange fluctuation risk considering that
the company also generates its income in foreign currency and does
not follow active hedging policy. Therefore, any adverse movement
in the prices of foreign currency can negatively affect the
profitability margin of the company. Furthermore, there are various
substitute products which are easily available in the market and
RMPL faces competition from same.
* Presence in a highly competitive stone industry with linkage to
cyclical real estate sector: It is considered to be highly
fragmented with presence of large number of organized and
unorganized player. The industry is concentrated in Karnataka,
Andhra Pradesh, Tamil Nadu and Rajasthan and majority of the
processing units are clustered around the mining area. The entry
barriers to the industry are very low and the operating margin is
susceptible to new capacity additions in the industry. The
industry is primarily dependent upon demand from real estate and
construction sector across the globe. The real estate industry is
cyclical in nature and is exposed to various external factors like
the disposable income, interest rate scenario, etc.
Key Rating Strengths
* Experienced management with long track record of operations: The
overall affairs of RMPL are looked after by Mr. Pawan Kumar
Agarwal, graduate by qualification and have more than two decade of
experience in the industry. He looks after overall affairs of the
company. Further he is supported by Mr. Mahesh Chand Agarwal, M.Com
by qualification and is associated with company since 1995 and Mr.
Saurabh Agarwal, MBA by qualification looks after the export
division of RMPL. Further, they are assisted by second tier
management who have relevant experience in the same line of
business. Furthermore, being present in the industry since 1995,
the management has long track record of operations and has
established relationship with customers and suppliers and sells its
products under the brand name of "Rajnigandha Marble" and it sells
its products both in domestic and export market and mainly to
Turkey, Egypt, Nepal and Bhutan.
* Strategic location of manufacturing units with close proximity to
raw material sources: RMPL’s manufacturing facility is located in
Rajasthan, strategically located in one of the major minerals
producing region of India which makes it easier for the company to
access its primary raw material. Being in business since 1995, RMPL
has developed good business relations with the quarries owners
resulting in benefits derived from lower logistic cost, easy and
timely availability and procurement of raw materials at effective
prices.
RMPL was incorporated in 1995 as a private limited company by
Agarwal family. RMPL is engaged in the processing and trading of
marble and granite slabs with an installed capacity of 5 lakh
square metre Per Annum for marble and 2 lakh square metre per annum
for granite and it sells its products both in domestic and export
market and mainly to Turkey, Egypt, Nepal and Bhutan.
RANJEET SHIVHARE: CARE Keeps B+ on INR9cr Loans in Not Cooperating
------------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Ranjeet
Shivhare (RSH) continues to remain in the 'Issuer Not Cooperating'
category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 4.00 CARE B+; Issuer not cooperating;
Facilities Based on best available
Information
Short-term Bank 5.00 CARE A4; Issuer not
Facilities Cooperating; On the basis of
best available information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from RSH to monitor the ratings
vide e-mail communications/letters dated April 30, 2020, May 4,
2020, May 6, 2020, May 8, 2020, May 14, 2020, May 29, 2020, June 1,
2020, June 3, 2020, June 5, 2020, June 15, 2020, June, 30, 2020,
July 1, 2020, July 3, 2020, July 7, 2020, July 13, 2020, July 16,
2020, July 24, 2020, July 27, 2020, July 28, 2020, July 29,2020 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 ratings on the basis of the best available information
which however, in CARE's opinion is not sufficient to arrive at a
fair rating. The ratings on RSH's bank facilities will now be
denoted as CARE B+; Stable/CARE A4; ISSUER NOT COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above ratings.
Detailed description of the key rating drivers
At the time of last rating done on February 25, 2020, the following
were the rating weaknesses and strengths:
Key Rating Weaknesses
* Modest scale of operations with moderate profitability margins:
The scale of operation of RSH stood modest in FY19, marked by Total
Operating Income and PAT of INR64.67 crore and INR1.23 crore
respectively with net worth of INR4.35 crore. During FY19, TOI of
the firm has increased by 1.23 times over FY18 mainly on account of
increase in sales volume. TOI of the firm has increased with CAGR
of 1.15 times during last three years ending FY19. Further,
profitability margins of the firm stood moderate as reflected by
PBILDT and PAT margins of 2.81% and 1.91% respectively in FY19 as
against 4.01% and 2.68% respectively in FY18. Further, in FY19,
Gross Cash Accruals (GCA) of the firm has increased by 58.34% over
FY18 and stood at INR1.35 crore.
* Trading nature of business characterized by low profitability and
high competition: RSH is engaged in wholesale and retail business
of liquor in Madhya Pradesh. As the business operations are of
trading nature, the profitability margins of the firm are
restricted. Further, liquor trading business is highly fragmented
due to presence of large number of outlets thereby limiting the
profitability margins of the firm
* High business risk due to regulated nature of liquor industry and
constitution as proprietorship concern: The Indian liquor industry
is highly regulated. The industry is witnessing high taxes and
numerous regulations from government which impacts the pricing
flexibility of the industry. The State Governments levy various
duties like excise duty, license fee, state-level import and export
duty, bottling fee, welfare levy, assessment fee, franchise fee,
turnover tax, surcharge etc. The state governments are also given
liberty to enact the bye-laws for liquor industry on their own;
hence any significant policy changes adversely affect the whole
industry. Further, the liquor retailing is tender driven and the
successful bidders' get license for trading for a period of one
year and has to go through same process for renewal of licenses.
Hence, it leads to aggressive bidding by the players resulting into
pressure on the profitability margins and also uncertainty over
future revenue visibility in case of non-renewal of licenses. RSH's
constitution as proprietorship firm with moderate net worth base
restricts its overall financial flexibility in terms of limited
access to external funds for any future expansion plans. Also,
there is inherent risk of possibility of withdrawal of capital and
dissolution of the firm in case of death/insolvency of the
proprietor.
Key Rating Strengths
* Experienced proprietor: Overall affairs of the firm are handled
by Mr. Raneet Shivhare, proprietor, who is graduate by
qualification and has around twenty five years of experience in the
industry. Further, the proprietor is assisted by a team of
experienced personnel.
* Favorable demand outlook with steady increase in consumption of
alcohol: Indian Liquor industry is one of the growing industries
despite being subjected to high taxes and innumerable regulations
by government. CL shares more than 50% of total liquor consumption
on account of low cost and easy availability. However, in last five
years, IMFL segment has seen higher growth rate of around 10-12%
than CL whose growth rate was around 5- 8%.The factors such as
rising income levels and changing mind-sets which are more open to
the consumption of alcoholic beverages drives the growth of IMFL
segment. In addition, changing consumer preference towards premium
varieties has resulted in improvement in sales mix of industry.
Hence, Indian liquor industry is envisaged to continue the trend of
steady growth supported by increasing demand led volume growth.
* Moderate solvency position: The capital structure of RSH stood
moderate with an overall gearing of 1.68 times as on March 31,
2019, improved from 3.59 times as on March 31, 2018 on account of
lower utilization of its working capital borrowings as well as
infusion of proprietorship capital. Further, debt service coverage
indicators of RSH stood moderate with total debt to GCA of 5.41
times as on March 31, 2019 improved from 12.00 times as on March
31, 2018 mainly due to higher increase in GCA level as well as
decline in total debt. Further, interest coverage stood comfortable
at 3.94 times in FY19, marginally improved from 3.78 times in FY18
owing to higher increase in PBILDT level as against increase in
interest cost.
Liquidity: Stretched
Liquidity ratio of the firm remains stretched marked by current
ratio and quick ratio stood at 1.24 times and 1.24 times as on
March 31, 2019. During February- April of every year, the firm
requires large amount of fund for bidding for the shop licenses.
Further, the firm has to maintain ready stock of products at all
its retail shops which is to be procured from wholesalers with a
credit period of 5-10 days. The working capital cycle of the firm
stood negative of 2 day. The firm has average 90% utilized of its
working capital limit in past 12 months ended March 31, 2019.
Further, it has cash and bank balance of INR1.38 crore as on March
31, 2019 and cash accrual of INR0.97 crore as against repayment of
INR0.11 crore in FY20 projections.
Betul (Madhya Pradesh) based Ranjeet Shivhare (RSH) was formed in
2008 as a proprietorship firm by Mr. Ranjeet Shivhare. The firm is
engaged in the retailing of country made and Indian Made Foreign
Liquor (IMFL) in Madhya Pradesh. The firm has licences for 14 shops
for FY 2018-19 and 10 Shops for FY 2019-20. The firm's product
profile comprises almost all the major brands of IMFL such as
Seagram, Signature, Mc Dowells No.1, DIG whisky among others. In
addition, the firm also distributes leading beer brands of UBL such
as Kingfisher, Kingfisher Blue, and Kingfisher Ultra beer.
ROSA POWER: Ind-Ra Affirms 'B' Rating on INR132-BB Rupee Term Loan
------------------------------------------------------------------
India Ratings and Research (Ind-Ra) has affirmed Rosa Power Supply
Company Limited's (RPSCL) debt facilities as follows:
-- INR32.760 bil. Rupee term loan due on September 30, 2024
affirmed with IND B/Stable rating; and
-- USD192.19 mil. External commercial borrowing due on December
31, 2023 affirmed with IND B/Stable rating.
The affirmation reflects RPSCL's timely debt servicing in FY20 and
4MFY21, according to the monthly no-default statements submitted to
Ind-Ra for the said period and FY20 audited annual report; the
Uttar Pradesh Electricity Regulatory Commission's (UPERC) tariff
order for additional CAPEX approval and continued stable
operations. The ratings are, however, constrained by RPSCL's
stretched liquidity, high working capital utilization levels,
volatile collection efficiency, and the weak financial flexibility
of its sponsor.
KEY RATING DRIVERS
Liquidity Indicator - Stretched: RPSCL's liquid cash balance
improved to about INR480 million as of June 30, 2020, from INR62.9
million at FYE19. The liquidity build-up was supported by cash flow
generation due to better plant availability and higher plant load
factor during FY20 and 1QFY21 than that in FY19. The project
maintains a partial debt service reserve (DSR) of about INR310
million; however, the full DSR according to the loan documents is
not being maintained. The company has applied for a DSR waiver from
the lenders. The project's receivables stood at INR8,300 million on
June 30, 2020, equivalent to over three months' revenue according
to Ind-Ra base case. April and May 2020 saw a significant dip in
RPSCL's collection efficiency to about 33% (INR1,680 million
received during this time period) due to the COVID-19-led
nationwide lockdown. However, the collection improved thereafter
with INR3,010 million and INR2,750 million being received in June
2020 and July 2020, respectively. Given the substantial loan
repayments scheduled till FYE22, continued low collections could
impact the debt servicing ability of the company. The company has
not availed the Reserve Bank of India-prescribed debt moratorium.
The project company continues to show high utilization of its
working capital limits. While the projected debt service coverage
ratios are reasonably above 1.2x over the balance loan tenor (till
FY25), historical deviations from the waterfall arrangement and the
transfer of funds to group companies reduce the comfort on the
liquidity to be maintained within the project over the
medium-to-long term. The agency will continue to monitor the
project's adherence to the waterfall mechanism and liquidity
build-up, before taking any further rating action. Furthermore, the
timely realization of power sale dues from the offtaker remains a
key monitorable.
Additional Capex Approval: The ratings consider the UPERC's
approval of additional CAPEX to the tune of INR2,737 million (lower
than Ind-Ra's earlier expectations) incurred by RPSCL between FY14
and FY17 vide its tariff order dated February 4, 2020. A
UPERC-appointed expert committee had recommended approving an
additional CAPEX of INR4,215.5 million against which UPERC finally
approved INR2,737 million. RPSCL is in the process of filing a
petition with APTEL for the balance unapproved amount. Ind-Ra will
continue to monitor the same. The management has also informed the
agency that undischarged liabilities of over FY11-FY15 have been
discharged by the company and a petition for claiming the same in
the multi-year tariff order has been filed with UPERC. The
management expects the CAPEX approval order and the discharge of
undischarge liabilities to translate into additional revenue (FY22:
INR580 million, FY23: INR550 million and so on, reducing for the
remainder of the power purchase agreement (PPA) term) in addition
to the arrears of about INR1,780 million. While these developments
are positive for the company, there is some uncertainty on the
timelines that will be required for their realization.
FGD Capex Funding Risk: According to the new environmental norms
for thermal plants announced by the Ministry of Environment, Forest
and Climate Change, the government of India, RPSCL has to install a
flue gas desulphurization (FGD) system in its plants to meet the
new emission standards. The installation process has to be
completed by December 2021. The management estimates CAPEX of about
INR8,000 million to be required for the installation. This CAPEX is
proposed to be funded in a debt-equity mix of 70:30. The cost
incurred for FGD installation will be a pass-through under the PPA
with Uttar Pradesh Power Corporation Limited (UPPCL). UPERC has
passed an order stating that cost approval will be considered after
the cost has been incurred. RPSCL has informed Ind-Ra that in line
with the requirement of its lenders, RPSCL has approached APTEL
seeking in-principle approval of the capital cost before incurring
the CAPEX. The debt tie-up required for funding the FGD CAPEX also
exposes RPSCL to some amount of funding risk. Ind-Ra will continue
to monitor the status of FGD installation and any significant
delays resulting in possible penalties on RPSCL will be credit
negative.
Weak Financial Flexibility of Sponsor: The ratings are constrained
by the reducing financial flexibility of the project's sponsor
Reliance Power Limited. At FYE20, RPSCL had outstanding
inter-corporate deposits in the form of current assets to the tune
of INR30.15 billion (FYE19: INR30.08 billion) given to Reliance
Power. In FY20, a sum of INR70 million was given to the sponsor in
the form of intercorporate deposits. The chances of recovering the
same in the near term continue to be remote, given the sponsor's
weak liquidity profile. Any further fund movements from RPSCL to
its sponsor/group companies prior to senior debt servicing will
continue to constrain the ratings.
Full Fixed Tariff Recovery backed by Availability above Normative
Level: RPSCL's availability factor and plant load factor improved
to 97.43% in FY20 (FY19: 88.88%) and 57.24% (41.18%) respectively.
RPSCL is eligible to receive the full fixed tariff, subject to the
plant availability above the normative 85% according to the terms
and conditions of the PPA. Also, the improvement in the scheduling
of power during FY20 compared to FY19 justifies the cost of power
generated by the project to the off-taker.
Favorable PPA Structure: RPSCL's ratings are supported by a
take-or-pay clause in its PPA with UPPCL. All the major costs,
including landed fuel costs, are pass-through in nature, mitigating
any revenue risk. According to the PPA, in case of a payment
default by UPPCL under the escrow account mechanism, RPSCL will
have recourse to the government of Uttar Pradesh's guarantee after
30 days of the default from the due date of payment (just for Phase
1 of 600MW), which provides additional surety to payments from the
off-taker.
Counterparty Risk partly mitigated by Escrow Mechanism Under PPA:
RPSCL is exposed to the single counterparty credit risk associated
with the sale of electricity only to UPPCL. The gap between the
average revenue realized and the average cost of supply on subsidy
booked basis for the distribution companies of Uttar Pradesh
increased to INR0.56/kWh in FY19 (FY18: INR0.45/kWh) and payable
days rose to about 217 (174), according to Report on Performance of
State Power Utilities 2018-19. The volatility in UPPCL's payment
cycle is mitigated, to an extent, by the default escrow mechanism
of the PPA. According to the mechanism, UPPCL's end-consumers will
directly deposit the billed amount in a designated escrow account.
UPPCL has identified various revenue circles with average monthly
revenue of about INR3,570 million. The escrow cover is sufficient
to cover the monthly billing for the entire project capacity of
1,200MW.
RATING SENSITIVITIES
Negative: The following factors, individually or collectively,
could lead to a rating downgrade:
- plant availability below the normative level of 85% for a
sustained period of time
- debt service coverage ratio below 1.15x for a sustained period
of time as per audited annual accounts
- any delay or any adverse action on the multi-year tariff
approval for the control period (FY19-FY24) by the regulator
- a significant increase in the receivables from the offtaker
- intercompany fund movements to the sponsor or any other group
company and a further reduction in cash liquidity available with
the project
Positive: The following factors, individually or collectively,
could lead to a rating upgrade:
- a sustained operational and financial performance in line with
Ind-Ra's base case estimates, and the timely debt servicing for a
sustained period
- a sustained liquidity build-up equivalent to at least three
months of debt servicing
- a significant improvement in the sponsor's credit profile
COMPANY PROFILE
RPSCL is a coal-fired thermal power plant located at Rosa,
Shahjahanpur District, Uttar Pradesh.
RPSCL has set up a 1,200MW (4 X 300MW) power plant in two phases of
600MW (2 X 300MW each) capacity. The project site is located 4km
from the Rosa railway station, about 160km from Lucknow. The phase
I commenced commercial operations in July 2010, while phase II came
online in April 2012.
Reliance Power's generation capacity is about 6,000MW, majorly in
thermal power and some renewable capacity. Apart from RPSCL, its
operational projects include the Butibori project in Nagpur,
Maharashtra (600MW), an ultra-mega power project in Sasan, Madhya
Pradesh (3,960MW), a solar PV project in Dhursar, Rajasthan (40MW),
a concentrated solar power project in Pokhran, Rajasthan (100MW)
and a wind project in Vashpet, Maharashtra (45MW). In January 2020,
Yes Bank Limited acquired 29.97% of the post-issue paid-up share
capital of RPSCL, pursuant to the invocation of pledge of RPSCL's
shares provided by Reliance Power to Yes Bank.
SAI SWARUPA: CARE Lowers Rating on INR8cr LT Loan to B
------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of Sri
Sai Swarupa Seeds Pvt Ltd. (SSPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 8.00 CARE B; Stable; Issuer not
Facilities cooperating; Revised from
CARE BB- 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 SSPL under the 'issuer non-cooperating' category as SSPL
had failed to provide information for monitoring of the rating.
SSPL continues to be non-cooperative despite repeated requests for
submission of information through e-mails, phone calls and email
dated July 17, 2020. In line with the extant SEBI guidelines, CARE
has reviewed the rating on the basis of the best available
information which however, in CARE's opinion is not sufficient to
arrive at a fair rating.
Users of these ratings (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above ratings.
The rating has been revised on account of CARE's inability in
carrying out due diligence in absence of the requisite information
that was sought from the company.
Detailed description of the key rating drivers
At the time of last rating on June 18, 2019 following were the
rating weaknesses and strengths (updated for the information
available from Registrar of Companies):
Key Rating Weakness
* Small Scale of operations: The scale of operation continues to
remain small compared to other major players in seeds industry
exposing company to competitive pressures.
* Leveraged capital structure: On account of the unsecured loans
received from promoters and high working capital utilizations,
coupled with the losses reported on net level, the overall gearing
of the company deteriorated to 1.79x as on March 31, 2019 as
compared to 1.58x as on March 31, 2018.
* Working capital intense nature of operations: SSPL procures paddy
from local farmers during February-March for processing in
April-May which results in accumulation of inventory at the year
end and thus high inventory days and stretched working capital
cycle.
* Competition from the established domestic players and MNCs: SSPL,
though, has a good distribution network and a strong product, being
a small-sized player, faces intense competition from the relatively
large-sized and established domestic players and MNCs. The industry
has significant entry barriers in view of high cost associated with
production, distribution, R&D, dealer discounts, etc.
Key Rating strengths
* Experienced promoters and management team: Mr. Kovvuri
Rajasekhara Reddy founder of KPR group, has over 10 years of
experience in managing the group's pesticides and fertilizers
businesses. He is involved in the day-today affairs of the
companies in the group assisted by a team of qualified personnel to
handle operations.
* Synergies from group with well-diversified distribution network:
KPRAL has a strong and established network of around 9200 dealers
in different states viz., AP, Karnataka, Tamil Nadu, Orissa,
Punjab, Haryana Maharashtra, MP and Bihar. SSPL leverages on the
distribution network of its parent company KPRAL and has been
supplying seeds in more than seven states.
Sri Sai Swarupa Seeds Private Limited (SSPL) incorporated in
February, 2009 belongs to KPR group of companies promoted by Mr. K
Papa Reddy. SSPL is engaged in processing Paddy, Cotton, Maize,
Sunflower, Pulses and Vegetable seeds at its seeds processing plant
located at Warangal, Andhra Pradesh. SSPL caters to Andhra Pradesh
and Telangana region through the well established distribution
network of KPR Agrochem Limited, the holding company.
SAISUDHIR ENERGY: CARE Keeps D on INR146cr Loans in Not Cooperating
-------------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Saisudhir
Energy Limited (SEL) continues to remain in the 'Issuer Not
Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 146.87 CARE D; Issuer not cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated December 1, 2017, placed the
rating of SEL under the 'issuer non-cooperating' category as SEL
had failed to provide information for monitoring of the rating.
Further vide its press release dated May 20, 2019, CARE has
continued the rating of SEL at 'CARE D' under issuer
non-cooperating category. SEL continues to be non-cooperative
despite repeated requests for submission of information through
emails, phone calls and email dated July 7, 2020 and July 20, 2020.
In line with the extant SEBI guidelines, CARE has reviewed the
rating on the basis of the best available information which
however, in CARE's opinion is not sufficient to arrive at a fair
rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating(s).
Detailed description of key rating drivers
At the time of last rating on May 20, 2019, the following were the
rating strengths and weaknesses (updated for the information
available from Registrar of Companies):
Key Rating Weaknesses
* Continued delays in debt servicing owing to cash flow mismatches:
As per the due diligence undertaken by CARE and the audit report
for FY19, there are continued delays in debt servicing. Delays are
on account of cash flow mismatches.
Saisudhir Energy Ltd. (SEL) was incorporated in 2010 by Mr. D.
Sreedhar Reddy to set up solar power plants in the Ananthpur
District in state of Andhra Pradesh. The company is a 100%
subsidiary of Saisudhir Infrastructures Limited (SSIL). SEL has
successfully commissioned two solar photovoltaic power plants of 5
MW and 20 MW respectively in Ananthpur district of Andhra Pradesh.
The 5 MW project was commissioned on January 5, 2012 within
stipulated timelines. There was a delay in commissioning of 20 MW
project. As per the Power Purchase agreement (PPA), Scheduled
Commercial Operation Date (SCOD) was 23 February 2013 however; the
project was commissioned on July 24, 2013 with a delay of five
months. The company has entered into long term PPA with NTPC Vidyut
Vyapar Nigam Limited for entire 25 MW capacity.
SAPTARISHI HOTELS: CARE Keeps D Debt Ratings in Not Cooperating
---------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Saptarishi
Hotels Pvt Ltd. (SHPL) continues to remain in the 'Issuer Not
Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 220.00 CARE D; Issuer not cooperating;
Facilities Based on best available
Information
Long Term/ 20.00 CARE D/CARE D; Issuer not
Short Term cooperating; Based on best
Bank Facilities available information
Detailed Rationale& Key Rating Drivers
CARE had, vide its press release dated July 23, 2019, placed the
rating of SHPL under the 'issuer non-cooperating' category as SHPL
had failed to provide information for monitoring of the rating.
SHPL continues to be non-cooperative despite repeated requests for
submission of information through e-mails, phone calls and email
dated July 17, 2020. In line with the extant SEBI guidelines, CARE
has reviewed the rating on the basis of the best available
information which however, in CARE's opinion is not sufficient to
arrive at a fair rating.
Users of these ratings (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above ratings.
Detailed description of the key rating drivers
At the time of last rating on July 23, 2019, the following were the
rating strengths and weaknesses (updated for the information
available from Registrar of Companies):
Key Rating Weaknesses
Stretched liquidity position: On account of time overrun, the
project cost has again been revised from earlier envisaged. The
funding of the cost overrun has not been fully tied up which has
resulted in stress on liquidity position and consequently delays in
IDC servicing.
Saptarishi Hotels Private Limited (SHPL) was incorporated on
October 7, 2010. The company is a special purpose vehicle (SPV)
incorporated for the development of a 4-star serviced apartments
and convention hotel property in the name of 'Double Tree by
Hilton' at Gachibowli, Hyderabad.
SHUBHSHREE ENGINEERING: Ind-Ra Corrects Aug. 17 Rating Release
--------------------------------------------------------------
India Ratings and Research (Ind-Ra) rectified a ratings release on
Shubhshree Engineering And Constructions Private Limited (SECPL)
published on August 17, 2020, to clarify that there was a slight
improvement in the company's net leverage ratio in FY20 and it
earned INR30 million in revenue in 1QFY21.
The amended ratings release is as follows:
India Ratings has downgraded Shubhshree Engineering And
Constructions Private Limited's (SECPL) Long-Term Issuer Rating to
'IND BB+' from 'IND BBB-'. The Outlook is Stable.
The instrument-wise rating actions are:
-- INR60 mil. Fund based working capital facility downgraded with
IND BB+/Stable /IND A4+ rating;
-- INR200 mil. (increased from INR190 mil.) Non-fund based
working capital facility downgraded with IND A4+ rating;
-- INR50 mil. Non-fund-based working capital facility# downgraded
& assigned with IND A4+ rating; and
-- INR20 mil. Proposed fund based working capital facility*
assigned with Provisional IND BB+/Stable /Provisional IND A4+
rating.
# Downgraded to 'Provisional IND A4+' and assigned final rating
following the receipt of executed financing documents by Ind-Ra.
* The ratings are provisional and shall be confirmed upon the
sanction and execution of loan documents for the above facilities
by SECPL to the satisfaction of Ind-Ra
The downgrade reflects deterioration in SECPL's operating
performance in FY20 and the likelihood of a continued deterioration
over the medium term, backed by its failure to maintain a healthy
order book in FY20.
KEY RATING DRIVERS
The downgrade reflects the lack of visibility on SECPL's revenue
over the medium term due to few orders in hand. SECPL's revenue
grew to INR696 million in FY20 (FY19: INR585 million) due to the
execution of orders in hand. The company's scale of operations
remained modest. SCEPL had an order book of INR764.63 million as of
30 July 2020 (1.09x of FY20 revenue) and L1 orders of INR400
million. The company achieved revenue of INR30 million in 1QFY21.
Ind-Ra expects the revenue to decline yoy in FY21 due to the low
order book and operational disruptions owing to the COVID-19 led
lockdown. FY20 financials are provisional in nature.
The ratings also factor in the company's modest EBITDA margin,
which contracted to 5.1% in FY20 (FY19: 15.8%) due to the execution
of lower-margin projects coupled with increased operating expenses.
The company's return on capital employed was 10% in FY20 (FY19:
33%). However, the management expects the company's EBITDA margins
to expand in FY21 as the company has undertaken cost-reduction
measures to contain the impact of COVID-19.
Liquidity Indicator - Stretched: SECPL's fund-based facilities were
maximum utilized at 96% in the 12 months ended June 2020 and the
non-fund based facilities at maximum 69% in the 12 months ended
July 2020. Its net cash cycle elongated to 50 days in FY20 (FY19:
26 days) due to a decrease in creditors days to 41 (93 days). The
cash flow from operations turned negative at INR12.93 million in
FY20 (FY19: INR17.76 million) due to unfavorable changes in the
working capital cycle. Ind-Ra expects SECPL's cash flows to be
sufficient to service term debt obligations of INR2.62 million and
INR8.42 million in FY21 and FY22, respectively. Further, Ind-Ra
expects the company's cash flow from operations to turn positive in
FY21-FY23 on the back of the improved EBITDA margins. The
company's free cash flow from operations remained negative in FY20
at INR25.43 million (FY19: negative INR23.18 million) due to capex
incurred during the period. SECPL has availed of a moratorium for
its working capital facilities over March-August 2020 under the
Reserve Bank of India's COVID-19 regulatory package, to conserve
liquidity.
The ratings are also constrained by the company's geographical
concentration risk, as most of its new as well as ongoing projects
are based in Maharashtra, Haryana and Rajasthan.
The ratings, however, are supported by SCEPL's continued
comfortable credit metrics, despite the deterioration in interest
coverage (operating EBITDA/gross interest expense) to 4.9x in FY20
(FY19: 10.1x) due to a decrease in the operating EBITDA to INR35.4
million (INR92.6 million). The net financial leverage (total
adjusted net debt/operating EBITDA), however, improved slightly to
0.2x in FY20 (FY19: 0.3x) as debt reduced to INR12.8 million
(INR28.8 million).
The ratings, however, benefit from the promoters' over two decades
of experience in the industrial construction business.
RATING SENSITIVITIES
Positive: A significant improvement in the revenue, driven by a
stronger order book position, along with an improvement in the
liquidity position and EBITDA margin, on a sustained basis, would
be positive for the ratings.
Negative: A delay in the execution of orders, impacting revenue
and/or failure to maintain a healthy order book or a decline in the
EBITDA margin leading to interest coverage deteriorating below
2.0x, on a sustained basis, could lead to negative rating action.
COMPANY PROFILE
Incorporated in July 2013, SECPL is engaged in industrial project
construction, planning and implementation, construction management,
and project commissioning in Aurangabad, Maharashtra Haryana, and
Rajasthan.
SRIPATHI PAPER: Ind-Ra Lowers LongTerm Issuer Rating to 'D'
-----------------------------------------------------------
India Ratings and Research (Ind-Ra) has downgraded Sripathi Paper &
Boards Private Limited's (SPBPL) Long-Term Issuer Rating to 'IND D'
from 'IND BB' and has simultaneously migrated it to the
non-cooperating category. The Outlook was Negative. The issuer did
not participate in the surveillance exercise despite continuous
requests and follow-ups by the agency. Thus, the rating is based on
the best available information. Therefore, investors and other
users are advised to take appropriate caution while using these
ratings. The rating will now appear as 'IND D (ISSUER NOT
COOPERATING)' on the agency's website.
The instrument-wise rating actions are:
-- INR1.80 bil. Fund-based working capital limit (Long-term/
Short-term) downgraded with IND D (ISSUER NOT COOPERATING)
rating;
-- INR1,387.94 bil. Term loan (Long-term) due on March 2025
downgraded with IND D (ISSUER NOT COOPERATING) rating;
-- INR685 mil. Non-fund-based working capital limit (Short-term)
downgraded with IND D (ISSUER NOT COOPERATING) rating; and
-- INR400 mil. Proposed fund-based working capital limits (Long-
term/ Short-term) is withdrawn.
*Ind-Ra has withdrawn the provisional ratings on SPBPL's
facilities as the company did not proceed with the instruments as
envisaged.
Note: ISSUER NOT COOPERATING: Issuer did not cooperate; based on
the best available information
KEY RATING DRIVERS
The downgrade reflects SPBPL's delays in the debt servicing of the
term loan due on January 31, 2020 for 25 days on account of its
tight liquidity position.
SPBPL was unable to share documents/information for the
surveillance process due to the COVID-19-led lockdown.
RATING SENSITIVITIES
Positive: Timely debt servicing for three consecutive months could
result in a positive rating action.
COMPANY PROFILE
SPBPL manufactures kraft paper, duplex board, writing and printing
paper, and newsprint at its manufacturing units in Sivakasi and
Sathyamangalam, Tamil Nadu. The company is wholly-owned by the
founders and their families.
THERMOKING (THK): CARE Lowers Rating on INR5.50cr Loan to B
-----------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Thermoking (THK), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 5.50 CARE B; Stable; Issuer not
Facilities cooperating; Revised from
CARE B+; Stable; ISSUER
NOT COOPERATING; on the basis
of best available information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated June 13, 2019, placed the
rating(s) of THK under the 'issuer noncooperating' category as THK
had failed to provide information for monitoring of the rating. THK
continues to be noncooperative despite repeated requests for
submission of information through phone calls and emails dated July
30, 2020 and July 29, 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. Further, banker could not be contacted.
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 on account of non-availability of
information and no due diligence conducted due to noncooperation by
Thermoking with CARE'S efforts to undertake a review of the rating
outstanding. CARE views information non-availability risk as a key
factor in its assessment of credit risk. Further, the rating takes
into account small scale of operations, low profitability margins,
elongated operating cycle, highly competitive nature of industry
and constitution of the entity being a proprietorship firm. The
rating, however, continues to draw comfort from experienced
proprietor and moderate capital structure.
Detailed description of the key rating drivers
At the time of last rating on June 13, 2019, the following were the
rating weaknesses and strengths:
Key Rating Weaknesses
* Small scale of operations: The scale of operations of the firm as
marked by total operating income and gross cash accrual stood small
at INR29.41 crore and INR0.22 crore respectively for FY17 (FY
refers to period April 1 to March 31). The small scale limits the
firm's financial flexibility in times of stress and deprives it
from scale benefits. Further, the firm has achieved total operating
income of ~INR30.84 crore for FY18 (based on provisional results).
* Low profitability margins: The profitability margins stood weak
for the past three financial years i.e. FY15-FY17 mainly on account
of highly competitive nature of industry. Further, the firm has
wide product portfolio wherein margins largely depend upon the
variety of product sold. The profitability margins as marked by
PBILDT and PAT margin stood low at 2.73% and 0.28% respectively for
FY17.
* Elongated operating cycle: The operating cycle of the firm stood
elongated at 129 days for FY17. The firm maintains adequate
inventory in the form of raw material for the smooth functioning of
operations. Also, owing to large product portfolio, the firm has to
maintain wide variety of finished product to meet the immediate
demand of its customers. Entailing the same, the average inventory
period for the firm stood at 79 days for FY17. The firm allows
credit period of around two months to its customers due to
competitive nature of industry. On the contrary, the firm receives
credit period of around 10-20 days for the suppliers. Due to the
same, the firm majorly has to rely on external borrowings to meet
the working capital requirement. The same resulted into average
utilization of around 85% of the working capital limits for the
past 12 months period ended June, 2018.
* Highly competitive industry: The firm operates in a competitive
industry wherein there is presence of a large number of players in
the unorganized and organized sectors. Hence, the players in the
industry do not have any pricing power and are exposed to
competition induced pressures on profitability.
* Constitution of the entity being a proprietorship firm:
Thermoking's constitution being a proprietorship firm has the
inherent risk of possibility of withdrawal of the proprietor's
capital at the time of personal contingency and firm being
dissolved upon the death/retirement of proprietor. Moreover,
proprietorship firms have restricted access to external borrowing
as credit worthiness of proprietor would be key factors affecting
credit decision for lenders.
Key rating strengths
* Experienced proprietor: The firm is managed by Mr. Pradeep
Khanna, who is a graduate by qualification and has more than three
and a half decades of experience in the manufacturing industry
through his association with Thermoking. He looks after the overall
operations of the firm.
* Moderate capital structure: The capital structure of the firm as
marked by debt equity and overall gearing ratio stood moderate for
the past three balance sheet dates ending March 31, '15-'17 owing
to moderate net worth base against the availed debt levels. The
overall gearing stood at 1.06x as on March 31, 2017 as against 0.60
as on March 31, 2016 mainly on account of higher reliance on
external debts as on balance sheet date.
Delhi based, Thermoking is a proprietorship firm established in
year 1979 by Mr. Pradeep Khanna. The firm is engaged in
manufacturing of electronic goods such as air coolers, geysers,
fans, room heaters, exhaust and ventilation, stabilizer and water
dispenser. It procures raw material like metal sheets, elements,
lighting, thermacol, wires and tanksfrom domestic manufacturers and
traders. The firm sells its products under the brand name
'Thermoking' to various domestic retailers located across India.
VIDEOCON INDUSTRIES: Waits for Better Offers Before Liquidation
---------------------------------------------------------------
Business Standard reports that the lenders to Videocon Industries
have decided to wait to get a better bid for the company before
taking a final call on liquidation.
Business Standard relates that the committee of creditors (CoC),
which met on Aug. 14, said because of the ongoing pandemic very few
bidders had shown interest in the firm. If the company is sent for
liquidation, the lenders will end up taking a huge haircut. But, as
the economy picks up, creditors are of the opinion that the bidders
will come back to the table, the report says.
When Videocon was sent to the National Company Law Tribunal (NCLT)
for debt resolution, the company had dues of INR59,451 crore. Of
this, claims of INR57,443 crore were admitted as of November 2018.
State Bank of India (SBI) had notched up the highest exposure with
INR11,175 crore. SBI was followed by IDBI Bank, with claims of
INR9,561 crore, while Central Bank of India has an exposure of
INR5,066 crore, Business Standard discloses.
In the last CoC meeting, the lenders discussed the option of
sending the firm to liquidation as bidders were backing out,
Business Standard says. However, with economic activity picking up,
the lenders decided to wait for some more weeks to get good offers.
Soon after the banks said that they would discuss sending Videocon
for liquidation, the promoters had appealed to the banks to
postpone any further action on the company's bankruptcy proceedings
till the pandemic is over.
In a written communication to the banks, Videocon's promoters said
any hasty steps would only bring down the valuation of the company,
Business Standard relays.
Some of the resolution plans that have been submitted to revive the
company were not even being opened, the promoters had said, asking
the lenders not to undervalue the firm, the report adds.
According to the promoters, the liquidation of Videocon would not
only cause grave harm and prejudice to its stakeholders, whether
they be financial creditors, operational creditors, or
workmen/employees, but will derail the entire insolvency process,
Business Standard relates. Even before the decision to liquidate
the group companies is taken, the CoC must open and consider each
resolution plans that they had received, the promoters said.
The promoters reiterated that according to the earlier debt
resolution proposal, banks would be able to recover dues of up to
INR27,500 crore (as of November 2017), says Business Standard. This
was even agreed by the joint lenders forum in November 2017 after
the forensic auditors gave a clean chit to Videocon. But, the
Reserve Bank of India, then led by Urjit Patel, decided to send the
company to the NCLT for debt resolution in December 2017.
About Videocon Industries
Videocon Industries sells consumer products like color televisions,
washing machines, air conditioners, refrigerators, microwave ovens
and many other home appliances in India.
On June 6, 2018, National Company Law Tribunal (NCLT), Mumbai
bench, admitted a petition for initiating insolvency resolution
process against the company under the Insolvency and Bankruptcy
Code, 2016.
According to Videocon's FY17 annual report, the company is liable
to repay the liability of other group companies to the extent of
INR5,082 crore as on March 31, 2017. The company's total debt stood
at INR19,506 crore as of March 2017.
[*] INDIA: Low Borrowing Costs Can't Save Shadow Banks in Crisis
----------------------------------------------------------------
Divya Patil at Bloomberg News reports that India's shadow banks are
benefiting from a drop in borrowing costs after government stimulus
steps, but the troubled sector faces more challenges ahead as the
economy reels from the pandemic.
The lenders' borrowing costs declined in June for a second straight
month, according to a gauge that's among four indicators compiled
by Bloomberg to check on the health of the industry. But the fall
is primarily because of easy cash conditions in the nation's
banking system and not because businesses have strengthened,
Bloomberg relays citing Sundaram Asset Management Co.
"India's economic outlook is uncertain, and chances are high
financial health of these companies deteriorates further,"
Bloomberg quotes Dwijendra Srivastava, chief investment officer for
debt at Sundaram Asset, as saying.
Worries are mounting that bad debt at shadow financiers may rise as
the world's strictest stay-at-home measures to contain the
coronavirus have hammered the nation's business and left millions
jobless, Bloomberg says. Moody's Investors Service last month
warned that the stress among these lenders may be deeper and
broader than it thought and S&P Global Ratings cut credit scores of
several such firms citing liquidity risks, according to Bloomberg.
Bloomberg says the health of shadow banks needs to improve because
they form the backbone of the Indian economy and lend to everyone
from small merchants to business tycoons. Prime Minister Narendra
Modi must kick-start lending to revive economic growth that's set
to shrink for the first time in four decades this year.
The Bloomberg check-up of the sector's health also showed that the
other three measures were unchanged from the previous month. The
scores attached to each of the indicators have been calculated by
normalizing the deviation of the latest value of the indicator from
its yearly average and have been assigned on a scale of 1 to 7,
with 1 implying weakness and 7 showing strength.
India's non-bank companies were first hit almost two years ago when
a major infrastructure financier IL&FS Group defaulted, says
Bloomberg. Risks roared back when Dewan Housing Finance Corp. and
Altico Capital India Ltd. also didn't honor their debt repayments
last year. Sentiment soured again this year when a big buyer of the
sector's debt fell prey to the contagion from the shadow-lender
crisis.
Bloomberg adds that to arrest the fallout and help firms amid the
pandemic, the government in its latest move in May announced a $277
billion virus-relief package, which included a INR750-billion ($10
billion) special credit line for shadow financiers. The central
bank slashed its benchmark repurchase rate to the lowest level
since at least 2000 and kept doors open for more easing.
=================
I N D O N E S I A
=================
SAWIT SUMBERMAS: S&P Assigns 'CCC+' LongTerm Issuer Credit Rating
-----------------------------------------------------------------
S&P Global Ratings, on Aug. 18, 2020, assigned its 'CCC+' long-term
issuer credit rating to the Indonesian crude palm oil (CPO)
producer PT Sawit Sumbermas Sarana Tbk (SSMS).
Existing financial linkages between SSMS and its parent PT Citra
Borneo Indah Tbk. (CBI) will prompt SSMS to make further cash
injections into CBI, to support the parent's highly leveraged
balance sheet and sizable operating losses over the next 18-24
months.
SSMS's 'b-' stand-alone credit profile (SACP) reflects its modest
operating scale with geographic concentration, exposure to volatile
CPO prices, and a leveraged balance sheet.
The issuer credit rating on SSMS reflects CBI's weak credit
profile, unsustainably high leverage, loss-making operations, and
limited liquidity. S&P believes CBI's limited debt servicing
capacity will gradually erode SSMS' own credit quality and
liquidity.
Poor operating performance and unsustainable capital structure at
SSMS' parent and sister companies -- particularly refinery PT Citra
Borneo Utama (CBU, 81%-owned by CBI, 19%-owned by SSMS) -- will
constrain the rating on SSMS.
In the absence of significant improvement in its refinery business,
CBI will require ongoing financial support from SSMS due to its
unprofitable operations and growing financial obligations. S&P
said, "This is credit negative for SSMS, in our view. CBI and its
subsidiaries, excluding SSMS, accounted for close to 25% of
consolidated debt as of Dec. 31, 2019, despite a 5% revenue
contribution for fiscal 2019 and loss-making operations. CPO
refineries within the group remain deeply loss-making, as they have
yet to fully ramp up their utilization rate, despite off-taking
almost all of SSMS' production. We estimate that EBITDA losses at
CBI excluding SSMS amounted to Indonesian rupiah (IDR) 274 billion
in 2018 and IDR491 billion in 2019. We project annual operating
losses at CBI to average IDR350 billion through 2022 given our
expectation of a slow ramp-up of the refineries, sizable overhead
costs, and low refinery spreads. Cross default clauses in CBI's and
its subsidiaries' debt will prompt SSMS to prioritize financial
support to the parent and sister companies over its own liquidity
management."
S&P said, "We believe CBI has an unsustainable capital structure.
We project CBI's consolidated funds from operations (FFO) to debt
to be negative, and its debt-to-EBITDA ratio to stay above 10x over
the next 18-24 months. We estimate that debt at CBI excluding SSMS
amounted to IDR1.9 trillion as of Dec. 31, 2019, predominantly made
up of short-term working capital facilities. We project that this
translates to a minimum annual interest expense of IDR115 billion."
The loss-making nature of operations at CBI will reduce its ability
to roll over its short-term debt, thereby inhibiting efforts to
secure additional facilities to fund the ramp-up in its refining
business.
SSMS' financial support to its parent and sister companies will
weigh on SSMS' liquidity over the next two to three years.
SSMS will have to support its parent and sister companies through
related-party loans or other means to the tune of IDR400
billion-IDR500 billion per year through 2022, at least, in S&P's
base case forecast. This will be in addition to a sustained
dividend payout policy of 30%, which CBI will require from SSMS.
The proceeds of these related-party transactions will be used to
fund CBI's operating losses, working capital requirement, interest
expenses, residual capital spending, and other financial
obligations. Meanwhile, CBU will continue to account for 80%-90% of
SSMS' revenues, as CBU's refineries source CPO from SSMS. This
figure was 87% for 2019.
These projected streams of periodic financial support to its parent
and sister companies will substantially erode SSMS' liquidity over
the next two to three years. As of March 31, 2020, SSMS had IDR2.2
trillion in cash. S&P said, "On the back of our expectations of a
modestly negative discretionary cash flow (before financial support
to related parties) at SSMS of IDR100 billion on average in
2020-2021, we forecast the company to have a cash balance of IDR1.6
trillion by the end of 2020, and IDR900 billion by the end of
2021." This is compared with SSMS' reported cash of IDR2.3 trillion
in 2018 and IDR2.2 trillion in 2019. Meanwhile, SSMS's total loans
and receivables to related parties stood at IDR3.1 trillion, or 26%
of total assets, as of March 31, 2020. This has quadrupled over the
past five years, while loan repayments from related parties to SSMS
only totaled IDR52 billion over the same period. The repayment
schedule on related-party loans have been repeatedly extended
without any penalty or material repayment plan.
Lack of transparency and consistent delays in operational and
financial disclosure at CBI limits visibility on the group's
near-term liquidity pressure.
This adds to the risk of an unpredictable deterioration in CBI's
liquidity, given minimal cash buffer which we estimate to be about
IDR200 billion as of Dec. 31, 2019. S&P believes this could lead to
unexpected and sizable cash calls at SSMS and drain its cash pile
amid weak operating conditions in the palm oil sector. CBI's
private ownership limits the visibility on its present financial
situation. The absence of clear articulation on CBI's financial
policy via SSMS further hampers the predictability of the amount of
cash being upstreamed from SSMS to the parent. Cross-default
clauses on CBI's debts, and SSMS' growing asset collateralization
to the wider group will also further incentivize SSMS to continue
supporting its sister companies, in S&P's view. The parent or
sister companies' failure to fulfill their debt obligations
(estimated at IDR1.9 trillion as of Dec. 31, 2019) could push SSMS
into a sudden, unforeseen, and sharp fall into default.
In S&P's opinion, the oversight of SSMS' management and board of
directors has weakened over the past two years, with limited
control over CBU's and CBI's operations and a substantial drain of
SSMS' cash to fund the parent's operations. SSMS maintained its
financial support through related-parties loans totaling IDR1
trillion over the past two years, and dividends payment of close to
IDR200 billion over the same period to CBI. This happened despite
lower CPO prices over the same period, and even when SSMS' ratio of
debt to EBITDA rose to about 8.0x in 2019, from 5.3x in 2018.
On a stand-alone basis, SSMS' modest operating scale, exposure to
volatile CPO prices, and geographic concentration reduce the
visibility on earnings and cash flow.
SSMS is a midsize producer of CPO (about 435,000 tons for 2019)
with a moderate planted area size of 69,000 hectares as of March
30, 2020. The company has concentrated all of its plantations and
mills in Central Kalimantan, thus subjecting production to weather
patterns. It also exposes SSMS' operations to structural regulatory
uncertainties for the palm oil sector in Indonesia, especially
rules and requirements regarding plantation size, creation of
community-farmed plantations ('plasma'), land titles, environmental
certification, and export duties.
S&P said, "We do not anticipate SSMS' operating scale and
concentration to Kalimantan to materially change over the next two
to three years. SSMS currently has 5,000 hectares in land bank that
could be converted to plantation area. However, expanding the
planted area beyond the available land bank will be a lengthy and
costly task given the environmental certification process. Instead,
SSMS will likely focus on improving the utilization of its two CPO
mills that were commissioned in 2019, thereby increasing its
reliance on purchased fresh fruit bunch (FFB). We therefore
forecast that SSMS will spend about IDR300 billion in capital
expenditure (capex) annually, mainly to fund ongoing projects to
improve its CPO production efficiency. Hence, this should likely
keep SSMS' total adjusted debt stable at about IDR6.3 trillion in
2020-2022.
"Our base case currently assumes an EBITDA per ton of CPO of IDR2
million in 2020, assuming an average benchmark CPO price of
Malaysian ringgit (MYR) 2,150. We estimate that a 5% increase in
CPO prices will increase SSMS' EBITDA by about IDR100 billion in
2020."
Delays in Roundtable on Sustainable Palm Oil (RSPO) certification
application implies that products have to be sold at 5%-10%
discount from benchmark CPO prices
In S&P's view, the absence of RSPO certification for a sizable
portion of its CPO production will weigh on SSMS' cash flow
generation amid tough pricing conditions. Only two out of SSMS' six
operating subsidiaries are RSPO-certified. As of Dec. 31, 2019,
they represent 55% of SSMS' CPO production. SSMS' subsidiaries, PT
Tanjung Sawit Abadi and PT Sawit Multi Utama, expect to receive
RSPO certification in 2020, a delay from the initial target of
2019. Other two subsidiaries, PT Mirza Pratama Putra (MPP) and PT
Menteng Kencana Mas (MKM), will receive their certifications in
2021, in the absence of delays. This implies that SSMS will have to
sell 45% of its CPO to customers with fewer environmental
restrictions at a 5%-10% discount on average from market prices,
amid growing environmental and sustainability concerns on palm oil
farming practices. Discounted selling prices due to the absence of
RSPO will translate into lower profitability and less earnings
cushion against adverse industry conditions for SSMS. More notably,
the absence of RSPO has resulted in the company being unable to
attract notable customers since Unilever's suspension of CPO
sourcing from SSMS in 2017.
SSMS' leverage will likely remain elevated over the next two to
three years, amid volatile pricing conditions and sizable debt.
S&P expects SSMS to report subdued earnings over the next one to
two years, resulting in its debt-to-EBITDA ratio remaining above
6.0x. Decline in petroleum product prices in the first quarter of
2020 has made biofuel unattractive and has substantially hindered
the demand for CPO for the year. In addition, demand disruption
induced by the COVID-19 pandemic will continue to suppress CPO
prices over the next one to two years. The long-term outlook for
palm oil demand remains unfavorable with the European Commission's
plan to prohibit palm oil-based biofuels by 2030. Under these
circumstances, S&P expects CPO prices of about MYR2,150-MYR2,300
per ton in 2020-2022, compared with peak prices of
MYR2,600-MYR2,800 per ton in 2016-2017.
Meanwhile, high reliance on purchased FFB will keep SSMS'
production costs elevated and margins narrow over the next one to
two years. S&P therefore expects the company to have 23%-24% EBITDA
margins in 2020-2021, relatively stable as compared with 2019, but
markedly lower than the 31% reported in 2018.
S&P said, "The negative outlook on SSMS over the next 12-18 months
reflects our view of increasing risk at CBI, driven by sustained
and sizable financial support that CBI requires from SSMS. It also
reflects our view that the absence of transparency and disclosure
at CBI will limit visibility over its weakening financial profile
and could lead to higher cash leakage from SSMS to CBI than we
anticipate."
S&P could lower the ratings on SSMS if:
-- CBI's financial situation deteriorates further such that SSMS'
financial support to the parent company further weakens SSMS's
liquidity. Such a scenario could arise if CBI's liquidity
deteriorates markedly, including its ability to roll over any
short-term debt; or if SSMS increases financial support to its
parent beyond S&P's base case assumptions through more loans, cash
injections, a higher dividend payout, or an increase in the amount
of assets pledged as collateral for its parent's or sister
companies' debts.
-- SSMS's SACP weakens because of faster cash depletion than S&P
expects, or a further weakening in earnings, reducing its capacity
to service its own financial obligations and those of CBI.
-- SSMS undertakes capital market transactions or bond buybacks
that S&P construes as a distressed exchange.
-- Rating upside is limited at least over the next 12-18 months
given that CBI will remain loss-making over the period and continue
to require support from SSMS. Although unlikely, upside momentum
will build up if CBI can generate sufficient cash flow to fund its
own operations and no longer requires SSMS' support. Any rating
upside would ultimately depend on the implications of any credit
dependencies within the group.
SSMS is an Indonesia-based palm oil plantation company incorporated
in 1995. It has about 69,000 hectares of planted area, CPO mills,
and palm kernel mills. The company's plantations are in South
Kalimantan.
The Citra Borneo Group owns 68.88% of SSMS through CBI (53.75%), PT
Putra Borneo Agro Lestari (10.22% and other family members. SSMS
was listed on the Indonesia Stock Exchange in December 2013.
=========
M A C A U
=========
WYNN MACAU: S&P Assigns 'BB-' Rating on New $600MM Unsecured Notes
------------------------------------------------------------------
S&P Global Ratings assigned its 'BB-' issue-level rating to
Macau-based casino resort owner and operator Wynn Macau Ltd.'s
proposed $600 million senior unsecured notes due in 2028 and placed
the rating on CreditWatch with negative implications. Wynn Macau is
a majority-owned subsidiary of Wynn Resorts Ltd.
S&P said, "We expect the company to use the proceeds from these
notes, along with the proceeds from a planned add-on to its
existing 2026 unsecured notes, to repay a portion of its
outstanding secured term loan due 2022, which had approximately
$2.16 billion outstanding as of June 30, 2020.
"All of our existing ratings on Wynn Macau and Wynn Resorts remain
on CreditWatch, where we placed them with negative implications on
Feb. 3, 2020. The CreditWatch reflects the significant anticipated
stress on the company's revenue and cash flow across its portfolio
this year. We plan to resolve the CreditWatch over the next few
months once we can evaluate how the near-term relaxation of travel
and visa restrictions might affect Macau's visitation and gaming
revenue this year and next as well as how the U.S. recession,
potential continued social distancing measures, and lingering
travel fears might affect consumer discretionary spending at the
company's U.S. casinos in 2020 and 2021. Specifically, we plan to
assess how quickly Wynn Resorts' EBITDA and cash flow generation
may recover later this year and into next year as well as how
quickly its credit measures could recover following a spike in
2020.
"Wynn Resorts is heavily reliant on a quick recovery in Macau,
which we anticipate will experience a faster recovery than Las
Vegas, to improve its S&P Global Ratings-adjusted leverage below 6x
by the end of 2021. Macau accounted for approximately 75% of the
company's property-level EBITDA in 2019. If we no longer believe
Wynn Resorts will recover in 2021 such that it improves its
leverage below 6x, we could lower our ratings. The delay in the
relaxation of Macau's travel and quarantine restrictions and the
reinstatement of tourist visa issuance well into the third quarter,
which compares with our previous expectation that many of these
restrictions would ease by the end of the second quarter, places
even greater pressure on our 2021 recovery scenario and increases
the likelihood that we will lower our ratings on Wynn in the near
term." While the government has eased the quarantine restrictions
on travel between Macau and mainland China in recent weeks, the
market is heavily reliant on the resumption of individual visit
scheme (IVS) visas to support an improvement in gaming revenue.
Individuals arriving under IVS visas accounted for about one-third
of all visitor arrivals to Macau in 2019 and nearly half of all
mainland Chinese customers used IVS to enter Macau. The government
recently announced that it resumed issuing IVS visas in Zhuhai (a
city in Guangdong province) on August 12 and that it would resume
issuing visas for all of Guangdong province on August 26 (visitors
from this province accounted for about one-third of all Macau
visitor arrivals in 2019). The government also announced that IVS
visas would be available nationwide starting September 23, assuming
the pandemic remains under control.
The operating performance of Wynn's Las Vegas properties will
likely remain impaired for some time, which increases the company's
reliance on a recovery in Macau to restore its credit measures in
2021. S&P said, "We expect Las Vegas to be slow to recover because
the market is heavily reliant on air travel, conventions, and
international visitation, which we believe will be slow to recover.
About half of Las Vegas visitors fly to the market, which raises
the cost of their trip and could lead some consumers to avoid the
destination because of lingering fears around traveling due to the
coronavirus. Furthermore, we expect the airlines to reduce their
capacity because of the lower demand stemming from the pandemic,
which could further slow the recovery in visitation given our view
that the reduced volume of flights may persist for some time.
Additionally, international visitors comprise about 20% of total
visitation to Las Vegas and the ongoing travel restrictions and
reduced airline capacity may impair their ability to visit.
Moreover, about 15% of visitors travel to Las Vegas to attend a
convention or group meeting. We believe lingering restrictions on
the size of gatherings, lower corporate travel budgets, and
corporate travel restrictions could impair this segment, which is
important for Las Vegas' midweek business, for an extended period,
especially until a vaccine or effective treatment is widely
available (may not occur until the second half of 2021)."
As of June 30, 2020, Wynn had roughly $3.8 billion of cash on its
balance sheet, including $2.4 billion in Macau and $1.4 billion in
the U.S. Wynn has reduced its estimated EBITDA loss in a
zero-revenue scenario to approximately $2.0 million daily and $60
million monthly. S&P said, "Incorporating our estimates of its
capital spending and debt service, we forecast that Wynn Macau has
a liquidity runway of more than 24 months in an almost zero-revenue
environment. In the U.S., Wynn has reduced its daily operating
expenses, excluding gaming taxes, to $2.6 million from $3.5
million. Incorporating our estimates of its capital spending and
debt service, we forecast Wynn has a liquidity runway of about 12
months in an almost zero-revenue environment." The re-opening of
its Las Vegas properties in June and Encore Boston Harbor in July,
albeit at reduced revenue, further extends its liquidity runway.
ISSUE RATINGS -- SUBORDINATION RISK ANALYSIS
S&P said, "We apply our subordination risk criteria to rate Wynn
Macau's credit facilities and notes because we do not assign
recovery ratings to debt issued in Macau. We have not published an
insolvency report for the jurisdiction and have not ranked it
because, to date, there is limited historical precedent for a
large-scale bankruptcy filing of a foreign-owned entity there.
Macau is a special administrative region of the People's Republic
of China. Furthermore, even if lenders have a good claim with a
registerable interest in the real estate, we believe there is
significant uncertainty surrounding the application of the
insolvency process and lenders' ability to realize asset value."
Capital structure
Pro forma for the proposed notes issuance, add-on, and term loan
repayment, Wynn Macau's capital structure comprises $2 billion of
secured debt outstanding as of June 30, 2020, issued by subsidiary
Wynn Resorts (Macau) S.A. and $3.95 billion of unsecured debt
issued by Wynn Macau.
Analytical conclusions
S&P said, "We rate the secured debt issued by Wynn Resorts (Macau)
'BB-', the same level as our issuer credit rating on Wynn Macau
Ltd., because it is secured.
"The unsecured debt at Wynn Macau is structurally subordinated and
ranks behind the secured debt issued by a subsidiary in its capital
structure. However, the company's ratio of secured debt to total
debt in its capital structure is below 50% because of its recent
unsecured note issuances and its plan to use the proceeds from the
notes to repay its term loan debt. Furthermore, we believe Wynn
Macau will use the cash flow its generates from its Macau
operations, along with excess cash on its balance sheet, to further
reduce its secured debt once its Macau casinos begin to recover.
Therefore, we believe the subordination risk is mitigated enough to
support our 'BB-' issue-level rating on the unsecured debt (the
same level as our issuer credit rating on Wynn Macau)."
=================
S I N G A P O R E
=================
KS ENERGY: OCBC's Demand is Less Then US$230MM, Company Clarifies
-----------------------------------------------------------------
Nisha Ramchandani at The Business Times reports that KS Energy has
clarified that a demand from OCBC Bank to the company for a term
loan owed by its 80.09 per cent-owned subsidiary KS Drilling (KSDL)
is for less than US$230 million, and that the term loan is secured
by various assets.
KSDL's liability under the term loan is secured by securities
including mortgages over certain of KSDL's jack-up and land rigs in
favour of OCBC, mainboard-listed KS Energy said in a filing to the
Singapore Exchange on Aug. 14, BT relays. The bridging loan is
unsecured.
This follows KS Energy's announcement on Aug. 12 that the bank had
sent letters of demand to KS Energy, KSDL and six other
subsidiaries of KSDL, seeking repayment of KSDL loans, according to
BT.
KSDL owed the bank a term loan totalling about US$230.7 million and
a bridging loan of nearly SGD5.2 million, while one of its
subsidiaries also owed OCBC a bridging loan of about SGD5.2
million, BT discloses.
According to BT, KS Energy on Aug. 14 said the demands it received
from OCBC are for guarantees it allegedly gave for US$150 million
of KSDL's term loan, and SGD5 million for the bridging loan. OCBC
demanded payments within seven days and could wind up the company
within six months if the payments are not made.
KS Energy said: "The company is presently seeking legal advice and
will engage OCBC to remedy the situation, and to advance the
interests of all stakeholders." It added that it will keep
shareholders informed on material developments, and advises
shareholders to exercise caution in the trading of its shares.
Indonesian tycoon Kris Wiluan, who is facing 112 charges for
alleged market rigging and false trading, last week resigned as
chairman, chief executive officer (CEO) and director of KS Energy.
His son, Richard James Wiluan, has replaced him as chairman and CEO
of KS Energy and has also taken on the position of KSDL chairman.
Shares in KS Energy, which are suspended, last traded on Aug. 7 at
1.3 Singapore cents, the report notes.
Headquartered in Singapore, KS Energy Limited operates as an energy
services provider primarily to the oil and gas, marine, and
petrochemical industries in Kurdistan, Egypt, Pakistan,
Vietnam, Indonesia, Malaysia, and internationally. KS Energy
Limited is a subsidiary of Pacific One Energy Limited.
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