/raid1/www/Hosts/bankrupt/TCRAP_Public/170125.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
A S I A P A C I F I C
Wednesday, January 25, 2017, Vol. 20, No. 18
Headlines
A U S T R A L I A
AUSTRALIAN AGRICULTURAL: First Creditors' Meeting Set for Feb. 6
CLAUSSEN'S MENSWEAR: First Creditors' Meeting Set for Jan. 31
KJ CARPENTRY: Placed Into Liquidation
MESOBLAST LIMITED: Had Cash Reserves of $60.4M as of Sept. 30
STONE CLIFF: ASIC Seeks Inquiry Into Conduct of Liquidators
WIDA PLUMBING: Former Director Charged with Fraud
C A M B O D I A
ATTOPEU AIRPORT: Ceases Commercial Operations
C H I N A
BIOSTIME INT'L: Moody's Ba2 CFR Unaffected by Tap Bond Offering
BIOSTIME INTERNATIONAL: S&P Affirms 'BB' CCR, Outlook Positive
CHINA BAK: Effectuates Merger with Newly Formed Subsidiary
CHINA WATER: S&P Assigns 'BB+' Rating to Proposed US$ Sr. Notes
I N D I A
ABG SHIPYARD: Three Suitors Keen on Buying Controlling Stakes
AGASTHYACODE RUBBER: CRISIL Assigns 'B' Rating to INR13MM Loan
BARNALA REALTECH: CRISIL Reaffirms 'B' Rating on INR7MM Loan
CAPARO ENGINEERING: CARE Ups Rating on INR191.59cr Loan to B+
CATVISION LIMITED: Ind-Ra Raises Long-Term Issuer Rating to BB+
CHHATTISGARH FERRO: CRISIL Assigns B+ Rating to INR5.5MM Loan
DIVINE CERA: Ind-Ra Assigns 'B-' Long-Term Issuer Rating
ESSAR STEEL: Farallon Capital May Buy 24% Stake for INR1,700cr
GENESIS FINANCE: CRISIL Cuts Rating on INR25MM Term Loan to 'D'
GLOBCON INDUSTRIES: ICRA Reaffirms B+ Rating on INR8.70cr Loan
KARGWAL ENTERPRISES: Ind-Ra Assigns 'BB' Long-Term Issuer Rating
LAKSHMI VACUUM: CARE Reaffirms B+ Rating on INR6.79cr LT Loan
MAGADH MICRO: CARE Reaffirms 'B' Rating on INR6.50cr LT Loan
MARUTHI TUBES: CARE Reaffirms 'D' Rating on INR7.0cr ST Loan
MILTECH INDUSTRIES: CARE Reaffirms B+ Rating on INR13cr LT Loan
MITTAL CLOTHING: Ind-Ra Raises Long-Term Issuer Rating to 'BB'
NATIONAL INDUSTRIES: CRISIL Reaffirms B+ Rating on INR5MM Loan
NEERG ENERGY: Fitch Assigns B+ Rating to Proposed USD Notes
PBR SELECT: CRISIL Lowers Rating on INR4MM Secured Loan to B+
RAGHU RAMA: ICRA Reaffirms 'B' Rating on INR14cr Fund Based Loan
RAVANI REALTERS: CARE Assigns B+ Rating to INR125cr LT Bank Loan
REPUBLIC AUTO: CARE Reaffirms B+ Rating on INR11.25cr LT Loan
S. GANESH: CRISIL Assigns B+ Rating to INR2.5MM Overdraft
SHIV COTTON: ICRA Reaffirms 'B' Rating on INR6.50cr Loan
SHIV SHANKAR: CRISIL Assigns B+ Rating to INR10MM Cash Loan
SHREE BHAGWATI: CRISIL Raises Rating on INR6MM Cash Loan to B+
SHREEGLUCO BIOTECH: CARE Hikes Rating on INR118cr LT Loan to BB-
SHRI RAMSWAROOP: Ind-Ra Affirms 'D' Rating on Bank Loans
SRI RAMACHANDRA: CRISIL Puts B+ Rating on INR5MM Cash Credit
SRI VENKATESWARA: CRISIL Assigns B Rating to INR3.8MM LT Loan
SUNDER IMPEX: CARE Reaffirms B+ Rating on INR2.0cr LT Bank Loan
SUNSHAKTI OIL: CRISIL Upgrades Rating on INR5MM Cash Loan to B
UNIFLEX INDUSTRIES: ICRA Assigns B+ Rating to INR5.0cr Loan
VALLABH CORPORATION: CARE Assigns B+ Rating to INR3.25cr Loan
VIJAYANAG POLYMERS: CARE Assigns 'B' Rating to INR7.30cr LT Loan
* INDIA: Bankruptcy Code to Improve Ease Of Doing Biz, IBBI Says
I N D O N E S I A
LIPPO KARAWACI: Moody's Says Delay in Assets Sale Credit Negative
PAN BROTHERS: Fitch Assigns 'B' Final Rating to USD200MM Notes
J A P A N
ASAHI MUTUAL: Fitch Assigns BB- Final Rating to USD350MM Bond
TAKATA CORP: Shares Fall Sharply as Bankruptcy Looms
TOSHIBA CORP: Lenders May Continue Support Until End of Feb.
M A C A U
MELCO CROWN: S&P Affirms 'BB' CCR; Outlook Negative
STUDIO CITY: S&P Affirms 'BB-' CCR; Outlook Negative
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A U S T R A L I A
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AUSTRALIAN AGRICULTURAL: First Creditors' Meeting Set for Feb. 6
----------------------------------------------------------------
A first meeting of the creditors in the proceedings of Australian
Agricultural Technologies Limited will be held at the offices of
Restructuring Solutions, Suite 3 Ground Floor, 131 Clarence
Street, in Sydney, on Feb. 6, 2017, at 10:00 a.m.
Christopher MacDonnell -- chris@resol.com.au -- of Restructuring
Solutions was appointed as administrator of Australian
Agricultural on Jan. 24, 2017.
CLAUSSEN'S MENSWEAR: First Creditors' Meeting Set for Jan. 31
-------------------------------------------------------------
A first meeting of the creditors in the proceedings of Claussen's
Menswear Pty Ltd will be held at the offices of Nicols + Brien,
Level 2, 350 Kent Street, in Sydney, on Jan. 31, 2017, at
11:00 a.m.
Steven Nicols of Nicols + Brien was appointed as administrator of
Claussen's Menswear on Jan. 19, 2017.
KJ CARPENTRY: Placed Into Liquidation
-------------------------------------
Helen Shield at The West Australian reports that a carpentry
subcontractor has been placed into liquidation after it was
unable to recover AUD71,000 it says it is owed by commercial and
residential builder Builton Group.
Builton builds home and land packages, turnkey strata
developments, inner-city apartments and mixed-use developments
and commercial buildings, the report discloses.
It is also part of the way through building Quattro on Burswood,
an apartment block billed as combining an "exciting, inner-urban
lifestyle with fantastic investment growth".
Australian Investment and Securities Commission records list
managing director Troy Felt as the sole director and company
secretary, according to The West Australian.
KJ Carpentry (WA), which worked on the fit-out for the David
Malcolm Justice Centre, two weeks ago went into liquidation,
leaving eight WA staff without a job, The West Australian
reports. NSW-based director Kevin Johns said he had been chasing
more than $70,000 owed by Builton for four months, the report
relates.
He said Builton Group was not KJ Carpentry (WA)'s only creditor
but that the carpentry group would have been able to continue
trading had the money been paid, says The West Australian.
Crouch Amirbeaggi managing director Shabnam Amirbeaggi told The
West Australian she was appointed KJ's liquidator on January 10.
"(Builton) is a debtor of KJ for approximately AUD71,000," the
report quotes Ms. Amirbeaggi as saying. "I have not been able to
recover any proceeds from Builton for the outstanding debt
owing."
MESOBLAST LIMITED: Had Cash Reserves of $60.4M as of Sept. 30
-------------------------------------------------------------
Mesoblast Limited filed with the Australian Securities Exchange a
copy of an investor presentation disclosing, among other things,
the following financial highlights:
* At Sept. 30, 2016, the Company had cash reserves of US$60.4
million
* In order to absorb the incremental costs of the MPC-150-IM
program in advanced heart failure in FY17, the Company has
executed its planned operational streamlining and re-
prioritization of projects
* Cash outflows for Q1 FY17 were reduced by 28% compared with
the comparable FY16 quarter
* In January 2017, the Company received AUD29.6
million/US$21.7
million pursuant to an equity purchase agreement with
Mallinckrodt Pharmaceuticals
* As previously announced, a fully discretionary equity
facility has been established for up to AUD120 million/US$90
million over 36 months
A copy of the Presentation is available for free at:
https://is.gd/xHtn6w
About Mesoblast Ltd.
Melbourne, Australia-based Mesoblast Limited (ASX:MSB;
Nasdaq:MESO) develops cell-based medicines. The Company has
leveraged its proprietary technology platform, which is based on
specialized cells known as mesenchymal lineage adult stem cells,
to establish a broad portfolio of late-stage product candidates.
Mesoblast's allogeneic, 'off-the-shelf' cell product candidates
target advanced stages of diseases with high, unmet medical needs
including cardiovascular diseases, immune-mediated and
inflammatory disorders, orthopedic disorders, and
oncologic/hematologic conditions.
Mesoblast reported a loss before income tax of $90.82 million for
the year ended June 30, 2016, compared to a loss before income
tax of $96.24 million for the year ended June 30, 2015.
As of Sept. 30, 2016, Mesoblast had $665.4 million in total
assets, $155.6 million in total liabilities and $509.9 million in
total equity.
PricewaterhouseCoopers, in Melbourne, Australia, issued a "going
concern" qualification on the consolidated financial statements
for the year ended June 30, 2016, citing that the Company has
suffered recurring losses from operations that raise substantial
doubt about its ability to continue as a going concern.
STONE CLIFF: ASIC Seeks Inquiry Into Conduct of Liquidators
-----------------------------------------------------------
The Australian Securities and Investments Commission has lodged
an application requesting the Supreme Court of NSW inquire into
the conduct of Sydney liquidators Andrew Hugh Jenner Wily and
David Anthony Hurst concerning the performance of their duties as
joint liquidators of 12 companies to which they had been
appointed.
ASIC's concerns include:
* a lack of independence and a failure to disclose potential
conflicts;
* the failure to report to ASIC suspected shadow directors and
offences underlying suspected illegal phoenix activity; and
* a failure to undertake basic investigations into the
companies' affairs.
At the time of their appointment, Mr. Wily and Mr. Hurst were
partners of Armstrong Wily. Mr. Wily remains a partner of
Armstrong Wily. Mr. Hurst is now a director of the firm
HoskingHurst Pty Ltd.
ASIC seeks orders that Mr. Wily and Mr. Hurst be prohibited from
practising as registered liquidators for such period as the Court
sees fit.
The matter has been listed for directions on Feb. 9, 2017.
Under the Corporations Act 2001, ASIC may apply to the Court to
undertake an inquiry where it appears that a liquidator has not
faithfully performed his or her duties.
ASIC seeks orders from the Court concerning Mr. Wily's and Mr.
Hurst's role as joint liquidators of the following companies
wound up by way of creditors' voluntary liquidation:
Stone Cliff Pty Ltd ACN 098 024 714 (Deregistered)
Sjain Pty Ltd ACN 127 505 720 (Deregistered)
Htbong Pty Ltd ACN 127 505 873 (Deregistered)
Mboa Pty Ltd ACN 128 067 489 (Deregistered)
Vbrkic Pty Ltd ACN 127 507 564 (Deregistered)
Kgifford Pty Ltd ACN 127 506 129 (Deregistered)
Msrour Pty Ltd ACN 127 505 579 (Deregistered)
Schauhan Pty Ltd ACN 127 508 034 (Deregistered)
Rgoel Pty Ltd ACN 127 508 221 (Deregistered)
Mhaigh Pty Ltd ACN 127 508 365 (Deregistered)
Pkhouri Pty Ltd ACN 127 505 908 (Deregistered)
Psingh Pty Ltd ACN 127 507 813 (Deregistered)
Prior to their liquidation, the companies provided either
administrative, carwash and/or cafe staff exclusively to Crystal
Carwash Cafe Pty Limited. Mr. Wily had previously conducted the
liquidation of 7 other companies that had also provided carwash
and/or cafe staff exclusively to Crystal Carwash.
Crystal Carwash operates a number of carwash sites at various
locations across the Sydney metropolitan area.
WIDA PLUMBING: Former Director Charged with Fraud
-------------------------------------------------
Paul Joseph Hanson, of Caroline Springs, Victoria, has appeared
at the Magistrates Court of Victoria in Melbourne, charged with
three counts of fraud under the Crimes Act (Vic).
Mr. Hanson, a former director of Wida Plumbing Supplies Pty Ltd,
operated a plumbing business.
The Australian Securities and Investments Commission alleges that
approximately eight months after Wida was placed in liquidation,
Mr. Hanson transferred AUD124,763.84 from a Wida overdraft bank
facility to the personal bank account of a family member. Mr.
Hanson then arranged for the family member to withdraw the funds,
which he used for his own personal use.
The matter was in Court on Dec. 21, 2016. The Commonwealth
Director of Public Prosecutions is prosecuting the matter.
The matter has been adjourned to March 1, 2017.
ASIC was alerted about the alleged contravention by the
liquidator of Wida.
The maximum penalty for the offence is 10 years imprisonment.
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C A M B O D I A
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ATTOPEU AIRPORT: Ceases Commercial Operations
---------------------------------------------
ch-aviation.com, citing Lao News Agency, reports that Attopeu
airport, located in the south of Laos near the borders of Vietnam
and Cambodia, has ceased commercial operations.
According to the report, Lao Airlines (QV, Vientiane) had been
running a scheduled service to the small aerodrome 2x weekly from
Vientiane via Pakse since April 2016 using an ATR 72-600, but the
service appears to have been suspended. According to
FlightRadar24 ADS-B data, the last commercial flight to Attapeu
was on October 26, 2016, ch-aviation.com relates.
Attapeu Airport was officially opened on May 30, 2015 after an
investment from Vietnam's Hoang Anh Gia Lai Group.
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BIOSTIME INT'L: Moody's Ba2 CFR Unaffected by Tap Bond Offering
---------------------------------------------------------------
Moody's Investors Service says that Biostime International
Holdings Limited's Ba2 corporate family rating and its Ba3 rating
on its senior notes are unaffected by the company's announcement
of a tap bond offering on its existing USD400 million senior
notes due June 21, 2021.
The rating outlook is stable.
The proceeds, along with cash on hand, will be used to fund
Biostime's proposed acquisition of an additional 17% stake in
Biostime Australia Holdings Pty Ltd (BAH, unrated) for AUD311
million (HKD1.8 billion).
The transaction will raise Biostime's stake in BAH to 100% from
83%.
BAH has in turn a 100% stake in Swisse Wellness Group Pty Ltd
(unrated).
Swisse is engaged in the marketing and distribution as well as
research of vitamins, health supplements, and skincare and sports
nutrition products in Australia, New Zealand and China under the
"Swisse" brand.
"Biostime's additional issuance is consistent with Moody's
expectation of the company's funding plan for its proposed
increased stake in Biostime Australia," says Gerwin Ho, a Moody's
Vice President and Senior Analyst.
Moody's estimates that Biostime's debt leverage - as measured by
debt/EBITDA - will rise to about 3.8x- 4.0x in the next 12 months
compared with Moody's expectation of around 3.5x in 2016.
This expected level represents a narrowing in headroom versus its
trigger of 3.5-4.0x.
Moody's estimates that Biostime's cash flow coverage -- as
measured by retained cash flow/net debt -- will fall below
Moody's trigger of 15% in the next 12 months. However, Moody's
expect this situation to be temporary and the ratio to recover to
16-17% in the next 18-24 months due to scheduled debt repayments.
Biostime's stable business profile is supported by the strength
of its infant milk formula business, resulting from its premium
product positioning and its strong presence in baby specialty
store channels, as evidenced by its steady market share.
The company's profitability is good, reflecting in turn its brand
equity and the confidence-sensitive nature of its Biostime infant
milk formula product and Swisse's vitamin, herbal and mineral
supplement (VHMS) products.
Moody's estimates that Biostime's profitability -- as measured by
its EBIT margin -- will remain steady at 22%-23%. This level of
profitability is strong for its Ba rating level.
At end-June 2016, Biostime's cash balance -- including restricted
cash -- was RMB2.7 billion and its short-term debt was RMB2.0
billion, resulting in cash/short-term debt of 134%.
After factoring in the proposed tap issuance, Moody's expects the
company's cash balance and operating cash flow will be sufficient
to cover its short-term debt, payment for its proposed increased
stake in BAH and its capital expenditure in the next 12 months.
The stable outlook reflects Moody's expectation that it will
maintain its market positions and stable credit profile,
including stable profit margin and cash generation.
Biostime's bond rating is notched down by one notch, because the
bond is subordinated to a USD450 million 3-year senior secured
term loan facility, which represented around 21% and 42% of its
total reported assets and debt at end-June 2016.
The principal methodology used in these ratings was Global
Packaged Goods published in June 2013.
Biostime International Holdings Limited is a leading domestic
infant milk formula provider in China. The company acquired a 83%
stake in the leading Australian vitamin, herbal and mineral
supplements (VHMS) provider Swisse Wellness Group Pty Ltd
(unrated) in September 2015.
Established in 1999, Biostime is headquartered in Guangzhou and
listed on Hong Kong's Stock Exchange in December 2010. Chairman
and CEO Mr. LUO Fei and other principal shareholders together
held a 72% stake at end-June 2016.
BIOSTIME INTERNATIONAL: S&P Affirms 'BB' CCR, Outlook Positive
--------------------------------------------------------------
S&P Global Ratings said it has revised its outlook on Biostime
International Holdings Ltd. to stable from positive. At the same
time, S&P affirmed its 'BB' long-term corporate credit rating on
the company. S&P also affirmed its 'BB-' long-term issue rating
on the company's senior unsecured notes. In line with the
outlook revision, S&P lowered its long-term Greater China
regional scale rating on Biostime to 'cnBBB-' from 'cnBBB' and on
the notes to 'cnBB+' from 'cnBBB-'.
Biostime manufactures and distributes infant milk formula (IMF)
products, other baby nutrition and food products, and baby care
products in China. The company also provides vitamin, herbal,
mineral, and health supplement (VHMS) products in Australia,
China, and internationally following its acquisition of Swisse
Wellness Group in September 2015.
S&P revised the outlook to reflect its view that Biostime's
proposed primarily debt-funded acquisition of the minority shares
of Swisse and the prolonged regulatory uncertainty for
distribution of VHMS products in China will delay the company's
debt reduction plan to beyond the next 12 months. S&P estimates
that Biostime's debt-to-EBITDA ratio is likely to increase to
3.5x-3.7x in 2017, from 3.0x in the first half of 2016. This is
much weaker than S&P's previous expectation of 2.0x-3.0x for 2016
and 2017 but the company's better control over Swisse's
strategies and cash flows temper the risks, in S&P's view.
On Jan. 23, 2017, Biostime announced that it plans to use both
cash on hand and an add-on to its existing U.S. dollar
denominated senior notes to fund its proposed acquisition of the
remaining 17% shares of Swisse. The total cash consideration
will be about AUD311 million (equivalent to about Chinese
renminbi (RMB1.6 billion). Biostime has already financially
consolidated Swisse post its initial acquisition of about 83%
shares of Swisse in September 2015.
S&P continues to see risks from the prolonged regulatory
uncertainty for the distribution of VHMS products through cross-
border e-commerce in China. This is despite the Chinese
government having extended the grace period to implement the new
requirement of registration or filing for the distribution of
health supplements through this channel to Dec. 31, 2017, from
May 11, 2017. Any material change in policies or tightening of
regulations on parallel trading through individual buying agents
or cross-border e-commerce in general could materially weaken
Swisse's sales and profitability. Nevertheless, S&P believes the
extended grace period will provide additional time to Swisse to
adjust its distribution strategy and optimize its rollout of
products in China.
S&P estimates that Biostime's EBITDA margin will decrease to 22%-
24% in 2017, from an estimate of 25%-27% in 2016, due to rising
spending on advertising and promotional activities amid intense
competition in the IMF and VHMS segments. Biostime's planned
distribution of Swisse products in the offline channels in China
may also incur higher marketing expenses over the next 12-24
months, although the company is likely to benefit from the more
diversified distribution network and stronger sales growth over
the medium to long term.
The rating affirmation reflects S&P's expectation that Biostime
will maintain its good market position in the IMF and VHMS
segments and satisfactory operating cash flow over the next 12-24
months, despite intense competition and regulatory uncertainties.
The company's good product quality, premium brand image, and
established distribution network for IMF products in China
underpin S&P's anticipation. Biostime maintained its market
position as the sixth-largest IMF provider in China--and the
largest domestic player--with a market share of about 6% as of
Sept. 30, 2016. Swisse also remained the leading player in the
VHMS market in Australia with about 17.0% market share as of
November 2016, according to IRI-Aztec (Australia) Pty. Ltd. (a
market data provider in Australia and New Zealand).
Biostime's proposed retap of its existing U.S. dollar-denominated
senior notes due 2021 will not affect S&P's ratings on the notes.
The company intended to use the net proceeds from the tap
issuance to fund the acquisition of the remaining interest of
Swisse. S&P continues to rate the notes one-notch lower than the
corporate credit ratings on Biostime, reflecting S&P's view of
subordination risks. The company's operating subsidiaries have
senior secured bank loans, which rank senior to notes the parent
has issued or proposes to issue.
The stable outlook reflects S&P's expectation that Biostime will
maintain its good market position in the IMF and VHMS segments
and satisfactory operating cash flow over the next 12 months,
despite intense competition and regulatory uncertainties. S&P
also expects that Biostime's debt leverage will peak in 2017 at
around 3.5x primarily driven by its recent acquisition, and will
improve to comfortably below 3.5x in 2018 driven by its steady
operating cash flow, disciplined capital spending, and
conservative dividend distributions.
S&P could lower the ratings if the Biostime's debt-to-EBITDA
ratio exceeds 3.75x with no sign of improvement over the next 12
months, leading to pressure on the company's ability to comply
with financial covenants or a material deterioration in its debt
service capability. This could happen if the company's sales
decline or its EBITDA margin drops by more than 400 basis points
in 2017 from that in 2016, possibly due to intense competition,
the negative impact from changes in regulations, or difficulties
integrating or expanding Swisse's business. This could also
happen if Biostime undertakes more aggressive debt-funded
expansion than S&P expects.
The rating upside is limited over the next 12 months. S&P could
nevertheless upgrade Biostime if the company smoothly integrates
and expands its Swisse business, while materially and sustainably
improving its EBITDA margin, such that its debt-to-EBITDA ratio
decreases to below 3x.
CHINA BAK: Effectuates Merger with Newly Formed Subsidiary
----------------------------------------------------------
China BAK Battery, Inc., filed Articles of Merger with the
Secretary of State of Nevada to effectuate a merger between the
Company and the Company's newly formed, wholly owned subsidiary,
CBAK Merger Sub, Inc. According to the Articles of Merger,
effective Jan. 16, 2017, the Merger Sub merged with and into the
Company with the Company being the surviving entity.
As permitted by Chapter 92A.180 of Nevada Revised Statutes, the
sole purpose of the Merger was to effect a change of the
Company's name. Upon the effectiveness of the filing of Articles
of Merger with the Secretary of State of Nevada, which is
Jan. 16, 2017, the Company's Articles of Incorporation were
deemed amended to reflect the change in the Company's corporate
name.
The trading symbol of the Company's common stock will remain as
"CBAK". The Company's common stock began trading on the Nasdaq
Global Market under the Company's new name when the market opened
on Jan. 17, 2017.
On Jan. 16, 2017, the Board of Directors of the Company approved
a change in the Company's fiscal year end from Sept. 30 to
December 31. Accordingly, the Company's next Annual Report on
Form 10-K will be for the fiscal year ending Dec. 31, 2017. With
this fiscal year end change, the Company will file a transition
report on Form 10-Q for the period from Oct. 1, 2016, through
Dec. 31, 2016.
About China BAK
China BAK Battery conducted business through BAK International
Limited and its subsidiaries that produced prismatic cells,
cylindrical cells, lithium polymer cells and high power lithium
batters. The BAK International business was foreclosed on
June 30, 2014. Consequently, China BAK is looking to develop,
manufacture and sell energy high power lithium batteries
primarily for electric vehicles when its Dalian, China
manufacturing facilities start to operate in the first quarter of
2015.
China BAK reported a net loss of US$12.65 million on US$10.36
million of net revenues for the year ended Sept. 30, 2016,
compared to net profit of US$15.87 million on US$13.90 million of
net revenues for the year ended Sept. 30, 2015.
As of Sept. 30, 2016, China BAK had US$93.31 million in total
assets, US$78.22 million in total liabilities and US$15.08
million in total shareholders' equity.
Centurion ZD CPA Limited, in Hong Kong, China, issued a "going
concern" qualification on the consolidated financial statements
for the year ended Sept. 30, 2016, citing that the Company has a
working capital deficiency, accumulated deficit from recurring
net losses and significant short-term debt obligations maturing
in less than one year as of Sept. 30, 2016. All these factors
raise substantial doubt about its ability to continue as a going
concern, the auditors said.
CHINA WATER: S&P Assigns 'BB+' Rating to Proposed US$ Sr. Notes
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S&P Global Ratings assigned its 'BB+' long-term issue rating and
'cnBBB+' long-term Greater China regional scale rating to a
proposed issue of U.S. dollar-denominated senior unsecured notes
by China Water Affairs Group Ltd. (CWA: BB+/Stable/--; cnBBB+/--
). The ratings on the notes are subject to S&P's review of the
final issuance documentation.
The issue rating is the same as the corporate credit rating on
CWA. The company's ratio of priority liabilities to adjusted
assets is 30%-40% (after considering the proposed notes
issuance). The ratio is higher than S&P's 15% notching threshold
for speculative-grade issuers. However, S&P believes that the
satisfactory geographical diversity of CWA's water supply
projects and downstream loans to subsidiaries mitigate structural
subordination risk associated with debt at the holding company
level.
The notes are subject to early redemption under certain events,
including but not limited to, change of control. The notes are
also subject to certain covenants, which may restrict the
financial flexibility of the issuer under certain circumstances,
such as, fixed charge coverage ratio (i.e., ratio of EBITDA to
interest and dividend), which should be maintained above 3.0x.
CWA intends to use the notes' proceeds for general corporate
purposes.
The stable outlook on the ratings on CWA reflects S&P's
expectation that the company will continue its focus on and
expansion of its water business in China, with stable
profitability. S&P expects the tariff regime to remain generally
stable and allow CWA's water supply projects to earn steady
returns.
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ABG SHIPYARD: Three Suitors Keen on Buying Controlling Stakes
-------------------------------------------------------------
Livemint reports that Reliance Defence and Engineering Ltd,
Shapoorji Pallonji Group and Liberty House Group of UK have shown
interest in buying debt-ridden ABG Shipyard Ltd, even as its
lenders try to force the ship maker out of a debt recast
mechanism and recover their dues.
Investment banking firm Rothschild is advising the company on its
sale plan, while SBI Capital Markets Ltd is helping it invite
bids from interested parties, Livemint says.
Livemint relates that in a written reply to a query, Dhananjay L.
Datar, executive director at ABG Shipyard said these requests to
buy a controlling stake are currently under consideration with
the lenders.
"We have received preliminary interest from Reliance Defence,
Shapoorji, M/s Liberty House, UK. These requests are under
consideration with lenders. Lenders and SBI Caps (SBI Capital)
will be calling for proposals from prospective investors and the
process will kick in," the report quotes Datar as saying.
ABG Shipyard has been reported to be in talks with strategic
investors for a while, the report states. In April 2016, Mint had
reported that lenders who had invoked the strategic debt
restructuring (SDR) in ABG Shipyard in December 2015 were in
talks with a Vietnamese financial investor.
ABG Shipyard Limited belongs to the Agarwal Business Group
(controlled by Mr Rishi Agarwal) and is the largest private
shipyard in India, in terms of the order book. ASL is
engaged in the construction and repair of various types of
vessels as well as rigs. ASL has constructed and delivered 156
vessels over the last 23 years. ASL has capacity to build vessels
up to 1,20,000 Dead Weight Tonnage (DWT) at Dahej and upto 20,000
DWT at Surat, Gujarat.
AGASTHYACODE RUBBER: CRISIL Assigns 'B' Rating to INR13MM Loan
--------------------------------------------------------------
CRISIL has revoked the suspension of its rating on the long-term
bank facility of Agasthyacode Rubber Traders (ART) and assigned
'CRISIL B/Stable' rating to the facility. CRISIL had, in its
rating rationale dated July 26, 2016, announced suspension of the
rating, since ART had not provided information necessary for a
rating review. ART has now shared the requisite information,
enabling CRISIL to assign the rating.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 13 CRISIL B/Stable (Assigned;
Suspension Revoked)
The rating reflects ART's below-average financial risk profile,
marked by weak debt protection metrics and leveraged capital
structure, and low operating profitability. These rating
weaknesses are partially offset by the extensive experience of
ART's partners in rubber trading segment.
Key Rating Drivers & Detailed Description
Weaknesses
* Below-average financial risk profile: The financial risk
profile is constrained by weak debt protection metrics and a
leveraged capital structure. Interest coverage was 1.1 times for
fiscal 2016, while total outside liabilities to tangible networth
ratio was 2.79 times as on March 31, 2016. The financial risk
profile is expected to remain below average over the medium term
because of low operating margin and sizeable working capital
debt.
* Low operating margin: Operating margin was at 1.9% for fiscal
2016 because of trading nature of operations and exposure to
intense competition. The margin will continue to remain low over
the medium term, thus constraining the business risk profile.
Strength
* Extensive experience of partners: The partners have extensive
experience in the rubber trading business in Kerala and have
developed healthy relations with suppliers and customers.
Outlook: Stable
CRISIL believes ART will continue to benefit over the medium term
from partner's extensive experience. The outlook may be revised
to 'Positive' if significant improvement in revenue and operating
profitability results in sizeable cash accrual and thus better
financial risk profile. Conversely, the outlook may be revised to
'Negative' if financial risk profile, particularly liquidity,
weakens because of low cash accrual, stretched working capital
cycle or large capital withdrawal.
Set up in 2000 as a partnership between Mr. Biju Lal and Mr.
Baiju Lal, Kollam-based ART trades in rubber sheets and scrap
rubber.
ART posted a net profit of INR0.08 crore on sales of INR98.1
crore in fiscal 2016, as against a net profit of INR0.08 crore on
sales of INR106.3 crore in fiscal 2015
BARNALA REALTECH: CRISIL Reaffirms 'B' Rating on INR7MM Loan
------------------------------------------------------------
CRISIL has reaffirmed its rating on the long-term bank facility
of Barnala Realtech (BR) at 'CRISIL B/Stable'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Working Capital
Demand Loan 7 CRISIL B/Stable (Reaffirmed)
The rating reflects the expectation of a stable business risk
profile because of a moderate booking rate. Construction of both
phases of a residential project, Riverdale Aquagreens, has been
completed within the stipulated timeline. The firm has sold
almost 60% of the area and has availed the entire term loan
sanctioned for the project. Cash flows from moderate customer
advances should remain adequate to meet debt servicing.
Key Rating Drivers & Detailed Description
Weaknesses
* Exposure to risks related to saleability of the residential
project because of a slowdown in the real estate industry: The
firm has completed construction of Riverdale Aquagreens. However,
due to slowdown in the real estate sector, sales may be subdued
over the medium term.
* Vulnerability to risks and cyclicality inherent in the real
estate sector in India: The real estate sector in India is
fragmented, with regional players dominating local markets, and
is cyclical. The industry witnessed robust growth from 2001
because of low interest rates and increasing demand driven by
high disposable income backed by economic growth. The industry
was hit in 2008 by weakening in the global economy and by
insecurity regarding earnings because of high retrenchment.
Anticipation of correction in real estate prices post the sub-
prime crisis in the US also kept customers away. Such cyclicality
may affect demand and saleability of projects over the medium
term.
Strength
* Extensive industry experience of the promoters: The promoters,
Mr. Jiwan Lal and Mr. Vijay Kumar, have experience in real estate
development and in businesses such as tyre trading, coal trading,
fast-food chains, and shuttering and scaffolding. They have
undertaken real estate development through group firms, BR and
Chandigarh Developers. They have delivered a residential project,
Maya Greens, comprising 66 flats in Nabha, Punjab, through BR.
Their experience has enabled the firm to complete construction of
the current project within the stipulated time.
Outlook: Stable
CRISIL believes BR will continue to benefit from the extensive
industry experience of its promoters. The outlook may be revised
to 'Positive' if there is significant improvement in the business
and financial risk profiles backed by higher-than-expected
customer advances, leading to healthy cash accrual. The outlook
may be revised to 'Negative' if sluggish demand leads to lower-
than-expected sales, or if delays in customer advances result in
pressure on profitability, and thus on liquidity.
BR was formed as a partnership firm by Mr. Jiwan Lal and Mr.
Vijay Kumar in October 2010 to develop real estate projects. The
firm is developing a residential project, Riverdale Aquagreens,
in Nabha.
Profit after tax was INR89 lakh on net sales of INR17.40 crore in
fiscal 2016, vis-a-vis INR91 lakh and INR14.56 crore,
respectively, in fiscal 2015.
CAPARO ENGINEERING: CARE Ups Rating on INR191.59cr Loan to B+
-------------------------------------------------------------
The revision in the ratings of Caparo Engineering India Ltd.
(CEIL) takes into account the improvement in CEIL's scale of
operations with improved profitability and overall gearing along
with promoter's continuous funding support over the years. The
ratings continue to derive strength from its experienced and
resourceful promoters with strong business association with major
auto manufactures in India.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank Facilities 191.59 CARE B+; Stable
Revised from CARE B
Short-term Bank Facilities 100.50 CARE A4 Reaffirmed
The ratings, however, continued to be constrained by CEIL's
stressed liquidity position with losses at net level and its
weak debt coverage indicators. The rating is also constrained by
the working capital intensive nature of business operations and
cyclicality associated with the auto industry.
Going forward, ability of the company to profitably scale up the
operations, while managing its working capital requirements and
register an improvement in its capital structure shall remain the
key rating sensitivities.
Detailed description of the key rating drivers
CEIL witnessed improvement in capital structure during FY16
driven by additional equity to the tune of INR227 crore infused
from promoters coupled with lower losses at net level. The
company also registered growth in scale of operations with
improved operating margins. The PBILDT margins improved to 8.31%
during the period owing to reduced raw material prices with
improved efficiencies. The PAT margins remain negative owing to
high depreciation and interest cost.
CEIL is part of the Caparo group which has operations in more
than 60 locations in the UK, USA, India, Canada, Poland and
Spain. The group had started its business in India in 1994 and
over a span of 22 years, Caparo group has expanded rapidly in
India with 19 plants working mainly for Original Equipment
Manufacturers (OEMs) of passenger cars, commercial vehicles and
off road vehicles and supplies sheet metal stampings, steel
forging, aluminum die casting, tubing, fasteners, tailor welded
blanks etc.
CEIL continue to register loses at net level with weak debt
coverage indicators and stressed liquidity position. The interest
coverage although improved to 0.84 during FY16 but still remains
low and total debt to GCA remained negative. Also, CEIL
has moderate working capital cycle, which improved to 30 days in
FY16 due to improvement in collection period coupled with
increased credit period.
CEIL remain exposed to the cyclicality inherent in auto ancillary
industry which is highly fragmented with presence of
number of units across the nation catering to various domestic
original equipment manufacturers as well as the exports
market.
Caparo Engineering India Ltd. (CEIL) incorporated in May 2000, is
engaged in the manufacturing of auto components including sheet
metal components, tubes and fasteners. The company's product
range includes outer body panel, large inner panels, brackets,
frame add-on parts, fasteners, electric resistance welded tubes
and cold-drawn welded tubes for automobile OEMs.
Currently, the company has 19 manufacturing plants located at
various locations across India. CEIL has diversified operations
and caters to the demand of Original Equipment Manufacturers
(OEMs) in the passenger vehicles, commercial vehicles and three
wheelers segment viz. Nissan Motors, Honda Motors, JCB, TATA
Motors etc.
During FY16 (refers to the period April 1 to March 31), on a
total operating income of INR701.58 crore, the company reported a
operating profit and net loss of INR58.33 crore and INR70.77
crore respectively as against the operating loss and net loss of
INR119.80 crore and INR228.46 crore respectively during FY15 on a
total income of INR636.22 crore.
CATVISION LIMITED: Ind-Ra Raises Long-Term Issuer Rating to BB+
---------------------------------------------------------------
India Ratings and Research (Ind-Ra) has upgraded Catvision
Limited's (CATVL) Long-Term Issuer Rating to 'IND BB+' from
'IND BB'. The Outlook is Stable.
KEY RATING DRIVERS
The upgrade reflects CATVL's significant revenue growth of 54.94%
yoy to INR506.31 million in FY16 and improvement in operating
EBITDA margins to 9.34% (FY15: 5.58%). This was due to cable TV
digitalization and the company venturing into manufacturing set-
top boxes in FY16. The credit metrics also improved in FY16 with
interest coverage (operating EBITDA/gross interest expense) of
5.54x (FY15: 3.23x) and net financial leverage (total adjusted
net debt/operating EBITDAR) of 1.92x (2.01x).
The ratings, however, remain constrained by the company's
presence in the highly competitive electronic industry.
The ratings are supported by the three-decade-long experience of
CATVL's promoters in the community antenna television equipment
manufacturing business and its strong supplier and customer
relations. Also, the liquidity of the company remains
comfortable with its 84.86% average use of the working capital
limits during the 12 months ended December 2016.
RATING SENSITIVITIES
Positive: A significant improvement in the top line while
maintaining the current level of credit metrics would be positive
for the ratings.
Negative: A decline in the revenue growth or EBITDA margins
leading to deterioration in overall credit metrics will be
negative for the ratings.
COMPANY PROFILE
CATVL was incorporated on June 28, 1985. The company
manufactures community antenna television equipment for providing
cable television services and also produces cable TV products,
such as modulators, combiners, optic transmitters, optic nodes,
radio frequency amplifiers, power supplies & splitters and tap-
offs of different functionalities.
CHHATTISGARH FERRO: CRISIL Assigns B+ Rating to INR5.5MM Loan
-------------------------------------------------------------
CRISIL has assigned its 'CRISIL B+/Stable' rating to the long-
term bank facility of Chhattisgarh Ferro Trades Private Limited.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 5.5 CRISIL B+/Stable
The rating reflects a small scale of operations in the fragmented
steel industry and vulnerability of the operating margin to
fluctuations in raw material prices. These rating weaknesses are
partially offset by the extensive industry experience of the
promoter and efficient working capital management
Analytical Approach
Unsecured loans of INR2.84 crore, from the promoters as on
March 31, 2016, have been treated as neither debt nor equity as
these are expected to remain in business over the medium term.
Key Rating Drivers & Detailed Description
Weaknesses
* Small scale of operations in a fragmented industry: Net sales
were INR39.8 crore in fiscal 2016. The modest scale of operations
restricts the ability to negotiate with customers or suppliers as
the steel industry is highly fragmented with several small
players.
* Vulnerability of operating margin to fluctuations in input
prices: The primary raw material is sponge, the prices of which
depend on steel prices, which are volatile. As raw material
accounts for 70-75% of operating cost, any sharp fluctuation is
likely to impact the operating margin.
Strengths
* Extensive experience of the promoters in the steel industry:
The promoters, Mr. Manish Dhuppad and Mrs Komal Dhuppad, have an
experience spanning several decades in the steel industry. This
has resulted in healthy revenue growth. An established
relationship with major suppliers and customers further
strengthens the market position.
* Efficient working capital management: Gross current assets were
60 days as on March 31, 2017, on account of low debtors and
moderate inventory. The working capital requirement is also
supported by the small credit received from the suppliers.
Outlook: Stable
CRISIL believes CFTPL will continue to benefit from the extensive
industry experience of its promoters. The outlook may be revised
to 'Positive' if there is significant improvement in operating
profitability coupled with revenue growth, resulting in better-
than-expected cash accrual. The outlook may be revised to
'Negative' in case of a stretched working capital cycle, leading
to weakening of the financial risk profile.
CFTPL, based in Raipur, Chhattisgarh, was incorporated in 2005.
However, commercial operations started in 2010. Operations are
managed by Mr. Manish Dhuppad, supported by his wife, Mrs Komal
Dhuppad. The company has a semi-integrated plant for
manufacturing angles and channels, along with ingots, which are
used for captive consumption (90-95%).
Profit after tax (PAT) was INR0.07 crore on net sales of INR39.8
crore in fiscal 2016, vis-a-vis INR0.02 crore and INR43.6 crore,
respectively, in fiscal 2015.
DIVINE CERA: Ind-Ra Assigns 'B-' Long-Term Issuer Rating
--------------------------------------------------------
India Ratings and Research (Ind-Ra) has assigned M/s Divine Cera
Wool India LLP (Divine) a Long-Term Issuer Rating of 'IND B-'.
The Outlook is Stable.
KEY RATING DRIVERS
The ratings reflect Divine's lack of operational track record and
small scale of operations. The company commenced operations in
July 2016 and indicated revenue of INR1.5 million in 1HFY17. It
has an order book of INR5 million, which will be executed by end-
January 2017. Divine's average use of fund-based facility was
18.5% over the nine months ended December 2016.
The ratings are supported by the company's comfortable gearing of
0.75x in FY16, revenue visibility from exploring other new
domestic markets besides Gujarat and the promoters combined
experience of 20 years in the similar line of business.
RATING SENSITIVITIES
Positive: Stabilization of profitable operations, leading to a
sustained improvement in the credit metrics will be positive for
the ratings.
Negative: Failure to scale up operations leading to a stress on
the company's liquidity position will be negative for the
ratings.
COMPANY PROFILE
Established on Jan. 28, 2015, Divine manufactures and sells
ceramic fiber related products such as ceramic fiber bulk,
blankets, modules, ropes and boards.
ESSAR STEEL: Farallon Capital May Buy 24% Stake for INR1,700cr
--------------------------------------------------------------
Livemint reports that private equity investor Farallon Capital is
likely to acquire a 24% stake in Essar Steel for $250 million
(INR1,700 crore) as part of restructuring of the Ruias-owned
firm.
"As part of restructuring of Essar Steel, the financial investor
-- Farallon Capital -- has been roped in to invest $250 million
(INR1,700 crore) for a 24% equity stake," the report quotes a
person aware of the development as saying.
The company is expected to utilise the funds from the financial
investor to complete its second pellet project in Odisha, the
person added, Livemint relays. According to the report, the
current debt of Essar Steel is INR44,000 crore, which also
includes working capital. The San Francisco-based Farallon
Capital has over $20 billion of assets under management.
Company sources told Livemint "it is inappropriate for us to
comment since this is in the realm of speculation".
Essar Steel is one of the first large-sized infrastructure and
core sector players to have a package for debt restructuring
being considered by lenders at a time when many of the schemes
like S4A, SDR and the like have not been able to resolve the
lenders' concerns, Livemint states. During the nine months to
December 2016, Essar Steel posted a growth of 60% in steel
production to over 4 million tonnes.
According to Livemint, bankers familiar with the matter said that
the package will also enable banks to regularise the account in
their books and upgrade the same to standard category. Livemint
says the lenders propose to convert part of the debt into
cumulative preference shares and will have a 30% stake in the
company. The proposal will also include standard terms such as
personal guarantee of promoter, nominee directors on board, and
the like, adds Livemint.
Incorporated in 1976, Essar Steel India Ltd. (ESIL) is a part of
the Essar Group and is having 10 MTPA integrated steel
manufacturing facilities at Hazira, Gujarat and iron ore
beneficiation and pelletisation facilities in Paradeep, Odisha
(12 mtpa) and Vizag, Andhra Pradesh (8 mtpa). The company also
owns and operates two iron ore slurry pipelines -- one each in
Odisha (Dabuna to Paradip) and Andhra Pradesh (Kirandul-Vizag),
which transport the iron ore slurry from the beneficiation plant
(located near the iron ore mines in Dabuna and Kirandul) to the
pellet plant (located near the Paradip and Vizag ports). A large
portion of the iron ore pellets produced are intended for captive
consumption by ESIL's steel plant at Hazira for cost
optimization.
GENESIS FINANCE: CRISIL Cuts Rating on INR25MM Term Loan to 'D'
---------------------------------------------------------------
CRISIL has downgraded its rating on Genesis Finance Co. Limited
bank facilities to 'CRISIL D' from 'CRISIL BB+/Stable'. The
downgrade reflects instances of delay by Genesis in servicing
debt during the past six months.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Overdraft 10 CRISIL D (Downgraded from
'CRISIL BB+/Stable')
Term Loan 25 CRISIL D (Downgraded from
'CRISIL BB+/Stable')
Key Rating Drivers & Detailed Description
Weaknesses
* Instances of delay in servicing of debt
There were multiple instances in the past six months wherein if
the instalment on the term loan was due on the last day of the
month, the company repaid it within 30 days from the due date.
* Small scale of operations with regional and borrower
concentration
Genesis remains a small player in the asset financing industry,
with loans of INR120 crore as on November 30, 2016. Regional and
borrower concentration risks also persist, with operations
limited to Delhi and National Capital Region (NCR), and the top
five customers accounting for the 40% of outstanding loans. The
company however has been in operations since 1990 and conducts a
detailed due diligence before sanctioning any loans. Moreover,
there are no instances of non-performing loans till date. Scale
of operations nevertheless may remain small over the medium term
and asset quality will remain susceptible to regional and
borrower concentration risks.
* Modest resource profile
Resource profile will remain modest; all borrowing was entirely
from Syndicate Bank (rated 'CRISIL AA/Negative') as of November
2016. However, borrowing cost (10.70%), is comparable to those of
similar-sized peers. Moreover, the company has been in
relationship with Syndicate Bank for more than a decade.
Furthermore, promoters have been supporting the resource profile
of the company by infusing equity on a regular basis. The
company's ability to diversify its funding relationship
nevertheless remains a key monitorable.
Strengths
* Adequate capitalisation
With networth of INR56 crore and Tier-I capital adequacy ratio of
45% as on March 31, 2016, capitalisation remains adequate.
Compulsorily convertible debentures of INR27.5 crore from the
promoters also support capital position. Gearing (0.6 time as on
November 30, 2016) may remain below 1 time over the medium term.
Conservative growth plans and financial policy should keep
capitalisation adequate.
Genesis, promoted by Mr. Naresh Garg and Ms Sangeeta Garg, was
incorporated in 1989 and has been operational for nearly 25
years. The company provides working capital loans secured by
property, company assets, vehicles, shares and jewellery. It also
provides small ticket unsecured personal loans.
Genesis disbursed loans aggregating INR109.6 crore in fiscal
2016. Profit after tax (PAT) improved to INR2.3 crore from
INR2.1 crore the previous fiscal, while total income remained
stable at INR12 crore. For the eight months ended November 30,
2016, PAT and total income were INR2.6 crore and INR9.3 crore,
respectively.
GLOBCON INDUSTRIES: ICRA Reaffirms B+ Rating on INR8.70cr Loan
--------------------------------------------------------------
ICRA has re-affirmed the long-term rating of [ICRA]B+ assigned to
the INR8.70 crore fund based bank limits of Globcon Industries
Private Limited. The outlook on the long-term rating is 'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Fund
Based Limits 8.70 [ICRA]B+(Stable); re-affirmed
Rationale
The re-affirmation of the rating continues to factor the limited
track record of GIPL's operations within the Autoclaved Aerated
Concrete (AAC) blocks manufacturing space. Nevertheless, the
experience of the promoters in the real estate industry provides
some comfort. The rating is further constrained by the company's
highly leveraged capital structure as on March 31, 2016, owing to
the debt funded capex undertaken in the past, coupled with a weak
net worth base. Being a relatively new entrant in the
manufacturing of AAC blocks, GIPL extends elongated credit to its
customers, which has strained its liquidity position as reflected
by NWC/OI of 33% as on March 31, 2016. Furthermore, the company
faces stiff competition from the other AAC block manufacturers as
well as from substitutes like clay bricks that limit its pricing
flexibility. With GIPL largely catering to real estate developers
in Mumbai and Surat, the operations of the company remain exposed
to the cyclicality in the real estate sector.
The rating, however, continues to positively factor in the stable
demand outlook for AAC blocks with the increasing acceptance of
the product in the domestic market. The rating also takes into
account the location advantages derived by the company on account
of its proximity to raw material sources and major consumption
centres.
Key rating drivers
Credit Strengths
* Stable demand outlook for AAC blocks with increasing
acceptance of the product in the domestic market;
* Location advantage on account of proximity to major
consumption
centres as well as to various raw material sources.
Credit Weakness
* Limited track record of company's operations within the AAC
blocks manufacturing space; however, promoters experience in
real estate industry provides some comfort;
* Highly geared capital structure on account of weak tangible
net-worth and debt funded capex undertaken in the past;
* Stretched liquidity position on account of elongated credit
extended to customers;
* Low entry barriers for new entrants as the manufacturing of
AAC blocks is not capital intensive, neither does it require
much technological know-how; capacity increase by existing
players further intensifying the competition.
* Presence of substitutes like clay bricks continues to
pressurise realisations;
* Exposed to cyclicality in real estate industry.
Description of key rating drivers highlighted:
GIPL commenced manufacturing AAC blocks from January, 2013. The
experience of the promoters within the AAC blocks manufacturing
space is thus limited. Nevertheless, the promoters have an
experience of over three decades in the real estate industry,
which helps the company procure orders from other real estate
players, thereby lending some comfort. Being a relatively new
player, GIPL extends elongated credit to its customers in order
to penetrate the intensely competitive market and retain existing
customers, leading to a stretched liquidity position as reflected
by an NWC/OI of 33% as on March 31, 2016. The company relies on
external borrowings for funding its high working capital
requirements, which coupled with the debt funded capex undertaken
has elevated its debt levels. GIPL's net-worth base however
remains weak and coupled with the high debt levels, results in a
highly leveraged capital structure as on March 31, 2016.
Furthermore, the company faces stiff competition from the other
AAC block manufacturers as well as from substitutes like clay
bricks that limit its pricing flexibility. With GIPL largely
catering to real estate developers in Mumbai and Surat, the
operations of the company remain exposed to the cyclicality in
the real estate sector.
Nevertheless, aided by the various advantages offered by AAC
blocks over the conventional clay bricks, they are being
increasingly accepted in the market. The company also benefits by
its proximity to the raw material sources and major consumption
centres in the form of lower transportation costs.
Globcon Industries Private Limited was initially established as a
partnership firm, Globcon Industries, in 2012. It was
subsequently converted into a private limited company in November
2013. The promoters of the company were previously associated
with the real estate industry for over three decades. The company
manufactures Autoclaved Aerated Concrete blocks that find
application in the real estate industry. GIPL's manufacturing
facility is located at Pipodara in Mangrol Taluka near Surat,
Gujarat, with an installed capacity of 1,50,000 cubic metre per
annum. The company commenced commercial production from January
2014 and currently operates at 50-60% of the installed capacity.
GIPL reported a net profit after tax and depreciation of INR0.07
crore on an operating income of INR23.41 crore for the period
ended March 31, 2016.
KARGWAL ENTERPRISES: Ind-Ra Assigns 'BB' Long-Term Issuer Rating
----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has assigned Kargwal
Enterprises Private Limited a Long-Term Issuer Rating of 'IND
BB'. The Outlook is Stable.
KEY RATING DRIVERS
The ratings reflect Kargwal's moderate credit profile. In FY16,
revenue was INR 1,043 million (FY15:INR850 million), net leverage
(total Ind-Ra adjusted net debt/operating EBITDA) was 6.3x (FY15:
5.7x) and interest coverage (operating EBITDA/gross interest
expense) was 1.5x (1.5x). The company has indicated revenue of
INR523.2 million during 7MFY17. Kargwal has a current order-book
of INR 264 million to be executed by January 2017.
The ratings factor in the company's volatile EBITDA margins in
the range of 5.0% - 7.8% during FY13-FY16 on account of raw
material price fluctuation.
The ratings, however, are supported by the promoter's more than
two decades of experience in the marble business.
Liquidity remains comfortable with the average utilization of its
fund-based facilities at around 74.1% over the 12 months ended
November 2016. The working capital cycle also slightly improved
to175 days in FY16 (FY15: 199 days) on account of reduction in
inventory days.
RATING SENSITIVITIES
Positive: Significant increase in scale and profitability leading
to sustained improvement in credit metrics could be positive for
the rating.
Negative: Any deterioration in EBITDA margin and credit metrics
could be negative for the rating.
COMPANY PROFILE
Kargwal, incorporated in 2000, is engaged in the cutting and
processing of imported marble blocks into slabs for the wholesale
and retail market. The imports are mainly from Italy, Turkey,
Greece, Lebanon, Iran and Spain. The company is owned and
promoted by Mr. Rajendra Agarwal.
LAKSHMI VACUUM: CARE Reaffirms B+ Rating on INR6.79cr LT Loan
-------------------------------------------------------------
The rating assigned to the bank facilities of Lakshmi Vacuum Heat
Treaters Private Limited (LVHTPL) continues to be constrained by
small scale of operations, leveraged capital structure,
moderately weak debt coverage indicators and weak liquidity
profile with increasing stretch in creditors' days. However, the
rating continues to derive benefits from reasonable track record
and experience of the promoter for two decades in the vacuum heat
treatment services industry, geographical diversification with
plants based in the vicinity of customers, well-established
customer relationship, growth in total operating income and
strong profit margins.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank Facilities 6.79 CARE B+; Stable
Reaffirmed
Detailed description of the key rating drivers
Over two decades of operations in the similar line of business,
the promoter has developed good long-term relationship with many
of the company's existing customers. Some of the major customers
that the company caters to include reputed names like Bosch
Limited, Rico Auto Industries Ltd., Bajaj Auto Ltd., Endurance
Group, Bill Forge Pvt. Ltd., etc. LVHTPL is geographically well-
diversified with its heat treatment facility located at seven
different locations viz. Bangalore, Hosur, Delhi, Coimbatore,
Chennai, Hyderabad, and Pune. The company typically tries to set
up facility closer to its customer's plants in order to attain
competitive advantage and ensure faster turnaround of orders. The
total operating income of LVHTPL grew by 10.92% in FY16 over FY15
on account of year on year increase in orders from existing
clients and addition of new customers. The PBILDT and PAT margin
of the company stood comfortable at 20.13% and 2.85% respectively
in FY16. The company has leveraged capital structure during the
review period. The debt equity ratio of the LVHTPL, though
improved from 3.95x as on March 31, 2015 to 3.32x as on March 31,
2016 due to repayment of term loan and vehicle loan, remained
weak. The overall gearing ratio of the company improved from
4.28x as on March 31, 2015 to 3.60x as on March 31, 2016, however
still remained weak due to high term loans and unsecured loans
infused by the directors during the financial year. The total
debt/GCA of the company improved from 8.41x in FY15 to 7.06x in
FY16 due to repayment of debt along with marginal incline in
gross cash accruals. The PBILDT interest coverage improved from
2.30x in FY15 to 2.57x in FY16 due to increase in PBILDT in
absolute terms and decrease in interest expense. The operating
cycle of the company is negative due to high average creditors'
period. The current ratio of the company has also deteriorated
from 0.95x as on March 31, 2014 to 0.63x as on March 31, 2016
due to high current portion of longterm debt.
Incorporated in the year 2008, Lakshmi Vacuum Heat Treaters Pvt.
Ltd. (LVHTPL) is engaged in providing heat treatment service to
attain different levels of hardness. The company's customers
mainly belong to automobile engineering, textile engineering,
medical engineering, aerospace, and other allied engineering
industries.
Ms. K S Varalakshmi, director of the company, also operates a
proprietorship firm viz. Lakshmi Vacuum Technologies (LVT)
engaged in manufacturing of vacuum furnaces. The firm is a sole
supplier of furnaces to LVHTPL.
MAGADH MICRO: CARE Reaffirms 'B' Rating on INR6.50cr LT Loan
------------------------------------------------------------
The rating assigned to the bank facilities of Magadh Micro Towers
and Transmission Private Limited (MTL) continues to be
constrained by its small scale of operations with limited
geographical presence, volatility of input prices, working
capital intensive nature of operations, intensely competitive
nature of the industry, low and concentrated order book position
and risk of delay in project execution. However, the aforesaid
constraints are partially offset by the company's experienced
management team and long track record of its operations.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank Facility 6.50 CARE B; Stable
Reaffirmed
Short-term Bank Facility 1.50 CARE A4 Reaffirmed
Going forward, the ability of the company to increase its scale
of operations with improvement in profitability and effective
management of working capital would be the key rating
sensitivities.
Detailed description of the key rating drivers
MTL's scale of operations remained modest as compared to its
peers with a PAT of INR0.12 crore on total operating income of
INR5.52 crore during FY16. Furthermore, total capital employed of
the company, decreased as on March 31, 2016, remained low at
INR3.80 crore as against INR4.21 crore as on March 31, 2015.
MTL, having commenced operation in the year 1988 has a track
record of being engaged in electrical contracting for 28 years.
Shri Arvind Gadviya is associated with the company since
incorporation.
Although total operating income (TOI) has grown by 79.80% in FY16
(A) over FY15 (A) on account of higher inflow of orders and
timely execution of the same, it continues to remain small in
comparison to its peers. Further, the operation of the company is
primarily concentrated in Bihar, Jharkhand and West Bengal.
Currently, the company has only four orders from Jharkhand Urja
Sancharan Nigam Ltd and Bihar Electricity Board out of which the
unexecuted portion is INR25 crore as on January 10, 2017. The
aforesaid orders are expected to be executed by March 2018. The
major input materials used are steel, cement and electrical
goods, the prices of which are highly volatile.
MTL's business is susceptible to losses arising out of delay in
project execution as MTL is generally required to give bank
guarantee (10% of contract value) to its clients for satisfactory
& timely completion of the contract.
Average working capital utilization for the company remained high
at about 95% for the twelve months period ending December, 2016.
Magadh Micro Towers & Transmission Pvt. Ltd. (MTL) was
incorporated in March, 1988 by Shri Rama Shankar Tiwari and
Shri Ashok Kumar of Gaya district of Bihar. The company is
engaged in the work of electrical infrastructure supply, erection
and installation on turnkey basis. Over the years, the company
has completed a good number of small sized projects on turnkey
basis for government entities, mainly Bihar State Electricity
Board (BSEB), Bihar State Holding Co. Ltd. and Jharkhand State
Electricity Board and established good relationship with them.
In FY16 (refers to the period April 1 to March 31), the company
achieved a total operating income of INR5.52 crore and PAT of
INR0.12 crore as against a total operating income of INR3.07
crore and PAT of INR0.06 crore in FY15. The company has achieved
a turnover of INR10.00 crore during 9MFY17.
MARUTHI TUBES: CARE Reaffirms 'D' Rating on INR7.0cr ST Loan
------------------------------------------------------------
The ratings assigned to the bank facilities of Maruthi Tubes
Private Limited (MTPL) continue to remain constrained by
continued overdrawals due to the stressed liquidity position of
the company.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank Facilities 5.65 CARE D Reaffirmed
Short-term Bank Facilities 7.00 CARE D Reaffirmed
Detailed description of the key rating drivers
There have been continued overdrawals by the company on account
of stretched liquidity position of the company at the back of
elongated operating cycle. The operating cycle of the company
continues to remain elongated with collection period of 205
days for FY16 (refers to the period April 1 to March 31).
MTPL was incorporated in March 1995 by Mr. M. Raaghavendra, Mr.
M. Nagesh Kumar and Mr. M. Chandraiah. The directors have four
decades of experience in pipe, borewell and civil construction
industry. MTPL is engaged in civil construction works and
manufacturing of HDPE pipes. The company has started
manufacturing HDPE Pipes under the brand name "SUPER FLOW" with
an initial capacity of 430 tons per annum.
MTPL undertakes water supply projects including construction of
pipelines, civil structures such as overhead tanks, sumps,
staff quarters and installation of pumps, etc, including supply
of HDPE pipes for the projects. The company undertakes project on
tender basis from public sector, private sector and government
department.
During FY16, the company reported PBILDT of INR2.31 crore (FY15 -
INR2.38 crore) and net profit of INR0.26 crore (FY15 - net profit
of INR0.19 crore) on a total operating income of INR27.54 crore
(FY15 -INR23.20 crore).
MILTECH INDUSTRIES: CARE Reaffirms B+ Rating on INR13cr LT Loan
---------------------------------------------------------------
The ratings assigned to the bank facilities of Miltech Industries
Private Limited (MIPL) continue to be constrained by low and
fluctuating profit margin, moderate scale of operation and weak
debt coverage indicators. The ratings are further constrained by
working capital intensive nature of operations with elongated
working capital cycle, susceptibility of profit margin to raw
material price fluctuation and operations in the highly
fragmented plastic processing industry. The reaffirmation of
ratings factor in the tepid growth in total operating income and
cash accruals and slight deterioration in capital structure
albeit improvement in operating cycle during FY16 (refers to the
period April 1 to March 31).
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank Facilities 13.00 CARE B+, Stable
Reaffirmed
Short-term Bank Facilities 6.50 CARE A4 Reaffirmed
The ratings however continue to benefit from the promoters'
experience, diversified and reputed customer base along with
diversified product portfolio and moderate capital structure.
The ability of MIPL to improve the scale of operations and
profitability amidst intense competition along with efficient
management of working capital requirement are the key rating
sensitivities.
Detailed description of the key rating drivers
MIPL's total income has reflected a fluctuating trend during the
period FY14-16. However during FY16 the total income grew
marginally by 2% due to lower order execution. Furthermore, the
profitability margins have remained low and fluctuating in the
range of 7%-10% during the past 3 years (FY14-FY16). MIPL's
capital structure remained moderately leveraged for the period
FY14-FY16 due to low capitalization and higher dependence on
external borrowings to support the operations. The operations of
the entity remained working capital intensive in nature with
large amount of funds blocked in inventory as reflected by high
Gross current asset days at 183 days during FY16 and also high
utilization of working capital limits. However, the promoters
have wide experience in the business and with certified
manufacturing facilities the entity has been able to garners
orders from clients on regular basis. Also the clientele base
remained diversified with 34.36% of income contributed by top 5
clients in the last three years.
MIPL, previously known as Miltech Metals Private Limited, was
promoted as 'Nityanand Packaging and Allied Industries Pvt Ltd by
Mr. Govindlal Nityanand Agarwal. MIPL commenced commercial
activity in 1990 with its first manufacturing facility at Nagpur
for producing plastic injection moulded components (magazines,
butt LNG, but normal, ammunition containers, adopter transit
assembly, grip pistol SAF and CLNG, mines) mainly to cater to the
requirements of the Defence Ordinance factories. In August 2005,
MIPL setup an additional injection moulding manufacturing
facility in Rajangoan near Pune mainly to undertake manufacturing
of parts and components for white goods and automobile units.
Mr. Govindlal Agarwal has been supplying goods to defence sector
for the last four decades which started with supply of wood and
steel components for armaments which still continues in the other
group companies of MIPL. MIPL has obtained an ISO 9001:2000
certification from KEMA Quality B.V. of the Netherlands in the
year 2003. The company has an in-house NABL accredited laboratory
and is the only plastic manufacturing unit in Central India which
has such accreditation.
During FY16, MIPL reported total operating income of INR75.49
crore (as against INR74.06 crore in FY15) and PAT of INR0.02 (as
against PAT of INR0.02 crore).
MITTAL CLOTHING: Ind-Ra Raises Long-Term Issuer Rating to 'BB'
--------------------------------------------------------------
India Ratings and Research (Ind-Ra) has upgraded Mittal Clothing
Private Limited's (MCPL) Long-Term Issuer Rating to 'IND BB' from
'IND BB-'. The Outlook is Stable.
KEY RATING DRIVERS
The upgrade reflects the improvement in MCPL's scale of
operations and credit metrics, on account of a higher number of
orders from the existing longstanding customers and an increase
in ethnic wear demand. However, the small scale of operations
and credit metrics remain at moderate levels for the ratings.
MCPL's FY16 financials indicate revenue of INR405 million (FY15:
INR234 million), interest coverage (operating EBITDA/gross
interest expense)of 2.3x (2.2x) and net financial leverage (total
adjusted net debt/operating EBITDAR) of 3.1x (4.3x). However,
EBITDA margin declined to 5.5% in FY16 (FY15: 7.5%), on account
of raw material price volatility. The company recorded revenue
of INR420 million in 9MFY17 due to a further increase in order
inflow from the existing customers. The company has orders worth
INR250 million in hand which are to be executed by March 2017.
The ratings, however, are supported by the company's moderate
liquidity position with the fund-based facilities being utilized
at an average of 89.7% over the 12 months ended December 2016.
Net working capital cycle was also comfortable at 85 days in FY16
(FY15: 148 days).
The ratings are also supported by the over three-decade-long
track record of the company's management in apparel
manufacturing.
RATING SENSITIVITIES
Positive: A significant increase in the revenue while maintaining
the operating profitability margins resulting in improved credit
metrics could be positive for the ratings.
Negative: A decline in the profitability margins or elongation of
working capital cycle resulting in deterioration of the credit
metrics and/or liquidity can be negative for the ratings.
COMPANY PROFILE
MCPL is a manufacturer of ready-made ethnic wear for women and
children. The company is involved in yarn dyeing, weaving,
fabric processing, developing design & embroidery, and
manufacturing ethnic apparels.
NATIONAL INDUSTRIES: CRISIL Reaffirms B+ Rating on INR5MM Loan
--------------------------------------------------------------
CRISIL has reaffirmed its rating on the long-term bank facilities
of National Industries - Faridkot (NI) at 'CRISIL B+/Stable'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 5 CRISIL B+/Stable (Reaffirmed)
Term Loan 0.8 CRISIL B+/Stable (Reaffirmed)
The company's business risk profile is likely to remain stable
driven by expected revenue growth of 5-10% per fiscal over the
medium term. Operating profitability remained modest at 2.96% in
fiscal 2016, and is expected to remain at 2.5-3.0% over the
medium term.
The financial risk profile is expected to remain weak over this
period, owing to a modest networth, low profitability, and
moderate reliance on external debt to fund working capital
requirement. Liquidity remains supported by promoter funding
through unsecured loans, and low bank limit utilisation.
Key Rating Drivers & Detailed Description
Weaknesses
* Weak financial risk profile:
The total outside liabilities to tangible networth ratio was high
at 3.40 times as on March 31, 2016, due to a modest networth of
INR3.07 crore, and moderate reliance on bank borrowing for
funding incremental working capital requirement. The debt
protection metrics are weak as indicated by interest coverage and
net cash accrual to total debt ratios of 1.5 times and 0.03 time,
respectively, for fiscal 2016.
* Small scale of operations in the highly fragmented rice-milling
industry:
Operating revenue was INR37.21 crore in fiscal 2016. Furthermore,
there are no direct exports and global sales are made through
indirect exporters. The scale of operations will remain small
compared with other players amid intense industry competition.
Strength
* Extensive experience of the partners in the rice industry: The
partners have about 15 years of experience in this industry. This
has helped to develop an established relationship with suppliers
and customers and has enabled a compound annual growth rate of
around 20% over the four fiscals through 2016.
Outlook: Stable
CRISIL believes NI will continue to benefit from the extensive
industry experience of its partners. The outlook may be revised
to 'Positive' if the financial risk profile improves
significantly, driven most likely by a considerable increase in
net cash accrual due to a substantially higher scale of
operations, or infusion of capital. The outlook may be revised to
'Negative' if liquidity deteriorates because of higher-than-
expected working capital requirement or pressure on
profitability.
NI was established in 1998 as a partnership firm. It was taken
over by the current partners in 2001, and is currently managed by
Mr. Rohit Monga and his cousin, Mr. Vikram Monga. The firm, based
in Faridkot, Punjab, mills and sorts rice.
NI, on a standalone basis, had a profit after tax (PAT) of
INR0.10 crore on net sales of INR37.23 crore in fiscal 2016, vis-
a vis INR0.08 crore and INR29.68 crore, respectively, in fiscal
2015.
NEERG ENERGY: Fitch Assigns B+ Rating to Proposed USD Notes
-----------------------------------------------------------
Fitch Ratings has assigned Neerg Energy Ltd's proposed US dollar
senior notes an expected rating of 'B+(EXP)', with a Recovery
Rating of 'RR4'.
The rating on the proposed notes reflects the credit profile of a
restricted group of operating entities under ReNew Power Ventures
Private Limited (ReNew Power), a company involved in renewable
power generation in India.
Neerg Energy is a SPV that will be held by a trust and its
ownership is not linked to ReNew Group. The SPV will use the
proceeds of the proposed US dollar notes to subscribe to proposed
masala bonds (offshore bonds denominated in Indian rupee but
settled in US dollars) to be issued by the entities in the
restricted group. The SPV will not undertake any business
activity other than investing in the proposed masala bonds.
KEY RATING DRIVERS
Ratings Linked to Restricted Group: Fitch's rating on the
proposed US dollar notes reflects the credit strengths and
weaknesses of the debt structure and assets of the operating
entities that form the restricted group. The US dollar
noteholders will benefit from a first charge over the masala
bonds in addition to a charge over the bank accounts and 100% of
the shares of the SPV. The masala bonds in turn are secured by a
first charge on all assets (excluding accounts receivables) and
cash flows of the operating entities in the restricted group.
The indentures on the proposed US dollar notes and masala bonds
restrict cash outflows and debt incurrence. The restricted group
is not permitted to incur additional debt or make restricted
payments if they raise the restricted group's ratio of gross debt
to EBITDA to above 5.5x. The restricted group does not have
significant prior-ranking debt, aside from a working capital debt
facility of a maximum of USD30m - secured exclusively against
accounts receivables - and total external debt at the restricted
group is limited to 15% of total assets.
Seasoned Portfolio, Diversified Operations: The restricted group
has total generation capacity of 504MW. Of this, 91% was
operational at end-December 2016, with over 40% in operation for
over two and a half years while the rest were launched in the
last 12 months. Fitch expects the rest to start operations by the
end of the financial year to 31 March 2017 (FY17).
The assets of the restricted group are also diversified by type
(wind: 78% of total capacity; solar: 22%) and location, which
mitigates risks from adverse climatic conditions. The wind assets
are spread across five Indian states, though wind patterns across
larger geographic areas also tend to be correlated; they are
complemented by solar power plants.
Price Certainty, Volume Risks: The restricted group's assets
benefit from long-term power purchase agreements (PPAs) for all
of its wind and solar assets, with tenors of 10-25 years in case
of contracts with state utilities, and 7-10 years for direct
sales. Although the long-term PPAs provide protection from price
risk, production volumes will vary with wind and solar radiation
patterns.
Weak Counterparty Profile: The rating also reflects the weak
credit profile of the key counterparties of the restricted group
- state-owned power distribution utilities, which account for
about 80% of the restricted group's offtake. The rest of the
offtake is sold directly to corporate customers, increasing the
diversity of counterparties. The utilities in Andhra Pradesh and
Gujarat have a track record of timely payments, but the
receivables cycle has been longer for others. However, there have
been no payment defaults by the state utilities to renewable
sector to date despite payment delays.
With the introduction of reforms for state distribution utilities
in India, Fitch expects an improvement in the financial health of
the state utilities and a reduction in payment delays. The states
that purchase power from the restricted group have signed up for
these reforms.
FX Risk Largely Hedged: Foreign-exchange risk arises as the
earnings of the restricted group's assets are in Indian rupees
while the notes are denominated in US dollars. However, the SPV
plans to fully hedge the semi-annual coupon payments and
substantially hedge the principal of its US dollar notes. The
proposed redemption premium on the masala bonds to be issued by
the operating entities in the restricted group, which is payable
to the SPV, should provide an additional cushion.
Weak but Improving Financial Profile: Fitch expects the
restricted group's financial profile to improve with leverage
(gross adjusted debt/ EBITDAR) falling below 5.0x by FY20,
supported by higher EBITDA as some of the existing assets chalk
up full years of operations and new assets come on-line. Leverage
of 8.0x at FYE16 was mainly due to the debt for projects under
construction. The restricted group plans to expand capacity, but
Fitch do not expect any unplanned capex in the near term given
the restrictions in the note covenants. Further, the company has
flexibility to defer the capex, if required.
The proposed US dollar notes face refinancing risk as the cash
balance at the restricted group is not likely to be sufficient to
repay the notes at maturity. However this risk is mitigated by
ReNew Power's relatively good access to funding and support from
its strong equity investors.
ReNew Power Guarantee: The ratings on the notes are not linked to
ReNew Power's credit quality. ReNew Power is providing a
guarantee to the masala bonds at the inception of this
transaction, but the guarantee may not be available through the
life of the notes as it is due to fall away once the restricted
group's gross debt to EBITDA falls below 5.5x.
DERIVATION SUMMARY
The expected ratings on the SPV's proposed bond are in line with
peers rated high 'B'. While Star Energy Geothermal (Wayang Windu)
Ltd (SEG, B+/Stable) has a better financial profile than the
restricted group, SEG is constrained by its single-site risk,
while the restricted group's assets are more diversified and its
operations are of a larger scale.
The restricted group's operations and financial profile are
comparable to those of Greenko Dutch B.V, whose senior unsecured
notes are also rated 'B+', and stronger than the standalone
assessment of 'B' of the senior unsecured notes of Greenko
Investment Company. The higher rating of Inifinis Plc (BB-/
Negative) reflects the benefits of UK regulations on renewables
obligations and a stronger financial profile. While Infinis's
free cash-flow generation is underpinned by its contracted
position until 1H18, the Negative Outlook reflects Fitch
expectation the company's FFO adjusted net leverage will breach
rating guidelines from FY17.
KEY ASSUMPTIONS
Fitch's key assumptions within the rating case for issuer
include:
- The plant load factors in line with the P75 estimates (25%
probability that the projects will not meet the estimates) in the
medium to long term
- Plant-wise tariff in accordance with the power purchase
agreements
- EBITDA margins of about 88%-89%
- No dividend payouts from the restricted group over next 4-5
years
- Capex of about INR2bn (30 MW) and INR7bn (104 MW) in FY19 and
FY20 in line with the covenants in the note indenture.
RATING SENSITIVITIES
Positive: Future developments that may, individually or
collectively, lead to positive rating action include:
- EBITDA fixed-charge coverage of 2.5x or more on a sustained
basis. Fixed charges include the cost of forex hedging
- Improvement in leverage (gross adjusted debt to operating
EBITDAR) to below 5x on a sustained basis
Negative: Future developments that may, individually or
collectively, lead to negative rating action include
- EBITDA fixed-charge coverage not meeting Fitch's expectation of
around 2x on a sustained basis over the medium term
- Failure to adequately mitigate foreign-exchange risk
LIQUIDITY
Liquidity to Improve: The refinancing of the restricted group's
project debt by the proposed US dollar notes is likely to improve
the group's liquidity. The notes are likely to have a five-year
maturity, resulting in minimal debt maturities in the medium
term. Fitch expects the restricted group's cash flow from
operations to be sufficient to cover any capex in the near to
medium term, although it can take additional external debt to the
extent allowed (15% of RG's total assets) under the bond
indenture for its capex or acquisitions.
PBR SELECT: CRISIL Lowers Rating on INR4MM Secured Loan to B+
-------------------------------------------------------------
CRISIL has downgraded its ratings on the bank facilities of PBR
Select Infra Projects (PBRS) to 'CRISIL B+/Stable/CRISIL A4' from
'CRISIL BB-/Stable/CRISIL A4+'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Bank Guarantee 4 CRISIL A4 (Downgraded from
'CRISIL A4+')
Secured Overdraft 4 CRISIL B+/Stable (Downgraded
Facility from 'CRISIL BB-/Stable')
The downgrade reflects expected deterioration in PBRS's credit
risk profile. Revenue declined to INR14.1 crore in fiscal 2016
from INR18.8 crore in the previous fiscal, and will remain
subdued over the medium term because of lower-than-expected
execution of orders, resulting in low cash accrual. Also, large
inventory has led to increased working capital debt, raising
gearing to 3.68 times as on March 31, 2016, from 2.54 times a
year earlier. The gearing is expected at 2.6-2.8 times over the
medium term.
The ratings continue to reflect the firm's modest scale of
operations in the intensely competitive civil construction
industry, its large working capital requirement, and weak
financial risk profile because of high gearing, subdued, debt
protection metrics, and small net worth. These weaknesses are
partially offset by its promoters' extensive industry experience.
Key Rating Drivers & Detailed Description
Weaknesses
* Modest scale of operations:
PBRS is a small player in a highly competitive civil construction
industry. Its small order book provides limited revenue
visibility, and revenue will be subdued over the medium term.
* Working capital-intensive operations
PBRS's large working capital requirement is reflected in gross
current assets of 125-244 days over the three fiscals ended March
31, 2016, driven by large work-in-progress inventory of 168 days
due to delays in billing. Receivables were moderate.
* Weak financial risk profile
PBRS has high gearing, weak debt protection metrics, and small
networth. Financial risk profile deteriorated in fiscal 2016
because of low cash accrual and increased debt.
Strength
* Promoters' industry experience
PBRS is managed by Mr. P Bhaskar Reddy and his family members.
Mr. Reddy has experience of over two decades in the construction
industry, and has an established market position and strong
customer relationships.
Outlook: Stable
CRISIL believes PBRS will continue to benefit from its promoter's
extensive industry experience. The outlook may be revised to
'Positive' if capital infusion or larger-than-expected accretion
improves the firm's financial risk profile. The outlook may be
revised to 'Negative' if stretch in working capital cycle, or
large, debt-funded capital expenditure, weakens the financial
risk profile, particularly liquidity.
PBRS, set up in 2010 as a partnership firm and based in
Hyderabad, undertakes civil construction activities, primarily
construction of roads, bridges, and flyovers.
In fiscal 2016, PBRS, on a provisional basis, reported net profit
of INR0.17 lacs on operating income of INR14.10 crores as
compared to net profit of INR54 lacs on operating income of
INR18.8 crores in the previous fiscal.
RAGHU RAMA: ICRA Reaffirms 'B' Rating on INR14cr Fund Based Loan
----------------------------------------------------------------
ICRA has reaffirmed the long term rating of [ICRA]B assigned to
INR14.00 crore (revised from INR15.68 crore ) fund based limits
and INR2.00 crore (revised from INR0.32 crore) unallocated limits
of Raghu Rama Rice Industry. The outlook assigned for long term
rating is Stable.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund based limits 14.00 [ICRA]B (Stable) re-affirmed
Unallocated limits 2.00 [ICRA]B (Stable) re-affirmed
Rationale
The rating continues to be constrained by RRRI's weak financial
profile characterized by low profitability, high gearing, modest
coverage indicators, and constrained liquidity position with high
working capital intensity on account of high inventory holding.
The rating also considers small scale of operations in the rice
milling industry characterized by intense competition limiting
operating margins and risks arising from partnership nature of
the firm. The rating is further constrained by intensive
competitive nature of the rice milling industry restricting
operating margins and agro climatic risks in the rice milling
industry, which can affect the availability of the paddy in
adverse weather conditions. The rating is however supported by
the long track record of the promoters in the rice mill business,
ease in paddy procurement due to plant location in major paddy
cultivating region of the country, and favorable demand prospects
of the industry with India being the second largest producer and
consumer of rice internationally augurs well for the firm.
Going forward, the firm's ability to improve its scale of
operations, profitability and manage its working capital
requirements effectively will be key rating sensitivities from
credit perspective.
Key rating drivers
Credit Strengths
* Experienced management with long presence in rice industry
* Presence in major rice growing area of East Godavari District
resulting in easy availability of paddy
* Rice being a staple food grain and the position of India as
world's second largest producer and consumer, demand prospects
for the industry are expected to remain good
Credit Weakness
* Financial profile of the firm is characterized by low
profitability, high gearing and modest coverage indicators.
* High working capital intensity in FY 2016 on account of higher
inventory holding as on March 31, 2016
* Agro climatic risks, which can affect the availability of the
paddy in adverse weather conditions
* Highly competitive nature of the industry with presence of
large number of organized and unorganized players put pressure
on margins
* Risk inherent in partnership nature of the firm
The firm has modest scale of operations and operating income
witnessed ~17% de-growth in FY 2016 due to lower realizations on
account of higher supply in the open market post abolition of
levy and job work performed for Civil Supplies Corporation for
Custom Milling of Rice (CMR).The working capital intensity of the
firm increased significantly to 31% in FY 2016 as against 19% in
FY 2015 due to change in inventory holding policy to 3 months
which adversely impacted the liquidity. However, long experience
of the promoters in the rice milling industry and location of the
firm in major rice growing region of the Andhra Pradesh provides
easy availability of paddy.
Founded in 2012 as a partnership firm, Raghu Rama Rice Industry
(RRRI) is engaged in milling of paddy and produces raw and boiled
rice. The firm started its operations in June 2013. The firm has
a milling unit in Jagannadhagiri village of East Godavari
district of Andhra Pradesh with an installed capacity of 8 tons
per hour. Rice is the main product of the milling process and the
by-products of the milling process are bran, broken rice, ash and
husk. Bran is supplied to bran oil extraction units; broken rice
is used for Rava making or as poultry feed depending on the
quality; ash is used by clay brick manufacturers; and husk is
sold as fuel for various units like brick manufacturing, husk
fired boilers etc.
RRRI has reported an operating income of INR50.20 crore and net
profit of INR0.08 crore in FY2016 as against an operating income
of INR61.11 crore and net profit of INR0.09 crore respectively in
FY2015.
RAVANI REALTERS: CARE Assigns B+ Rating to INR125cr LT Bank Loan
----------------------------------------------------------------
The rating assigned by CARE is based on the capital deployed by
the partners and the financial strength of the firm at present.
The rating may undergo a change in case of withdrawal of the
capital or of the unsecured loans brought in by the partners, in
addition to the changes in the financial performance and other
relevant factors.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank Facilities 125 CARE B+; Stable
Assigned
Detailed Rationale
The rating assigned to the bank facilities of Ravani Realters
(RR) is constrained by the nascent stage of implementation of its
ongoing real estate project, pending financial closure &
clearances from the concerned departments and modest booking
status. The rating is further constrained by RR's presence in an
inherently cyclical real-estate industry and its constitution as
a partnership firm.
The rating, however, draws strength from the vast experience of
the promoters in executing various real estate projects in Surat
city.
RR's ability to achieve financial closure, receive necessary
approvals, complete and sell the residential units of its ongoing
project in a timely manner at envisaged price, along with timely
realisation of sales proceed are the key rating sensitivities.
Detailed description of the key rating drivers
RR is promoted by Surat-based Ravani Group which has a strong
presence in the real-estate sector. The promoters are engaged in
the field of the construction activity for more than two decades
and have promoted multiple projects under group concerns.
The project was launched and the construction work begun in April
2016 post receipt of prerequisite approvals; "Antila Dreams" is
envisaged to be completed by September 2019; however, financial
closure of the project is yet to be received.
Till November 5, 2016, RR had incurred construction cost of
INR7.80 crore; just 3% of the envisaged total cost which was
funded by the promoters and had received modest booking.
Constituted in April 2016, Ravani Realters (Ravani) is a
partnership firm incorporated jointly by Ravani Developers and
Mr.
Mahavirkumar Shah. The firm launched the project 'Antlia Dreams'
in Vesu, Surat - Gujarat and it comprise of 7 residential towers
aggregating to 224 residential units with a total saleable area
of 8,89,248 Sq.ft. The project was launched in April 2016 and is
envisaged to be completed by September 2019 at a total cost of
INR277 crore.
REPUBLIC AUTO: CARE Reaffirms B+ Rating on INR11.25cr LT Loan
-------------------------------------------------------------
The rating assigned to the bank facilities of Republic Auto Sales
(RAS) continues to remain constrained by its declining scale of
operations and weak financial risk profile marked by thin
profitability margins, leveraged capital structure and weak debt
service coverage. The rating is further constrained by intense
competition amongst distributors and from alternate brands along
with constitution of the entity as a partnership firm. The rating
also takes cognizance of the fortunes linked to the performance
of manufacturers.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank Facilities 11.25 CARE B+; Stable
Reaffirmed
The rating, however, continues to take comfort from experienced
partners in automobile dealership business, moderate operating
cycle and RAS's association with Escorts & Yahama.
Going forward, the ability of RAS to increase its scale of
operations along with improvement in the profitability margins
and capital structure shall be the key rating sensitivities.
Detailed description of the key rating drivers
In FY16 total operating income of firm declined by 9% on y-o-y
basis and stood at INR63.82 crore as against INR70.18 crore in
FY15 on account of lower quantity sold. The company has achieved
total operating income of INR75.00 crore in 8MFY17 (refers to the
period April 1 to November 30; based on provisional results).
In FY16, PBILDT margin of RAS declined by 16 bps and continues to
remain low at 1.10%. While PAT margin continue to remain below
unity at 0.39% due to higher interest charges.
The capital structure of the firm improved and stood comfortable
marked by overall gearing of 0.65x as on March 31, 2016 as
against 1.86x as on March 31, 2015 on account of lower
utilization of the working capital borrowings.
The debt coverage indicators marked by interest coverage ratio
and total debt/GCA continues to remain weak at 2.79x and 14.01
for FY16 on account of lower gross cash accruals.
The average operating cycle remained moderate at 56 days during
FY16.
Lucknow-based (Uttar Pradesh) Republic Auto Sales (RAS) was
established in April 2005 as a partnership firm by four partners
namely Mr. Mohd. Zubair, Mr. Mohd. Tariq, Ms. Shama Sheikh and Ms
Shagufta Tariq sharing profit and losses in ratio of 40%, 40%,
10% and 10% .
RAS operates as authorized dealer of 'Escorts Limited' for
tractors and 'Yahama Motor Private Limited' for two wheelers.
The firm has one showroom in Lucknow and operates 3S facility
(Sales, Spares and Services).
RAS has two associate concerns namely Republic Service Centre and
Metro Cargo Carriers. The former is engaged in petrol pump
business while later is engaged in cargo business for carriers of
Escorts, Yahama and Force motors.
In FY16 (refers to the period April 1 to March 31), achieved a
total operating income (TOI) of INR62.82 crore with PAT of
INR0.25 crore, as against total operating income of INR69.52
crore with PAT of INR0.24 crore in FY15. Furthermore, the company
has achieved total operating income of INR75.00 crore in 8MFY17
(refers to the period April 1 to November 30; based on
provisional results).
S. GANESH: CRISIL Assigns B+ Rating to INR2.5MM Overdraft
---------------------------------------------------------
CRISIL has assigned its 'CRISIL B+/Stable/CRISIL A4' rating to
the bank facilities of S. Ganesh and Nagendra Co (SGN).
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Foreign Letter of
Credit 5.5 CRISIL A4
Overdraft 2.5 CRISIL B+/Stable
The rating reflects SGN's average financial risk profile and the
firm's moderate scale of operations in a highly fragmented and
intensively competitive chemicals (inorganic) trading segment.
These rating weaknesses are partially offset by extensive
industry experience of SGN's promoters and their established
relationships with principals and customers.
Key Rating Drivers & Detailed Description
Weaknesses
* Below average financial risk profile: Modest operating
profitability led to below average debt protection metrics in
fiscal 2016. Debt protection metrics are likely to be below
average, with interest coverage and net cash accrual to total
debt ratios expected at 1.5 times and 7%, respectively, in fiscal
2017.
* Moderate scale of operations: SGN operates in a highly
fragmented industry leading to intense competition and moderate
scale of operations. SGN's scale is expected to remain moderate
at similar levels over the medium term.
Strength
* Extensive experience of promoters: Presence of over three
decades in trading of chemicals and agro products has enabled
promoter to establish strong relationship with customers and
suppliers.
Outlook: Stable
CRISIL believes that SGT will continue to benefit from the
promoter's extensive experience in Chemicals and Agro products
trading industry. The outlook may be revised to 'Positive' in
case the firm's scale of operations improves considerably while
improving profitability leading to better than expected cash
accruals and improvement in liquidity. Conversely, the outlook
may be revised to 'Negative', in case of any pressure on
profitability or increase in working capital requirements leading
to further deterioration in financial risk profile and liquidity,
or any significant capital withdrawals by the promoter.
Set up in 1960, SGN is a proprietorship firm engaged in
wholesale trading of chemicals (inorganic in Nagercoil (Tamil
Nadu). The day to day operations are managed by Mr. Balaganesan.
SHIV COTTON: ICRA Reaffirms 'B' Rating on INR6.50cr Loan
--------------------------------------------------------
ICRA has reaffirmed the long-term rating of [ICRA]B on the
INR1.50-crore1 term-loan facility and the INR5.00-crore working
capital facility of Shiv Cotton Industries. The outlook assigned
on the long-term rating is 'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-Based Limits 6.50 [ICRA]B (Stable) Reaffirmed
Rationale
The rating reaffirmation continues to remain constrained by SCI's
modest operating scale and weak financial profile, characterised
by decline in revenue in FY2016, low profitability, stretched
capital structure and weak debt coverage indicators. The working
capital intensity of the firm remained stretched as reflected in
the NWC/OI ratio of 34% in FY2016, due to higher inventory
holdings during the year. The firm witnesses intense competition
because of the highly fragmented industry structure due to low-
entry barriers and low product differentiation. The rating also
reflects the vulnerability of the firm's profit margins to raw
material (cotton) prices, which are subject to seasonality, crop
harvest and regulatory risks.
The rating, however, continues to favorably factor in the
proximity of the firm's manufacturing unit to raw material
source, easing procurement.
The firm's ability to increase its scale, maintain adequate
profitability and improve its capital structure, given the
seasonality in the business, volatility in prices of cotton
bales, intense competition and high working capital requirement
will remain crucial for the credit metrics. ICRA also notes that
SCI is a partnership concern and any substantial withdrawal from
the capital account in future could adversely impact the credit
profile of the firm.
Key Rating Drivers
Credit Strengths
* Favourable location of the plant in the cotton producing
belt of India gives it easy access to raw cotton
Credit Weakness
* Modest scale of operations; financial profile characterised
by low profitability, moderate capital structure as well as
weak debt coverage metrics;
* Limited value addition; highly competitive and fragmented
industry structure due to low-entry barriers leads to low
operating and net margins;
* Partnership firm, any substantial withdrawal from capital
accounts would impact the net worth and thereby the gearing
levels.
Description of Key Rating Drivers Highlighted:
SCI's financial profile is characterised by a decline in revenue
due to reduced sales volume. Elongated inventory in FY2016
weakened the liquidity position, resulting into high working
capital requirement, which further impacted the capital structure
as most of the working capital requirement was funded through
bank borrowings.
The company procures Shankar-6 quality of raw cotton either
directly from local farmers or from agriculture marketing yards.
The price for cotton almost equals the cotton prices in Gujarat
after factoring in the transportation costs. Raw cotton is
procured between September and April, when the supply is
generally high. The product profile of the company consists of
cotton bales and cotton seeds. SCI's entire sales proceeds are
made to the domestic market. The company's revenue is largely
dependent on the sales of cotton bales. Sales of cotton bales are
channeled through brokers/agents.
The cotton ginning industry is highly fragmented due to the
presence of numerous players operating in Gujarat, leading to
high competition. The industry is also exposed to regulatory
risks with the Government imposing MSP for the purchase of raw
cotton during over-supply in the market and for restricting
export of cotton bales in order to support the domestic cotton
textile industry.
Analytical approach:
For arriving at the ratings, ICRA has taken into account the debt
servicing track record of SCI, its business risk profile,
financial risk drivers and management profile.
Shiv Cotton Industries (SCI) was established as a partnership
firm in May 2013. SCI commenced its operation in January 2014 and
currently gins and presses raw cotton to produce cotton bales and
cotton seeds. The manufacturing unit is located in Tankara,
Rajkot district of Gujarat and is currently equipped with 24
ginning machines and 1 pressing machine, with an installed
capacity to produce 250 cotton bales per day (24 hours
operation). The firm is currently owned and managed by, Mr.
Pankajbhai Ghetia, Mr. Rameshbhai Aghera, Mr. Dilipbhai Kalola
and Mr. Virjibhai Ghetiya.
On March 31, 2016, the firm reported an operating income of
INR19.27 crore with a net profit of INR0.02 crore against an
operating income of INR29.86 crore with a net profit of INR0.02
crore as on March 31, 2015.
SHIV SHANKAR: CRISIL Assigns B+ Rating to INR10MM Cash Loan
-----------------------------------------------------------
CRISIL has assigned its 'CRISIL B+/Stable' rating to the bank
facility of Shiv Shankar Rice Mills - Taraori.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 10 CRISIL B+/Stable
The rating reflects a weak financial risk profile because of high
gearing. The rating also factors in the working capital-intensive
nature and small scale, of operations in the highly fragmented
rice industry. These weaknesses are partially offset by the
extensive industry experience of the partners.
Key Rating Drivers & Detailed Description
Weaknesses
* High gearing: The gearing was around 7 times as on March 31,
2016. There is considerable reliance on short-term debt to fund
large incremental working capital requirement. The gearing is
likely to remain high over the medium term due to low cash
accruals.
* Small scale of operations:
Scale of operations remains small with sales of INR600 crore in
fiscal 2016. The basmati rice segment is intensely competitive,
thereby restricting opportunities for players to expand into new
regions and increase their scale. The ability to bargain with
suppliers and customers is also constrained.
* Working capital-intensive operations: Working capital
requirement is large, with gross current assets of 107 days as on
March 31, 2016. This is driven by the inherently large inventory
requirement in the rice industry.
Strength
* Experience of the partners in the basmati rice segment: The
partners have been operating in the basmati rice segment for
nearly two decades. Over the years, they have successfully
established a procurement network which meets the firm's growing
needs. The firm has developed a healthy relationship with
customers in the global and domestic markets.
Outlook: Stable
CRISIL believes SSRM will continue to benefit from the extensive
industry experience of its partners. The outlook may be revised
to 'Positive' in case of significant improvement in the financial
risk profile on account of better-than-expected cash accrual led
by improvement in scale of operations and operating
profitability, or capital infusion. The outlook may be revised to
'Negative' in case of aggressive, debt-funded expansions, a
substantial decline in revenue and profitability, or a stretched
working capital cycle, thereby weakening the financial risk
profile.
Established in 2003, and managed by Mr. Anil Gupta and his wife
Ms Savita Gupta, SSRM is a partnership firm engaged in processing
and sale of basmati rice. The firm deals mainly in parboiled
basmati rice and long-grain parboiled basmati rice. It has
sorting and milling capacity of 6 tonne per hour and its plant in
Tarori, Haryana.
Status of non-cooperation with previous CRA: SSRM has not
cooperated with ICRA Ltd (ICRA), which has suspended its rating
vide release dated July 21, 2016, on account of non-provision of
information required for monitoring of ratings.
SHREE BHAGWATI: CRISIL Raises Rating on INR6MM Cash Loan to B+
--------------------------------------------------------------
CRISIL has upgraded its rating on the long-term bank facilities
of Shree Bhagwati Samarth Food Products Private Limited (SBSF) to
'CRISIL B+/Stable' from 'CRISIL B/Stable'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 6 CRISIL B+/Stable (Upgraded
from 'CRISIL B/Stable')
Term Loan 6 CRISIL B+/Stable (Upgraded
from 'CRISIL B/Stable')
The upgrade reflects the company's healthy business risk profile,
because of robust revenue and efficient working capital
management. Revenue was INR55 crore in fiscal 2016, against
CRISIL's expectation of INR40 crore, and is likely to grow at a
healthy pace in fiscal 2017 (Rs 88 crore till December 2016).
SBSF had gross current assets (GCAs) of 80 days as on March 31,
2016, driven by inventory of 70 days. Healthy demand and
established clientele will support growth over the medium term.
Completion of capital expenditure (capex) without any time or
cost overrun will remain a key sensitivity factor.
The rating reflects the company's below-average financial risk
profile because of small networth and high gearing, and its
exposure to risks relating to proposed capital expenditure
(capex). These weaknesses are partially offset by its promoter's
extensive experience in the food processing business, and its
controlled working capital cycle.
Analytical Approach
Unsecured loans of INR0.68 crore from the promoter as on March
31, 2016, have been treated as neither debt nor equity as they
are expected to remain in the business over the medium term.
Key Rating Drivers & Detailed Description
Weaknesses
* Below-average financial risk profile: SBSF's financial risk
profile is constrained by small networth of about INR1.5 crore
and high gearing of 6.59 times as on March 31, 2016. Interest
coverage and net cash accrual to total debt ratios were adequate,
at 1.9 times and 0.11 time, respectively, in fiscal 2016.
* Exposure to risks related to proposed capex: SBSF plans capex
of INR4 crore, which is more than double its networth. Completion
of the capex within the budgeted time and cost, and sales
following commissioning of the new capacity will be key
monitorables.
Strengths
* Strong track record and established presence in key markets:
The promoter has good understanding of the food products
business, as he has been managing a proprietorship firm, which
sells similar products under the Raja Rani brand, for a decade.
The promoter's industry experience will help SBSF sustain growth.
* Controlled working capital cycle: SBSF had gross current assets
of 80 days as on March 31, 2016, driven by controlled receivables
cycle and moderate inventory.
Outlook: Stable
CRISIL believes SBSF will continue to benefit from its promoter's
industry experience. The outlook may be revised to 'Positive' if
increase in revenue following completion of capex, and steady
operating margin, leading to large cash accrual, strengthen the
financial risk profile. The outlook may be revised to 'Negative'
if there is a significant delay in project completion, or if the
company undertakes additional debt-funded capex.
SBSF was incorporated in May 2012 by Mr. Bhagwati Omprakash
Kalani, who also owns a sole proprietorship firm, Shree Samarth
Food Products. SBSF commenced operations in May 2015 and produces
besan and wheat flour. Its manufacturing facility and registered
office are in Thane, Maharashtra.
For fiscal 2016, SBSF reported a profit after tax of INR0.20
crore on an operating income of INR55.90 crore.
SHREEGLUCO BIOTECH: CARE Hikes Rating on INR118cr LT Loan to BB-
----------------------------------------------------------------
The revision in the rating assigned to the bank facilities of
ShreeGluco Biotech Pvt Ltd (SGBPL) factors in financial closure
achieved by the company for its on-going greenfield project and
promoters infusing entire portion of their contribution upfront.
The rating continues to remain constrained by project
implementation risk given 35% of the project cost incurred till
December 2016.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank Facilities 118.00 CARE BB-; Stable
Revised from CARE B+
However, the rating derives strength from experience of the
promoters in maize trading business, advantageous location
of the maize processing plant emanating from proximity to raw
materials which is abundantly available and nearness to
key consuming markets and product's widespread applicability
spanning various industries.
Going forward, the ability of the company to achieve timely
completion of the project within the envisaged cost and time
and achieving optimum capacity utilization would remain the key
rating sensitivities.
Detailed description of the key rating drivers
SGBPL on-going greenfield project cost was revised to INR186.32
crore as against INR180 crore envisaged earlier, owing to
revision in working capital margin and factoring in DSRA
equivalent to one quarters principal and interest into the
project cost. Furthermore, the company achieved financial closure
for the project's debt requirement of INR118 crore in November
2016. Promoters have infused entire portion of their contribution
upfront, having a mix of equity and unsecured loans. As on
December 14, 2016, company has incurred 35% of the project cost
amounting to INR64.39 crore, which has been entirely funded
through promoter's contribution. On account of delay in achieving
financial closure, project commissioning date was revised to
October 2017 as against April 2017 envisaged.
Mr Srinath, promoter of SGBPL has long-standing experience in the
maize industry and has been actively involved in maize trading
business in Bangalore since 1986; this is expected to help the
company in prudent procurement of its key raw material maize,
which would be key to its profitability.
SGBPL was incorporated in February 2012 with the objective of
processing maize into various products. Promoted by Mr. B A
Srinath, Mr. s B S Mamatha and Mr. B S Adinarayana Gupta, the
company is currently setting up a green field maize processing
unit (corn wet mill), with a total capacity of 500 tons/day. Mr.
B A Srinath has 25 years of experience in the maize trading
industry. The company will process maize into various products:
starch powder, liquid glucose, malto dextrin, etc, which find
application in pharmaceutical, food, paper, textile industry for
various purposes. The project is being set-up at a cost of
INR186.32 crore and is expected to commence operations from
October 2017.
SHRI RAMSWAROOP: Ind-Ra Affirms 'D' Rating on Bank Loans
--------------------------------------------------------
India Ratings and Research (Ind-Ra) has affirmed Shri Ramswaroop
Memorial Charitable Trust's bank loans at Long-term 'IND D'.
KEY RATING DRIVERS
The ratings reflect the trust's ongoing monthly delays in debt
servicing since October 2016, due to lack of available funds and
tight liquidity.
RATING SENSITIVITIES
The ratings reflect the trust's ongoing monthly delays in debt
servicing since October 2016, due to lack of available funds and
tight liquidity.
COMPANY PROFILE
The trust was established by Shri Ramswaroop Memorial Group in
May 2010. Under its aegis, Shri Ramswaroop Memorial University
was established under UP State Government Act 1 of 2012. Spread
across 52.46 acres of land, the university has been established
by a separate state act named Shri Ramswaroop Memorial University
Act, 2011.
The university is located in Uttar Pradesh. The university was
set up to provide education in the fields of science, engineering
and technology, bio and medical sciences, Dental science,
pharmacy, management, hotel and hospitality management, law and
other professional courses and also history, culture, commerce,
economics, humanities, philosophy and art.
The trust's total income grew to INR592.26 million in FY16 from
INR428.67 million in FY15. Tuition fees income grew 44.14% yoy
in FY16 after growing 31.10% yoy in FY15. Operating profit
margins declined to 50.76% in FY16 from 54.15% in FY15.
SRI RAMACHANDRA: CRISIL Puts B+ Rating on INR5MM Cash Credit
------------------------------------------------------------
CRISIL has assigned its 'CRISIL B+/Stable' rating to the long-
term bank facility of Sri Ramachandra Pooja Industries (SRPI).
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 5 CRISIL B+/Stable
The rating reflects the small scale of operations with revenues
of around INR30.4 Cr in 2015-16 marked by high fragmentation and
intense competition in the rice milling business. Furthermore
SRPI's business is working-capital-intensive owing to its
seasonal availability of raw material and high debtor cycle.
However the promoters' long standing experience in rice milling
industry will benefit SRPI over the medium term.
Key Rating Drivers & Detailed Description
Weaknesses
* Modest scale of operations and exposure to intense competition
in the rice milling industry
Scale of operations is small, with revenue of INR30.4 crore in
fiscal 2016, limiting benefits arising from economies of scale.
Furthermore, the rice milling business in Karnataka is highly
fragmented and intensely competitive, constraining the business
risk profile.
* Below-average financial risk profile, with low networth
The financial risk profile is marked by small networth at INR3.2
Cr as on March 31, 2016, constraining the financial flexibility.
This, coupled with large working capital borrowings has resulted
in modest gearing of 1.9 times as on March 31, 2016.
Strength
* Extensive experience of partners in the rice milling industry
The partners have experience of over three decades in rice
milling and under their able guidance SRPI has been steadily
growing over the years. The business risk profile will continue
to be benefit from their experience.
Outlook: Stable
CRISIL believes SRPI will continue to benefit over the medium
term from its partners' extensive experience. The outlook may be
revised to 'Positive' if improvement in scale of operations and
profitability leads to improved cash accruals thereby
strengthening the financial risk profile. Conversely, the outlook
may be revised to 'Negative' if any debt-funded capital
expenditure, or a substantial decline in revenue and
profitability, or capital withdrawals weakens the financial risk
profile.
Set up in 1994 as a partnership between Mr. M Subba Rao and Mr.
Krishna Rao, SRPI mills and processes paddy into rice, rice bran,
broken rice, and husk.
For fiscal 2016, SRPI reported a profit after tax (PAT) of
INR0.26 crore on an operating income of INR30.4 crores as against
a PAT of INR0.25 crore on an operating income of INR28.5 crores
in fiscal 2015.
SRI VENKATESWARA: CRISIL Assigns B Rating to INR3.8MM LT Loan
-------------------------------------------------------------
CRISIL has assigned its 'CRISIL B/Stable/CRISIL A4' ratings to
the bank loan facilities of Sri Venkateswara & Company - Tenkasi.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Proposed Long Term
Bank Loan Facility 3.8 CRISIL B/Stable
Cash Credit 0.2 CRISIL B/Stable
Foreign Letter of
Credit 21.0 CRISIL A4
The rating reflects modest scale and working capital intensity in
operations in the intensely competitive timber industry. However,
these weaknesses are partially offset by the partners' extensive
experience and long relationships with customers. Financial risk
profile, especially debt protection metrics and networth are
moderate, despite high total outside liabilities to tangible net
worth.
Key Rating Drivers & Detailed Description
Weaknesses
* Modest scale of operations in highly fragmented timber
industry: Scale of operations (revenue was INR27.8 crore in
fiscal 2016) continues to be constrained by intense competition,
limiting bargaining power with customers.
* Working capital intensity in operations: Operations are working
capital intensive, with sizeable gross current assets (GCA) of
around 341 days as on March 31, 2016, because of large inventory
and substantial credit extended.
Strength
* Extensive experience of the partners: Key partner, Mr. S P T
Arumugaswamy, has been associated with the timber industry for
nearly 4 decades, along with his family members. Even prior to
setting up SVC, he was involved in the same line of business. His
vast experience has helped maintain healthy relationships with
key suppliers in countries of Africa, South East Asia and in
Papua New Guinea.
Outlook: Stable
CRISIL believes SVC will continue to benefit over the medium term
from the partners' extensive experience in the timber trading
industry. The outlook may be revised to 'Positive' if ramp-up in
scale of operations and profitability leads to higher-than-
expected accrual. Conversely, the outlook may be revised to
'Negative', if financial risk profile weakens due to increased
working capital borrowings, any large debt-funded capital
expenditure, or any adverse movement in foreign exchange rates.
SVC processes (cuts and saws) and trades in wood logs. The firm
processes a variety of wood, including teak.
SUNDER IMPEX: CARE Reaffirms B+ Rating on INR2.0cr LT Bank Loan
---------------------------------------------------------------
The ratings assigned to the bank facilities of Sunder Impex
Private Limited (SIP) continue to remain constrained by its
small scale of operations, low profitability margins, leveraged
capital structure and weak debt service coverage indicators.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank Facilities 2.00 CARE B+; Stable
Reaffirmed
Short-term Bank Facilities 10.85 CARE A4 Reaffirmed
The ratings are further constrained by the working capital
intensive nature of operations, geographical and customer
concentration risk, raw material price fluctuation risk and
highly competitive nature of the steel industry. The ratings,
however, continue to take comfort from the experienced promoters
and SIP's well-established relationship with its customers.
Going forward, the ability of SIP to increase its scale of
operations with improvement in profitability margins and capital
structure coupled with effective working capital management shall
be the key rating sensitivities.
Detailed description of the key rating drivers
The total operating income (TOI) of the company broadly remained
stagnant in FY16 (refers to the period April 1 to March 31). The
profitability margins stood low on account of low value addition
and highly competitive nature of industry.
Capital structure of SIP remained leveraged due to low net worth
base and high dependence on bank borrowing to meet the working
capital requirement. The debt coverage indicators stood weak
owing to high debt levels and low profitability.
SIP's operations continued to remain working-capital intensive
owing to elongated collection period and inventory days against
major reliance on cash-based arrangement for procurement.
Furthermore, working capital borrowings remained 90% utilized for
the 12-month period ended November 30, 2016, indicating high
reliance on the bank finance to meet the working-capital
requirement.
The total operating income of the company remained concentrated
towards customers and geographically as reflected from the income
pattern in the previous financial years (FY15 & FY16). The
company has been getting repeat orders since inception from its
clients and has established relationship with its customers due
to long standing experience of the promoters in stainless steel
industry.
The company is exposed to the raw material price volatility risk
due to the volatility experienced in the prices of stainless
steel and allied products. Since it constitute a major component
of the raw material and hence any volatility in their prices has
a direct impact on the profitability margins of the company.
SIP operates in a highly competitive industry with competition
from both organized and unorganized players established in
vicinity of the company.
Analytical Approach: Standalone
Incorporated in 2005, Sunder Impex Private Limited (SIP) is a
Delhi-based private limited company promoted by Mr. Sushil Kumar
Bansal and Mr. Suresh Goyal. The company is currently being
managed by Mr. Sushil Kumar and Mr. Manish Bansal SIP is engaged
in the manufacturing of customized stainless steel products
mainly bar stools, tables and utensils used in kitchen. The
manufacturing unit of SIP is located at Wazirpur Industrial Area
in New Delhi with installed capacity of 150 tonnes per month and
the manufacturing processes are ISO 9001:2008 certified. The
company sells its product to domestic wholesalers and trading
houses located overseas. The company exports its products
primarily to Dubai, Nigeria, USA, etc. The products are sold
under the brand name 'Sunder' as well as are exported under the
private labels as required by the overseas customer. The raw
material required for productions of stainless steel products are
stainless steel flat, stainless steel patties and cold rolled
circle which the company procures domestically.
In FY16, SIP achieved a total operating income (TOI) of INR36.00
crore with PAT of INR0.21 crore, as against total operating
income of INR35.69 crore with PAT of INR0.21 crore in FY15.
Furthermore, the company has achieved total operating
income of INR19.49 crore in 8MFY17 (refers to the period April 1
to November 30; based on provisional results).
SUNSHAKTI OIL: CRISIL Upgrades Rating on INR5MM Cash Loan to B
--------------------------------------------------------------
CRISIL has upgraded its rating on the long-term bank facilities
of Sunshakti Oil Refinery Private Limited (SORPL) to 'CRISIL
B/Stable' from 'CRISIL B-/Stable' and reaffirmed the short-term
facility at 'CRISIL A4'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 5 CRISIL B/Stable (Upgraded
from 'CRISIL B-/Stable')
Letter of Credit 3 CRISIL A4 (Reaffirmed)
Proposed Long Term 0.9 CRISIL B/Stable (Upgraded
Bank Loan Facility from 'CRISIL B-/Stable')
Rupee Term Loan 1.1 CRISIL B/Stable (Upgraded
from 'CRISIL B-/Stable')
The rating upgrades reflects improvement in the liquidity risk
profile of the company marked by improvement in the working
capital cycle. Following a change in customer segment, SORPL's
debtor collection cycle has improved considerably to around 10
days as on September 2016 compared to 30 days as on March 2015
Also, the gross current assets stands around 26 days as on
September 2016 compared to 52 days as on March 2015 leading to
improvement in the working capital cycle of the company.
The rating also reflects SORPL's modest profitability and below
average financial risk profile. These rating weaknesses are
partially offset by extensive experience of the promoters in the
oil refining industry.
Key Rating Drivers & Detailed Description
Weaknesses
* Modest profitability:
SORPL's operating margin is expected to remain thin at around 1 %
over medium term on account of focus on volumes to gain market
share and add customers.
* Below-average financial risk profile:
The financial risk profile is constrained by modest networth of
INR5.25 crore and moderate gearing of 2.5 times as on March 31,
2016. Also, the interest coverage and net cash accrual to total
debt ratios is expected to remain moderate over the medium term.
Strength
* Extensive experience of promoters in the oil refining industry:
The promoters' industry experience of over one decade has helped
them establish relationships with customers and suppliers, and
gain understanding of the market, which is expected to benefit
the business profile of the company over the medium term.
Outlook: Stable
CRISIL believes SORPL will benefit from its promoters' extensive
industry experience. The outlook may be revised to 'Positive' if
improvement in revenue and profitability leads to more than
expected cash accruals along with sustenance of prudent working
capital management. The outlook may be revised to 'Negative' if
the financial risk profile weakens because of fall in revenue or
cash accrual or stretch in working capital cycle, or large debt-
funded capital expenditure.
SORPL, incorporated in 2011, refines oil. The company is promoted
by Mumbai-based Gala family and operations are managed by Mr.
Vishal Gala. Its manufacturing unit is at Vada in Tilgaon.
UNIFLEX INDUSTRIES: ICRA Assigns B+ Rating to INR5.0cr Loan
-----------------------------------------------------------
ICRA has assigned the long-term rating of [ICRA]B+ to the
INR5.00-crore of fund-based facilities of Uniflex Industries
Private Limited (UIPL). ICRA has also assigned the short-term
rating of [ICRA] A4 to the INR5.00-crore non-fund based
facilities of UIPL. The outlook on the long-term rating is
'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based Limits 5.00 [ICRA]B+ (Stable); assigned
Non fund-based Limits 5.00 [ICRA] A4; assigned
Rationale
The assigned ratings take into account the company's modest scale
of operation in consignment stockiest business as well as the
modest financial profiles as reflected in the low net worth, high
gearing and moderate debt protection indicators. The ratings are
also subdued because of the exposure to counter party risks
(default on payments would be borne by UIPL for GAIL) and the
susceptibility of the company's profitability to interest income
from debtors, given the interest spread against borrowing cost.
The ratings, however, favourably takes into account the company's
long track record in the polymers distribution business; the
healthy demand prospects for polymer products marketed by the
company; and the diversified customer profile. ICRA also notes
that margins are protected against commodity price movements as
majority of the sales are made on commission basis, with fixed
margins per ton for firm.
Going forward, the company's ability to improve its scale of
operations and maintain profitability while managing its working
capital requirement will remain the key rating sensitivity from
the credit perspective.
Key rating drivers
Credit Strengths
* Significant experience of the promoters in the polymers
trading business
* Healthy demand outlook for various polymers and chemicals in
India due to the growth of plastic processing industries and
end-user industries
* Long track record as one of the leading distributors of GAIL
in the Eastern UP region
Credit Weakness
* Modest scale of operations in the polymers trading business
* Dual supplier and product concentration risk as the company
trades in HDPE/LLDPE/PP products of Gas Authority of India
Limited (GAIL) and Brahmaputra Cracker and Polymer Limited
(BCPL)
* Exposure to default risk on payments from customers since the
credit risk is transferred by GAIL to UIPL, the latter being
in the Consignment Stockist business
* Modest financial risk profile as evident from the weak debt
coverage indicators and leveraged capital structure; gearing
was 3.31 times as on March 31, 2016, due to low net worth and
high working capital borrowings
* Profitability exposed to interest rate fluctuations
considering the significant interest spread income; ability of
the company to pass on any increase in interest rates remains
important
The operating income of the company increased by 15% in FY2016 to
INR1.73 crore from INR1.50 crore in FY2015 on account of the
increase in the other income; although the commission income
declined in F2016 by 30% from INR1.17 crore to INR0.82 crore as
competition increased. Till FY2015, UIPL was the sole consignment
stockiest (CS) in Eastern UP but from FY2016 onwards, two new CS
became operational in that region, leading to decline in sales.
The company has done commission sales of INR0.52 crore and has
booked interest of INR0.42 crore till FY2016. It expects to
achieve commission sales of over INR0.85 crore and interest
income of INR0.56 crore. From the current financial year, the
company is also dealing with HDPE/LLDPE/PP of Brahmaputra Cracker
and Polymer Limited (BCPL), which is expected to increase its
commission sales further.
UIPL gets fixed commission from GAIL (Rs 350 per MT via stock
point and INR300 per MT via factory sale) for sourcing customers
and ensuring the payment for materials supplied. UIPL meets its
working capital requirements through channel financing. The
interest charged from customers is in the range of 10-15%,
depending on the market conditions and the ability of the company
to pass on to its customers any increase in charges by the banks.
Given the low net worth base of the company, any non-recovery of
the dues could adversely impact the financial profile and
operations of the company. The ratings also remain constrained by
the decline in sales volume during the current fiscal and the
susceptibility of profitability of the company to the persistent
high industry competition.
UIPL, incorporated in 1997, had been manufacturing and exporting
HDPE blow moulded containers for the FMCG industry till 2008. The
company is presently the consignment stockist2 for GAIL and BCPL
for distribution of polymer products in the Eastern Uttar Pradesh
region. The company makes sales from a stock point in Kanpur and
ex-factory unit at Pata in Auraiya district.
UIPL reported a net profit of INR0.27 crore on an operating
income of INR1.73 crore in FY2016, as against a net profit of
INR0.14 crore on an operating income of INR1.50 crore in FY2015.
The company, on a provisional basis, reported an operating income
of INR0.94 crore in 9M FY2017.
VALLABH CORPORATION: CARE Assigns B+ Rating to INR3.25cr Loan
-------------------------------------------------------------
The ratings assigned to the bank facilities of Vallabh
Corporation (VCO) is constrained on account of its small scale of
operations, low profitability coupled with geographical
concentration risk and presence into the competitive construction
industry having low entry barriers and tender driven nature of
business. The ratings also remained constrained due to its
leveraged capital structure, weak debt protection metrics and
moderate liquidity position during FY16 (refers to the period
April1 to March 31).
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank Facilities 3.25 CARE B+; Stable
Assigned
Short-term Bank Facilities 3.50 CARE A4 Assigned
The ratings, however, derive benefits from the experience of the
promoters in the construction industry.
VCO's ability to increase its scale of operations by executing
more orders, geographical diversification and improving its
profitability, solvency position and debt protection metrics
would be the key rating sensitivities.
Detailed description of the key rating drivers for SIL
VCO's scale of operations stood small marked by its total
operating income (TOI) of INR16.63 crore during FY16 and net
worth base of INR1.40 crore as on March 31, 2016. Furthermore,
overall profitability stood low marked by PAT of INR0.31 crore
and cash accruals of INR0.34 crore during FY16. VCO primarily
executes orders primarily from Gujarat location thereby leading
to geographical concentration risk as well as facing stiff
competition from other local players in a tender driven nature of
business.
On the back of small net worth base and comparatively high debt
level, capital structure stood leveraged as marked by an
overall gearing ratio at 2.77 times as on March 31, 2016.
Consequently, with low cash accruals level total debt to GCA
stood weak.
On account of high credit period received from its suppliers,
operating cycle of VCO stood negative during FY16 while average
utilization of its working capital limits stood at 60% for
trailing 12 month period ended November 2016.
VCO is registered 'Class AA' (on a scale of "AA to E2", AA being
the highest grade) contractor with Government of Gujarat
for civil and road construction work. Mr. Dineshbhai Valjibhai
Patel, the key partner, holds experience of around three
decades in the construction industry and looks after overall
operations of the firm. He is also supported by Mr. Jigar Patel
and Mr. Kaviraj Patel who are also well versed with the
construction business.
Established in 1986 as proprietorship firm, Ahmedabad-based
(Gujarat) VCO is promoted by Mr. Dineshbhai Patel and executes
civil construction contracts largely for the departments of the
Government of Gujarat. Later in April 2015, VCO was converted
into partnership firm with addition of Mr. s Sunita Patel, Mr.
Kaviraj Patel and Mr. Jiger Patel. VCO is registered as 'Class
AA' contractor with Government of Gujarat for civil and road
construction work along with interior designing and
electrification work. Most of the contracts pertain to road
construction, development of parking areas of government
authorities, warehouse up gradation and any repair or renovation
work.
During FY16 (A), VCO reported PAT of INR0.31 crore on a TOI of
INR16.63 crore as against PAT of INR0.33 crore on a TOI of
INR15.95 crore during FY15. Till November 30, 2016, VCO has
achieved a turnover of INR11 crore.
VIJAYANAG POLYMERS: CARE Assigns 'B' Rating to INR7.30cr LT Loan
----------------------------------------------------------------
The rating assigned to the bank facilities of Vijayanag Polymers
Private Limited (VPPL) is constrained by the small scale and
short track record of operations, leveraged capital structure and
weak debt protection on account of cash losses incurred during
the review period, susceptibility of profit margins to
fluctuation in raw material prices and working capital intensive
nature of operation with the highly competitive industry.
However, the rating is underpinned by the moderate experience of
the promoters in the packaging industry, growth in total
operating income during the review period and stable demand
outlook for the packaging industry.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank Facilities 7.30 CARE B; Stable
Assigned
Going forward, the ability of the company to increase the scale
of operations, turnaround from loss to profit and improve capital
structure and debt service indicators.
Detailed description of the key rating drivers
VPPL's has only completed around three years of operations and
has short track record of operations. Furthermore, its scale of
operations remained small as compared to other industry peers
marked by total operating income of INR11.54 crore during FY16
(refers to the period April 1 to March 31) and negative net worth
on account of net losses incurred during the review period.
However, the company has substantial order book in hand to offset
the risk of discontinued operations due to non-availability of
the business.
The primary raw material required by VPPL is LDPE, polymers,
polyester etc, which constituted around 80% of total raw material
purchases. The price of LDPE, polymers, polyester is linked to
crude oil prices which are volatile in nature thus might affect
the raw material prices.
VPPL is engaged into manufacturing of packaging material mainly
for FMCG and agriculture, where the company has to purchase raw
material like polymers, film role, chemical and others based on
client's requirement. However, the operating cycle of the company
is comfortable at 49 days in FY16, and improved year-on-year from
203 days in FY14 on account of improved in collection and
inventory days.
The company was incorporated in 2011 and currently promoted by Dr
V V Nagi Reddy and his wife Mr. s M Vijaya Lakshmi. Dr V V Nagi
Reddy is a retired Physics professor and has an experience of
around four years in the packaging industry.
Vijayanag Polymers Private Limited (VPPL) was incorporated in the
July 2011 and commenced commercial operation from October 2012.
VPPL is promoted by Dr V V Nagi Reddy and his wife Mr. s M Vijaya
Lakshmi. VPPL is engaged in production of plain and printed
packaging laminated materials like Laminated films, Pouches, Poly
bags and others, which are used across a wide range of industries
like consumer food, fertilizers and others. VPPL is having total
installed capacity of 200 tonne per month at the manufacturing
facility in Bapulapadu, near Vijayawada (Andhra Pradesh).
During FY16, the company reported PBILDT of INR0.56 crore (FY15-
INR0.39 crore) and net loss of INR1.20 crore (FY15-net loss of
INR1.67 crore) on a total operating income of INR11.54 crore
(FY15-INR6.53 crore).
* INDIA: Bankruptcy Code to Improve Ease Of Doing Biz, IBBI Says
----------------------------------------------------------------
Press Trust of India reports that providing the first possible
avenue to resolve insolvency in a market-determined and time-
bound manner, the Insolvency and Bankruptcy Code will help
improve ease of doing business as well as develop the debt
market, says Insolvency and Bankruptcy Board of India (IBBI)
Chairperson M S Sahoo. PTI relates that less than four months
old, IBBI has started its work in a mission mode and well over
900 insolvency professionals have already registered with it.
IBBI has been set up under the Insolvency and Bankruptcy Code,
which was cleared by Parliament last year. The Code seeks to
consolidate and amend laws relating to reorganisation and
insolvency resolution of corporate persons, partnership firms and
individuals in a time-bound manner.
"We needed a mechanism to resolve the insolvency wherever there
was a default at the first possible opportunity and release idle
resources for efficient use. The Bankruptcy Code provides these
in a market-determined and time-bound manner. This will improve
the ease of doing business, promote entrepreneurship, develop
debt market and consequently, develop the economy," Sahoo told
PTI.
In his first interview after taking over as the IBBI chairperson,
Sahoo said the insolvency and bankruptcy regime empowers the
stakeholders with built-in institutional facilities to hasten the
process, according to the news agency. A few cases related to
insolvency and bankruptcy have already come up before the
National Company Law Tribunal (NCLT), which decides whether a
matter is fit to be taken up under the Code or not.
According to the report, Sahoo said IBBI is part of an ecosystem
that relies on market forces and aims to achieve certain outcome
in a time-bound manner. An insolvency process has to be completed
within 180 days from the day it is approved by NCLT. Provisions
related to corporate insolvency resolution and corporate
liquidation have already been notified, the report says. IBBI is
now working on regulations and developing a competitive market
industry for information utilities. These utilities will be a
centralised repository of financial and credit information of
borrowers as well as give entities access to financial data
provided by creditors. When asked whether the Code can help in
bringing to book defaulters, Sahoo said the Code aims at
resolution of insolvency, PTI relates.
"It (Code) alerts both creditors and debtors as and when a
default arises . . . It provides them an opportunity, but does
not mandate them to use it. They may have reasons not to use it
at the first opportunity. It enables them to take the call and
empowers them to take the most appropriate call in their best
interests," he noted. PTI relates that while the Code requires
that an insolvency process, once initiated, should be completed
in 180 days, an entity can go for an appeal which could possibly
result in delays. "Wherever rights are adversely affected, one
should have an opportunity to go on appeal. That does not mean
that one is delaying the process," Sahoo said, adding that it is
not that all cases will pass through an appeal.
"Importantly, wherever a matter goes on appeal, the authority
lays down the norms which facilitate future transactions. So
instead of thinking that appeals delay the process, I consider
that these streamline all future, similar transactions. These
help clarify and transactions move faster in the future," the PTI
quotes Sahoo as saying. When asked whether IBBI has received its
first case, Sahoo said cases come before the NCLT. "I am told
that quite a few cases have been filed. A few cases have already
been admitted by the NCLT. Market needs time to prepare for a new
way of life. You need to allow time to see large inflows (of
cases)," he added.
=================
I N D O N E S I A
=================
LIPPO KARAWACI: Moody's Says Delay in Assets Sale Credit Negative
-----------------------------------------------------------------
Moody's Investors Service says that the delay in the sale by
Lippo Karawaci Tbk (P.T.) (Ba3 negative) of Siloam Hospitals
Yogyakarta and Lippo Plaza Jogya is credit negative.
On January 17, 2017, Lippo Karawaci's Singapore real estate
investment trusts (REITs) -- Lippo Malls Indonesia Retail Trust
(LMIRT, Baa3 stable) and First Healthcare REIT (unrated) --
announced the termination of the conditional sale and purchase
agreement for their proposed joint acquisition of an integrated
development comprising Siloam Hospitals Yogyakarta and Lippo
Plaza Jogya.
According to the announcement, the sale was terminated to provide
more time for Lippo Karawaci to obtain the relevant licenses for
the hospital operations, expected in the later part of 2017, and
to carry out asset enhancement works to the retail mall, before
the REITs proceed with the acquisition. The asset sale was
initially targeted for completion in 2016.
"While the value of the planned asset sale is small, the multiple
delays in the completion of the sale have raised uncertainty over
the effectiveness of Lippo Karawaci's asset-light and cash
recycling strategy," says Jacintha Poh, a Moody's Vice President
and Senior Analyst.
According to Lippo Karawaci, it has launched a new residential
project -- Newport Park in Lippo Cikarang township -- in November
2016. Moody's expects that the project, when fully sold, is
expected to contribute less than IDR500 billion of marketing
sales. Hence, the developer will miss its revised 2016 marketing
sales target of IDR3.5 trillion, as it had achieved only IDR753
billion of marketing sales in the nine months to September 2016.
"A failure to improve its marketing sales over the next few
months, including the successful launch of Urban Homes -- a
residential property project targeting the lower-middle income
group -- will result in significant downward pressure for Lippo
Karawaci's Ba3 ratings," says Poh.
Taking into account the completion of the Lippo Mall Kuta sales
and possibly less than IDR2 trillion of marketing sales in 2016,
Moody's expects Lippo Karawaci's adjusted debt/EBITDA in 2016 to
be around 5.0x and its interest coverage ratio - as measured by
adjusted homebuilding EBIT/interest expense - to be around 2.0x.
For the 12 months to Sept. 30, 2016, the developer recorded
adjusted debt/EBITDA of 5.2x and adjusted homebuilding
EBIT/interest expense of 1.9x.
Notwithstanding these weak financial metrics, Lippo Karawaci's
Ba3 rating continues to reflect its established position as one
of the leading and largest property developers in Indonesia.
More importantly, the rating is supported by Lippo Karawaci's
diversified business profile -- which allows it to generate a
well-balanced stream of recurring revenue from multiple business
segments -- and non-recurring revenue from real estate
development.
The bulk of the company's recurring income comes from the
resilient and growing healthcare segment, which provides a
cushion against the business and execution risks associated with
real estate development, while also mitigating the lumpy nature
of development cash flows.
In addition, Lippo Karawaci has no near-term refinancing risk.
Its next major debt maturity will only be in 2022, after the call
redemption of its $403 million notes due 2020 in November 2016.
The ratings outlook is negative, reflecting weaker than expected
marketing sales and delays in asset sales.
Upward ratings pressure is unlikely over the near to medium term,
given the negative rating outlook. However, the outlook could
return to stable if Lippo Karawaci's new mass-market housing
project launches are successful and if it demonstrates a
sustainable asset-light strategy to maintain a stable financial
profile within the parameters of its Ba3 rating.
Lippo Karawaci's rating could face downward pressure if: (1) the
company fails to implement its business plans, such that new
residential sales are delayed further; and (2) there is a
deterioration in the property market, leading to protracted
weakness in its operations and credit profile. Such a situation
would result in its credit metrics staying weaker than the
downgrade thresholds for a prolonged period.
Metrics indicative of downward pressure include adjusted
debt/EBITDA above 4.0x and adjusted homebuilding EBIT/interest
expense below 2.5x on a sustained basis.
The principal methodology used in this rating was Homebuilding
And Property Development Industry published in April 2015.
Lippo Karawaci Tbk (P.T.) is one of the largest property
developers in Indonesia, with a sizable land bank of around 1,328
hectares as of Sept. 30, 2016. It owns and/or manages - either
directly or via its real estate investment trusts - 44 malls, 23
hospitals and nine hotels. Lippo Karawaci owns a 33% stake in
First Healthcare REIT and a 29% stake in Lippo Malls Indonesia
Retail Trust.
PAN BROTHERS: Fitch Assigns 'B' Final Rating to USD200MM Notes
--------------------------------------------------------------
Fitch Ratings has assigned Indonesia-based garment manufacturer
PT Pan Brothers Tbk's (B/Positive) USD200 million 7.625% senior
unsecured notes due in 2022 a final rating of 'B' with a Recovery
Rating of 'RR4'. The notes are issued by Pan Brothers' wholly
owned subsidiary, PB International B.V., and guaranteed by Pan
Brothers and certain subsidiaries.
The notes will mostly be used to redeem outstanding debt and will
rank pari passu with senior unsecured obligations of Pan Brothers
and its subsidiaries, as they represent the company's
unconditional, unsecured and unsubordinated obligations. The
final rating follows the receipt of documents conforming to
information already received and is in line with the expected
rating assigned on Jan. 12, 2017.
KEY RATING DRIVERS
Product Range, Revenue Visibility: Pan Brothers' rating is
underpinned by its position as Indonesia's largest publicly
listed garment manufacturer by capacity, its established
relationships with global apparel brands, and its contractual
revenue visibility over a 12-18 month horizon. Pan Brothers'
growing expertise in apparel manufacturing and its ability to
cater to a wide range of products have attracted global apparel
brands, with which it has longstanding relationships.
High Working Capital: The above strengths are balanced by the
company's limited bargaining power with its top customers, which
has resulted in high working capital requirements and negative
cash flow from operations (CFO). For example the company has
increased advance payments to secure raw materials on behalf of
its key customers in 2015 and 2016 in line with its capacity
expansion. Fitch expects Pan Brothers' CFO to remain negative
until end-2017.
Positive Outlook on Expected Deleveraging: The Positive Outlook
on Pan Brothers' Long-Term Issuer Default Rating (IDR) reflects
Fitch's expectation that the company's ongoing capacity expansion
would lead to better bargaining power with its customers as well
as a more diversified customer base, allowing for better working-
capital management. Fitch forecasts Pan Brothers' leverage, as
measured by lease-adjusted debt net of seasonally adjusted cash/
EBITDAR, to fall to around 3.5x in 2018 from around 4.5x in 2017.
Capacity Expansion: Pan Brothers expects to increase its
installed capacity from 84 million pieces (polo shirt-based) a
year to 117 million by end-2019. Fitch expects this to increase
existing customers' reliance on Pan Brothers, and expand its
customer base. Pan Brothers' expanded production capacity will
also position it to benefit from the trend in consolidation among
the vendors of global apparel brands.
Cost Pass-Through Ability: Pan Brothers operates under a cost-
plus pricing mechanism, where the price of its products is mostly
derived from the cost of raw materials plus a mark-up margin.
This allows Pan Brothers to pass through cost fluctuations to its
customers. However, margins may be pressured during prolonged
cyclical downturns. Fitch expects the EBITDA margin to remain
stable at 7%-8% in the short to medium term.
Seasonal Cash Flows: Pan Brothers' working-capital cycle is
longer in the first half of the year due to purchases of
materials to cater for woven outerwear clothing, in particular
down jackets, to be ready for the peak production season between
April and September. Pan Brothers' knitwear sales are rising,
which will provide some earnings stability. To reflect the
seasonality, Fitch has excluded an estimated USD25m from Pan
Brothers' year-end cash balance from the year-end leverage ratio.
Manageable Currency Exposure: Close to 90% of Pan Brothers' sales
in 2015 were from exports, while around 80% of its raw materials
are imported. This provides the company with a natural hedge
against currency volatility, as evident in 2015 when Pan
Brothers' EBITDA margin remained relatively intact in the face of
severe volatility of the local exchange rate. Raw material costs
make up 65% of the company's total costs.
DERIVATION SUMMARY
Pan Brothers' rating is reasonably well-positioned relative to
other Fitch-rated peers in the same industry, such as PT Sri
Rejeki Isman Tbk (Sritex, BB-/Stable). Fitch believes that Pan
Brothers' more leveraged financial profile is compensated by its
position as the largest garment manufacturer in the domestic
market, its contractual revenue visibility and ability to pass on
cost fluctuations to customers. Nevertheless, the company's
ongoing expansion and still-limited bargaining power with top
customers have increased its working capital requirement. This
has led to weaker ability to generate cash flow from operations
relative to Sritex. Coupled with Sritex's wider EBITDA margins,
higher free cash flow generation in the medium-term and more
stable working capital requirements, Fitch assesses Pan Brother's
overall credit profile to be weaker than Sritex.
KEY ASSUMPTIONS
Fitch's key assumptions within Fitch rating case for the issuer
include:
- Net sales growth of around 15%-19% in 2016-2019;
- Average selling price increase by up to 2% in 2016-2017; and
- Capex of USD17m in 2016 and USD49m in 2017.
RATING SENSITIVITIES
Positive: Future developments that may, individually or
collectively, lead to positive rating action include:
- Leverage sustained below 3.5x (end-2015: 3.3x)
- Ability to maintain neutral cash flow from operations
Negative: Future developments that may, individually or
collectively, lead the Outlook being revised to Stable include:
- Not meeting the above positive triggers for an extended period
LIQUIDITY
Sufficient Liquidity: Readily available cash was USD49 million as
at end-2015, with gross debt of USD141 million and a committed
unused working-capital facility of around USD100 million. Pan
Brothers plans to use most of the proceeds of the US dollar bond
to redeem outstanding debt. A natural currency hedge arises from
close to 90% of 2015 sales being export-based, while around 80%
of raw materials (where raw materials made up 65% of total costs)
are imported.
Pan Brothers also plans to retain more than USD100 million of its
syndicated working-capital loan facility (current limit USD230
million) as a back-up for any future working-capital requirement.
=========
J A P A N
=========
ASAHI MUTUAL: Fitch Assigns BB- Final Rating to USD350MM Bond
-------------------------------------------------------------
Fitch Ratings has assigned Asahi Mutual Life Insurance Co.'s
(Asahi Life; Insurer Financial Strength rating: BB+/Stable)
USD350 million 7.25% step-up callable cumulative perpetual
subordinated bonds with interest deferral options a final rating
of 'BB-'.
The issue is expected to be callable after five years, at which
point there would be a 100bp coupon step-up feature.
The assignment of the final rating follows the receipt of
documents conforming to the information previously received. The
final rating is the same as the expected rating assigned on
Jan. 9, 2017.
KEY RATING DRIVERS
The subordinated bonds are rated one notch below Asahi Life's
Long-Term IDR to reflect Fitch baseline assumption of "below
average" recovery.
The bonds include a mandatory interest deferral feature on a
cumulative basis, which is triggered when Asahi Life's statutory
solvency margin ratio (SMR) falls below the regulatory capital
requirement of 200% on a consolidated or non-consolidated basis
or on the issuance of an order of prompt corrective action by
Japan's Financial Services Agency. The company's SMR was 707% on
non-consolidated basis and 710% on consolidated basis at end-
September 2016. Fitch classifies the interest deferral features
on this instrument as "minimal" non-performance risk, with no
additional notching applied, in line with Fitch's notching
criteria.
The subordinated bonds are classified as 100% capital within
Fitch's assessment of risk-based capital adequacy, as Fitch
follows the regulatory treatment of hybrids under its criteria
when assessing capital adequacy.
The bonds are classified as 50% debt and 50% equity capital for
the agency's financial leverage calculations, which follow Fitch-
specific guidelines under the agency's methodology for treatment
of hybrids in the financial leverage ratio. Typically, hybrids
with coupon step-ups combined with call provisions are treated as
100% debt by Fitch. However, the agency believes that under the
current regulation, Japanese regulators will be assertive in
ensuring Japanese insurers meet requirements to issue at least
the same amount of perpetual subordinated debt of the same (or
better) quality when a company redeems perpetual subordinated
debts. Fitch therefore regards Japanese insurers' perpetual
subordinated debt as having economically "perpetual"
characteristics, even if they have call dates with modest step-
ups.
Fitch expects Asahi Life's financial leverage and interest
coverage to remain adequate after the perpetual subordinated
bonds issuance.
RATING SENSITIVITIES
Key rating triggers for an upgrade include a further
strengthening of capitalisation and a decline in financial
leverage to below 35% on a sustained basis. Growth in the
profitable "third" (health) sector business and lower surrender
and lapse rates of death-protection products would also be
positive.
Key rating triggers for a downgrade include a major erosion of
capitalisation; higher financial leverage to above 45%; and
significant deterioration in profitability, such as the core
profit margin falling below 5% on a sustained basis.
TAKATA CORP: Shares Fall Sharply as Bankruptcy Looms
----------------------------------------------------
Sean McLain at MarketWatch reports that Takata Corp. shares fell
sharply for a third straight day Jan. 23 as investors rushed to
sell ahead of a possible bankruptcy filing for the company, which
faces a potential multibillion-dollar bill for recalls related to
its faulty air bags.
The company's share price closed down 18% at JPY467, the third
consecutive day of double-digit decline, MarketWatch says.
Trading volume was thin as buyers of the stock were scarce,
accelerating the declines.
A bankruptcy is one of several possibilities being presented by
companies bidding to take over Takata, including air-bag giant
Autoliv Inc. and Key Safety Systems Inc., MarketWatch relates.
According to MarketWatch, Takata agreed to pay $1 billion in
penalties in the U.S. earlier this month to resolve a probe into
the company's handling of air bags that were prone to spraying
shrapnel into vehicle cabins, a problem linked to injuries and
deaths around the world.
Shares rose sharply following the news, the report states.
MarketWatch notes that the latest selloff began on Jan. 19 after
Japan's Nikkei newspaper reported that bidders, with the support
of Takata's customers, were pushing for a court-mediated
bankruptcy.
Takata faces numerous other lawsuits and is expected to bear at
least some of the bills for the millions of recalled air bags
currently being shouldered by auto makers, adds MarketWatch.
About Takata Corp
Japan-based Takata Corporation (TYO:7312) --
http://www.takata.com/en/-- develops, manufactures and sells
safety products for automobiles. The Company offers seatbelts,
airbags, steering wheels, child seats and trim parts. The
Company has subsidiaries located in Japan, the United States,
Brazil, Germany, Thailand, Philippines, Romania, Singapore,
Korea, China and other countries.
In May 1995, a voluntary recall in the U.S. affecting 8 million
predominantly Japanese built vehicles made from 1986 to 1991 with
seat belts manufactured by the Takata was conducted.
Large recalls of vehicles due to faulty Takata-made airbags began
in 2013.
Takata is presently facing massive costs of recalling 100 million
defective airbag inflators worldwide and lawsuits tied to at
least 16 deaths and numerous injuries.
As of May 19, 2015, Takata has already recalled 40 million
vehicles across 12 vehicle brands for defective airbags.
In November 2015, Takata was fined $200 million by U.S. federal
regulators for mishandling the way it recalled its air bag
inflators. The fine is the largest civil penalty in NHTSA
history.
TOSHIBA CORP: Lenders May Continue Support Until End of Feb.
------------------------------------------------------------
Nikkei Asian Review reports that lenders to Toshiba Corp. are
leaning toward continuing their support until the end of February
in the wake of massive impairment charges originating from its
U.S. nuclear business.
According to Nikkei, the banks will decide on lending beyond that
point after scrutinizing the Japanese conglomerate's turnaround
plan and financial health. Toshiba is exploring a spinoff of its
chip business as well as other restructuring steps.
Nikkei relates that Rating and Investment Information downgraded
Toshiba to junk status in late December after the extensive
bleeding came to light. This sparked concerns over violating
restrictive covenants at some banks, allowing the lenders to call
in loans or take other actions. Toshiba asked banks to maintain
their joint financing in a meeting Jan. 10, the report says.
Toshiba's interest-bearing liabilities stood at roughly
JPY1.4 trillion ($12.3 billion) as of December 2016. Such core
lenders as Sumitomo Mitsui Banking Corp., Mizuho Bank and
Sumitomo Mitsui Trust Bank have apparently agreed to maintain
their backing, Nikkei discloses. Most of the regional banks and
smaller institutions have apparently joined these ranks as well.
But some regional banks have indicated misgivings on continuing
support.
Maximum losses stemming from an acquisition by American
subsidiary Westinghouse Electric could balloon to roughly
JPY700 billion, Nikkei notes. Toshiba will tabulate the losses
and then meet with lenders again in mid-February, around the time
that quarterly earnings come out, says Nikkei.
About Toshiba
Toshiba Corporation (TYO:6502) -- http://www.toshiba.co.jp/-- is
a Japan-based manufacturer involved in five business segments.
The Digital Products segment offers cellular phones, hard disc
devices, optical disc devices, liquid crystal televisions, camera
systems, digital versatile disc (DVD) players and recorders,
personal computers (PCs) and business phones, among others. The
Electronic Device segment provides general logic integrated
circuits (ICs), optical semiconductors, power devices, large-
scale integrated (LSI) circuits for image information systems and
liquid crystal displays (LCDs), among others. The Social
Infrastructure segment offers various generators, power
distribution systems, water and sewer systems, transportation
systems and station automation systems, among others. The Home
Appliance segment offers refrigerators, drying machines, washing
machines, cooking utensils, cleaners and lighting equipment. The
Others segment leases and sells real estate.
As reported in the Troubled Company Reporter-Asia Pacific on
Dec. 30, 2016, Moody's Japan K.K. downgraded Toshiba
Corporation's corporate family rating (CFR) and senior unsecured
rating to Caa1 from B3. Moody's has also downgraded Toshiba's
subordinated debt rating to Ca from Caa3, and affirmed its
commercial paper rating of Not Prime. At the same time, Moody's
has placed Toshiba's Caa1 CFR and long-term senior unsecured bond
rating, as well as its Ca subordinated debt rating under review
for further downgrade.
The TCR-AP reported on Jan. 4, 2017, that S&P Global Ratings said
it has lowered its long-term corporate credit and senior
unsecured debt ratings on Toshiba Corp. one notch each, to
'B-' from 'B' and 'B+' from 'BB-', respectively, and has placed
the ratings on CreditWatch with negative implications. At the
same time, S&P has placed its 'B' short-term corporate credit and
commercial paper program ratings on Toshiba on CreditWatch
negative.
=========
M A C A U
=========
MELCO CROWN: S&P Affirms 'BB' CCR; Outlook Negative
---------------------------------------------------
S&P Global Ratings said that it had affirmed its 'BB' long-term
corporate credit rating on Melco Crown (Macau) Ltd. The outlook
is negative. S&P also affirmed its 'BB-' long-term issue rating
on the senior unsecured notes that MCE Finance Ltd. issued.
Melco Crown guarantees the notes.
At the same time, S&P lowered its long-term Greater China
regional scale rating on the Macau-based casino operator to
'cnBB+' from 'cnBBB-' and on the notes to 'cnBB' from 'cnBB+'.
S&P removed all the ratings from CreditWatch, where they were
placed with negative implications on Dec. 19, 2016.
"We affirmed the ratings because we believe Melco Crown's debt
service capability is unlikely to materially weaken following its
ultimate parent's proposed debt-funded purchase of 13.4% of the
issued shares of Melco Crown Entertainment Ltd. (MCE)," said S&P
Global Ratings credit analyst Sophie Lin. "The group's strong
operating cash flow and reduced capital investment requirement
provide a buffer for potentially higher investments or
shareholder returns over the next 12-24 months, in our view."
When analyzing Melco Crown, S&P looks at the consolidated profile
of the group headed by Melco International Development Ltd. In
S&P's view, Melco Crown is the most important asset of its
immediate parent (MCE) and ultimate parent company (Melco
International), and it drives the group's credit profile. S&P
equalizes the stand-alone credit profile (SACP) of Melco Crown
with the 'bb' credit profile of MCE, which consolidates Studio
City, a newly opened casino of the group in Macau.
S&P expects MCE to generate stronger operating cash flow over the
next 12-24 months, driven by the accelerated ramp-up of Studio
City, and an improvement in EBITDA margin. The rebound of the
gaming industry in Macau since the fourth quarter of 2016
underpins S&P's anticipation. S&P's base case assumes MCE's
EBITDA margin will increase to 21%-23% in 2017-2018, from S&P's
estimate of 20%-21% in 2016, driven by the improvement of
operating leverage and a structural shift in revenue to the more
profitable mass market gaming segment from the low-margin credit-
fueled VIP gaming segment.
The rating affirmation also reflects S&P's expectation that MCE's
capital investment is likely to reduce over the next two years.
The company has limited development projects in its pipeline,
after the opening of Studio City. S&P estimates MCE's annual
capital expenditure to be US$600 million-US$650 million in 2017
and about US$300 million in 2018, much lower than the 2015 figure
of about US$1.2 billion.
MCE's credit profile is constrained by the weaker consolidated
credit metrics of the Melco International group. S&P expects the
group to improve its leverage--with consolidated debt-to-EBITDA
ratio falling below 4.0x in 2018, after peaking at 4.0x-4.5x in
2017--with the expected improvement at MCE. Nevertheless, the
group's credit profile is similar to that of MCE, in S&P's view.
MCE's debt service capability could also erode if it adopts more
shareholder-friendly cash distribution policies than S&P expects.
Melco International will own about 51.3% stake in MCE after the
completion of its proposed share purchase, indicating a potential
cash leakage of about 48.7%.
S&P's base case assumes the cash dividend payout to be about
US$830 million in 2017 and about US$530 million in 2018, mainly
reflecting a recently announced special dividend of US$650
million in 2017, and S&P's assumption of a special dividend of
about US$350 million in 2018.
"The negative outlook on Melco Crown for the next 12 months
reflects our expectation that the company's debt service
capability could deteriorate over the next 12 months if MCE
undertakes more investments or shareholder returns than we
expect, or if the Melco International group's consolidated credit
profile weakens materially," said Ms. Lin.
S&P could lower its ratings on Melco Crown if the consolidated
debt-to-EBITDA ratio of the Melco International group sustains
above 4.0x in 2018 with no sign of improvement. This could
happen if the group's consolidated operating cash flow is weaker
or its capital investment or shareholder return is more
aggressive than S&P anticipates.
S&P could also lower its ratings on Melco Crown if MCE's stand-
alone debt-to-EBITDA ratio exceeds 4.0x or EBITDA interest
coverage stays below 3.0x with no sign of improvement. This
could happen if: (1) MCE's financial performance materially
weakens due to more challenging operating condition in Macau's
gaming industry than S&P anticipates; or (2) MCE undertakes more
aggressive shareholder-friendly cash distribution or significant
debt-funded acquisition or investment.
S&P could revise the outlook to stable if the consolidated debt-
to-EBITDA ratio of the Melco International group improves to
comfortably below 4.0x on a sustained basis. This could happen
if the group generates strong operating cash flows and
demonstrates good financial discipline with capital investment
and shareholder returns over the next 12 months.
STUDIO CITY: S&P Affirms 'BB-' CCR; Outlook Negative
----------------------------------------------------
S&P Global Ratings said that it had affirmed its 'BB-' long-term
corporate credit rating on Studio City Co. Ltd. The outlook is
negative. S&P also affirmed its 'BB-' long-term issue rating on
Studio City's senior secured notes and the 'B' long-term issue
rating on the senior unsecured notes that Studio City guarantees.
Studio City Finance Ltd. issued the senior unsecured notes.
S&P also lowered its long-term Greater China regional scale
rating on the Macau-based casino operator and its senior secured
notes to 'cnBB' from 'cnBB+' and on the senior unsecured notes to
'cnB+' from 'cnBB-'. S&P removed all the ratings from
CreditWatch, where it had placed them with negative implications
on Dec. 19, 2016.
"We affirmed the ratings on Studio City in tandem with our rating
action on Melco Crown (Macau) Ltd. (Melco Crown) earlier today,"
said S&P Global Ratings credit analyst Sophie Lin.
A deterioration in Melco Crown's creditworthiness would also
pressure S&P's ratings on Studio City, in which Melco Crown
Entertainment Ltd. (MCE) owns 60%. MCE is the parent of Studio
City and Melco Crown, the rated entities. The rating on Studio
City is three notches higher than its stand-alone credit profile
(SACP), reflecting S&P's anticipation of extraordinary group
support from MCE. S&P do not expect any material change in
Studio City's SACP from the proposed transaction.
"The negative outlook reflects the negative outlook on Melco
Crown over the next 12 months," said Ms. Lin.
S&P could lower its ratings on Studio City if S&P lowers its
ratings on Melco Crown.
S&P could revise the outlook on Studio City to stable if S&P
revises the outlook on Melco Crown to stable.
*********
Tuesday's edition of the TCR-AP delivers a list of indicative
prices for bond issues that reportedly trade well below par.
Prices are obtained by TCR-AP editors from a variety of outside
sources during the prior week we think are reliable. Those
sources may not, however, be complete or accurate. The Tuesday
Bond Pricing table is compiled on the Friday prior to
publication. Prices reported are not intended to reflect actual
trades. Prices for actual trades are probably different. Our
objective is to share information, not make markets in publicly
traded securities. Nothing in the TCR-AP constitutes an offer
or solicitation to buy or sell any security of any kind. It is
likely that some entity affiliated with a TCR-AP editor holds
some position in the issuers' public debt and equity securities
about which we report.
A list of Meetings, Conferences and Seminars appears in each
Wednesday's edition of the TCR-AP. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com
Friday's edition of the TCR-AP features a list of companies with
insolvent balance sheets obtained by our editors based on the
latest balance sheets publicly available a day prior to
publication. At first glance, this list may look like the
definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical
cost net of depreciation may understate the true value of a
firm's assets. A company may establish reserves on its balance
sheet for liabilities that may never materialize. The prices at
which equity securities trade in public market are determined by
more than a balance sheet solvency test.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Asia Pacific is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Valerie U. Pascual, Marites O. Claro, Joy A. Agravante, Rousel
Elaine T. Fernandez, Julie Anne L. Toledo, and Peter A. Chapman,
Editors.
Copyright 2017. All rights reserved. ISSN: 1520-9482.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding,
electronic re-mailing and photocopying) is strictly prohibited
without prior written permission of the publishers.
Information contained herein is obtained from sources believed
to be reliable, but is not guaranteed.
TCR-AP subscription rate is US$775 for 6 months delivered via e-
mail. Additional e-mail subscriptions for members of the same
firm for the term of the initial subscription or balance
thereof are US$25 each. For subscription information, contact
Peter Chapman at 215-945-7000 or Nina Novak at 202-362-8552.
*** End of Transmission ***