/raid1/www/Hosts/bankrupt/TCRAP_Public/170216.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
A S I A P A C I F I C
Thursday, February 16, 2017, Vol. 20, No. 34
Headlines
A U S T R A L I A
BEAUTY & HAIR: First Creditors' Meeting Slated for Feb. 23
CLIFFS NATURAL: Posts $174 Million Net Income for 2016
CLINT CORP: First Creditors' Meeting Set for Feb. 23
CRUSADE ABS 2017-1: Fitch Rates Class E Notes 'BB(EXP)sf'
EVALU8 LIMITED: First Creditors' Meeting Set for Feb. 23
MOUNT EDISAR: First Creditors' Meeting Set for Feb. 23
NATIONAL DAIRY: Owners Withdraw Settlement Offer
SOVEREIGN MF: ASIC Cancels Australian Financial Services License
C H I N A
RONSHINE CHINA: Tap Bond Issuance No Impact on Moody's B2 CFR
H O N G K O N G
KING & WOOD MALLESONS: Business Failure Investigation Started
I N D I A
ANNAPURNA COTTON: CARE Reaffirms B+ Rating on INR6.38cr LT Loan
ARVEE ELECTRICALS: CARE Upgrades Rating on INR1.50cr Loan to B+
BHAVYALAXMI INDUSTRIES: ICRA Reaffirms B+ INR6.45cr Loan Rating
DARVESH CONSTRUCTIONS: ICRA Reaffirms B+ Rating on INR30cr Loan
DATACOM PRODUCTS: ICRA Assigns 'D' Rating to INR4cr LT Loan
G.S. RADIATORS: CARE Reaffirms B+ Rating on INR4.49cr LT Loan
GREEN PETRO: ICRA Assigns 'B' Rating to INR6.80cr Cash Loan
HATGAD RESORT: CARE Reaffirms B+ Rating on INR12cr LT Loan
HOIN MAL: ICRA Reaffirms B+ Rating on INR9.90cr Cash Loan
J.J. AUTOMOTIVE: ICRA Lowers Rating on INR25cr Cash Loan to B+
KIRTILAL M: ICRA Reaffirms B+ Rating on INR108.66cr Loan
KIRTILAL M SHAH: ICRA Reaffirms 'B' Rating on INR10cr Loan
KUMAR MOTOR: ICRA Reaffirms 'B' Rating on INR3.90cr Term Loan
LAXMI VENKATESH: CARE Reaffirms B+ Rating on INR7.75cr LT Loan
M-BO GRANITO: ICRA Assigns 'B' Rating to INR42.05cr Loan
MAHAVIR EDUCATIONAL: ICRA Reaffirms B- Rating on INR3.82cr Loan
MAHESH LUMBER: ICRA Lowers Rating on INR10cr Loan to 'D'
MAXHEAL PHARMACEUTICALS: CARE Lowers Rating on INR12cr Loan to B+
MY CAR: ICRA Assigns 'B' Rating to INR22.48cr Fund Based Loan
NIRVANA FASHION: Ind-Ra Affirms 'BB-' Long-Term Issuer Rating
NEELSON CERAMIC: ICRA Reaffirms B Rating on INR12cr LT Loan
NEERG ENERGY: Fitch Assigns B+ Final Rating to USD475MM Sr. Notes
P.G. INFRASTRUCTURE: CARE Reaffirms B+ Rating on INR7.62cr Loan
P. PADMA: Ind-Ra Assigns 'B+' Long-Term Issuer Rating
P. SHIVA: Ind-Ra Assigns 'B' Long-Term Issuer Rating
PARAS FOODS: ICRA Reaffirms 'B' Rating on INR8.0cr Loan
PHILIP D'COSTA: Ind-Ra Assigns 'B' Long-Term Issuer Rating
SAGAR BUSINESS: Ind-Ra Assigns 'BB' Long-Term Issuer Rating
SELEO CERAMIC: ICRA Reaffirms 'B' Rating on INR6.48cr Loan
SHREE RAM: ICRA Reaffirms B+ Rating on INR7.72cr Fund Based Loan
SHREE RAMKRISHNA: CARE Reaffirms B+ Rating on INR9.60cr LT Loan
SIVASRI ENGINEERING: ICRA Withdraws B+ Rating on INR5.5cr Loan
SPECIALITY SILICA: Ind-Ra Assigns 'BB-' Long-Term Issuer Rating
SUBADRA TEXTILES: ICRA Revises Rating on INR4cr Loan to 'B'
SUNRISE MARKETING: CARE Reaffirms B+ Rating on INR5.50cr LT Loan
TATA STEEL: UK Unit Sells Speciality Steel Business to Liberty
J A P A N
TOSHIBA CORP: Puts Chips Unit Up for Sale to Salvage Business
TOSHIBA CORP: Books $6.3BB WriteDown; Chairman to Resign
M A L A Y S I A
STONE MASTER: Auditor Expresses Qualified Opinion
S I N G A P O R E
EZRA HOLDINGS: Associate's Unit Faces Winding Up Application
S O U T H K O R E A
DAEWOO SHIPBUILDING: Looks for Ways to Deal With 'April crisis'
S R I L A N K A
SRI LANKA INSURANCE: Fitch Affirms IFS Rating at B+
SRI LANKA TELECOM: Fitch Affirms B+ IDR; Outlook Stable
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A U S T R A L I A
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BEAUTY & HAIR: First Creditors' Meeting Slated for Feb. 23
----------------------------------------------------------
A first meeting of the creditors in the proceedings of Beauty &
Hair Academy Of Australia Pty Ltd will be held at 165 Camberwell
Road, in Hawthorn East, Victoria, on Feb. 23, 2017, at 10:30 a.m.
Roger Darren Grant and Nicholas Giasoumi of Dye & Co. Pty Ltd
were appointed as administrators of Beauty & Hair on Feb. 14,
2017.
CLIFFS NATURAL: Posts $174 Million Net Income for 2016
------------------------------------------------------
Cliffs Natural Resources Inc. filed with the Securities and
Exchange Commission its annual report on Form 10-K disclosing net
income attributable to Cliffs shareholders of $174.1 million on
$2.10 billion of revenues for the year ended Dec. 31, 2016,
compared to a net loss attributable to Cliffs shareholders of
$749.3 million on $2.01 billion of revenues for the year ended
Dec. 31, 2015.
Fourth-quarter 2016 consolidated revenues of $754 million
increased 58 percent from the prior year's fourth-quarter
revenues of $476 million. As a result of increased volumes sold,
cost of goods sold increased by 32 percent to $573 million
compared to $433 million reported in the fourth quarter of 2015.
For the fourth quarter of 2016, the Company recorded net income
of $81 million compared to a net loss of $58 million recorded in
the prior-year quarter. The Company recorded net income
attributable to Cliffs' common shareholders of $79 million,
compared to a net loss attributable to Cliffs' common
shareholders of $60 million recorded in the fourth quarter of
2015.
As of Dec. 31, 2016, Cliffs Natural had $1.92 billion in total
assets, $3.25 billion in total liabilities and a total deficit of
$1.33 billion. For the full-year 2016, adjusted EBITDA1 was $374
million, compared to $293 million in 2015.
Lourenco Goncalves, chairman, president and chief executive
officer, said: "2016 was the year in which we finalized the
execution of the operational, commercial and financial actions
necessary to ensure Cliffs will have a great future. Among the
actions accomplished last year are several new sales agreements
entered with clients, including the renewal of our long-term
supply contract with our largest customer, and a number of
capital markets transactions that were successfully executed to
reduce debt and extend our maturity runway." Mr. Goncalves added:
"Despite the undeniable fact that the underlying business
environment was far from ideal during almost all of 2016, the
environmentally compliant and safety oriented performance of the
Cliffs teams in the United States and in Australia resulted in a
very profitable year with strong cash flow generation."
Mr. Goncalves concluded: "We are excited about Cliffs and about
our future. A much more favorable business environment in the
U.S. and a newly adopted rational behavior in the international
iron ore market support the work we have done internally in our
company. With a much lower debt profile and extended maturities,
and several new and more favorable commercial agreements that we
put in place in 2016, we expect Cliffs to deliver strong and
sustainable results in 2017."
Reporting Matters
Given that the Company anticipates running its mines at full
capacity going forward, Cliffs will provide more simplified
disclosures with respect to reporting operating cost performance
at its two business units. Accordingly, the Company will no
longer separate cash cost of goods sold and operating expense
rate into "cash production cost per ton" and "non-production cash
cost per ton." Idle cost was a significant component of non-
production cash cost in 2015 and 2016.
Debt and Cash Flow
Total debt at the end of the fourth quarter of 2016 was $2.2
billion, versus $2.7 billion at the end of the fourth quarter of
2015. Fourth quarter cash and cash equivalents totaled $323
million, compared to $285 million at the end of the fourth
quarter of 2015.
At the end of the fourth quarter of 2016, Cliffs had net debt of
$1.8 billion, compared to $2.4 billion of net debt3 at the end of
the fourth quarter of 2015.
Capital expenditures during the quarter were $23 million, in line
with the prior-year quarter. Full-year 2016 capital expenditures
were $69 million, a 15 percent reduction compared to $81 million
in the prior year.
Cliffs also reported depreciation, depletion and amortization of
$27 million in the fourth quarter of 2016.
Outlook
In 2017, Cliffs expects to generate $510 million of net income
and $850 million of adjusted EBITDA1. This expectation is based
on the assumption that iron ore and steel prices will average
levels consistent with the full month of January throughout 2017.
In future quarters, Cliffs anticipates continuing to update 2017
net income and adjusted EBITDA1 guidance.
Segment Outlook
Consistent with the SEC's recent guidance on the presentation of
non-GAAP financial measures, the Company will be taking a more
robust approach to reconciling its non-GAAP measures. Cliffs
will begin providing guidance for cost of goods sold and
operating expense rate including freight and venture partner's
cost reimbursements, which have offsetting amounts in revenue and
have no impact on sales margin.
A full-text copy of the Form 10-K is available for free at:
https://is.gd/gi42B1
About Cliffs Natural Resources
Cliffs Natural Resources Inc. --
http://www.cliffsnaturalresources.com/-- is a mining and natural
resources company. The Company is a major supplier of iron ore
pellets to the U.S. steel industry from its mines and pellet
plants located in Michigan and Minnesota. Cliffs also produces
low-volatile metallurgical coal in the U.S. from its mines
located in West Virginia and Alabama. Additionally, Cliffs
operates an iron ore mining complex in Western Australia and owns
two non-operating iron ore mines in Eastern Canada. Driven by the
core values of social, environmental and capital stewardship,
Cliffs' employees endeavor to provide all stakeholders operating
and financial transparency.
On Jan. 27, 2015, Bloom Lake General Partner Limited and certain
of its affiliates, including Cliffs Quebec Iron Mining ULC
commenced restructuring proceedings in Montreal, Quebec, under
the Companies' Creditors Arrangement Act (Canada). The initial
CCAA order will address the Bloom Lake Group's immediate
liquidity issues and permit the Bloom Lake Group to preserve and
protect its assets for the benefit of all stakeholders while
restructuring and sale options are explored.
Cliffs Natural reported a net loss attributable to Cliffs common
shareholders of $788 million on $2.01 billion of revenues for the
year ended Dec. 31, 2015, compared to a net loss attributable to
Cliffs common shareholders of $7.27 billion on $3.37 billion of
revenues for the year ended Dec. 31, 2014.
* * *
As reported by the TCR on April 19, 2016, Standard & Poor's
Ratings Services said it raised its corporate credit rating on
Cleveland-based Cliffs Natural Resources Inc. to 'CCC+' from
'SD'.
As reported by the TCR on Sept. 13, 2016, Moody's Investors
Service upgraded Cliffs Natural Resources Inc.'s Corporate Family
Rating (CFR) and Probability of Default Rating to Caa1 and Caa1-
PD respectively from Ca and Ca-PD respectively. The upgrade
reflects the improving trends evidenced in Cliffs performance on
strengthened fundamentals in the US steel industry, the dominant
market for Cliffs iron ore pellets, and an improving order book
as well as the successful renegotiation of the contracts with
ArcelorMittal USA LLC, which had expiry dates of late 2016 and
early 2017.
CLINT CORP: First Creditors' Meeting Set for Feb. 23
----------------------------------------------------
A first meeting of the creditors in the proceedings of Clint Corp
Pty Ltd will be held at the offices of Worrells Solvency +
Forensic Accountants, Suite 4, Level 3, 26 Duporth Avenue, in
Maroochydore, Queensland, on Feb. 23, 2017, at 2:00 p.m.
John William Cunningham of Worrells Solvency + Forensic
Accountants was appointed as administrator of Clint Corp on Feb.
13, 2017.
CRUSADE ABS 2017-1: Fitch Rates Class E Notes 'BB(EXP)sf'
---------------------------------------------------------
Fitch Ratings has assigned expected ratings to Crusade ABS Series
2017-1 Trust's floating-rate notes. The issuance consists of
notes backed by automotive lease and loan receivables originated
by Westpac Banking Corporation (Westpac, AA-/Stable/F1+).
The ratings are:
AUD607.50m Class A1/A2 notes: 'AAA(EXP)sf'; Outlook Stable
AUD37.50m Class B notes: 'AA+(EXP)sf'; Outlook Stable
AUD30.00m Class C notes: 'A(EXP)sf'; Outlook Stable
AUD21.00m Class D notes: 'BBB(EXP)sf'; Outlook Stable
AUD12.75m Class E notes: 'BB(EXP)sf'; Outlook Stable
AUD41.25m Seller notes: 'NR(EXP)sf'
The class A1 and A2 notes' final allocation will be determined at
the pricing date
The notes will be issued by Perpetual Corporate Trust Limited in
its capacity as trustee of Crusade ABS Series 2017-1 Trust.
The collateral backing the Crusade ABS 2017-1 transaction,
statistically, is of similar credit-quality to prior pools
securitised under the Crusade ABS programme. The total collateral
pool consisted of receivables backed by motor vehicles with a
weighted-average (WA) seasoning of 10.1 months and average
receivable size of AUD26,733 at the Nov. 30, 2016 cut-off date.
The WA balloon residual percentage - percentage of the original
outstanding balance of the receivable - is 7.1%.
KEY RATING DRIVERS
Asset Origination: The receivables will be sourced from Westpac,
as the lender of record, and are reviewed under the same central
credit policy. The servicer of record is Westpac. Collections are
outsourced to Collection House Ltd and overseen by Westpac.
Consumer Finance Composition: Consumer finance receivables
comprise 57.3% of the portfolio. Consumer finance has higher loss
levels than other product types and longer lease terms of up to
85 months. Fitch has taken this into account in the rating
analysis.
Low Historical Defaults: The receivables book has experienced
relatively low levels of defaults to date, with the majority of
quarterly vintage gross loss percentages ranging from 1.3%-3.8%
for passenger vehicles. Delinquencies greater than 30 days have
generally tracked below 3.0%.
Eligibility and Pool Parameters: A substitution period of 12
months will allow receivables to be sold to the trust on a
regular basis, subject to eligibility and pool parameters to
ensure consistent portfolio characteristics. All substitutions
will cease upon unreimbursed charge-offs exceeding 1%, if an
event of default or servicer termination event subsists, or if
the average percentage of loans more than 90 days in arrears over
the prior three months exceeds 3%.
EXPECTED RATING SENSITIVITIES
Unanticipated increases in the frequency of defaults and loss
severity on defaulted receivables could produce loss levels
higher than Fitch's base case, likely resulting in a decline in
credit enhancement and remaining loss-coverage levels available
to the notes. Fitch has evaluated the sensitivity of the ratings
assigned to Crusade ABS Series 2017-1 to increased gross default
levels and decreased recovery rates over the life of the
transaction.
Expected impact upon the note rating of increased defaults:
Expected rating: AAAsf/AA+sf/Asf/BBBsf/BBsf
Increase defaults by 10%: AAAsf/AAsf/A-sf/BB+sf/B+sf
Increase defaults by 25%: AA+sf/AA-sf/A-sf/BB+sf/Bsf
Increase defaults by 50%: AA-sf/Asf/BBBsf/BBsf/Bsf
Expected impact upon the note rating of decreased recoveries:
Expected rating: AAAsf/AA+sf/Asf/BBBsf/BBsf
Reduce recoveries by 10%: AAAsf/AA+sf/Asf/BBB-sf/BB-sf
Reduce recoveries by 25%: AAAsf/AA+sf/A-sf/BB+sf/B+sf
Reduce recoveries by 50%: AAAsf/AAsf/A-sf/BB+sf/Bsf
Expected impact upon the note rating of multiple factors:
Expected rating: AAAsf/AA+sf/Asf/BBBsf/BBsf
Increase defaults by 10%; reduce recoveries by 10%: AA+sf/AAsf/A-
sf/BB+sf/B+sf
Increase defaults by 25%; reduce recoveries by 25%:
AA+sf/A+sf/BBBsf/BBsf/B+sf
Increase defaults by 50%; reduce recoveries by 50%: A+sf/A-
sf/BB+sf/Bsf/CCCsf
EVALU8 LIMITED: First Creditors' Meeting Set for Feb. 23
--------------------------------------------------------
A first meeting of the creditors in the proceedings of evalu8
Limited will be held at the offices of Worrells Solvency &
Forensic Accountants, Level 5 HQ @ Robina, 58 Riverwalk Avenue,
in Robina, Queensland, on Feb. 23, 2017, at 2:30 p.m.
Jason Bettles and Raj Khatri of Worrells Solvency & Forensic
Accountants were appointed as administrators of evalu8 Limited on
Feb. 13, 2017.
MOUNT EDISAR: First Creditors' Meeting Set for Feb. 23
------------------------------------------------------
A first meeting of the creditors in the proceedings of Mount
Edisar Pty Ltd, trading as McVilly Timber, will be held at The
Geelong Club, 74 Brougham Street, in Geelong, Victoria, on
Feb. 23, 2017, at 10:00 a.m.
Craig David Crosbie and Rodney James Slattery of PPB Advisory
were appointed as administrators of Mount Edisar on Feb. 13,
2017.
NATIONAL DAIRY: Owners Withdraw Settlement Offer
------------------------------------------------
Peter Hemphill at The Weekly Times reports that unsecured
creditors of National Dairy Products may not get a cent in the
wind-up of the company, after the company's owner and director
withdrew their settlement offer.
The Weekly Times relates that administrator Glen Kanevsky, of
Deloitte, said NDP owner Tony Esposito and his director partner
Violetta Esposito had not increased their $521,000 offer to
settle between AUD10.1 million and AUD17.8 million owed to
creditors, and had withdrawn the original offer.
"We have been advised that there will not be a new Deed of
Company Arrangement proposal for consideration by creditors, and
that the original proposal has also been withdrawn," the report
quotes Mr. Kanevsky as saying.
NDP now looks set for liquidation when creditors meet on Feb. 22,
with dairy farmer creditors willing to push to wind up the
company, the report says.
According to the report, creditors forced an adjournment of a
meeting on December 21 to allow the Espositos to submit a revised
DoCA after a six-cent-in-the-dollar offer was rejected.
Despite the Espositos withdrawal of the DoCA, a source said he
expected Mr Esposito to resubmit the original offer at next
week's meeting, as he did not believe he would let the company be
wound up, The Weekly Times relates.
The source said liquidation of NDP might force the deportation of
Ms Esposito's cousin, Marjan Temelkovski, adds The Weekly Times.
NDP sponsored Mr. Temelkovski under a 457 temporary work visa
granted last March. He was to work at NDP as a business
development manager, The Weekly Times discloses.
The report adds that Colac dairy farmer, and NDP supplier, Alex
Robertson said the Australian Securities and Investments
Commission should investigate "all transactions" within NDP's
accounts.
"Tony Esposito was paying AUD5 a kg (milk solids) for milk," the
report quotes Mr. Robertson as saying. "The administrator said
he was paying too much for milk. But two other companies were
paying AUD5 a kg (for the same period)."
About National Dairy
National Dairy Products (NDP) is a milk brokering company based
in Victoria, Australia.
Salvatore Algeri and Glen Kanevsky of Deloitte were appointed as
administrators of National Dairy on Nov. 17, 2016.
SOVEREIGN MF: ASIC Cancels Australian Financial Services License
----------------------------------------------------------------
The Australian Securities and Investments Commission has
cancelled the Australian Financial Services (AFS) license of
Sovereign MF Ltd. Sovereign is the responsible entity for The
Sovereign Tarneit Land Fund and The Sovereign Aged Care Property
Fund.
Sovereign was placed into liquidation on May 24, 2013, following
a creditors' resolution on the basis that Sovereign was
insolvent. The liquidators are currently engaged in the final
stages of winding up the Schemes. The wind up has involved
completing the residential development of the Westbourne Fields
Estate in outer Melbourne and the realisation of all lots within
the development.
The cancellation is subject to a specification under section 915H
of the Corporations Act that the AFS licence continues in effect
as though the cancellation had not happened for a period of 24
months to allow the liquidators to provide financial services
that are reasonably necessary or incidental to the winding up of
the Schemes. A period of 24 months is necessary to allow the
liquidators to pay a number of bonds and retentions to statutory
bodies which do not expire for another 18 months. The AFS licence
was cancelled on Feb. 8, 2017.
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C H I N A
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RONSHINE CHINA: Tap Bond Issuance No Impact on Moody's B2 CFR
-------------------------------------------------------------
Moody's Investors Service says that Ronshine China Holdings
Limited's B2 corporate family rating and B3 senior unsecured
rating and the stable outlook on the ratings are unaffected by
the company's announcement of a tap bond offering on terms and
conditions that are the same as its existing USD175 million
senior notes due 2019.
"The additional debt from Ronshine's tap issuance is within
Moody's expectations for 2017 and will not materially alter the
credit metrics that support its ratings," says Anthony Lee, a
Moody's Analyst and who is also the Lead Analyst for Ronshine.
The tap bond issuance will not change Moody's expectation that
Ronshine's revenue/debt - including its share in joint ventures
and associates - will register around 45%-50% over the next 12-18
months.
In addition, the company's gross profit margin of 28% for the 12
months to end-June 2016 was better than the average for Moody's-
rated Chinese developers. Moody's expects that Ronshine's
interest coverage - as measured by adjusted EBIT/interest and
including its share in joint ventures and associates - will
register around 2.3x-2.5x over the next 12-18 months.
Such a level would be broadly comparable with its B-rated Chinese
property peers.
The tap issuance will enhance Ronshine's liquidity position. Its
cash balance of RMB12.8 billion at end-June 2016 and strong
contracted sales are sufficient to meet its short-term debt of
RMB7.8 billion and committed land payments over the next 12
months.
Ronshine's B2 corporate family rating reflects the company's
track record of developing residential properties in Fujian
Province and strong contracted sales growth.
The B2 rating also factors in the financial and execution risks
associated with the company's expansion into cities in the
Yangtze River Delta. Moody's notes that the company's high
financial risk is driven by its aggressive land acquisition
strategy, as well as limited but developing funding channels.
The B3 rating of Ronshine's senior unsecured notes is one notch
lower than its corporate family rating, reflecting structural and
legal subordination risk. Its secured and subsidiary debt/total
assets was more than 40% at 30 June 2016.
The stable outlook reflects Moody's expectation that Ronshine
will be able to execute its sales plan, while maintaining a
healthy profit margin and sufficient liquidity.
Upward pressure on the ratings could emerge if Ronshine improves
its liquidity position and debt leverage, while maintaining
strong contracted sales growth.
Credit metrics indicative of upward ratings pressure include: (1)
an adjusted revenue/debt above 75%-80%; and (2) cash/short-term
debt above 1.25x on a sustained basis.
The ratings could be downgraded if: (1) Ronshine fails to
deleverage or EBIT/interest coverage deteriorates, due to
aggressive land acquisitions; (2) its contracted sales or
revenues fall short of Moody's expectations; or (3) its liquidity
position weakens.
The principal methodology used in these ratings was Homebuilding
And Property Development Industry published in April 2015.
Ronshine China Holdings Limited was incorporated in the Cayman
Islands in 2014 and listed on the Hong Kong Stock Exchange in
January 2016. As a property developer, it focuses on mid- to
high-end residential units in Fujian Province. The company was
founded by Chairman, Mr. Ou Zonghong, who owns 75% of Ronshine.
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H O N G K O N G
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KING & WOOD MALLESONS: Business Failure Investigation Started
-------------------------------------------------------------
Max Walters at The Law Society Gazette reports the administrators
of the now defunct European arm of King & Wood Mallesons have
confirmed that investigations into the failure of the business
are underway.
Restructuring outfit Quantuma took over KWM in January this year
after the European arm of the firm collapsed into administration,
according to The Law Society Gazette. Andy Hosking --
andrew.hosking@quantuma.com -- and Sean Bucknall --
sean.buckhall@quantuma.com -- were named joint administrators.
In a statement released on January 9, the pair said they were
'conducting investigations into the failure of the firm which is
typical with any insolvency in order to understand how this came
about and the circumstances that led to the failure,' the report
relays. It added that a final verdict was a 'long way down the
line'.
The statement follows reports that Quantuma was considering
launching an investigation into the conduct of the firm's
management, the report notes.
Earlier this month, the Gazette reported that KWM had retained a
'strategic presence' in the UK, Europe and the Middle East
following the European arm collapse, the report discloses.
The new business, based near St Paul's, will focus on corporate
M&A, finance, competition and dispute resolution, the report
notes.
The report relays more than 30 partners together with their
associatesand support staff will make up the business, the report
adds.
About King & Wood Mallesons
King & Wood Mallesons is a multinational law firm headquartered
in Hong Kong. With more than 2,200 lawyers and $1 billion in
revenue, King & Wood Mallesons is a product of two large scale
mergers: in 2012, China's King & Wood PRC Lawyers merged with
Mallesons Stephen Jaques of Australia, and then what became King
& Wood Mallesons merged with SJ Berwin of the United Kingdom in
2013.
KWM is the first and only global law firm based in Asia and is
the largest law firm headquartered outside of the United States
or European Union. It is the 6th largest firm in the world by
number of lawyers and one of the top thirty by revenue.
The firm's Chinese, Australian and UK divisions each maintain
separate finance units but operate under a single brand name.
European Arm's Woes
KWM's European and Middle East (EUME) operation as of November
2016 had 130 partners and more than 500 lawyers altogether. Its
offices in Europe and the Middle East are London, Cambridge,
Madrid, Brussels, Luxembourg, Milan, Paris, Frankfurt, Munich,
Dubai and Riyadh. In 2015, the division accounted for 27 percent
of the firm's global revenue.
The Australian, Chinese, Hong Kong portions of KWM are
financially separate and have different management from the
European operations.
KWM Europe faced cash flow issues because of a slowdown in
business and partner defections. In 2016, it was unable to make
timely payments to partners.
The firm subsequently announced a plan to inject $18 million of
capital by raising it from partners. But the recapitalization
plan failed due to a number of partner departures. Among those
who jumped ship are managing partner Rob Day and its head of
investments practices Michael Halford, left.
On Nov. 10, 2016, the firm announced that KWM global managing
partner Stuart Fuller would step down and that a process was
underway to select a new leader.
On Nov. 16, 2016, KWM announced a proposed bail-out, under which
the Chinese division agreed to infuse GBP14 million of additional
capital to KWM Europe, provided that 60% of partners agree to a
12 month "lock-in" and provide some additional capital. However,
insufficient partners committed to the deal.
By the end of November 2016, KWM announced that it was
considering a range of strategic options, including a merger of
the European division.
In early December 2016, reports say that KWM Europe was in
negotiations to enter pre-packaged administration proceedings in
the UK.
KWM Europe announced on Dec. 9, 2016, that it has received "a
number of indicative purchase offers."
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I N D I A
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ANNAPURNA COTTON: CARE Reaffirms B+ Rating on INR6.38cr LT Loan
---------------------------------------------------------------
The rating assigned to the bank facilities of Annapurna Cotton
Impex continue to remain constrained on account of its thin
profit margins, moderate capital structure, weak debt coverage
indicators and moderate liquidity position. The ratings further
continue to remain constrained on account of susceptibility of
ACI's profit margins to the raw material price fluctuations and
its presence in the highly fragmented cotton industry.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 6.38 CARE B+; Stable Reaffirmed
The ratings, however, continue to derive comfort from experienced
partners coupled with proximity of its manufacturing facility to
cotton-growing region in Madhya Pradesh.
Going forward, ACI's ability to increase its scale of operations,
improvement in profit margins, capital structure and debt
coverage indicators would remain the key rating sensitivities.
Detailed description of the key rating drivers:
ACI's total operating income (TOI) witnessed a y-o-y increase of
about 2.23% mainly on account of increase in overall sales of
cotton seeds. The PBILDT margin declined by 96 bps and remained
at 6.29% during FY16 as against 7.25% during FY15 primarily due
to higher cost of raw material in FY16, however, PAT margins have
improved by 15 bps to 0.41% as against 0.26% in FY15 primarily
due to lower interest and depreciation cost. ACI's overall
gearing stood at 1.26 times as on March 31, 2016. Capital
structure and liquidity position remained moderate, whereas, debt
coverage indicators remained weak during FY16. Liquidity position
stood moderate marked by current ratio of 1.82x as on March 31,
2016 while average utilization stood at 50% for last 12 month
period ended December 2016.
ACI is established in May 2012 as a partnership firm by the
members of Goyal family. ACI is engaged in cotton ginning and
pressing activities. The manufacturing facilities of the firm is
in Sendhwa (Madhya Pradesh) with installed capacity for cotton
bales of 76,500 MTPA and cotton seeds of 15,000 MTPA as on
March31, 2015. ACI commenced its commercial operations from
December, 2012. The other associate concerns of ACI are Tirupati
Fibers, Annapurna Cotex Pvt. Ltd. and Annapurna Cotton Industries
which are also in cotton industry.
ARVEE ELECTRICALS: CARE Upgrades Rating on INR1.50cr Loan to B+
---------------------------------------------------------------
The revision of the ratings assigned to the bank facilities of
Arvee Electricals And Engineers Private Limited takes
into account the regularisation of debt serving track record and
no delays in payment of debt obligations since June 2016.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 1.50 CARE B+; Stable Revised
Facilities from CARE D
Short-term Bank 10.00 CARE A4 Revised
Facilities from CARE D
The ratings, however, continue to remain constrained on account
of the declining total operating income, low and fluctuating
profitability, leveraged capital structure and weak liquidity
position. The ratings are further constrained on account of
susceptibility of margins to raw material price fluctuation and
intense competition in the industry.
The ratings, however, continue to derive strength from the long
track record of the entity, experience of the promoters and
modest order book position for the execution of transmission
lines and substation projects.
The ability of the firm to increase its scale of operations,
improve profitability and solvency position while improving
liquidity position with efficient working capital management
remain the key rating sensitivities.
Detailed description of the key rating drivers:
The total operating income of the firm has been declining since
the last three years ended FY16 (refers to the period April 1 to
March 31), on account of the slower execution of orders. Profit
margins of the company although moderate have been fluctuating
due to the competitive nature of industry. The PBILDT margin
remained in the range of 8%-11%. The solvency position of AEEPL
stood leveraged with overall gearing of 2.34x as on March 31,
2016. The liquidity position of the company remained stressed
with funds being mainly blocked in inventory and debtors as
reflected by high gross current asset days of over 200 days
during last three years ending FY16. The same resulted in high
utilization of its working capital limits. The company has an
established and reputed track record of operations of over three
decades and is promoted by Mr. Arun Doshi and Mrs Asha Doshi
having an experience of over 25 years in the industry.
Furthermore, the entity deals with reputed players in the
industry has been able to get orders from them on regular basis
as reflected by moderate order book of 1.57x of TOI of FY16
reflecting medium term revenue visibility.
Established in the year, 1987, AEEPL is a Pune-based company
promoted by Mr. Arun Doshi and Mrs Asha Doshi. The company is a
turnkey electrical contractor and handles contracts for sugar,
cement, fertiliser, metallurgical plants, cement plants and the
oil industry amongst others. The company also provides services
related to engineering, detailing, designing, production and
commissioning of substations and transmission lines set up for
private organizations. AEEPL is also involved in the trading of
electrical components like LT panels and electrical control
boards.
During FY16, the entity reported total operating income of
INR15.16 crore with PAT of INR0.13 crore.
BHAVYALAXMI INDUSTRIES: ICRA Reaffirms B+ INR6.45cr Loan Rating
---------------------------------------------------------------
ICRA has reaffirmed the long-term rating of [ICRA]B+ for the
INR8.00-crore bank facilities of Bhavyalaxmi Industries Private
Limited. The outlook on the long-term rating is 'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based-Cash
Credit 6.45 [ICRA]B+ (Stable); Reaffirmed
Fund-based-Term
Loan 0.27 [ICRA]B+ (Stable); Reaffirmed
Unallocated Limits 1.28 [ICRA]B+ (Stable); Reaffirmed
Detailed rationale
ICRA's rating continues to take into account the intensely
competitive nature of the rice milling industry restricting
BIPL's operating margins and agro-climatic risks to which the
company is exposed to, as the availability of paddy can be
affected in adverse weather conditions. The rating also takes
into account the company's modest scale of operations and its
modest financial profile characterised by high gearing and
subdued coverage indicators.
However, the rating favourably factors in BIPL's experienced
management, easy availability of paddy with the rice mill being
located in a major paddy cultivating region and favourable demand
prospects for rice with India being the second largest producer
and consumer of rice internationally. Further, ICRA also takes
note of the benefit of operational synergies that BIPL derives
from group companies owing to their presence in similar agro-
related businesses.
Going forward, the company's ability to improve its profitability
and scale while effectively managing its working capital cycle
shall be the key rating sensitivities.
Key rating drivers
Credit Strengths
* Experienced promoters with long track record in the milling
industry
* The manufacturing facility of the company is located in U.P.,
which being a prominent rice belt, ensures easy accessibility
of the main raw material for the company
* Flexibility from the operational, financial and management
inter-linkages between its group companies
Credit Weaknesses
* Moderate scale of operations
* Low entry barriers and high competitive intensity of the
industry limits the pricing flexibility of the rice millers,
including BIPL
* Low value additive nature of work has resulted in modest
profitability
* Operating in an agro-based industry, raw material
availability, its quality and pricing depend on monsoon and
climatic conditions
Detailed description of key rating drivers:
Incorporated in 2008, BIPL mills and manufactures high quality
non-basmati rice and undertakes sales under their own brands. The
company's promoters Mr. Sanjeev Gupta and Mr. Pradeep Kumar Gupta
have extensive experience in agro-based businesses through their
group companies. The promoters' business group is well
diversified and in addition to the rice milling business, it is
also involved in milling of wheat, biscuit manufacturing and also
operates a cold storage. The rice industry is working capital
intensive in nature, given the need to store large quantities of
paddy as the harvesting season is during October-January. High
working capital borrowings to fund inventory resulted in weak
gearing at 2.63 times as on March 31, 2016. The debt coverage
indicators remained weak with interest coverage indicator of 1.62
times and NCA/TD of 4% in FY2016 due to increased working capital
borrowings. Rice industry is a highly competitive industry
characterised by low entry barriers and a large number of
unorganised players and a few established players. This exerts
pressure on the company's margins.
BIPL was incorporated in 2008 and undertakes milling of non-
basmati rice, which it sells under its own brand names. The
company's promoters Mr. Sanjeev Gupta and Mr. Pradeep Kumar Gupta
have extensive experience in agro-based businesses through their
group companies.
BIPL reported a net profit of INR0.09 crore on an operating
income of INR18.44 crore in FY2016 as against a net profit of
INR0.08 crore on an operating income of INR17.42 crore in the
previous year.
DARVESH CONSTRUCTIONS: ICRA Reaffirms B+ Rating on INR30cr Loan
---------------------------------------------------------------
ICRA has reaffirmed the long-term rating at [ICRA]B+ for the
INR30.00 crore term-loan facility of Darvesh Constructions
Private Limited. The outlook on the long term rating is 'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Term Loan 30.00 [ICRA]B+ (Stable) Re-affirmed
Rationale
The rating re-affirmation is constrained by DCPL's exposure to
market risks for the sizeable unsold inventory in its ongoing
project, 'MAK The Address' which is nearing completion, moderate
collection efficiency for the area already booked till date and
decline in sales velocity in the current fiscal owing to slowdown
in the real-estate sector. The rating considers the company's
limited scale of operations and the deterioration in its capital
structure and coverage indicators during FY2016 due to increase
in total debt and lower accretion to reserves. The rating factors
in the company's exposure to geographical risks, owing to the
concentration of all its projects in Mangalore. Besides, there
are strong operational and financial linkages among the MAK India
Group of entities, and any surplus from DCPL could be utilized
for funding the financial commitments of Group concerns, leading
to liquidity risks. The competition from upcoming projects of
other reputed developers in the vicinity of DCPL's ongoing
project, and the demand cyclicality in the real estate business,
are other concerns.
The rating, however, derives comfort from the more than 20 years
of experience of the promoter group in executing real estate
projects in Karnataka and Kerala and the considerable land banks
in the possession of the company and its directors. The favorable
location of the ongoing project may aid in achieving healthy
sales velocity. The rating also takes into account the low
funding risk of the project, as the financial closure has been
attained and the debt repayments have started. ICRA notes the
large debt repayment obligations in the near term, however, the
committed receivables towards the already booked area provide
sufficient cover to fund the same.
Given the slowdown in the real estate market, the company's
ability to secure healthy bookings and improve collection
efficiency, while managing its cash flows, would be the key
rating sensitivities.
Key rating drivers
Credit Strengths
* Longstanding experience and established track record of the
promoter group in Karnataka and Kerala's real estate market
* Adequate liquidity position, with committed receivables,
providing sufficient cover to the balance cost to be incurred
and debt outstanding
* Considerable land banks in the possession of the company and
its directors enhances financial flexibility
* Low funding and project execution risk as the project is
nearing completion and financial closure has been attained
Credit Weakness
* Modest scale of operations and limited track record of
completed projects under the company
* Concentration of operations in Mangalore; large supply of
residential and commercial space in the vicinity, along with
exposure to cyclicality inherent in the realty sector
* Deterioration in capital structure with increased debt levels;
significant debt repayment obligations in the near to medium
term
* Exposure to market risks for the unsold inventory (~33%) in
the ongoing project, however, majority portion (~67%) of the
saleable area has already been booked
* Strong operational and financial linkages among MAK India
Group of entities; possibility of surplus funds being utilized
for funding financial commitments of Group concerns
Description of key rating drivers highlighted:
DCPL's ongoing project, 'MAK The Address', which commenced in
2013, is located in the Falnir area of Mangalore. The project is
~1 km from the Mangalore Central railway station and ~13 km from
the Mangalore airport. It is in close vicinity to several
residential and commercial complexes, temples, hospitals, schools
and colleges, among other social infrastructure. The company has
all the necessary statutory clearances in place for this project
and almost 96% of its construction work been completed till
December 2016. The total cost of the project is ~Rs. 74.64 crore,
inclusive of land, construction expenses and interest during
construction. The project was funded through bank loans of
INR30.00 crore, and the rest through unsecured loans from
promoters and customer advances. The project's sales velocity has
remained moderate, with ~61% and ~67% of the area having been
sold, as of March, 2016 and December 2016, compared to ~50% in
March 2015 with a moderate collection efficiency of ~69%, as of
December 2016. The bookings have been low during FY2017 due to
slowdown in the local market. The company's committed cash flows
are expected to provide a cover of over 90% for meeting the
pending construction and debt obligations on time (~INR8 crore in
FY2017 and INR~18 crore in FY2018).
Incorporated in 1993, Darvesh Constructions Private Limited
(DCPL), part of the MAK India Group of entities, is involved in
real estate development in the Mangalore real estate market since
1993. The MAK Group started its operations in 1982 with the
formation of National Wood Products (NWP) which is into
manufacturing and trading of face veneer and branded plywood
(under the name 'Trojan') in Kerala. The group also has
significant presence in residential and commercial real estate
development mainly in Kerala and Karnataka through different
entities, which besides DCPL, include MAK India Constructions
(MIC) and MAK Infra Reality Private Limited. Since its inception,
DCPL has completed four projects encompassing ~0.16 million sq.
ft. of constructed area. The largest residential apartment
developed by the company is MAK Grand (43,100 sq. ft.). The
company is also involved in commercial projects, with the largest
commercial project developed by it being MAK Mall (70,098 sq.
ft). With a saleable area of 0.25 million sq. ft., MAK The
Address, is the biggest project of the company till date, and
carries a total project cost of INR~74.64 crore.
DCPL recorded a net profit of INR0.85 crore on an operating
income of INR18.02 crore for the year ending March 31, 2016.
DATACOM PRODUCTS: ICRA Assigns 'D' Rating to INR4cr LT Loan
-----------------------------------------------------------
ICRA has assigned a long-term rating of [ICRA]D and a short-term
rating of [ICRA]D to the captioned LOC of Datacom Products
(India) Private Limited.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term: Fund
based 4.00 [ICRA]D; Assigned
Short term: Non
Fund Based 2.00 [ICRA]D; Assigned
Long-term/Short-
term: Unallocated 4.00 [ICRA]D/[ICRA]D; Assigned
Rationale
The assigned rating reflect Datacom Products (India) Private
Limited strained liquidity profile arising from delayed payments
from its customers which has resulted in letter of credit (LC)
devolvement and subsequent overutilization of working capital
limits.
The rating also takes into account the small scale of operations
and high dependence on state and central government departments
for major share of its revenue leading to high customer
concentration risk. Further, the rating takes note of the high
competition intensity in the business which is accentuated by the
fact that the global players have multiple channel partners in
India. ICRA also notes the vulnerability of company's revenue to
unfavorable changes in policies in the United States and Europe,
given that the contact centre industry growth is dependent on
business from these countries.
The rating however, favourably factors in the long standing
experience of the promoters of DPIPL in IT products and services
businesses and the healthy relationship enjoyed by the company
with multiple government departments.
Going forward, the company's ability to ramp up its scale of
operation, improve its profit metrics, so as to timely meet its
financial obligations from operational cash-flow remains key
rating sensitivities.
Key rating drivers
Credit Strengths
* Long standing experience of the promoters in IT products
and services businesses
* Favorable relationship enjoyed by the company with multiple
government departments
Credit Weakness
* Strained liquidity profile owing to delayed payments from
customers, resulting in letter of credit (LC) devolvement and
subsequent overutilization of working capital limits
* High dependence on State and Central government departments
for major share of revenues, risk of non-renewal of contract
* Small scale of operations
* The industry is highly competitive which is accentuated by the
fact that the global players have multiple channel partners in
India.
* Company's revenues are vulnerable to any unfavorable changes
in policies in the United States and Europe, given that the
contact centre industry growth is dependent on business from
these countries
Description of key rating drivers highlighted:
DPIPL is an enterprise communication provider and solution
integrator delivering customized communication solutions for
organizations. DPIPL offers industry-specific IP solutions
customized to the user requirement, which seamlessly integrates
business applications thereby addressing the unique and
specialized needs of a business. These solutions enable DPIPL's
customers to handle all their business communication on the
device of their choice - laptop, mobile phone, office phone or
residence phone - using wired, wireless or broadband connection.
Thus, the customer gets unified access to messages including
voice, fax and email messages on the device of their choice. The
company has three major lines of business - Unified
Communications, Call Centre & CRM Solution and Customer Service.
Unified Communications and Call Centre & CRM Solutions are
classified under the Product Category while Customer Service is
categorized under Service Category.
DPIPL has an unexecuted order book of INR6.98 crore as on
Dec. 31, 2016. The order book comprises of projects from both
government as well as private enterprises. The scope of the
project includes supplying and installation of electronic private
branch exchange (EPBX). EPBX is a telephone exchange or switching
system that serves a private organization and performs
concentration of central office lines or trunks and provides
intercommunication between a large numbers of telephone stations
in the organization. The central office lines provide connections
to the public switched telephone network and the concentration
aspect of an exchange permits the shared use of these lines
between all stations in the organization. The intercommunication
aspect allows two or more stations to establish telephone or
conferencing calls between them without using the central office
equipment.
According to the terms of the rate contract, DPIPL bills the
client as soon as the equipments are delivered to the client,
however, the client pays the total amount only after complete
execution of the project causing the debtor days to increase
considerably. The company has 18% of its debtors overdue for more
than 180 days amounting to INR2.26 crore as on December 31, 2016
as compared to INR1.63 crore as on March 31, 2016. Most of the
debtors of the company consist of government entities which limit
the possibility of the debtors turning bad due to credit issues,
however, most of the government entities have fixed budget
allocated to be spent on IT for a particular year which causes
regular delay in payment of outstanding amount. Delay in payment
from one of the customers has stressed the liquidity position of
the company as a result there has been a devolvement of LC in the
month of December 2016.
Recent Results: The company has recorded an operating income of
INR14.61 crore and profit after tax of INR0.49 crore in FY2016 as
compared to an operating income of INR15.61 crore and profit
after tax of INR1.16 crore in FY2015.
Analytical approach: To arrive at the ratings ICRA has taken into
account the standalone financials of the company along with key
operational developments in the recent past. The company operates
as a standalone entity and doesn't have any subsidiary in place.
Datacom Products (India) Private Limited was established in 1990
and grew over the years to become an independent system
integration company with dealership of products from companies
like Avaya India, Tadiran, Cisco, Extreme and other international
companies. It is an enterprise communication provider and
solution integrator delivering customized communication solutions
for organizations. The company has three major lines of business
- Unified Communications, Call Centre & CRM Solutions and
Customer Service.
G.S. RADIATORS: CARE Reaffirms B+ Rating on INR4.49cr LT Loan
-------------------------------------------------------------
The ratings assigned to the bank facilities of G.S. Radiators
Limited continue to be constrained by its small scale of
operations with low net worth base, weak coverage indicators,
working capital intensive nature of operations and fortunes
linked to automobile industry, which is cyclical in nature. The
ratings also take cognizance of exposure to the raw material
price volatility.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 4.49 CARE B+; Stable Reaffirmed
Long-term Bank
Facilities/Short
term Bank Facilities 4.00 CARE B+; Stable/ CARE A4
Reaffirmed
Short-term Bank
Facilities 9.00 CARE A4 Reaffirmed
The ratings, however, derive strength from long experience of the
promoters, reputed clientele of the company and moderate capital
structure. Going forward, the ability of GSR to increase its
scale of operations while improving its PAT margin will be the
key rating sensitivities.
Detailed description of the key rating drivers:
Despite being in the operations for more than two and a half
months, the company's scale of operations has remained small
marked by Total Operating Income (TOI) of INR 35.30 crore in FY16
(refers to the period April 1 to March 31).
Furthermore, the net worth base of the company stood low at
INR9.57 crore as on March 31, 2016. The operations of the
company are working capital intensive in nature; the average
operating cycle of the company stood elongated at 79 days
for FY16. The company is further exposed to cyclicality risk
associated with automobile industry. The company is, further,
exposed to the raw material price volatility risk. GSR has
moderate interest coverage ratio of 1.61x in FY16 but weak total
debt to GCA of 10.47x for FY16. However, the capital structure of
GSR continued to remain moderate as reflected by overall gearing
ratio of 1.12x as on March 31, 2016. Furthermore, the clientele
of the company includes reputed customers like Mahindra &
Mahindra Limited, etc. Also, Mr. Ranjodh Singh has an experience
of more than two decades in the manufacturing of automobiles
parts. He is further supported by his wife Mrs Rajinder Kaur who
has an experience of more than 15 years.
Incorporated in 1988, G.S Radiators Limited is a closely-held
public limited company promoted by Mr. Ranjodh Singh. Mr. Ranjodh
Singh has an experience of more than two decades in the
automobile industry. He looks after the overall affairs of the
company. He is supported by his wife, Mrs Rajinder Kaur, who has
an experience of more than a decade in the auto ancillary
industry. The company is engaged in the manufacturing of copper-
brass radiators for the automotive original equipment
manufacturers (OEMs). The clientele of the company includes
Mahindra & Mahindra Limited (rated 'CARE AAA/ CARE A1+'),
Kirkland Associates, SML ISUZU Limited, Punjab Tractors Ltd, etc.
The manufacturing unit of the company is located at Ludhiana
(Punjab) and has an installed capacity for processing one lakh
pieces per annum (LPA) as on March 31, 2016. The main raw
materials of the company are brass and copper which are mainly
procured domestically. The company sells its products in both the
domestic and overseas market under the brand name of "GS RADIS
EUROPE" *exports constituted around 40% of the total income in
FY16 (refers to the period April 1 to March 31)]. The company has
two group concerns- G. S. Engitech Private Limited and G. S
Distributors. G. S. Engitech Private Limited is engaged in
trading of radiators. G. S Distributors is a partnership firm and
is engaged in manufacturing of sheet metals.
GREEN PETRO: ICRA Assigns 'B' Rating to INR6.80cr Cash Loan
-----------------------------------------------------------
ICRA has assigned the long-term rating of [ICRA]B to the INR6.80-
crore cash-credit facilities, INR3.23-crore term loans and
INR0.22-crore unallocated limits of Green Petro Fuels LLP. ICRA
has also assigned the short-term rating of [ICRA]A4 to the
INR10.00-crore non-fund based limits of the entity. The outlook
on the long-term rating is Stable.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund Based Limit-
Cash Credit 6.80 [ICRA]B (Stable) assigned
Fund Based Limit-
Term Loan 3.23 [ICRA]B (Stable) assigned
Unallocated Limits 0.22 [ICRA]B (Stable) assigned
Short-term scale
Non-Fund Based Limit 10.00 [ICRA]A4 assigned
Detailed Rationale
The assigned ratings take into account the small scale of the
company's current operations and its weak financial profile
characterised by a high gearing and weak debt coverage
indicators. The company's liquidity position also remains
stretched owing to high working capital intensity of operations
due to high debtor days and inventory days, reflected by high
utilisation of its fund-based working capital limits. The ratings
are also constrained by GPF's exposure to high client
concentration risks with over 70% of the revenues coming from a
single customer in H1FY2017. While the company's profitability
and cash flow margin are likely to remain vulnerable to
fluctuations in the crude oil prices, low value-additive nature
of its operations are likely to exert further pressure on its
margins.
The ratings, however, favorably factor in the established track
record of the promoters in the industrial oil-manufacturing
business through other companies.
ICRA notes that the ability of the company to improve its
capacity utilisation and working capital cycle would remain key
rating sensitivities.
Key rating drivers
Credit Strengths
* Established track record of the promoters in the industrial
oil-manufacturing business through other companies
Credit Weaknesses
* Small scale of current operations
* Weak financial profile, as reflected by high gearing and weak
debt coverage indicators
* Stretched liquidity position owing to high working capital
intensity of operations, also reflected by high utilisation of
fund-based working capital limits
* High client concentration risks with over 70% of the revenues
generated from a single customer in H1 FY2017
* Profitability and cash flows susceptible to volatility in
prices of crude oil
* Low value-additive nature of operations likely to keep the
margins under check
Detailed description of key rating drivers highlighted:
The company has an installed blending capacity of 17000 MT for
manufacturing of light diesel oil for industrial uses. GPF's
current scale of operations remains small as also reflected by
low utilisation of its installed capacity at 35% in FY2016 and
45% of its available capacity (8500 MT) in H1 FY2017. The company
primarily manufactures processed oil and pellet oil which is
primarily sold to iron and steel manufacturing companies in
Chhattisgarh and Odisha. With over 70% of its sales to a single
client in H1 FY2017, the company is exposed to high client
concentration risks. The main raw materials required by the
company are coal tar, creosote oil, bitumen and other types of
oil such as base oil, residue oil etc. The company had imported
over 50% of its raw material requirement in FY2016.
The company has generated revenues of INR14.27 crore and INR10.44
crore during FY2016 and H12017. Although the operating
profitability of the company remained healthy at ~12.8% in
FY2016, its net profitability remained low at 0.02% due to high
depreciation and interest costs. High debt levels resulted in an
aggressive capital structure of the company as reflected by a
high gearing of 4.05 times, as on March 31, 2016. The total debt
relative to the company's operating profits also remained high at
6.63 times as on March 31, 2016. Moreover, high working capital
intensity of the company's operations due to high debtor days as
well as high inventory days result in its stretched liquidity
position, also reflected by high utilisation of its fund-based
working capital limits.
Analytical approach: For arriving at the ratings, ICRA has taken
into account the debt-servicing track record of GPF, its business
risk profile, financial risk drivers and the management profile.
Green Petro Fuels LLP was incorporated in November, 2012 to set
up a light diesel oil manufacturing facility in Raipur, by
Tirubhala Chemicals Private Limited (owned by Mr. Monish Johri)
and Mr. Santosh Dwidevi. The entity has an installed capacity of
17000 MT for blending of oils to manufacture light diesel oils
for industrial use. The entity utilised around 35% of its
installed capacity in FY2016 at a production level of 6025 MT.
HATGAD RESORT: CARE Reaffirms B+ Rating on INR12cr LT Loan
----------------------------------------------------------
The rating assigned to the bank facilities of Hatgad Resort Pvt.
Ltd. continue to remain constrained on account of its small scale
of operations, leveraged capital structure, weak debt coverage
indicators and moderate liquidity position. The ratings are
further constrained by inherent cyclical nature of the
hospitality industry and intense competition.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 12 CARE B+; Stable Reaffirmed
The ratings continue to derive strength from the experienced
promoters. The reaffirmation also factors into lease rental
agreement entered into with M/s. Mahindra Holiday & Resorts Pvt.
Ltd. during FY16 (refers to the period April 1 to March 31) for
nine year period.
The ability of HRPL to increase its scale of operations, improve
its profitability, solvency position and debt protection metrics
will remain the key rating sensitivities.
Detailed description of the key rating drivers:
On the back of stabilization of its resort during FY16, HRPL's
total Operating Income (TOI) grew by 26.92% y-o-y during FY16.
However, scale of operations continues to remain small and HRPL
has registered net loss during FY16 owing to high fixed costs
involved during initial years of operations.
On the back of high bank borrowing and low net worth base as on
March 31, 2016, solvency position marked by overall gearing stood
leveraged while debt protection metrics marked by total debt to
GCA and interest coverage ratio also stood weak during FY16.
Liquidity position stood moderate marked by comfortable operating
cycle of 10 days during FY16.
HRPL has been promoted by Mr. Bharat Thakkar, Mr. Kailash Malik,
Mr. Atul Vashi and Mr. Bharat Vashi. Mr. Bharat Thakkar was the
main craftsmen of the project; he holds total experience of more
than one and half decade in the same line of business. From
June 26, 2016 HRPL has entered into lease agreement with M/s.
Mahindra Holiday & Resorts Pvt. Ltd. and handed over the Hatgad
Resort and Anado Palm Resort on lease for nine years.
Hatgad Resort Pvt. Ltd. (HRPL, earlier known as Anando Group) was
promoted by Mr. Bharat Thakkar, Mr. Kailash Malik, Mr. Atul
Vashi, Mr. Bharat Vashi. All the directors have an average
experience of 18 years in the same industry. HRPL owns 'Anando
Palm' resort too. The resort which is located at Saputara- Nasik
highway and it is fully operational HRPL has constructed resort
within timeline and it has been inaugurated in August, 2015 and
FY16 was its first year of operations.
During FY16 (A), HRPL reported net loss of INR1.27 crore on a TOI
of INR2.97 crore as against PAT of INR0.03 crore on a TOI of
INR2.34 crore during FY15. During 9MFY17 (Provisional), THRPL has
achieved a TOI of INR2.55 crore.
HOIN MAL: ICRA Reaffirms B+ Rating on INR9.90cr Cash Loan
---------------------------------------------------------
ICRA has reaffirmed its long-term rating of [ICRA]B+ on the
INR19.40-crore fund-based limits of Hoin Mal Sons Enterprises
Private Limited. The outlook on the long-term rating is 'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term: Fund-
based limits
(Cash Credit) 9.90 [ICRA]B+(Stable); reaffirmed
Long-term: Fund-
based limits
(Term loan) 9.50 [ICRA]B+(Stable); reaffirmed
Rationale
The rating re-affirmation continues to factor in the extensive
experience of the promoters in the steel industry, its
diversified customer base, proximity to raw material sources, and
forward integration into thermo-mechanically treated (TMT) bars.
The ratings, however, remains constrained by the company's
relatively small scale of operations though the revenues showed
an upward trend in FY2016 in the middle of a sluggish
environment. The ratings are further constrained by the company's
weak profitability, stretched capital structure, and weak debt
coverage indicators. The ratings also take into account the
company's scheduled debt repayment obligations, which are large
relative to its projected cash accruals. The ratings also take
into account the highly competitive and fragmented nature of the
industry with competition from both unorganised and established
players resulting in price competitiveness. The ratings also
factor in the vulnerability of the company's profit margins to
raw material fluctuations and finished goods prices which is
further augmented by high inventory holding. The company's
exposure to price risks and demand cyclicality inherent in the
steel sector, which is likely to keep the company's cash flows
volatile, is also a constrain.
Going forward, the company's ability to increase its business
scale given the continuous softening of steel prices globally,
which is further accentuated due to slowdown in demand, post
demonetisation, registering sustained profitability and managing
working capital, remain crucial for maintaining a strong credit
profile.
Key rating drivers
Key Strengths
* Long experience of the promoters in the steel manufacturing
business
* Partially integrated nature of operations
* Commissioning of second induction furnace with lower fuel
consumption expected to result in cost savings
Key Weaknesses
* Nascent stage of operations with nominal accruals
* Pressure on accruals due to low profitability; sizeable debt
repayments over next two years may require further promoters'
support
* Depressed debt protection metrics on account of low
profitability
* Intensely competitive nature of the industry, which exerts
pricing pressures and results in low operating profitability
* Cyclical nature of the steel industry, which is likely to keep
the company's cash flows volatile
* Any slowdown in the end user industries like construction and
real estate segment is likely to result in muted growth for
the company
* Ability to tide over the expected slowdown in demand post
currency demonetisation
* High working capital intensity as a result of high inventory
Days
Description of key rating drivers:
The company commenced operations in FY2015, and at present the
scale of operations remain relatively small though the revenues
showed an upward trend in FY2016 in the middle of a sluggish
environment. The prior experience of the directors aided growth.
The company has partially integrated operations. The billets are
manufactured in-house. Till FY2016 the installed capacity of the
induction furnace was 21,000 MTPA, which increased to 42,000 MTPA
in the current year (as of now, due to lower demand only one
furnace is operational). The company has set up its second
furnace in which the power consumption is lower, power being one
of the key determinants behind the operating profitability.
The company has incurred losses of INR0.17 crore in FY2016 and
the accruals also remain nominal. This has resulted in depressed
coverage indicators. The company's debt obligation in the coming
years is higher than its projected accruals, which will keep the
capital structure leveraged. Further, it faces tough competition
from the unorganised sector as well as other established players.
The products find applications mainly in the construction and
infrastructure sector, and hence, its profitability remained
exposed to the cyclicality associated with infrastructure and
construction activities. The company also faced a temporary slump
in sales in Q3 FY2017, post demonetisation; however, at present,
the demand has picked up.
Hoin Mal Sons Enterprises Private Limited was incorporated in
2008 by Mr. Anshul Chandwani and Mr. Chandan Chandwani, along
with other members of their family. The company commenced
commercial operations in April 2014. It manufactures MS (mild
steel) Billets and TMT (thermo mechanically treated) bars. The
directors have vast experience in the sector. The company is a
part of the Chandwani Group, which has other companies in a
similar line of business. HMPL has an induction furnace for steel
ingots and a unit for MS bars at its manufacturing unit in the
UPSIDC Industrial Area in Rae Bareli. It has a manufacturing
capacity of 42,000 MTPA of MS billets and 30,000 MTPA of TMT
bars.
J.J. AUTOMOTIVE: ICRA Lowers Rating on INR25cr Cash Loan to B+
--------------------------------------------------------------
ICRA has revised downwards the long-term rating assigned to the
INR13.25-crore (revised from INR21.29 crore) term loans,
INR25.00-crore (revised from INR15.75 crore) cash credit limit
and untied limit of INR0.50 crore (revised from INR1.71 crore)
from [ICRA]BB- (pronounced ICRA double B minus) to [ICRA]B+ of
J.J. Automotive Limited. The outlook on the long-term rating has
been also revised from 'negative' to 'stable'. ICRA has
reaffirmed the short-term rating of [ICRA]A4 to the INR0.40 crore
of non-fund based limit (which is a sublimit of cash credit
facility) of JJAL.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based limit-
Term Loans 13.25 [ICRA]B+ (Stable) downgraded
from [ICRA]BB-(Stable)
Fund-based limit-
Cash Credit 25.00 [ICRA]B+ (Stable) downgraded
from [ICRA]BB-(Stable)
Fund-based limits-
Untied Limits 0.50 [ICRA]B+ (Stable) downgraded
from [ICRA]BB-(Stable)
Non-fund Based
Limits-Letter of
Guarantee (0.40) [ICRA]A4 reaffirmed
Detailed Rationale
The ratings primarily take into account the continuing delay
witnessed in commission of the showroom-cum-real estate project,
which led to a cost overrun; any further delay might impact the
overall project cost and affect the overall business risk profile
of the company. The ratings are also constrained by the
significant debt repayment obligations which commenced before the
commissioning of the project, which has led the company to rely
further on external borrowings and any further delay in bookings
for sale/ rent in the project might lead to cash flow mismatch.
The ratings also consider the cash losses suffered by JJAL in H1
FY2017, primarily on account of reduced incentives/discount from
HMIL. The rating continues to remain constrained on account of
JJAL's weak financial profile characterised by a leveraged
capital structure and depressed level of coverage indicators.
ICRA also takes note of the high competition prevailing among
dealers of various automobile and auto component manufacturing
companies, and the commission structure decided by the principal
that keep margins under check.
The ratings, however, derive comfort from the long experience of
the promoters in the vehicle dealership business and established
brand name of 'Bengal Hyundai' in the Kolkata market. ICRA also
considers the established dealer network for its auto component
business in eastern India, positively supports the top-line and
profitability to some extent.
Going forward, the company's ability to timely completion of the
project and generate adequate cash inflows from the overall
business to service the debt obligations would remain the key
rating sensitivities.
Key rating drivers
Credit Strengths
* Long experience of the promoters in the vehicle dealership
business, and the established brand name of "Bengal Hyundai"
in the Kolkata market
* Established dealer network in the auto component business,
with branches spread across five states in eastern India
Credit Weaknesses
* Continuing delay witnessed in commission of the showroom cum
real estate project, leading to cost overrun; any further
delay in the commissioning is likely to adversely impact the
cash flows of the company, going forward
* Debt repayment obligations commenced before the project
commissioning has led the company to rely further on
external borrowings; any further delay in bookings for sale/
rent in the project might lead to cash flow mismatch
* Cash losses suffered by the company in H1 FY2017 primarily
on account of reduced incentives/discount from HMIL
* Weak financial profile, characterised by a leveraged capital
structure and depressed coverage indicators
* High competition amongst other dealers of various automobile
and the commission structure decided by the principal, putting
pressure on margins
Detailed description of key rating drivers highlighted:
JJAL is an authorized dealer of Hyundai Motor India Limited
(HMIL)'s passenger vehicles (PV) engaged in the sale of vehicle
(new and pre-owned) and spare parts. JJAL also earns income in
the form of incentives from HMIL and payout from financiers. At
present, JJAL has five showrooms in Kolkata and surrounding
areas, while it offers a majority of its servicing facility via
workshops of its group companies. The company also operates a
separate auto component division and it supplies critical auto
components manufactured by various original equipment
manufacturers (OEMs), needed in two-wheelers, light, medium and
heavy commercial vehicles.
The revenue contribution from its new vehicle segment has
remained at around 50% (49% in FY2015) in FY2016, whereas
contribution from the sale of auto component and spare parts,
accounted for around 37% and 3% of its total sales in FY2016
respectively. Intense competition among various dealers puts
pressure on the pricing, adversely impacting the profitability of
the players. Further, the profitability, in case of vehicle
dealers, is mainly driven by the efficiency of workshop
operations, as the profit from sale of new vehicles is limited to
the basic dealer's margin set by the OEM. Moreover, in the
current fiscal the company was not able to achieve the sale
targets in few months given by HMIL, due to which the company has
received low incentives from HMIL.
The company is in the process of constructing a showroom cum real
estate property at 'Auto Hub' in Rajarhat, Kolkata, which is
being developed in two basements and it is a nine storey
building. JJAL has developed an area of around 125,000 sq. ft.
(square feet) in the property, out of which around 75,000 sq. ft.
will be sold to the customers, while the remaining area will be
used by JJAL for its own showroom and administrative office.
The repayments for the debts taken for the capex started in
February 2015, i.e. before the commissioning date and the company
was unable to sell/rent its property or receive any advance from
prospective customers, JJAL serviced the debts by infusion of
unsecured loan from their group entities. However, ICRA expects
that debt repayment obligations for the same might lead to a cash
flow mismatch in near to medium term.; although sale of a portion
of property at 'Auto Hub' may mitigate such risk to a large
extent. However, ongoing slowdown in the commercial real estate
market in Kolkata and the lack of bookings till date exposes the
project to off-take risks and also expected realizations.
The operating income of JJAL grew by 11% from INR153.54 crore in
FY2015 to INR170.95 crore in FY2016, primarily on account of
increase in average realization of vehicles. In H1 FY17, JJAL
managed to achieve a turnover of INR75.84 crore. The operating
margin has declined continuously in FY 2016 owing to increased
competition, leading to pass on more discounts to its customers.
Moreover, during the current fiscal the company was not able to
achieve the sale targets in few months given by HMIL, due to
which the company has received low incentives from HMIL. As
indicated by the management, they have also reducing credit terms
given to its auto component dealers, which have impacted the
sales and margins from its auto component division. Both the
factors impacted the operating margins of the company sharply in
H1 FY17. Further, on account of steep decline in the operating
margins, high interest costs has let the company to post cash
losses in H1 FY17.
Moreover, on account of the ongoing debt funded capex, the
capital structure has remained aggressive over the past few
years. The gearing levels of the company deteriorated to 3.47
times as on 31st March, 2016 from 2.83 times as on 31st March,
2015 due to increase in working capital borrowings and infusion
of unsecured loan from the promoters to repay the term loans. On
account of low profitability and high gearing, the coverage
indicators continue to remain at a depressed level, as reflected
by OPBDITA/ Interest & Finance charges of 1.25 time (1.90 time in
FY2015), NCA/Total Debt of 1% (3% in FY2015) and Total
Debt/OPBDITA of 17.23 time (10.45 time in FY2015) during FY2016.
Analytical approach: For arriving at the ratings, ICRA has taken
into account the debt-servicing track record of JJAL, its
business risk profile, financial risk drivers and management
profile.
JJAL was incorporated in 1981 primarily as an auto component
dealer of various OEM's. In 1998 it became a dealer of Hyundai
Motor India Limited (HMIL) and began operations under the brand
name of "Bengal Hyundai". The company currently operates through
five showrooms, spread across Kolkata. At present, JJAL provides
the majority of its servicing facility and insurance option to
its customers via its group companies. JJAL also operates an auto
component division, which is the authorised dealer for various
auto components OEM's and has six branches located at Kolkata,
Guwahati, Patna, Siliguri, Ranchi and Cuttack.
KIRTILAL M: ICRA Reaffirms B+ Rating on INR108.66cr Loan
--------------------------------------------------------
ICRA has revised the long-term rating assigned to the INR108.66
crore1 fund based bank limits and INR1.34 un-allocated limits of
Kirtilal M Shah to [ICRA]B+ from [ICRA]BB-. ICRA has also re-
affirmed the short-term rating of [ICRA]A4 assigned to the
aforementioned fund-based and un-allocated limits. The outlook on
the long-term rating is 'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund Based Limits 108.66 [ICRA]B+ (Stable); revised
from [ICRA]BB- (Stable)
and [ICRA]A4; re-affirmed
Un-allocated limits 1.34 [ICRA]B+ (Stable); revised
from [ICRA]BB- (Stable) and
[ICRA]A4; re-affirmed
Rationale
The rating revision factors in the weakened financial profile of
the firm in FY2016 and 9M FY2017 as evident from decline in
operating income on account of slowdown in demand from key export
destinations. ICRA notes the dip in profitability and
deterioration in the liquidity position of the firm emanating
from sluggish receivables and high inventory levels.
Consequently, the firm's reliance on working capital borrowings
has remained high leading to a leveraged capital structure and
weak coverage indicators. The ratings further take into account
the risks associated with KMS's status as a partnership firm,
wherein substantial withdrawals as witnessed during FY2015 and
FY2016 would adversely impact the capital structure. The ratings
also factor in the susceptibility of KMS's profitability to
volatility in diamond prices and adverse movements in foreign
exchange. However, the same is mitigated to an extent by a
natural hedge in the form of exports and dollar denominated
domestic earnings via Diamond Dollar Account (DDA). Additionally,
the presence of intense competition from organised as well as
unorganised players in the industry limits the firm's pricing
flexibility.
The ratings, however, continue to favourably factor in the
established experience of the partners in the CPD industry; and
the firm's established relations with its customers, which
ensures repeat orders.
Key rating drivers
Credit Strengths
* Longstanding experience of the partners in the cut and
polished diamond (CPD) business;
* Established relations with clients ensures repeat orders.
Credit Weakness
* De-growth in operating income in FY2016 and 9M FY2017 on
account of challenging demand scenario in key export markets;
* Risks associated with the legal status of the entity as a
partnership firm, including the risk of capital withdrawal by
the partners as witnessed during FY2015 and FY2016;
* Financial profile characterised by stretched receivables
entailing high reliance on working capital borrowings,
resulting in highly leveraged capital structure and weak
coverage indicators;
* Susceptibility of profit margins to fluctuations in rough and
polished diamond prices and foreign exchange fluctuations;
* Industry characterised by severe competition from players in
the unorganised as well as organised sectors.
Description of key rating drivers highlighted:
The operating income of the firm declined by ~12% and ~19% in
FY2016 and 9M FY2017, respectively, following a decline in the
sales volume because of weak demand from the key export markets.
The firm's exports to Belgium and Hong Kong declined by 30% and
25%, respectively, in FY2016, following the continued weakness in
European markets coupled with slowdown in China, which adversely
impacted its revenues. The firm extends elongated credit of 90-
150 days to its customers, which together with its high inventory
levels necessitate high reliance on working capital borrowings.
Consequently, KMS's capital structure remains highly leveraged,
which owing to its low profitability is coupled with weak
coverage indicators. Furthermore, the partners of the firm have
withdrawn profits of INR2.43 crore and INR1.76 crore in FY2015
and FY2016; and any further withdrawals will adversely impact the
firm's capital structure. The firm's profitability remains
susceptible to volatility in diamond prices. Furthermore, with
~54% of the firm's procurement met through imports, the profits
also remain vulnerable to adverse fluctuations in foreign
exchange, which remains mitigated to the extent of natural hedge
provided by exports and sales through DDAs, however.
Additionally, the presence of intense competition from organised
as well as unorganised players in the industry imits the firm's
pricing flexibility.
Nevertheless, the partners of the firm have an experience of over
four decades in the CPD industry, which lends some comfort. Over
the years, the firm has also developed established ties with its
key customers, which ensures repeat orders, supporting future
revenue growth.
Analytical approach:
ICRA has assigned the ratings following a detailed evaluation of
the issuer's business and financial risks.
Established as a partnership firm in 1968, Kirtilal M Shah (KMS)
processes and exports polished diamonds. The firm also trades in
rough and polished diamonds. KMS primarily deals in diamonds
ranging from 30 cents to 5 carats, with majority of its revenues
being derived from the sale of diamonds sized 1 carat and above.
The firm is collectively managed by the six partners -- Mrs.
Sonal V. Shah, Mr. Nalin J. Shah, Mr. Dipak G. Shah, Mr. Dilip G.
Shah, Mr. Pankaj G. Shah and Mr. Sunil Gagaldas Shah. KMS has a
marketing office at Mumbai and two diamond polishing facilities
at Surat and Navsari (Gujarat).
KMS reported a net profit after tax and depreciation of INR1.51
crore on an operating income of INR247.45 crore for the period
ended March 31, 2016.
KIRTILAL M SHAH: ICRA Reaffirms 'B' Rating on INR10cr Loan
----------------------------------------------------------
ICRA has revised the long-term rating assigned to the INR108.66
crore1 fund based bank limits and INR1.34 un-allocated limits of
Kirtilal M Shah to [ICRA]B+ from [ICRA]BB-. ICRA has also re-
affirmed the short-term rating of [ICRA]A4 assigned to the
aforementioned fund-based and un-allocated limits. The outlook on
the long-term rating is 'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund Based Limits 10.00 [ICRA]B (Stable) Reaffirmed
Unallocated Limits 0.73 [ICRA]B (Stable) Reaffirmed
Rationale
The rating revision factors in the weakened financial profile of
the firm in FY2016 and 9M FY2017 as evident from decline in
operating income on account of slowdown in demand from key export
destinations. ICRA notes the dip in profitability and
deterioration in the liquidity position of the firm emanating
from sluggish receivables and high inventory levels.
Consequently, the firm's reliance on working capital borrowings
has remained high leading to a leveraged capital structure and
weak coverage indicators. The ratings further take into account
the risks associated with KMS's status as a partnership firm,
wherein substantial withdrawals as witnessed during FY2015 and
FY2016 would adversely impact the capital structure. The ratings
also factor in the susceptibility of KMS's profitability to
volatility in diamond prices and adverse movements in foreign
exchange. However, the same is mitigated to an extent by a
natural hedge in the form of exports and dollar denominated
domestic earnings via Diamond Dollar Account (DDA). Additionally,
the presence of intense competition from organised as well as
unorganised players in the industry limits the firm's pricing
flexibility.
The ratings, however, continue to favorably factor in the
established experience of the partners in the CPD industry; and
the firm's established relations with its customers, which
ensures repeat orders.
Key rating drivers
Credit Strengths
* Longstanding experience of the partners in the cut and
polished diamond (CPD) business;
* Established relations with clients ensures repeat orders.
Credit Weakness
* De-growth in operating income in FY2016 and 9M FY2017 on
account of challenging demand scenario in key export markets;
* Risks associated with the legal status of the entity as a
partnership firm, including the risk of capital withdrawal by
the partners as witnessed during FY2015 and FY2016;
* Financial profile characterised by stretched receivables
entailing high reliance on working capital borrowings,
resulting in highly leveraged capital structure and weak
coverage indicators;
* Susceptibility of profit margins to fluctuations in rough and
polished diamond prices and foreign exchange fluctuations;
* Industry characterised by severe competition from players in
the unorganised as well as organised sectors.
Description of key rating drivers highlighted:
The company reported a de-growth of ~17% in operating income due
to unfavorable market conditions and small scale of operations.
The profitability remains low owing to limited value additive
nature of business and highly fragmented as well as competitive
nature of the industry with numerous organized and unorganized
players. The inventory levels are linked to cotton prices hence
the company tends to procure higher quantities of raw cotton in a
falling price regime with anticipation of higher realizations in
the short-term which leads to high working capital requirements.
NAFPL relies on external borrowings to fund these requirements as
reflected by a gearing of 3.25 times as on March 31, 2016.
However, the cash flows for the company turned positive in FY2016
supported by improvement in profitability as well as working
capital management.
Incorporated in 2007, Nano Agro Foods Pvt. Ltd. is involved in
the business of ginning and pressing of raw cotton to produce
cotton bales and cotton seeds with its manufacturing facility
located at Rajkot (Gujarat). The company is equipped with 30
ginning machines and 1 pressing machine with an installed
capacity of processing 170 bales per day.
NAFPL recorded a net profit of INR0.01 crore on an operating
income of INR49.33 crore for the year ending March 31, 2016.
KUMAR MOTOR: ICRA Reaffirms 'B' Rating on INR3.90cr Term Loan
-------------------------------------------------------------
ICRA has reaffirmed the long-term rating of [ICRA]B assigned to
the INR1.60 crore cash credit facility and INR3.90 crore term
loan facility of Kumar Motor Corporation Private Limited. ICRA
has also reaffirmed the short-term rating of [ICRA]A4 to the
INR0.31 crore bank guarantee of KMCPL. ICRA has also reaffirmed
rating of [ICRA]B/[ICRA]A4 assigned to the INR10.69 crore
unallocated limit of KMCPL. The outlook assigned on the long-term
rating is 'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term-Cash
Credit 1.60 [ICRA]B (Stable); re-affirmed
Long Term-Term
Loan 3.90 [ICRA]B (Stable); re-affirmed
Short Term-Bank
Guarantee 0.31 [ICRA]A4; re-affirmed
Unallocated Limits 10.69 [ICRA]B (Stable)/[ICRA]A4;
re-affirmed
Rationale
The ratings continue to remain constrained by the moderate scale
of the company's operations that limits economies of scale and
the high working capital requirements in the automobile
dealership business leading to a stretched liquidity position.
The ratings consider the vulnerability of the sales to the
cyclicality of passenger vehicle industry and intense competition
from other OEM dealerships in the region thereby limiting growth
to an extent. The ratings also factor in the company's financial
profile characterized by subdued profitability, stretched capital
structure and weak coverage indicators. The ratings are, however,
supported by the long track record and experience of the
promoters in automobile dealership business spanning over two
decades and established presence of the company as a sole dealer
for Volkswagen for the entire North Karnataka region. With the
launch of Ameo in June 2016, which is specifically designed for
the domestic market, KMCPL has sold 341 cars during 9M FY 2017
against 325 cars during the same period in FY 2016 despite
slowdown in November 2016 due to demonetisation.
Going forward, the company's ability to scale up its operations,
improve profitability and efficiently manage its working capital
requirement will remain the key rating sensitivities.
Key rating drivers
Credit Strengths
* Strong promoter background, with Group engaged in other
automobile dealerships
* Sole authorized dealer for Volkswagen cars in North Karnataka
region
Credit Weakness
* Moderate scale of operations limits economies of scale
* Working capital intensive nature of dealership business leads
to stretched liquidity
* Financial profile remains stretched with subdued
profitability, high gearing and inadequate coverage indicators
* Low market share of Volkswagen in India; intense competition
from other Original Equipment Manufacturer (OEM) dealerships
in the region limits growth to an extent
* Exposure to cyclical nature of the Indian Passenger Vehicle
industry
Description of key rating drivers highlighted:
Based on SIAM's classification, the Indian PV industry may be
grouped into three main categories - Passenger Cars (PCs),
Utility Vehicles (UVs) and Vans. In 9M 2016-17, the passenger car
segment, which constitutes 70% of the domestic volume, grew by
2.46% followed by 32.99% in utility vehicles and 1.67% in the van
segment. While demonetization put a brake on industry growth
during Q3FY17, the scenario seems to ease considerably in Jan-17.
Also, about 70% of PVs in India are financed, which insulate the
segment from liquidity crunch faced by other automotive segments
like 2W and tractors. With the launch of 'Ameo' in June 2016,
Volkswagen's market share in the domestic market increased
marginally to 1.66% in 9M FY 2017 (1.50% in 9M FY 2016) with
'Ameo' contributing ~35% of the total number of the cars sold.
KMCPL is the solo Volkswagen car dealer for North Karnataka
region. Sales of vehicle forms the major revenue segment for the
company i.e. ~77% in FY 2016 with income from other streams
forming a small (albeit increasing) proportion of the revenues.
The company's portfolio is dominated by 'Polo' and 'Vento' and
its sales volume remained stagnant during FY 2016 after declining
for two consecutive years due to intensified competition with the
launch of many new models by its competitors. Nevertheless, the
company was able to sell higher number of cars i.e. 341 during 9M
FY 2017 (314 in 9M FY 2016) due to the new launch despite being
some slowdown in November-2016 on account of demonetization.
Higher proportion of revenue from the high margin segments i.e.
service income, spare parts and dealer's incentive have led to
improved operating profitability during FY 2015 and FY 2016.
However, due to the low value added nature of dealership
operations, operating margin remained weak at absolute level. Net
worth of the company has eroded over the years owing to the net
losses incurred by the company over FY 2012-FY 2015. KMCPL's
capital structure remain stressed owing to the high working
capital borrowings, which along with weak profitability leads to
inadequate coverage indicators.
Incorporated in 2009, KMCPL is an authorized dealer for passenger
cars of Volkswagen India Private Limited for the entire North
Karnataka region. The target market of the company includes
Davangere, Dharwar, Karwar, Haveri, Gadag, Koppal, Bellary,
Raichur, Belgaum and Hubli. KMCPL presently has two showrooms,
one each at Hubli and Belgaum, with 3S (i.e. sales, spares and
service) facility. In addition, the company also has two
stockyards, one each at Hubli and Belgaum. The company was
promoted by Mr Shashikumar Desai who has more than 23 years of
experience in the automotive dealership business.
For FY 2016, the company reported a net profit of INR0.24 crore
on an operating income of INR42.57 crore against a net loss of
INR0.16 crore on an operating income of INR38.75 crore in FY
2015.
LAXMI VENKATESH: CARE Reaffirms B+ Rating on INR7.75cr LT Loan
--------------------------------------------------------------
The rating assigned to the bank facilities of Laxmi Venkatesh
Ginning and Pressing Factory continues to be constrained by
modest scale of operations with low capitalization, low
profitability with susceptibility to fluctuation in the raw
material prices and seasonality associated with cotton
availability, leveraged capital structure, presence in a highly
fragmented and regulated cotton industry with limited value
addition and working capital intensive nature of operations and
limited financial flexibility owing to partnership nature of
constitution.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 7.75 CARE B+; Stable Reaffirmed
The above weaknesses are partially offset by the extensive
experience of the promoters along with long track record of
the firm and location advantage emanating from proximity to the
raw material.
The ability of the firm to increase its scale of operations and
improve profitability and capital structure while managing its
working capital requirement effectively remain the key rating
sensitivities.
Detailed description of the key rating drivers:
The total operating income of the firm has seen a volatile trend
in the last three years ended FY16 on account of the stressed
industry condition owing to the below moderate monsoon in the
last three years. The scale of operations remained modest with
low net-worth base of INR4.68 crore as on March 31, 2016,
limiting its financial flexibility. Profit margins of the entity
low and in a close range of 3.62% to 3.68% owed to limited value
addition nature of business and presence in competitive nature of
industry. The solvency profile, though deteriorated remained
leveraged owing to high dependence on external borrowings to
support the operations. The operations of the firm are working
capital intensive in nature with payments to suppliers made in on
a cash bases and seasonality associated with raw material
availability resulting high limit utilization during the peak
season. However, LVGPF has an established track record of 14
years in the industry and also the partners of the firm have
experience of more than two decades in the cotton ginning
industry through its various group entities.
Beed-based LVGPF was established as a partnership firm on
July 25, 2003, with 2 partners, Mr. K. Murlikrishna and Ms B
Sidamma, sharing profit equally. LVGPF is engaged in the business
of cotton ginning, pressing and trading of ginned cotton and
cotton seeds. The firm procures raw cotton directly from the
local farmers and has an installed capacity of 1,680 Quintals /
day as on March 31, 2016. Its manufacturing unit is located in
Village Bhopa District of Beed (Maharashtra).
During FY16, the firm has set up an oil mill which is operational
since February 2016. During FY16, the firm booked a total
operating income of INR39.90 crore (as against INR32.48 crore in
FY15) and PAT of INR0.48 crore (as against INR0.51 crore in
FY15).
M-BO GRANITO: ICRA Assigns 'B' Rating to INR42.05cr Loan
--------------------------------------------------------
ICRA has assigned a long-term rating of [ICRA]B to the 42.05
crore (enhanced from 8.80 crore) enhanced fund based limits of M-
BO Granito LLP. ICRA also has a short-term rating of [ICRA]A4
outstanding to the INR3.95 crore (reduced from INR4.20 crore) Non
Fund Based Limits of M-BO Granito LLP. The outlook on the long
term rating is 'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund Based Limits 42.05 [ICRA]B (Stable)
Assigned/Outstanding
Non Fund Based Limits 3.95 [ICRA]A4 Outstanding
Rationale
The assigned/reaffirmed ratings are constrained by the nascent
stage of the firm's operations and the risk associated with
stabilisation of the plant as per the expected operating
parameters. The ratings also remain constrained by the highly
fragmented nature of the tiles industry, resulting in intense
competitive pressures; the cyclical nature of the real estate
industry which is the main consuming sector; and the exposure of
the firm's profitability to volatility in raw material and gas
prices as well as to adverse foreign exchange fluctuations.
Further, the assigned/reaffirmed ratings take into account the
firm's financial profile, which is expected to remain stretched
in the near term given the debt-funded nature of the project and
impending debt repayment.
The assigned/reaffirmed ratings, however, favourably factor in
the experience of the promoters in the ceramic industry, the
location advantage of the firm for raw material procurement by
virtue of its presence in Wankaner (Gujarat) and the benefits
derived from its group concerns in terms of marketing and
distribution.
Going forward, the timely commissioning of operations within the
estimated cost will remain important from the credit perspective.
The ability of the firm to establish a market for its products;
scale up its operations in a profitable manner amidst intense
competition and maintain a healthy financial risk profile will be
some of the key rating sensitivities.
Key rating drivers
Credit Strengths
* Extensive experience of the promoters in the ceramic industry
* Proximity to raw material sources
* Marketing and operational support from associate concerns
Credit Weakness
* Risks associated with stabilisation and successful scale up
of operations as per expected operating parameters
* Significant debt repayments coupled with long gestation period
likely to keep the credit profile constrained over the near
term
* Competitive business environment given the fragmented nature
of industry that has a large number of regional ceramic tile
manufacturers
* Profitability to remain susceptible to volatility in raw
material and fuel prices
Description of key rating drivers highlighted:
MBGL proposes to manufacture medium and large sized glazed
vitrified tiles. The unit has an estimated installed capacity of
producing 1,30,500 metric tonnes of tiles per annum with an
estimated project cost is INR53.60 crore. The commercial
operations are estimated to commission in January end, 2017,
earlier than the projected commissioning of April 2017.
Nonetheless, project execution risks remain and timely
commissioning of the project would remain important from a rating
perspective. The aggressive D/E ratio for the project and
significant debt repayments coupled with long gestation period is
likely to keep the credit profile constrained over the near term.
The ceramic industry is highly fragmented and the company's
ability to compete with several other organised and unorganised
players and maintain adequate profitability despite volatility in
raw material and fuel prices remain the key rating sensitivities.
Nevertheless, the extensive experiences of promoters vide their
association with other ceramic units is expected to support the
operations of the company.
M-BO Granito LLP, incorporated in June 2016, is setting up a
greenfield project at Wankaner in Gujarat to manufacture medium
and large sized glazed vitrified tiles of 600X600mm and
800X800mm. The unit has an estimated installed capacity of
producing 1,30,500 metric tonnes of tiles per annum. The
commercial operations are expected to commission in January end
2017, earlier than the estimated commencement in April 2017. The
promoters have proven experience in the ceramic industry by
virtue of their association with other ceramic units as partners
or directors.
MAHAVIR EDUCATIONAL: ICRA Reaffirms B- Rating on INR3.82cr Loan
---------------------------------------------------------------
ICRA has re-affirmed the long term rating of [ICRA]B- to the
INR3.82-crore fund-based facility of Mahavir Educational Society
(MES). ICRA has also assigned the rating of [ICRA]B- to the
unallocated amount of INR3.30 crore. The outlook assigned on the
long-term rating is 'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term-Fund-
based Limits 3.82 Re-affirmed [ICRA]B-(Stable)
Unallocated 3.30 Re-affirmed [ICRA]B-(Stable)
Detailed Rationale
ICRA's rating continues to derive strength from MES' experienced
management profile as well as the society's agreement with the
Delhi Public School (DPS) society, which provides an established
brand name to the society's school. While the society witnessed
moderate improvement in enrolments to 706 students from 593
students in Academic Year (AY) 2016-17, given the relatively high
fixed establishment expenses; and significant interest expenses,
resulting from stretched capital structure, the society continued
to incur cash losses and remained dependent on timely funding
support from members for managing its cash flows. Thus, the
rating remains constrained by a weak financial profile, apart
from MES' small scale of operations, given its single asset
nature. Going forward, the society's ability to attract fresh
enrolments and receive timely support will be the key rating
sensitivities.
Key Rating Drivers
Credit Strengths
* Healthy ramp up in student base
* Association with reputed DPS Brand lends the school an
established brand name and provides it operational and
management expertise
Credit Weaknesses
* Modest scale of operations owing to initial years of operation
and single asset nature of operations of the company
* Cash losses being incurred by the society owing to the initial
gestation period and high debt levels. Stretched capital
structure characterized by negative net worth, with a majority
of the contributions from society members in the form of
interest-bearing unsecured loans
* Intense competition from a large number of schools located
within the vicinity
Description of key rating drivers:
The ratings assigned favorably factors in the moderate increase
in the total enrolments in MES' school aided by strong brand
recognition. The school has started class XI from AY2016-17 and
the growth was largely led by good enrolments in class XI. The
enrolments, however, remained weak in the junior sections due to
limited track record of the school coupled with high fees as
compared to other schools operating in the vicinity. The school
witnessed an overall occupancy of 70% in AY2016-17.
Although the operating surplus remains healthy, given the modest
operating scale and debt-funded capex resulting in high interest
costs, MES remained in cash losses till FY2016. Further, the
capital structure and coverage indicators of the society remained
weak with negative gearing and NCA/TD as on March 31, 2016 and
TD/Operating Surplus of 13.60x for FY2016. While the risk of cash
flow mismatches and liquidity pressure exists, given that the
debt obligations are being met by promoters funding in the form
of unsecured loans. The repayment shall be stepped up going
forward owing to the ballooning nature of the loan.
Incorporated in 2011, MES is a single asset society which runs
and operates 'Delhi Public School' in Kurukshetra (Haryana). The
school commenced operations in AY2012-13 and at present caters to
students till Standard XI. It proposes to commence admissions for
Standard XII from AY2017-18 onwards. The society is managed by a
board of seven members and is headed by Mr. Subhash Chand Jain.
The members have significant experience in the education sector
and are associated with other educational institutions as well.
The society reported a cash loss of INR1.72 crore on revenue
receipts (RR) of INR4.03 crore in 2015-16 as against a cash loss
of INR1.94 crore on RR of INR3.44 crore in the previous year.
MAHESH LUMBER: ICRA Lowers Rating on INR10cr Loan to 'D'
--------------------------------------------------------
ICRA has revised the long-term rating from [ICRA]BB+ to [ICRA]D
on the INR10.00-crore fund-based limits. ICRA has also revised
the short-term rating from [ICRA]A4+ to [ICRA]D on the INR20.00-
crore non-fund based limits of Mahesh Lumber Private Limited.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based Limits 10.00 [ICRA]D; revised from
[ICRA]BB+ (Stable)
Non-fund based
Limits 20.00 [ICRA]D; revised from
[ICRA]A4+
Rationale
ICRA's rating action is driven by the continued high utilisation
of fund-based limits and the instances of devolvement of Letters
of Credit (LC) on account of the company's stretched liquidity
profile. ICRA takes note of MLPL's low value-adding and highly
competitive timber trading industry, which has resulted in low
profitability and the vulnerability of the company's
profitability to fluctuations in timber prices and regulatory
risk related to imported timber. ICRA also takes cognizance of
the extensive experience of the promoters and their longstanding
relationships with the clients. Going forward, a sustained
improvement in the liquidity position and a track record of
timely debt servicing will be the key rating sensitivities.
Mahesh Lumber Private Limited is a privately owned company that
was incorporated in September 2014. The company is managed by Mr.
Ashok Mittal and is a part of the Mahesh Group, which has been
trading timber since 1952. The company trades particularly in
German Pine Timber. The timber is procured either directly from
Germany or from various third party importers in India.
MAXHEAL PHARMACEUTICALS: CARE Lowers Rating on INR12cr Loan to B+
----------------------------------------------------------------
The revision in the long-term rating assigned to the bank
facilities of Maxheal Pharmaceuticals (India) Limited is mainly
on account of decline in operating income and cash accruals along
with deterioration in capital structure and debt coverage
indicators during FY16 (refers to the period April 1 to
March 31).
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long /Short-term 12 CARE B+; Stable/CARE A4
Bank Facilities LT Rating revised from
CARE BB-, ST Rating
Reaffirmed
Short-term Bank
Facilities 7 CARE A4 Reaffirmed
The ratings continue to remain constrained by modest scale of
operations with low capitalization, fluctuating profit margins,
moderately leveraged capital structure and weak debt coverage
indicators and working capital intensive nature of operations
with elongated collection period. The ratings also remained
constrained on account of its presence in highly fragmented,
regulated and competitive pharmaceutical industry, susceptibility
of margins to volatile raw material prices and exposure to
foreign exchange rate fluctuation.
The ratings continue to derive strength from the long experience
of promoters in the pharmaceutical industry, support from group
entities engaged in similar business, long track record of
operation with established presence in African countries along
with certified manufacturing facility.
The ability of MPL to increase its scale of operations and
improve profitability and capital structure with efficient
working capital management are the key rating sensitivities.
Detailed description of the key rating drivers:
The scale of operations of MPL has remained modest with low net
worth base depriving it of benefits of economies of scale.
Furthermore, total operating income and cash accruals have been
declining during last three years ending FY16 on account of lower
sales volume and fluctuation in the foreign exchange rates and
volatility in input prices. Furthermore, owing to recently
completed debt-funded capex and low cash accruals, capital
structure of the company remained leveraged with weak debt
coverage indicators. Operations of the entity remained working
capital intensive owing to large amount of funds blocked in
debtors and inventory leading to high dependence on working
capital borrowings. However, the promoters have experience of
over 30 years in the pharmaceutical industry along with support
from group entities which are engaged in similar business.
Furthermore, the entity has a long track record of operations
with certified manufacturing facility having established presence
in African countries.
MY CAR: ICRA Assigns 'B' Rating to INR22.48cr Fund Based Loan
-------------------------------------------------------------
ICRA has assigned the long-term rating of [ICRA]B to the enhanced
amount of INR22.48-crore (enhanced from INR10.00 crore) of fund-
based facilities of My Car Nexa Private Limited . The outlook on
the long-term rating is 'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based Limits 22.48 [ICRA]B (Stable);
assigned/outstanding
Rationale
ICRA's rating continues to be constrained by MCNL's limited track
record of operations and the intense competition it faces from
other OEM1 dealerships in the vicinity. The rating also continues
to factor in the weak financial profile of the company
characterized by low net-worth and high working capital
requirements, which are largely debt funded, leading to a
leveraged capital structure and weak debt protection metrics. The
rating also continues to be subdued due to the low bargaining
power of the company, wherein pricing policies are determined by
Maruti Suzuki India Ltd (MSIL), which keeps the profitability
under check, and exposure to the inherent cyclicality of the
passenger vehicle industry by virtue of its linkage to
macroeconomic environment.
However, the rating continues to favorably factor in the long
track record and experience of the promoters in the automobile
dealership business and the favorable demand prospects for MCNL,
with positive response towards launch of MSIL's premium offerings
under the 'NEXA' brand. The rating also continues to take into
account the continued market leadership of MSIL as the largest
domestic passenger car manufacturer. The company's ability to
augment its revenue in a profitable manner, while optimally
managing its working capital cycle, and bring about an
improvement in its capital structure will be the key rating
sensitivities.
Key rating drivers
Credit Strengths
* Three-decade long presence of the promoters in the automobile
dealership business
* Benefits from MSIL's leadership position in the Indian
passenger car industry
Credit Weakness
* Limited track record of operations
* Stiff competition from other Original Equipment Manufacturers
(OEMs) dealer of passenger cars
* Stretched liquidity position as reflected in the high working
capital utilisation levels
* Low margins as commission on vehicles, spares, service and
accessories are all controlled by the principal (OEMs)
Description of key rating drivers highlighted:
The company became operational in January 2016 and started making
sales from February. In the two months, the company had achieved
sales of INR2.64 crore. In 5M FY2017, the company achieved sales
of INR17.09 crore and in 9M FY2017 the company achieved sales of
INR53.44 crore and expects to close the year with sales of INR90
crore. The company achieved less-than-expected sales in 5M FY2017
as supply was disrupted due to fire in the facilities of MSIL's
supplier of air-conditioning compressors. As of now, the order
lead time for customer from booking to receipt of vehicle is 4-5
months because of slow supply. As per the management, MSIL
manages supplies across India, depending on the festive seasons.
In October, November and December (the festive season in North
India) the company's average sale has been ~11 crore. The launch
of new model, Ignis under NEXA, will further help in enhancing
the sales. From January-end, the Gujarat plant of MSIL is
expected to become operational, which will further boost the
sales.
Incorporated in 2015, My Car Nexa Pvt Ltd is an authorised dealer
in Kanpur, Uttar Pradesh for passenger cars manufactured by MSIL
under the brand NEXA. The showroom became operational in January
2016 and at present, the cars sold through NEXA are premium
cross-over, S-Cross and premium hatchback, Baleno.
The company incurred a net loss of INR0.25 crore on an operating
income of INR2.66 crore in FY 2016. The company, on a provisional
basis, reported an operating income of INR53.44 crore for eight
months ending November 30, 2016.
NIRVANA FASHION: Ind-Ra Affirms 'BB-' Long-Term Issuer Rating
-------------------------------------------------------------
India Ratings and Research (Ind-Ra) has affirmed Nirvana Fashion
Clothing's Long-Term Issuer Rating at 'IND BB-'. The Outlook is
Stable. The instrument-wise rating actions are:
-- INR90 mil. Fund-based limits affirmed at IND BB-/Stable
Rating; and
-- INR30 mil. Non-fund-based limits affirmed at IND A4+ rating
KEY RATING DRIVERS
The affirmation reflects Nirvana's continued small scale of
operations and moderate credit profile. FY16 financials indicate
revenue of INR380 million (FY15: INR390 million), net financial
leverage (adjusted net debt/operating EBITDA) of 6.8x (7.1x) and
interest coverage of 1.6x (1.5x) along with EBITDA margins of 5%
(4.4%). The revenue declined in FY16 due to a lower number of
work orders executed and the margins rose because of the cost
control measures undertaken by the management to reduce wastage.
The ratings continue to be supported by around five decades of
experience of Nirvana's founders in the garments industry. The
ratings are also supported by the firm's comfortable liquidity
position as reflected in its 96.1% average utilization of the
working capital limits in the 12 months ended December 2016.
RATING SENSITIVITIES
Positive: A sustained increase in the revenue along with an
improvement in the overall credit metrics will be positive for
the ratings.
Negative: Any deterioration in the overall credit metrics will be
negative for the ratings.
COMPANY PROFILE
Nirvana was established by Biyani family in 1996 as a partnership
firm. The firm manufactures readymade garments, such as shirts
and trousers for men; shirts, trousers, dresses and tops for
women' and kids wear, on a contract basis and supplies them to
reputed retail chains such as Future Group, Pantaloons, etc.
The company also has its own brand, named Going 3 for menswear.
The founder and key partner of the firm is Bajrang Biyani. The
firm's office is located in Mumbai.
NEELSON CERAMIC: ICRA Reaffirms B Rating on INR12cr LT Loan
-----------------------------------------------------------
ICRA has re-affirmed the long-term rating assigned to the
INR12.00 crore fund based limits of Neelson Ceramic LLP at
[ICRA]B. ICRA has also re-affirmed the short-term rating assigned
to INR0.80 crore short-term, non-fund based limits of NCL. The
outlook on the long-term rating is stable.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term: Fund
based limits 12.00 [ICRA]B (Stable)/re-affirmed
Short term: Non
fund based limits 0.80 [ICRA]A4/ re-affirmed
Rationale
The ratings re-affirmation takes into account NCL's limited track
record with small scale of operation as it recently commenced
commercial operation in April 2016. The ratings further take into
consideration NCL's weak financial profile as reflected by a low
profit margin, leveraged capital structure, modest debt
protection metrics and its stretched liquidity position. The
ratings are also constrained by the firm's dependence on the
performance of the real estate industry, which is the main
consuming sector, and the intense competition in the industry
with a large number of established organised tile manufacturers
and unorganised players in the field. ICRA, moreover, notes NCL's
vulnerability to fluctuations in raw material and fuel prices.
The ratings, however, continue to take into account the long
experience of the key promoters of NCL in the ceramic industry as
well as the favourable location of the firm's plant, with respect
to raw material procurement.
ICRA expects NCL's capital structure to remain stretched in the
near future with planned debt funded capex. Going forward, the
firm's ability to ramp up its scale of operations, while
maintaining adequate profit margin to meet its debt repayment
obligations, will remain the key rating sensitivities.
Key rating drivers
Credit Strengths
* Longstanding experience of key promoters in the ceramic
industry;
* Location advantage resulting in easy access to raw material
sources.
Credit Weakness
* Limited track record with small scale of operations in
relation to other large organised ceramic tile manufacturers;
* Financial profile characterised by a low profitability,
leveraged capital structure, modest coverage indicators and
stretched liquidity position;
* Vulnerability of profitability and cash flows to cyclicality
inherent in the real estate industry, which is the main
consuming sector;
* Vulnerability of profitability to fluctuations in raw material
and fuel prices;
* Competitive business environment with presence of large
established organised tile manufacturers as well as
unorganised players to limit significant improvement in
realisations.
Neelson Ceramic LLP commenced commercial operations from April
2016 and has achieved a turnover of INR14.48 crore in 8M FY2017.
The initial phase of operation, coupled with a muted demand
growth scenario from the slowdown in the realty sector, have led
to low capacity utilisation levels at 45% in 8M FY2017. However,
going forward, with an increase in the export driven sales, the
utilisation levels are expected to improve. Raw material and fuel
are the two major cost components accounting for ~80% of the
total output and determine the cost competitiveness of NCL's
operations. As on November 30, 2016, NCL's capital structure was
leveraged with a gearing at 2.99 times. The debt coverage
indicators remain modest as indicated by OPBDITA/Interest at
~1.55 times and NCA/TD at 4% in 8M FY2017.
NCL's manufacturing facility is located at Morbi, Gujarat, which
is the largest tile manufacturing cluster of India. Out of the
approximately 750 odd ceramic tile manufacturing units in
Gujarat, around 610 are located in the Morbi district, and
Gujarat alone contributes around 80-90% of the total production
of the Indian ceramic tile industry. The intense competition
among ceramic tiles players, coupled with the fragmented nature
of the industry, are expected to put pressure on NCL's margins.
However, the favourable location of firm's manufacturing unit in
Morbi benefits it with easy access to raw materials and fuel.
Incorporated in May 2015, Neelson Ceramic LLP (NCL) is engaged in
manufacturing polished glazed vitrified tiles. The company's
manufacturing facility is at Morbi, Gujarat, with an installed
capacity of 45,000 MTPA of glazed vitrified tiles. NCL currently
manufactures vitrified tiles in sizes of 600" x 600" and 300" x
600".
The firm is promoted by Shri Kalesh Makasana, Shri Sanjay
Makasana, Shri Ghanshyam, Smt. Maheshwari Makasana and Smt. Reena
Makasana. The promoters of the firm have experience of the
ceramic industry owing to their association with the previous
group concerns, Neha Ceramic and Nehani Tiles Private Limited.
NEERG ENERGY: Fitch Assigns B+ Final Rating to USD475MM Sr. Notes
-----------------------------------------------------------------
Fitch Ratings has assigned Neerg Energy Ltd's USD475m 6% senior
notes due 2022 a final rating of 'B+' with a Recovery Rating of
'RR4'.
The rating on the notes reflects the credit profile of a
restricted group of operating entities under ReNew Power Ventures
Private Limited, a company involved in renewable power generation
in India.
Neerg Energy is a SPV held by a trust and its ownership is not
linked to ReNew Group. The SPV will use the issue proceeds 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.
The assignment of the final rating follows a review of final
documentation that conforms to the draft documentation previously
received. The final rating is the same as the expected rating
assigned on 23 January 2017. However, Fitch expects lower
headroom under the current rating due to higher-than-expected
debt at the restricted group, as Neerg Energy raised USD475m
against Fitch previous expectations of USD450m. This is likely to
delay credit metrics improvements, with little cushion to absorb
interim operational weakness. Fitch believes improvement in the
restricted group's leverage, as measured by gross adjusted
debt/EBITDAR, to below 5.0x and EBITDA fixed-charge cover to
around 2x may now extend beyond the agency's earlier expectations
of improvements in the financial year to end-March 2020 (FY20).
KEY RATING DRIVERS
Ratings Linked to Restricted Group: Fitch's rating on the 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 banks' 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 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/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-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 FYE17.
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 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 profiles 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 the Indian states
of Andhra Pradesh and Gujarat have a record of timely payments,
but the receivables cycle has been longer for others. However,
there have been no payment defaults by state utilities to the
renewable sector to date, despite payment delays.
Fitch expects an improvement in the financial health of the state
utilities and a reduction in payment delays due to the
introduction of reforms for state distribution utilities in
India. The states that purchase power from the restricted group
have signed up for these reforms.
Foreign-Exchange 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
falling below 5.0x. This is supported by higher EBITDA, as some
existing assets chalk up full years of operation and new assets
come online. However, the improvement may be delayed beyond
Fitch's initial expectations of FY20 on account of the higher-
than-expected debt levels at the restricted group. 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 does not expect any unplanned capex in the near-term given
note covenant restrictions. Further, the company has flexibility
to defer capex, if required.
The 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 sound 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 provided a guarantee
for the proposed masala bonds at the inception of this
transaction, but the guarantee may not be available through the
life of the notes. This is because it is due to fall away once
the restricted group's gross debt/EBITDA falls below 5.5x.
DERIVATION SUMMARY
The ratings on the SPV's bond are in line with high 'B' category
ratings of other rated peers. Star Energy Geothermal (Wayang
Windu) Ltd (B+/Stable) has a better financial profile than the
restricted group, but is constrained by its single-site risk,
while the restricted group's assets are more diversified and
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 Infinis Plc (BB-
/Negative) reflects the benefits of UK regulations on renewables
obligations and a stronger financial profile. Infinis' free cash-
flow generation is underpinned by its contracted position until
1H18, but the Negative Outlook reflects Fitch expectations that
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 PPAs.
- EBITDA margins of about 88%-89%.
- No dividend payouts from the restricted group over next four
to five years.
- Capex of about INR2bn (30MW) and INR7bn (104MW) in FY19 and
FY20, respectively, in line with the covenants in the note
indenture.
RATING SENSITIVITIES
Positive: 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; and
- improvement in leverage, as measured by gross adjusted
debt/operating EBITDAR, to below 5x on a sustained basis.
Negative: 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; and
- failure to adequately mitigate foreign-exchange risk.
LIQUIDITY
Liquidity to Improve: The refinancing of the restricted group's
project debt by the US dollar notes is likely to improve the
group's liquidity. The notes 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 the
restricted group's total assets) under the bond indenture for its
capex or acquisitions.
P.G. INFRASTRUCTURE: CARE Reaffirms B+ Rating on INR7.62cr Loan
---------------------------------------------------------------
The rating assigned to bank facilities of P.G. Infrastructure &
Services Private Limited continues to be constrained by its
modest scale of operation, short track record in publication
business, negative net-worth and stressed liquidity. The rating
is further constrained by its geographical concentration and
presence in highly fragmented and competitive industry.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 7.62 CARE B+; Stable Reaffirmed
The rating, however, derives strength from the long and
established presence of the group in Bhopal and resourceful
promoters and consistent improvement in its scale of operations
and profitability for past 5 years ended FY16 (refers to the
period April 1 to March 31).
The ability of PGIS to increase the scale of operations along
with improvement in profitability margins and capital structure
would be the key rating sensitivities.
Detailed description of the key rating drivers:
The total operating income (TOI) of PGIS has shown consistent
improvement over past 5 years ended FY16. Furthermore, TOI
increased by ~14% during FY16 on y-o-y basis largely driven by
increase in sale of newspaper income as well as advertisement
revenue. Although PBILDT margin declined by 873 bps to 13.72% in
FY16 on account of increase in the raw material cost of
newsprint, its net loss reduced from INR0.73 crore in FY15 to
INR0.45 crore in FY16. The net worth continued to remain
negative owing to accumulated losses since inception. However,
the promoter group has regularly infused funds, either through
capital or unsecured loans to support the operations of PGIS.
The first edition of the daily newspaper 'People's Samachar' was
launched in Bhopal during February 2009. During FY11, the same
was launched in Indore, Gwalior and Jabalpur. Hence, the track
record of the newspaper is relatively shorter and its presence is
limited to four cities in Madhya Pradesh.
Incorporated in 2003, P. G. Infrastructure & Services Private
Limited (PGIS; erstwhile known as S. R. Offset Printers Pvt.
Ltd.) is engaged in publishing and circulation of a daily
newspaper 'People's Samachar' in Hindi and a weekly magazine
'People's Post' in English. PGIS has four printing facilities
across four different cities of Madhya Pradesh, namely, Bhopal,
Indore, Jabalpur and Gwalior. PGIS also runs an education
institute, viz, 'People's Institute of Media Studies' (PIMS)
offering degree courses in fields like journalism, advertising,
public relations, mass communication and electronic media.
PGIS incurred net loss of INR0.45 crore on TOI of INR29.59 crore
in FY16 as against net loss of INR 0.73 crore on a TOI of
INR25.90 crore in FY15. During H1FY17, the company reported TOI
of INR15.82 crore.
P. PADMA: Ind-Ra Assigns 'B+' Long-Term Issuer Rating
-----------------------------------------------------
India Ratings and Research (Ind-Ra) has assigned P. Padma Rural
Godowns a Long-Term Issuer Rating of 'IND B+'. The Outlook is
Stable. The instrument-wise rating action is:
-- INR97.4 mil. Term loan assigned with IND B+/Stable rating
KEY RATING DRIVERS
The ratings reflect P. Padma's small scale of operations as
reflected by revenue of INR5.4 million in FY16. The ratings also
factor in the firm's short operating track record as FY16 was the
first full year of operations.
The ratings also take into account completion risk for the firm,
stemming from its ongoing expansion programmes, which include
construction of another godown with a capacity of 11,000MT for
the storage of food grains, and railway sidings. The total
project cost is INR103.1 million, which is being funded through a
mix of debt and equity in the ratio of 2.5:1. The firm expects
to complete the construction of the godown by May 2018.
However, the ratings are supported by its proprietor's experience
of around one decade in the trading and storage of agricultural
commodities.
RATING SENSITIVITIES
Negative: Any delay in the expansion project completion which
might impact the debt servicing ability of the firm might be
negative for the ratings.
Positive: Timely completion of the expansion project enabling the
generation of revenue and cash flow required for debt servicing
as projected by the management would be positive for the ratings.
COMPANY PROFILE
Established in 2013, P. Padma Rural Godowns owns an 11,000MT
godown at Nagireddy Pally, Telangana. It provides godown rental
services to Food Corporation of India and Telangana State
Warehousing Corporation.
P. SHIVA: Ind-Ra Assigns 'B' Long-Term Issuer Rating
----------------------------------------------------
India Ratings and Research (Ind-Ra) has assigned P. Shiva Raj
Goud Rural Godowns a Long-Term Issuer Rating of 'IND B'. The
Outlook is Stable. The instrument-wise rating action is:
-- INR99.9 mil. Term loan assigned with IND B/Stable rating
KEY RATING DRIVERS
The ratings reflect completion risk for the firm, given the
construction phase of the rural godowns and railway sidings it is
setting up. However, the project is progressing on schedule and
the firm expects it to be completed by May 2018. The total
project cost is INR139.6 million and is being funded through a
mix of debt and equity in the ratio of 4.9:1.
The ratings are supported by the proprietor's more than a decade-
long experience in the agricultural and construction activities.
RATING SENSITIVITIES
Negative: Any delay in project completion which might impact the
debt servicing ability of the firm might be negative for the
ratings.
Positive: Timely completion of the project enabling the
generation of revenue and cash flow required for debt servicing
as projected by the management would be positive for the ratings.
COMPANY PROFILE
Established in 2016, P. Shiva Raj Goud Rural Godowns is setting
up rural godowns of an installed capacity of 16,500MT for the
storage of agricultural products at Yadagiri, Telangana.
PARAS FOODS: ICRA Reaffirms 'B' Rating on INR8.0cr Loan
-------------------------------------------------------
ICRA has reaffirmed the long-term rating of [ICRA]B on the
INR8.00-crore fund-based facility of Paras Foods. The outlook on
the long-term rating is 'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based Limits 8.00 [ICRA]B; reaffirmed, Stable
outlook assigned
Rationale
The rating reaffirmation takes into account the significant
improvement in working capital intensity in FY 2016 as well as
gearing levels; although the operating profit margins and Total
Debt/OPBDITA have deteriorated.
The rating reaffirmation continues to factor in the modest scale
of operations of the firm, which coupled with low value-added
business and high industry competition has led to low
profitability and weak debt coverage indicators. The rating
continues to reflect the firm's high gearing as working capital
requirements are funded mainly through bank borrowings. The
rating also continues to factor in the working capital intensive
rice milling business, arising from the need to maintain
substantial inventory in line with the industry trends. The
rating also continues to take into account the agro climatic
risks, which affect paddy availability. ICRA also continues to
take note of the partnership constitution of the firm, which
exposes it to risks such as dissolution and capital withdrawal.
ICRA, however, continues to draw comfort from the extensive
experience of the promoters in the rice industry, the easy access
to raw material by virtue of the mill's proximity to major rice
growing area, the firm's access to distribution network developed
by its group company and the stable demand outlook with rice
being an important part of the staple Indian diet.
The ability of the firm to increase its scale of operations and
optimally manage its working capital cycle while improving its
capital structure would remain the key rating sensitivity.
Key Rating Drivers
Credit Strengths
* Experienced promoters with long presence in the industry
* Presence in a major rice growing area ensures easy
availability of rice
* Good demand prospects for the industry as rice is a staple
food grain and India is the world's second largest producer
and consumer of rice
Credit Weaknesses
* Low profitability owing to low value-adding business
* High gearing as working capital requirement are funded through
bank borrowings; although it improved in FY2016 due to closure
of warehousing limits
* Intense industry competition, characterised by the presence of
numerous small players
* Agro climatic risks can affect paddy availability
* Risk inherent in the partnership firm
Description of key rating drivers highlighted:
The promoters and their family are involved in the rice milling
business for more than three decades and have gained a thorough
knowledge of the markets. The long presence in the industry has
helped the firm to establish strong relationship with its
suppliers and customers.
The working capital intensity has remained high over the past few
years, primarily on account of high inventory days coupled with
high debtor days. However, the working capital intensity of the
firm has decreased in the last two years, from 112% in FY2014 to
39% in FY2016 on account of decrease in inventory holding period.
The management plans to keep the inventory level low and has
accordingly closed all its warehousing facilities. This has also
helped to improve the capital structure significantly and reduce
the gearing level from 10.98 times in FY2015 to 5.49 times in
FY2016. However, the capital structure continues to remain
leveraged, which coupled with low profitability has resulted in
weak coverage indicators.
Incorporated in 2005, Paras Foods is a partnership firm engaged
in processing and sorting of rice with an installed capacity of 5
tons/hour. Ms. Mamta Singhal, Ms. Monika Singhal, Ms. Sumitra
Singhal and Mr. Suraj Bhan are the promoters of the firm, and are
also involved in the rice milling business through its group
company R.P Basmati Rice Limited.
PF recorded a net profit of INR0.24 crore on an operating income
of INR59.81 crore in FY2016 as against a net profit of INR0.21
crore on an operating income of INR57.08 crore in the previous
year.
PHILIP D'COSTA: Ind-Ra Assigns 'B' Long-Term Issuer Rating
----------------------------------------------------------
India Ratings and Research (Ind-Ra) has assigned Philip D'Costa &
Co. (PDC) a Long-Term Issuer Rating of 'IND B'. The Outlook is
Stable. The instrument-wise rating actions are.
-- INR20 mil. Fund-based facilities assigned with
IND B/Stable/IND A4 rating;
-- INR30 mil. Non-fund-based facilities assigned with IND A4
rating;
-- INR6.6 mil. Long-term loans assigned with IND B/Stable
rating;
-- INR10 mil. Proposed long-term loans* assigned with
provisional IND B/Stable rating;
-- INR5 mil. Proposed fund-based facilities* assigned with
provisional IND B/Stable/ Provisional IND A4; and
-- INR10 mil. Proposed non-fund-based facilities* assigned
with provisional IND A4 rating
* The ratings are provisional and the final ratings will be
assigned subject to execution of sanction letter for the above
facilities.
KEY RATING DRIVERS
The ratings reflect PDC's stressed liquidity profile and weak
credit profile. There were five instances of over-utilization of
working capital facilities up to nine days during the 12 months
ended December 2016. Revenue was INR91 million (FY15: INR14
million), driven by healthy execution of orders, net leverage
(total adjusted net debt/operating EBITDA) was 2.6x (5.9x) and
EBITDA interest coverage (operating EBITDA/gross interest
expense) was 3.5x (3.8x). The firm booked a revenue of INR94.2
million for 9MFY17. EBITDA margin declined to 11.3% in FY16 from
11.7% in FY15 due to raw material price fluctuations.
The ratings are supported by the founders' experience of over
four decades in engineering, procurement and construction (EPC).
RATING SENSITIVITIES
Negative: Any decline in EBITDA margin resulting in further
stress on the liquidity position and a sustained deterioration in
credit metrics will lead to a negative rating action.
Positive: Substantial growth in revenue and EBITDA margin leading
to a sustained improvement in credit metrics will lead to a
positive rating action.
COMPANY PROFILE
In May 2014, PDC commenced operations as a partnership firm based
out of Karwar, Karnataka. PDC is an EPC contractor that
undertakes government projects (construction of bridges and
flyovers). PDC operates in Karnataka.
SAGAR BUSINESS: Ind-Ra Assigns 'BB' Long-Term Issuer Rating
-----------------------------------------------------------
India Ratings and Research (Ind-Ra) has assigned Sagar Business
Private Limited (SBPL) a Long-Term Issuer Rating of 'IND BB'.
The Outlook is Stable. Instrument-wise rating actions are:
-- INR230 mil. Fund-based limits assigned with IND BB/Stable
rating; and
-- INR20 mil. Proposed fund-based limits* assigned with
provisional IND BB/Stable rating
* The above rating is provisional and shall be confirmed upon the
sanction and execution of the loan documents for the above
facilities by SBPL to the satisfaction of Ind-Ra.
KEY RATING DRIVERS
The ratings reflect SBPL's moderate credit profile, despite an
improvement in profitability in FY16. Revenue grew to INR2,328
million in FY16 (FY15: INR2,279 million) on account of an
increase in the total sales volume of iron and steel products.
EBITDA margins increased to 3.53% in FY16 (FY15: 3%) owing to a
decrease in purchase expenses. Net financial leverage (total
adjusted net debt/operating EBITDAR) improved to 7.3x in FY16
(FY15: 8.2x) and interest coverage (operating EBITDAR/gross
interest expense) to 1.3 x (1.2x) due to repayment of a secured
long-term loan. As per provisional financials, SBPL registered
revenue of INR1,136 million in 1HFY17.
The ratings also factor in SBPL's tight liquidity position as
reflected by more than 97% use of working capital limits during
the 12 months ended December 2016.
The ratings are further constrained by strong counterparty
relations with Tata Steel Limited ('IND AA'; Outlook Rating Watch
Evolving) and its various group companies, Steel Authority of
India Limited ('IND AA'; Outlook Negative), Escorts Limited
('IND A'; Outlook Stable), Philips Lighting India Limited, Surya
Roshni Limited and Hyderabad Industries Limited, thus leaving
SBPL with a minimal bargaining power.
However, the ratings are supported by low customer concentration
risk as top 10 customers contributed less than 30% to the total
revenue in FY16, and SBPL's strong customer base which includes
KEC International Limited ('IND A1+'; Outlook Stable), Orissa
Construction Corporation Ltd. (a state government entity), Rungta
Mines Ltd. ('IND AA+'; Outlook Stable) and HAFEL India Pvt Ltd.
The ratings are also supported by the agency's expectation of a
further improvement in SBPL's scale of operations, as the company
further diversified its product portfolio by adding new products
such as tractor, charminar sheet, etc.
RATING SENSITIVITIES
Negative: Any deterioration in the credit metrics will be
negative for the ratings.
Positive: A sustained improvement in the credit metrics will be
positive for the ratings.
COMPANY PROFILE
Established in 1983 in Bihar, SBPL is headed by Shri. R.K.
Kishorepuria. The company is engaged in selling of steel
products such as TMT reinforcement bars, hollow pipes, corrugated
sheets, structural steel, flat products such as hot-rolled coils,
cold-rolled coils, square steel billets and steel ingots, among
others.
The company has been appointed as the project distributor for
Tata Tiscon, business development partner for Tata Steel and
industrial lighting supplier for Philips Lighting India Limited
for Odisha.
SELEO CERAMIC: ICRA Reaffirms 'B' Rating on INR6.48cr Loan
----------------------------------------------------------
ICRA has reaffirmed the long-term rating of [ICRA]B assigned to
the INR3.25 crore cash credit facility, INR3.23 crore term loan
facility and INR2.30 crore unallocated limits of Seleo Ceramic
Private Limited . The outlook on long term rating is 'Stable'.
ICRA has also reaffirmed the short-term rating of [ICRA]A4
assigned to the INR1.00 crore non-fund based facilities of SCPL.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund Based Limits 6.48 [ICRA]B (Stable) reaffirmed
Unallocated Limits 2.30 [ICRA]B (Stable) reaffirmed
Non-fund based limits 1.00 [ICRA]A4 reaffirmed
Rationale
The rating reaffirmation reflects SCPL's small scale of
operations, the revenue decline in FY2016 as well as the weak
financial risk profile characterised by low return indicators,
leveraged capital structure and below average debt protection
metrics. The ratings are also constrained by the working capital
intensive operations caused by high raw material and finished
goods inventory holding and stretched receivable period. ICRA
also notes the intense competition and fragmentation in the
ceramic industry due to the presence of numerous organised as
well as unorganised tile manufacturers; dependence of the
company's operation and cash flow on the performance of the real
estate industry; and the exposure of its profit margins to
volatility in raw material prices.
The ratings, however, draw comfort from the long standing
industry experience of the promoters through their former
association with other ceramic companies and the location of the
company's unit in Morbi, India's ceramic hub, which gives it easy
access to raw material.
Going forward, ICRA expects SCPL to witness moderate revenue
growth in FY2017 supported by the improvement in sales volumes.
The operating profitability is expected to remain moderate amidst
intense competition and input price fluctuations. The net
profitability, however, would improve with the increase in scale
of operations coupled with the reduction in fixed costs
(depreciation and interest charges). Furthermore, the company's
capital structure is expected to improve because of scheduled
debt repayments, improvement in profitability and absence of
major planned capex. The ability of the company to scale up its
operations, while maintaining its profitability levels and
efficiently managing its working capital requirements would
remain important from a credit perspective.
Key rating drivers
Credit Strengths
* Long experience of the promoters in the ceramic industry
* Favorable location in Morbi (Gujarat), India's ceramic hub,
giving easy access to raw material sources
Credit Weakness
* Small scale of operations; revenue decline in FY2016
* Weak financial risk profile characterised by weak return
indicators, leveraged capital structure and weak debt
protection metrics
* Working capital intensive operations due to elongated customer
payment cycle and high inventory level
* Susceptibility of profit margins and cash flows to cyclicality
inherent in the real estate industry
* Highly fragmented industry with competition from organised as
well as unorganised players
Description of key rating drivers highlighted:
Seleo Ceramic Private Limited manufactures ceramic wall tiles and
its promoters have been involved in this line of business since
long. The company's scale of operations remains small with RI
reporting a decline in operating income to INR8.30 crore in
FY2016 from INR12.61 crore in FY2015. The intense competition
among the ceramic tiles players in Morbi, coupled with a muted
demand growth scenario from the slowdown in the realty sector,
have led to decline in capacity utilisation levels in FY2016. The
inventory levels remains high for the company as it maintains 2-3
months' raw material inventory and carries out production either
based on the orders received from its dealers or on a rolling
stock basis. The company relies on external borrowings to meet
its fund requirements leading to a leveraged capital structure as
depicted by a gearing of 2.03 times as on March 31, 2016.
Moreover, the company benefits by virtue of location of its unit
in Morbi, India's ceramic hub, which gives it easy access to raw
material.
Incorporated in March 2013, Seleo Ceramic Private Limited
manufactures ceramic wall tiles from its facility located at
Morbi, Gujarat. The company commenced its commercial operations
in January 2014 and currently manufactures digitally printed
ceramic wall tiles of four sizes, 10" X 15", 12" X 18", 12" X 12"
and 10" X 10" with total installed capacity of ~16,80,000 boxes
per annum (~18,480 Metric Tonnes Per Annum). The company is
promoted by Mr. Nanji Kavar, Mr. Atul Kavar and Mr. Tarun Kavar
who have past experience in ceramic industry by way of their
former association with other tile trading and manufacturing
companies.
During FY2016, SCPL reported an operating income of INR8.30 crore
and profit after tax of INR0.09 crore as against the operating
income of INR12.61 crore and profit after tax of INR0.04 crore in
FY2015.
SHREE RAM: ICRA Reaffirms B+ Rating on INR7.72cr Fund Based Loan
----------------------------------------------------------------
ICRA has reaffirmed the long-term rating of [ICRA]B+ on the
INR0.22-crore term-loan facility and the INR7.50-crore working
capital facility of Shree Ram Cotton Industries. ICRA has also
reaffirmed the long-term rating of [ICRA]B+ and assigned the
short-term rating of [ICRA]A4 to the INR0.91-crore unallocated
limits of SRCI. The outlook assigned on the long-term rating is
'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-Based Limits 7.72 [ICRA]B+ (Stable); Reaffirmed
Unallocated Limits 0.91 [ICRA]B+ (Stable) and
[ICRA]A4; Assigned
Rationale
The ratings reaffirmation continues to remain constrained by
SRCI's modest operating scale and weak financial profile, which
is 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 due to high receivables, resulting from higher year-end
orders. The firm witnesses intense competition because of the
highly fragmented industry structure due to low-entry barriers
and low product differentiation. The rating also takes into
account the vulnerability of the firm's profit margins to raw
material (cotton) prices, which are subject to seasonality, crop
harvest and regulatory risks.
The ratings, however, continues to favourably factor in the
proximity of the firm's manufacturing unit to raw material
source, easing procurement.
The firm's ability to increase its scale of operation, 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
SRCI 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
* Location of the manufacturing unit in the cotton producing
belt of Gujarat provides regular and easy access to raw
materials
Credit Weakness
* Modest scale of operations; financial profile characterised by
low profitability, stretched 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:
SRCI gins and presses raw cotton to produce cotton bales and
cotton seeds as well as crushes cotton seeds to produce cotton
seed oil and cotton seed oil cake. The firm's financial profile
is characterised by a decline in revenue during the past two
years on account of lower volume sales caused by sluggish demand
in the market. Elongated receivables in FY2016 weakened the
liquidity position, resulting in high working capital
requirement, which further impacted the capital structure as most
of the working capital requirement was funded through bank
borrowings. However, the working capital cycle improved with the
decline in receivables as per the provisional financials for
9MFY2016.
The firm procures Shankar-6 quality of raw cotton either directly
from local farmers or from agriculture marketing yards. Raw
cotton is procured between September and April, when the supply
is generally high. SRCI's entire sales proceeds are made to the
domestic market. The firm'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.
Shree Ram Cotton Industries-Tankara was established as a
partnership firm in January 2011 by Mr. Keshav Lalapara, Mr.
Rakesh Lalpara and Mr. Harshad Ratanpara along with other family
members. Later in August 2014, Mr. Suresh Ratanpara, along with
other 11 partners, took over the management of the firm from all
previous partners. SRCI currently gins and presses raw cotton and
crushes cotton seeds to produce cotton bales, cotton seeds,
cotton seed oil and cotton seed oil cake. The manufacturing unit
is located in Tankara, Rajkot district of Gujarat and is
currently equipped with 36 ginning machines and 1 pressing
machine, with an installed capacity to produce 300 cotton bales
per day (24 hours operation) and 8 expellers for crushing cotton
seeds.
On March 31, 2016, the firm reported an operating income of
INR34.31 crore with a net profit of INR0.01 crore against an
operating income of INR37.05 crore with a net profit of INR0.01
crore as on March 31, 2015. Furthermore, the firm booked revenue
of INR24.7 crore till December 31, 2016, with profit before
depreciation and tax of INR0.3 crore as per the provisional
unaudited financials for 9MFY2017.
SHREE RAMKRISHNA: CARE Reaffirms B+ Rating on INR9.60cr LT Loan
---------------------------------------------------------------
The rating assigned to the bank facilities of Shree Ramkrishna
Oil Industries continues to remain constrained on account of its
declining scale of operations with low profitability during FY16
(refers to the period April 1 to March 31), coupled with
moderately leveraged capital structure and weak debt coverage
indicators.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 9.60 CARE B+; Stable Reaffirmed
The rating is further constrained on account of volatility
associated with the raw material prices, susceptibility to the
change in the government policies, working capital intensive
nature of operations, seasonal and fragmented nature of the
cotton industry and partnership nature of constitution with
inherent risk of capital withdrawal by the partners.
The rating, however, continues to derive benefit from the vast
experience of promoters and locational advantage in terms of
proximity to the cotton-growing region in Gujarat.
The ability of SROI to increase its scale of operations and
improve its overall financial risk profile by improving its
profitability, capital structure and debt coverage indicators via
efficient working capital management would remain the key rating
sensitivities.
Detailed description of key rating drivers
The business of SROI is jointly managed by all the partners; who
are family members having an average experience of more than a
decade in the cotton industry.
The total operating income (TOI) of SROI is on a declining trend
since the last four years, while it declined by 29.53% y-o-y
in FY16 on the back of decline in demand from its customers.
Profit margins continued to remain low on account of lowvalue
addition nature of cotton ginning and pressing business.
Resultantly, gross cash accruals (GCA) level also decreased
by 35.67% y-o-y in FY16.
With an increase in the level of net worth the capital structure
though improved marginally stood moderately leveraged, while the
debt protection metrics also continued to remain weak as on
March 31, 2016, on the back of low level of cash accruals
vis-a-vis that of total debt.
SROI's operating cycle elongated to 59 days in FY16 from 41 days
in FY15, on account of higher inventory holding period as on
March 31, 2016, while average working capital utilization stood
at around 53% during the 12 months ended December 2016.
SROI was established in the year 1986 as a partnership firm by 11
partners with Mr. Bharatbhai Bhudarbhai Patel, Mr. Manjibhai
Narshibhai Patel, Mr. Bhudarbhai Shankarbhai Patel and Mr.
Laljibhai Chaturdas Patel being the key partners who are actively
involved in business operations. SROI is engaged in cotton
ginning & pressing and seed crushing with a manufacturing
facility located at Kadi, Gujarat. SROI has installed capacity to
manufacture 52.48 MT of cotton bales per day, 49.5 MT of oil cake
per day and 7.00 MT of cotton seed wash oil per day as on
March 31, 2016. The firm sells the products under its own
registered brand name 'Shree Rama'.
During FY16, SROI reported a total operating income (TOI) of
INR45.14 crore with a PAT of INR0.01 crore as against TOI of
INR64.06 crore with a PAT of INR0.06 crore in FY15. During 9MFY17
(Provisional), SROI reported a TOI of INR33 crore.
SIVASRI ENGINEERING: ICRA Withdraws B+ Rating on INR5.5cr Loan
--------------------------------------------------------------
ICRA has withdrawn the long term rating [ICRA] B+ outstanding on
INR5.50 crore fund based facilities of Sivasri Engineering
Private Limited and the short term rating of [ICRA]A4 outstanding
on INR1.0 crore sub limit to fund based facilities which was
under notice of withdrawal, at the request of the Company
following the closure of said facilities and the receipt of no
dues letter from the bankers. The rating is withdrawn as the
period of notice of withdrawal ended.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Cash credit 5.50 [ICRA]B+ Withdrawn
Bills Discounting (1.00) [ICRA]A4 Withdrawn
Sivasri Engineering Private Limited was incorporated in 2004 by
converting from a partnership firm to a private limited company.
The partnership firm "Sivasri Industries" started undertaking
fabrication contracts from heavy engineering manufacturers since
1980. The company's business operation includes metal
fabrication, machining and metal stamping. The end products of
the company are used as an assembly component by heavy
engineering manufacturers. The company has four manufacturing
facilities located in and around Chennai, Tamil Nadu.
SEPL's major customer is Schwing Stetter India Private Limited.
The company is involved in the manufacturing and fabrication of
sub assemblies for ready mix concrete plants and mixers. The
company has a manufacturing facility appurtenant to Schwing
Stetter India Limited, Tamil Nadu. SEPL caters to fabrication of
compact plants for ready mix concrete i.e. CP301 and CP18 and
Mobile Mixing plant - M1.
SPECIALITY SILICA: Ind-Ra Assigns 'BB-' Long-Term Issuer Rating
---------------------------------------------------------------
India Ratings and Research (Ind-Ra) has assigned Speciality
Silica Private Limited (SSPL) a Long-Term Issuer Rating of 'IND
BB-'. The Outlook is Stable. The instrument-wise rating actions
are:
-- INR23.40 mil. Term loan assigned with IND BB-/Stable
rating;
-- INR1.61 mil. Term loan assigned with IND BB-/Stable rating;
-- INR47.5 mil. Fund-based working capital assigned with
IND BB-/Stable/ IND A4+ rating;
-- INR30 mil. Proposed fund-based working capital* assigned
with provisional IND BB-/Stable/Provisional IND A4+
* The above rating is provisional and shall be confirmed upon the
sanction and execution of the loan documents for the above
facilities by SSPL to the satisfaction of Ind-Ra.
KEY RATING DRIVERS
The ratings reflect SSPL's small scale of operations and moderate
credit metrics. Revenue was INR199.71 million in FY16 (FY15:
INR185.83 million), net leverage (total adjusted net
debt/operating EBITDA) was 5.01x (4.41x) and gross interest
coverage (operating EBITDA/gross interest expense) was 2.04
(1.73x).
The ratings are also constrained by the company's long net
working capital cycle of 126 days in FY16 (FY15: 139 days) and
tight liquidity position as reflected by around 97.39% use of its
fund-based limits during the 12 months ended January 2017.
The ratings also factor in high customer concentration risk as
its single largest customer, JK Tyre & Industries Limited ('IND
AA-'; Outlook Negative) contributes more than 70% to the top
line.
The ratings, however, derive strength from SSPL's healthy EBITDA
margins of 13.75% in FY16 (FY15: 16.2%) and the promoters' more
than three-decade-long experience in the chemical industry.
RATING SENSITIVITIES
Negative: A decline in the operating profitability and/or
deterioration in the net working capital cycle, leading to
deterioration in the overall credit metrics could lead to a
negative rating action.
Positive: The ability of the company to expand its clientele and
a substantial increase in revenue along with profitability,
leading to an improvement in the overall credit metrics could
lead to a positive rating action.
COMPANY PROFILE
Incorporated in 2004, SSPL is a Rajasthan-based silica
manufacturer having an installed manufacturing capacity of
6,000MTPA. The company procures raw material from domestic
suppliers and sells silica to tyre and rubber manufacturers.
SUBADRA TEXTILES: ICRA Revises Rating on INR4cr Loan to 'B'
-----------------------------------------------------------
ICRA has revised the long-term rating from [ICRA]BB- to [ICRA]B
for the INR4.00 crore cash credit facility of Subadra Textiles
Private Limited. ICRA has re-affirmed the short-term rating at
[ICRA]A4 for the INR3.50 crore PCFC/ PSCFC facility of the
company. ICRA has also reaffirmed the long-term rating of [ICRA]B
and the short-term rating of [ICRA]A4 assigned to the INR1.50
crore unallocated limits of the company. The outlook on the long
term rating is 'Stable'.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-Term Fund
Based Limits 4.00 [ICRA]B (Stable); Revised
from [ICRA]BB- (Stable)
Short-Term Fund
Based Limits 3.50 [ICRA]A4 Re-affirmed
Long-Term/Short-
Term Unallocated
Limits 1.50 [ICRA]B (Stable)/[ICRA]A4
Re-affirmed
Rationale
The rating revision takes into consideration the deterioration in
STPL's financial profile, characterized by operating and net
losses, high gearing and subdued coverage indicators, mainly
owing to decrease in yarn realisations and inventory losses
during FY2016. Although the company had closed majority of its
term loans in May 2016, continuing loss from operations resulting
in erosion of net worth is expected to keep the gearing and
coverage indicators at a depressed level in the near future.
Also, the company would have to rely on its short term bank
facilities and/ or loans from promoters to fund its working
capital cycle which shall create further pressure on its capital
structure. However, certain prudent steps being taken currently
for the management of the working capital cycle mitigate the
above risk to some extent. The ratings also factor in STPL's
modest scale of operations, and the intense competition prevalent
in the fragmented spinning industry, which restricts economies of
scale and pricing power. ICRA also notes the susceptibility of
earnings to volatility in exchange rates and low bargaining power
with respect to raw material procurement prices.
The ratings, however, take comfort from STPL's longstanding
experience in the Indian spinning industry, and its established
relationships with its clientele, along with its growing export
business in Bangladesh. The ratings continue to be supported by
the company's location advantage due to its proximity to sources
of raw material; diversification into spinning of different
counts of yarn during FY2016, and its presence in the finer count
range, which aids in better realizations and limits competition
to a certain extent.
Going forward, STPL's ability to improve its profitability,
capital structure and coverage indicators, while increasing its
scale of operations will be the key rating sensitivities.
Key rating drivers
Credit Strengths
* Long standing experience of the promoter group with over
50 years of experience in the spinning industry
* Established relationships and repeat orders from agents in
both domestic and export markets ensures revenue stability;
increasing focus on the more profitable export market
* Presence in finer count range limits competition and provides
better realisations to an extent
* Proximity to and long term association with suppliers
* Financial profile characterised by operating and net losses,
high gearing and subdued coverage indicators during FY2016
* Modest scale of operations restricts scale economics and
financial flexibility, notwithstanding the year-on-year growth
in operating income
* Margins remain vulnerable to fluctuations in cotton prices
* Limited pricing power on account of commoditized nature of
product and fragmented industry structure
Description of key rating drivers highlighted:
STPL's operating income grew by ~22% from INR29.34 crore in
FY2015 to INR35.72 crore in FY2016, supported by an increase in
sales volumes in the export market; although yarn realizations
dropped over the last one year by around 20%. Lower realisations
leading to increase in the average cost of raw materials
purchased in FY2016 and inventory losses suffered by the company
adversely impacted the operating margins of the company. Higher
selling expenses led by higher export sales also constrained the
profitability. Overall, the company registered operating and net
margins of -0.97% and -3.99% in FY2016 as compared to 8.15% and -
3.03% in FY2015. As on March 31, 2016, the company's total debt
comprised INR2.69 crore of term loans from banks and other
financial institutions, with INR3.50 crore of unsecured loans
from the directors, INR5.77 crore of working capital facilities
in the form of cash credit and packing credit limits. The gearing
level deteriorated from 2.85 times in FY2015 to 5.99 times in
FY2016 due to increase in short term debt and erosion of net
worth owing to net losses in the last two fiscals. Out of the
INR2.69 crore bank term loans, the company has repaid INR1.52
crore in May 2016. During FY2017, the company has generated
revenue worth INR25 crore till December 31, 2016. For the full
year, it is expected to report similar revenues as in FY2016
along with operating losses due to the effect of increase in
cotton prices during H1 FY2017 and their non parity with the yarn
prices.
Incorporated in 1972, Subadra Textile Private Limited (erstwhile
Bhadra Spinning Mills Private Limited (1963-1971)) has been
functioning under the directorship of Mr. V.S. Rajagopal since
1975. It is engaged in the business of manufacturing cotton yarn
of counts ranging from 27s-100s for domestic as well as
international markets. The company operates from Bangalore, with
its manufacturing unit spread over 4.7 acres on Magadi Main Road,
which has an installed capacity of 18,720 spindles with combed
and auto-coned capacity. It also outsources manufacturing of
polyester yarn on job-work basis to its subsidiary, Subadra
Spinning Mills Private Limited, which was taken over by the
company in December 2014. It has also diversified into the
merchant exports business during FY2015.
STPL recorded a net loss of INR1.42 crore on an operating income
of INR35.72 crore for the year ending March 31, 2016.
SUNRISE MARKETING: CARE Reaffirms B+ Rating on INR5.50cr LT Loan
----------------------------------------------------------------
The ratings assigned to the bank facilities of Sunrise Marketing
and Services continue to remain constrained on account of its
modest scale of operations in a highly competitive industry, thin
profitability, moderate liquidity position, leveraged capital
structure and weak debt protection metrics. The ratings are
further constrained on account of its proprietorship nature of
constitution and limited bargaining power with principal
manufacturers.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 5.50 CARE B+; Stable Reaffirmed
Short-term Bank
Facilities 0.25 CARE A4 Reaffirmed
However, the ratings derive strength from the wide experience of
proprietor in the electrical appliances industry and established
track record of operations. The ratings also factors in increase
in scale of operations during FY16 (refers to the period April 1
to March 31).
The ability of Sunrise to increase the scale of operations and
improve overall financial risk profile via efficient working
capital management are the key rating sensitivities.
Detailed description of key rating drivers:
The proprietor of Sunrise, Mr. Lejas Desai has a wide experience
of over 15 years in the electrical components industry. The
customer profile of Sunrise consists of government/ semi-
government entities as well as other private sector entities
and corporates.
The total operating income (TOI) of Sunrise grew by 31.22% y-o-y
owing to other ancillary electrical and mechanical engineering
components added to its product portfolio. Profit margins
remained thin on account of low-value addition nature of
business. Resultantly, the gross cash accruals (GCA) level also
remained modest. With an increase in the level of total debt,
the capital structure deteriorated marginally and continued to
remain leveraged as on March 31, 2016. Furthermore, debt
protection metrics also continued to stand weak with higher level
of debt and interest and finance costs as compared to the
previous year.
Sunrise's operating cycle elongated to 69 days in FY16 from 57
days in FY15, owing to a decrease in average creditor
period days, on account of which average working capital
utilization stood high at around 90% during the 12 months ended
December 2016.
Surat-based (Gujarat) proprietorship firm, Sunrise was
established in the year 2002 as an authorized dealer for various
electrical components and machine lubricating oil and grease. The
proprietor, Mr. Lejas Hemantrai Desai looks after the overall
management of the entity. The entity purchases electrical motors
primarily from Bharat Bijlee Limited, gear boxes primarily from
Premium Transmission Limited, lighting products from Crompton
Greaves Limited and AXL Lighting Limited, machine lubricating oil
and grease from Gulf Oil Lubricants India Limited and paltry
amount of welding consumables like welding rods and mig/ tig
wires from few other companies, which it stocks in its own godown
and office, while it sells the same directly via its own sales
executives to various Original Equipment Manufacturers (OEM's)
primarily belonging to the textile and diamond industry. The
electric motors are the major revenue drivers, followed by gear
boxes.
The proprietor is also associated with other firms, namely, Niti
Enterprises and Suniti Hospitality Private Limited. Niti
Enterprises is owned by Mrs. Mitali Lejas Desai, which provides
after sales service and consultation for the products sold by
Sunrise. Mr. Lejas Desai and Mrs Mitali Lejas Desai are also
directors in Suniti Hospitality Private Limited, which is into
the business of hotels and banquet halls.
During FY16, Sunrise reported a total operating income (TOI) of
INR26.33 crore with a PAT of INR0.17 crore as against TOI of
INR20.07 crore with a PAT of INR0.13 crore in FY15. During 9MFY17
(Provisional), Sunrise reported a TOI of INR24.38 crore.
TATA STEEL: UK Unit Sells Speciality Steel Business to Liberty
--------------------------------------------------------------
Devidutta Tripathy at Reuters reports that India's Tata Steel
Ltd. said on Feb. 9 its British arm has signed a definitive
agreement to sell its speciality steel business to Liberty House
Group for GBP100 million ($125.55 million).
According to Reuters, the deal covers several South Yorkshire-
based assets including the electric arc steelworks and bar mill
at Rotherham, Tata Steel said in a filing to Indian stock
exchanges.
Tata and Liberty House had entered into exclusive talks in
November as the Indian group seeks to offload its money-losing
assets and restructure European operations, Reuters recounts.
Tata Steel is the UK's biggest steel company.
=========
J A P A N
=========
TOSHIBA CORP: Puts Chips Unit Up for Sale to Salvage Business
-------------------------------------------------------------
Pavel Alpeyev and Takashi Amano at Bloomberg News report that
after a chaotic day of earnings, it's become clearer Toshiba
Corp. may soon end up a shadow of its former self.
Bloomberg relates that buried in company presentation materials
Feb. 14 was a note that the Tokyo-based conglomerate is
considering selling a majority stake in its memory chip business,
a reversal of a previous plan to limit the sale to 20 percent.
Then President Satoshi Tsunakawa took that a step further, saying
a sale of the entire unit is now possible, the report says.
NAND flash memory, used in smartphones and solid state disk
drives, is one of Toshiba's few bright spots. Bloomberg
Intelligence estimates that the entire division could be worth as
much as $14 billion, which would more than cover the $6.3 billion
writedown in the struggling nuclear unit. That would leave
Toshiba with few growth prospects, relying on public
infrastructure projects, elevators and a struggling consumer
electronics business, according to Bloomberg. In response,
investors sent the stock down to 10-month lows; one analyst even
suspended his rating.
"We're getting to the stage of asset-stripping," Bloomberg quotes
Amir Anvarzadeh, head of Japanese equity sales at BGC Partners
Inc. in Singapore, as saying. "They're selling the majority of
the chips business which is the only business they can sell right
now."
Among potential acquirers for the chip unit, South Korea's SK
Hynix Inc., which is seeking to expand its share of the global
mobile and smart devices market, already offered to buy a stake
in the memory division, Bloomberg says. Chinese chipmakers are
also among the other potential buyers.
Bloomberg relates that Toshiba also said it may pull out of
nuclear plant construction and only provide equipment and
engineering, which would make it extremely difficult to sell
nuclear projects to customers. All options are on the table for
the nuclear business, including a possible sale of Westinghouse
Electric Co., its U.S. nuclear unit, Mr. Tsunakawa said,
Bloomberg relates.
All told, Toshiba is now forecasting a provisional JPY500 billion
loss for the nine months through Dec. 31. As a result,
shareholder equity will drop to negative JPY150 billion for the
current year ending in March, the company said. All of this is
making it difficult to assess Toshiba's future earnings
potential, according to Masaya Yamasaki, an analyst at Nomura
Securities Co., who suspended his rating on the company.
Bloomberg notes that almost three-quarters of the 15 analysts
tracking Toshiba have a sell or hold rating on the stock,
although many of them have been adjusting their targets since
Feb. 14.
"Based on our policy of not forecasting corporate actions, we
have no choice but to anticipate the company will continue to
have negative net worth," Mr. Yamasaki wrote in a note.
Toshiba shares fell as much as 13 percent in Tokyo, to levels not
seen since April, Bloomberg discloses. Toshiba is down more than
25 percent this year after it discloses the new accounting
challenges in late December.
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. 26, 2017, that S&P Global Ratings
said it has lowered its long-term corporate credit rating on
Toshiba Corp. to 'CCC+' and its short-term corporate credit and
commercial paper program ratings on the company to 'C', all by
one notch. All of these ratings remain on CreditWatch with
negative implications. S&P also lowered its senior unsecured
debt rating on Toshiba two notches to 'B-' from 'B+' and kept the
rating on CreditWatch negative. On Dec. 28, 2016, S&P placed the
long- and short-term ratings on Toshiba on CreditWatch with
negative implications at the same time as lowering the long-term
ratings, in response to Toshiba's announcement that it might
recognize several JPY100 billion in impairment losses related to
goodwill arising from its acquisition of a nuclear power business
through U.S.-based Westinghouse Electric Co. LLC, because the
goodwill far exceeded the company's initial estimates.
TOSHIBA CORP: Books $6.3BB WriteDown; Chairman to Resign
--------------------------------------------------------
Pavel Alpeyev and Takashi Amano at Bloomberg News report that
Toshiba Corp. said it expects to book a JPY712.5 billion
($6.3 billion) writedown in its nuclear power business, citing
cost overruns at a U.S. unit and diminishing prospects for its
atomic-energy operations. Shigenori Shiga will step down as
chairman of the conglomerate.
The charge will result in a provisional JPY500 billion loss for
the nine months through Dec. 31, the company said in a statement
Feb. 14, Bloomberg relays. In December, Toshiba had warned the
writedown could reach several billion dollars, triggering a share
decline that has erased more than $7 billion in market value. As
a result of the losses, shareholder equity will drop to negative
JPY150 billion for the current year ending in March, Toshiba
forecast.
Bloomberg relates that the earnings results came after a chaotic
afternoon, which began when the company missed its own deadline
for announcing earnings. That raised questions over whether the
Japanese company has control over its finances, and the shares
fell to near 38-week lows.
Bloomberg says Toshiba is now under pressure to come up with a
plan for shoring up its balance sheet, which was already under
strain from a profit-padding scandal in 2015 that led to
restructuring, record losses and asset sales. Toshiba has put up
for sale a significant stake in its flash memory operations and
is considering other ways of raising cash.
"The questions surrounding Toshiba are so numerous, where do you
even begin," Bloomberg quotes Masahiko Ishino, an analyst at
Tokai Tokyo Securities, as saying. "Investors want to know what
will happen to nuclear and chip businesses, whether elevator
operations and some of Toshiba's listed subsidiaries will be sold
off. There is also the question of why the nuclear writedown
happened in the first place."
Bloomberg notes that in a sign of how bad things are, Toshiba
said it is considering selling a majority stake in its memory
chip business. The report says the company has previously
planned to limit the sale to 20 percent to maintain control.
Toshiba has said it will separate the chip unit by the end of
March and hold a shareholders' meeting that month. Strategic
investors and foreign private equity funds are among the
potential bidders, Bloomberg report citing people with knowledge
of the matter.
According to Bloomberg, Toshiba's $5.4 billion acquisition of
Westinghouse in 2006 was a bet on the future of nuclear power and
a way to balance volatility of chip operations with steady long-
term revenues. The vision has soured after the 2011 Fukushima
meltdown damped demand and the company's next-generation AP1000
modular reactor technology proved difficult to implement,
Bloomberg relates.
For the full fiscal year ending March 31, Toshiba forecast a net
loss of JPY390 billion, reversing its November outlook for a
JPY145 billion profit. That compares with a projected loss of
JPY262.7 billion, the average of analysts' projections compiled
by Bloomberg.
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. 26, 2017, that S&P Global Ratings
said it has lowered its long-term corporate credit rating on
Toshiba Corp. to 'CCC+' and its short-term corporate credit and
commercial paper program ratings on the company to 'C', all by
one notch. All of these ratings remain on CreditWatch with
negative implications. S&P also lowered its senior unsecured
debt rating on Toshiba two notches to 'B-' from 'B+' and kept the
rating on CreditWatch negative. On Dec. 28, 2016, S&P placed the
long- and short-term ratings on Toshiba on CreditWatch with
negative implications at the same time as lowering the long-term
ratings, in response to Toshiba's announcement that it might
recognize several JPY100 billion in impairment losses related to
goodwill arising from its acquisition of a nuclear power business
through U.S.-based Westinghouse Electric Co. LLC, because the
goodwill far exceeded the company's initial estimates.
===============
M A L A Y S I A
===============
STONE MASTER: Auditor Expresses Qualified Opinion
-------------------------------------------------
The Star Online reports that Stone Master Corp Bhd's (SMCB)
external auditor, Messrs Baker Tilly Monteiro Heng, has expressed
a qualified opinion on the company's annual audited financial
statements for the financial year ended Sept. 30, 2016.
In a filing with Bursa Malaysia on Feb. 8, SMCB, a PN17-status
company, said its external auditors were not able to obtain
sufficient appropriate audit evidence to provide a basis for an
audit opinion, the Star Online relates.
According to the Star, SMCB said the group and the company
incurred a net loss of MYR9.58 million and MYR9.98 million
respectively for the financial year ended Sept. 2016.
Additionally, SMCB said the current liabilities of the group and
the company exceeded its current assets by MYR12.50 million and
MYR12.12 million respectively during the year.
It also said the group and the company recorded accumulated
losses of RM23.60mil and RM33.69mil respectively during the
period, thereby indicating the existence of a material
uncertainty which may cast significant doubt about the group and
the company's ability to continue as a going concern, according
to the Star.
"The ability of the group and the company to operate as going
concerns is dependent upon the timely and successful formulation
and implementation of a regularisation plan, the continuing
support from its lenders, and achieving sustainable and viable
operations.
"If these are not forthcoming, the application of the going
concern accounting concept may be inappropriate and adjustments
may be required to, inter alia, write down assets to their
realisable values, reclassify all long-term assets and
liabilities as current and to provide for any further costs which
may arise."
The Star adds that SMCB said its external auditors were unable to
obtain sufficient appropriate audit evidence regarding the
ability of the group and the company to achieve sustainable and
viable operations.
"The timely formulation and implementation of a regularisation
plan, including obtaining the support from lenders remain
uncertain at this stage."
About Stone Master
Stone Master Corporation Berhad is a Malaysia-based company,
which is principally engaged in investment holding and the
provision of management services. The Company's subsidiaries
include S.P. Granite Sdn. Bhd., Rainbow Marble & Tiling Sdn.
Bhd., Stone Master Marketing Sdn. Bhd. and Stone Design House
Sdn. Bhd. S.P. Granite Sdn. Bhd. is engaged in manufacturing and
trading in marble, granite and ceramic tiles. Rainbow Marble &
Tiling Sdn. Bhd. is engaged in trading in marble, granite,
ceramic tiles and sanitary ware. Stone Master Marketing Sdn. Bhd.
is engaged in trading in marble, granite, sanitary ware and all
other related products. Stone Design House Sdn. Bhd. specializes
in the designing, architectural, interior designing works,
constructions designing and refurbishment works. Stone Master
(Malaysia) Sdn. Bhd. is the subsidiary of S.P. Granite Sdn. Bhd,
which is engaged in trading in marble, granite, ceramic tiles,
and sanitary ware and contract works.
Stone Master Corporation Berhad in December 2016 triggered the
prescribed criteria pursuant to Paragraph 8.04 and Paragraph 2.1
(e) of Practice Note 17 ("PN17") under the Main Market Listing
Requirements of Bursa Malaysia Securities Berhad.
The PN17 criteria was triggered as the Auditors have expressed an
emphasis of matter on the Company's ability to continue as a
going concern in the Company's latest audited financial
statements for the financial year ended Sept. 30, 2015 which was
announced on Jan. 29, 2016 and based on the Company's fourth
quarterly results for the period ended Sept. 30, 2016, announced
on Nov. 30, 2016, the Company's shareholders' equity on a
consolidated basis is less than 50% of the Company's issued and
paid-up capital (excluding treasury shares).
=================
S I N G A P O R E
=================
EZRA HOLDINGS: Associate's Unit Faces Winding Up Application
------------------------------------------------------------
The Strait Times reports that Ezra Holdings disclosed on
Feb. 14 of a winding-up application against EMAS-AMC Pte Ltd, a
wholly owned unit of its associate Emas Chiyoda Subsea (ECS).
According to the report, Ezra said in a Singapore Exchange filing
that it was notified through a newspaper advertisement on Feb. 13
that a Singapore-incorporated company, Necotrans Singapore Pte
Ltd, had filed the application with Singapore's High Court on
Feb 6.
Hearing of the application is fixed on March 3, ST discloses.
Singapore-based Ezra Holdings Limited, an investment holding
company, provides integrated offshore solutions for the oil and
gas industry. The company operates in three divisions: Subsea
Services, Offshore Support and Production Services, and Marine
Services.
====================
S O U T H K O R E A
====================
DAEWOO SHIPBUILDING: Looks for Ways to Deal With 'April crisis'
---------------------------------------------------------------
Yonhap News Agency reports that Daewoo Shipbuilding & Marine
Engineering Co. is looking at a slew of options to deal with
massive debt due in April, its chief said on Feb. 15, brushing
off concerns that the cash-strapped shipbuilder may fail to pay
off the maturing debt.
According to the report, the shipyard should pay off or refinance
up to KRW1 trillion ($869 million) worth of debts that mature
this year, but the shipbuilder's financial status is not good
enough to deal with the situation amid the dearth of new orders
and a delay in the delivery of drill ships.
Daewoo Shipbuilding has KRW440 billion in debt scheduled to be
due in April, KRW300 billion in July and KRW200 billion in
November, Yonhap discloses.
"We are preparing for the problem (the April crisis), and we are
focusing on securing new deals in the coming months," Daewoo
Shipbuilding chief executive Jung Sung-leep told Yonhap News
Agency.
He said the tangible outcomes of new contracts may come out later
this month. "We are in talks with some customers (over new
shipbuilding deals)," Jung said, notes the report.
Yonhap relates that Daewoo Shipbuilding has not received any new
orders so far this year, although it has recently signed a letter
of intent with a US firm to build up to seven floating storage
and regasification units.
Under the deal with Excelerate Energy, Daewoo Shipbuilding will
receive an order to build one FSRU for the US energy firm in the
second quarter of the year, whose value will be between some $200
and $300 million, says the report.
But the official contract is expected to be finalized in April.
Adding to its difficulty is that it is facing a delay in
receiving KRW1 trillion in payment from an Angola oil firm for
the delivery of two drill ships, Yonhap relays.
Sources said Daewoo Shipbuilding and Sonangol have been
negotiating to resolve the delayed payment since last year, but
the delivery was pushed back to this year, Yonhap says.
The delivery of the two drill ships was originally scheduled for
June and July, respectively, last year.
Yonhap says the payment is one of the key resources that Daewoo
Shipbuilding needs to repay its maturing debts.
"The negotiation is still going on, and I expect the deal to be
completed in the first half of the year," the report quotes Jung
as saying.
Earlier this month, the state-run Korea Development Bank, the
main creditor for the shipyard, ruled out any additional cash
injections into the shipyard, which means that Daewoo
Shipbuilding should pay off or refinance the maturing debt on its
own, Yonhap recalls.
KDB and another policy lender, the Export-Import Bank of Korea,
have so far injected a combined KRW3.5 trillion into Daewoo
Shipbuilding.
About Daewoo Shipbuilding
Headquartered in Seoul, South Korea, Daewoo Shipbuilding &
Marine Engineering Co. -- http://www.dsme.co.kr/-- is engaged in
building ships and offshore structures. Its product portfolio
includes commercial ships, such as liquefied natural gas (LNG)
carriers, oil tankers, containerships, liquefied petroleum gas
(LPG) carriers, pure car carriers; offshore structures, such as
FPSO vessels, drilling rigs, drillships and fixed platforms, and
naval vessels, including submarines, destroyers, rescue ships and
patrol boats.
The shipyard, along with two other major South Korean
shipbuilders, are currently undergoing self-created debt-
restructuring plans in the face of a decrease in new orders
caused by the protracted global economic slump, according to
Yonhap News.
================
S R I L A N K A
================
SRI LANKA INSURANCE: Fitch Affirms IFS Rating at B+
---------------------------------------------------
Fitch Ratings has revised the Outlook on Sri Lanka Insurance
Corporation's Insurer Financial Strength (IFS) rating to Stable
from Negative, and affirmed the IFS rating at 'B+'.
The rating action follows the revision of the Outlook on Sri
Lanka's Long-Term Local-Currency Issuer Default Rating (IDR) to
Stable from Negative and the affirmation of the rating at 'B+' on
Feb. 9, 2017. SLIC's IFS rating is constrained by Sri Lanka's
Long-Term Local-Currency IDR and the Negative Outlook reflects
the Negative Outlook on Sri Lanka's IDR.
This rating review does not include SLIC's 'AA(lka)' National
Long-Term Rating and 'AA(lka)' National IFS rating .
KEY RATING DRIVERS
SLIC's ratings reflect its established franchise and market
position in Sri Lanka, 99.9%-state ownership and importance to
the government as the largest state-owned insurer. Offsetting
these strengths are significant investments in non-core
subsidiaries and a high equity exposure, which weighs on its
risk-based capital.
RATING SENSITIVITIES
If the sovereign ratings are upgraded in the future, and the
constraints on SLIC's IFS rating are relieved, Fitch would take
similar rating action on SLIC's IFS rating.
Conversely, a downgrade of Sri Lanka's ratings will lead to
downgrade of SLIC's IFS rating.
The IFS rating may also be downgraded if there is:
- Significant weakening in SLIC's market position.
- Deterioration in the non-life combined ratio to above 100%
on a sustained basis.
- Weakening in SLIC's importance to the government, increased
pressure from the state for higher dividend payouts or a
significant increase in non-core investments.
SRI LANKA TELECOM: Fitch Affirms B+ IDR; Outlook Stable
-------------------------------------------------------
Fitch Ratings has revised the Outlook on Sri Lanka Telecom PLC's
(SLT) Long-Term Foreign- and Local-Currency Issuer Default
Ratings (IDRs) to Stable from Negative and affirmed the IDRs at
'B+'.
The rating actions follow the Outlook revision on Sri Lanka's
Long-Term Foreign- and Local-Currency IDRs to Stable from
Negative on 9 February 2017. The agency also affirmed SLT's
National Long-Term Rating at 'AAA(lka)' with a Stable Outlook.
KEY RATING DRIVERS
Ratings Constrained by Sovereign: SLT's IDRs are constrained by
the sovereign's IDRs of 'B+', as the government directly and
indirectly holds a majority stake in SLT and exercises
significant influence on its operating and financial profile.
Therefore the Outlook has been revised to Stable, following the
revision of the sovereign Outlook to Stable. SLT's second-biggest
shareholder, Malaysia's Usaha Tegas - which owns 44.9% of SLT -
does not have any special provisions in its shareholder agreement
that dilute the government's significant influence over SLT.
Negative FCF, Large Capex: Fitch expects SLT to have negative FCF
in 2017-2018 (2016 estimated FCF deficit: LKR7bn-8bn), as cash
flow from operations will be insufficient to fund its large capex
plan. Fitch expects SLT to invest about LKR20bn-22bn, or 28%-30%
of revenue, in capex each year to expand its optical fibre and
3G/4G mobile networks.
Taxes Hinder Growth: Fitch expects SLT's revenue growth to slow
to 2%-3% in 2017 (2016 estimated: 9%), as consumers will likely
curb usage due to the reintroduction of value-added tax and
nation-building tax on telecom services from November 2016. The
effective tax rate for voice and SMS services increased to about
50%, from 28%. The effective tax on data services increased to
32% from 12%, and will further increase to 50% when the
telecommunications levy increase becomes effective from April
2017. Revenue growth from increased use of data services is
likely to be more than offset by declines in revenue from fixed-
voice, code division multiple access and international
operations.
Fitch forecasts SLT's EBITDA margin to narrow by about 50bp over
2017-2018, from an estimated 29% in 2016, as improving
profitability of fixed-broadband and mobile internet usage will
only partly offset margin erosion from a change in revenue mix
and the tax hikes.
Solid Market Position: SLT's ratings are underpinned by its
market-leading position in the fixed-line services and second-
largest position in the mobile market, along with its ownership
of the country's extensive optical fibre network. The company
benefits from a diverse service offering, which includes fixed-
voice, broadband, mobile, pay-tv, enterprise, international
terminations and international data services. Fitch believes
SLT's market position will strengthen from its planned mobile and
fibre infrastructure expansion.
Market Consolidation, M&A Risk: Fitch believes some industry
consolidation is likely with ongoing intense competition -
especially in the mobile segment where there are five operators,
of which the smaller operators are unprofitable, and all of them
face still-high investment requirements. SLT's National Long-Term
Rating could come under pressure if it were to do a debt-funded
acquisition of a smaller operator; any rating action will be
based on the acquisition price, funding structure and the
financial and operating profile of the combined entity. The
international ratings, which are constrained by the sovereign
ratings, have sufficient headroom to absorb a debt-funded
acquisition.
DERIVATION SUMMARY
SLT's Foreign-Currency and Local-Currency IDRs are constrained by
Sri Lanka's IDRs of 'B+', given the government's ownership and
significant influence on its operating and financial profile.
SLT's National Long-Term Rating is based on a relative comparison
of domestic peers. SLT has a lower exposure to the crowded mobile
market and more diverse service platforms than Sri Lanka's mobile
market-leader, Dialog Axiata PLC (AAA(lka)/Stable). Distilleries
Company of Sri Lanka PLC (DIST, AAA(lka)/Rating Watch Negative)
faces high regulatory risk, with frequent excise tax hikes.
However, it benefits from a higher EBITDAR margin and stronger
FCF generation than SLT. SLT's estimated 2016 FFO-adjusted net
leverage of 1.5x is broadly similar to that of Dialog Axiata and
DIST.
KEY ASSUMPTIONS
Fitch's key assumptions within Fitch ratings case for the issuer
include:
- Slower revenue growth of 2%-3% in 2017 (2016: 9%) on higher
taxes.
- Growth to recover from 2018 to a mid-single-digit percentage,
driven by fixed-broadband and mobile data services.
- Operating EBITDAR margin to fall by about 50bp in 2017-2018,
due to a change in revenue mix and higher taxes.
- Capex/revenue to remain high around 28%-30%, as SLT expands it
fibre and 3G/4G networks.
- Dividend payout to remain similar to 2016, at LKR1.6bn.
- Negative FCF during 2017-2018, resulting in gradual increase
in FFO-adjusted net leverage.
RATING SENSITIVITIES
Developments that may, individually or collectively, lead to
positive rating action include:
- A change in Sri Lanka's IDRs will result in a corresponding
action on SLT's IDRs.
- A weakening of links between SLT and the sovereign could
result in SLT's Local-Currency IDR being upgraded above
Sri Lanka's Local-Currency IDR. However, SLT's Foreign-
Currency IDR will remain constrained by the Country Ceiling of
'B+'.
Developments that may, individually or collectively, lead to
negative rating action include:
- A downgrade in Sri Lanka's IDRs will result in a corresponding
action on SLT's IDRs.
- A debt-funded acquisition of a smaller operator could threaten
SLT's National Long-Term Rating, depending on the acquisition
price and the financial profile of the combined entity.
LIQUIDITY
Solid Access to Capital: Cash of LKR5.8bn and committed undrawn
bank lines of LKR7.9bn were insufficient to fund its short-term
debt of LKR12.7bn and annual FCF deficit of LKR3bn-5bn. However,
SLT is in the process of raising LKR6bn to refinance its short-
term debt and has demonstrated a solid record of accessing
capital from local banks and capital markets.
*********
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
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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 ***