/raid1/www/Hosts/bankrupt/TCRAP_Public/170217.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
A S I A P A C I F I C
Friday, February 17, 2017, Vol. 20, No. 35
Headlines
A U S T R A L I A
BREDA KENNY: First Creditors' Meeting Set for Feb. 22
DAVID LAWRENCE: 13 Stores to Close; 20 Staff to Lose Jobs
HARKER ACCOUNTING: First Creditors' Meeting Set for Feb. 24
QUEENSLAND NICKEL: Palmer Says He Was Trying to Save Firm
R&F PROPERTIES: Australian Unit in Liquidation
SHED TAVERN: First Creditors' Meeting Set for Feb. 22
SLATER & GORDON: In Talks with Lenders for Recapitalization Plans
SOFTEC HOMES: Judge Orders Liquidation
TERRY WHITE: Andrew Schwartz Appointed as Administrator
WOOCOM GROUP: First Creditors' Meeting Set for Feb. 24
C H I N A
NATURAL DESTINY: GBH CPAs Raises Going Concern Doubt
XINYUAN REAL: Fitch Assigns 'B' Rating to US Dollar Sr. Notes
H O N G K O N G
FWD LIFE: Fitch Affirms Rating on USD250MM Sub. Securities at BB+
I N D I A
AMAZON TECHNOCAST: CRISIL Assigns B+ Rating to INR4.12MM Loan
ANJANEYA COTTON: CARE Reaffirms B+ Rating on INR5.75cr LT Loan
ARCHIT PLYWOOD: CARE Assigns B+ Rating to INR4.25cr LT Loan
BALKRISHNA AGRO: CARE Assigns B+ Rating to INR4.68cr LT Loan
BHANSALI TRADE: CRISIL Reaffirms B+ Rating on INR3.5MM Cash Loan
BULANDSHAHR ROLLER: CARE Reaffirms B+ Rating on INR8cr LT Loan
CALAMONDINN BUNGALOW: CARE Assigns 'KTP B' Tourism Rating
INNOVATION HOUSE: CRISIL Ups Rating on INR13.5MM Loan to B-
ISHAAN TPR: CRISIL Assigns 'B' Rating to INR1.5MM Cash Loan
JMK MOTOWHEELS: CRISIL Raises Rating on INR7MM Loan to B+
K. B. RICE: CRISIL Reaffirms B Rating on INR9MM Cash Loan
K.P. INDUSTRIES: CARE Reaffirms 'B' Rating on INR9.69cr LT Loan
KAIZEN AUTOCARS: CARE Assigns 'B' Rating to INR9.57cr LT Loan
KAMAL PRESSING: CARE Assigns 'B' Rating to INR5cr LT Loan
LIKHITA ENERGY: CARE Reaffirms 'B' Rating on INR10.70cr LT Loan
MANNE LABORATORIES: CARE Assigns B+ Rating to INR15cr LT Loan
NAVIN COTTON: CARE Reaffirms B+ Rating on INR9cr LT Loan
NAYAAB JEWELS: CARE Reaffirms B Rating on INR17.50cr LT Loan
NEPTUNE SUPER: CRISIL Assigns 'B' Rating to INR10MM Term Loan
ORIENTAL GRANITES: CARE Ups Rating on INR5.35cr LT Loan to BB-
PRADEEP COTTON: CARE Reaffirms B+ Rating on INR9cr LT Loan
PROGRESSIVE INDUSTRIES: CRISIL Ups Rating on INR3.94MM Loan to B-
RAJRAJESHWAR COTEX: CARE Reaffirms 'B' Rating on INR6.50cr Loan
RISHIKA COTTONS: CRISIL Reaffirms B+ Rating on INR15MM Cash Loan
S.S. WOOD: CRISIL Reaffirms 'B' Rating on INR1.6MM Cash Loan
SHARADA AYURVEDIC: CARE Assigns B+ Rating to INR5.65cr LT Loan
SIWAL INFRACON: CRISIL Assigns B+ Rating to INR6.9MM Cash Loan
STERLING GATED: CARE Reaffirms B+ Rating on INR60cr LT Loan
TIRUPATI COTTON: CARE Assigns B+ Rating to INR10cr LT Bank Loan
TRIMEX INDUSTRIES: CRISIL Hikes Rating on INR93.9MM Loan to 'C'
VINA ELECTRICALS: CARE Lowers Rating on INR12cr Loan to 'B'
J A P A N
KAWASAKI KISEN: Egan-Jones Cuts Sr. Unsecured Debt Ratings to B-
KOBE STEEL: Egan-Jones Lowers Sr. Unsec. Ratings to BB
TOSHIBA CORP: Won't Sell Chip Business Before Fiscal Year Ends
TOSHIBA CORP: Seek Extension of Waiver on Loan Covenant Violation
M O N G O L I A
DEVELOPMENT BANK: Moody's Caa1 Rating on Review for Downgrade
MONGOLIA: Moody's Puts Caa1 Issuer Rating on Review for Downgrade
S O U T H K O R E A
HANJIN SHIPPING: U.S. Creditors Appeal Container Terminal Sale
S R I L A N K A
BANK OF CEYLON: Fitch Revises Outlook to Stable & Affirms 'B' IDR
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A U S T R A L I A
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BREDA KENNY: First Creditors' Meeting Set for Feb. 22
-----------------------------------------------------
A first meeting of the creditors in the proceedings of Breda
Kenny Pty Ltd will be held at Level 2, 949 Wellington Street, in
West Perth, WA, on Feb. 22, 2017, at 2:00 p.m.
Bob Jacobs of Auxilium Partners was appointed as administrator of
Breda Kenny on Feb. 10, 2017.
DAVID LAWRENCE: 13 Stores to Close; 20 Staff to Lose Jobs
---------------------------------------------------------
Emma Koehn at SmartCompany reports that nine David Lawrence and
four Marcs stores will shut next week, resulting in 20 job losses
as administrators look to improve profitability ahead of a
possible sale of the brands.
Potential buyers for the clothing brands, which collapsed into
voluntary administration on February 2, have until February 22 to
lodge expressions of interest, SmartCompany relates citing
news.com.au.
According to SmartCompany, administrator Geoff Reidy said the
decision to close 13 stores across the network was a "difficult
decision", but one that was made to ensure the brands were as
attractive as possible to buyers.
Fifty other employees at other stores will have the opportunity
to discuss redundancies, according to reports.
At the time administrators were appointed, the Marcs and David
Lawrence brands employed more than 1,100 staff across Australia
and New Zealand, SmartCompany recounts. The brands were operating
52 standalone stores, along with 11 outlet stores and 140
concessions contained within larger department stores, including
David Jones and Myer.
Retail experts have told SmartCompany the brands faced tough
conditions, particularly in suburban shopping centres as discount
fashion retailers moved away from flagship stores in Australian
cities and into smaller shopping malls.
"If we look at those mid-tier fashion retailers, they're not
cheap, they're sitting in the middle, but they'd normally put
themselves in suburban shopping centres. When a shopper goes
shopping for fashion in a shopping centre, they go, 'well, now
I've also got a very big H&M'," the report quotes Dr Gary
Mortimer, associate professor at Queensland University of
Technology Business School, as saying.
About Marcs and David Lawrence
Retail fashion labels Marcs and David Lawrence has 52 standalone
stores, 11 outlets and over 140 concession stores operating out
of Australia and New Zealand.
In Australia, the Companies employ approximately 1,130 staff. 640
staff are employed on a casual basis, approximately 260 staff are
employed on a full-time basis and 230 on a part-time basis. There
are 10 stores in New Zealand employing 42 staff.
As reported in the Troubled Company Reporter-Asia Pacific on
Feb. 3, 2017, The Sydney Morning Herald said high-profile
Australian fashion labels Marcs and David Lawrence have collapsed
under debts of close to AUD30 million, including close to AUD3
million in worker entitlements and a AUD700,000 debt to the tax
office.
The combined companies that operate retail fashion labels in
Australia and New Zealand appointed Voluntary Administrators on
Feb. 1, 2017.
Pursuant to resolutions passed by the sole director of the
Companies on Feb. 1, 2017:
* Geoffrey Reidy and Andrew Barnden, Directors of Rodgers
Reidy, were appointed as Voluntary Administrators to
M. Webster Holdings Pty Limited and Webster Asset Pty
Limited; and
* Andrew Barnden and Paul Vlasic, a Director at Rodgers
Reidy's Auckland office, were appointed as Voluntary
Administrators to M. Webster Holdings (NZ) Limited.
The Companies' sole director, Mr. Malcolm Webster, has informed
the Administrators that the appointment of administrators was
necessary due to factors including deteriorating sales, general
market conditions and poor cash flow.
HARKER ACCOUNTING: First Creditors' Meeting Set for Feb. 24
-----------------------------------------------------------
A first meeting of the creditors in the proceedings of Harker
Accounting Pty. Ltd. will be held at the offices of Vincents,
Level 34, 32 Turbot Street, in Brisbane, Queensland, on Feb. 24,
2017, at 10:00 a.m.
Nick Combis and Liyan Tay of Vincents were appointed as
administrators of Harker Accounting on Feb. 14, 2017.
QUEENSLAND NICKEL: Palmer Says He Was Trying to Save Firm
---------------------------------------------------------
Australian Associated Press reports that Clive Palmer said he was
trying to save Queensland Nickel when his wife signed off on a
deal that gave the ailing company AUD135 million worth of new
debt, just five days before it went into administration, a court
has heard.
AAP relates that Mr. Palmer said he was involved in planning a
deal in which QN agreed to pay AUD135 million for two billion
shares in another one of his companies, China First. At the time
the deal was done, in QN's dying days, his wife, Anna, was the
sole director of China First and it was she that signed off on
the deal.
Mr. Palmer, who is being examined by liquidators in the federal
court, said there was plenty in the deal for QN, the report
relays.
He said that, at the time it was signed, in January last year and
five days before debt concerns saw administrators called in, QN
was in need of a funding lifeline so it could keep operating and
employing refinery workers in Townsville, relates AAP. But he
said banks and others had refused to lend the nickel business any
money unless assets outside the QN group were put up as security.
According to the report, Mr. Palmer said the deal that committed
QN to buying AUD135 million in his China First enterprise did
just that and was aimed at securing a financial lifeline and
keeping the Townsville refinery open.
Barrister Walter Sofronoff, for liquidators FTI Consulting, asked
Mr. Palmer who came up with plan, The Australian relates.
"I can't recall," he replied.
The report says Mr. Sofronoff asked: "How could or might the
people of Townsville have benefited by Queensland Nickel
undertaking a fresh obligation of AUD135 million - to a company
owned by you and controlled by your wife - when on your evidence
that in January 2016 it had no assets and no ability to pay its
creditors?"
The Australian relates that Mr. Palmer said he did not agree with
that assessment of the nickel company, describing its future
prospects as "tremendous". But he earlier told the court he
considered, at the time the deal was done in January last year,
that QN was basically worthless.
"Queensland Nickel had no assets, had nothing, and they were
trying to raise hundreds of millions of dollars," the report
quotes Mr. Palmer as saying. "My thought at the time was that if
they get real assets, they can borrow money against [those] and
keep thousands of people employed. That was my view."
Mr. Palmer was also asked in court to provide a phone number for
his nephew Clive Mensink, whom liquidators want to question over
the collapse of QN, adds The Australian.
Mr. Mensink, who was QN's sole registered director when the
business failed, has been out of the country since the federal
court hearings began last year.
Mr. Palmer provided a number to the court but said he did not
know where he was or when he would return to Australia, though he
had recently boarded a cruise off the United States.
About Queensland Nickel
Queensland Nickel operates the Palmer Nickel and Cobalt Refinery
in Queensland, Australia. Queensland Nickel directors appointed
John Park, Stefan Dopking, Kelly-Anne Trenfield and Quentin Olde
of FTI Consulting as voluntary administrators on Jan. 18, 2016.
FTI went from being administrators to liquidators at the second
creditors meeting in April, after issuing a damning report into
Queensland Nickel's finances, The Courier-Mail reported.
R&F PROPERTIES: Australian Unit in Liquidation
----------------------------------------------
The Australian reports that liquidators have been appointed to an
Australian arm of multi-billion-dollar Chinese developer R&F
Properties, the international company that swept into the
Australian market vowing to buy AUD500 million worth of sites.
The Australian says an order to wind up R&F Mega Property, an
Australian subsidiary of the Hong Kong-listed and Guangzhou-based
R&F Properties, was issued in the Victorian Supreme Court on
February 1.
According to The Australian, Associate Justice John Efthim
ordered R&F Mega Property be wound up in insolvency and appointed
Deloitte partner Robert Woods as liquidator. R&F Mega Property
did not attend.
A Deloitte spokesman said Mr. Woods, a restructuring services
partner, had started his investigations into the company's
affairs, The Australian relays.
R&F Mega Property caused a splash in 2014 when it paid
AUD46 million -- more than double the price the previous owner
paid a year earlier -- to purchase a 4600sq m development site on
Cordelia Street, South Brisbane with approval for more than 600
apartments, the report recounts.
The Australian says deputy general manager Amy Zhang confirmed in
a statement that liquidators had been appointed to R&F Mega
Property but said they did not receive the application to wind up
the company. "It is alleged that R&F Mega Property was served
documents by representatives of a creditor," the report quotes
Ms. Zhang as saying.
"However, R&F Mega Property has no records of having received
those documents and accordingly did not respond to the
application.
"R&F Mega Property immediately started to communicate with the
liquidator to proactively resolve this matter.
"An application will shortly be submitted to the court to
terminate the liquidation."
The Australian relates that Ms. Zhang said R&F Mega Property was
not insolvent and there would be no interruption to the estimated
completion date of their flagship development, Brisbane One.
The Australian, citing R&F's last update, says an interim report
to the Hong Kong exchange on August 31, contracted sales at the
AUD400 million Brisbane One reached CNY353.1 million (AUD67
million).
R&F Properties aggressively entered the Australian market in
2014, purchasing three inner-Brisbane development sites at top
dollar for almost AUD150 million and a 1400-apartment site in
Footscray, Melbourne, through subsidiaries.
In 2015, R&F deputy general manager Vincent Chen told The
Australian the company planned to spend AUD500m over the next
five years acquiring sites.
This month, two days after the winding-up order in Victoria, R&F
Properties executive James Cui flew to Queensland to officially
sign a deal with Springfield Land Corporation and joint venture
partner Etone Australia Holdings for its Central Gardens 10,000
apartment development. It is a 15-year deal potentially worth
AUD6 billion.
R&F Properties, with a market capitalisation of AUD5.7 billion,
has six subsidiaries in Australia.
SHED TAVERN: First Creditors' Meeting Set for Feb. 22
-----------------------------------------------------
A first meeting of the creditors in the proceedings of The Shed
Tavern Pty Ltd, trading as the Skye Bar, The Hidden Bar and The
Old Mother Hubbard, will be held at Level 2, 949 Wellington
Street, in West Perth, WA, on Feb. 22, 2017, at 2:30 p.m.
Bob Jacobs of Auxilium Partners was appointed as administrator of
Breda Kenny on Feb. 10, 2017.
SLATER & GORDON: In Talks with Lenders for Recapitalization Plans
-----------------------------------------------------------------
Jonathan Shapiro and Sarah Thompson at Australian Financial
Review report that embattled law firm Slater & Gordon said it is
in talks with lenders to recapitalize the group as it recognized
for the first time that the debt it owes exceeds the value of the
business.
AFR says the firm also acknowledged its Australian business was
starting to be impacted by "negative sentiment", cash flows were
negative and further write-downs to its troubled British
investment were likely.
According to the report, Slater & Gordon said it hopes to reach
an agreement with its lenders in the "coming months" that will
lead to a recapitalization.
As foreshadowed by The Australian Financial Review's Street Talk
column, the statement to the Australian Securities Exchange
followed a meeting between Slater & Gordon and its lenders to
discuss a debt to equity swap.
"It is clear that based on performance expectations and
liquidity, the continued support of the company's lenders is
fundamental, as current levels of bank debt exceed total
enterprise value," it said, AFR relays.
Slater & Gordon shares fell more than 25% to 20 cents on Feb. 16,
valuing the equity of the company at AUD73 million, AFR
discloses. The shares peaked at above AUD8 in April 2015 but a
disastrous debt funded acquisition of British professional
services firm Quindell, a string of accounting mis-steps and
unexpected regulatory changes sent the stock tumbling.
AFR notes that the company is also the subject of one of
Australia's largest shareholder class actions. Based on other
debt restructures, it is understood claimants could potentially
form part of an agreement to recapitalize the firm.
Slater & Gordon also revealed its cash flow remained negative
over the half year, according to AFR.
Most worryingly, the 82-year old personal injury law firm also
pointed out that the Australian business was starting to show
signs of being impacted by negative sentiment about the business
and increased competition in key segments, AFR states.
According to AFR, Slater & Gordon flagged further potential
write-downs of the AUD327.2 million of goodwill relating to its
British assets as recent trading experience and a slower than
expected recovery weighed on its earnings. The firm wrote down
AUD1.05 billion of goodwill in 2016 related to the Quindell
acquisition.
The announcement came after a meeting was held with lenders late
on Feb. 15 to accommodate British banks. The meeting had to be
held this week under new terms agreed to with lenders that are
owed about AUD840 million, of which AUD480 million is due in May
2018.
Australia-based Slater & Gordon Limited (ASX:SGH) --
https://www.slatergordon.com.au/ -- is engaged in operating legal
practices in Australia and the United Kingdom. The Company
operates through segments, including Slater and Gordon Australia
(AUS), Slater and Gordon UK (UK) and Slater Gordon Solutions
(SGS). The AUS segment conducts a range of legal services within
a geographical area of Australia. The AUS segment also includes
investments, borrowing and capital rising activities. The
Company's UK segment conducts a range of legal services in in the
United Kingdom. The UK segment also includes the investments in
SGS. The SGS segment offers legal services relating to road
traffic accidents, employee liability and noise, including
hearing loss. The SGS segment also provides complementary
services in health and motor services. The Company's business and
specialized litigation services include commercial, estate and
professional negligence litigation and class actions.
SOFTEC HOMES: Judge Orders Liquidation
--------------------------------------
The Advertiser reports that disgruntled customers of an Adelaide
home builder have celebrated a court ruling to wind up the
northern suburbs company paving the way for insurance claims to
finish their homes.
Federal Court Registrar Nicholas Parkyn on February 14 ordered
Softec Homes be put into liquidation after finding that the
Mawson Lakes company - which the court heard owed at least
AUD350,000 to creditors - was insolvent, according to The
Advertiser.
The report notes customers, some of whom have waited more than
four years for their homes to be completed, hugged in the public
gallery after the decision.
The ruling means that the customers can now seek insurance claims
to help complete their homes.
The report says Registrar Parkyn said evidence from Softec's
managing director Furqan Baig that Softec was solvent was "no
higher than a bald assertion".
Trade creditor Stair Lock took winding up application against
Mawson Lakes based Softec over a AUD30,000 debt, the report
discloses.
The report relays the application was supported by nine other
creditors, including Adelaide Rendering who claimed it was owed
AUD100,640.
The report notes that registrar Parkyn ordered the appointment of
Anthony Matthews, of Anthony Matthews and Associates, as
liquidator.
TERRY WHITE: Andrew Schwartz Appointed as Administrator
-------------------------------------------------------
Melanie Plane, Adam Wratten and Amber Hooker at Queensland Times
report Andrew Schwartz -- andrew@asadvisory.com.au -- of
AS Advisory is one of two administrators called in to handle the
liquidation of Terry White Chemists and Priceline in Stockland
Rockhampton.
Mr. Schwartz advised he and Matt Adams of FTI Consulting were
appointed on Feb. 14, and have since been in discussions with
other parties who may be interested in acquiring the businesses,
according to Queensland Times.
He said their intention was to keep staff employed, notes the
report.
"We are working with the company to develop a plan to move
forward with a view to finding a party that might be interested
in acquiring the businesses," Mr. Schwartz said, the report
relays.
"We are working towards trying to recapitalise the business with
a view to the business going forward.
"If that is successful obviously there would be opportunity for
employment."
The report relays that Mr. Schwartz said the administration
process would take about four weeks.
The closure came as a shock to staff.
Several Stockland shoppers were unaware of the liquidation, but
were saddened by the news, the repot adds.
WOOCOM GROUP: First Creditors' Meeting Set for Feb. 24
------------------------------------------------------
A first meeting of the creditors in the proceedings of Woocom
Group Limited, Woocom Pty Ltd, Moocow Group Pty Ltd, and Derek
Tree Pty Ltd will be held at the offices of Ferrier Hodgson,
Level 28, 108 St Georges Terrace, in Perth, on Feb. 24, 2017, at
10:00 a.m.
Dermott McVeigh & Wayne Rushton of Ferrier Hodgson were appointed
as administrators of Woocom Group on Feb. 14, 2017.
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C H I N A
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NATURAL DESTINY: GBH CPAs Raises Going Concern Doubt
----------------------------------------------------
Natural Destiny Inc. filed with the U.S. Securities and Exchange
Commission its annual report on Form 10-K, disclosing a net loss
of $244,786 on $25,947 of revenues for the fiscal year ended
September 30, 2016, compared to a net loss of $137,270 on
$452,841 of revenues for the fiscal year ended September 30,
2015.
GBH CPAs, PC, issued a "going concern" qualification on the
consolidated financial statements for the fiscal year ended
September 30, 2016, citing that the Company has an accumulated
deficit and has not yet generated significant recurring revenues
to support its operating costs. These matters raise substantial
doubt about its ability to continue as a going concern.
The Company's balance sheet at September 30, 2016, showed total
assets of $1.36 million, total liabilities of $248,429, all
current, and a stockholders' equity of $1.11 million.
A full-text copy of the Company's Form 10-K is available at:
https://is.gd/xWRpcZ
Natural Destiny Inc., through its subsidiaries in China, is
engaged in the business of distributing foods and beverages in
China. The Company's executive offices are located in Jiande
City, Zhejiang Province, China. Its principal distributed
products include fruits, juices, wine and nutritional supplement
products such as tablets and condensed drinks made out of
traditional Chinese herbs such as ginseng and edible bird's nest.
XINYUAN REAL: Fitch Assigns 'B' Rating to US Dollar Sr. Notes
-------------------------------------------------------------
Fitch Ratings has assigned Xinyuan Real Estate Co., Ltd.'s
(B/Stable) proposed US dollar senior notes a 'B(EXP)' expected
rating and a Recovery Rating of 'RR4'.
The notes are rated at the same level as Xinyuan's senior
unsecured rating because they constitute its direct and senior
unsecured obligations. The final rating is subject to the receipt
of final documentation conforming to information already
received.
The Chinese homebuilder's ratings are supported by strong
contracted sales and moderate margin recovery. The ratings are
constrained by a low landbank business model, high leverage
driven by land-replenishment needs and tight, but sustainable,
liquidity.
KEY RATING DRIVERS
Solid Contracted Sales: Xinyuan's contracted sales increased by
35% to CNY12bn in 2016, following a 35% increase in 2015. The
strong growth was driven by robust market sentiment in its core
Tier 2 cities as well as satellite cities surrounding Tier 1
cities, namely Zhengzhou, Jinan, Suzhou and Kunshan. Tier 2
cities contributed 61% of contracted sales in 1H16 (2015: 62%).
Small Landbank Constrains Ratings: Xinyuan's total sellable gross
floor area had decreased to 2.2 million square metres (sqm) by
end-2016, from 2.3 million sqm at end-2015. Its landbank will
last for two years - based on 2016 sales - which is low compared
with 'B' rated peers. Xinyuan pays advance deposits to local
government and industry partners to secure a large part of its
landbank, excluding normal public auctions. This acquisition
strategy creates uncertainty about its landbank, as it constrains
scale and sales.
Land Replenishment Pressures Leverage: Xinyuan has accelerated
acquisitions after not purchasing any new land in 2015. It
announced acquisitions of CNY3.6bn in China and the US in 2016,
with a cash outlay of around CNY2.6bn after considering returned
land deposits and prepayments for certain land parcels. With its
low landbank and fast asset-churn model, Xinyuan's high land-
replenishment needs will continue to pressure leverage, which
Fitch expects to hover at around 45%-50% in 2016-2017. This is
made worse by surging land prices in higher-tier cities amid
fierce competition and a moderate acquisition pace with cash-
land-premium-paid/contracted-sales at 40%-45%.
Margin Recovery Sustainable: Fitch expects Xinyuan's gross margin
to continue improving in 2017, with a rising average selling
price (ASP) trend for most of its top-10 projects on sale in
2016. Xinyuan's contracted sales ASP of USD1,564 per sqm in 2016
was also higher than the aggregate price of USD1,387 per sqm
recognised in its 2016 revenue. The higher ASPs in core cities
and recognition of the Oosten project in the US helped the
homebuilder's gross margin recover in 2H16 by 2%-3% from the 1H16
level. This follows a slight fall to 27% in 1H16 after adding
back capitalised interest, from 28% in 2015 when the homebuilder
recognised its low-margin projects in Suzhou, Jinan and Kunshan.
However, this improvement may reverse for projects it will be
acquiring in 2017 if land acquisition costs sprint ahead of the
rising ASP.
The homebuilder's EBITDA margin is likely to improve faster than
the gross margin, as its slower 6% increase in selling, general
and administration costs compared with the 35% increase in
contracted sales suggests that operational costs are under
control. Xinyuan's selling, general and administration cost will
also be spread over a wider base and boost its EBITDA margin, as
its 2016 revenue of USD1.6bn catches up with its contracted sales
of USD1.8bn.
DERIVATION SUMMARY
Xinyuan's rating is supported by its solid sales and constrained
by its tight liquidity and low landbank. Xinyuan has a larger
scale measured by EBITDA, higher contract sales and greater
leverage compared with 'B' rated Chinese property peers, such as
Redco Properties Group Ltd (B/Stable). Furthermore, Xinyuan has
more stable profitability and lower leverage than 'B-' peers such
as Jingrui Holdings Limited (B-/Negative).
KEY ASSUMPTIONS
Fitch's key assumptions within Fitch ratings case for the issuer
include:
- Contracted sales gross floor area to increase by 40%-50% in
2016 and 5% in 2017-2018 due to improved churn in Tier 1 and 2
cities.
- Contracted sales' ASPs to increase by around 5% between 2016
and 2018 due to price increases in Tier 1 and 2 cities.
- Moderate acquisition pace with cash-land-premium-
paid/contracted-sales at 40%-45% in 2016-2018.
- Construction cost per sqm declining to around USD650-700 in
2016-2018, due to cheaper construction costs in Tier 2 cities.
- Selling, general and administrative costs as a percentage of
contracted sales to gradually decrease to between 12%-13%, as
Xinyuan plans to cut internal costs.
RATING SENSITIVITIES
Developments that may, individually or collectively, lead to
negative rating action include:
- Net debt/adjusted inventory rising above 60% on a sustained
basis (2015: 45%).
- Contracted sales/total debt falling below 0.6x on a sustained
basis (last 12 months to June 2016: 0.8x).
- EBITDA margin falling below 15% on a sustained basis.
Developments that may, individually or collectively, lead to
positive rating action include:
- Significant increase in scale, as reflected by contracted
sales exceeding CNY15bn.
- Net debt/adjusted inventory sustained below 40%.
- Contracted sales/total debt improving to above 1.0x on a
sustained basis.
- EBITDA margin improving to above 20% on a sustained basis.
LIQUIDITY
Tight but Sustainable Liquidity: The company's liquidity position
is stable, with a ratio of cash/short-term debt of 90% at end-
June 2016 (end-2015: 92%). Xinyuan's total cash of USD931m and
undrawn credit facilities of USD306m are insufficient to cover
its short-term borrowings of USD1.036bn and acquisition costs,
although active fundraising in the onshore bond market has
alleviated refinancing pressure. The company issued two five-year
bonds of - USD107m and USD77m at 7.47% and 7.09%, respectively -
in 2016. This issuance brought down Xinyuan's average borrowing
cost to 8.5% at end-June 2016, from 9.5% at end-2015.
================
H O N G K O N G
================
FWD LIFE: Fitch Affirms Rating on USD250MM Sub. Securities at BB+
-----------------------------------------------------------------
Fitch Ratings has affirmed the Insurer Financial Strength (IFS)
ratings of Hong Kong-based FWD Life Insurance Company (Bermuda)
Ltd and FWD General Insurance Company Limited at 'A'. Fitch has
also affirmed FWD Limited's Long-Term Issuer Default Rating (IDR)
at 'BBB+'. The Outlook on these ratings is Stable.
KEY RATING DRIVERS
The rating affirmation reflects FWD Life HK's focus on value
creation, manageable exposure to risky assets and its ongoing
efforts in expanding its distribution coverage. The IFS rating of
FWD GI benefits from a two-notch uplift above its standalone
assessment because Fitch views FWD GI as a very important
subsidiary within the group. The ratings also consider FWD
Limited's prudent capital management strategies, and the moderate
business profile and solid liquidity position of FWD Life HK and
FWD GI.
The ratings of FWD Limited and its insurance subsidiaries are
constrained by its moderate operating scale and volatile
operating results. Despite having been operating for about three
decades in Hong Kong, FWD Life HK's market share in terms of new
business annualised premiums equivalent (APE) was only about 1.9%
in 9M16 while FWD GI captured a market share of about 1.1% in
2015 in terms of gross premiums.
The agency believes FWD Limited will maintain adequate capital
buffers within its operating subsidiaries to support their
business expansion and as cushion against asset volatility. New
business growth and interest rate volatility will weaken FWD Life
HK's solvency position, although the risks are mitigated by
coinsurance treaties and continued capital infusion from its
parent, FWD Limited. The solvency ratio of FWD Life HK improved
to 239% at end-1H16 (end-2015: 216%).
FWD Limited's risk-based capital ratio on a consolidated basis,
as measured by Fitch's Prism Factor Based Model (FBM), was at the
'Strong' category at end-1H16, with a financial leverage ratio at
25.6%. After factoring in the issuance of USD250m subordinated
perpetual securities in January 2017, FWD Limited's FBM score
improved to 'Very Strong' while its financial leverage increased
to 28.8% on a pro-forma basis.
FWD Limited's exposure to risky assets remained tolerable,
although FWD Life HK raised its equities and funds allocation
moderately in 2015. The total risky assets, which include listed
and unlisted equities, investment funds, below-investment-grade
and non-rated bonds, and investment properties, rose to about
29.2% of FWD Limited shareholders' equity on a consolidated basis
at end-1H16 (end-2015: 27.3%, end-2014:15.7%).
FWD Life HK reported strong growth in its value of new business
(VNB) of 27% in 2015 and 46% in 1H16 from the preceding half. A
wider VNB margin from the agency channel and a 16% increase in
the agency force in 1H16 contributed to the overall VNB growth.
Increasing sales in more profitable health and participating
policies also reflect the company's focus on value creation.
Higher costs associated with the expansion of distribution
capabilities, such as the tied agency and digital commerce
channels, together with the increase in insurance liabilities due
to inforce coinsurance, lowered the group's overall operating
result in 1H16. FWD Limited's annualised pre-tax operating return
on asset stood at 0.2% in 1H16 (2015: 0.6%).
FWD GI's underwriting profitability improved in 1H16 after the
claims reserves adjustment implemented in 2H15. Its loss ratio
reduced to 46.3% in 1H16 from 58.1% in 2015, leading to an
improvement in combined ratio to 93.5% in 1H16 (2015: 102.5%).
RATING SENSITIVITIES
Downgrade rating triggers for FWD Limited and its insurance
subsidiaries include:
- Decline in FWD Limited's consolidated capital strength with
its capital score persistently below the 'Strong' category as
measured by Prism FBM and the solvency ratio of FWD Life HK, the
main operating entity of the FWD group, consistently below 225%.
- An increase in FWD Limited's financial leverage to above 30%
for a prolonged period.
- A significant deterioration in the operating result of its
insurance subsidiaries in terms of lapse rates and mortality
profits of its life business and underwriting result of its
general insurance, with combined ratio persistently in excess of
105%.
Upgrade of FWD Limited's IDR and its insurance subsidiaries' IFS
ratings is unlikely in the near term. However, over the medium
term, upgrade rating triggers for FWD Limited and its insurance
subsidiaries include:
- Broader distribution coverage.
- Improvement in FWD Limited's operating profitability with pre-
tax operating return on assets consistently higher than 1.2%.
- Further strengthening in FWD Life HK's operating stability as
measured by new business margin and growth of value of in-force
business.
FULL LIST OF RATING ACTIONS
FWD Life HK
- IFS Rating affirmed at 'A'; Outlook Stable
FWD GI
- IFS Rating affirmed at 'A'; Outlook Stable
FWD Limited
- IDR affirmed at 'BBB+'; Outlook Stable
- USD325m 5.00% senior unsecured notes due 2024 affirmed at
'BBB'
- USD100m 4.15% senior unsecured notes due 2023 affirmed at
'BBB'
- USD250m 6.25% subordinated perpetual securities affirmed at
'BB+'
=========
I N D I A
=========
AMAZON TECHNOCAST: CRISIL Assigns B+ Rating to INR4.12MM Loan
-------------------------------------------------------------
CRISIL has assigned its 'CRISIL B+/Stable' rating to the long-
term bank facilities of Amazon Technocast Private Limited. The
rating reflects ATPL's modest scale of operations and below-
average financial risk profile due to start-up nature of
operations. These weaknesses are partially offset by its
promoters' extensive experience.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 2 CRISIL B+/Stable
Term Loan 4.12 CRISIL B+/Stable
Analytical Approach
Unsecured loans are treated as neither debt nor equity as these
are expected to remain in the business over the medium term.
Key Rating Drivers & Detailed Description
Weaknesses
* Modest scale of operations due to early stage of operations:
The scale of operations should remain modest given the early
stage of operations. ATPL recorded topline of INR3.8 crore in
fiscal 2016 (its first year of operations) and is expected to
clock revenue of about INR10 crore in fiscal 2017. Although the
revenue is expected to increase with stabilisation of operations,
intense competition, along with limited capacities, will restrict
scalability over the medium term.
* Below-average financial risk profile: Financial risk profile
remains constrained by small networth, and relatively large debt
on account of debt-funded project and working capital
requirement. Nonetheless, the promoters' fund support partly
cushions the financial risk profile.
* Large working capital requirement: ATPL is expected to have
large working capital requirement because of its increasing
scale, longer receivables cycle, and moderate inventory.
Strength
* Promoter's extensive experience in the castings industry and
their fund support: The promoters have an experience of 20 years
in the casting industry. Their industry association has helped
add customers and ramp up operations. The promoters have infused
fresh funds of INR2 crore in fiscal 2017 to fund the capital
expenditure for windmill and working capital requirement. Their
experience and fund support remains critical for the scaling up
of operations.
Outlook: Stable
CRISIL believes ATPL will continue to benefit over the medium
term from its promoters' extensive experience. The outlook may be
revised to 'Positive' in case of a significant and sustained
improvement in the scale of operations and profitability, leading
to higher cash accrual. Conversely, the outlook may be revised to
'Negative' if lower cash accrual, stretch in the working capital
cycle or unanticipated large capital expenditure weakens the
financial risk profile, especially liquidity.
Incorporated in 2014, ATPL has setup an 850-tonne per annum
investment castings unit at Rajkot (Gujarat). The company is
promoted by Mr. Rajesh Senjaliya and his family who oversee its
overall operations. It has also recently set up a windmill for
in-house use.
ATPL reported net loss was INR1.08crore on an operating income of
INR3.80crore for fiscal 2016, its first year of operations.
ANJANEYA COTTON: CARE Reaffirms B+ Rating on INR5.75cr LT Loan
--------------------------------------------------------------
The rating assigned to the bank facilities of Anjaneya Cotton
Traders continues to be constrained by the small scale of
operations, thin profit margins and volatility in raw material
prices impacting profit margins, working capital intensive
nature of operations with leveraged capital structure and weak
debt coverage indicators, highly regulated industry with
government fixing the minimum support price (MSP) of cotton and
constitution of the entity as a proprietary concern.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 5.75 CARE B+; Stable Reaffirmed
The rating, however, continues to derive strength from the
experience of the promoter and adequate available of raw material
due to presence of facility in cotton growing area of Andhra
Pradesh. The rating also factors in increase in total operating
income in FY16 (refers to period April 1 to March 31).
The ability of the firm to increase its scale of operations and
deleverage its capital structure forms the key rating
sensitivities.
The rating assigned to the long-term loan (term loan) has been
withdrawn as the firm has fully repaid the said loan and there is
no outstanding due under the facility.
Detailed Description of the key rating drivers
The promoter of Anjaneya Cotton Industries, Mr. Challa Siva
Venkata Reddy, hails from agricultural background and has been
associated with textile industry for about 5 years. The promoter
has established name and presence in the Guntur region. The
promoters of the company are resourceful and have been infusing
the funds as and when it was required. The company is located in
Guntur District which is one the major cotton growing areas in
Andhra Pradesh. Availability of raw material is not expected to
be an issue as the company procures major portion of its raw
materials (cotton lint) from the registered dealers in and around
Guntur. Total operating income (TOI) of the firm has witnessed
increasing trend in the last three years. Total income of the
firm had increased by 39% in FY16 to INR 34.50 crore from
INR24.81 crore in FY15 due to higher volumes of sale of cotton
lint.
The firm's nature of business being attributed towards excess
dependence on working capital requirements; the working capital
borrowings increased from INR4.20 crore as on March 31, 2015 to
INR5.10 crore as on March 31, 2016. The overall gearing ratio of
the company remain leveraged and deteriorated to 2.61x as on
March 31,2016 as against 2.31x as on March 31, 2015 on account of
increased amount of working capital borrowings.
PBILDT margins of the firm has been thin during the review period
with further decline by 77 basis points from 4.40% in FY15 to
3.63% in FY16.
The working capital cycle days of the firm improved from 82 days
in FY15 to 74 days in FY16 on account of improved average
collection period. The collection days of the firm improved from
85 days in FY15 to 78 days in FY16 at the back of higher amount
of volumes sold during the year on cash basis. ACT operates in a
working capital intensive industry with associated high working
capital requirements.
Anjaneya Cotton Traders is a propriety concern started by Challa
Vishwanadha Bhargava Reddy in 2007. The day to day activities of
the firm are looked after the promoter and by his father Mr. Siva
Venkata Reddy. The firm is engaged in manufacturing and
processing of Kappas into cotton lint. The firm has 14 double
roller cotton ginning machines and bailing press located at
Guntur district of Andhra Pradesh.
ARCHIT PLYWOOD: CARE Assigns B+ Rating to INR4.25cr LT Loan
-----------------------------------------------------------
The ratings assigned to the bank facilities of Archit Plywood
Private Limited are primarily constrained by small scale of
operations coupled with low net worth base along with moderately
leveraged capital. The ratings, further, continue to remain
constrained by APPL's working capital intensive nature of
operations, susceptibility to fluctuating exchange rates, log
prices and government regulations and presence in a highly
fragmented timber sector with low entry barriers and high
competition.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 4.25 CARE B+; Stable Assigned
Short-term Bank
Facilities 4.00 CARE A4 Assigned
The rating constraints are partially offset by support from the
experienced promoters in timber industry, growing scale of
operations, moderate profitability margin and coverage indicators
and location advantage.
Going forward, the ability of APPL to stabilize its scale of
operations while improving profitability margins and registering
improvement in capital structure.
Detailed description of the key rating drivers
Delhi-based Archit Plywood Private Limited was incorporated in
2011 by Mr. Sushil Kumar and Mrs Suchitra Goel and Mr. Raghav
Goel. APPL is engaged in the manufacturing of plywood using
timber mainly procured domestically from traders. The company
also imports timber (around 45% of total procurement). The
company sells its products to wholesalers and retailers located
on Pan India. SKG Timbers Private Limited is an associate concern
and engaged in trading of plywood.
Despite increase in the scale of operations on y-o-y basis in
the last 3 FY (FY14-FY16 [refers to the period April 1 to
March 31]), the scale stood small which inherently limits
company's financial flexibility in times of stress and deprives
it from scale benefits. PBILDT margin stood moderate, and range
bound owing to limited value addition and intense market
competition given the highly fragmented nature of the industry.
The capital structure of the company stood leveraged due to high
dependence on bank borrowing to meet the working capital
requirements and low net worth base.
Furthermore, coverage indicators stood moderate owing to moderate
profitability levels.
APPL's procurement is majorly in the form of imports and company
does have policy to hedge its foreign currency exposure.
Therefore, the company's profitability margins are exposed to
volatility in foreign exchange. Furthermore, the company is also
exposed to adverse changes in the government policies of those
exporting countries with respect to wooden log export. The
business is characterized by high volumes and low margins. The
sector is highly competitive, comprising a large number of
players in the organized segment as a result of low entry
barriers.
Delhi-based Archit Plywood Private Limited (APPL) was
incorporated in 2011 by Mr. Sushil Kumar and Mrs Suchitra Goel
supported by their son Mr. Raghav Goel. Earlier Mr. Sushil Kumar
was running proprietorship firm "Raghav timber" and Mrs Suchitra
Goel was running proprietorship firm "Sushil Kumar & Sons". APPL
is engaged in the manufacturing of wood and wood products mainly
plywood using timber mainly procured from traders located
domestically. Also, it imports timber and teak mainly from
Singapore. The company sells its products to wholesalers and
retailers located on Pan India basis. Moreover, the company also
sells plywood to its associate concern i.e. SKG Timbers Private
Limited engaged in
trading of plywood.
In FY16, APPL achieved a total operating income (TOI) of INR18.23
crore with PAT of INR0.27 crore as against total operating income
of INR16.96 crore with PAT of INR0.10 crore in FY15. Furthermore,
the company has achieved total operating income of INR7 crore in
6MFY17 (refers to the period April 1 to September 30; based on
provisional results).
BALKRISHNA AGRO: CARE Assigns B+ Rating to INR4.68cr LT Loan
------------------------------------------------------------
The ratings assigned to the bank facilities of Balkrishna Agro
Products continue to remain constrained on account of its nascent
stage of operations and susceptibility of operating margins to
fluctuations in raw material prices and foreign exchange
fluctuation risks. The ratings are further constrained on account
of its presence in highly fragmented and competitive agro-
processing industry along with geographical concentration risk.
The above constraints, however, outweigh the comfort derived from
the experienced promoters and support from the government in the
form of various subsidies.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 4.68 CARE B+; Stable Assigned
Short-term Bank
Facilities 4.00 CARE A4 Assigned
The ability of BAP to increase its scale of operations and
profitability while rationalizing its debt level along with
efficient management of its working capital would remain the key
rating sensitivities.
Detailed description of key rating drivers
BAP's key promoter Mr. Popatlal Devjibhai Patel has an experience
of more than two decades in the agro-industry while all partners
carry an average experience of around 10 years in the varied
industries. Furthermore, government support in the form of
subsidies is expected to help in saving cost to a certain extent,
in the short-run.
BAP commenced its operations from August 2016 onwards, while the
total operating income (TOI) for its four months of operations
till November 2016 (Provisional) stood low at INR0.86 crore. It
reported an operational loss of INR0.30 crore during the same
period.
BAP needs to maintain high level of inventory on account of
seasonal nature of business, while average working capital
utilization stood at around 55% during the 6 months ended
November 2016.
Ahmedabad-based (Gujarat) BAP was established in July 2015 by
five partners, to carry on the business of processing cashew
nuts. The entity commenced its processing operations from 2016
onwards from its facility located at Daskroi (Ahmedabad) with ten
automatic shell cutting machines having a combined installed
capacity of 4 tons/day. The activities involve boiling of the raw
cashews, post which they are shelled, dried, peeled, graded and
packaged into varieties like white wholes, butts, splits, baby
bits, etc. While BAP imports majority of raw cashews from West
African nations, the
processed cashew nuts and kernels are sold directly to different
traders within the state of Gujarat under the brand name of 'MDF'
and the by-product; i.e. cashew shells are sold to local oil
paint manufacturing industries.
BAP completed the capex in Q1FY16 with a total project cost of
INR4.77 crore funded with a debt-equity mix of 2.18 times. The
associate entities of BAP primarily include Balkrishna Boilers
Private Limited which is engaged in the manufacturing of boilers
and Adishwar Infrastructure Private Limited which is engaged in
the manufacturing of ready-mix concrete (RMC).
During 8MFY17 (Provisional), BAP reported a TOI of INR0.86 crore
for its four months of operations.
BHANSALI TRADE: CRISIL Reaffirms B+ Rating on INR3.5MM Cash Loan
----------------------------------------------------------------
CRISIL has reaffirmed its 'CRISIL B+/Stable/CRISIL A4' ratings on
the bank facilities of Bhansali Trade Impex.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 3.5 CRISIL B+/Stable (Reaffirmed)
Letter of Credit 6.5 CRISIL A4 (Reaffirmed)
The ratings continue to reflect BTI's modest scale of operations
in the intensely competitive metal trading business, and its
large working capital requirement. These weaknesses are partially
offset by its partners' extensive industry experience, and their
financial support.
Analytical Approach
CRIISL has treated BTI's unsecured loan of INR3.94 crore from its
partners as neither debt nor equity as the loan should remain in
the business over the medium term.
Key Rating Drivers & Detailed Description
Strengths
Weaknesses
* Modest scale of operations in the highly fragmented steel
trading business: BTI's modest scale is reflected in revenue of
INR28 crore in fiscal 2016. The small scale in a highly
fragmented industry constrains the firm's business risk profile.
* Large working capital requirement: BTI had gross current assets
of 151 days as on March 31, 2016, primarily on account of
sizeable inventory of 60-70 days and receivables of 90-100 days.
Strength
* Partners' extensive industry experience: The partners'
experience of over 40 years in the steel industry has ensured
steady orders from customers and longstanding relationships with
suppliers and customers.
Outlook: Stable
CRISIL believes BTI will continue to benefit from its partners'
extensive industry experience. The outlook may be revised to
'Positive' if there is a significant increase in cash accrual,
resulting in a better financial risk profile. The outlook may be
revised to 'Negative' if the financial risk profile weakens
because of low cash accrual, large working capital requirement,
or substantial capital withdrawal.
BTI, formed in 2003, is a partnership firm of Mr. Suresh
Bhansali, his brother Mr. Naresh Bhansali, and their cousin Mr.
Chandanmal Bhansali. It trades in ferrous and non-ferrous metals
such as steel and nickel scrap, and in stainless steel pipes,
tubes, and coils. BTI's main office is in Mumbai.
BTI had a profit after tax of INR0.4 crore on sales of INR28
crore in fiscal 2016, vis-a-vis INR0.39 crore and INR24 crore,
respectively, in fiscal 2015.
BULANDSHAHR ROLLER: CARE Reaffirms B+ Rating on INR8cr LT Loan
--------------------------------------------------------------
The rating assigned to the long-term bank facilities of
Bulandshahr Roller Flour Mills Private Limited continues to
remain constrained by small scale of operations, low
profitability margins and weak debt service coverage indicators.
The rating is further constrained by vulnerability of
profitability to fluctuations in raw material prices and its
presence in a highly fragmented industry. The rating also factors
in the fluctuation in total operating income of the company.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 8 CARE B+; Stable Reaffirmed
The rating, however, continues to derive comfort from the
experience of the promoters in wheat processing business and
moderate operating cycle.
Going forward, the ability of BRFM to profitably scale up its
operations amidst high level of competition, effectively manage
its working capital requirements to support the operations shall
be the key rating sensitivities.
Key Rating Updates
The scale of operations continues to remain small which
inherently limits company's financial flexibility in times of
stress and deprives it from scale benefit. Also, the Company's
total operating income has been fluctuating over the past three
years. TOI has registered a decline on y-o-y basis in FY15
(refers to the period April 1 to March 31) and registers a growth
in FY16. The profitability margin of the company continues to
remain on lower side owing to low value addition and highly
competitive nature of industry. Though the company has high
sanctioned limit of working capital borrowings, capital structure
stood moderate mainly on account of low utilization levels as on
balance sheet date. Furthermore, the debt service coverage
indicators remained weak due to low profitability margins.
Agro-based industry is characterized by seasonality, as it is
dependent on the availability of raw materials, which varies
with different harvesting periods. The companies in such
industries have to store raw material during harvesting period
for future consumption which leads to high inventory holding
period and results into high holding cost. The commodity
nature of the product makes the industry highly fragmented, with
numerous players operating in the unorganized sector with very
less product differentiation. Since there is a long time lag
between raw material procurement and liquidation of inventory,
the company is exposed to the risk of adverse price movement
resulting in lower realization than expected. The company has
long track record of operations with all the directors having
relevant experience of more than 15 years which has resulted in
long term relationship with customers and suppliers.
Uttar Pradesh-based Bulandshahr Roller Flour Mills Private
Limited (BRFM) was incorporated on June 23, 1997 and started its
commercial operations in June 1999. The company is currently
being managed by Mr. Dinesh Goel, Mr. Mohit Goel and Ms Usha
Goel. BRFM is engaged in the processing and trading of wheat,
maida, suji, wheat flour and cattle feed.
BRFM has its manufacturing facility located at Bulandshahr, Uttar
Pradesh with an installed capacity of 40,150 MTPA of wheat and
22,550 MTPA of cattle feed as on December 31, 2016. BRFM sells
its products under the brand name of 'Brij' to wholesalers and
retailers in Delhi and surrounding regions.
In FY16 (refers to the period April 1 to March 31), BRFM achieved
a total operating income (TOI) of INR29.44 crore with PAT of
INR0.06 crore, as against total operating income of INR23.88
crore with PAT of INR0.13 crore in FY15. Furthermore, the company
has achieved total operating income of INR24.50 crore in 9MFY17
(refers to the period April 1, 2016 to December 31, 2016; based
on provisional results).
CALAMONDINN BUNGALOW: CARE Assigns 'KTP B' Tourism Rating
---------------------------------------------------------
The tourism rating assigned to Calamondinn Bungalow derives
strength from the favourable location of the homestay, homestay
built with Heritage British colonial style theme lending some
uniqueness, spacious premises and rooms fitted with adequate
infrastructure and compliance with various statutory
requirements.
Karnataka Tourism Product-Homestay CARE KTP B Assigned
The rating is however constrained by limited track record of
operations, seasonality risk associated with the hospitality
industry and competition from established homestays in the
vicinity.
Calamondinn Bungalow is operating a 5 room boutique homestay from
Dec'16 in Gonikoppal, Virajpet. Located around 7 kms away from
Gonikoppal Bus stand, the place derives its name from a
type of orange fruit, Calamondin. CIB is promoted by Ms Devika T
Krishnegowda, who is ably supported by his son Mr. Arjun M.
The home stay has five fully-furnished spacious rooms built in
British Colonial Style with attached bathrooms fitted with
western commode & 24*7 cold/hot water supply, wardrobes, Wi-Fi
(basic speed) and electricity backup. CIB also has a common
dining area cum fully equipped kitchen with water purifier,
refrigerator, gas connection and utensils. The homestay provides
complimentary breakfast & dinner and paid lunch on prior request
by the guests. Moreover, the guests are allowed to cook for
themselves if needed.
The homestay also offers on-request services like laundry
service, iron board, information on nearby tourist destinations
and paid transportation facilities. There are 3 CCTVs for
monitoring the
entrance/common areas. The door of the rooms is fitted with
ordinary locks. The sizes of the rooms and bathrooms in the CIB
are adequately spacious. External furniture, windows, internal
floors are kept clean and dust free. Homestay has TV in the
common lounge.
CIB is run by Mrs Devika T Krishnegowda, who is a homemaker and
is good in cooking local Malnad cuisine. She is supported by her
son, Mr. Arjun M, who is a media graduate with a background in
hotel management and also has good knowledge about Kodagu
district.
INNOVATION HOUSE: CRISIL Ups Rating on INR13.5MM Loan to B-
-----------------------------------------------------------
CRISIL has revised its rating on the long-term bank facilities of
Innovation House Industries Private Limited from 'CRISIL B-
/Stable' to 'CRISIL D', and simultaneously upgraded it to 'CRISIL
B-/Stable'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 1.5 CRISIL B-/Stable (Revised
from 'CRISIL B-/Stable'
to 'CRISIL D' and
simultaneously upgraded
to 'CRISIL B-/Stable')
Term Loan 13.5 CRISIL B-/Stable (Revised
from 'CRISIL B-/Stable'
to 'CRISIL D' and
simultaneously upgraded
to 'CRISIL B-/Stable')
The rating downgrade takes into account delays in servicing
interest on term loan for March 2016. However, the rating has
been upgraded because of timely debt servicing in the last 180
days.
The rating also factors in the improvement in liquidity on the
back of ramp-up in operations in fiscal 2017. With increasing
sales and healthy profitability, cash accrual is likely to be
sufficient to meet debt obligation over the medium term.
Furthermore, controlled working capital cycle post stabilisation
of operations has also led to moderate bank limit utilisation.
Improvement in scale and profitability will be a key monitorable.
Key Rating Drivers & Detailed Description
Weaknesses
* Below-average financial risk profile: Gearing was over 7 times
as on March 31, 2016, because of sizeable debt contracted to set
up manufacturing unit and small networth of INR1.99 crore.
Furthermore, debt protection metrics remained subdued, with
interest coverage ratio of 1.25 times for fiscal 2016. Financial
risk profile will remain below-average over the medium term.
* Small scale of operation exposed to intense industry
competition: Scale of operation remains small with expected
topline of about INR10 crore for fiscal 2017. The scale is
constrained because of intense competition from other
manufacturers of Autoclaved Aerated Concrete (AAC) blocks as well
as competing products.
Strength
* Extensive entrepreneurial experience of promoters and healthy
demand prospects for AAC blocks: The promoters have extensive
entrepreneurial experience in various businesses. Also, healthy
demand prospects for AAC blocks will benefit the company over the
medium term.
Outlook: Stable
CRISIL believes IHIPL will continue to benefit over the medium
term from the extensive experience of its promoters. The outlook
may be revised to 'Positive' if higher-than-expected cash accrual
due to improving revenue and operating profitability and
controlled working capital requirement, results in better
financial risk profile. The outlook may be revised to 'Negative'
if financial risk profile, particularly liquidity, weakens
further on account of lower cash accrual or stretch in working
capital cycle.
Incorporated in January 2013 and promoted by Mr. Ravi Laddha, Mr.
Nakul Mundhada, and Ms. Sarita Kasat, IHIPL manufactures AAC
blocks at its unit in Amravati, Maharashtra. Operations commenced
from September 2015.
In fiscal 2016, net loss was INR1.96 crore on operating income of
INR2.49 crore, against a net loss of INR0.2 lakh on an operating
income of INR7 lakh in the previous fiscal.
ISHAAN TPR: CRISIL Assigns 'B' Rating to INR1.5MM Cash Loan
-----------------------------------------------------------
CRISIL has assigned its 'CRISIL B/Stable/CRISIL A4' ratings to
the bank facilities of Ishaan TPR.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Long Term Loan 1 CRISIL B/Stable
Cash Credit 1.5 CRISIL B/Stable
Import Letter of
Credit Limit 7 CRISIL A4
The rating reflects Ishaan's weak financial risk profile marked
by small net worth and high gearing and working capital intensive
nature of operations. These rating weaknesses are partially
offset by the extensive experience of promoters in footwear
industry.
Key Rating Drivers & Detailed Description
Weaknesses
* Weak financial risk profile:
The company is expected to have a weak financial risk profile
with expected gearing at 8 times and expected moderate debt
protection metrics with interest coverage and net cash accruals
to total debt (NCATD) at 1.74 times and 0.05 times respectively
as on March 31st, 2017.
* Working capital intensive nature of operations:
The firm is expected to have working capital intensive operations
reflected in its expected GCA days of around 400 days for March
2017. The higher GCA days are mainly driven by expected
receivables at around three-four months and inventory at similar
levels.
Strength
* Extensive experience of promoters in the footwear industry:
The business risk profile is strengthened by the promoters'
extensive experience. They have a track record of almost a decade
which will help forge established relations with suppliers and
customers.
Outlook: Stable
CRISIL expects Ishaan to benefit from its partners extensive
experience in the industry. The outlook may be revised to
'Positive' in case of higher than expected growth in revenues and
operating margins. Conversely, the outlook may be revised to
'Negative' in case the company undertakes higher than expected
debt funded capex or deterioration in working capital management
leading to deterioration in the financial risk profile.
Incorporated in 2015 as a partnership firm between Mr. Deevik
Garg, Mr. Nitin Jindal and Mr. Ankit Goyal; the firm is engaged
into manufacturing of Thermo Plastic Rubber (TPR) compounds which
are used in soles of footwear. The firm started its operations in
January 2016. The manufacturing capacity is based in Narela.
JMK MOTOWHEELS: CRISIL Raises Rating on INR7MM Loan to B+
---------------------------------------------------------
CRISIL has upgraded its rating on the long-term bank facilities
of JMK Motowheels Private Limited to 'CRISIL B+/Stable' from
'CRISIL B/Stable'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 1 CRISIL B+/Stable (Upgraded
from 'CRISIL B/Stable')
Channel Financing 7 CRISIL B+/Stable (Upgraded
from 'CRISIL B/Stable')
Proposed Long Term 1.65 CRISIL B+/Stable (Upgraded
Bank Loan Facility from 'CRISIL B/Stable')
The upgrade reflects expected improvement in business risk
profile of JMKMPL over the medium term as increased demand and
healthy outlook for the passenger car segment will help sustain
growth in revenue and operating profitability. The company
reported operating income of INR30 crore for the period April-
December 2016 and is expected to report operating income of INR37
crore for fiscal 2017 against INR30 crore in fiscal 2016.
Moreover, operating profit margins are expected to increase to
around 5% in fiscal 2017 against 3.8 % in fiscal 2016 marked by
increase in sales of higher margins cars and incentives received
by JMKMPL from the principal on reaching targets for the fiscal.
Analytical Approach
Unsecured loans of INR4.21 crore (as on March 31, 2016) from
directors have been treated as neither debt nor equity as these
are subordinate to bank debt, are expected to remain in business
over the medium term, and the interest rate is less than the
interest paid on the bank borrowings.
Key Rating Drivers & Detailed Description
Weaknesses
* Modest scale of operations in competitive segment: With
expected operating income of INR37 crore for fiscal 2017, scale
remains small in the competitive automotive dealership industry.
* Modest financial risk profile: Networth stands negative at Rs.
0.50 cr in fiscal 2016 and is expected to become positive in
fiscal 2017.
Strength
* Extensive experience of promoters and established market
position: Presence of around 15 years in the auto dealership
segment through group entity (JMK Motors Pvt Ltd) has enabled the
promoters to understand industry trends and establish strong
relationship with principal, Toyota Kirloskar Motors Pvt Ltd. The
promoters also have dealerships of Tata Motors Ltd (TML) and Hero
Motocorp Ltd in other company.
Outlook: Stable
CRISIL believes JMKMPL will continue to benefit over the medium
term from the extensive experience of its promoters. The outlook
may be revised to 'Positive' if significant expansion in scale of
operations and better operating profitability result in higher-
than-expected cash accrual and hence better liquidity; and if
working capital requirement is efficiently managed. The outlook
may be revised to 'Negative' if a substantial decline in scale of
operations affects cash accrual, or if liquidity weakens due to
larger-than-expected working capital requirement or debt-funded
capital expenditure.
Incorporated in 2012 and promoted by Mr. Rakesh Singh Baghel and
his wife, Ms Pratiba Singh, JMKMPL is an authorised dealer and
service centre for Toyota's passenger vehicles in Jhansi.
JMKMPL reported Profit after tax was INR0.14 crore on net sales
of INR30.09 crore in fiscal 2016, against a net loss of INR0.45
crore on net sales of INR30.61 crore in fiscal 2015.
K. B. RICE: CRISIL Reaffirms B Rating on INR9MM Cash Loan
---------------------------------------------------------
CRISIL has reaffirmed its 'CRISIL B/Stable' rating on the long-
term bank facilities of K. B. Rice Mills.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 9 CRISIL B/Stable (Reaffirmed)
Rupee Term Loan 3 CRISIL B/Stable (Reaffirmed)
Operating revenue declined by 7% in fiscal 2016 due to low
realisations. However, the business risk profile will remain
stable with revenue expected to grow at 5-6% over the medium
term, supported by partners' extensive experience in the rice
industry business. The operating margin is expected to hover at
4.8-5.0% over this period.
The financial risk profile is likely to remain weak because of
working capital-intensive operations. However, absence of debt-
funded capital expenditure (capex) will support the financial
risk profile. Liquidity is weak as indicated by high bank limit
utilisation of around 97% over the 11 months through November
2016 and barely sufficient cash accrual to meet term debt
repayment obligation; however, liquidity is supported by need-
based funding by partners
Key Rating Drivers & Detailed Description
Weakness
* Working capital-intensive operations: Operations are working
capital intensive, reflected in gross current assets of 131 days
as on March 31, 2016, owing to large inventory of 100-120 days.
Considering the nature of business, working capital requirement
will remain large over the medium term.
* Weak financial risk profile: The total outside liabilities to
tangible networth ratio were high owing to small networth and
high dependency on bank borrowing. Resultantly, debt protection
metrics were low. Capital structure will remain leveraged over
the medium term due to large working capital requirement.
Strengths
* Extensive experience of partners: The partners have
longstanding experience of over two decades in the rice industry
through their group firms, JK Industries (rated 'CRISIL
B+/Stable'), and Zamindara Agro Traders (commission agent). This
has enabled KBRM develop strong relationships with suppliers and
customers and thus scale up operations.
* Financial support received from partners: The partners'
families and group companies extended unsecured loans of around
INR89 lakhs as on March 31, 2016; it is likely to increase to
INR2.45 crore by end of fiscal 2017. The firm will continue to
get need-based financial support from the partners.
Outlook: Stable
CRISIL believes KBRM will continue to benefit over the medium
term from the partners' experience. The outlook may be revised to
'Positive' if the financial risk profile significantly improves
because of capital infusion, or if scale of operations and
profitability increases resulting in large cash accrual.
Conversely, the outlook may be revised to 'Negative' if financial
risk profile weakens because of sizeable increase in inventory,
leading to large bank borrowing, significant debt-funded capex,
or scale of operations and profitability declines resulting into
negligible cash accrual.
KBRM is a partnership firm established in 2013 by Mr. Sarandeep
Singh, Mr. Gurpreet Singh, Mr. Darshan Lal, Mr. Pawan Kumar, Smt.
Kulwant Kaur and Smt. Mona Rani. The firm undertakes rice milling
and shelling at its plant in Fazilka (Punjab). It processes
basmati rice and its by-products such as bran, phuk, and bardana,
which are sold in both the overseas and domestic markets.
Profit after tax and net sales were INR8.4 lakhs and INR45.07
crore, respectively, for fiscal 2016, as against INR9.8 lakhs and
INR48.55 crore, respectively, for the previous fiscal.
K.P. INDUSTRIES: CARE Reaffirms 'B' Rating on INR9.69cr LT Loan
---------------------------------------------------------------
The rating assigned to the bank facilities of K.P. Industries is
constrained primarily on account of its modest scale of
operations, thin profit margins, leveraged capital structure and
weak debt coverage indicators during FY16 (refers to the period
April 1 to March 31). The rating is also constrained on account
of its partnership nature of constitution, working capital
intensive nature of operations in a fragmented and competitive
rice processing industry and exposure to the risk associated with
government regulations.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 9.69 CARE B; Stable Suspension
Facilities revoked and rating reaffirmed
The rating, however, derives strength from the vast experience of
the promoters into rice processing industry and its presence in
paddy-growing areas which provides location advantage.
The ability of KPI to increase its scale of operation along with
improvement in profitability by managing risks associated with
raw material price fluctuation and improve its solvency position
via efficient management of working capital are the key rating
sensitivities.
Detailed description of key rating drivers
KPI's promoters carry a reasonable experience in the rice milling
business. The total operating income (TOI) of KPI has remained
stable in FY16 at INR52.01 crore which was almost in line with
FY15. Profit margins of KPI remained low and almost in line with
previous year, due to low-value addition processing operations of
KPI. With an increase in the level of tangible net worth, the
capital structure of KPI improved marginally and continued to
remain leveraged as on March 31, 2016. Furthermore, debt
protection metrics deteriorated and continued to remain
weak as on March 31, 2016. Resultantly, average working capital
utilization remained full for the past 12 months ended
December 2016 while its operating cycle also stood moderately
high at 88 days in FY16.
Established in the year 2009, Ahmedabad-based K.P. Industries
(KPI) is a partnership firm engaged in the processing of non-
basmati rice. Key partners include Mr. Dhaval Prajapati and
Mr. Atul Prajapati who manage the day-to-day operations.
As on March 31, 2016, it had a total installed capacity of 69,120
Metric Tonnes per annum and operates through its sole
manufacturing unit at Kheda.
During FY16, KPI reported a total operating income (TOI) of
INR52.01 crore with a PAT of INR0.19 crore as against TOI of
INR51.04 crore with a PAT of INR0.18 crore in FY15. During 9MFY17
(Provisional), KPI reported a TOI of INR32.36 crore.
KAIZEN AUTOCARS: CARE Assigns 'B' Rating to INR9.57cr LT Loan
-------------------------------------------------------------
The rating assigned to the bank facilities of Kaizen Autocars
Private Limited continue to be constrained on account of its
nascent stage and modest scale of operations in highly
competitive auto dealership industry, low profitability inherent
to trading nature of business, leverage capital structure and
weak debt coverage indicators, low bargaining power with Original
Equipment Manufacturers (OEM) and working capital intensive
nature of operations.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 9.57 CARE B, Stable
The rating derives strength from experienced promoters and
established market position of its principal Honda Cars India
Limited (HCIL) in the passenger vehicle segment.
The ability of the company to increase its operations and improve
profitability and capital structure while managing working
capital requirement efficiently is the key rating sensitivity.
Detailed description of the key rating drivers
KAPL is an authorised dealer for the four wheelers of Honda Cars
India Limited (Honda) and is promoted by Mr. Prasad Zapke, Mr.
Nitin Bijjargi and his wife Mrs Prarthana Bijjargi having an
experience of over a decade in the auto dealer industry. With
FY16 being first full year of operations for KAPL scale of
operations remained modest marked by low networth base limiting
financial flexibility. Further owing to trading nature of
business and prices of vehicles being fixed by OEM, KAPL has low
bargaining power resulting in low profit margins while capital
structure remained weak owing to higher dependence on external
borrowings to support the operations. Operations remained working
capital intensive in nature with high investment in inventory and
low credit period received from OEM resulting in high utilization
of limits.
Kaizen Autocars Private Limited was incorporated in the year 2013
with its registered office located in Solapur, Maharashtra. The
company is an authorized dealer for the four wheelers of Honda
Cars India Limited (Honda) and is promoted by Mr. Prasad Zapke,
Mr.Nitin Bijjargi and his wife Mrs.Prarthana Bijjargi. The
promoters have an experience of over one decade in the auto
dealer industry through group concern viz. 'Kaizen Motors'
engaged in the auto dealership for two wheelers of Honda with its
showroom located in Solapur.
The entity operates through two facilities located in Solapur and
Latur respectively. The facility in Solapur (area of around
50,000 sqft) is owned and operates as showroom, service station
and warehouse. KAPL commenced operations on August 1, 2014
through its facility in Solapur. The facility in Latur commenced
operations in April 2015 with the facility being leased and
operating as a showroom, service station and warehouse.
KAPL registered total operating income of INR60.11 crore with net
loss of INR0.86 crore in FY16.
KAMAL PRESSING: CARE Assigns 'B' Rating to INR5cr LT Loan
---------------------------------------------------------
The rating assigned to the bank facilities of Kamal Pressing
Factory are constrained on account of declining scale of
operations, below-average financial risk profile marked by
leveraged capital structure and weak debt coverage indicators,
low and fluctuating profitability margins owing to limited value
addition nature of business and susceptibility to fluctuation in
raw material price. The rating is further constrained by working
capital intensive nature of operations, presence in highly
competitive and fragmented industry and susceptibility to adverse
changes in government policies and proprietorship nature of
constitution.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 5 CARE B; Stable Assigned
However, the rating derives strength from long track record of
operations of entity of around two decades, experience of
promoter in cotton industry and location advantage emanating from
proximity to raw material source.
The ability of the entity to increase its scale of operations,
improve its solvency position and profit margins amidst
competitive scenario alongwith efficient management of working
capital requirements is the key rating sensitivity.
Detailed description of the key rating drivers
Despite being in existence for more than one and half decade, the
scale of the entity remained small with low networth base thus
depriving it of scale benefits. Furthermore, owing to limited
value addition nature of business and high degree of competition
and fragmentation the profit margin remained low. The same are
susceptible to fluctuation in raw material prices i.e; raw cotton
as the entity has to stock high level of inventory owing to
seasonal availability of the same which has led to higher working
capital intensity. Dependence on external borrowings remained
high resulting in leveraged capital structure owing to low
networth base.
However, the entity benefits from it being located in cotton-
producing belt of Parbhani (Maharashtra) resulting to lower
logistic expenditure and proximity to clients as well. The entity
is spearheaded by Mr. Anil Kumar Lahoti, with three decades of
experience in the cotton industry, through association with group
entities engaged in similar segment.
Established in 1998, Kamal Pressing Factory is based in Hingoli,
Maharashtra. KPF is primarily engaged in the business of
processing of cotton and has an installed capacity to process 450
cotton bales per day. The overall operations of KPF are looked
after by Mr. Anil Bansilal Lahoti. The entity sells its finished
goods to local dealers and wholesalers and firms, namely, Jalaram
Ginning, Radhalakshmi Pvt. Ltd, Siddhivainaka Cotton Corp. Ltd
located in close vicinity. The major raw material for entiy is
raw cotton, which is procured from farmers and local commission
agents. Lahoti Ginning Factory (LGF), the associate concern of
KPF (estd. in 1997) by Mr. Anil Kumar Lahoti, is also engaged in
similar business as KPF. Furthermore, for 9MFY17, KPF has
achieved TOI of INR11 crore, which is ~50% of projected TOI for
FY17 (refers to the period April 1 to March 31).
LIKHITA ENERGY: CARE Reaffirms 'B' Rating on INR10.70cr LT Loan
---------------------------------------------------------------
The rating assigned to the bank facilities of Likhita Energy
Systems Private Limited continues to be constrained by small
scale of operations, relatively low profit level and cash
accruals, highly leveraged capital structure albeit improved debt
coverage indicators during FY16 [refers to the period April 1 to
March 31] and debt-funded capital expenditure.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 10.70 CARE B Reaffirmed
The rating, however, derives comfort from the experienced
promoter, increasing operating income over the years and
satisfactory operating cycle. The ability of the company to
expand the scale of operation with subsequent improvement in
profitability and coverage ratios are the key rating sensitivity.
Detailed description of the key rating drivers
The company has relatively short track record of operation and
the total operating income was INR18.12 crore during FY16. The
profitability has also been on the lower side during FY16.
The company has a highly leveraged capital structure as on
March 31, 2016. The company is also planning to undertake
debt-funded capital expenditure in the coming years. The
operating cycle has also improved during FY16. Mr. T.Y. Reddy,
promoter and Managing Director of Likhita Group of Companies, is
a graduate in Mechanical Engineering from the University of
Marathwada in India. He has more than 25 years of experience in
engineering industry. His experience has enabled him to establish
and maintain healthy relationships with his customers.
LESPL was incorporated in June 21, 2010, and is engaged in
fabrication/manufacturing of tubular wind turbine towers, huge
storage tanks and heavy fabrication of structures for thermal
power stations, harbor projects, and refinery projects on order
basis. LESPL is managed by Mr. T. Y. Reddy, Mr. ASGS Sandilya and
Mr. T. P. Reddy.
LESPL is a part of the Likhita Group (ISO 9001:2008 Certified);
an engineering company established in 1996 and having focus on
multiple business segments which includes manufacturing of bulk
drugs processing equipment and wind turbine towers for wind power
projects, construction of residential buildings and IT-enabled
services. The quality and safety of Likhita Group is certified by
'TUV India' and 'TATA Projects Limited.
During FY16, LESPL reported a PAT of INR3.50 crore (net loss of
INR0.74 crore in FY15) on a total operating income of INR18.12
crore (INR8.70 crore in FY15).
MANNE LABORATORIES: CARE Assigns B+ Rating to INR15cr LT Loan
-------------------------------------------------------------
The rating assigned to the bank facilities of Manne Laboratories
Private Limited is constrained by the on-going project
implementation risk, highly regulated nature of pharma industries
and working capital intensive nature of operations. However, the
rating is underpinned by the experienced and qualified promoters
for around two decades in the pharma industry, achievement of
financial closure of the on-going project and advance stage of
project completion.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 15 CARE B+; Stable Assigned
Going forward, ability of the company to complete the project
without any cost and time overrun and further stabilize the
operations generating revenues and profit levels as envisaged are
key rating sensitivities.
Detailed Description of the key rating drivers
Manne Laboratories Private Limited is planning to set up a
manufacturing unit of API (Active Pharmaceutical Ingredients) at
Visakhapatnam, with total installed capacity of 90 KL per annum.
The total proposed cost of project is INR24.65 crore which is
proposed to be funded through bank term loan of INR11.70 crore
and equity share capital of INR12.95 crore. As on January 15,
2017, the company has incurred expenses of INR16.00 crore (around
69% of total project cost) towards the land development, civil
and electrical works, advance to machinery supplier. The said
expenses are funded by the equity share capital (INR10.00 crore)
and term loan (INR6.00 crore). Apart from the bank term loan, the
company is planning to avail INR1.50-3.30 crore of overdraft
facility based on the requirement, to support its working capital
requirements. The ability of the company to complete the ongoing
project without time or cost overrun would be crucial from credit
perspective.
The company was established in 2014, by Mr. Satyanarayana Prasad
Manne and Mrs. Nagamani Manne. The director is having experience
of more than two decades in same line of business (Pharma
Industry). He has worked with Dr. Reddy's Laboratories in
different functions. Apart, he has worked in Natco Pharma Ltd.
and Divis Laboratories.
Manne Laboratories Private Limited was incorporated on March 19,
2014 and promoted by Mr. Satyanarayana Prasad Manne (Managing
Director) and his wife Mrs. Nagamani. The company has proposed to
set-up a manufacturing unit of APIs with an installed capacity of
90,000 kilo liters (KL) per annum. MLPL would manufacture the
products like Valacyclovir, Gabapentin, Panpoprozole,
Dextromethorphan, Carbidopa, which are used for manufacturing of
Anti-viral and Anti-Biotic drugs. The company is expected to
start its commercial operations from April 2017. The total cost
proposed for setting up the manufacturing facilities is INR23.07
crore funded by equity share capital of INR12.95 crore.
NAVIN COTTON: CARE Reaffirms B+ Rating on INR9cr LT Loan
--------------------------------------------------------
The rating assigned to the bank facilities of Navin Cotton Fiber
continues to remain constrained on account of the modest scale
with low capitalization, working capital intensive nature of
operations owing to seasonality associated with availability of
cotton, low profitability with susceptibility of margins to
fluctuations in cotton prices, presence in the highly fragmented
cotton ginning and pressing industry and limited financial
flexibility owing to proprietorship nature of constitution. The
rating take into consideration the decline in total operating
income and profitability along with moderation in capital
structure and debt coverage indicators during FY16 (refers to the
period April 1 to March 31).
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 9 CARE B+; Stable Suspension
revoked and rating reaffirmed
The rating, however, continues to derive strength from the
established operations, wide experience of the proprietor in
the industry, geographically diversified customer base and
moderate capital structure and debt coverage indicators.
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 declining trend
in the last three years ended FY16 on account of the weak
industry condition owing to the below moderate monsoon in the
last three years affecting the availability of cotton.
Furthermore, the scale of operations of the entity remained
modest with low net-worth base of INR4.22 crore as on March 31,
2016, thus limiting its financial flexibility. Owing to limited
value addition nature of business and high level of competition
the profit margins of the company remained low in the range of
2%-3% during the said period. Furthermore, with the seasonality
associated with availability of cotton and with payments to
suppliers made in on a cash basis, the operations remained
working capital intensive in nature leading to high utilization
of working capital limits during the peak season. The same led to
moderate solvency position. NCF has an established track record
of 14 years in the industry and has a geographically diversified
revenue base across Maharashtra, Madhya Pradesh, West Bengal, and
Tamil Nadu
among others.
Established in October 2002 by Mr. Prashant Tayal, NCF is a
proprietary concern which undertakes ginning and pressing of
cotton from its facility based in Devalgaonraja, Maharashtra.
From 2002 to 2011, the firm undertook trading of cotton and later
set up a factory for ginning and pressing operations with an
annual capacity of 30,000 cotton bales. The company procures
cotton from mainly from 'Mandis'.
During FY16, the firm booked a total operating income of INR54.30
crore (as against INR62.20 crore in FY15) and PAT of INR0.65
crore (as against INR0.67 crore in FY15).
NAYAAB JEWELS: CARE Reaffirms B Rating on INR17.50cr LT Loan
------------------------------------------------------------
The ratings assigned to the bank facilities of Nayaab Jewels (NJ)
continue to remain constrained by its modest scale of operations
with low capitalization, low profitability, weak debt coverage
indicators, geographical concentrated revenue base and working
capital intensive nature of operations with high inventory
holding. The ratings also remained constrained due to its
presence in the highly fragmented industry Gems & Jewellery
industry and limited financial flexibility owing to partnership
nature of constitution.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 17.50 CARE B; Stable Reaffirmed
Short-term Bank
Facilities 0.27 CARE A4 Reaffirmed
The ratings however, continue to derive strength from wide
experience of the promoters and established track record of
operations of the firm and moderately comfortable capital
structure.
The ability of the firm to improve its scale of operations,
efficiently manage its working capital requirement and improve
profitability and solvency position remain the key rating
sensitivities.
Detailed description of the key rating drivers
The scale of operations of NJ remained modest with low networth
base limiting its financial flexibility. The operating income of
the firm grew at a moderate CAGR of 8.73% during the last two
years ending FY16 (refers to the period April 1 to March 31). The
stagnant growth was primarily driven by the slower growth in
demand in the industry. Profit margins of the company although
moderate have been deteriorating mainly on account of lower
realizations and high level of competition and differentiation in
the jewelry business. The solvency profile of NJ is comfortable
and improved on account of capital infusion by the partners thus
reducing dependence on external borrowings. The liquidity profile
of the company is stressed with funds being mainly blocked in
inventory. The gross current assets days remained high of over
320 days during the last three years ended FY16 thus resulting in
working capital limit utilization. However, the partners of the
firm, Mr. Upendra Bothra and Mrs Manali Bothra have been in the
gems and jewellery industry for over two decades.
Established in the year, 2003, Nayaab Jewels (NJ) and is engaged
in the manufacturing and designing gems, diamonds, precious and
semi-precious stone studded jewellery in gold, silver and
platinum. The firm is promoted by Mr. Upendra Bothra and Mrs
Manali Bothra. Mr. Upendra Bothra is a third generation
entrepreneur of the Bothra family having presence in the gems and
jewellery business segment since 1961. Furthermore, Mrs Manali
Bothra, hails from the Lalwani family who are also engaged in the
manufacturing and designing under the brand name of "Rajmal
Lakhichand Jewellers Private Limited" having presence across
Maharashtra. The firm has two showrooms situated in Jaipur and
Mumbai along with a manufacturing facility in Jaipur.
During FY16, the entity reported total operating income of
INR40.74 crore with a PAT of INR6 crore.
NEPTUNE SUPER: CRISIL Assigns 'B' Rating to INR10MM Term Loan
-------------------------------------------------------------
CRISIL has assigned its 'CRISIL B/Stable' rating to the long-term
bank facilities of Neptune Super Speciality Hospitals Private
Limited.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Proposed Long Term
Bank Loan Facility 1 CRISIL B/Stable
Proposed Term Loan 10 CRISIL B/Stable
The rating reflects the company's presence in the intensely
competitive and regulated healthcare industry and weak financial
risk profile because of high gearing and subdued debt protection
metrics. These weaknesses are partially offset by the extensive
experience of its promoters and their funding support.
Key Rating Drivers & Detailed Description
Weaknesses
* Presence in the intensely competitive and regulated healthcare
industry: NSSHPL is under process of acquiring 100 bedded multi-
specialty hospital in Nashik- Amrut Vinayak Hospital. Operations
of NSSHPL will be concentrated in the Nashik region unlike the
aforementioned large healthcare chains that have multiple
hospitals in various locations, resulting in a wider presence.
Moreover, the firm will face local competition from private
hospitals, and also from government hospitals. The image-
sensitive nature of the healthcare industry aggravates the risk
of being in a competitive and regulated healthcare industry.
* Weak financial risk profile: Project gearing is expected to
remain around 2 times due to total project cost at Rs. 15.0 crs
funded through term loan of INR10 crore and remaining through
promoters funding. Debt protection metrics are also likely to
remain weak.
Strength
* Extensive experience of promoters and their funding support:
The company will depend on promoters' expertise. Also, promoters
extended unsecured loans of INR3.0 crore in fiscal 2017 and are
likely to offer need-based support.
Outlook: Stable
CRISIL believes NSSHPL will benefit over the medium term from the
extensive experience of its promoters. The outlook may be revised
to 'Positive' with timely acquisition of AVH and quick ramp up in
revenues leading to higher cash accrual. The outlook may be
revised to 'Negative' if time or cost over run due to delay in
acquisition process also leading to lower cash accruals weakens
financial risk profile, especially liquidity.
Incorporated in 2016 and promoted by Mr. Avinash Datar and his
wife, Ms. Sangeeta Datar, NSSHPL is set up to take over AVH in
Nashik.
ORIENTAL GRANITES: CARE Ups Rating on INR5.35cr LT Loan to BB-
--------------------------------------------------------------
The revision in the rating assigned to the bank facilities of
Oriental Granites and Crushers (OGC) takes into account growth
in total operating income and improvement in capital structure
along with satisfactory debt coverage indicators. The rating
continues to derive benefit from the experience of the promoter
with an established track record and healthy profitability
margins.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 5.35 CARE BB-; Stable Revised
from CARE B+
However, the rating continues to be constrained by small scale of
operations, working capital intensive nature of operations,
presence in a highly fragmented and competitive industry,
regulatory risk pertaining to environmental issues and
proprietorship constitution of the entity.
The ability of the company to improve its scale of operations and
capital structure along with efficient management of working
capital requirements would be the key rating sensitivity
Detailed description of the key rating drivers The total
operating income of OGC grew by 4.18% from INR11.71 crore in FY15
(refers to the period April 1 to March 31) to INR12.20 crore in
FY16 on account of year on year increase in orders from existing
clients and addition of new customers. Furthermore, the entity
has strong profitability margins during review period. The PBILDT
margin of the entity increased by 326 bps to 26.63% in FY16 as
compared with 23.37% in FY15 due to decrease in power and fuel
expenses and maintenance costs of plant. However, the PAT margin
of the company decreased marginally by 48 bps to 8.84% in FY16 as
compared with 9.32% in FY15 due to increase in interest cost and
depreciation expense. The entity has moderate capital structure
marked by debt equity ratio which improved from 2.00x as on
March 31, 2015, to 1.42x as on March 31, 2016, due to repayment
of term loan coupled with increase in tangible net worth on
account of accretion of profit to its reserves. Due to the above
reason, the overall gearing ratio of the entity also improved
from 3.70x as on March 31, 2015, to 2.73x as on March 31, 2016.
The entity has moderately satisfactory debt coverage indicators
during review period FY14 to FY16. Total debt/GCA improved from
4.59x in FY15 to 4.29x in FY16 due to decline in the total debt
on account of repayment of term loan coupled with increase in
GCA. However, interest coverage ratio of the entity deteriorated
from 5.78x in FY15 to 3.79x in FY16 due to increase in interest
expense. The scale of operations of the entity marked by total
operating income (TOI), remained small at INR12.20 crore in FY16
coupled with moderate net worth base of INR3.60 crore as on March
31, 2016, as compared with other peers in the industry. The
entity has elongated operating cycle during review period FY14 to
FY16. The operating cycle of the entity deteriorated from 87 days
in FY15 to 114 days in FY16 due to increase in average inventory
period from 41 days in FY15 to 67 days in FY16. The entity
receives payments from its customers within 45-60 days. The firm
is making payment to its creditors within 20-30 days.
OGC being a proprietorship entity, the risks associated with
withdrawal of proprietor's capital exists. Stone crushing
industry is highly competitive and fragmented in nature. OGC
witnesses intense competition from both the organized and
largely unorganized players.
Mr. Chuzhikunnel Michele Joy, proprietor of OGC, holds an
experience of more than 20 years in the stone crushing business.
He is actively involved in the day-to-day activities of the firm.
Oriental Granites and Crushers is a proprietorship entity
established in 2010 and engaged in the business of stone
crushing. The entity leases the mines (size of around 3 acres) &
undertakes the mining activities to obtain raw material (stone
boulders).
After getting the raw material, it further breaks the boulders
into aggregates (primarily used in real estate and construction
industry) and transports it to its crushing unit.
At present, the unit has nine crushers, which helps them to
further break the aggregates into different sizes and sells it to
the client base located in Udupi District. The entity has leased
mines to the size of 3 acres from Government of Karnataka to
quarry stones from it.
In FY16, OGC reported a Profit after Tax (PAT) of INR1.08 crore
on a total operating income of INR12.20 crore, as against a PAT
and TOI of INR1.09 crore and INR11.71 crore, respectively, in
FY15.
PRADEEP COTTON: CARE Reaffirms B+ Rating on INR9cr LT Loan
----------------------------------------------------------
The rating assigned to the bank facilities of Pradeep Cotton
Private Limited (PCPL) continue to remain constrained on account
of thin profit margins, moderate capital structure, weak debt
coverage indicators and moderate liquidity position. The rating
further continue to remain constrained on account of
susceptibility of PCPL's profit margins to the raw material price
fluctuations and its presence in the highly fragmented cotton
industry. The reaffirmation of the rating also takes into
consideration decline in the total operating income (TOI) during
FY16 (refers to the period April 1 to March 31).
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 9 CARE B+; Stable Re-affirmed
The rating, however, continue to derive comfort from experienced
promoters, established track record of PCPL's operations coupled
with proximity of its manufacturing facility to cotton-growing
region in Madhya Pradesh.
Going forward, PCPL's ability to increase its scale of operations
along with improvement in profit margins, capital structure and
debt coverage indicators would remain the key rating
sensitivities. Furthermore, efficient working capital management
would also remain crucial.
Detailed description of the key rating drivers
PCPL is a family owned company with key promoters being Mr.
Mohanlal Tayal & Mr. Kishore Tayal having experience of more than
two decade. Mr. Kishor Tayal looks after purchase and sales. He
is accompanied by Mr. Mohanlal Tayal who looks after overall
management of the business.
PCPL's total operating income (TOI) witnessed a y-o-y decline of
about 26.41% mainly on account of decline in demand of cotton
Bales and cotton seeds as well as significant decline in the
price of the product. The PBILDT margin improved marginally by 15
bps and remained at 2.30% during FY16 as against 2.15% during
FY15 primarily on account of decline in cost of raw material
during FY16 while PAT margin improved by 11 bps over the previous
year to 0.51% during FY16 (0.40% during FY15). PCPL's overall
gearing stood moderately leveraged as on March 31, 2016 while
total debt to GCA remained weak on the back of low level of cash
accruals and high debt level.
Liquidity position stood moderate marked by current ratio of 1.77
times and quick ratio of 1.00 times as on March 31, 2016.
Incorporated in July 2011, Pradeep Cotton Private Limited (PCPL)
is engaged in business of cotton ginning & pressing. PCPL is a
family owned company with key promoters being Mr. Mohanlal Tayal
& Mr. Kishore Tayal and both the directors are actively involved
in the overall management of the company. PCPL supplies cotton
bales to spinning mills (through agents) and cotton seeds to oil
extracting units. The company's entire sales are into domestic
market & the key raw material i.e. raw cotton is also sourced
from local framers and "mandis" predominantly on cash basis.
During FY16 (A), PCPL reported PAT of INR0.30 crore on a TOI of
INR59.30 crore as against PAT of INR0.32 crore on a TOI of
INR80.58 crore during FY15. Till December 2016 (Provisional), the
firm has achieved a turnover of INR40.34 crore.
PROGRESSIVE INDUSTRIES: CRISIL Ups Rating on INR3.94MM Loan to B-
-----------------------------------------------------------------
CRISIL has upgraded its rating on long-term bank facilities of
Progressive Industries to 'CRISIL B-/Stable' from 'CRISIL D'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 4 CRISIL B-/Stable (Upgraded
from 'CRISIL D')
Proposed Long Term 0.06 CRISIL B-/Stable (Upgraded
Bank Loan Facility from 'CRISIL D')
Term Loan 3.94 CRISIL B-/Stable (Upgraded
from 'CRISIL D')
The upgrade reflects timely servicing of instalments on term loan
in the past three months and funding support from promoters.
The rating reflects PI's nascent stage of operations,
geographical concentration in revenue, and weak financial risk
profile because of large, debt-funded capital expenditure
(capex). These weaknesses are partially offset by the extensive
experience and funding support of its promoters.
Key Rating Drivers & Detailed Description
Weaknesses
* Initial stage of operations: Scale of operations will remain
modest given early stage of operations. Topline is likely to be
INR14 crore for fiscal 2017(first year of operations).
* Below-average financial risk profile: Small networth and large
term debt contracted to fund capex to set up the LPG cylinder
unit and meet working capital requirement will keep financial
risk profile weak.
Strength
* Extensive experience of promoters: The promoters have industry
experience of two decades and have infused equity of INR1.32
crore in fiscal 2017 to help meet debt obligation on time.
Outlook: Stable
CRISIL believes PI will continue to benefit over the medium term
from the extensive experience of its promoters and their funding
support. The outlook may be revised to 'Positive' if a
significant and sustained improvement in scale of operations and
profitability leads to higher cash accrual. The outlook may be
revised to 'Negative' if lower cash accrual, stretch in working
capital cycle, or any further, large capex deteriorates financial
risk profile, especially liquidity.
Established as a proprietorship concern in fiscal 2010 and
reconstituted as a partnership firm in fiscal 2013 by Mr. Amarjit
Singh, Mr. Navtej Singh, Mr. Gurnam Singh, and Mr. Lakhvir Singh,
PI manufactures metal sheets and LPG cylinders for Indian Oil
Corporation Ltd, Bharat Petroleum Corporation Ltd, and Hindustan
Petroleum Corporation Ltd. The firm has an installed capacity of
60 thousand cylinder per month that vary in sizes ranging from
14.2-47.5 kilogrammes.
RAJRAJESHWAR COTEX: CARE Reaffirms 'B' Rating on INR6.50cr Loan
---------------------------------------------------------------
The rating assigned to the bank facilities of Rajrajeshwar Cotex
Private Limited continues to remain constrained on account of
thin profit margins, moderate capital structure, weak debt
coverage indicators and moderate liquidity position. The rating
further continues to remain constrained on account of
susceptibility of RCPL's profit margins to the raw material price
fluctuations and its presence in the highly fragmented cotton
industry. The reaffirmation of the rating also takes into
consideration decline in the total operating income (TOI) during
FY16 (refers to the period April 1 to March 31).
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 6.50 CARE B; Stable Re-affirmed
The rating, however, continues to derive comfort from experienced
promoters and proximity of its manufacturing facility to cotton-
growing region in Madhya Pradesh.
Going forward, RCPL's ability to increase its scale of operations
along with improvement in profit margins, capital structure and
debt coverage indicators would remain the key rating
sensitivities. Furthermore, efficient working capital
management would also remain crucial.
Detailed description of the key rating drivers
RCPL's total operating income (TOI) witnessed a y-o-y decline of
about 57.55%, mainly on account of decline in demand of cotton
bales and cotton seeds as well as significant decline in the
prices of the product. The PBILDT margin improved by 404 bps and
remained at 8.81% during FY16 as against 4.78% during FY15
primarily on account of negligible trading sale during FY16,
while high depreciation and interest cost led to marginal loss.
RCPL's overall gearing stood leveraged as on March 31 2016 while
debt protection metrics remained weak during the same period.
Liquidity position stood moderate marked by current ratio of 1.15
times.
RCPL was incorporated in May 2011 by Mr. Kedar Mittal and Mr.
Pawan Mittal as a private limited company with an objective for
setting up of new ginning and pressing unit. RCPL deals in 'NCH
BT Cotton' type of cotton which is being sourced through local
farmers from Maharashtra. RCPL operates from its sole
manufacturing plant located at Parbhani (Maharashtra) with an
installed capacity to process 250 cotton bales per day and 650
quintal of cotton seeds per day as on March 31, 2015. RCPL sells
cotton cake in the brand names of "Surbhi" and "Rajmalai".
During FY16 (A), RCPL reported after tax losses of INR0.01 crore
on a TOI of INR11.27 crore as against PAT of INR0.01 crore on a
TOI of INR26.54 crore during FY15. Till December 2016
(Provisional), the firm has achieved a turnover of INR12.00
crore.
RISHIKA COTTONS: CRISIL Reaffirms B+ Rating on INR15MM Cash Loan
----------------------------------------------------------------
CRISIL has reaffirmed its rating on the long-term bank facility
of Rishika Cottons Private Limited.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 15 CRISIL B+/Stable (Reaffirmed)
The rating continues to reflect working capital-intensive
operations, weak financial risk profile because of small
networth, high gearing, and subpar debt protection metrics, and a
modest scale of operations in the intensely competitive garment
industry. These weaknesses are partially offset by promoters'
extensive experience and established relationships with major
customers and suppliers.
Key Rating Drivers & Detailed Description
Strengths
* Promoters' extensive experience and established relationships
with major customers and suppliers
Promoters have over two decades' experience in the textile
industry. Mr. Ajay Agarwal and Mr. Vijay Agarwal set up RCPL in
2008 to make designer sarees and dress materials and have been
operating it successfully since then. Furthermore, they have
established relations with some large retail chain stores,
including Chennai Silk, Pothys Silks, Shardas, and INRBrothers
India Pvt Ltd; no single customer accounts for over 10% of
turnover.
Weaknesses
* Working capital-intensive operations
Business is highly working capital intensive, as reflected in
gross current assets of 193 days as on March 31, 2016. Inventory
days and debtor days were high at 112 and 78, respectively.
Various stages of manufacturing that include dyeing, printing,
embroidery works, and stocking up of large finished goods result
in high inventory days and hence working capital-intensive
operations.
* Weak financial risk profile
Networth was moderate at INR8.3 Crore as on March 31, 2016.
Gearing was high at 2.2 times, and debt protection metrics were
weak, with net cash accrual to total debt and interest coverage
ratios at 8 times and 1.9 times, respectively, in fiscal 2016.
* Modest scale of operations in the intensely competitive garment
industry
Scale is small as reflected in revenue of INR76.4 Crore in fiscal
2016. Given the intense competition in the segment, ability to
significantly scale up operations is restricted. Moreover,
fragmentation on account of low entry barriers and small capital
requirement limits the bargaining power and pricing flexibility
of small players such as RCPL.
Outlook: Stable
CRISIL believes RCPL will continue to benefit over the medium
term from its promoters' extensive experience and established
relations with customers. The outlook may be revised to
'Positive' in case of a substantial and sustained improvement in
revenue and profitability margins, or a sustained improvement in
working capital management. Conversely, the outlook may be
revised to 'Negative' in case of a steep decline in profitability
margins, or significant deterioration in the capital structure
caused most likely by a large, debt-funded capital expenditure or
a stretch in its working capital cycle.
Incorporated in 2008 in Hyderabad and promoted by Mr. Ajay
Agarwal and his brother, Mr. Vijay Agarwal, RCPL manufactures
cotton sarees and dress materials.
Profit after tax (PAT) was INR1.2 crore on net sales of INR76.4
crore for fiscal 2016, against a PAT of INR0.9 crore on net sales
of INR69.5 crore for the previous fiscal.
S.S. WOOD: CRISIL Reaffirms 'B' Rating on INR1.6MM Cash Loan
------------------------------------------------------------
CRISIL has reaffirmed its ratings on the bank facilities of S.S.
Wood Craft at 'CRISIL B/Stable/CRISIL A4'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Bill Discounting
under Letter of
Credit 1.4 CRISIL A4 (Reaffirmed)
Buyer`s Credit 7 CRISIL B/Stable (Reaffirmed)
Cash Credit 1.6 CRISIL B/Stable (Reaffirmed)
The rating continues to reflect SSWC's weak liquidity because of
tightly matched repayments and working-capital-intensive
operations. The ratings also reflect SSWC's modest scale of
operations and average financial risk profile. These weaknesses
are partially offset by the promoters' extensive experience in
the timber industry.
Key Rating Drivers & Detailed Description
Weaknesses
* Tightly matching net cash accrual to meet term debt obligation:
SWCC is expected to report cash accrual of around Rs.15 Lakhs in
2016-17 against repayment of Rs.10 lakhs. Bank lines of the
company remained moderately utilized at around 90 per cent from
past nine months ended Dec 2016. The utilisation is expected to
remain at similar levels over the medium term and support firms
liquidity, driven by the incremental working capital requirement
and reliance on short-term bank debts.
* High working capital requirement: The working capital
requirement is high owing to large inventory, and credit offered
to customers. Raw material inventory of 2-3 months has to be
maintained due to the wide range of product mix and the multiple
designs and variety to be retained in anticipation of orders; the
inventory was around 28 days as on March 31, 2016. High credit
has to be offered to customers resulting in debtors of 114 days
as on March 31, 2016.
* Modest scale of operations in highly fragmented industry: The
scale of operations is modest, as indicated by revenue of Rs.20.8
crore in 2015-16 (refers to financial year, April 1 to March 31),
owing to intense competition in the highly fragmented timber
trading and processing industry.
Strength
* Promoter's extensive industry experience: The promoter has been
engaged in the timber business for over three decades through
other entities. His extensive experience helped establish healthy
relationships with key suppliers, in the overseas markets such as
the African and European countries, Germany, France, Spain and
Malaysia, and timber wholesalers and retailers in Delhi/ National
Capital Region (NCR), West Bengal, Uttar Pradesh, Punjab, Bihar
and Haryana. This resulted in good product quality and stable raw
materials supply.
Outlook: Stable
CRISIL believes SSWC's business risk profile will continue to
benefit from its promoters' extensive industry experience. The
outlook may be revised to 'Positive' if the firm achieves higher-
than-expected growth in revenue and profitability or if there is
improvement in working capital management leading to better
business and financial risk profiles. Conversely, the outlook may
be revised to 'Negative' if there is a significant decline in
SSWC's top line or margin due to high competition, leading to
deterioration in its business risk profile or if there is more-
than-expected increase in its working capital requirements or if
it undertakes any significant debt-funded capital expenditure
leading to deterioration in its financial risk profile.
Established in 2010 as a proprietorship firm, SSWC is engaged in
trading and manufacturing of timber logs, mainly softwood. The
firm is promoted by Miss Shikha Gupta. Its manufacturing plant is
situated in Nangloi, New Delhi. The firm caters to the demand in
the domestic market, mainly in northern India.
For fiscal 2016, SWCC reported a profit after tax (PAT) of INR6
lakhs on an operating income of INR20.8 crores as against a PAT
of INR4 lakhs on an operating income of INR5.55 crores in fiscal
2015.
SHARADA AYURVEDIC: CARE Assigns B+ Rating to INR5.65cr LT Loan
--------------------------------------------------------------
The rating assigned to the bank facilities of Sharada Ayurvedic
Medical College (SAMC: Run by Sri Basava Charitable & Social
Welfare Trust) is constrained by project execution risk, presence
of the college in the fragmented education sector leading to
intense competition and shortage of teaching staff in the sector.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 5.65 CARE B+; Stable Assigned
The rating, however, derives strength from long experience of the
trustees in the educational sector.
SAMC's ability to complete the project without any cost or time
overrun and achieve the desired enrolment ratio as envisaged are
the key rating sensitivities.
Detailed description of the key rating drivers
SAMC has completed the construction of medical college building
and achieved commercial operations in January 2017.
However, the construction of hostel building is expected to be
completed by August 2017. Although the project is nearing its
completion date, project risk remains high due to its debt-funded
nature. The total cost of the project is envisaged at INR8.20
crore and the college has achieved only 55% (Rs.4.55 crore) of
the total project cost till December 28, 2016, funded by term
loan of INR2.00 crore and remaining from promoter's fund.
Moreover, the remaining amount of term loan will be disbursed
during February 2017 which will be utilized for the construction
of hostel building under SAMC.
SAMC is in education sector, which is highly fragmented in nature
with the presence of various educational institutes. This leads
to high competition for institutes of SAMC. Furthermore, the
Central Government is also encouraging private sector
participation in the education sector which will further
intensify the level of competition for SAMC. Increasing
competition may lead to decline in student enrolment which will
directly impact the revenue visibility for the Trust. Mr.
Chandrashekhar Kuppi, Managing Trustee, has more than 15 years of
experience in the education field and has earlier worked as a
lecturer for more than 10 years at Ayurvedic College, Hubli. SAMC
will also be benefitted from the experience of the trustees and
their past track record in the educational sector through SBE.
SAMC was established in the year 2014 at Yadgir, Karnataka. SAMC
(a under construction college) is managed by Sri Basava Education
Charitable & Social Welfare Trust (SBE). SBE was established in
the year 2004. Mr. Chandrashekhar Kuppi, Mr. Prabhu Kuppi, Mrs
Nagaratna Kuppi, Mr. Somnath Reddy and Mr. Lingraj are the
trustees of SBE. SBE is a closelyheld family-owned trust located
at Yadgir district of Karnataka. The trust under its name is
presently running two colleges' viz. Smt. Sharada Institute of
Paramedical Science College, Yadgir (Karnataka) and Smt. Sharada
Institute of Paramedical Science College, Shahpur (Karnataka).
SAMC is constructing medical college (with hostel facility) for
Bachelor of Ayurveda Medicine and Surgery (BAMS) with a total
project cost of INR8.20 crore which is to be funded by term loan
of INR5.65 crore and remaining through promoters' contribution.
The college is approved by Central Council of Indian Medicine
[CCIM] & Department of AYUSH, Ministry of Health & Family
Welfare, Government of India, New Delhi. Furthermore, SAMC has
received the affiliation from Rajiv Gandhi University of Health
Science, Bangalore (Karnataka).
SIWAL INFRACON: CRISIL Assigns B+ Rating to INR6.9MM Cash Loan
--------------------------------------------------------------
CRISIL has assigned its 'CRISIL B+/Stable/CRISIL A4+' ratings to
the bank facilities of Siwal Infracon Private Limited.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Bank Guarantee 8 CRISIL A4
Cash Credit 6.9 CRISIL B+/Stable
The ratings factor in modest scale of operations, exposure to
cyclical real estate sector and tender-driven business, and
average financial risk profile because of working capital-
intensive operations. These weaknesses are partly offset by the
extensive experience of promoters in the civil construction
industry and moderate current order book.
Key Rating Drivers & Detailed Description
Weaknesses
* Modest scale of operations and exposure to risks related to
real estate sector and competition: Modest scale is reflected in
topline of Rs32.74 crore in fiscal 2016. The revenue is expected
to cross INR40 crore in fiscal 2017. The company derives its
revenue from construction work contracts undertaken for real
estate players, educational institutes, and industries. Its
revenue and business risk profile remain exposed to volatility in
the real estate sector, and competition and tender-driven
business in other sectors.
* Average financial risk profile due to working capital-intensive
operations: Stretched receivables augment SIPL's working capital
requirement. Large debtors and inventory lead to considerable
working capital requirement thus constraining the financial risk
profile and liquidity.
Strength
* Promoters' experience in the civil construction industry and
moderate order book: The key promoters Mr. Rajesh Siwal, Mr.
Kailesh Siwal and their family have around two decades of
experience in the civil construction industry. The company has an
outstanding order book of over INR105 crore to be executed over
the next 12-24 months, thus providing revenue visibility.
Outlook: Stable
CRISIL believes SIPL will benefit from the promoters' extensive
experience and its moderate order book. The outlook may be
revised to 'Positive' in case of a significant increase in scale
of operations and controlled working capital cycle leading to
higher-than-expected cash accrual. Conversely, the outlook may be
revised to 'Negative', if less-than-expected revenue or decline
in profitability or a stretch in working capital cycle leads to
deterioration in liquidity.
Incorporated in 2012, SIPL, based in Jaipur (Rajasthan), started
operations in 2004 as a partnership firm, Siwal Builders &
Developers. SIPL undertakes construction of buildings for
corporates, educational institutes, and others.
Profit after tax stood at INR1.38 crore on net sales of Rs32.76
crore for fiscal 2016, vis-a-vis net loss of Rs0.11 crore and on
net sales of Rs12.43 crore in fiscal 2015.
STERLING GATED: CARE Reaffirms B+ Rating on INR60cr LT Loan
-----------------------------------------------------------
The rating assigned to the non-convertible Debenture Issue of
Sterling Gated Community Private Limited continues to factor in
the high project execution risk as the project is at a very
nascent stage and yet to be launched for booking, the additional
delay being attributable to the revision in configuration of
units necessitating revised approvals, and increased dependency
on customer advances.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Instruments- 60 CARE B+; Negative
Non-Convertible Reaffirmed
Debentures
The rating, however, derives strength from the promoter's
extensive experience in the real estate industry and the
favorable location of the project.
With the change in configuration of the units, the ability of the
company to obtain the requisite revised approvals, and mobilize
the required funding and customer advances for the project as per
the estimated timelines would be the key rating sensitivities.
Outlook: Negative
The negative outlook on the rating reflects the refinancing risk
with the repayments of the debenture falling shortly and
heightened project execution risk with some approvals still
pending.
Detailed description of the key rating drivers
Project has high execution risk as it in nascent stage of
development with construction work yet to begin. The Company
revised the configuration from 3 BHK, and 4 BHK with a total of
147 units to 1 BHK, 2BHK and 3 BHK with a total of 600 units.
This has necessitated the company to get revised approvals
factoring the revision in configuration and number of units.
The reliance on debt has increased as the principal payments,
debenture redemption premium and coupon payments of the NCD of
INR60 crore is falling due shortly and is expected to be
refinanced by fresh term loan.
The project cost has also increased significantly on account of
increase in saleable area and increase in interest cost resulting
from higher debt. The increased cost is proposed to be financed
through a mix of debt and customer advances.
The project is located in Whitefield which is one of the prime
localities of Bangalore with good physical and social
infrastructure. Even though Whitefield enjoys healthy demand for
residential projects, there is a large supply of projects in
this location and hence, the response to the project by SGCPL is
yet to be seen. However, revision in configuration to 1BHK, 2BHK
and 3 BHK, would enhance the saleability to an extent and some
comfort can be drawn from the fact that the group has a track
record of selling projects in various parts of the city as well
as the project ('Villa Grande') located on the same land parcel.
SGCPL is a special purpose vehicle (SPV) formed by Mr. Ramani
Sastri and Mr. Shankar Sastri, who have more than 30 years
of experience of developing real estate projects in Bangalore and
founders of the Sterling group. The Sterling group has an
experience in developing apartments, villas and commercial
complexes across Bangalore. The Sterling developers group till
date has developed over 28 projects in total.
SGPCL is developing a real estate apartment project in
Whitefield, Bangalore. The project is residential project with
the total of 600 units of 1BHK, 2BHK and 3 BHK, planned over a
part of larger land parcel owned by an associate company,
Sterling Urban development Pvt Ltd and proposed TDR area of 2.84
lakh square feet. The configuration has been revised from the
earlier plan of 3BHK and 4BHK with a total of 147 units. The
project, which is in a pre-approval stage, is a Joint Development
with SUDPL as the land owner with a share of 25% in revenue and
the balance 75% with SGCPL as developer of the project. The
remaining land of SUDPL is being developed as Villa Grande
project comprising total 250 villas with Phase-I completed and
Phase-II ongoing.
TIRUPATI COTTON: CARE Assigns B+ Rating to INR10cr LT Bank Loan
---------------------------------------------------------------
The rating of Tirupati Cotton Corporation is primarily
constrained on account of its presence in the lowest segment of
the textile value chain and in highly competitive and fragmented
cotton ginning industry and seasonality associated with the
cotton industry leads to fluctuations in the cotton prices and
vulnerability to margins. The rating is, further, constrained on
account of stabilization risk associated with its recently
completed greenfield project.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term bank
Facilities 10.00 CARE B+; Stable Assigned
The rating, however, favourably takes into account experienced
promoters in the textile and cotton ginning industry, established
relations with customers and suppliers through group companies
and its location advantage being situated in the cotton growing
region.
Ability of the firm to successfully stabilize its operations and
achieve envisaged level of TOI and profitability with better
management of working capital would be the key rating
sensitivities.
Detailed description of the key rating drivers
TCC has completed its greenfield project for cotton ginning and
pressing along with production of cotton seed oil within time and
cost parameters and has started commercial production from
January 2017. The stabilization risk is associated with this
project owing to its presence in the highly fragmented and
competitive cotton ginning and pressing industry and
vulnerability of margins to fluctuation in cotton prices.
Sendhwa-based (Madhya Pradesh) Tirupati Cotton Corporation was
incorporated in April 21, 2016 by Mr. Anant Kumar Tayal, Mrs
Namita Tayal and Mr. Tushar Pathak with an objective to set up
green field project for cotton ginning and pressing at Ralkode
Mandal, Telangana, Andhra Pradesh.
TRIMEX INDUSTRIES: CRISIL Hikes Rating on INR93.9MM Loan to 'C'
---------------------------------------------------------------
CRISIL has upgraded its long-term rating on the bank facilities
of Trimex Industries Private Limited to 'CRISIL C/CRISIL A4' from
'CRISIL D/CRISIL D'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Bank Guarantee 7.5 CRISIL A4 (Upgraded from
'CRISIL D')
Cash Credit 20.5 CRISIL C (Upgraded from
'CRISIL D')
Long Term Loan 8.5 CRISIL C (Upgraded from
'CRISIL D')
Proposed Working 93.9 CRISIL C (Upgraded from
Capital Facility 'CRISIL D')
The rating upgrade centrally factors in the track record of
timely repayments of debt obligations over the 3 months. The
ratings upgrade also reflects the promoter funding support that
the company has received which has enabled the timely repayment
of bank debts over the last 3 months.
Key Rating Drivers & Detailed Description
Strength
* Funding support from promoters: The promoters have infused
about Rs. 30 crores of funds in FY 16. The same has helped in
repayment of the term debt obligations and regularizing of the
accounts for the past three months. The funding support is
expected to continue till bank debt obligations are completely
repaid.
Weakness
* Below Average financial risk profile: Though the company's net
worth is strong, the company has weak debt protection metrics due
to the negative cash accruals that the company is generating.
However, the financial risk profile is expected to strengthen
over the medium term on the back of steady repayment of term debt
and improvement in operating performance that is envisaged.
Established in 1984 as Trimex Agencies Ltd, TIPL is promoted by
Mr. Pradeep Koneru. The company is engaged in mining and selling
of industrial minerals such as baryte, iron ore, and dolomite.
For fiscal 2016, TIPL reported a negative profit after tax (PAT)
of INR14.5 crore on an operating income of INR113 crores as
against a negative PAT of INR6.3 crore on an operating income of
INR167.5 crores in fiscal 2015.
VINA ELECTRICALS: CARE Lowers Rating on INR12cr Loan to 'B'
-----------------------------------------------------------
The ratings assigned to Vina Electricals Private Limited continue
to be constrained by the relatively small scale of operations of
the company with low capitalization, susceptibility of
profitability to volatility in raw material prices and high
degree of competition from organized and unorganized players in
the industry. Furthermore, the ratings also take into
consideration the leveraged capital structure and weak debt
coverage indicators and working capital intensive nature of
operations with elongated collection period.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 12 CARE B; Stable Suspension
revoked and revised from
CARE B+
Short-term Bank
Facilities 8 CARE A4 Reaffirmed
The ratings are, however, underpinned by the wide experience of
the promoters and healthy order book position providing revenue
visibility for the medium term and moderate profitability.
The ability of the entity to increase its scale of operations
while maintaining profitability and improvement in capital
structure along with efficiently managing its working capital
requirement is the key rating sensitivity.
Detailed description of the key rating drivers
The scale of operations of the company remained small with low
networth base of INR5.68 crore. Total operating income (TOI) has
been declining during last three years ending FY16 (refers to the
period April 1 to March 31) owing to lower number of orders
executed. However, the PBILDT margin remained at moderate level
and remained in the range of 8%- 20%. The profitability level
remained at moderate level and owing to volatility in raw
material prices. Owing to low capitalization capital structure of
the company remained leveraged owing to higher reliance on cash
credit facility to support the working capital intensive
operations with high amount of funds blocked in the debtors and
inventory as reflected by higher gross current asset days of over
300 days during last two years ending FY16. The company has a
healthy outstanding order book of INR33.27 crore (2.79x FY16
sales) as on November 30, 2016, providing revenue visibility for
VEPL in near future.
The company is spearheaded by Mr. Dilip Gitte (Managing Director)
having wide experience of more than a decade in the EPC business.
Incorporated in year 2009, Vina Electricals Private Limited is
promoted by Mr. Dilip Gitte having 16 years of experience in the
capacity of electrical contractor. The company is engaged in EPC
business of providing turnkey solutions majorly to state
utilities for setting up sub-stations and electrical distribution
lines. The company participates in tender floated by state run
entities majorly Maharashtra State Electricity Distribution
Company Limited ['CARE A+', December 17, 2015].
Currently, VEPL is working on 6 projects and has an outstanding
order book of INR33.27 crore as on November 30, 2016. The order
book includes all the projects from MSEDCL.
=========
J A P A N
=========
KAWASAKI KISEN: Egan-Jones Cuts Sr. Unsecured Debt Ratings to B-
----------------------------------------------------------------
Egan-Jones Ratings, on Jan. 30, 2017, lowered the senior
unsecured ratings on debt issued by Kawasaki Kisen Kaisha Ltd to
B- from B.
Kawasaki Kisen Kaisha, Ltd., also referred to as "K" Line, is one
of the largest Japanese transportation companies.
KOBE STEEL: Egan-Jones Lowers Sr. Unsec. Ratings to BB
------------------------------------------------------
Egan-Jones Ratings, on Jan. 23, 2017, downgraded the senior
unsecured ratings on debt issued by Kobe Steel Ltd. to BB from
BB+.
Headquartered at Chuo-ku, Kobe, in Hyogo, Japan, Kobe Steel
Limited -- http://www.kobelco.co.jp/english/corp/index.html--
is one of Japan's leading steel makers, as well as the top
supplier of aluminum and copper products. Other businesses
include welding consumables, urban infrastructure and plant
engineering services, and industrial machinery. Kobe Steel has
offices in New York, Singapore, Bangkok and Beijing.
TOSHIBA CORP: Won't Sell Chip Business Before Fiscal Year Ends
--------------------------------------------------------------
Kyodo News Agency reports that Toshiba Corp. has decided not to
sell a stake in its chip business before the current fiscal year
ends, a source close to the matter said Feb. 15, in a move that
makes certain the company will have a negative net worth at the
end of the year.
Toshiba, which was listed on the first section of the Tokyo Stock
Exchange in 1949, will be downgraded to the second section if it
fails to avoid negative net worth by the end of the fiscal year
on March 31, Kyodo discloses.
Kyodo relates that Toshiba's decision comes a day after the
company estimated a loss of JPY712.5 billion ($6.23 billion) from
its U.S. nuclear business in the April-December period and fell
into negative net worth of JPY191.2 billion at the end of
December.
According to the report, President Satoshi Tsunakawa said at a
news conference on Feb. 14 that his company is looking to bolster
its capital by selling a majority or even the entire stake in its
chip operation after spinning it off. But he did not specify the
timing.
Fears grew among its creditors that if it sells the chip business
now the manufacturer may be forced to bargain it away, Kyodo
says. The 140-year-old conglomerate decided to take its time to
try to sell the profitable operation at a higher price.
Toshiba's chip business is believed to have a value of
JPY2 trillion ($17.46 billion), Kyodo discloses.
"It doesn't have to rush to sell it at a lower price," Kyodo
quotes a senior official at one of Toshiba's creditors as saying.
On Feb. 15, Toshiba also decided to ask its creditors to ease
conditions for an extension of loans after revealing its huge
estimated losses, other sources familiar with the situation said,
Kyodo adds.
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: Seek Extension of Waiver on Loan Covenant Violation
-----------------------------------------------------------------
Japan Today reports that Toshiba Corp on Feb. 15 asked creditors
for an extension of a waiver for a loan covenant violation until
the end of March, financial sources who were briefed on the
matter said.
According to the report, the request comes one day after the
beleaguered conglomerate failed to deliver audited third-quarter
earnings as scheduled, instead saying it needed more time to look
at potential problems at its Westinghouse division.
It also said it expected to book $6 billion writedown on its U.S.
nuclear business that will wipe out shareholders' equity and may
sell a majority stake in its prized flash-memory chip unit, Japan
Today relays.
Japan Today relates that Toshiba made the request at the meeting
with banks and life insurers, the sources said, declining to be
identified as they were not authorized to speak to the media on
the matter.
Toshiba was granted a one-month waiver by its banks in January,
says Japan Today. Cuts to credit ratings after the TVs-to-nuclear
conglomerate warned of a large writedown put it in violation of a
loan covenant, which could prompt lenders to call in loans early,
the report notes.
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 O N G O L I A
===============
DEVELOPMENT BANK: Moody's Caa1 Rating on Review for Downgrade
-------------------------------------------------------------
Moody's Investors Service has placed Caa1 issuer and senior
unsecured debt ratings of the Development Bank of Mongolia LLC
(DBM) on review for downgrade. At the same time, Moody's has
affirmed DBM's Baseline Credit Assessment at ca.
The rating actions follow Moody's review for downgrade of
Mongolia's sovereign ratings on 15 February 2017.
Moody's expects to complete the review within three months.
A full list of the affected ratings can be found at the bottom of
this press release.
RATINGS RATIONALE
The review for downgrade of DBM's rating is driven by its strong
linkages with the Mongolian government -- as reflected by the
government's direct ownership in the bank, its clear public
policy mandate, and the presence of an irrevocable government
guarantee on DBM's $580 million bonds -- and follows the review
for downgrade of Mongolia's sovereign rating of Caa1.
The sovereign review is initiated because of uncertainty around
the financing options for DBM's $580 million repayment which is
maturing on 21 March 2017. DBM lacks the foreign currency funds
to finance the repayment itself, and the presence of an
irrevocable and unconditional government guarantee on the DBM
issuance means that Moody's would consider a default on the notes
to constitute a default by the sovereign. The DBM notes also
contain cross-acceleration clauses on other government
obligations, implying wider implications of a default for
investors.
The purpose of the sovereign review is to assess the implications
of the 21 March 2017 maturity of government-guaranteed notes
issued by the DBM for the government's fiscal position and
foreign exchange buffers. In Moody's view, the as yet unresolved
issue of how that maturity will be financed poses a near-term
threat to Mongolia's credit profile, notwithstanding ongoing
discussions with the IMF.
Should an agreement with the IMF be reached during the review,
the review will also assess the extent to which the terms of the
program mitigate those near-term risks, as well as offer the
prospect of improvements in Mongolia's credit profile over the
medium term.
The review for DBM will focus on the level of expected loss, if
any, for holders of the DBM government-guaranteed bond of the
redemption proposal at maturity in March if the government
guarantee is not exercised.
DBM's Baseline Credit Assessment (BCA) at ca already reflects a
high likelihood that DBM will require extraordinary support from
the government to meet this debt service obligation, such as
through a distressed exchange, and its BCA is therefore affirmed.
What Could Stabilize the Rating at the Current Level:
The bank's long-term rating incorporates a three-notch uplift
from its BCA and is at the same level as the sovereign rating. As
such, positive rating action is unlikely in the absence of upward
pressure on Mongolia's sovereign rating.
At the end of the review period, Moody's will confirm the Caa1
rating with a stable outlook if the sovereign rating of Caa1 is
confirmed with a stable outlook, and if any expected losses for
bondholders are in line with the loss levels expected for a Caa1
rating.
Moody's would consider upgrading the BCA of ca if DBM improves
its capitalization and liquidity position after it repays the
$580 million bond due in March 2017, while also demonstrating
stable asset quality over the next 4-6 quarters.
What Could Change the Rating - Down:
Factors that could result in a downgrade include, but are not
limited to, the following:
(1) A downgrade of Mongolia's sovereign rating; or
(2) An expected loss larger than compatible for a Caa1 rating.
The resultant ratings and actions are listed below:
- Foreign currency issuer rating of Caa1 placed on review for
downgrade
- Foreign currency backed senior unsecured/backed senior
unsecured MTN of Caa1/(P)Caa1 placed on review for downgrade
- B3(cr) Counterparty Risk Assessment placed on review for
downgrade
- BCA/adjusted BCA of ca affirmed
- NP(cr) Counterparty Risk Assessment affirmed
PRINCIPAL METHODOLOGIES
The methodologies used in these ratings were Banks published in
January 2016, and Government-Related Issuers published in October
2014.
MONGOLIA: Moody's Puts Caa1 Issuer Rating on Review for Downgrade
-----------------------------------------------------------------
Moody's Investors Service has placed government of Mongolia's
Caa1 issuer rating on review for downgrade.
The purpose of the review is to assess the implications of the 21
March 2017 maturity of government-guaranteed notes issued by the
Development Bank of Mongolia LLC (DBM) for the government's
fiscal position and foreign exchange buffers. In Moody's view,
the as yet unresolved issue of how that maturity will be financed
poses a near-term threat to Mongolia's credit profile,
notwithstanding ongoing discussions with the IMF.
Should an agreement with the IMF be reached during the review,
the review will also assess the extent to which the terms of the
programme mitigate those near-term risks, as well as offering the
prospect of improvements in Mongolia's credit profile over the
medium term.
Moody's expects to complete the review within three months.
The review for downgrade also applies to the government's senior
unsecured debt rating at Caa1 and the senior unsecured MTN rating
at (P)Caa1. The short-term issuer rating remains unchanged at Not
Prime. Mongolia's foreign and local currency ceilings remain
unchanged.
RATINGS RATIONALE
RATIONALE FOR INITIATING A REVIEW FOR DOWNGRADE: INTENSIFYING
LIQUIDITY AND EXTERNAL PRESSURE
As the 21 March maturity approaches, the financing options for
DBM's $580 million repayment have not been finalized. DBM lacks
the foreign currency funds to finance the repayment itself, and
the presence of an irrevocable and unconditional government
guarantee on the DBM issuance means that Moody's would consider a
default on the notes to constitute a default by the sovereign.
The DBM notes also contain cross-acceleration clauses on other
government obligations, implying wider implications of a default
for investors.
Moody's will use the review period to assess the impact on the
sovereign's own credit profile of the various options at its
disposal to avoid a default by DBM.
One option is that the DBM notes payments are made out of
Mongolia's foreign exchange reserves. Moody's will assess the
implications for Mongolia's external position of potential
support from the government that would lead to a drawdown on
foreign exchange reserves and further erode already thin external
buffers. The Bank of Mongolia's foreign exchange reserves stood
at around $1.2 billion in December 2016 ($1.3 billion of total
reserves including gold and SDR), the latest period for which
data are available. Further depletion of foreign exchange
reserves could heighten refinancing hurdles for other public as
well as private external debt. Moody's estimates that Mongolia
has $1.7 billion in external debt maturing in 2017, excluding the
swap line with the People's Bank of China.
Mongolia has for some time been negotiating an agreement with the
IMF which would offer the prospect of substantial additional
external financing over the life of the programme subject to the
terms agreed with the IMF. Mongolia may also be able to raise
bilateral or private sector financing either independent of, or
in parallel with, an agreed IMF programme. Should either occur
during the review period, Moody's would then assess the
implications for Mongolia's fiscal outlook, government liquidity
and external buffers, how far it mitigated the risk to Mongolia's
credit profile over the very near term, and any positive
implications over the medium term.
WHAT COULD STABILIZE THE RATING AT THE CURRENT LEVEL
Given the review for possible downgrade, an upgrade in the near
future is unlikely. However, Moody's would maintain the Caa1
rating with a stable outlook if it were to conclude that the
pressures arising from the 21 March payment had been, or were
likely to be, addressed without negative implications for
Mongolia's credit profile, in particular without undermining its
foreign exchange buffers or its ability to finance future debt
obligations.
Looking beyond the immediate pressures that are the subject of
this action, the prospect of actions to rebuild foreign exchange
buffers in a sustainable manner and consolidate the government's
finances, most likely in the context of the planned IMF
programme, could stabilise the rating and potentially imply
upward pressure. The effectiveness of the government's measures
could be amplified by new mining productivity capacity coming on
stream over the next three to five years.
WHAT COULD MOVE THE RATING DOWN
Moody's would downgrade Mongolia's rating if it were to conclude
that actions taken or likely to be taken to support DBM in
servicing its maturing debt and placing its finances on a
sustainable footing would damage the Mongolian government's own
credit profile and borrowing capacity, including by depleting
foreign exchange reserves without prospect of future material
reserve accretion.
GDP per capita (PPP basis, US$): 12,178 (2015 Actual) (also known
as Per Capita Income)
Real GDP growth (% change): 2.4% (2015 Actual) (also known as GDP
Growth)
Inflation Rate (CPI, % change Dec/Dec): 1.9% (2015 Actual)
Gen. Gov. Financial Balance/GDP: -5% (2015 Actual) (also known as
Fiscal Balance)
Current Account Balance/GDP: -8.1% (2015 Actual) (also known as
External Balance)
External debt/GDP: 185.6% (2015 Actual)
Level of economic development: Low level of economic resilience
Default history: At least one default event (on bonds and/or
loans) has been recorded since 1983.
On Feb. 14, 2017, a rating committee was called to discuss the
rating of the Mongolia, Government of. The main point raised was
a discussion of the credit implications of the upcoming DBM
maturity.
The principal methodology used in these ratings was Sovereign
Bond Ratings published in December 2016.
The weighting of all rating factors is described in the
methodology used in this credit rating action, if applicable.
The Local Market analyst for these ratings is Mathias Angonin,
+971 4 237 9548.
====================
S O U T H K O R E A
====================
HANJIN SHIPPING: U.S. Creditors Appeal Container Terminal Sale
--------------------------------------------------------------
Tom Corrigan, writing for The Wall Street Journal Pro Bankruptcy,
reported that a group of U.S. creditors appealed a court order
authorizing Hanjin Shipping Co. to sell one of their key
remaining assets and to send the proceeds to South Korea, likely
beyond the U.S. creditors' reach.
According to the report, the creditors, a group of shipping
container and trucking chassis providers, filed papers asking the
U.S. District Court in New Jersey to revisit a bankruptcy judge's
decision to approve the $78 million sale of Hanjin's stake in a
Long Beach, Calif., container terminal operator.
In January, the creditors lost a bid to keep the sale proceeds in
the U.S. The proceeds will instead be administered by a court in
South Korea, where the U.S. creditors say their rights and
prospects of being repaid will be diminished, the report related.
The appeal comes as a court in South Korea, where Hanjin's assets
and bankruptcy proceedings have been largely consolidated, has
moved to end any efforts to help get the company back on its
feet, opting instead for a total liquidation, the report said. A
final ruling from the South Korean court regarding Hanjin's fate
is slated for Feb. 17, the report added.
About Hanjin Shipping
Hanjin Shipping Co., Ltd., is mainly engaged in the
transportation business through containerships, transportation
business through bulk carriers and terminal operation business.
The Debtor is a stock-listed corporation with a total of
245,269,947 issued shares (common shares, KRW 5000 per share) and
paid-in capital totaling KRW 1,226,349,735,000. Of these shares
33.23% is owned by Korean Air Lines Co., Ltd., 3.08% by Debtor
and 0.34% by employee shareholders' association.
The Company operates approximately 60 regular lines worldwide,
with 140 container or bulk vessels transporting over 100
million tons of cargo per year. It also operates 13 terminals
specialized for containers, two distribution centers and
six Off Dock Container Yards in major ports and inland areas
around the world. The Company is a member of "CKYHE," a
global shipping conference and also a partner of "The
Alliance," another global shipping conference to be
launched in April 2017.
Hanjin Shipping listed total current liabilities of KRW 6,028,543
million and total current assets of KRW 6,624,326 million as of
June 30, 2016.
As a result of the severe lack of liquidity, Hanjin applied to
the Seoul Central District Court 6th Bench of Bankruptcy Division
for the commencement of rehabilitation under the Debtor
Rehabilitation and Bankruptcy Act on Aug. 31, 2016. On the same
day, it requested and was granted a general injunction and the
preservation of disposition of the Company's assets. The Korean
Court's decision to commence the rehabilitation was made on
Sept. 1, 2016. Tai-Soo Suk was appointed as the Debtor's
custodian.
On Sept. 2, 2016, Hanjin Shipping Co. filed in the U.S. a
voluntary petition under Chapter 15 of the Bankruptcy Code. The
Chapter 15 case is pending in New Jersey (Bankr. D.N.J. Case No.
16-27041) before Judge John K. Sherwood. Cole Schotz P.C. serves
as counsel to Tai-Soo Suk, the Chapter 15 petitioner and the duly
appointed foreign representative of Hanjin Shipping.
================
S R I L A N K A
================
BANK OF CEYLON: Fitch Revises Outlook to Stable & Affirms 'B' IDR
-----------------------------------------------------------------
Fitch Ratings has revised the Outlook on Sri Lanka-based Bank of
Ceylon (BOC, B+/Stable), National Savings Bank (NSB, B+/Stable)
and People's Leasing & Finance PLC (PLC, B/Stable) to Stable from
Negative and affirmed their Long-Term Issuer Default Ratings
(IDR).
The rating action follows the Feb. 9, 2017, Outlook revision on
Sri Lanka's sovereign rating (B+/Stable) to Stable from Negative.
See Fitch Affirms Sri Lanka at 'B+'; Outlook Revised to Stable.
The lenders' National Long-Term Ratings have not been reviewed at
this time. A full list of rating action is at the end of this
commentary.
KEY RATING DRIVERS
IDRS, NATIONAL RATINGS AND SENIOR DEBT
The IDRs, Support Rating and Support Rating Floors of BOC and NSB
reflect Fitch's expectation of extraordinary support from the
sovereign. Their ratings are equalised with the sovereign. Fitch
sees state support for BOC stemming from its high systemic
importance and quasi-sovereign status while state support for NSB
stems from its policy mandate.
PLC's ratings differ by one notch from those of the sovereign, as
Fitch expects sovereign support to flow through its parent, the
state-owned and systemically important People's Bank (Sri Lanka)
(AA+(lka)/Stable).
The Stable Outlook on the IDRs of BOC, NSB and PLC reflect the
Stable Outlook on the sovereign's rating.
RATING SENSITIVITIES
Changes to the sovereign rating or perception of state support to
BOC and NSB could result in a change in the lenders' ratings.
PLC's ratings are also sensitive to changes in the sovereign
rating, as this would affect People's Bank's ability to provide
support to its subsidiary. PLC's ratings are also sensitive to
People's Bank's propensity to provide support.
The rating actions are:
BOC
Long-Term Foreign-Currency IDR affirmed at 'B+'; Outlook revised
to Stable from Negative
Long-Term Local-Currency IDR affirmed at 'B+'; Outlook revised to
Stable from Negative
Short-Term Foreign-Currency IDR affirmed at 'B'
Support Rating is '4'
Support Rating Floor is 'B+'
US dollar senior unsecured notes affirmed at 'B+'; Recovery
Rating at 'RR4'
National Savings Bank
Long-Term Foreign-Currency IDR affirmed at 'B+'; Outlook revised
to Stable from Negative
Long-Term Local Currency IDR affirmed at 'B+'; Outlook revised to
Stable from Negative
Short-Term Foreign-Currency IDR affirmed at 'B'
Support Rating is '4'
Support Rating Floor is 'B+'
US dollar senior unsecured notes affirmed at 'B+'; Recovery
Rating at 'RR4'
People's Leasing & Finance PLC
Long-Term Foreign-Currency IDR affirmed at 'B'; Outlook revised
to Stable from Negative
Long-Term Local-Currency IDR affirmed at 'B'; Outlook revised to
Stable from Negative
*********
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.
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