/raid1/www/Hosts/bankrupt/TCRAP_Public/170412.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
A S I A P A C I F I C
Wednesday, April 12, 2017, Vol. 20, No. 73
Headlines
A U S T R A L I A
CARING CHOICE: First Creditors' Meeting Set for April 21
FLEXI ABS 2015-1: Fitch Affirms 'BBsf' Rating on Cl. E Notes
JOHNGAY PTY: Second Creditors' Meeting Set for April 20
PARKVIEW ESTATE: Second Creditors' Meeting Set for April 20
POWER IQ: First Creditors' Meeting Set for April 24
REDZED TRUST 2017-1: S&P Assigns BB Rating on Cl. E Securities
TOMNICK PTY: Second Creditors' Meeting Set for April 20
TVH ENTERPRISE: First Creditors' Meeting Set for April 21
WATERSUN HOMES: May Have Traded While Insolvent Before Collapse
C H I N A
CHINA YIDA: Fitch Assigns First-Time 'B' IDR, Outlook Positive
CHINA YIDA: Moody's Assigns B2 1st Time Corporate Family Rating
MODERNLAND REALTY: Fitch Assigns B Final Rating to USD240MM Notes
* Fitch: Chinese Banks' Profitability Likely to Decline Further
I N D I A
BLUE PINK: CRISIL Reaffirms 'B' Rating on INR1.67MM LT Loan
CALYPSO AGRO: CARE Reaffirms B+ Rating on INR10CR LT Loan
DEESAN COTEX: CARE Reaffirms B+ Rating on INR21.86cr LT Loan
DURASIGN CORP: CRISIL Reaffirms 'B' Rating on INR2MM Loan
ELECTROMECH MARITECH: CARE Assigns D Rating to INR11.25cr Loan
G.S. BUILDTECH: CARE Cuts Rating on INR6.80cr Loan to B+/A4
GOLD SPIN: CRISIL Assigns B+ Rating to INR7.15MM Cash Loan
GOPAL SHIVHARE: CARE Denotes Rating as D/Issuer Not Cooperating
GOURMET EMPIRE: CARE Denotes Rating as B+/Issuer Not Cooperating
GULATI BROTHERS: CRISIL Assigns 'B' Rating to INR1.25MM Loan
HARYANA RICE: CRISIL Reaffirms 'B' Rating on INR35MM Cash Loan
JOSAN FOODS: CRISIL Reaffirms 'D' Rating on INR37MM Cash Loan
JUPITER INTERNATIONAL: CARE Reaffirms B Rating on INR91.59cr Loan
KALPANA SHIVHARE: CARE Denotes Rating B+/Issuer Not Cooperating
KAMAKSHI LAMIPACK: CRISIL Reaffirms 'D' Rating on INR7.7MM Loan
KAMLA SHIVHARE: CARE Denotes Rating as D/Issuer Not Cooperating
KHWAHISH MARKETING: CARE Rating Denotes B+/Issuer Not Cooperating
LAXMI MEGHAN: CRISIL Reaffirms B+ Rating on INR0.25MM Loan
LAXMI NARAYAN: CARE Denotes Rating as C/Issuer Not Cooperating
MALANKARA SOCIAL: CRISIL Reaffirms B- Rating on INR5MM Loan
MARUTI DEVELOPERS: CRISIL Lowers Rating on INR8MM Term Loan to D
MOHAN ROCKY: CRISIL Reaffirms B- Rating on INR9MM Loan
NIRMAN ENGINEERS: CARE Reaffirms B+ Rating on INR3.0cr Loan
P.N. GAWANDE: CARE Assigns 'B' Rating to INR8cr LT Loan
PICL MULTI: CARE Assigns 'B' Rating to INR5cr LT Loan
PRAJAY PROPERTIES: CRISIL Reaffirms 'D' Rating on INR121.3MM Loan
R. R. ENTERPRISES: CRISIL Hikes Rating on INR15MM Loan to B+
RAI BAHADUR: CRISIL Reaffirms B+ Rating on INR181MM Loan
RAM SWAROOP: CARE Denotes Rating as B+/Issuer Not Cooperating
SHRI PRASANNA: CARE Assigns B+ Rating to INR7.0cr LT Loan
SUPRAJA DAIRY: CRISIL Assigns B+ Rating to INR5.95MM Cash Loan
SURANA INDUSTRIES: CARE Reaffirms 'D' Rating on INR517.28cr Loan
VICEROY BANGALORE: CRISIL Reaffirms 'D' Rating on INR206MM Loan
VISHNU STEELS: CRISIL Reaffirms 'D' Rating on INR19MM Cash Loan
Y.M.R. CONSTRUCTIONS: CRISIL Reaffirms B- Rating on INR.25MM Loan
J A P A N
TOSHIBA CORP: Warns of Ability to Continue as Going Concern
TOSHIBA CORP: Foreign Bidders Prove More Aggressive in Chip Sale
TOSHIBA CORP: Planning to Sell TV Business
N E W Z E A L A N D
MUSE ON ALLEN: Liquidators Chase Director Over Payments
P A P U A N E W G U I N E A
PAPUA NEW GUINEA: S&P Affirms 'B+' FC & LC Long-Term Ratings
V I E T N A M
ORIENT COMMERCIAL: Moody's Assigns B2 Deposit and Issuer Ratings
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A U S T R A L I A
=================
CARING CHOICE: First Creditors' Meeting Set for April 21
--------------------------------------------------------
A first meeting of the creditors in the proceedings of Caring
Choice Pty Ltd will be held at the offices of BRI Ferrier (SA),
at Level 4, 12 Pirie St, in Adelaide, SA, on April 21, 2017, at
4:00 p.m.
Alan Scott and Stuart Otway of BRI Ferrier were appointed as
administrators of Caring Choice on April 7, 2017.
FLEXI ABS 2015-1: Fitch Affirms 'BBsf' Rating on Cl. E Notes
------------------------------------------------------------
Fitch Ratings has affirmed 16 tranches across Flexi ABS Trust
2015-1, Flexi ABS Trust 2015-2 and Flexi ABS Trust 2016-1. The
Rating Outlook on each tranche remains Stable. The transactions
are securitisations of small-balance consumer-loan receivables
and unsecured commercial-lease receivables. The notes were issued
by Perpetual Corporate Trust Limited in its capacity as trustee.
KEY RATING DRIVERS
The affirmations reflect Fitch's view that initial sequential
amortisation has resulted in a build-up of credit enhancement for
the rated notes and the transactions' strong performance compared
with Fitch's expectations. All transactions are currently paying
pro rata amortisation across all notes. Total net losses have
been below Fitch's base cases to date and excess spread has been
more than sufficient to cover any losses incurred.
The Flexi 2015-1 transaction contains 7.3% of assets with
disputed payments between Flexirent Capital Pty Ltd (Flexi) and
one of the main vendors to the Flexi 2015-1 transaction that acts
as an introducer of receivables. The reconciliation of the
disputed payments has progressed, but was not completed by the
expected date of September 30, 2016. Losses are low at 3.6% of
the original pool, but are expected to increase as write-offs
from the dispute are realised.
RATING SENSITIVITIES
Flexi 2015-1 is paying pro rata to all classes, limiting build-up
of credit enhancement. If the arrears trigger of 60+ days
arrears, averaged over six months, of greater than 4% is
breached, the transaction will revert to sequential pay. There is
sufficient subordination to protect the notes in the event of
total non-payment of the disputed assets. Fitch has affirmed all
rated notes for Flexi 2015-1 as a result.
Both Flexi 2015-2 and Flexi 2016-1 transactions are currently
amortising pro rata, limiting additional build-up of
subordination. Switch back to sequential payment is only expected
if a charge-off occurs or the 60+ day arrears average over six
months is greater than 4% of the pool. The prospect of downgrade
is considered remote at present, given the performance of the
pool to date, strong excess spread and subordination. Both
transactions can withstand additional losses.
The full list of rating actions are:
Flexi ABS Trust 2015-1 (as at February 2017 payment date)
AUD47.4 million Class A notes (ISIN AU3FN0027256) affirmed at
'AAAsf'; Outlook Stable
AUD5.1 million Class B notes (ISIN AU3FN0027264) affirmed at
'AAsf'; Outlook Stable
AUD5.1 million Class C notes (ISIN AU3FN0027272) affirmed at
'Asf'; Outlook Stable
AUD2.6 million Class D notes (ISIN AU3FN0027280) affirmed at
'BBBsf'; Outlook Stable
AUD3.4 million Class E notes (ISIN AU3FN0027298) affirmed at
''BBsf'; Outlook Stable
Flexi ABS Trust 2015-2(as at February 2017 payment date)
AUD31.9 million Class A2 notes (ISIN AU3FN0027868) affirmed at
'AAAsf'; Outlook Stable
AUD4.6 million Class B notes (ISIN AU3FN0027876) affirmed at
'AAsf'; Outlook Stable
AUD3.5 million Class C notes (ISIN AU3FN0027892) affirmed at
'Asf'; Outlook Stable
AUD2.7 million Class D notes (ISIN AU3FN0027900) affirmed at
'BBBsf'; Outlook Stable
AUD1.5 million Class E notes (ISIN AU3FN0027918) affirmed at
'BBsf'; Outlook Stable
Flexi ABS Trust 2016-1(as at March 2017 payment date)
AUD39.7 million Class A2 notes (ISIN AU3FN0031092) affirmed at
'AAAsf'; Outlook Stable
AUD32.8 million Class A2-G notes (ISIN AU3FN0031100) affirmed at
'AAAsf'; Outlook Stable
AUD8.8 million Class B notes (ISIN AU3FN0031118) affirmed at
'AAsf'; Outlook Stable
AUD10.5 million Class C notes (ISIN AU3FN0031126) affirmed at
'Asf'; Outlook Stable
AUD7.4 million Class D notes (ISIN AU3FN0031134) affirmed at
'BBBsf'; Outlook Stable
AUD5.5 million Class E notes (ISIN AU3FN0031142) affirmed at
'BBsf'; Outlook Stable
JOHNGAY PTY: Second Creditors' Meeting Set for April 20
-------------------------------------------------------
A second meeting of creditors in the proceedings of Johngay Pty
Ltd, trading as John Harris Gentleman's Outfitter & Pins &
Needles Alterations, has been set for April 20, 2017, at 1:00
p.m., at the offices of Artemis Insolvency, Level 36 Riparian
Plaza, 71 Eagle Street, in Brisbane, Queensland.
The purpose of the meeting are (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the
Company be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by April 19, at 5:00 p.m.
Peter Dinoris of Artemis Insolvency was appointed as
administrator of Johngay Pty on March 16, 2017.
PARKVIEW ESTATE: Second Creditors' Meeting Set for April 20
-----------------------------------------------------------
A second meeting of creditors in the proceedings of Parkview
Estate Pty Ltd has been set for April 20, 2017, at 3:00 p.m., at
the offices of Cliftons Sydney, Level 13, 60 Margaret Street, in
Sydney, NSW.
The purpose of the meeting are (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the
Company be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by April 19, at 4:00 p.m.
Barry Frederic Kogan & Joseph David Hayes of McGrathNicol were
appointed as administrators of Parkview Estate on Feb. 21, 2017.
POWER IQ: First Creditors' Meeting Set for April 24
---------------------------------------------------
A first meeting of the creditors in the proceedings of Power IQ
Pty Ltd will be held at 22 Market Street, in Brisbane,
Queensland, on April 24, 2017, at 9:30 a.m.
KellyAnne Lavina Trenfield and John Park of FTI Consulting were
appointed as administrators of Power IQ on April 10, 2017.
REDZED TRUST 2017-1: S&P Assigns BB Rating on Cl. E Securities
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to seven classes of
Non-conforming residential mortgage-backed securities (RMBS)
issued by Perpetual Trustee Co. Ltd. as trustee of RedZed Trust
Series 2017-1. RedZed Trust Series 2017-1 is a securitization of
nonconforming mortgages originated by RedZed Lending Solutions
Pty Ltd.
The ratings reflect:
-- S&P's view of the credit risk of the underlying collateral
portfolio, including S&P's view that the credit support is
sufficient to withstand the stresses S&P applies. The
credit support for the rated notes comprises note
subordination.
-- The availability of a retention amount and amortization
amount, both of which will be funded by excess spread, but
at various stages of the transaction's term. They will be
used to reduce the balance of the senior notes.
-- S&P's expectation that the various mechanisms to support
liquidity within the transaction, including a liquidity
facility equal to 2.0% of the outstanding balance of the
notes, and principal draws, are sufficient under S&P's
stress assumptions to ensure timely payment of interest.
-- There is a condition that a minimum margin will be
maintained on the assets.
RATINGS ASSIGNED
Class Rating Amount (mil. AUD)
A1 AAA (sf) 180.0
A2 AAA (sf) 61.50
B AA (sf) 17.31
C A (sf) 15.27
D BBB (sf) 10.8
E BB (sf) 6.78
F B (sf) 4.14
G NR 4.2
NR--Not rated.
TOMNICK PTY: Second Creditors' Meeting Set for April 20
-------------------------------------------------------
A second meeting of creditors in the proceedings of Tomnick Pty
Ltd, trading as Frontline Pest Management, has been set for
April 20, 2017, at 2:00 p.m., at the offices of Artemis
Insolvency, Level 36, 71 Eagle Street, in Brisbane, Queensland.
The purpose of the meeting are (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the
Company be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by April 19, at 5:00 p.m.
On Feb. 16, 2017, Deputy Commissioner of Taxation filed an
application to wind up of Tomnick Pty Ltd.
Peter Dinoris of Artemis Insolvency was appointed as
administrator of Tomnick Pty on March 15, 2017.
TVH ENTERPRISE: First Creditors' Meeting Set for April 21
---------------------------------------------------------
A first meeting of the creditors in the proceedings of TVH
Enterprise (Australia) Pty. Ltd. will be held at the offices of
Cor Cordis Chartered Accountants, One Wharf Lane, Level 20, 161
Sussex Street, in Sydney, NSW, on April 21, 2017, at 11:00 a.m.
Ozem Kassem and Jason Tang of Cor Cordis were appointed as
administrators of TVH Enterprise on April 7, 2017.
WATERSUN HOMES: May Have Traded While Insolvent Before Collapse
---------------------------------------------------------------
Aisha Dow at The Sydney Morning Herald reports that Watersun
Homes could have been trading insolvent for more than a year
before its collapse, accepting money from customers while
contractors complained about unpaid bills worth tens of thousands
of dollars, according to the company's administrators.
More than 800 creditors claim they have been left out of pocket
by the shock collapse and liquidation of the Victorian arm of
Watersun Homes, WSH Group, the report says.
SMH relates that many suppliers, tradespeople and home buyers
said they are now fighting for their own financial survival,
after an investigation by administrators revealed it was "highly
unlikely" much of the estimated AUD20 million debt would be
recovered.
It comes amid reports "several threats" have been levelled at the
company's directors Gary John Caulfield and Tanya Lewis, who have
been unreachable for days, the report says.
According to SMH, the pair failed to front a creditors meeting
last month, saying "due to the several threats we have received
we felt it would be better that this statement be read out at the
meeting rather than attending in person".
SMH says the directors have blamed the failure of the company on
a decision to aggressively expand into regional Victoria, and an
unexpected AUD4 million loss on a townhouse project in Bundoora.
But, according to a report obtained by Fairfax Media,
administrators found there were other factors at play including
poor management of the business that resulted in delays in
completing homes and many reports of defects on Watersun building
sites, SMH relays.
This issue of poor workmanship is so significant, administrators
expect creditors can only claim a fraction of the approximately
AUD1.89 million owed by Watersun customers, according to SMH.
"We envisage that there will be many home owners who will claim
that works undertaken by the company were defective," the
administrators' report, as cited by SMH, said.
Last-ditch attempts to sell the business from December 2016
failed, while Mr Caulfield personally sourced AUD3 million to
funnel into WSH Group, records released to creditors reveal, SMH
relays.
The administrators have concluded WSH Group may have been trading
insolvent from at least December 31, 2015, "and as such directors
may be liable for debts incurred after this date," SMH reports.
According to SMH, Director of liquidator Rodgers Reidy Melbourne,
Mathew Gollant, said investigations continued into when exactly
the company became insolvent, but the preliminary indications
were "that it was probably 12-months ago".
SMH relates that Mr. Gollant said he could not yet speculate how
much, if any, of the debt could be recovered but first priority
would be given to 90 former Watersun employees.
"We need over a million dollars to satisfy those claims, the
question is going to be what's left after that and it's too early
to say at this stage," the report quotes Mr. Gollant as saying.
Neil Mclean and Mathew Gollant of Rodgers Reidy Melbourne were
appointed as administrators of Watersun Homes on Feb. 28, 2017.
The company entered into liquidation on April 5.
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C H I N A
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CHINA YIDA: Fitch Assigns First-Time 'B' IDR, Outlook Positive
--------------------------------------------------------------
Fitch Ratings has assigned China-based business park developer,
Yida China Holdings Limited, a first-time Long-Term Issuer
Default Rating of 'B'; The Outlook is Positive. Fitch has also
assigned Yida a foreign-currency senior unsecured rating of 'B'
with a Recovery Rating of 'RR4'.
At the same time, Fitch has assigned Yida's proposed US dollar
senior notes a 'B(EXP)' expected rating with a Recovery Rating of
'RR4'. The notes are rated at the same level as Yida's senior
unsecured rating because they constitute its direct and senior
unsecured obligations. The final rating of the notes is subject
to the receipt of final documentation conforming to information
already received. Yida says it intends to use the net proceeds
from the note issue to fund new property projects and for working
capital purposes.
Yida's ratings are constrained by its high leverage, as measured
by net debt/adjusted inventory, the still-small contribution from
operations outside the city of Dalian in China's Liaoning
province and limited scale. Its ratings are supported by its
strong record in business park operation in Dalian and expanding
presence in other Chinese cities.
The Positive Outlook reflects Fitch's belief that Yida's higher
development property sales are supported by firm demand from its
established business parks. This will allow the company to
deleverage to below 45% over the next twelve months. Furthermore,
as Yida's business parks mature and its business in entrusted
operation of business parks expands, its recurring EBITDA can
sustainably provide in excess of 0.3x coverage of interest
expenses.
KEY RATING DRIVERS
High Leverage: Yida's leverage has remained above 45.0%
historically and was at 46.7% at end-2016, which is higher than
for most mid-to-high 'B' rating category Chinese developers.
Fitch expects leverage to drop gradually from 2017, due to
stronger sales and better cash collection, as well as from cash
gradually recycling from the Dalian government as a result of
primary land development in the early years. However, leverage is
likely to remain above 40% during 2017-2019, considering the
company's expansion plans and continuous investment property
development.
Limited Geographic Diversification: More than 90% of Yida's
attributable contracted sales were generated from Dalian before
2016, although this decreased to 82% in 2016 due to a higher
contribution from new projects in the city of Wuhan in China's
Hubei province. Fitch expects Dalian to still account for around
80% of contracted sales in the next two to three years, given 87%
of Yida's attributable land reserve was located in Dalian as of
end-2016.
Small Scale: Yida's contracted sales of around CNY7 billion-8
billion in 2015 and 2016 are small compared with 'B+' rated
developers, which generate more than CNY10 billion in contracted
sales annually. Housing market risk will continue to
significantly affect Yida's credit profile, as development
property sales remain its key operating cash contributor.
Increasing maturity of the company's investment properties in its
new business parks and the expanding scale of its development
property sales, with more projects generating sustainable sales,
will eventually mitigate its small scale.
Leading Business Park Developer: Yida has 15 years of experience
in business park development and operation, starting with its
first project, Dalian Software Park, in 2002. The company has
demonstrated an ability to attract large multinational
corporations and reputable local companies to its business parks.
Its strong retention rate is reflected by the 92% occupancy rate
enjoyed by Dalian Software Park and average occupancy rates of
above 80% for mature assets. The strong performance of its
business parks can also be seen from the sustained positive
annual rental reversion of 5%-8%. Its fast-expanding entrusted
businesses in 2015 and 2016 also demonstrates the company's
proficiency in business park operation.
Rising Recurring Income: Fitch expects recurring income from
Yida's business parks and entrusted operation business to
increase at 10%-18% yoy from CNY435 million in 2016 to CNY649
million in 2019, with recurring EBITDA interest coverage
improving from 0.3x towards 0.5x. Recurring income growth will be
driven by both enlarged leasable gross floor area, with new parks
in Dalian and Wuhan, and increasing occupancy rates in existing
business parks.
New Shareholder, No Immediate Impact: Fitch believes Yida's new
shareholder, China Minsheng Investment Group (CMIG), may benefit
the company's business development, but there are no immediate
changes to the company's operations. CMIG can facilitate more
business opportunities outside Yida's Dalian stronghold that Yida
is already exploring. Furthermore, CMIG may bring more funding
flexibility. CMIG, a leading private investment group, bought a
53% equity interest from Yida's founder, Mr. Sun Yinhuan. The
acquisition was made by CMIG's subsidiary, China Minsheng Jiaye
Investment Limited (CMIG Jiaye), which is CMIG's platform
specialising in property investment. CMIG Jiaye held 61.1% stake
in Yida as of end-March 2017.
DERIVATION SUMMARY
Yida's business profile as a leading regional homebuilder in
Dalian and business park developer, with a sufficient and sound-
quality landbank to support its property development, is
commensurate with a 'B' rating. Yida also has a satisfactory
EBITDA margin of above 20%, which is comparable with 'BB' rating
category peers. Its recurring income from investment property
assets, especially from mature office buildings in Dalian
Software Park, provides an extra liquidity buffer.
However, Yida's leverage is higher than most of its 'B' rated
peers, such as Xinyuan Real Estate Co., Ltd. (B/Stable), and its
contracted sales are small compared to 'B+' rated developers,
such as Modern Land (China) Co., Limited (B+/Stable). Yida's
insignificant recurring income and geographic concentration in
Dalian cap its rating at 'B'.
KEY ASSUMPTIONS
Fitch's key assumptions within its ratings case for the issuer
include:
- Attributable contracted sales to stay at CNY7 billion to
CNY9 billion during 2017-2019.
- Construction expenditure accounting for 30%-40% of contracted
sales during 2017-2019.
- Land acquisition paid accounting for around 20%-30% of
contracted sales during 2017-2019.
- Capex for new investment properties at CNY350 million to
CNY450 million per year during 2017-2019.
RATING SENSITIVITIES
Developments that May, Individually or Collectively, Lead to
Positive Rating Action include:
- recurring EBITDA/gross interest sustained above 0.3x (2016:
0.3x; 2015: 0.2x);
- net debt/adjusted inventory of below 45% for a sustained
period (2016: 46.7%; 2015: 52.8%); and
- EBITDA margin sustained above 25.0% (2016: 25.6%; 2015:
27.8%).
Developments that May, Individually or Collectively, Lead to
Negative Rating Action
- Failure to maintain the above positive rating sensitivities
will lead to the Positive Outlook reverting to Stable.
LIQUIDITY
Adequate Liquidity: Yida had CNY2.9 billion in cash, including
restricted cash, on hand as of end-2016 and unused bank
facilities of CNY4.1 billion; sufficient to cover its short-term
debt of CNY4 billion.
Diversified Funding Channels: Yida has access to diversified
funding channels, including domestic corporate bonds, bank
borrowings, trust borrowings and the equity market. It issued two
tranches of domestic bond, totalling CNY3 billion, during
September 2015 to March 2016 at a cost of 6.0%-6.5%. Its average
borrowing cost was hence lowered to around 7% in 2016, from 10%
in 2014. The company's borrowing structure was improved after it
replaced part of its short-term debt with longer-maturity
corporate bonds in 2016. Also, the portion of secured debt among
total debt was cut to 80%, from above 90% in previous years.
CHINA YIDA: Moody's Assigns B2 1st Time Corporate Family Rating
---------------------------------------------------------------
Moody's Investors Service has assigned a first-time B2 corporate
family rating to Yida China Holdings Limited.
At the same time, Moody's has assigned a B3 senior unsecured
rating to Yida's proposed USD bonds.
The ratings outlook is stable.
RATINGS RATIONALE
"Yida's B2 corporate family rating reflects the company's
established track record in the development and management of
business parks in Dalian city," says Kaven Tsang, a Moody's Vice
President and Senior Credit Officer.
Yida has a focused business strategy of developing industrial
parks and their neighboring residential properties in Dalian, a
large city and seaport in the south of Liaoning Province. It has
successfully completed five business parks in Dalian since 1998,
and the industrial parks have attracted tenants in the global
technology and software sector.
Yida's business model and operating strengths position it well to
benefit from the growth of software development, as well as
information technology and financial services in China (Aa3
negative) over the medium term.
"Yida also has diversified sources of income and operations, with
somewhat different business dynamics when compared to pure
residential developers," says Tsang, who is also Moody's Lead
Analyst for Yida.
The company has streams of rental income from tenants in its
industrial properties. Such income provides a buffer against the
volatility from its residential property development business,
and is important because the property market in Dalian is not as
robust when compared with the cities in Eastern China, such as in
the Yangtze River Delta region.
And, the company's B2 rating is constrained by its small
operating scale, high geographic concentration, elevated leverage
and weak liquidity.
Yida's scale is relatively small when measured by revenue. Its
revenue registered RMB7 billion in 2016; a result which was
comparable to that of its B2-rated property peers in China.
The company's operation and geographic concentration in Dalian
exposes it to performance volatility from the weak economy in
Dalian.
Yida also faces execution risk, if the company expands
geographically to reduce its reliance on Dalian. Nevertheless,
this risk is at a moderate level, because the company has a track
record in the development of business parks, a disciplined
approach to land acquisitions, and has adopted an asset light
strategy. It has also accumulated experience managing business
parks in Beijing, Chengdu, Suzhou, Shanghai, and Wuhan.
Yida's debt leverage is high, because of its heavy reliance on
debt to fund new projects and strategy of keeping a sizable
portfolio of investment properties. Its revenue/adjusted debt
registered 44% at end-2016, which reflects a higher debt leverage
versus its B2-rated Chinese property peers.
Yida's financial risk is high, but its stable rental income
offers some stability to its debt servicing because rental income
covered around 33% of its interest expenses in 2016.
Moody's expects that over the next 12-18 months, the company will
show: (1) stable growth in the selling prices of its Dalian
projects; (2) moderate growth in revenues and an improvement in
gross profit margins from the levels in 2016; (3) lower borrowing
costs; and (4) a disciplined approach in its business expansion
and land acquisitions.
Its growing scale and credit metrics over the next 12-18 months
with revenue/adjusted debt of around 45% and EBIT/interest of
around 2.0x - will position the company at the mid-B rating
level.
Yida's liquidity is weak. Its cash/short-term debt was at 0.7x at
end-2016.
Nonetheless, its liquidity position could improve, if the company
can borrow long-term debt or issue medium-term bonds, such as the
proposed bonds.
Moody's notes that Yida's shareholder, China Minsheng Investment
Corp., Ltd (CMIC, unrated) - with a 61% share in the company - is
an investment company which could broaden Yida's access to new
business opportunities and funding.
Moody's will monitor CMIC's influence on Yida's corporate
governance practices, growth levels and risk appetite, as well as
CMIC's longer-term plan for Yida in the context of its own
strategic priorities.
The B3 senior unsecured rating is one notch below Yida's
corporate family rating, reflecting structural and legal
subordination, given its high level of priority debt - secured
and subsidiary debt. Moody's expects that Yida's level of
priority debt will stay high over the next 12-18 months, because
the company has secured its investment and development properties
for funding.
The stable ratings outlook reflects Moody's expectation that the
company will show stable sales growth, maintain a disciplined
approach to land acquisitions, and have the ability to address
the repayment of its short-term debt.
An upgrade of Yida's ratings is unlikely in the near term, given
its high debt leverage and weak liquidity position.
However, upward ratings pressure could emerge over the medium
term, if Yida: (1) achieves growth in scale for its residential
development and business park development businesses; and (2)
improves its debt leverage and liquidity position.
Credit metrics that indicate ratings upgrade pressure include:
(1) revenue/adjusted debt exceeding 65%; (2) EBIT/interest
exceeding 2.5x; (3) gross rental income/interest above 0.5x -
0.6x; and (4) cash/short-term debt above 1x on a sustainable
basis.
Evidence of strong financial support from its largest shareholder
could also be positive for the ratings.
Downward ratings pressure on Yida could emerge if: (1) the
company's contracted sales fall significantly short of Moody's
expectations; (2) its credit metrics deteriorate, due to poor
market conditions or fast expansion; or (3) its liquidity
position remains weak; in particular, if its cash/short-term debt
fails to trend towards 1x over the next 12-18 months.
Ratings downgrade pressure could arise if its key credit metrics
show that: (1) revenue/adjusted debt is below 40%; or (2)
EBIT/interest is below 1.5x -- 2.0x.
The principal methodology used in these ratings was Homebuilding
And Property Development Industry published in April 2015.
Yida China Holdings Limited engages in the development and
operation of business parks, and development and sale of
residential properties, with a focus on Dalian. It also provides
property management and construction, decoration and landscaping
services. Yida was founded in 1998 and listed on the Hong Kong
Stock Exchange in June 2014.
MODERNLAND REALTY: Fitch Assigns B Final Rating to USD240MM Notes
-----------------------------------------------------------------
Fitch Ratings has assigned Indonesia-based PT Modernland Realty
Tbk's (Modernland, B/Negative) USD240 million 6.95% senior
unsecured notes due in 2024 a final rating of 'B' with a Recovery
Rating of 'RR4'. The notes are issued by Modernland's wholly
owned subsidiary, Modernland Overseas Pte Ltd, and guaranteed by
Modernland and certain subsidiaries.
The final rating follows the receipt of documents conforming to
information already received, and is in line with the expected
rating assigned on April 3, 2017. The notes are rated at the same
level as Modernland's senior unsecured rating as they represent
unconditional, unsecured and unsubordinated obligations of the
company.
Fitch believes Modernland's financial profile will remain
unchanged and consistent with its rating, as proceeds from the
new notes will be used mainly for refinancing and to extend the
maturity profile of the company's debt, allowing it more
flexibility to manage cash flows. The company plans to use the
proceeds to partly redeem its existing USD248 million 9.75%
senior unsecured notes maturing in 2019.
KEY RATING DRIVERS
Negative Outlook; Recovering Macroeconomic Condition: The
Negative Outlook on Modernland's Long-Term Issuer Default Rating
(IDR) reflects the risk that the company could breach a number of
its local-currency debt covenants in 2017, as EBITDA may remain
weak unless presales improve in the next six to 12 months. In
2016, Modernland reported presales of around IDR4.5 trillion
(2015: IDR3.1 trillion). However, this included IDR3.2 trillion
booked as proceeds from a one-off land sale to a joint venture
(JV) between Modernland and PT Astra Land Indonesia, where
Modernland will only receive half of this sale in cash, with the
balance going towards its investment in the JV.
In Fitch's view, Modernland may not achieve its presales target
for 2017, as the domestic macroeconomic environment is only
starting to recover and Fitch believes there will be a lag before
Fitch see a sustained improvement in demand for property.
Nevertheless, the company may take measures to improve the
recognition of EBITDA or obtain waivers on covenant breaches.
Volatile Industrial Cash Flows: Around 70% of Modernland's
contracted sales in 2016 stemmed from industrial land sales and
the one-off land sale to the JV. Therefore its cash flows tend to
be more volatile during economic downturns than those of peers
that depend on residential sales. Nevertheless, the low
development risk associated with industrial land sales mitigates
this cash flow volatility.
Modernland has a 20-year track record in developing industrial
estates, and has built strong relationships with tenants. Its
flagship Cikande industrial estate has a very low average land
cost compared with the current average selling price (ASP) of
around IDR1.7 million per square metre (sqm), and Modernland has
sufficient land to continue developing there for around five
years, even if Fitch assumes that the company makes no further
land acquisitions. Fitch believes Modernland can build on its
success in Cikande and replicate its business model for future
developments in its newer industrial estate in Bekasi.
Limited Residential Track Record: Fitch expects Modernland's
residential and commercial segment to account for around 55% of
presales by 2018, driven by the Jakarta Garden City (JGC) project
and the new launches in Bekasi. The growing proportion of
residential sales will counterbalance volatility in industrial
land sales, but Modernland's track record in developing an
integrated, large-scale residential project is still limited
relative to the other rated developers, like PT Bumi Serpong
Damai Tbk (BB-/Stable), PT Lippo Karawaci Tbk (BB-/Stable) and PT
Alam Sutera Realty Tbk (B+/Negative).
Manageable Forex Risk: Modernland has entered into a few call-
spread options to partially hedge the principal of its USD248
million bond due 2019, covering rupiah depreciation of up to
IDR15,500 per US dollar. The company is also planning to enter
into a similar hedging arrangement for its new proposed bond. In
addition, Fitch believes Modernland's thick margins are
sufficient to absorb short-term currency volatility.
DERIVATION SUMMARY
Modernland's rating is well-positioned relative to other Fitch-
rated property developers, such as PT Kawasan Industri Jababeka
Tbk (KIJA, B+/Stable) and PT Alam Sutera Realty Tbk (ASRI,
B+/Negative). Fitch believes that KIJA's stronger recurring
interest coverage, lower leverage and relatively more strategic
industrial development location compared to that of Modernland
supports its higher rating. Fitch believes ASRI's longer track
record in residential developments and more defensive cash flow
mix support a higher rating than Modernland.
KEY ASSUMPTIONS
Fitch's key assumptions within Fitch ratings case for the issuer
include:
- Presales of around IDR2.1 trillion in 2017
- Land acquisition capex of around IDR350 billion in 2017
RATING SENSITIVITIES
Future developments that may, individually or collectively, lead
to negative rating action include:
- If there are heightened risk that the company may breach
covenants on its local-currency debt, or the company fails to
negotiate waivers on covenant breaches
- Presales/ gross debt sustained at less than 40% (2016: 62%)
Future developments that may, individually or collectively, lead
the Outlook to be revised back to Stable include:
- If the risk of the company breaching its local-currency debt
covenants is reduced, or the company successfully manages to
negotiate waivers on covenant breaches
LIQUIDITY
As of December 2016, Modernland has readily available cash of
around IDR400 billion compared with IDR470 billion of maturing
short-term debt. Fitch currently expects the company to post
positive FCF of around IDR400 billion for 2017, which supports
its liquidity. Modernland's capex in the short term is going to
be limited to construction costs, which are partly contingent
upon meeting sales thresholds in the current period. This,
coupled with the discretionary nature of land acquisitions, may
allow Modernland to accumulate cash and shore-up its liquidity
profile. Liquidity is also supported by Modernland's access to
local banks.
* Fitch: Chinese Banks' Profitability Likely to Decline Further
---------------------------------------------------------------
Chinese banks will struggle to avoid further declines in
profitability this year if tight market liquidity aimed at
slowing further build-up in leverage remains in effect, as it is
likely to increase funding costs, Fitch Ratings says. There is
limited scope to pass higher funding costs to borrowers because
corporate leverage and associated interest burdens are already
high.
Net interest margin contraction and large loan provisions led to
declines in all Fitch-rated Chinese banks' ROA and ROE in 2016,
which Fitch expected. This year, higher interbank interest rates
will mostly affect the smaller banks, which tend to be more
reliant on wholesale funding facilities, and most vulnerable to
liquidity squeezes. Fitch expects smaller banks' margins will
erode further in 2017 but larger banks, typically net providers
of market liquidity, may see margins stabilise or slightly
increase.
Recent reported asset quality metrics were largely flat quarter-
on-quarter, but this does not indicate a stabilisation in asset
performance, in Fitch views. Fitch believes it has been driven by
costly debt resolution measures such as the disposal of non-
performing loans and debt-to-equity swaps, as well as delays in
the classification of weakened borrowers.
Most banks lowered their provision coverage last year to avoid
declines in reported net profits. However, there is little room
to relax coverage further this year as coverage ratios have
typically fallen close to the sector's 150% regulatory minimum.
Notably, Industrial and Commercial Bank of China's (ICBC)
coverage ratio fell to 137% at end-2016, down from 156% at end-
2015, while it reported just a 0.5% increase in net profit.
Fitch notes the delay in designating domestic systemically
important banks (D-SIBs) in China provides temporary relief for
those which otherwise were supposed to comply with a minimum loan
loss reserve of 2.5% by end-2016. Among the state banks, ICBC,
China Construction Bank and Bank of Communications did not meet
this requirement at end-2016.
Loan-to-deposit ratios are stable for the largest banks but
notably higher for some mid-tier banks, reflecting their
aggressive loan growth - a trend that is likely to continue. This
is negative for their standalone credit profile. Mid-tier banks
have also continued aggressive growth in entrusted investments,
which are often quasi-loan substitutes with lower risk weights,
and effectively help banks to bypass lending restrictions and
capital constraints to pursue growth while profitability and
capital are under pressure.
Exposure to wealth management products (WMPs) is stable for state
banks but still growing for mid-tier banks, and Fitch expects
this growth to continue in 2017 despite new Macro Prudential
Assessment (MPA) rules incorporating off-balance sheet WMPs into
the credit calculation for regulatory purposes. Most banks do not
expect the new MPA framework to alter their business strategies
and some are even planning to increase their focus on off-
balance-sheet credit given the higher yields it offers.
Risk-weighted assets relative to total assets declined for most
banks in 2016, as mortgages (which have a 50% risk weight) and
entrusted investments were the main drivers of on-balance-sheet
growth. Fitch expects mortgage loans will remain the key loan
growth driver in 2017, but the growing presence of non-loan and
off-balance-sheet credit will continue to add risks.
Overall Fitch believes banks are targeting a similar pace of
credit growth in 2017, in line with Fitch base-case scenario
where credit continues to outpace GDP growth over the medium
term. Fitch views such rapid growth and rising system leverage as
unsustainable. It weighs negatively on the sector's operating
environment and is a key rating constraint for Chinese banks'
viability ratings.
=========
I N D I A
=========
BLUE PINK: CRISIL Reaffirms 'B' Rating on INR1.67MM LT Loan
-----------------------------------------------------------
CRISIL Ratings has reaffirmed its ratings on the long term bank
loan facilities of Blue Pink Apparels Private Limited (BPAPL) at
'CRISIL B/Stable'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 4 CRISIL B/Stable (Reaffirmed)
Long Term Loan 1.67 CRISIL B/Stable (Reaffirmed)
The rating continues to reflect BPAPL's small scale of operations
and below-average financial risk profile marked by high gearing
and small networth. These weaknesses are partially offset by the
extensive experience of BPAPL's promoters in the readymade
garment (RMG) segment.
Key Rating Drivers & Detailed Description
Weaknesses
* Modest scale of operations in highly fragmented RMG exports:
The scale of operation was small with revenue of around INR10
crore in fiscal 16. The operations are exposed to intense
competition in the fragmented RMG exports industry.
* Moderate financial risk profile: The financial risk profile of
the firm is below average marked by modest net wort, moderate
gearing and debt protection metrics. Net worth and gearing were
at INR1.85 Crores and 2.9 times respectively as on March 31,
2016. The debt protection metrics were below average with
interest coverage and net cash accrual to total debt ratio of
1.81 times and 0.07 times respectively for fiscal 2016.
Strength
* Extensive experience of proprietor in the textile industry: The
proprietor Mr. Fakhrudeen's family has been in the RMG exports
for the last two decades. The proprietor's extensive experience
in the industry has helped the firm in establishing strong
relationships with its suppliers and customers
Outlook: Stable
CRISIL believes that BPAPL will continue to benefit from its
promoters' extensive experience. The outlook may be revised to
'Positive' if the company improves its scale of operations and
profitability resulting in improvement in the business and
financial risk profile. Conversely, the outlook may be revised to
'Negative' if there is considerable decline in accruals, or in
case of deterioration in working capital management or if it
undertakes a large debt-funded capital expenditure leading to
deterioration in the financial risk profile.
Based out of Chennai and established in 2012 by Mr.Fakhrudeen Ali
Ahmed, BPAPL is engaged into manufacturing and export of RMG
primarily men shirts, trousers and kids wear.
For 2015-16 (refers to financial year, April 1 to March 31),
BPAPL reported profit after tax (PAT) of INR24 lakh on net sales
of INR10.3 Crore against PAT of INR24 lakh on net sales of
INR7.16 crore for 2014-15.
CALYPSO AGRO: CARE Reaffirms B+ Rating on INR10CR LT Loan
---------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Calypso Agro Industries Private Limited (CAIPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 10 CARE B+; Stable Reaffirmed
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of CAIPL continues to
remain constrained on account of weak financial risk profile
marked by leveraged capital structure, weak solvency position,
weak debt coverage indicators and thin profitability margins .
The rating is further constrained by exposure of profitability
margins to fluctuation in raw material price and presence of the
company in highly competitive cotton ginning and pressing
industry. However, the rating continues to factor in increasing
scale of operations in FY16 (refers to the period April 1 to
March 31), experience of promoters in the cotton industry and
location advantage.
The ability of the company to increase its scale of operations,
improve its solvency position and profitability margins along-
with efficient management of working capital requirements remain
the key rating sensitivity.
Detailed description of the key rating drivers
Key Rating Strengths
Experienced promoters: The directors of CAIPL, have wide
experience of more than one decade in the agro based processing
industry. The company belongs to the Bolla group of Nagpur and is
likely to be benefited from the established presence of the
group, as it has seven entities engaged in trading of agro
commodities.
Key Rating Weaknesses
Modest scale of operations, weak capital structure and debt
coverage indicators: The scale of operations of the company
remained small with low networth base in FY16, thus depriving it
of scale benefits. Furthermore, high dependence of the entity on
external borrowings resulted in leveraged capital structure owing
to low networth base. Presence in highly fragmented industry and
low profitability margins: The Indian trading industry is highly
unorganized & fragmented in nature. Due to low entry barriers,
the trading Industry in the country is flooded with many
unorganized players. This has led to high level of competition in
the industry and players work on wafer-thin margins. Availability
of goods is not an issue for the industry but procuring these
goods at competitive prices poses a challenge to maintain
margins.
Seasonality associated with trading product being an agro based
commodity: The company is engaged in the business of trading of
rice and pulses, which is an agro-based commodity. Agro-based
industry is characterized by its seasonality, as it is dependent
on the availability of raw materials, which further varies with
different harvesting periods. Availability and prices of agro
commodities are highly dependent on the climatic conditions.
Adverse climatic conditions can affect their availability and
lead to volatility in raw material prices.
Incorporated in the year 2012, Calypso Agro Industries Private
Limited (CAIPL) was promoted by Mr. Vekanta Ramanrao, Mr. Prakash
Kharat, Mr. Anil Pohekar, Mr. Abhijeet Pohekar, Mr. Amitabh
Pohekar and Mr. Arvind Deshmukh. The company was not fully
operational till FY15.CAIPL is engaged in the trading of grains.
The major products of the company include pulses, rice and paddy.
The company procures the products from farmers and then sells the
same to the wholesalers located in Maharashtra, Andhra Pradesh,
Karnataka and Tamil Nadu. The entity reported TOI of INR7.04
crore with nil PAT in FY16 against TOI of INR0.06 crore with a
net loss of INR0.31 crore in FY15.
DEESAN COTEX: CARE Reaffirms B+ Rating on INR21.86cr LT Loan
------------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Deesan Cotex Private Limited (DCPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 21.86 CARE B+, Stable Reaffirmed
Short-term Bank
Facilities 1.00 CARE A4 Reaffirmed
The ratings assigned to the bank facilities of DCPL are
constrained by the relatively small scale of operations,
leveraged capital structure along with weak debt coverage
indicators and working capital intensive nature of operations.
The ratings are further constrained by operations in the highly
competitive and fragmented the textile industry and
susceptibility of operating margins to the raw material price
fluctuation.
These factors far offset the benefits derived from the experience
of the promoters and their financial support in the past and
operational support from group entities with presence across
textile value chain.
Ability of DCPL to improve the scale of operations and
profitability coupled with efficient management of the working
capital amidst the intense competition are the key rating
sensitivities.
Detailed description of the key rating drivers
Key Rating Strengths
Experienced management and support from group entities: DCPL's
promoters have experience of over more than fifteen years in the
textile industry. Furthermore, DCPL is a part of Deesan group
which has been in textile business since 1996 and having several
companies operating under it and has presence in all segments of
cotton textile starting from cultivation of cotton to
manufacturing of garments. DCPL receives operational support from
the other group companies in terms of procurement of materials
and building customers.
Key Rating Weaknesses
Small scale of operations: Even though DCPL's TOI have shown
growing trend during past three years i.e. FY14-FY16 (refers to
the period April 1 to March 31) and same has remained small.
Small scale restricts financial flexibility and deprives it of
benefits of economies of scale.
Low profitability and weak solvency position
Also, the profitability margins remained fluctuating and low
during past three years ending FY16. Furthermore, the capital
structure has also remained leveraged during FY14-FY16 with high
dependence on external borrowings.
Working capital intensive operations: The operations of the
entity remained working capital intensive FY16 in nature with
high amount of funds blocked in debtors for the past three years
(FY14-FY16), however the same has improved in FY16. The gross
current asset days stood moderately high at 50 days during last
three years ending FY16. The same led to high utilization of
working capital limits.
Incorporated in 2007, Deesan Cotex Private Limited (DCPL) is
engaged in manufacturing of terry towels, trading of grey fabric
and job work of yarn doubling (80% of total sales during FY16).
Company procures woven fabric from domestic suppliers and exports
finished towel. DCPL has its plants located at Dhaiwad, Dhule,
Maharashtra with an installed capacity of 15 tonnes per day for
terry towel. DCPL is a part of Deesan group which has been in
business of textile since 1996 and having several companies
operating under it and has presence in all segments of cotton
textile starting from cultivation of cotton to manufacturing of
garments. DCPL receives operational support from the other group
companies in terms of procurement of materials and building
customers.
During FY16, the total income of DCPL stood at INR68.77 crore
(vis-Ö-vis INR30.46 crore in FY15) and PAT of INR0.04 crore
(vis-a-vis net loss of INR4.07 crore in FY15). Furthermore during
10MFY17 the company posted a turnover of INR45.80 crore.
DURASIGN CORP: CRISIL Reaffirms 'B' Rating on INR2MM Loan
---------------------------------------------------------
CRISIL's ratings on the bank loan facilities of Durasign
Corporation (DSC) continue to reflect DSC's small scale of
operations and the constrained financial risk profile because of
a modest net worth. These rating weaknesses are partially offset
by the extensive experience of promoters in the labels and
signage business, and established clientele.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Proposed Bank
Guarantee 0.5 CRISIL A4 (Reaffirmed)
Proposed Cash
Credit Limit 1.5 CRISIL B/Stable (Reaffirmed)
Proposed Long Term
Bank Loan Facility 2.0 CRISIL B/Stable (Reaffirmed)
Proposed Term Loan 1.0 CRISIL B/Stable (Reaffirmed)
Analytical Approach
For arriving at the ratings, CRISIL has considered DSC's
standalone business and financial risk profiles. CRISIL had
earlier combined the business and financial risk profiles of DSC
and Durasign Technologies (DST). The revised analytical approach
reflects absence of significant financial support and cash flow
fungibility among the companies, and the management's stance of
operating them independently.
Key Rating Drivers & Detailed Description
Weakness
* Extensive experience of promoters in the labels and signage
business, and established clientele: The promoters are engineers
and are in the signage and engraving industry for past 25 years.
The have sound knowledge of signage and engraving industry. The
promoters established good relations with many original equipment
manufacturers such as Tata Motors, Bajaj Auto, General Motors,
and Greaves, Larsen and Toubro. The promoters have been working
for these clients for over two decades.
Strengths
* Small scale of operations: DSC has small scale of operations,
with net sales of INR2.24 crs. in fiscal 2016, despite being in
operations for past four years.
* Weak financial risk profile: DSC has financial risk profile is
constrained with modest net worth which stood of INR1.37 crs. in
fiscal 2016.
Outlook: Stable
CRISIL believes the DSC will benefit from the extensive
experience of promoters in the labels and signage manufacturing.
The outlook may be revised to 'Positive' if the DSC significantly
improves the scale of operations and profitability, leading to
higher-than-expected cash accrual. Conversely, the outlook may be
revised to 'Negative' if any stretch in receivables or larger-
than-expected debt contracted for working capital or capacity
expansion, deteriorates the financial risk profile and liquidity.
Based in Pune (Maharashtra), DSC was established as a partnership
firm in 2011. It manufactures labels and stickers, and undertakes
domed labelling, signage marking and engraving for end-user
industries.
Profit after tax (PAT) of INR0.48 crore on net sales of INR2.24
crore was reported for fiscal 2016, against INR0.04 lakh and
INR1.32 crore, respectively, for fiscal 2015.
ELECTROMECH MARITECH: CARE Assigns D Rating to INR11.25cr Loan
--------------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of
Electromech Maritech Pvt Ltd (EMPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank
Facilities
(Term Loan-I) 23.34 CARE BB; Stable Assigned
Long term Bank
Facilities
(Term Loan-II) 11.25 CARE D Assigned
Detailed Rationale & Key Rating Drivers
The rating assigned to the term loan facility of Electromech
Maritech Pvt Ltd (EMPL) is primarily constrained by the company's
weak financial risk profile as exhibited by low profitability,
weak debt coverage indicators and its moderate capital structure.
The rating is further constrained by credit risk emanating from
single counterparty and susceptibility of power generation to
variation in climatic conditions and module degradation.
The rating assigned to the term loan facility 2 of EMPL to 'CARE
D' (Single D) factors in instances of delays in servicing of debt
obligations.
The ratings, however, derive comfort from the experience of
promoters with long track record in the power generation, EMPL's
stable operating performance with healthy energy generation
levels, its long term off take arrangement in the form of Power
Purchase Agreement (PPA) with NTPC Vidyut Vyapar Nigam Ltd
(NVVNL) at a fixed tariff along with its satisfactory payment
track record and favorable policy framework and demand outlook
for the renewable energy sector.
Going forward, improvement in debt servicing track record along
with achievement of generation levels as envisaged and timely
receipts of payments from the off-taker shall be the key rating
sensitivities.
Detailed description of the key rating drivers
Key Rating Strengths
Key Rating Weaknesses
Weak financial risk profile
The EMPL has weak financial risk profile as exhibited by
continued losses at net level since commencement of operations,
owing to high depreciation and interest charges. With the
availment of additional term loan and erosion of tangible net
worth due to continued losses the overall gearing and total debt
to GCA deteriorated further to 4.47x and 14.04x respectively as
on March 31, 2016.
Operations exposed to climatic conditions and technological risks
The operations of the company are exposed to climatic conditions
as well as technological risks pertaining to adequate
availability of sunlight and any redundancy associated with the
operational efficiency of PV modules.
Key Rating Strengths
Long track record of promoters in solar generation LSEPL has
considerable experience in solar projects. It is a wholly owned
subsidiary of Lanco Infratech Limited (LIL). LSEPL provides EPC
services to solar projects under JNNSM. LSEPL has also provided
EPC services to various solar projects in Gujarat and Rajasthan,
the capacity of the projects range between 1MW to 15MW.
Long term power off take arrangement and medium term operations
and maintenance (O&M) contract- EMPL has signed a PPA with NVVNL
to supply power generated from the 5 MW solar projects for a
period of 25 years from COD which was on January 10, 2012.
According to the PPA, the power is to be sold at a fixed tariff
rate of INR11.60 per KWH. In the event that the payments are
delayed beyond the due date, NVVNL would be liable to pay late
payment surcharge for the delayed amount at 1.25% per month for
the actual period of delay. Also, EMPL has renewed its contract
with LSSPL for Operations & Maintenance (O&M) for a period of 5
years on January 9, 2017 (expiring on January 09, 2022).
Stable operating performance- The plant has good and stable
Capacity Utilization Factor (CUF) of 19.54% during FY16 and
average CUF of 19.10% for last 4 years which ensures stable power
generation.
Government led reforms and incentives resulting in favorable
terms for producers- Given the thrust by the government for RE
capacity addition, rising cost of conventional energy assets
vis-a-vis declining cost of solar assets, relatively faster
execution cycle and distributed nature of solar energy, the
outlook is positive for the solar sector. The major drivers for
the growth in solar capacity addition have been various
government initiatives and policies (both Central and respective
States) including feed-in-tariffs and renewable purchase
obligations (RPO), decline in equipment cost over the years,
technological advancement, shorter implementation schedules and
lower fuel availability risks as compared to conventional sources
of energy.
EMPL is a joint venture between Golden Infraprojects Pvt Ltd
(GIPL) and Lanco Solar Energy Private Limited (LSEPL)
incorporated on January 2, 2008, with GIPL holding 51% shares and
LSEPL holding 49% shares respectively. Both, GIPL and LSEPL, are
promoter group companies. LSEPL is a 100% subsidiary of Lanco
Infratech Limited. LSEPL was established in June 2009 and is
engaged in providing design & engineering, procurement of
equipment and complete construction of solar power projects.
The company has executed turnkey EPC contracts for ~250 MW solar
power projects located majorly in Rajasthan, Gujarat and
Maharashtra. EMPL is a 5 MW solar energy project located at
Askandra Village, Jaisalmer district, Rajasthan. The project was
funded in debt equity ratio of 63:37, the project achieved
Commercial Operations Date (COD) on January 10, 2012. The company
has signed a long term PPA with NVVNL for 25 years at a fixed
tariff rate of INR11.60/kwh in January 2011. Also, the company
has Operations and Maintenance in place with LSSPL for next five
years i.e. January 2022.
EMPL has achieved total income of INR10.25 crore and a net loss
of INR0.56 crore in FY16 (refers to the period April 1 to
March 31) as against a total income of INR10.18 crore and net
loss of INR1.07 crore in FY15. During 9MFY17 (refers to the
period April 1 to December 31) the company has reported total
income of INR7.76 crore with a PBILDT of INR7.30 crore.
G.S. BUILDTECH: CARE Cuts Rating on INR6.80cr Loan to B+/A4
-----------------------------------------------------------
CARE Ratings has been seeking information from G.S. Buildtech
Private Limited to monitor the rating(s) vide e-mail
communications/ letters dated February 20, 2017 and numerous
phone calls. However, despite CARE's repeated requests, the firm
has not provided the requisite information for monitoring the
ratings. In the absence of minimum information required for the
purpose of rating, CARE is unable to express opinion on the
rating. In line with the extant SEBI guidelines CARE's rating on
G.S. Buildtech Private Limited and Company's bank facilities will
now be denoted as CARE B+/A4; ISSUER NOT COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 6.80 CARE B+/A4; ISSUER NOT
Facilities COOPERATING; Revised from
CARE BB-/CARE A4 on the
basis of best available
information
Users of these ratings (including investors, lenders and the
public at large) are hence requested to exercise caution while
using the above rating(s).
Detailed description of the key rating drivers
At the time of last rating in August 27, 2015, the following were
the rating strengths and weaknesses.
Key Rating Weaknesses
Small scale of operations
The scale of operations of the company has remained small marked
by total operating income and gross cash accruals of INR11.25
crore and INR0.46 crore, respectively, during FY14 (refers to the
period April 1 to March 31). Furthermore, the company's networth
base was relatively small at INR4.79 crore as on March 31, 2014.
The company achieved total operating income of INR9.32 crore in
FY15 (as per unaudited results). The small scale limits the
company's financial flexibility in times of stress and deprives
it from scale benefits.
Below average financial risk profile
The scale of operations of the company has been fluctuating over
the last three financial years FY12-FY14 primarily due to tender-
driven nature of business. The total operating income of the
company declined from INR31.59 crore in FY12 to INR10.27 crore in
FY13 as the company received exceptionally high value order
during FY12 resulting in higher one time income.
The profitability margins of the company have remained low over
the last three financial years FY12-FY14 on account of high
competition and low bargaining power of the company vis-Ö-vis
customers. Furthermore, the margins of the company has shown
erratic trend due to different margins in different type of
contract work. The PBILDT margin and PAT margin of the company
stood low at 5.30% and 2.98%, respectively, in FY15 as against
9.56% and 5.62%, respectively, in FY13.
The debt profile of the company comprised term loan and unsecured
loans from the directors and related parties as on March 31,
2014. The capital structure of the company has remained moderate
marked by overall gearing of 0.59x as on March 31, 2014, due to
low reliance on external borrowings.
The debt service coverage indicators of the company have remained
moderate over the last three financial years FY12-FY14 on account
of low reliance on external debt resulting in low financial
charges. The interest coverage and total debt to GCA of the
company stood at 2.76x and 6.18x, respectively, for FY14 as
against 4.72x and 3.35x, respectively, for FY13.
The debt service coverage indicators weakened for F1Y4 over FY13
due to decline in PBILDT though continued to remain moderate.
Elongated collection period
The collection period of the company has remained elongated
marked by average collection period of 88 days for FY14 as
against 78 days for FY13. The collection period is elongated as
the company has to extend high credit period to its customer due
to high competition in the market and low bargaining power with
customers. Furthermore, 10% of the contract value is held by
customers as retention money for one year results in debtors
outstanding for more than six months which stood at INR4.77
crore for FY15 as against INR3.00 crore for FY14. This resulted
in overall operating cycle of around 100 days the average
operating cycle of the company stood at 101 days for FY14 as
against 109 days for FY13.
Highly fragmented and competitive nature of industry
GSB operates in a highly fragmented and competitive interior
designing works industry marked by the presence of a large number
of players in the organized and unorganized sector. The industry
is characterized by low entry barriers due to low technological
inputs. Smaller companies in general are more vulnerable to
intense competition due to their limited pricing flexibility,
which constrains their profitability as compared with larger
companies who have better efficiencies and pricing power
considering their scale of operations with different harvesting
periods. The price of rice moves in tandem with the prices of
paddy.
Key Rating Strengths
Experienced promoters
The company is managed by Mr. Gopal Das Khandelwal and his son
Mr. Vikas Khandelwal. Mr. Gopal Das Khandelwal has an overall
experience of around four decades in the construction industry.
Before GSB, he was engaged in the similar business in his
individual capacity. He is supported by his son Mr. Vikas
Khandelwal who has an overall experience of close to one and the
half decades in the construction business. Before GSB, he was
engaged in the similar business in his individual capacity.
New Delhi-based GSB was incorporated in July 2009 and is engaged
in turnkey solutions for interior works such as furniture and
furnishing, flooring, false ceiling and wall finishing, civil and
plumbing work, installation of security systems and external
building work. It is currently being managed by Mr. Gopal Das
Khandelwal and his son, Mr. Vikas Khandelwal.
All the processes of the company are ISO 9001-20008 certified.
The company caters to the needs of various corporate houses
primarily in the private sector and receives orders through
tenders. The company operates on Pan India basis and procures the
raw material from the various dealers and traders in the domestic
market on order to order basis.
In FY14 (refers to the period April 1 to March 31), GSB has
achieved a total operating income (TOI) of INR11.25 crore with
PBILDT and profit after tax (PAT) of INR0.60 crore and INR0.34
crore, respectively, as against TOI of INR10.27 crore with
PBILDT and PAT of INR0.98 crore and INR0.58 crore, respectively,
in FY13. Furthermore, the company has achieved TOI of around
INR9.32 crore in FY15 (based on unaudited results).
GOLD SPIN: CRISIL Assigns B+ Rating to INR7.15MM Cash Loan
----------------------------------------------------------
CRISIL Ratings has revoked the suspension of its rating on the
long-term bank facilities of Gold Spin India Private Limited
(GSIPL) and assigned its 'CRISIL B+/Stable' rating to the
facilities. CRISIL had, on November 2, 2016, suspended the rating
as GSIPL had not provided the information required for a rating
review. The company has now shared the requisite information,
enabling CRISIL to assign rating to its facilities.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 7.15 CRISIL B+/Stable (Assigned;
Suspension Revoked)
Long Term Loan .48 CRISIL B+/Stable (Assigned;
Suspension Revoked)
Proposed Long Term 1.45 CRISIL B+/Stable (Assigned;
Bank Loan Facility Suspension Revoked)
The rating reflects GSIPL's modest scale of operations in the
highly fragmented polar blanket industry, geographical
concentration in its revenue, and susceptibility of profitability
to volatility in raw material prices. These weaknesses are
partially offset by above-average financial risk profile and
promoters' extensive experience in the polyester blanket
industry.
Key Rating Drivers & Detailed Description
Weakness
* Small scale of operations in the highly fragmented polar
blanket industry: GSIPL's small scale is reflected in expected
operating income of INR33-34 crore in fiscal 2017 against
INR46.27 crore in fiscal 2016. The operating income is
constrained by competition in a fragmented industry.
* Geographical concentration in revenue: GSIPL generates its
entire revenue through sales in Panipat, Haryana. Any downturn in
demand in Panipat will affect its business risk profile.
* Susceptibility of profitability to volatility in raw material
prices: The prices of key raw materials, such as polyester yarn,
are volatile as they are derivatives of petrochemicals.
Strengths
* Promoters' extensive experience in the polar blankets industry:
The promoters have experience of a decade in the textile industry
through group entities, and have gained a sound understanding of
market dynamics and have established relationships with customers
and suppliers.
* Above-average financial risk profile: The financial risk
profile is supported by comfortable interest coverage of 0.09
time and net cash accrual to total debt ratio of 0.16 time in
fiscal 2016. Gearing was high, at 2.4 times, as on March 31,
2016.
Outlook: Stable
CRISIL believes GSIPL will continue to benefit from its
promoters' extensive industry experience. The outlook may be
revised to 'Positive' if there is a significant increase in
revenue, leading to healthy cash accrual, while financial risk
profile remains stable. The outlook may be revised to 'Negative'
if cash accrual is low, or if working capital management weakens,
or if the company undertakes substantial, debt-funded capital
expenditure
GSIPL, incorporated in 2005 by Jain family, manufactures polar
fleece fabric used to make polar blankets. Its manufacturing
facility is in Panipat, and has capacity of 15 tonne per day.
GSIPL's profit after tax (PAT) was INR4.35 lakh on operating
income of INR46.27 crores for fiscal 2016, vis-a-vis INR10 lakh
and INR44.77 crores, respectively, for fiscal 2015.
GOPAL SHIVHARE: CARE Denotes Rating as D/Issuer Not Cooperating
---------------------------------------------------------------
CARE Ratings has been seeking information from Gopal Shivhare, to
monitor the rating vide e-mail communications/ letters dated
February 25, 2017, February 21, 2017, February 1, 2017, and
numerous phone calls. However, despite CARE's repeated requests,
the firm has not provided the requisite information for
monitoring the ratings. In the absence of minimum information
required for the purpose of rating, CARE is unable to express
opinion on the ratings. Furthermore, Gopal Shivhare has not paid
the surveillance fees for the rating exercise as agreed to in its
Rating Agreement. In line with the extant SEBI guidelines CARE's
rating on Gopal Shivhare's bank facilities will now be denoted as
CARE D; ISSUER NOT COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 5 CARE D; ISSUER NOT
COOPERATING
Long-term Bank 3 CARE D; ISSUER NOT
Facilities/Short- COOPERATING
term Bank
Facilities
Users of these ratings (including investors, lenders and the
public at large) are hence requested to exercise caution
while using the above ratings.
Detailed description of the key rating drivers
At the time of last rating on September 15, 2016, the following
were the rating strengths and weaknesses.
Key Rating Strengths
Rich experience of promoters in liquor trading business
GSH is part of the Shivhare Liquor Group which through its
various associate concerns has license for around 73 liquor shops
in various districts of Madhya Pradesh as on March 31, 2015.
Favorable demand outlook with steady increase in consumption of
liquor Indian Liquor industry is one of the growing industries
despite being subjected to high taxes and innumerable regulations
by government. In addition, changing consumer preference towards
premium varieties has resulted in improvement in sales mix of
industry. Hence, Indian liquor industry is envisaged to continue
the trend of steady growth supported by increasing demand led
volume growth.
Key Rating Weaknesses
Delays in servicing interest on working capital limits
Debt servicing of GSH is irregular as reflected by over-drawls in
its CC account. Liquidity position of the firm is stressed
due to high leverage on account of working capital intensive
operations.
Established in 2006, M/s Gopal Shivhare (GSH) is a sole
proprietorship firm which is into the business of retailing of
alcohol. GSH is part of Shivhare liquor group based in Madhya
Pradesh (MP). GSH holds retail liquor supplier license in MP and
undertakes retail trade of Indian made foreign liquor (IMFL),
beer, country liquor (CL), wine etc. The firm enters into open
tendering process every year to avail license for the retailing
of the liquor. Depending upon the allotment of shops during
tendering, the number of shops held by the firm varies every
year. The shops are allotted in MP by the state government
through a competitive bidding process, and for FY15 (refers to
the period April 1 to March 31) and FY16, the firm has received
license for three shops. Of these three shops, two are of IMFL
and one of CL. Shivhare Liquor group has other associate concern
namely M/s Ram Swaroop Shivhare, M/s Kamla Shivhare, M/s Laxmi
Narayan Shivhare & M/s Kalpna Shivhare which are engaged in
similar business activity.
GOURMET EMPIRE: CARE Denotes Rating as B+/Issuer Not Cooperating
----------------------------------------------------------------
CARE Ratings has been seeking information from Gourmet Empire
Private Limited, to monitor the rating(s) vide e-mail
communications/letters dated February 28, 2017 and numerous phone
calls. However, despite CARE's repeated requests, the company has
not provided the requisite information for monitoring the
ratings. In line with the extant SEBI guidelines, CARE has
reviewed the rating on the basis of the publicly available
information which however, in CARE's opinion is not sufficient to
arrive at a fair rating. The rating on Gourmet Empire Private
Limited bank facilities will now be denoted as CARE B+; ISSUER
NOT COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 6.76 CARE B+; ISSUER NOT
Facilities COOPERATING; Based on
best available information
The rating takes into account limited experience of promoters,
short track record and small scale of operations. The rating
is further constrained by leveraged capital structure and high
level of competition. The rating, however, derives strength
from moderate profitability margins and positive outlook of
bakery products.
Users of these ratings (including investors, lenders and the
public at large) are hence requested to exercise caution
while using the above rating(s).
Detailed description of the key rating drivers
At the time of last rating in May 28, 2015, the following were
the rating strengths and weaknesses:
Key Rating Strengths
Moderate profitability margins: The company had moderate
profitability margin reflected by PBILDT margin of more than 22%
for the last two financial years [FY14-FY15 (refers to the period
April 01 to March 31)] and PAT margin of 4.26% for FY15.
Positive outlook of bakery products: India is beginning to
develop a taste for western-style fast food. As a result, sales
at both western and local fast-food chains are growing steadily.
The increase in middle income segment coupled with an increasing
proportion of population living in urban areas is leading to an
increase in dining out as a lifestyle choice.
Key Rating Weaknesses
Limited experience of Promoters: Mrs. Manjeet Kaur, Mrs.
Harvinder Kaur and Mr. Surinder Singh are promoters and directors
of GEPL. Mrs. Manjeet Kaur, Mrs. Harvinder Kaur and Mr. Surinder
Singh look after overall operations of the company and have
limited experience of around two years in bakery products
industry through their association with GEPL. Short track record
and small scale of operations: The company has started its
business operations in August 2013 and FY15 was the first full
year of operations.
Leveraged capital structure: As on March 31, 2015, the total debt
of the company comprised of term loan of INR5.56 crore and
working capital bank borrowings of INR1.40 crore. GEPL has
leveraged capital structure marked by debt equity ratio and
overall gearing of 1.48x and 1.85x as on March 31, 2015. High
level of competition: The company faces tough competition from
well organised players like: Britania, Bakers and Harvest Gold
etc. which have better brand presence in the breads & buns
segment. Apart from the organized players, the company faces
challenge from various smaller players in the market.
Gourmet Empire Private Limited (GEPL) was incorporated in August
2013 by Mrs. Manjeet Kaur, Mrs. Harvinder Kaur and Mr. Surinder
Singh. Initially, the company was engaged in restaurant business
and later on in December 2014, they also ventured in to
manufacturing of bakery products such as breads, pastries, cakes,
chocolates, sandwiches, etc. The company markets its bakery
products under brand name "South Ampton Bakes". Besides this GEPL
is also running two restaurants under the name 'Garlic and Green'
in mall located in Chandigarh and nearby area and two coffee
kiosks in Apollo hospital and Fortis Hospital located in
Ludhiana. The manufacturing unit is located in Mohali and the
company sells its products to reputed wholesalers as Wal-mart
India, Metro- Zirakpur and West Side in Chandigarh, Punjab and
Haryana.
GULATI BROTHERS: CRISIL Assigns 'B' Rating to INR1.25MM Loan
------------------------------------------------------------
CRISIL Ratings has assigned the 'CRISIL B/Stable/CRISIL A4'
ratings on the bank loan facilities of Gulati Brothers (GB).
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Packing Credit 3.50 CRISIL A4 (Assigned)
Foreign Bill Purchase 1.25 CRISIL B/Stable (Assigned)
Overdraft 0.50 CRISIL A4 (Assigned)
The rating reflects weak liquidity, marked by large working
capital requirement, and high bank limit utilisation, and the
small scale of operations in an intensely competitive industry.
These weaknesses are partially offset by the long track record of
the partners, and their established relationships with customers.
Key Rating Drivers & Detailed Description
Weakness
* Small scale of operations with high revenue concentration in a
fragmented industry: Exposure to intense competition has
constrained the scale of operations, as reflected in revenue of
5.77 crore reported in fiscal 2016, despite the two-decade long
presence of the company in the current business.
* Weak financial risk profile: Financial risk profile is marked
by a low networth, high gearing and weak debt protection metrics.
Networth and gearing were around INR1.88 crore, and 3.65 times,
respectively, as on March 31, 2016. Debt protection metrics were
weak, as reflected in interest coverage of 1.8 times and net cash
accrual to total debt ratios of 0.05 time, expected as on March
31, 2017. Debt protection metrics may continue to be weak because
of low cash accrual and large working capital debt.
* Working capital-intensive operations, constraining liquidity:
Gross current assets were high (316 days as on March 31, 2016)
primarily driven by large debtors (121 days) and substantial
inventory (113 days). While customers are offered significant of
90-120 days, no credit is received from suppliers, because of
intense competition.
Strengths
* Long track record of partners and established relationships
with key customers: The partners have been in windows and door
fittings business for over two decades. The firm, which started
exports from 1999, has longstanding association, mainly with
customers in in the US and Europe.
Outlook: Stable
CRISIL believes GB will continue to benefit from the extensive
experience of its partners, and established relationships with
customers. The outlook may be revised to 'Positive' if the firm
reports an improvement in scale of operations, and the financial
risk profile. The outlook may be revised to 'Negative' in case of
a drop in revenue, or if a stretch in working capital cycle or
large debt-funded capex, weakens the financial risk profile.
Established in 1999 as a partnership firm by Mr Amarjeet Singh
and his family members, the firm manufactures and exports windows
and door fittings, which include hinges, door knobs, handles and
latches. The facility is located in New Delhi. The firm exports
to the US, Europe, New Zealand, Netherland and various other
countries.
For fiscal 2016, profit after tax (PAT) was INR0.20 crore on an
operating income of INR5.77 crore, against INR0.75 crore and
INR6.96 crore in the previous fiscal.
HARYANA RICE: CRISIL Reaffirms 'B' Rating on INR35MM Cash Loan
--------------------------------------------------------------
CRISIL Ratings has reaffirmed its 'CRISIL B/Stable' rating on the
long-term bank facility of Haryana Rice Mills (HRM).
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 35 CRISIL B/Stable (Reaffirmed)
The rating continues to reflect the firm's large working capital
requirement leading to weak financial risk profile, and modest
scale of operations. The rating also factors in vulnerability of
profitability to volatility in raw material prices, high
dependence on monsoon, and susceptibility to regulatory changes.
These weaknesses are partially offset by strong track record of
promoters in the basmati rice industry.
Key Rating Drivers & Detailed Description
Weaknesses
* Weak financial risk profile driven by large working capital
requirement: HRM's financial risk profile is constrained by weak
capital structure and debt coverage indicators, primarily on
account of large working capital debt and modest networth driven
by low accretion to reserves. Gearing was 22.2 times as on
March 31, 2016, and interest coverage ratio was 1.1 times for
fiscal 2016. Gross current assets were at 174 days as on
March 31, 2016.
* Modest scale of operations and vulnerability of operating
margin to volatility in raw material prices: With revenue of
INR85.11 crore in fiscal 2016, scale of operations remains modest
in the highly fragmented basmati rice industry. The operating
margin remains vulnerable to volatility in raw material prices.
* High dependence on monsoon and susceptibility to changes in
government policies: Cultivation of basmati requires a large
quantity of water, and though the rice-growing states have good
irrigation systems, they remain dependent on the monsoon.
Furthermore, the firm is also susceptible to changes in
government policies governing export of rice, including basmati
rice.
Strengths
* Partners' extensive experience in the rice industry: The
partners have experience of more than three decades in the rice
industry which has helped establish a strong procurement network
in various mandis in Haryana, and build relationships with
customers.
Outlook: Stable
CRISIL believes HRM's financial risk profile will remain weak
over the medium term because of substantial working capital debt.
The outlook may be revised to 'Positive' in case of sizeable cash
accrual generation or significant improvement in capital
structure due to capital infusion. The outlook may be revised to
'Negative' if capital structure weakens or if a steep decline in
rice realisations adversely affects profitability.
Set up in 1985 as a partnership firm by the Lal family of
Haryana, HRM mills and sorts basmati rice in Karnal (Haryana).
The firm had a book profit of INR0.03 crore on net sales of
INR85.11 crore in fiscal 2016, against a book profit of INR0.09
crore on net sales of INR78.83 crore in fiscal 2015.
JOSAN FOODS: CRISIL Reaffirms 'D' Rating on INR37MM Cash Loan
-------------------------------------------------------------
CRISIL Ratings has been consistently following up with Josan
Foods Private Limited (JFPL; part of the Josan group) for
obtaining information through letters and emails dated November
9, 2016, and December 14, 2016, among others, apart from
telephonic communication. However, the issuer has remained
non-cooperative.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 37 CRISIL D (Issuer Not
Cooperating; Rating
Reaffirmed)
Proposed Long Term .56 CRISIL D (Issuer Not
Bank Loan Facility Cooperating; Rating
Reaffirmed)
Term Loan 20 CRISIL D (Issuer Not
Cooperating; Rating
Reaffirmed)
Warehouse Receipts 10 CRISIL D (Issuer Not
Cooperating; Rating
Reaffirmed)
The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed
with the suffix 'ISSUER NOT COOPERATING'. These ratings lack a
forward looking component as it is arrived at without any
management interaction and is based on best available or limited
or dated information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of Josan Foods Private Limited.
This restricts CRISIL's ability to take a forward looking view on
the credit quality of the entity. CRISIL believes that the
information available for Josan Foods Private Limited is
consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL B Rating
category or lower.' Therefore, on account of inadequate
information and lack of management co-operation, CRISIL is
reaffirming the rating at 'CRISIL D'.
JFPL, set up in 2000 by Mr. Hukam Chand Josan and Mr. Sher Chand
Josan in Ferozepur (Punjab), mills and shells rice. GRM, set up
in 2010, mills rice. Currently, the firm is managed by its
partners, Mr. Sarvjeet Josan and Mr. Pushpinder Singh.The Josan
group has combined milling and sorting capacities of 14 tonnes
per hour (tph) and 10 tph, respectively.
JUPITER INTERNATIONAL: CARE Reaffirms B Rating on INR91.59cr Loan
-----------------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
of Jupiter International Ltd (JIL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 91.59 CARE B; Stable Reaffirmed
Long-term/Short
Term Bank Facilities 12.87 CARE B; Stable/ CARE A4
Reaffirmed
Short-term Bank
Facilities 2.08 CARE A4 Assigned
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of JIL continue to be
constrained by the high overall gearing ratio, stretched
operating cycle and working capital intensity leading to stressed
liquidity position, exposure towards foreign exchange fluctuation
risk, intense competition and significant exposure in subsidiary
company. The aforesaid ratings also take into account the
improvement in financial performance in FY16 (refers to the
period April 1 to March 31), experience of the promoters,
established brand in the domestic market and foray into solar
cell manufacturing. Improvement in profitability and capital
structure and effective management of working capital are the key
rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
High overall gearing ratio: The debt-equity ratio improved to
1.20x as on Mar.31, 2016 vis-a-vis 1.47x as on Mar.31, 2015 while
the overall gearing ratio improved to 3.37x as on Mar.31, 2016
vis-a-vis 3.91x as on Mar.31, 2015. However, it continued to
remain high. The improvement was due to significant improvement
in PAT due to deferred tax asset of INR9.06 crore. Stretched
operating cycle: The operating cycle of the company has been
continuously increasing over the last three financials and stood
at 225 days in FY16 vis-a-vis 178 days in FY15. The fund based
limits were fully utilised during the last 12 months ended
December 31, 2016 and the liquidity position is stressed due to
high working capital requirement. Further, the working capital
requirement increased due to commissioning of the solar cell
manufacturing unit in November 2016.
Significant exposure to group companies: JIL maintained exposure
in its subsidiary Jupiter Solar Power Ltd. (JSPL) amounting to
INR59.39 crore in the form of investments as on Mar.31, 2016. In
addition, JIL has extended corporate guarantee of INR154.48 crore
as on Mar.31, 2016 vis-a-vis INR145.41 crore as on Mar.31, 2015,
for loans availed by JSPL. Considering the corporate guarantee,
the overall gearing of JIL was 7.04x as on March 31, 2016. (8.31x
as on Mar 31 2015).
Exposure towards foreign exchange fluctuation risk: JIL imports
majority of the trading materials from Chinese or Taiwan
market to sell in the domestic market. Hence, JIL is a net
importer and has dollar payable. The company partially hedges
its forex exposure depending on market conditions and incurred
forex loss of INR0.47 crore in FY16 vis-Ö-vis INR0.03 crore
in FY15.
Intense competition: The IT distribution industry remains highly
competitive due to large number of players operating in the
business, lower product differentiation and inherent risk of
technological obsolescence which results in declining
profitability as companies are forced to sell their products at
lower prices to avoid inventory pile up and remain operational.
Key Rating Strengths
Experienced promoters: JIL is a family managed business. The main
promoter, Mr. Alok Garodia (MD) has more than 20 years of
experience in both manufacturing and trading of computer hardware
related products. The promoter also has experience in
manufacturing solar cells. Improvement in financial performance
in FY16: Net sales in FY16 increased marginally by about 2% y-o-y
on account of higher trading sales. PBILDT margin increased
significantly from 9.37% in FY15 to 14.51% in FY16 on account of
reduction in operating expenses including employee cost. Interest
coverage improved to 1.27x in FY16 as against 0.77x in FY15 due
to improved PBILDT. However, the high level of capital charge led
to significantly low level of PBT at INR0.09 crore in FY16.
Established in-house brand in domestic market with large
distribution network: JIL is engaged in manufacture of CD-Rs &
DVD-Rs, which it sells in the domestic market under the in-house
brand 'Frontech'. JIL has an extensive distribution network.
JIL was incorporated in 1978 by its founder-promoter Mr. Raj
Kumar Garodia of Kolkata. JIL is engaged in trading of computer
peripherals and other products (solar UPS, solar battery, Tablets
and Toner cartridges) in the domestic market under the brand name
'Frontech'. The company is also engaged in manufacturing of CD-Rs
and DVD-Rs. Sales from traded goods constituted 89% of gross
sales in FY16.JIL had applied to its bankers for debt
restructuring in October 2014. The restructuring proposal was
approved by the bankers in December 2014, with cut-off date as
September 1, 2014. The company has set up a solar cell
manufacturing plant of 260 MW at its existing manufacturing
facility in Baddi, Himachal Pradesh which commenced operation in
November 2016.
During FY16, JIL reported PAT of INR9.14 crore on total operating
income of INR133 crore against loss of INR3.96 crore on total
operating income of INR130.32 crore in FY15. During 9MFY17, total
operating income was INR109.22 crore.
KALPANA SHIVHARE: CARE Denotes Rating B+/Issuer Not Cooperating
---------------------------------------------------------------
CARE Ratings has been seeking information from Kalpana Shivhare,
to monitor the rating vide e-mail communications/ letters dated
February 25, 2017, February 21, 2017, February 1, 2017, and
numerous phone calls. However, despite CARE's repeated requests,
the firm has not provided the requisite information for
monitoring the ratings. In the absence of minimum information
required for the purpose of rating, CARE is unable to express
opinion on the ratings. Furthermore, Kalpana Shivhare has not
paid the surveillance fees for the rating exercise as agreed to
in its Rating Agreement. In line with the extant SEBI guidelines
CARE's rating on Kalpana Shivhare's bank facilities will now be
denoted as CARE B+/CARE A4; ISSUER NOT COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 3.50 CARE B+; ISSUER NOT
Facilities COOPERATING
Long-term Bank 5.00 CARE B+/CARE A4; ISSUER
Facilities/Short- NOT COOPERATING
term Bank Facilities
Users of these ratings (including investors, lenders and the
public at large) are hence requested to exercise caution
while using the above ratings.
Detailed description of the key rating drivers
At the time of last rating on March 4, 2016, the following were
the rating strengths and weaknesses.
Key Rating Strengths
Experienced Promoters
KSH has been in the liquor business from the last 10 years. At
present KSH have 10 licences in different district of Madhya
Pradesh for retailing of liquor. KSH is part of the Shivhare
Liquor Group which through its various associate concerns has
licence for around 73 liquor shops in various districts of Madhya
Pradesh as on March 31, 2015.
Favourable demand outlook with steady increase in consumption of
alcohol
Indian Liquor industry is one of the growing industries despite
being subjected to high taxes and innumerable regulations by
government. In addition, changing consumer preference towards
premium varieties has resulted in improvement in sales mix of
industry. Hence, Indian liquor industry is envisaged to continue
the trend of steady growth supported by increasing demand led
volume growth.
Key Rating Weaknesses
High business risk due to regulated nature of liquor industry The
Indian liquor industry is highly regulated. The industry is
witnessing high taxes and numerous regulations from government
which impact the pricing flexibility of the industry. The state
governments are also given liberty to enact the bye-laws for
liquor industry on their own hence any significant policy changes
adversely affect the whole industry.
Incorporated in 1990, M/s Kalpana Shivhare (KSH) is a sole
proprietorship firm which is into the business of retailing of
alcohol. The firm also own and operates petrol pump under the
name M/s Patel & Sons in Madhya Pradesh. KSH is part of Shivhare
Liquor Group which is based out of Madhya Pradesh. KSH undertakes
retail trade of Indian made foreign liquor (IMFL), country liquor
(CL), wine etc. and holds retail license for liquor shops in the
state of MP. KSH has been allotted retail liquor license for 10
shops in different districts of Madhya Pradesh in FY15 (refers to
the period April 1 to March 31) and FY16. The firm enters into
open tendering process every year to avail license for the
retailing of the liquor. Depending upon the allotment of shops
during tendering, the number of shops held by the company varies
every year. Shivhare Liquor group has other associate concern
namely M/s Ram Swaroop Shivhare, M/s Gopal Shivhare, M/s Kamla
Shivhare & M/s Laxminarayan Shivhare which are also engaged in
similar business activity.
KAMAKSHI LAMIPACK: CRISIL Reaffirms 'D' Rating on INR7.7MM Loan
---------------------------------------------------------------
CRISIL Ratings has been consistently following up with Kamakshi
Lamipack Private Limited (KLPL) for obtaining information through
letters and emails dated August 2, 2016, November 10, 2016, and
March 16, 2017 among others, apart from telephonic communication.
However, the issuer has remained non-cooperative.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 5 CRISIL D (Issuer Not
Cooperating; Rating
Reaffirmed)
Letter of Credit 2.5 CRISIL D (Issuer Not
Cooperating; Rating
Reaffirmed)
Long Term Loan 7.7 CRISIL D (Issuer Not
Cooperating; Rating
Reaffirmed)
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed
with the suffix 'ISSUER NOT COOPERATING'. These ratings lack a
forward looking component as it is arrived at without any
management interaction and is based on best available or limited
or dated information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of Kamakshi Lamipack Private
Limited. This restricts CRISIL's ability to take a forward
looking view on the credit quality of the entity. CRISIL believes
that the information available for Kamakshi Lamipack Private
Limited is consistent with 'Scenario 1' outlined in the
'Framework for Assessing Consistency of Information with CRISIL B
Rating category or lower.' Therefore, on account of inadequate
information and lack of management cooperation, CRISIL is
reaffirming the rating at CRISIL D/CRISIL D.
KLPL, established in 1982, is engaged in the manufacture of
flexible packaging materials. The company's day-to-day operations
are managed by Mr. A L Chidambaram.
KAMLA SHIVHARE: CARE Denotes Rating as D/Issuer Not Cooperating
---------------------------------------------------------------
CARE has been seeking information from Kamla Shivhare, to monitor
the rating vide e-mail communications/letters dated February 25,
2017, February 21, 2017, February 1, 2017, and numerous phone
calls. However, despite CARE's repeated requests, the firm has
not provided the requisite information for monitoring the
ratings. In the absence of minimum information required for the
purpose of rating, CARE is unable to express opinion on the
ratings. Furthermore, Kamla Shivhare has not paid the
surveillance fees for the rating exercise as agreed to in its
Rating Agreement. In line with the extant SEBI guidelines CARE's
rating on Kamla Shivhare's bank facilities will now be denoted as
CARE D; ISSUER NOT COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 4.7 CARE D; ISSUER NOT
COOPERATING
Long-term Bank 3.0 CARE D; ISSUER NOT
Facilities/Short- COOPERATING
term Bank
Facilities
Users of these ratings (including investors, lenders and the
public at large) are hence requested to exercise caution while
using the above ratings.
Detailed Description of the Key Rating Drivers
At the time of last rating on September 15, 2016, the following
were the rating strengths and weaknesses.
Key Rating Strengths
* Rich experience of promoters in liquor trading business: KSH is
part of the Shivhare Liquor Group which through its various
associate concerns has license for around 73 liquor shops in
various districts of Madhya Pradesh as on March 31, 2015.
* Favorable demand outlook with steady increase in consumption of
liquor: Indian Liquor industry is one of the growing industries
despite being subjected to high taxes and innumerable regulations
by government. In addition, changing consumer preference towards
premium varieties has resulted in improvement in sales mix of
industry. Hence, Indian liquor industry is envisaged to continue
the trend of steady growth supported by increasing demand led
volume growth.
Key Rating Weaknesses
* Delays in servicing interest on working capital limits: Debt
servicing of KSH is irregular as reflected by over-drawls in its
CC account. Liquidity position of the firm is stressed due
to high leverage on account of working capital intensive
operations.
Established in 1995, M/s Kamla Shivhare, is a sole proprietorship
firm which is into the business of retailing of alcohol. KSH is
part of Shivhare liquor group based in Madhya Pradesh (MP). KSH
holds retail liquor supplier license in MP and undertakes retail
trade of Indian made foreign liquor (IMFL), beer, country liquor
(CL), wine etc. The firm enters into open tendering process every
year to avail license for the retailing of the liquor. Depending
upon the allotment of shops during tendering, the number of shops
held by the firm varies every year. The shops are allotted in MP
by the state government through a competitive bidding process and
for FY15 (refers to the period April 1 to March 31) and FY16, the
firm has received license for six shops. Of these six shops, two
are of IMFL and four of CL. Shivhare Liquor group has other
associate concern namely M/s Ram Swaroop Shivhare, M/s Gopal
Shivhare, M/s Laxmi Narayan Shivhare & M/s Kalpna Shivhare which
are engaged in similar business activity.
KHWAHISH MARKETING: CARE Rating Denotes B+/Issuer Not Cooperating
-----------------------------------------------------------------
CARE Ratings has been seeking information from Khwahish Marketing
Private Limited to monitor the rating(s) vide e-mail
communications/ letters dated February 22, 2017, and numerous
phone calls. However, despite CARE's repeated requests, the
company has not provided the requisite information for monitoring
the ratings. In the absence of minimum information required for
the purpose of rating, CARE is unable to express opinion on the
rating. Furthermore, Pan Intellecom Limited has not paid the
surveillance fees for the rating exercise as agreed to in its
rating agreement. In line with the SEBI guidelines, CARE's
Khwahish Marketing Private Limited, will now be denoted as CARE
B+ /CARE A4; ISSUER NOT COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 7.5 CARE B+; ISSUER NOT
COOPERATING
Short-term Bank 8.5 CARE A; ISSUER NOT
Facilities COOPERATING
Users of these ratings (including investors, lenders and the
public at large) are hence requested to exercise caution while
using the above rating(s).
Detailed description of the key rating drivers
At the time of last ratings on September 9, 2015, the following
were the rating strengths and weaknesses.
Key Rating Weaknesses
* Small scale of operations with low net worth base: Despite
being operational for more than a decade, the scale of operations
has remained small marked by a total operating income and gross
cash accruals Furthermore, the company's net worth base was
relatively small. The small scale limits the company's financial
flexibility in times of stress.
* Weak financial risk profile: The company's scale of operations
has been growing on y-o-y basis. The increase in operating income
was on account of increase in quantity sold.
The profitability margins of the company have remained on the
lower side owing to the trading nature of the business and
intense market competition given the highly fragmented nature of
the industry. Moreover, owing to low PBILDT coupled with interest
cost burden, the PAT margin also stood very low.
The capital structure of the company stood leveraged during past
three financial years, ie, FY13 (refers to the period April 1 to
March 31) -FY15. Although the overall gearing ratio improved on
account of increase in networth owing to infusion of funds by the
directors in form of equity (share application money) but the
same continues to remain leveraged. Debt coverage indicators
marked by interest coverage and total debt to GCA stood weak on
account of low PBILDT margin resulting into low GCA level coupled
with high total debt.
* Highly fragmented nature of industry characterized by intense
competition: The spectrum of the steel industry in which the
company operates is highly fragmented and competitive marked by
the presence of numerous players in India. Hence, the players in
the industry do not have any pricing power and are exposed to
competition induced pressures on profitability. This apart, its
product being intermediary steel products is subjected to the
risks associated with the industry like cyclicality and price
volatility.
Fortunes linked to the steel industry, which is cyclical in
nature Prospects of steel industry are strongly co-related to
economic cycles. Demand for steel products is sensitive to trends
of particular industries such as automotive, construction,
infrastructure, etc, which are the key consumers of steel
products. These key user industries in turn depend on various
macroeconomic factors, such as consumer confidence, employment
rates, interest rates and inflation rates, etc, in the economies
in which they sell their products. When downturns occur in these
economies or sectors, steel industry may witness decline in
demand, which may lead to decrease in steel prices putting
pressure on the company.
KMP is currently being managed by Mr. Prashant Sharma; the
promoter of KMP. He is a graduate by qualification and has around
a decade of experience in trading of iron and steel product
through his association with KMP. Long experience aids in
establishing relationship with suppliers and customers.
Moderate operating cycle
KMP has moderate operating cycle. The company maintains inventory
of traded goods to meet the demands of its customers. The company
receives credit period of around 45-60 days from its suppliers
and owing to high competition the company provides credit period
of around 1-2 months to its customers.
KMP was incorporated in 2004 and is currently being managed by
Mr. Prashant Sharma. The company is engaged in trading of iron
and steel products such as hot rolled coils. The company procures
the product from manufacturers located in Delhi and nearby
regions. The company sells its products through commission agents
as well as directly to traders located in Delhi and nearby
regions.
Furthermore, the company has achived the total operating income
of INR51.83 crore and PAT of INR0.08 crore in FY15 as against
INR44.87 crore and INR0.05 crore in FY14.
LAXMI MEGHAN: CRISIL Reaffirms B+ Rating on INR0.25MM Loan
----------------------------------------------------------
CRISIL Ratings has been consistently following up with Laxmi
Meghan Speciality Hospital (LMSH) for obtaining information
through letters and emails dated November 11, 2016, December 14,
2016, and March 16, 2017 among others, apart from telephonic
communication. However, the issuer has remained non cooperative.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Overdraft .25 CRISIL B+/Stable (Issuer
Not Cooperating; Rating
Reaffirmed)
The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed
with the suffix 'ISSUER NOT COOPERATING'. These ratings lack a
forward looking component as it is arrived at without any
management interaction and is based on best available or limited
or dated information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of Laxmi Meghan Speciality
Hospital. This restricts CRISIL's ability to take a forward
looking view on the credit quality of the entity. CRISIL believes
that the information available for Laxmi Meghan Speciality
Hospital is consistent with 'Scenario 2' outlined in the
'Framework for Assessing Consistency of Information with Crisil
BB Rating category or lower.' Therefore, on account of inadequate
information and lack of management cooperation, CRISIL is
reaffirming the rating to CRISIL B+/Stable.
Set up in 1994, Kerala based LMSH operates a hospital in
Kanhangad with 80 beds; SCH also operates a 80 bed hospital in
Kanhangad. The day-to-day operations of the group are managed by
the partners Dr. M V Sasidharan his wife, Dr. C M Sathidevi and
his daughter, Dr. Sheetal.
LAXMI NARAYAN: CARE Denotes Rating as C/Issuer Not Cooperating
--------------------------------------------------------------
CARE Ratings has been seeking information from Laxmi Narayan
Shivhare to monitor the rating vide e-mail communications/
letters dated February 25, 2017, February 21, 2017, February 1,
2017, and numerous phone calls. However, despite CARE's repeated
requests, the firm has not provided the requisite information for
monitoring the ratings. In the absence of minimum information
required for the purpose of rating, CARE is unable to express
opinion on the ratings. Furthermore, Laxmi Narayan Shivhare has
not paid the surveillance fees for the rating exercise as agreed
to in its Rating Agreement. In line with the extant SEBI
guidelines CARE's rating on Laxmi Narayan Shivhare's bank
facilities will now be denoted as CARE C/CARE A4; ISSUER NOT
COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 7 CARE C; ISSUER NOT
COOPERATING
Long-term Bank 3.0 CARE C/CARE A; ISSUER
Facilities/Short- NOT COOPERATING
term Bank
Facilities
Users of these ratings (including investors, lenders and the
public at large) are hence requested to exercise caution
while using the above ratings.
Detailed description of the key rating drivers
At the time of last rating on March 4, 2016, the following were
the rating strengths and weaknesses.
Key Rating Strengths
* Experienced Promoters: LSH is part of the Shivhare Liquor Group
which through its various associate concerns has licence for
around 73 liquor shops in various districts of Madhya Pradesh as
on March 31, 2015.
* Favourable demand outlook with steady increase in consumption
of alcohol: Indian Liquor industry is one of the growing
industries despite being subjected to high taxes and innumerable
regulations by government. In addition, changing consumer
preference towards premium varieties has resulted in improvement
in sales mix of industry. Hence, Indian liquor industry is
envisaged to continue the trend of steady growth supported by
increasing demand led volume growth.
Key Rating Weaknesses
* High business risk due to regulated nature of liquor industry:
The Indian liquor industry is highly regulated. The industry is
witnessing high taxes and numerous regulations from government
which impact the pricing flexibility of the industry. The state
governments are also given liberty to enact the by-laws for
liquor industry on their own hence any significant policy changes
adversely affect the whole industry.
Established in 1990, M/s Laxmi Narayan Shivhare (LNSH) is a sole
proprietorship firm which is into the business of retailing of
alcohol. The firm also operates a warehouse named M/s Maa Kaila
Devi Warehouse. LNSH is part of Shivhare liquor group based in
Madhya Pradesh (MP). LNSH holds retail liquor supplier license in
MP and undertakes retail trade of Indian made foreign liquor
(IMFL), beer, country liquor (CL), wine, etc. The firm enters
into open tendering process every year to avail license for the
retailing of the liquor. Depending upon the allotment of shops
during tendering, the number of shops held by the firm varies
every year. The shops are allotted in MP by the state government
through a competitive bidding process and for FY15 (refers to the
period April 1 to March 31) and FY16, the firm has received
license for thirty six shops. Of these 36 shops, nine are of IMFL
and 25 of CL. Shivhare Liquor group has other associate concern
namely M/s Ram Swaroop Shivhare, M/s Gopal Shivhare, M/s Laxmi
Narayan Shivhare & M/s Kalpna Shivhare which are engaged in
similar business activity.
MALANKARA SOCIAL: CRISIL Reaffirms B- Rating on INR5MM Loan
-----------------------------------------------------------
CRISIL Ratings has been consistently following up with Malankara
Social Service Society (MSSS) for obtaining information through
letters and emails dated November 11, 2016, December 14, 2016,
and March 16, 2017 among others, apart from telephonic
communication. However, the issuer has remained non-cooperative.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Proposed Term Loan 5 CRISIL B-/Stable (Issuer
Not Cooperating; Rating
Reaffirmed)
The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed
with the suffix 'ISSUER NOT COOPERATING'. These ratings lack a
forward looking component as it is arrived at without any
management interaction and is based on best available or limited
or dated information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of Malankara Social Service
Society. This restricts CRISIL's ability to take a forward
looking view on the credit quality of the entity. CRISIL believes
that the information available for Malankara Social Service
Society is consistent with 'Scenario 1' outlined in the
'Framework for Assessing Consistency of Information with Crisil B
Rating category or lower.' Therefore, on account of inadequate
information and lack of management co-operation, CRISIL is
reaffirming the rating at 'CRISIL B-/Stable'.
MSSS, the social work organ of the Major Arch Diocese of
Thiruvananthapuram, was constituted in 1961 under the Travancore-
Cochin Literary Scientific and Charitable Societies Act XII of
1955. It is a social service society committed to improving the
quality of life and well-being of the under privileged.MSSS, the
social work organ of the Major Arch Diocese of
Thiruvananthapuram, was constituted in 1961 under the Travancore-
Cochin Literary Scientific and Charitable Societies Act XII of
1955. It is a social service society committed to improving the
quality of life and well-being of the under privileged.
MARUTI DEVELOPERS: CRISIL Lowers Rating on INR8MM Term Loan to D
----------------------------------------------------------------
CRISIL Ratings has downgraded its rating on the bank facility of
Maruti Developers (MD) to 'CRISIL D' from 'CRISIL B+/Stable'
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Term Loan 8 CRISIL D (Downgraded from
'CRISIL B+/Stable')
The downgrade reflects delays in servicing interest payment of
term loan due to stretched liquidity. The firm's modest cash
accrual, due to lower demand in real estate sector further
impacted by demonetization and debt servicing constrained
liquidity.
Key Rating Drivers & Detailed Description
Weakness
* Exposure to risks related to execution of projects, and
geographic concentration in revenue: Project is at early stage
of implementation. Adequate incremental bookings and timely
receipt of customer advances remain critical. Further any
slowdown in the real estate sector could adversely affect the
execution and salability of project. Most of the projects are in
Ahmedabad, thus geographic concentration exposes the firm to
regional factors.
* Weak financial risk profile: Financial risk profile remains
weak due to low networth hand higher dependence on external
funding for project execution requirements.
Strengths
* Extensive experience of proprietor: The proprietor has decade-
long experience in the industry. The firm has under taken various
economic housing projects in Ahmedabad.
Established in 2001, MD constructs residential real estate
projects in Ahmedabad (Gujarat). The proprietor of the firm is
MrAkshay Thakkar,who is supported by his father MrNiranjan
Thakkar.
In fiscal 2016, net profit was INR0.13 crore on operating income
of INR5.48 crore, against net profit of INR0.15 crore on
operating income of INR2.48 crore in fiscal 2015.
MOHAN ROCKY: CRISIL Reaffirms B- Rating on INR9MM Loan
------------------------------------------------------
CRISIL Ratings has been consistently following up with Mohan
Rocky Springwater Breweries Limited (MRSBL) for obtaining
information through letters and emails dated November 11, 2016,
December 14, 2016, and March 16, 2017 among others, apart from
telephonic communication. However, the issuer has remained non
cooperative.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Overdraft 9 CRISIL B-/Stable (Issuer
Not Cooperating; Rating
Reaffirmed)
The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed
with the suffix 'ISSUER NOT COOPERATING'. These ratings lack a
forward looking component as it is arrived at without any
management interaction and is based on best available or limited
or dated information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of Mohan Rocky Springwater
Breweries Limited. This restricts CRISIL's ability to take a
forward looking view on the credit quality of the entity. CRISIL
believes that the information available for Mohan Rocky
Springwater Breweries Limited consistent with 'Scenario 1'
outlined in the 'Framework for Assessing Consistency of
Information with Crisil B Rating category or lower.' Therefore,
on account of inadequate information and lack of management co-
operation, CRISIL is reaffirming the rating at 'CRISIL B-
/Stable'.
MRSBL was incorporated in 1970 as a closely held public company
and is part of the Mohan Meakin group which is engaged in the
liquor and food products business. MRSBL manufactures beer and
Indian-made foreign liquor (IMFL). Its day-to-day operations are
handled by Mr. Vinay Mohan. The company has a manufacturing
facility in Khopoli (Maharashtra).
NIRMAN ENGINEERS: CARE Reaffirms B+ Rating on INR3.0cr Loan
-----------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Nirman Engineers and Contractors (NEC), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 3.00 CARE B+; Stable Reaffirmed
Short-term Bank
Facilities 10.00 CARE A4 Reaffirmed
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of NEC continue to be
constrained by small scale of operations, short-term revenue
visibility in order book with high client concentration risk,
working capital intensive nature of operations, intensely
competitive civil construction segment and constitution being a
partnership firm with risks of continuity of business, withdrawal
of capital and limited resources of partners. However, the
ratings continue to derive benefits from experienced partners,
comfortable capital structure and debt coverage indicators and
satisfactory profitability margins. The ratings also factor in
the growth in the total operating income albeit decline in
profitability margins in FY16 (refers to the period April 01 to
March 31). Going forward, the firm's ability to increase scale of
operations by executing the work orders in timely manner, bag new
work orders with reduction geographical concentration risk,
maintain profitability margins amidst high competition and
effectively manage working capital requirements would be the key
rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
* Small scale of operations: The scale of operations of the firm
remained small marked by total operating income (TOI) of INR20.41
crore in FY16. Furthermore, the net worth of the company is low
at INR5.77 crore as on March 31, 2016, as compared with other
peers in the industry.
* Short-term revenue visibility in order book with high client
concentration risk: The firm has a small order book size to the
tune of INR1.11 crore to be executed by December 12, 2017,
reflecting shortterm revenue visibility. However, the firm has
submitted tenders to various government departments and is likely
to receive work orders. The current work orders are
geographically concentrated and relate to road construction works
for Public Works Department (PWD), Tumkur Division (Karnataka).
Furthermore, the firm's income is predominately derived from
contracts from the government of Karnataka (mainly PWD) exposing
it to substantial client concentration risk. The ability of the
firm to diversify its revenue base would help reduce the risk of
client concentration at present.
* Working capital intensive nature of operations: The operations
of the firm are working capital intensive in nature. The firm
receives the payment from its customers within 30-45 days.
However, the firm makes the payment to its suppliers within 90-
120 days and sometimes avails the extension in the credit period
due to long-term relationship. The average creditor days remained
high at 243 in FY16.
* Intensely competitive civil construction segment: The firm is
engaged in construction business which is highly fragmented
industry due to presence of large number of organized and
unorganized players in the industry the firm faces huge
competition.
* Constitution being a partnership firm: The partners typically
make all the decisions and run the entire business operation. If
they become ill or disabled, there may be nobody else who can
step in and keep the business going. Running a business on two
hands can also pose a risk due to heavy burden. Constitution as a
partnership has the inherent risk of possibility of withdrawal of
the capital at the time of personal contingency, which can
adversely affect its capital structure.
Key Rating Strengths
* Experienced partners: NEC has been in the civil construction
industry for over 20 years and has established a reasonable track
record of operations with its ability to bag repeat orders from
its clientele and complete the projects in a timely manner. Mr.
B.Kishore Kumar Hegde; (Graduate) handles the overall operations.
He has been in this field for more than 20 years and is well
acquainted to carry out the business. Being in the industry for
considerable period of time, the promoters were able to establish
long term relationship with Governments departments in Karnataka
region, which has helped in developing his business.
* Growth in total operating income albeit decline in
profitability margins: The total operating income of NEC grew by
80.52% from INR11.30 crore in FY15 to INR20.41 crore in FY16 on
account of year on year increase in the execution of civil
construction orders received from government departments.
However, the PBILDT margin of the entity declined by 381 bps from
13.77% in FY15 to 9.96% in FY16 due to increase in sub contract
expenses coupled with increase in material cost and labour cost.
However, the PAT margin of the firm improved by 48 bps from 4.14%
in FY15 to 4.62% in FY16 due to increase in PBILDT earned.
Comfortable capital structure and debt coverage indicators NEC's
capital structure is comfortable with minimal debt on its balance
sheet. The debt equity ratio of the firm has been improving y-o-y
and remained below unity during review period. The overall
gearing ratio of the firm has also been improving y-o-y from
0.65x as on March 31, 2014, to 0.49x as on March 31, 2016, due to
repayment of loans coupled with increase in tangible networth.
While the operations are working capital intensive, the firm has
traditionally relied more on equity to fund the same.
The debt coverage indicators of the firm remained at moderate
levels marked by PBILDT interest coverage ratio which decreased
from 2.54x in FY15 to 2.48x in FY16 due to increase in interest
cost. The total debt /GCA is improved from 4.72x in FY15 to 2.33x
in FY16 due to decrease in debt level coupled with increase in
tangible networth.
NEC is a partnership firm based out of Bangalore, Karnataka, and
is a Class I government civil contractor engaged in construction
of roads, canals since 1993. The firm receives government
contracts on tender basis which are typically executable over the
span of 12-18 months. The outstanding order book of the firm is
INR1.11 crore as on January 31, 2017.
In FY16, NEC reported a Profit after Tax (PAT) of INR0.95 crore
on a total operating income of INR20.41 crore, as against a PAT
and TOI of INR0.47 crore and INR11.31 crore, respectively, in
FY15.
P.N. GAWANDE: CARE Assigns 'B' Rating to INR8cr LT Loan
-------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of P.N.
Gawande Ginning Pressing and Oil Mill Private Limited (PNGL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 8 CARE B; Stable Assigned
Detailed Rationale & Key Rating Drivers
The rating assigned to P.N. Gawande Ginning Pressing and Oil Mill
Private Limited (PNGL) is constrained by nascent stage of
operations in highly competitive and fragmented industry with
high working capital intensity, project execution risk and
susceptibility to fluctuation in the raw material price.
Furthermore, the rating is also constrained on account of
susceptibility to adverse changes in government policies related
to prices and export of cotton. However, the rating derives
strength from experience of promoters and location advantage
emanating from proximity to raw material source.
Going forward, the ability of the company to scale up the
operations as envisaged and timely complete the project while
efficiently managing its working capital requirements are the key
rating sensitivity.
Detailed description of the key rating drivers
Key Rating Strengths
* Experienced promoters: PNGL is promoted by Mr. Shubash P.
Gawande (aged 30 years) having an experience of more than three
decades in agro industry through his association with Govt. of
Maharashtra, Agriculture Department. He looks after the overall
management of the company with adequate support from other two
directors Mrs Kiran G. Gawande and Mrs Saroj Thakare and a team
of experienced professionals to support the growth of operations
of the company. Being in the industry for more than three decades
will help the promoter to gain adequate acumen about the business
which will aid in smooth operations of PNGL.
* Locational advantage emanating from proximity to raw material:
The manufacturing facility of the company is located at A/P-
Bazargaon, Dist: Nagpur. Maharashtra produces around 21% of total
cotton production of India. Out of the total production of
Maharashtra, 65% is contributed by Vidarbha region. Hence, raw
material will be available in adequate quantity. Furthermore, the
presence of PNGL in cotton-producing region will fetch a location
advantage of lower logistics expenditure. Moreover, there is
robust demand of cotton bales and cotton seeds in the region due
to presence of spinning mills in the region.
Key Rating Weaknesses
* Nascent stage of operations and project implementation risk:
The company has recently commenced its ginning and pressing
division in January 5, 2017, at is plant located in Bazargaon,
Nagpur. The small size restricts the financial flexibility of the
company in times of stress and it suffers on account of lack of
economies of scale. Furthermore, the company is in the process of
setting up its oil extraction unit at Bazargaon, Nagpur. The
total cost of the project is estimated at INR1.21 crore which is
proposed to be funded by term loan from bank of INR0.44 crore and
balance through promoters' contribution. The financial closure
for the project is already achieved. The commercial production is
expected to commence from July 2017.
* Risk associated with seasonality and fragmented nature of
industry: Operation of cotton business is highly seasonal in
nature, as the sowing season is from March to July and the
harvesting season is spread from November to February. Hence, the
working capital utilization will remain high in the peak season
i.e. November to May. Furthermore, the cotton industry is highly
fragmented with large number (approximately 80%) of players
operating in the unorganized sector.
PNGL will face stiff competition from other players operating in
the same industry in the Nagpur area, which will further result
in low bargaining power of PNGL against its customers.
* Susceptibility to government policies related to price and
export of cotton: The price of raw cotton in India is regulated
through function of MSP by the government. Furthermore, the price
of raw cotton is highly volatile in nature and depends upon
factors like area under production, yield for the year,
international demand-supply scenario, export quota decided by
government and inventory carry forward from previous year. As and
when cotton prices touches the MSP, Cotton Corporation of India,
as a Nodal Agency of Government of India, resorts to immediate
market intervention and makes purchase of cotton at MSP without
any quantitative limits to check price stabilization and prevent
distress sales by the farmers. Moreover, exports of cotton are
also regulated by government through quota systems to suffice
domestic demand for cotton. Hence, any adverse change in
government policy i.e. higher quota for any particular year, ban
on the cotton or cotton yarn export may negatively impact the
prices of raw cotton in domestic market and could result in lower
realizations and profit for PNGL.
P. N. Gawande Ginning Pressing and Oil Mill Private Limited
(PNGL) was incorporated as a private limited company in the year
2016. The company has recently commenced its ginning and pressing
division in January 5, 2017, at is plant located in Bazargaon,
Nagpur, with an installed capacity to gin and press 100,000
quintals of cotton per annum. The project was completed with an
aggregate cost of INR3.41 crore which was funded by term loan of
INR2.56 crore and balance through promoter's contribution. The
company procures the raw material i.e. raw cotton from the local
farmers and sells its final product i.e. cotton bales to the
customers located in Maharashtra. Currently, the company is in
the process of setting up its oil extraction unit at Bazargaon,
Nagpur. The total cost of the project is estimated at INR1.21
crore, which is proposed to be funded by term loan from bank of
INR0.44 crore and balance through promoters' contribution. The
financial closure for the project is already achieved. The
commercial project is expected to commence from July 2017.
PICL MULTI: CARE Assigns 'B' Rating to INR5cr LT Loan
-----------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of PICL
Multi State Credit Cooperative Society Limited (PICL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 5 CARE B; Stable Assigned
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of PICL Multi State
Credit Cooperative Society Limited (PICL) is constrained by short
track record and small scale of operation, thin PAT margin,
concentrated loan portfolio and limited resource profile coupled
with high dependence on deposits. However, the rating is
underpinned by the experienced management, growth in scale of
operation during review period, satisfactory asset quality,
regular loan requirement from society members coupled with wide
geographical reach.
Going forward, the ability of the society to increase its scale
of operations, profitability and diversify the loan portfolio
will be the key rating sensitivities.
Detailed Description of the key rating drivers
Key Rating Weaknesses
* Short track record and small scale of operations and thin PAT
margin albeit growth in total operating income during the review
period: PICL was established in the year 2012 and hence, has a
short track record of operations. The society has been increasing
the number of members' year-on-year and has 57,075 members as on
January 31, 2017. The total operating income of the society
increased at Compounded Annual Growth Rate (CAGR) of 174% from
INR0.21 crore in FY14 (refers to the period April 1 to March 31)
to INR1.58 crore in FY16. Despite increase in total operating
income y-o-y, the scale of operations and networth of the society
remained small as compared to other peers in the industry.
The society has net loss till FY15 due to high operating expenses
and interest expenses. However, the society has turnaround from
net loss to net profit from FY16 onwards at the back of
absorption of overhead. Furthermore, the society achieved PAT of
INR0.003 crore in FY16, but the PAT margin of the society
remained thin at below unity level.
* Concentrated loan portfolio: The product and customer profile
of PICL is concentrated having 100% credit exposure to PICL
members of society in the form of personal loans, gold loans and
loan against deposit resulting in small scale business. There is
no collateral requirement for the loans extended to members. The
loans are secured by investment made by the society member along
with postdated cheques (PDC) and guarantee given by the other
member of the society.
* Limited resource profile: The major source of funding for PICL
is deposits received from members of the society. The total debt
comprises of deposits received from members and interest payable.
As on March 31, 2016, the total deposit of the society was
INR21.20 crore as compared to INR12.48 crore as on March 31,
2015.
Key Rating Strengths
* Satisfactory asset quality: As on March 31, 2016, the society
has reported NIL number of NPA accounts. The loans extended by
PICL are based upon the deposits made by the members of the
society. The society will not have any NPA's as the society
undertakes surety from the other members of the society along
with PDC and the loan is secured by the investment by the member.
* Experienced management: PICL was incorporated in the year
2012. Mr. Pratap Bhatti (Vice Chairman) has ten years of
experience in marketing of financial products. Mr. Lalit Deep
(Director) has more than five years of experience in banking and
finance industry. Furthermore, the trust members are actively
involved in the day to day operations of the society. The society
is well supported by the other management team i.e. Mr. Jitendra
Verma, Mr. Ravi among others for smooth functioning of the PICL
Multi State Credit Co-operative Society Limited (PICL) was
established in the year 2012. The society is registered under
Central Registrar of Cooperative societies, Ministry of
Agriculture, Govt. of India. The society is engaged in lending
loans to its members of the society in form of personal loans and
loan against deposit and gold loan. PICL has 57,075 members as on
January 31, 2017. Furthermore, the society accepts the deposits
from its members and pays interest depending on the nature of
deposit (regular deposit and fixed deposit) and tenure.
Presently, the society has its branches located at Odisha
(Balangir, Rourkela, Bhawanipatna, Keonjhar andKhantabanji)
Chattisgarh (Raigarh, Manedragarh, Rajnandgaon and Chowki). PICL
is planning to avail bank loan of INR2.50 crore in order to meet
the working capital requirement and another INR2.50 crore for
setting up new branches at various locations.
In FY16, PICL reported a Profit after Tax (PAT) of INR0.003 crore
on a total operating income of INR1.58 crore, as against a
net loss and TOI of INR1.22 crore and INR0.75 crore,
respectively, in FY15. Total loan portfolio of PICL stood at
INR14.04 crore as on March 31, 2016 (Rs.7.37 crore as on
March 31, 2015). The total capital adequacy stood at (3.13%) and
as on March 31, 2016 as against (7.22%) as on March 31, 2015.
PRAJAY PROPERTIES: CRISIL Reaffirms 'D' Rating on INR121.3MM Loan
-----------------------------------------------------------------
CRISIL Ratings has been consistently following up with Prajay
Properties Private Limited (PPPL) for obtaining information
through letters and emails dated October 18, 2016, November 21,
2016, and March 16, 2017, among others, apart from telephonic
communication. However, the issuer has remained non cooperative.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Project Loan 121.3 CRISIL D (Issuer Not
Cooperating; Rating
Reaffirmed)
Proposed Long Term 0.7 CRISIL D (Issuer Not
Bank Loan Facility Cooperating; Rating
Reaffirmed)
The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed
with the suffix 'ISSUER NOT COOPERATING'. These ratings lack a
forward looking component as it is arrived at without any
management interaction and is based on best available or limited
or dated information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of Prajay Properties Private
Limited. This restricts CRISIL's ability to take a forward
looking view on the credit quality of the entity. CRISIL believes
that the information available for Prajay Properties Private
Limited is consistent with 'Scenario 1' outlined in the
'Framework for Assessing Consistency of Information with Crisil B
Rating category or lower.' Therefore, on account of inadequate
information and lack of management co-operation, CRISIL is
reaffirming the rating at 'CRISIL D'
PPPL, incorporated in 2007 by Prajay Engineers Syndicate Ltd, is
developing a high-rise residential real estate project ' Prajay
Megapolis - in Hyderabad (Andhra Pradesh). State General Reserve
Fund, Oman, has invested around INR.659 million in PPPL by way of
compulsory convertible debentures. PLCPL, a wholly owned
subsidiary of PPPL, owns 8.35 acres of land out of the total
17.12 acres under development.
R. R. ENTERPRISES: CRISIL Hikes Rating on INR15MM Loan to B+
------------------------------------------------------------
CRISIL Ratings has upgraded its ratings on the long term bank
facilities of R. R. Enterprises - Mumbai (RRE) to 'CRISIL
B+/Stable' from 'CRISIL B/Stable', while reaffirming its rating
on the short term bank facility at 'CRISIL A4'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Bank Guarantee 5 CRISIL A4 (Reaffirmed)
Cash Credit 3 CRISIL B+/Stable (Upgraded
from 'CRISIL B/Stable')
Proposed Long Term 15 CRISIL B+/Stable (Upgraded
Bank Loan Facility from 'CRISIL B/Stable')
The upgrade reflects the improvement in the business risk profile
backed by increased revenue contribution from high margin
yielding barge chartering segment. Additionally, the revenue
profile in the barge chartering segment is expected to be stable
given firm has already tied up for 3 out of 4 large barges for
three years contract. On the back of steady revenue streams and
high margins, firm is expected to generate over INR.3.5 cr of
cash accruals over the medium terms, which was less than INR.2 cr
in past. The improvement in margins is also expected to help firm
improve its debt protection metrics. Furthermore, INR.2 cr of
capital infusion by proprietor has already led to improvement in
financial risk profile, although it remains below average with
modest net worth and high gearing. Firm's ability to get long
term contracts for other barges and incremental investments in
the barges will remain key rating sensitivity factors over the
medium term.
The rating continues to reflect the firm's below average
financial risk profile because of a small net worth and high
gearing. The ratings also factor in a modest scale of operations,
and susceptibility to risks related to regulatory changes and
occupancy risk for barges with short term contracts. These rating
weaknesses are partially mitigated by the extensive experience of
the firm's promoter in the shipping and sand-dredging industry
and his funding support. The ratings also factors in steady
income expected from long term contract for three barges.
Key Rating Drivers & Detailed Description
Weaknesses
* Below average financial risk profile: RRE's net worth is
estimated to be small at around INR.3.2 cr as on March 31, 2016.
Networth is small due to low accretion to reserves. The modest
net worth reduces the cushion available to the concern in an
exigency, and limits its financial flexibility, thereby rendering
its financial risk profile highly susceptible to marginal
increment in debt. Gearing was 5.45 times because of working
capital-intensive operations and small networth. Debt protection
metrics were moderate, with interest coverage and net cash
accrual to total debt ratios of 2.57 times and 0.07 time,
respectively, for 2015-16.
* Modest scale of operations: Scale of operations is modest, as
reflected in an estimated operating income of INR.11 cr for 2016-
17(refers to financial year, April 1 to March 31). The
improvement in scale would largely be dependent on the increased
occupancy for the barges. However, the scale will remain at
modest levels over the medium term.
* Susceptibility to risks related to regulatory changes and
occupancy risk for barges: Also, the domestic sand mining
industry as well as Steel industry which is the major customer
for its Barges, is highly regularised by the Ministry of
Environment and Forest. In the past few years, the government has
banned sand mining activities many times due to issues related to
environment clearances, which affects revenue growth and
profitability of players such as RRE.
Strengths
* Experience of the firm's promoter in the shipping and sand-
dredging industry and his funding support: Mr. Rashad Mujawar
started his entrepreneurial stint in 1999 by setting up S. R.
Construction Over a period of past five to seven years; the
concern had built its own barges and started other activities
like sand dredging from coastal areas and trading in sand. The
promoter has also been associated with several other entities
which are engaged in similar activities as that of SRS. SRS was
closed in 2015 and entire business of SRS was transferred to RRE.
CRISIL believes that the extensive experience of the promoter in
shipping and sand dredging industry will support the business
risk profile of RRE.
* Steady income expected from long term contract for three
barges: The company has rented three of the four large barges for
3 years, while one has been rented for 1 year, which is expected
to get renewal from the customer. Other barges are rented for
shorter duration during the year and do not have any long term
contracts. They are generally booked for around 70 per cent of
time during year. The steady income from the long term contract
for its three large barges will ensure scale to remain above
INR.10 cr of revenue along with healthy margins of close to 40
per cent.
Outlook: Stable
CRISIL believes RRE will continue to benefit over the medium term
from its promoter's extensive industry experience and funding
support. The outlook may be revised to 'Positive' in case of
significant and sustained growth in revenue and increase in cash
accrual, leading to an improved capital structure and liquidity.
Conversely, the outlook may be revised to 'Negative' in case of a
steep decline in revenue or profitability, or large debt funded
capital expenditure or withdrawals by proprietor, leading to
deterioration in its financial risk profile.
Established in 2015, RRE is a proprietorship concern of Mr.
Rashad Mujawar. The firm is engaged in sea transportation,
chartering, and related activities such as sand dredging and sand
trading. It primarily operates in Maharashtra.
RRE reported a profit after tax (PAT) of INR.3 lakh on net sales
of INR.6.21 cr for 2015-16, as against PAT of INR.15 lakh on net
sales of INR.7.91 cr for 2014-15.
RAI BAHADUR: CRISIL Reaffirms B+ Rating on INR181MM Loan
--------------------------------------------------------
CRISIL Ratings has been consistently following up with Rai
Bahadur Narain Singh Sugar Mills Limited (RBNL) for obtaining
information through letters and emails dated October 18, 2016,
November 14, 2016, and March 16, 2017 among others, apart from
telephonic communication. However, the issuer has remained non
cooperative.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Bank Guarantee 2 CRISIL A4 (Issuer Not
Cooperating; Rating
Reaffirmed)
Cash Credit 181 CRISIL B+/Stable (Issuer
Not Cooperating; Rating
Reaffirmed)
The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed
with the suffix 'ISSUER NOT COOPERATING'. These ratings lack a
forward looking component as it is arrived at without any
management interaction and is based on best available or limited
or dated information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of Rai Bahadur Narain Singh Sugar
Mills Limited. This restricts CRISIL's ability to take a forward
looking view on the credit quality of the entity. CRISIL believes
that the information available for Rai Bahadur Narain Singh Sugar
Mills Limited is consistent with 'Scenario 3' outlined in the
'Framework for Assessing Consistency of Information with Crisil
BBB Rating category or lower.' Therefore, on account of
inadequate information and lack of management co-operation,
CRISIL is reaffirming the rating at 'CRISIL B+/Stable/CRISIL A4.
Incorporated in 1932, by Shri Rai Bahadur Narain Singh, RBNL
started commercial production on 1934-35. The company is
currently being managed by Hardev Singh Akoi, son of Shri Rai
Bahadur Narain Singh.
RAM SWAROOP: CARE Denotes Rating as B+/Issuer Not Cooperating
-------------------------------------------------------------
CARE Ratings has been seeking information from Ram Swaroop
Shivhare, to monitor the rating vide e-mail communications/
letters dated February 25, 2017, February 21, 2017, February 1,
2017, and numerous phone calls. However, despite CARE's repeated
requests, the firm has not provided the requisite information for
monitoring the ratings. In the absence of minimum information
required for the purpose of rating, CARE is unable to express
opinion on the ratings. Furthermore, Ram Swaroop Shivhare has not
paid the surveillance fees for the rating exercise as agreed to
in its Rating Agreement. In line with the extant SEBI guidelines
CARE's rating on Kalpana Shivhare's bank facilities will now be
denoted as CARE B+/CARE A4; ISSUER NOT COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 5 CARE B+; ISSUER NOT
COOPERATING
Long-term Bank 5 CARE B+/CARE A; ISSUER
Facilities/Short- NOT COOPERATING
term Bank
Facilities
Users of these ratings (including investors, lenders and the
public at large) are hence requested to exercise caution while
using the above ratings.
Detailed description of the key rating drivers
At the time of last rating on March 4, 2016, the following were
the rating strengths and weaknesses.
Key Rating Strengths
Experienced Promoters
RSH has been in the liquor business from the last 13 year.
Currently, RSH has 18 licences in different district of Madhya
Pradesh for retailing of liquor. RSH is part of the Shivhare
Liquor Group which through its various associate concerns has
licence for around 73 liquor shops in various districts of Madhya
Pradesh as on March 31, 2015.
Favourable demand outlook with steady increase in consumption of
alcohol
Indian Liquor industry is one of the growing industries despite
being subjected to high taxes and innumerable regulations
by government. In addition, changing consumer preference towards
premium varieties has resulted in improvement in sales mix of
industry. Hence, Indian liquor industry is envisaged to continue
the trend of steady growth supported by increasing demand led
volume growth.
Key Rating Weaknesses
High business risk due to regulated nature of liquor industry The
Indian liquor industry is highly regulated. The industry is
witnessing high taxes and numerous regulations from government
which impact the pricing flexibility of the industry. The state
governments are also given liberty to enact the bye-laws for
liquor industry on their own hence any significant policy changes
adversely affect the whole industry.
Incorporated in 1990, M/s Ram Swaroop Shivhare (RSH) is a sole
proprietorship firm which is into the business of retailing of
alcohol. RSH is part of Shivhare Liquor Group which is based out
of Madhya Pradesh. RSH undertakes retail trade of Indian made
foreign liquor (IMFL), country liquor (CL), wine etc. and holds
retail license for liquor shops in the state of MP. RSH has been
allotted retail liquor license for 18 shops in different
districts of Madhya Pradesh for FY15 (refers to the period April
1 to March 31) & FY16. The firm enters into open tendering
process every year to avail license for the retailing of the
liquor. Depending upon the allotment of shops during tendering,
the number of shops held by the company varies every year.
Shivhare Liquor group has other associate concern namely M/s
Kalpana Shivhare, M/s Gopal Shivhare, M/s Kamla Shivhare & M/s
Laxminarayan Shivhare which are also engaged in similar business
activity.
SHRI PRASANNA: CARE Assigns B+ Rating to INR7.0cr LT Loan
---------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Shri
Prasanna Anjaneya Agro Tech (SPAAT), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 7.00 CARE B+; Stable Assigned
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of SPAAT is
constrained by nascent stage of business operations, partnership
nature of constitution and seasonal nature of availability of
paddy resulting in working capital intensive nature of
operations. However, the rating is underpinned by the experience
of the partners for a decade in the rice milling industry and
locational advantage with healthy demand outlook of rice.
Going forward, the firm's ability to achieve the envisaged sales
and productivity with efficient management of the working capital
borrowings are the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Nascent stage of business operations with leveraged capital
structure due to recently completed debt funded capex SPAAT was
established in the year 2016 and the commercial operations of the
firm were started in December 2016. Thus, the total operating
income stood at INR8.91 crore in two months of operations in FY17
(i.e. December 2016 and January 2017). Furthermore, the
Corporation Bank sanctioned working capital loans to the extent
of 7.50 crores to facilitate the operations of the business. The
total cost of the project is 1.20 crore and the same was funded
by the promoter's contribution to the extent of INR0.60 crore and
by bank loan to the extent of INR0.60 crore. Due to high working
capital bank borrowings the capital structure of the company
likely to be remained leveraged for the projected period, ie, at
3.81x as on March 31, 2017.
Constitution of the entity as a partnership firm
SPAAT, being a partnership firm, the business has restriction in
avenues to raise capital for the growth of business.
Seasonal nature of availability of paddy
Paddy in India is harvested mainly at the end of two major
agricultural seasons Kharif (June to September) and Rabi
(November to April). The millers have to stock enough paddy by
the end of the each season as the price and quality of paddy is
better during the harvesting season. Moreover, the paddy is
procured from the farmers generally against cash payments or with
a minimal credit period of 5-10 days while the millers have to
extend credit to the wholesalers and distributors around 30-60
days resulting in high working capital utilization.
Key Rating Strengths
Experience of promoter for more than a decade in rice milling
industry
SPAAT was promoted by Mr. M. R. Suresh (Managing Partner) and his
family members. He is having more than 15 years of experience in
rice milling industry. Through his experience in the rice milling
industry, he has established healthy relationship with key
suppliers, customers, local farmers, dealers and also with the
brokers facilitating the rice business within the state.
Location advantage with presence in cluster and easy availability
to paddy
Karnataka ranks tenth in the production of rice in India.
Furthermore, the rice milling unit of SPAAT is located at Manvi,
Dakshina Kannada District which is one of the major paddy
cultivation areas in Karnataka. The manufacturing unit is
located near the rice-producing region, which ensures easy raw
material access and smooth supply of raw materials at
competitive prices and lower logistic expenditure.
Healthy demand outlook of rice
Rice is consumed in large quantity in India which provides
favorable opportunity for the rice millers and thus the demand is
expected to remain healthy over medium to long term. India is the
second largest producer of rice in the world after China and the
largest producer and exporter of basmati rice in the world. The
rice industry in India is broadly divided into two segments -
basmati (drier and long grained) and non-basmati (sticky and
short grained). Demand of Indian basmati rice has traditionally
been export oriented where the South India caters about one-
fourth share of India's exports. However, with a growing consumer
class and increasing disposable incomes, demand for premium rice
products is on the rise in the domestic market. Demand for non-
basmati segment is primarily domestic market driven in India.
SPAAT was established in 2016 as a partnership firm. It was
promoted by Mr. M. R. Suresh, Mr. M.R. Srikanth, Mr. M. R.
Rohini, Mr. Shyamsunder, Ms M. R. Deepti and Mr. M. R. Narayana
Setty. SPAAT is engaged in milling and processing of rice. The
rice milling unit of the firm is located at Manvi, Karnataka,
which was established with a total project cost of INR1.2 crore
and installed capacity of 20000 metric tons per annum. Apart from
rice processing, the firm is also engaged in selling by-products
such as broken rice, husk and bran. The main raw material, paddy,
is directly procured from local farmers located in and around
Manvi and the firm sells rice and other by-products in the open
markets of Karnataka. The firm started its commercial operations
in December 2016. FY18 (refers to the period April 1 to March 31)
will be the first full year of business operations for the firm.
SUPRAJA DAIRY: CRISIL Assigns B+ Rating to INR5.95MM Cash Loan
--------------------------------------------------------------
CRISIL Ratings has assigned its 'CRISIL B+/Stable' rating to the
bank loan facilities of Supraja Dairy Pvt Ltd (SDPL).
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Proposed Long Term
Bank Loan Facility 1.29 CRISIL B+/Stable
Cash Credit 5.95 CRISIL B+/Stable
Long Term Loan 0.41 CRISIL B+/Stable
The rating reflects the modest scale of operations,
susceptibility to volatile raw material prices, and the leveraged
capital structure. These strengths are partially offset by
extensive experience of the promoters in the dairy industry, and
their established relationships with customers and suppliers, and
moderate debt protection metrics.
Analytical Approach
For arriving at the ratings, CRISIL has treated unsecured loans
of INR1.2 crore as on March 31, 2016, extended to SDPL by its
promoters, as neither debt nor equity as they are non-interest
bearing, and are subordinated to bank debt.
Key Rating Drivers & Detailed Description
Weakness
* Modest scale of operations: Estimated revenue of around INR32
crore in fiscal 2017, reflects the modest scale of operations.
* Susceptibility to fluctuation in raw material prices:
Operations remain susceptible to risks related to volatility in
raw milk prices. Moreover, the company cannot increase its pouch
milk prices inordinately, given the intense competition from
other leading players and state cooperative societies.
* Leveraged capital structure: Total outside liabilities to
tangible networth ratio is likely to be high at 1.99 times as on
March 31, 2017.
Strengths
* Extensive experience of the promoters, and established
relationships with customers and suppliers: The promoter Mr. BRM
Raju has experience of over a decade in dairy business. The
promoters have been instrumental in establishing relationship
with customers in the coastal regions of Andhra Pradesh wherein
state cooperative has a strong foothold
* Moderate debt protection metrics: Debt protection metrics are
expected to be moderate, marked by an interest coverage and net
cash accrual to adjusted debt ratios of around 2.05 times and
around 13%, respectively, in fiscal 2017.
Outlook: Stable
CRISIL believes SDPL will benefit from the extensive experience
of its promoters in the medium term. The outlook may be revised
to 'Positive' if substantial increase in cash accrual strengthens
the financial risk profile, particularly liquidity. The outlook
may be revised to 'Negative' in case of a drop in revenue or
profitability, or if sizeable debt-funded capital expenditure
weakens the financial risk profile.
SDPL, which was set up in 1993, processes milk and produces and
sells milk products under its brand 'Millkline'. Commercial
operations began in 1996, and the company has a manufacturing
facility at Achutapuram, and seven chilling plants in different
locations. Mr B R M Raju manages the daily operations.
Profit after tax was INR18.81 lakh on net sales of INR28.76 crore
in fiscal 2016, against loss of INR35.68 lakh on net sales of
INR27.90 crore in fiscal 2015.
SURANA INDUSTRIES: CARE Reaffirms 'D' Rating on INR517.28cr Loan
----------------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Surana Industries Limited (SIL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 517.28 CARE D Reaffirmed
Short-term Bank
Facilities 75.63 CARE D Reaffirmed
Detailed Rationale & Key Rating Drivers
The rating continues to factor in delays in servicing of the debt
obligations by SIL.
Detailed description of the key rating drivers
Instances of delays in debt servicing: The company has reported
delays in debt servicing to banks on account of tight liquidity
position. During FY16 (refers to the period April 01 to March
31), the company generated total income of INR586 crore as
against INR643 crore during FY15. The company reported net loss
of INR526 in FY16 as against net loss of INR263 crore in FY15.
Net worth has moderated from INR668 crore as on March 31, 2015 to
INR142 crore as on March 31, 2016.
Surana Industries Limited (SIL) is into manufacturing of iron and
steel products and trading in MS Structurals. The company has two
units, one each at Raichur (Karnataka) and Gummidipoondi, Tamil
Nadu (GPD). As on March 31, 2016, Raichur unit had a sponge iron
capacity of 1,28,000 tonnes per annum (tpa), steel melting shop
with capacity of 2,25,000 tpa and Rolling Mill/Wire drawing
capacity of 3,00,000 tpa. GPD unit has a rolling mill capacity of
1,09,800 tpa and induction furnace of 30,000 tpa for production
of ingots. In addition to production and sale of billets & TMT
bars, GPD operations include purchase and sale of MS Structural.
SIL is in this line of business for the past 25 years.
VICEROY BANGALORE: CRISIL Reaffirms 'D' Rating on INR206MM Loan
---------------------------------------------------------------
CRISIL Ratings has been consistently following up with Viceroy
Bangalore Hotels Private Limited (VBHPL) for obtaining
information through letters and emails dated October 18, 2016,
November 21, 2016, and March 16, 2017, among others, apart from
telephonic communication. However, the issuer has remained non
cooperative.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Term Loan 206 CRISIL D (Issuer Not
Cooperating; Rating
Reaffirmed)
The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed
with the suffix 'ISSUER NOT COOPERATING'. These ratings lack a
forward looking component as it is arrived at without any
management interaction and is based on best available or limited
or dated information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of Viceroy Bangalore Hotels
Private Limited. This restricts CRISIL's ability to take a
forward looking view on the credit quality of the entity. CRISIL
believes that the information available for Viceroy Bangalore
Hotels Private Limited consistent with 'Scenario 1' outlined in
the 'Framework for Assessing Consistency of Information with
Crisil B Rating category or lower.' Therefore, on account of
inadequate information and lack of management co-operation,
CRISIL is reaffirming the rating at 'CRISIL D'.
VBHPL, incorporated in 2010, is setting up a five-star hotel in
Bengaluru (Karnataka). The company has a tie-up with Marriott
International for managing operations of the hotel, which will
operate under the Renaissance brand and is expected to commence
operations by September 2015. Viceroy Hotels Ltd holds 40 per
cent stake in VBHPL, and JP Morgan Mauritius India Pvt Ltd holds
the balance 60 per cent.
VISHNU STEELS: CRISIL Reaffirms 'D' Rating on INR19MM Cash Loan
---------------------------------------------------------------
CRISIL Ratings has been consistently following up with Vishnu
Steels for obtaining information through letters and emails dated
November 11, 2016, December 14, 2016 and March 16, 2017, among
others, apart from telephonic communication. However, the issuer
has remained non cooperative.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Cash Credit 19 CRISIL D (Issuer Not
Cooperating; Rating
Reaffirmed)
Letter of credit 1.55 CRISIL D (Issuer Not
& Bank Guarantee Cooperating; Rating
Reaffirmed)
Long Term Loan 3.90 CRISIL D (Issuer Not
Cooperating; Rating
Reaffirmed)
The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed
with the suffix 'ISSUER NOT COOPERATING'. These ratings lack a
forward looking component as it is arrived at without any
management interaction and is based on best available or limited
or dated information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of Vishnu Steels. This restricts
CRISIL's ability to take a forward looking view on the credit
quality of the entity. CRISIL believes that the information
available for Vishnu Steels is consistent with 'Scenario 1'
outlined in the 'Framework for Assessing Consistency of
Information with 'CRISIL B rating category or lower.' Therefore,
on account of inadequate information and lack of management co-
operation, CRISIL is reaffirming the rating at 'CRISIL D/CRISIL
D'.
Vishnu Steels, set up in 2003 by Mr. Gumansingh B Rajpurohit,
manufactures thermo-mechanically treated (TMT) bars from ingots.
The firm has a plant in Wada district, Thane (Maharashtra).
Y.M.R. CONSTRUCTIONS: CRISIL Reaffirms B- Rating on INR.25MM Loan
-----------------------------------------------------------------
CRISIL Ratings has reaffirmed its ratings on the bank facilities
of Y.M.R. Constructions (YMR) at 'CRISIL B-/Stable/CRISIL A4'.
Amount
Facilities (INR Mln) Ratings
---------- --------- -------
Bank Guarantee 10.5 CRISIL A4 (Reaffirmed)
Long Term Loan .25 CRISIL B-/Stable (Reaffirmed)
Overdraft 4.25 CRISIL A4 (Reaffirmed)
CRISIL's ratings on the bank facilities of YMR continue to
reflect YMR's modest scale of operations in the intensely
competitive construction industry, large working capital
requirement, and high revenue concentration. These weaknesses are
partially offset by its proprietor's extensive industry
experience.
Key Rating Drivers & Detailed Description
Weakness
* Modest scale of operations in intensely competitive
construction industry: YMR's business risk profile is constrained
by its modest scale of operations in the intensely competitive
construction industry. The firm registered revenue at INR33.33
crores in 2015-16. The modest scale of operations limits the
bargaining power of the firm with its customers and suppliers.
* Large working capital requirements: YMR's business is highly
working capital intensive, as reflected in gross current asset
(GCA) days of 130 days as on March 31, 2016; the GCA days have
been at higher levels in the past. The high GCA days emanates
from the firm's inventory levels of 42 days and receivables cycle
of 60 days.
* High revenue concentration: The firm derives around 40 per cent
of its revenue from sub-contracts and 60 per cent from direct
contracts for government bodies. It undertakes all of its
projects in Hyderabad, limiting its scale of operations to new
projects in this region only. Any events such as slowdown in the
infrastructure spending in this region or operational delays may
affect the flow of orders for the firm and thus impact its
revenue growth.
Strengths
* Proprietor's extensive industry experience: YMR's proprietor,
Mr. Mohan Reddy, had prior experience of around three years
through SSR Crest Engineering and Construction Ltd (rated 'CRISIL
B+/Stable/CRISIL A4'), a closely held public limited firm being
managed by Mr. Reddy's brother, Mr. Pavan Reddy. Mr. Mohan Reddy
set up in 1999 to construct bore wells in the Hyderabad region;
however, with the large number of orders coming in SSR Crest
Engineering and Construction Ltd, Mr. Mohan Reddy started
undertaking subcontracts for the firm.
Outlook: Stable
CRISIL believes YMR will continue to benefit over the medium term
from its proprietor's extensive industry experience. The outlook
may be revised to 'Positive' in case of substantial and sustained
increase in revenue and profitability, or continued improvement
in working capital management. Conversely, the outlook may be
revised to 'Negative' in case of decline in profitability, or
significant deterioration in capital structure because of stretch
in working capital cycle or larger-than-expected debt-funded
capital expenditure.
YMR, established in 1999 as a proprietorship firm by Mr. Mohan
Reddy, undertakes construction and maintenance of roads, and
caters to state government bodies such as the Roads and Buildings
department and Panchayat Raj Engineering Department. The firm is
based in Hyderabad.
In fiscal 2016, net profit was INR1.25 crore on total income of
INR33.3 crore, against net profit of INR0.96 crore on total
income of INR25.41 crore in the previous fiscal.
=========
J A P A N
=========
TOSHIBA CORP: Warns of Ability to Continue as Going Concern
-----------------------------------------------------------
Pavel Alpeyev and Takako Taniguchi at Bloomberg News report that
Toshiba Corp., the 142-year-old conglomerate, warned on April 11
it may not be able to continue as a going concern as it grapples
with billions of dollars in losses from its Westinghouse Electric
nuclear business.
Bloomberg says the disclosure came as the Japanese company
reported earnings for the third quarter after missing two
previous deadlines for financial results. According to Bloomberg,
Toshiba posted an operating loss of JPY576.3 billion (US$5.2
billion) for the nine months ended Dec. 31 and said it had
negative shareholders equity of JPY225.6 billion at the end of
the period, although the earnings statement hadn't been approved
by auditor PricewaterhouseCoopers Aarata.
Bloomberg notes that Toshiba has been at odds with its auditors
over internal controls at Westinghouse, which has filed for
bankruptcy in the U.S. Bloomberg relates that the company said
on April 11 it found instances of "inappropriate pressure"
internally to push through the acquisition of a U.S. construction
firm specializing in atomic plants, but that had no bearing on
financial results. Toshiba's inability to report earnings has
raised speculation of a possible delisting from the Tokyo Stock
Exchange and pushed the shares 20% lower this year, Bloomberg
says.
"How the TSE will take this is anyone's guess now," Bloomberg
quotes Hideki Yasuda, an analyst at Ace Research Institute, as
saying. "This is just quarterly earnings. Now the question is
whether the company can release the full-year statement in time."
Toshiba has missed financial filing deadlines even before the
current crisis, the report states. The company pushed back
earnings announcements twice amid an accounting scandal in 2015,
delaying the release by about four months. In theory, there is no
limit on how many times the company can request an extension.
According to Bloomberg, the TSE kept Toshiba on its list of
securities on alert in a December announcement, after originally
being included for overstating profits from 2008 through 2014.
The company last month submitted a report detailing plans to
improve internal controls. If deemed insufficient, the company
will face delisting, Bloomberg relays.
"The disclaimer of opinion by the auditor is an additional item
that we must evaluate and consider," the report quotes Miwa
Aonuma, a spokeswoman for Japan Exchange Group, which runs the
Tokyo Stock Exchange, as saying.
Even if Toshiba clears these hurdles, there is a longer-term
threat to stakeholders, Bloomberg says. The nuclear business
writedown has pushed Toshiba's liabilities beyond its level of
assets. If the company can't reverse the situation in the fiscal
year just ended, it could face demotion to the second section of
the Tokyo Stock Exchange. That would in turn force an automatic
selloff by some index funds. If the situation persists for two
straight years, it will be delisted, Bloomberg notes.
"The situation at Toshiba continues to make a mockery of TSE
listing rules, as authorities have done their best to allow it as
much time as possible for its auditors to approve its" third-
quarter results, Amir Anvarzadeh, head of Japanese equity sales
at BGC Partners Ltd. in Singapore, wrote in a note prior to the
announcement, Bloomberg relays. "We think TSE will continue to
remain supportive."
Bloomberg says Toshiba has responded by putting its prized memory
chip unit up for sale and is narrowing down a list of bidders.
Taiwan's Hon Hai Precision Industry Co., South Korea's SK Hynix
Inc. and chipmaker Broadcom Ltd. have all submitted preliminary
bids for the Toshiba business valued at JPY2 trillion or more,
Bloomberg reports, citing people familiar with the matter. Hon
Hai has indicated it may pay as much as JPY3 trillion, in part to
force Japanese management into negotiations, said one of the
people, asking not to be identified because the matter is
private, Bloomberg relays.
Bloomberg adds that in the meantime, Toshiba has sought
additional financial support from banks, offering stock holdings
and real estate as collateral to lenders.
"Toshiba could move back into solvency depending on how it
proceeds with the Toshiba Memory sale," Credit Suisse Group AG's
Tokyo-based analysts Hideyuki Maekawa and Yoshiyasu Takemura
wrote in a report, Bloomberg relays. "We think the only major
risk remaining is a possible delisting."
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 March 21, 2017, that S&P Global Ratings
has lowered its long-term corporate credit rating on Japan-based
capital goods and diversified electronics company Toshiba Corp.
two notches to 'CCC-' from 'CCC+' and lowered the senior
unsecured debt rating three notches to 'CCC-' from 'B-'.
Both ratings remain on CreditWatch with negative implications.
Also, S&P is keeping its 'C' short-term corporate credit and
commercial paper program ratings on the company on CreditWatch
negative. The long- and short-term ratings on Toshiba have
remained on CreditWatch with negative implications since December
2016, when S&P also lowered the long-term ratings because of the
likelihood that the company might recognize massive losses in its
U.S. nuclear power business; S&P kept them on CreditWatch
negative when it lowered the long- and short-term ratings in
January 2017.
TOSHIBA CORP: Foreign Bidders Prove More Aggressive in Chip Sale
----------------------------------------------------------------
Alex Sherman, Takahiko Hyuga, and Peter Elstrom at Bloomberg News
report that Toshiba Corp. and the Japanese government want to
sell the company's semiconductor business to a domestic buyer,
but foreign bidders are proving more determined and aggressive as
the auction heads toward a final decision in the coming weeks.
Taiwan's Hon Hai Precision Industry Co., South Korea's SK Hynix
Inc. and chipmaker Broadcom Ltd. have all submitted preliminary
bids for the Toshiba business valued at JPY2 trillion (US$18
billion) or more, Bloomberg relates citing people familiar with
the matter. Hon Hai has indicated it may pay as much as JPY3
trillion, in part to force Japanese management into negotiations,
said one of the people, asking not to be identified because the
matter is private, Bloomberg relays. Hynix is in talks with
Japanese investors on a joint bid, in part to overcome political
hurdles, the person, as cited by Bloomberg, said.
Toshiba and government officials are planning to seek offers led
by Japanese acquirers, though none has emerged yet, people
familiar with the matter have said, according to Bloomberg. The
company could seek a bailout through what's known as hougacho-
hoshiki, or a form of community financing in which multiple
domestic companies chip in a small amount of capital, one of the
people said, Bloomberg relays. Fujifilm Holdings Corp. may
consider participating once it understands the investment
framework, said spokesman Takao Aoki, Bloomberg relays.
Bloomberg notes that Toshiba is selling off assets as it grapples
with billions of dollars in losses from its Westinghouse nuclear
division. The Tokyo-based electronics conglomerate has more than
600 different businesses in everything from elevators to light
bulbs, but its most valuable asset is the semiconductor business,
which makes flash-memory chips used to store data in mobile
phones and other devices.
The Japanese government has made no secret of the fact that it
wants to keep the business in the country, citing the strategic
importance of chip manufacturing in future technologies,
Bloomberg says. Chief Cabinet Secretary Yoshihide Suga has said
flash memory chips are "extremely important" for Japan's growth
strategy, the report states.
So far though, foreign bidders appear more likely to land the
operation, Bloomberg says. Hon Hai, led by Chairman Terry Gou,
has proven particularly aggressive, much like it was when Gou
faced down Japan government opposition to win control of Sharp
Corp. last year. In that case, he also made an extremely high
opening bid to pressure management into negotiations, only to
later backtrack and reduce his offer, says Bloomberg. Gou still
won the auction and has made progress in turning around Sharp.
According to Bloomberg, Gou's bid for Toshiba's chip business
faces stiff resistance in part because Hon Hai's factories are
located in China and he would likely move semiconductor
manufacturing into the country, people familiar with the matter
said. Japan is concerned Hon Hai would transfer Toshiba
intellectual property to China, the people, as cited by
Bloomberg, said. Hon Hai has talked with several parties about a
joint bid, including with Korea's Hynix, but all of the potential
partners have resisted such a move to China, one person said,
Bloomberg relays.
Bloomberg relates that Hynix is in negotiations with partners for
a joint bid, including Japanese investors, and has said the
Korean company won't own more than 20% of the chips business, one
person said. That's aimed at helping Hynix win approval for its
offer from Japanese authorities.
But Hynix hasn't yet been able to organize a consortium to cover
the full price of a JPY2 trillion bid, one of the people said,
Bloomberg relays. The South Korean company also may offer its
partners an option to sell their equity to Hynix at a pre-
determined price in the future, the person said. The conditions,
aimed at reassuring other investors, may lead to resistance from
Japanese officials who don't want Hynix to have control over the
chips unit, the person said, Bloomberg relays.
Broadcom, which has considered joining with private equity
investor Silver Lake on a bid, may instead make an offer on its
own, people familiar with the matter said, according to
Bloomberg. Broadcom has emphasized it is a newcomer to the flash
memory business so it won't face the anti-trust scrutiny that
Hynix will, the person said. Still Broadcom thinks it will gain
synergies from combining Toshiba memory operations with its own
chips business, says Bloomberg.
About Toshiba
Toshiba Corporation (TYO:6502) -- http://www.toshiba.co.jp/-- is
a Japan-based manufacturer involved in five business segments.
The Digital Products segment offers cellular phones, hard disc
devices, optical disc devices, liquid crystal televisions, camera
systems, digital versatile disc (DVD) players and recorders,
personal computers (PCs) and business phones, among others. The
Electronic Device segment provides general logic integrated
circuits (ICs), optical semiconductors, power devices, large-
scale integrated (LSI) circuits for image information systems and
liquid crystal displays (LCDs), among others. The Social
Infrastructure segment offers various generators, power
distribution systems, water and sewer systems, transportation
systems and station automation systems, among others. The Home
Appliance segment offers refrigerators, drying machines, washing
machines, cooking utensils, cleaners and lighting equipment. The
Others segment leases and sells real estate.
As reported in the Troubled Company Reporter-Asia Pacific on
Dec. 30, 2016, Moody's Japan K.K. downgraded Toshiba
Corporation's corporate family rating (CFR) and senior unsecured
rating to 'Caa1' from 'B3'. Moody's has also downgraded
Toshiba's subordinated debt rating to 'Ca' from 'Caa3', and
affirmed its commercial paper rating of Not Prime. At the same
time, Moody's has placed Toshiba's 'Caa1' CFR and long-term
senior unsecured bond rating, as well as its 'Ca' subordinated
debt rating under review for further downgrade.
The TCR-AP reported on March 21, 2017, that S&P Global Ratings
said it has lowered its long-term corporate credit rating on
Japan-based capital goods and diversified electronics company
Toshiba Corp. two notches to 'CCC-' from 'CCC+' and lowered the
senior unsecured debt rating three notches to 'CCC-' from 'B-'.
Both ratings remain on CreditWatch with negative implications.
Also, S&P is keeping its 'C' short-term corporate credit and
commercial paper program ratings on the company on CreditWatch
negative. The long- and short-term ratings on Toshiba have
remained on CreditWatch with negative implications since December
2016, when S&P also lowered the long-term ratings because of the
likelihood that the company might recognize massive losses in its
U.S. nuclear power business; S&P kept them on CreditWatch
negative when it lowered the long- and short-term ratings in
January 2017.
TOSHIBA CORP: Planning to Sell TV Business
------------------------------------------
Asia Nikkei Review reports that Toshiba Corp., which sold the
first Japan-made color television in 1960, now appears to want to
sell its TV business.
Some foreign buyers are said to be showing interest in taking
over the unit, Nikkei relates citing people familiar with the
matter.
Potential bidders include Turkish home-appliance maker Vestel and
a few Chinese rivals, Nikkei discloses.
Nikkei says bidders are expected to start the process of putting
a price on Toshiba's TV business soon. The sale could fetch up to
a few dozen billion yen, or a few hundred million dollars, the
report notes. Toshiba expects to complete the process by next
March -- the end of the current fiscal year, Nikkei says.
Nikkei notes that after an accounting scandal came to light in
2015, Toshiba decided to restructure its businesses. It
concentrated the development and sales of TVs in Japan, changing
overseas operations to licensing businesses.
Vestel has already cut a licensing agreement with Toshiba to
produce TVs in Europe under the Toshiba brand, according to
Nikkei.
Potential Chinese buyers include the Hisense Group, the report
adds.
In the April-September period of last year, the company's TV unit
made JPY27.9 billion in sales, down 42% from the year before, and
registered an operating loss of JPY10.5 billion, Nikkei
discloses.
In June 2016, Toshiba sold its white goods unit to China's Midea
Group, Nikkei recalls.
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 March 21, 2017, that S&P Global Ratings
said it has lowered its long-term corporate credit rating on
Japan-based capital goods and diversified electronics company
Toshiba Corp. two notches to 'CCC-' from 'CCC+' and lowered the
senior unsecured debt rating three notches to 'CCC-' from 'B-'.
Both ratings remain on CreditWatch with negative implications.
Also, S&P is keeping its 'C' short-term corporate credit and
commercial paper program ratings on the company on CreditWatch
negative. The long- and short-term ratings on Toshiba have
remained on CreditWatch with negative implications since December
2016, when S&P also lowered the long-term ratings because of the
likelihood that the company might recognize massive losses in its
U.S. nuclear power business; S&P kept them on CreditWatch
negative when it lowered the long- and short-term ratings in
January 2017.
====================
N E W Z E A L A N D
====================
MUSE ON ALLEN: Liquidators Chase Director Over Payments
-------------------------------------------------------
Chloe Winter at Stuff.co.nz reports that liquidators of Muse on
Allen are pursuing the former director over payments he says went
to creditors.
The former fine dining restaurant in Wellington closed in
February 2016, with owner Samuel North reopening Muse Eatery and
Bay on the corner of Chews Ln and Victoria St, formerly home to
3C Bar and Restaurant, according to Stuff.
Stuff relates that the action against North - the sole director
of the former Allen St business - has liquidators alleging
avoidable preference claim.
In some cases, transactions deemed voidable could have to be
reversed.
On April 10, liquidator Vivian Fatupaito of KPMG confirmed legal
action had been taken against North, SMH says.
"[However], there is a dispute. That's why we don't like going
into too much detail until issues are resolved, so he is aware of
the claim, but it is disputed," the report quotes Ms. Fatupaito
as saying. Ms. Fatupaito said she could not give any further
details as the matter was before the courts, Stuff relates.
In September, Mr. North said his current business - Muse Eatery &
Bar - was not connected to the liquidated business. It was owned
by Catering Limited, of which he is the sole director, Stuff
recalls.
Stuff relates that Mr. North said it was the first he had heard
of the court action. However, he said he had argued with the
liquidators "ages ago" about money he took from the company to
pay suppliers.
Mr. North was previously chef de partie at another fine dining
restaurant, White House, which closed in 2014, Stuff discloses.
Muse on Allen was put into liquidation in September last year
following an application by the Inland Revenue (IRD). The first
liquidators report, in November, showed creditors were owed more
than NZ$160,000.
Mr. North told the liquidators the business failed as a result of
management conflict with business partners, an expensive lease
and cashflow issues, the liquidators report said, Stuff adds.
=============================
P A P U A N E W G U I N E A
=============================
PAPUA NEW GUINEA: S&P Affirms 'B+' FC & LC Long-Term Ratings
------------------------------------------------------------
S&P Global Ratings affirmed its foreign and local currency long-
term rating on Papua New Guinea (PNG) at 'B+', and the respective
short-term rating at 'B'. The outlook on the long-term rating
remains negative. The transfer and convertibility (T&C)
assessment remains 'BB'.
RATIONALE
The sovereign ratings on PNG reflect structural constraints
inherent in a lower middle-income economy dependent on extractive
industries and served by weak institutions. In addition, the
economy faces external and fiscal imbalances linked to the
completion in 2014 of a US$19 billion (118% of 2014 GDP)
liquefied natural gas (LNG) project. With the LNG project now
operational, S&P expects it to contribute to both export receipts
and government revenues, enabling the unwinding of PNG's related
imbalances in the next few years. But risks remain that these
external and fiscal imbalances may be very slow to unwind, mainly
due to the current weakness in global energy prices,
notwithstanding some improvement in the outlook for these prices.
These risks underpin S&P's negative rating outlook on PNG.
PNG faces pressing development needs. It had a per capita GDP of
US$2,100 in 2015 and is ranked 158 out of 188 countries on the
United Nations Development Program's Human Development Index.
Moreover, the prevalence of crime in major cities deters
investment, in S&P's view, while governmental institutions are a
weakness. In addition, economic data inconsistency is another
credit weakness. Despite some recent improvements, gaps and lags
in economic and external data remain, besides a lack of
transparency in public-sector fiscal affairs.
PNG's economy has been transforming in recent years, with the
construction and, since 2014, operation of a new LNG plant by
ExxonMobil PNG Ltd., a subsidiary of ExxonMobil Corp. Annual
economic growth was in the range of 4.7%-7.4% over the four years
to 2015, boosted by the LNG plant's construction, then a surge in
government spending and, most recently, the LNG plant's ramp-up
to full production.
Economic growth then slowed sharply in 2016 to about 2.5%. Apart
from the end of LNG-related stimulus, this slowdown reflected
lower commodity prices and associated cost-cutting in the
resources sector, drought conditions hurting agricultural
production and leading to the temporary shutdown of Ok Tedi (a
large copper and gold mine), and sharp cuts in government
spending. S&P expects growth to be only a little higher in 2017
at about 3%, assisted by improved climate conditions.
The medium-term economic outlook hinges on whether further large
foreign-financed projects, such as the touted additional LNG
projects, go ahead. Despite the weakness in global energy
prices, the Papua LNG project and expansion of the existing
ExxonMobil project still appear to have the support of their
proponents, although final investment decisions are still some
way off. Should these projects proceed, they would boost growth
sharply relative to S&P's current forecasts, probably from 2019.
Meanwhile, the government continues to deal with a collapse in
resources-related revenues, with global energy prices having
plunged just as the ExxonMobil LNG project came online. Fiscal
imbalances had already grown significantly, with the government
running large fiscal deficits to address development priorities
and to support economic growth until LNG production reached full
capacity. Importantly, the current rating assumes that these
fiscal imbalances would narrow quickly after LNG revenues started
to flow to the government from 2015.
The government has responded forcefully to the revenue declines.
Through budgets and supplementary budgets since late 2015, the
government enacted savings decisions and targeted declining
fiscal deficits to keep debt within its targets. As a result,
the government kept operating spending broadly flat in nominal
terms between 2014 and 2016, and reduced capital spending by
about 80% - with overall spending down by about 13% over this
period.
With this decisive action, PNG's fiscal deficits have narrowed in
absolute terms, and relative to GDP, despite a very challenging
revenue environment (and a looming general election). S&P
estimates the fiscal deficit narrowed to 4.4% of GDP in 2016,
from 6.9% in 2013. And despite an election in mid-2017, S&P
expects the deficit to narrow further this year to less than 3%
of GDP.
On this basis, S&P projects PNG's general government net debt to
remain comfortably below 30% of GDP. (This is somewhat lower
than S&P's previous estimate, due to a major revision to the GDP
data.) If the government fails to continue to restrain spending
adequately, or if growth in the nominal economy comes under even
further downward pressure, net general government debt could rise
materially above 30%.
Financing fiscal deficits remains challenging. Domestic banks
and pension funds are around their internal limits for lending to
the government, and the central bank is acting as lender-of-last-
resort when government bond auctions are undersubscribed. The
limited demand for government debt has led to a sharp rise in
yields on government paper in recent years, and the government's
interest burden has risen significantly as a result.
Given the domestic financing challenges, the government obtained
a syndicated loan from Credit Suisse during 2016 for up to
US$500 million, and has drawn down about US$300 million to date.
The government has also for some time planned to issue a U.S.-
dollar sovereign bond, and a US$500 million bond issue remains on
the table. Although such foreign-currency borrowing likely
lowers the government's average interest expense, it further
exposes the government's debt stock to exchange rate risk, and
this exposure will likely continue to rise as the government
increasingly seeks external sources of finance.
The private sector holds most of the external debt in PNG.
External debt ballooned in recent years, with large current
account deficits - financed by a combination of external debt and
foreign direct investment - that averaged about 30% of GDP
between 2010 and 2013 during the LNG project's construction
phase. Narrow net external debt peaked at about 390% of current
account receipts in 2012 (although S&P believes this measure is
heavily over-stated, as much of it related to foreign direct
investment but is not reported as such). Relatedly, PNG's net
external liabilities surged to nearly 480% of current account
receipts in 2013 from 45% of current account receipts in 2008.
S&P estimates that these ratios began to decline in 2014 with the
commencement of LNG production, and expect them to steadily
decline, although the pace of decline is being tempered by weak
global commodity prices. Meanwhile, gross external financing
needs are likely to be broadly steady at 80%-90% of current
account receipts.
PNG's external vulnerability is exacerbated by high volatility in
its terms of trade, which reflects its strong reliance on
commodity exports. In addition, potential future LNG projects
may lead to further external imbalances arising during their
construction phases.
The ongoing shortage of U.S. dollars within PNG is affecting the
economy's external transactions, and is symptomatic of a currency
that is above the market-clearing exchange rate. (PNG's exchange
rate arrangements are crawl-like, according to the International
Monetary Fund.) Although the PNG kina has depreciated
substantially against the U.S. dollar over the past few years
(notwithstanding a sharp spike in early 2014 when the central
bank's trading band policy was put in place), dollar shortages
remain, and the currency also remains high against those of major
trading partners.
While PNG's currency depreciation has only been moderate, it is
contributing to the upward drift in inflation. S&P expects
inflation to remain elevated over the next few years, but staying
below 10%. Still, the central bank's purchases of government
debt could add inflationary pressure if they are not fully
offset. More broadly, the Bank of PNG's weak monetary policy
flexibility is a rating constraint. This weakness mainly
reflects the very limited transmission of monetary policy
settings to the interest rates faced by borrowers--largely
because of the high level of liquidity in the banking system.
PNG's banking system stability benefits from limited competition
and a strong reliance on deposit funding, which is supported by
high levels of liquidity. It also has an external net asset
position and limited linkages to global markets. That said, the
country's low income levels and credit risk concentrations that
weigh on credit risks hamper banking system stability. Legal
infrastructure and judicial system delays also pose challenges to
enforcing creditor rights. S&P's Banking Industry Credit Risk
Assessment for PNG is '9' (with '1' being the highest assessment
and '10' being the lowest).
OUTLOOK
The negative outlook reflects S&P's view of a one-in-three chance
that it may lower the rating within the next 12 months. This is
due to the possibility that the government is unable to constrain
its debt levels, and that large fiscal and external imbalances
are slow to unwind when export revenues are weak and its medium-
term economic growth modest. This could occur, for instance, if
commodity prices weaken further.
The outlook could revert to stable if S&P believes fiscal
deficits will narrow further and the government's debt will
stabilize (relative to GDP), and that it remains likely that
PNG's external position will improve significantly over the next
few years, supported by solid economic growth and export
receipts.
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the
methodology applicable. At the onset of the committee, the chair
confirmed that the information provided to the Rating Committee
by the primary analyst had been distributed in a timely manner
and was sufficient for Committee members to make an informed
decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts.
The committee agreed that the fiscal, debt, and monetary profiles
had improved. All other key rating factors were unchanged.
The chair ensured every voting member was given the opportunity
to articulate his/her opinion. The chair or designee reviewed
the draft report to ensure consistency with the Committee
decision. The views and the decision of the rating committee are
summarized in the above rationale and outlook. The weighting of
all rating factors is described in the methodology used in this
rating action.
RATINGS LIST
Ratings Affirmed
Papua New Guinea (Independent State of)
Sovereign Credit Rating B+/Negative/B
=============
V I E T N A M
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ORIENT COMMERCIAL: Moody's Assigns B2 Deposit and Issuer Ratings
----------------------------------------------------------------
Moody's Investors Service has assigned the following first-time
ratings and assessments to Vietnam-based Orient Commercial Joint
Stock Bank (OCB):
1. Long-term local and foreign currency deposit and issuer
ratings of B2; stable outlook
2. Short-term local and foreign currency deposit and issuer
ratings of Not Prime;
3. Baseline credit assessment (BCA) and adjusted BCA of b3;
4. Counterparty Risk Assessments of B2(cr)/NP(cr)
The outlook is stable.
RATINGS RATIONALE
The B2 long-term ratings assigned to OCB reflect its BCA of b3,
and a one-notch uplift based on Moody's expectation of a moderate
probability of support from the Government of Vietnam (B1
stable).
The b3 BCA assigned to OCB reflects its modest solvency and
funding metrics. The BCA also takes in account Moody's
expectation that the bank's asset quality and capital profile
will weaken over time, because of its aggressive loan growth
strategy.
OCB's asset risk is elevated, but largely in line with the
average for other rated banks in Vietnam. Around 6% of its
adjusted gross loans were problematic at end-2016, an improvement
from 11% at end-2015. Moody's definition of adjusted problem
loans includes special mention loans, nonperforming loans,
problem loans sold to the Vietnam Asset Management Company
(VAMC), restructured loans classified as performing, and other
problem assets.
OCB's asset quality improved in 2016, because of the full cash
recovery of assets due from the government-owned Vietnam
Development Bank (unrated), and healthy cash recovery on VAMC
bonds. However, Moody's expects that OCB's asset risk will remain
elevated over the next 12-18 months, because of the rapid loan
growth of 39% in 2016 and 30% in 2015, which were much higher
than for the overall banking sector in Vietnam.
The bank's loan book is focused on the corporate and retail
sectors, which accounted for 58% and 39% of gross loans,
respectively, at end- 2016. The bank's corporate loan portfolio
has concentrations in construction and real estate; a credit
negative.
Like the other banks in Vietnam, OCB's rapid loan growth exerts
negative pressure on its capital ratios. At end-December 2016,
Moody's estimates that OCB's pro-forma tangible common equity
(TCE) to adjusted risk-weighted assets (RWA) fell to 7.9%. This
estimate assumes a cash dividend payout ratio similar to 2015,
and Moody's standard increase in risk weightings for Vietnam
government securities to 100%. Such a result is around 160 basis
points lower than at end-2015.
OCB's funding profile is moderate, because its small market share
in system deposits disadvantages the bank in competing with
larger rivals for depositors. Such a situation is reflected by
OCB's cost of deposit funding, which is one of the highest among
the 15 Moody's-rated banks in Vietnam. OCB also shows some
reliance on market funds, with wholesale liabilities funding 22%
of assets at end-2016.
The bank's overall liquidity position is comfortable, with liquid
resources representing 35% of tangible banking assets at end-
2016. However, 21% of liquid assets is pledged against
borrowings, a situation which weakens the overall liquidity
profile of the bank. Moody's expects that the bank's proportion
of liquid assets will moderate over time against the backdrop of
loan growth.
In terms of government support for OCB, Moody's applies the same
moderate support assumption as for other private-sector banks in
Vietnam. As a result, OCB's B2 long-term ratings incorporate one
notch of uplift from its BCA of b3. The moderate support
assumption is mainly underpinned by the bank's market share of
around 0.8% of system assets at end-2016.
WHAT COULD CHANGE THE RATINGS UP/DOWN
Moody's will consider upgrading the BCA if the bank's adjusted
problem loans ratio falls below 4%, and its TCE ratio exceeds
10%. Loan diversification away from real estate and construction
loans -- which Moody's considers as higher-risk in Vietnam --
would also be positive for the BCA. An improvement in Vietnam's
Macro Profile of Weak would also be BCA-positive.
The B2 long-term ratings could be upgraded, if the bank's BCA is
upgraded and Vietnam's sovereign rating is upgraded.
On the other hand, OCB's long-term ratings could be downgraded if
its problem loans ratio - as adjusted by Moody's - rises above
10% of gross loans, or if its TCE ratio drops significantly below
7%. The ratings are also sensitive to a significant weakening in
the bank's liquidity profile.
The principal methodology used in these ratings was Banks
published in January 2016.
Orient Commercial Joint Stock Bank is a small privately-owned
commercial bank headquartered in Ho Chi Minh City, Vietnam. At
end-2016, it held consolidated assets of VND64 trillion (around
$2.8 billion), including gross loans of VND38.5 trillion (around
$1.7 billion). It pursues a high-growth strategy centered on
retail and corporate loans.
*********
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
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or solicitation to buy or sell any security of any kind. It is
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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,
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Valerie U. Pascual, Marites O. Claro, Joy A. Agravante, Rousel
Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro and
Peter A. Chapman, Editors.
Copyright 2017. All rights reserved. ISSN: 1520-9482.
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