/raid1/www/Hosts/bankrupt/TCRAP_Public/180129.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
Monday, January 29, 2018, Vol. 21, No. 020
Headlines
A U S T R A L I A
EMECO HOLDINGS: Moody's Ups CFR to B3 on Improving Credit Profile
LADY MINDAMURRA: First Creditors' Meeting Set for Feb. 5
NQR PTY: First Creditors' Meeting Set for Feb. 6
PALLAS BRIDE: Second Creditors' Meeting Set for Feb. 7
PILETECH PTY: First Creditors' Meeting Slated for Feb. 5
R C CIVIL: Second Creditors' Meeting Set for Feb. 5
C H I N A
GANGTAI GROUP: Fitch Publishes 'B' IDR; Outlook Stable
JIANGSU NANTONG: Moody's Rates US$300MM Senior Unsecured Notes B2
RONSHINE CHINA: Fitch Rates Proposed US Dollar Senior Notes B+
TAIZHOU HUAXIN: Fitch Publishes BB+ Long-Term IDR; Outlook Stable
TIMES PROPERTY: S&P Affirms 'B+' CCR With Stable Outlook
XINYI CITY: Fitch Affirms BB- Long-Term IDR; Outlook Stable
H O N G K O N G
NOBLE GROUP: Nears Debt Restructuring Deal With Lenders
I N D I A
ACCORD PLUS: ICRA Reaffirms B+ Rating on INR13cr Term Loan
AISHWARYA IMPEX: Ind-Ra Affirms BB- Issuer Rating, Outlook Stable
ARCADIA SHIPPING: CARE Lowers Rating on INR129.12cr Loan to D
BETTIAH MUNICIPAL: ICRA Assigns B+ Long-Term Issuer Rating
BHUSHAN STEEL: Piramal to Join JSW Steel, JFE Steel in Bid
D P GARG: Ind-Ra Affirms B+ LT Issuer Rating, Outlook Stable
DIVINE MISSION: CARE Reaffirms 'B' Rating on INR7.56cr Loan
ENERSHELL ALLOYS: CARE Raises Rating on INR34.76cr Loan to B
EXCEL METAL: CARE Moves D Rating to Not Cooperating Category
GEETANJALI VASTRALAYA: Ind-Ra Assigns B+/Stable Issuer Rating
GLOBAL COPPER: ICRA Withdraws B Rating on INR10cr Cash Loan
HI-TECH RADIATORS: Ind-Ra Affirms 'BB+'/Stable Issuer Rating
HMT MACHINE: CARE Reaffirms C Rating on INR49.82cr LT Loan
IDAA INFRASTRUCTURE: Ind-Ra Withdraws Senior Bank Loan Rating
IRB JAIPUR: Ind-Ra Withdraws Senior Project Bank Loan Rating
IRB SURAT: Ind-Ra Withdraws Senior Project Bank Loan Rating
ISKCON STRIPS: Ind-Ra Moves BB+ Issuer Rating to Non-Cooperating
JAINEX METALIKS: Ind-Ra Moves B- Issuer Rating to Non-Cooperating
JALARAM GINNING: CARE Reaffirms B+ Rating on INR0.32cr LT Loan
JANALAKSHMI FINANCIAL: ICRA Cuts Rating on INR4.10cr PTCs to D
MADRAS MEDICAL: ICRA Reaffirms B+ Rating on INR34.94cr LT Loan
MANOR FLOATEL: IDBI Files Insolvency Case Over Unpaid Loans
MARUTI ENTERPRISES: CARE Assigns 'B' Rating to INR7.25cr Loan
NAMASTHETU INFRATECH: ICRA Moves B Rating to Not Cooperating
NEERAJ PAPER: Ind-Ra Assigns 'BB+' Issuer Rating, Outlook Stable
PAVAN AGRO: CARE Assigns 'B' Rating to INR5.48cr LT Loan
RIYA IMPEX: Ind-Ra Migrates B+ Issuer Rating to Non-Cooperating
S.V. PATEL: ICRA Moves B+ Rating to Not Cooperating
SAHARA ENGINEERING: Ind-Ra Affirms 'BB' LT Issuer Rating
SARAF TRADING: Ind-Ra Migrates B Issuer Rating to Non-Cooperating
SIDDHI COTTON: ICRA Reaffirms B+ Rating on INR8cr Cash Loan
SIDDHI COTTON INDUSTRIES: ICRA Reaffirms B+ INR12cr Loan Rating
SUBHAMASTHU SHOPPING: ICRA Withdraws B+ Rating on INR6.5cr Loan
SVR CORPORATION: CARE Assigns B+ Rating to INR9.50cr LT Loan
VARDAAN LIFESTYLE: CARE Reaffirms B+ Rating on INR15cr LT Loan
VEGA ENTERTAINMENT: Ind-Ra Migrates D Rating to Non-Cooperating
VIDEOCON INDUSTRIES: NCLT Moves SBI's Insolvency Plea to Feb. 21
WESTERN INDIA: CARE Moves D Rating to Not Cooperating Category
WOMEN'S NEXT: CARE Assigns B Rating to INR12.50cr LT Loan
I N D O N E S I A
MEDCO ENERGI: Fitch Gives Final 'B' Rating to US$500MM Sr. Notes
WIJAYA KARYA: Fitch Rates IDR5.4 Tril. Sr. Unsecured Notes 'BB'
J A P A N
HARENOHI: Court Starts Bankruptcy Process v. Kimono Rental Firm
N E W Z E A L A N D
CHRISTIAN SAVINGS: Fitch Hikes IDR to BB-; Outlook Stable
P A K I S T A N
PAKISTAN: Fitch Revises Outlook to Negative; Affirms B IDR
S I N G A P O R E
UTAC HOLDINGS: S&P Assigns 'B' CCR, Outlook Stable
S O U T H K O R E A
CAFFE BENE: Wins Court Nod to Restructure Under Receivership
S R I L A N K A
SRILANKAN AIRLINES: Fitch Affirms B+ US$ Denominated Bonds Rating
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A U S T R A L I A
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EMECO HOLDINGS: Moody's Ups CFR to B3 on Improving Credit Profile
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Moody's Investors Service has upgraded Emeco Holdings Limited's
(Emeco) corporate family rating to B3 from Caa1 and Emeco Pty
Limited's backed senior secured debt rating to B3 from Caa1. At
the same time, Moody's has changed the outlook on the ratings to
stable from positive.
RATINGS RATIONALE
"The ratings upgrade reflects Emeco's improving credit profile,
underpinned by increased earnings and margins during the last
three quarters," says Shawn Xiong, a Moody's Analyst.
"The successful closing of the Force Equipment acquisition,
funded completely by an equity raising, will further increase
Emeco's fleet size, earnings, geographic and commodities
diversification, as well as provide the company with repair and
maintenance capabilities."
For the second quarter of fiscal 2018, ending Dec. 31, 2017, the
company's reported operating EBITDA improved to AUD35.8 million
from AUD31.2 million during the first quarter of fiscal 2018, and
its operating EBITDA margin improved to 43% from 35% over the
same period.
As such, Moody's expects Emeco's adjusted debt/EBITDA to register
in the range of 3.0x-3.5x for fiscal 2018, which is a level
comfortably above the Caa1 rating up-driver of less than 4.0x.
Moody's expects Emeco to continue to benefit from an improved
operating environment in Australia, where mining equipment supply
has tightened, and commodity producers are looking to increase
their capital spending off the back of relatively stable
commodity prices.
WHAT COULD CHANGE THE RATINGS
For a further ratings upgrade to be considered, Moody's would
expect to see Emeco continue to secure new contracts and sustain
or increase its revenue and earnings, while achieving the cost
and capex synergies outlined at the time of the merger.
Specifically, Moody's would consider upgrading Emeco's ratings if
the company generates positive free cash flow on a sustained
basis, and maintains adjusted debt/EBITDA comfortably below 3.0x
on a consistent basis.
A ratings upgrade would also require Emeco to improve and sustain
the operating utilization of its equipment to around 60% and to
maintain its operating EBITDA margin in the range of 35%-40%.
The ratings could be downgraded if a worse-than-expected macro
environment, operating underperformance and/or competitive
pressure, lead to a large number of Emeco's contracts being
terminated or not renewed on similar terms and margins, thereby
further reducing revenue and cash flow generation.
The ratings could also be downgraded if liquidity diminishes, and
the company cannot maintain adequate compliance with the
covenants in its debt facilities. Specifically, Moody's would
consider downgrading Emeco's ratings if its adjusted debt/EBITDA
exceeds 4.0x.
The principal methodology used in these ratings was Equipment and
Transportation Rental Industry published in April 2017.
Emeco Holdings Limited, established in 1972 and based in Perth,
is a mining equipment rental company.
Emeco Pty Limited is a wholly owned subsidiary of Emeco Holdings
Limited.
LADY MINDAMURRA: First Creditors' Meeting Set for Feb. 5
--------------------------------------------------------
A first meeting of the creditors in the proceedings of Lady
Mindamurra Pty Ltd will be held at the Conference Room Plaza
Level, BGC Centre, 28 The Esplanade, in Perth, WA, on Feb. 5,
2018, at 10:30 a.m.
Dino Travaglini, Jeremy Joseph Nipps, and Cliff Rocke of Cor
Cordis were appointed as administrators of Lady Mindamurra on
Jan. 23, 2018.
NQR PTY: First Creditors' Meeting Set for Feb. 6
------------------------------------------------
A first meeting of the creditors in the proceedings of NQR Pty
Ltd will be held at the offices of Cor Cordis Chartered
Accountants, Level 29, 360 Collins Street, in Melbourne,
Victoria, on Feb. 6, 2018, at 3:00 p.m.
Bruno Anthony Secatore and Luke Targett of Cor Cordis were
appointed as administrators of NQR Pty on Jan. 24, 2018.
PALLAS BRIDE: Second Creditors' Meeting Set for Feb. 7
------------------------------------------------------
A second meeting of creditors in the proceedings of Pallas Bride
and Fashion Pty Ltd has been set for Feb. 7, 2018 at 11:30 a.m.
at the offices of Cor Cordis, Mezzanine Level, BGC Centre, 28 The
Esplanade, in Perth, WA.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the
Company be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by Feb. 6, 2018, at 4:00 p.m.
Jeremy Joseph Nipps and Cliff Rocke of Cor Cordis were appointed
as administrators of Pallas Bride on Nov. 20, 2017.
PILETECH PTY: First Creditors' Meeting Slated for Feb. 5
--------------------------------------------------------
A first meeting of the creditors in the proceedings of:
- Piletech Pty Ltd;
- Piletech NSW Pty Ltd;
- SFL/Piletech (WA) Pty. Ltd.(trading as Piletech Western
Australia Pty Ltd;
- SFL/Piletech (Eastern Div) Pty Ltd;
- Steel Foundations Limited;
- Steel Foundations Technology Pty Ltd;
- Significant Pty Ltd; and
- Screw In Technologies Pty Ltd
will be held at the offices of Rodgers Reidy (QLD) Pty Ltd,
'River Quarter', Level 9, 46 Edward Street, in Brisbane,
Queensland, on Feb. 5, 2018, at 2:30 p.m.
David James Hambleton and James Marc Imray of Rodgers Reidy were
appointed as administrators of Piletech Pty and subsidiaries on
Jan. 23, 2018.
R C CIVIL: Second Creditors' Meeting Set for Feb. 5
---------------------------------------------------
A second meeting of creditors in the proceedings of R C Civil Pty
Ltd has been set for Feb. 5, 2018, at 10:00 a.m. at the offices
of Hall Chadwick, Level 40, 2 Park Street, in Sydney, NSW.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the
Company be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by Feb. 2, 2018, at 5:00 p.m.
David Allan Ingram and Richard Albarran of Hall Chadwick were
appointed as administrators of R C Civil on Dec. 19, 2017.
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C H I N A
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GANGTAI GROUP: Fitch Publishes 'B' IDR; Outlook Stable
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Fitch Ratings has published Gangtai Group Co., Ltd.'s Long-Term
Issuer Default Rating (IDR) of 'B' with Stable Outlook. The
agency has also published the senior unsecured rating of 'B',
with Recovery Rating of 'RR4'.
China-based Gangtai Group has businesses such as jewellery
retailing, real-estate development, cultural and media, financial
investments and trading. The company operates its main jewellery
business through 39.2%-owned Gangtai Holdings, which is listed on
Shanghai Stock Exchange.
Gangtai Group's ratings are supported by its diversified
jewellery brand portfolio, expansion into other business segments
and improving credit profile. The ratings are constrained by
limited access to the cash at Gangtai Holdings, a short history
of operating in the financial investments and cultural and media
segments, and the company's high leverage.
KEY RATING DRIVERS
Proportionate Consolidation: Gangtai Group's rating is derived
using a bottom-up approach in line with Fitch's Parent and
Subsidiary Rating Linkage criteria. Fitch assesses that there is
moderate to weak linkage between Gangtai Group and its associate
Gangtai Holdings. Therefore Gangtai Group is rated on a
proportionate consolidated basis.
Limited Cash Access: Gangtai Group's access to Gangtai Holdings
cash is limited because the parent does not hold the majority of
the listed company. Gangtai Group cannot easily access Gangtai
Holdings' cash flows except via dividends. Fitch expects Gangtai
Group to receive dividends of CNY10 million-15 million a year
from the listed company, compared with group EBITDA of CNY0.5
billion-1.0 billion a year during 2017-2020.
Multi Jewellery Brand Retailer: Gangtai Holdings retails a
diversified portfolio of four brands of jewellery in China, and
is the group's major revenue and EBITDA generator. According to
Euromonitor, jewellery sales in China are expected to increase by
3%-5% a year in 2017-2020. Fitch expects the jewellery retailer
to have generated 51% of group revenue and 57% of group gross
profit in 2017 compared with 79% of revenue and 57% of gross
profit in 2016. Gangtai Group acquired Italian jewellery and
watch company Buccellati in 2H17 and Fitch expect the group to
inject the acquired company into Gangtai Holdings in 2018.
Benefits from Business Diversification: Gangtai Group also
benefits from improving business diversification through the
development of its residential and commercial property, financial
investments and cultural and media segments. The cultural and
media business is still at the investment stage, and Fitch
expects it to break even on a free cash flow basis only from
2020. However, the property business is likely to be the key
driver of Gangtai Group's revenue and EBITDA from 2018. The
cultural and media, financial investments and trading businesses
will make only minimal revenue and cash flow contribution to the
group in the next three years.
Weak Financial and Credit Profile: On a proportionally
consolidated basis, Gangtai Group's financial profile is weak
with low FFO fixed-charge coverage of 0.6x and EBITDA gross
interest coverage 0.8x by end-2017, and high FFO net leverage of
17.5x and net debt/EBITDA of 13.3x. Although revenue growth and
margin expansion are likely to pick up in 2017-20, Fitch expects
Gangtai Group to generate negative FCF of CNY400 million to
CNY700 million a year in 2017-2018 due to capex on residential
and commercial property development. FCF is likely to only turn
positive from 2019 after the completion of a major property
project.
Fitch expects Gangtai Group's FFO net leverage to reduce to 5x-8x
and FFO fixed-charge coverage to improve to 1.2x-2.3x in 2018-20,
following the completion of several residential property
development projects as well as the injection of Buccellati into
Gangtai Holdings.
DERIVATION SUMMARY
Gangtai Group has higher leverage, lower coverage and a more
volatile margin than Gangtai Holdings. Gangtai Holdings'
financial profile is comparable to consumer companies rated
between 'BB-' and 'B-' categories, including Chinese watch
retailer Hengdeli Holdings Limited (B-/Stable) and Chinese
department store operator Golden Eagle Retail Group Limited (BB-
/Negative). In particular, Gangtai Holdings and Hengdeli require
heavy working capital to finance the inventory for jewellery and
watch retailing, respectively.
KEY ASSUMPTIONS
Fitch's key assumptions within Fitch rating case for the issuer
include:
- Revenue growth of 1%-9% per year, with EBITDA margin expanding
to 7.4%-12.8% in 2017-2020 from 7.1% in 2016
- Lower working capital requirement in 2017-2020
- Capex at CNY400 million-500 million a year during 2017-2020
- CNY40 million-50 million dividend payout (10% payout ratio)
from Gangtai Holdings; no dividend payout from unlisted
entities
RATING SENSITIVITIES
Developments That May, Individually or Collectively, Lead to
Positive Rating Action
- Gangtai Holdings successfully executes business plans,
including improving the profitability of Buccellati
- FFO adjusted net leverage sustained below 5x, based on
proportionate consolidation
- FFO fixed charge coverage sustained above 1.5x, based on
proportionate consolidation
Developments That May, Individually or Collectively, Lead to
Negative Rating Action
- Gangtai Holdings has poor business execution, including
widening losses at Buccellati
- FFO adjusted leverage sustained above 6.5x, based on
proportionate consolidation
- FFO fixed charge coverage sustained below 1.2x, based on
proportionate consolidation
LIQUIDITY
Adequate Liquidity: At end-June 2017, on a proportionate
consolidation basis, Gangtai Group had short-term debt of CNY5.4
billion, (including a gold loan of CNY2.0 billion and of the
current portion of long-term debt of CNY725 million), long-term
borrowings of CNY2.8 billion and long-term bonds of CNY2.4
billion. The group had available cash of CNY5.2 billion and an
unused credit facility of CNY2.1 billion; Fitch believe Gangtai
Group will be able to roll over the short-term debt.
JIANGSU NANTONG: Moody's Rates US$300MM Senior Unsecured Notes B2
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Moody's Investors Service has assigned a definitive B2 rating to
the US$300 million, 7.8%, 3-year senior unsecured notes, due
Oct. 20, 2020, issued by Jiangsu Nantong Sanjian International
Co., Ltd. The notes are guaranteed by Jiangsu Nantong Sanjian
Construction Group Co., Ltd. (JNTC, B2 stable).
The rating outlook is stable.
RATINGS RATIONALE
The definitive rating assignment follows JNTC's completion of its
USD bond issuance, the final terms and conditions of which are
consistent with Moody's expectations, and the registration of
JNTC's guarantee on the issued bonds with China's State
Administration of Foreign Exchange.
The provisional rating was assigned on Oct. 17, 2017, and Moody's
ratings rationale was set out in a press release published on the
same day.
The principal methodology used in this rating was Construction
Industry published in March 2017.
Jiangsu Nantong Sanjian Construction Group Co., Ltd. (JNTC),
headquartered in Haimen, Jiangsu Province, is a privately owned
engineering contractor in Eastern China. Revenue for the 12
months ended June 30, 2017 totaled approximately RMB20.4 billion.
The company is 73.05% owned by Nantong Sanjian Holdings Co.,
Ltd., which is in turn majority owned by its founders and 13.2%
owned by Haimen City Development and Construction Co., Ltd.,
under the Haimen State-owned Assets Supervision and
Administration Commission.
JNTC listed on China's National Equities Exchange and Quotations
in July 2016.
RONSHINE CHINA: Fitch Rates Proposed US Dollar Senior Notes B+
--------------------------------------------------------------
Fitch Ratings has assigned Ronshine China Holdings Limited's
(B+/Stable) 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 Ronshine's senior unsecured rating because they
are unconditionally and irrevocably guaranteed by the company.
Ronshine's ratings are supported by a geographically diversified
land bank, following expansion into new cities in 2017, and
strong contracted sales growth. However, the rating is
constrained by Ronshine's sustained high leverage from its
aggressive land acquisition strategy and uncertain government
policy, which Fitch believes may significantly affect the
profitability of projects built on the more expensive land bought
in 2016.
KEY RATING DRIVERS
More Diversified Land Bank: Fitch believes Ronshine's expansion
has reduced the company's geographical concentration risk, which
should mitigate the slowing sales pace in high-tier cities that
are severely affected by tighter home-purchase restriction
policies. In 1H17 the company entered the cities of Chengdu,
Tianjin, Guangzhou, Chongqing, Ningbo and Zhengzhou as well as
lower-tiered Longyan, Putian, Jinhua, Shaoxing and Quzhou.
Increased exposure to lower-tier cities that are benefiting from
spill-over development in neighbouring high-tier cities was a key
driver for Ronshine's strong 2017 sales. Fitch expect this trend
to continue and for Ronshine's market repositioning to allow it
to tap into the new urban housing demand. Ronshine had
attributable land bank of 6.3 million square metres (sqm) across
18 cities in China as of end-June 2017, up from 4.8 million sqm
across seven cities at end-2016.
Larger Scale, Strong Sales: Ronshine's contracted sales were up
by 104% yoy to CNY50 billion in 2017, following a 70% yoy
increase in contracted floor space sold to 2.4 million sqm.
Proactive land acquisitions in 2016 have provided the company
with abundant saleable resources. Its contracted selling price
was up by 20% yoy to CNY21,046 per sqm in 2017, with the sales
contribution from the high-average-selling-priced Shanghai region
rising to 18% in 1H17, from 9% in FY16.
Aggressive Land Acquisitions: Fitch expects Ronshine's leverage,
as defined by net debt/adjusted inventory, to remain at a higher
50%-55% in the next three years, from 49% as at end-2016.
Ronshine replenished 3.1 million sqm of attributable gross floor
area in 10M17 for CNY24 billion, or 69% of its contracted sales.
Fitch believes Ronshine will need to use about 60% of its
contracted sales proceeds each year to acquire new land to deepen
its geographical penetration and expand its contracted sales
scale, limiting its room to de-leverage in the short term.
Limited Margin Improvement: Fitch expect Ronshine's EBITDA margin
to stay at around 20% in 2017-2018. Its margin, excluding
capitalised interest, fell to 19% in 2016, from 36% in 2015, when
projects outside high-margin Fujian province started to be
recognised. The EBITDA margin stabilised to 20% in 1H17, but the
expansion in the company's scale and geographical coverage may
incur higher operating costs, which could limit further margin
improvement.
DERIVATION SUMMARY
Ronshine's contracted sales scale of CNY50 billion per year and
diversified land bank in China is equivalent to other 'BB-' rated
homebuilders, such as Yuzhou Properties Company Limited (BB-
/Stable) and China Aoyuan Property Group Limited (BB-/Stable).
Its leverage, as defined by net debt/adjusted inventory, of
around 40%-50% is at the mid-range level of 'B' category peers,
including Times Property Holdings Limited (B+/Positive) and
Modern Land (China) Co., Limited (B+/Stable), while most 'B+'
peers have leverage below 40%. Fitch believe Ronshine's more
diversified land bank can support a 'B+' rating despite its
leverage being higher than 'B+' peers. Ronshine needs to
continuously replenish its land bank at market prices, which
limits its ability to de-leverage and pressures its margin. This
constrains its rating at 'B+'.
KEY ASSUMPTIONS
Fitch's key assumptions within Fitch rating case for the issuer
include:
- Contracted sales gross floor area to increase by 3% in 2018
- Average selling price to increase by 5% in 2018
- EBITDA margin, excluding capitalised interest, at 20%
for 2017-2018
- Land acquisition costs at 0.5x-0.6x of contracted sales for
2018, assuming Ronshine maintains about four to five years of
land bank (2017: 0.5x)
- Leverage, as measured by net debt/adjusted inventory, at about
50%-60% for 2017-2018
RATING SENSITIVITIES
Positive: Positive rating action is unlikely in the next 12 to 18
months, as leverage is likely to remain high, but developments
that may, individually or collectively, lead to positive rating
action include:
- attributable contracted sales sustained at CNY30 billion or
above;
- EBITDA margin, excluding capitalised interest, sustained at
25% or above; and
- leverage, as measured by net debt/adjusted inventory,
sustained below 40%.
Negative: Developments that may, individually or collectively,
lead to negative rating action include:
- Attributable contracted sales below CNY20 billion for a
sustained period;
- EBITDA margin, excluding capitalised interest, below 20% for a
sustained period; and
- leverage, as measured by net debt/adjusted inventory, at above
55% for a sustained period.
LIQUIDITY
Tight Liquidity: Ronshine had cash and deposits, including term
deposits and restricted cash, of CNY11 billion as of end-June
2017, against debt maturing in one year of CNY19 billion. Fitch
expect that the liquidity position improved in 2H17 after the
company's share placement and strong 2H17 contracted sales.
Ronshine completed a top-up equity market placement in November
2017, raising HKD1 billion. Contracted sales also accelerated in
2H17, reaching CNY26 billion in the five months from July 2017 to
November 2017, against CNY16 billion in 1H17 and CNY25 billion
for the full-year 2016.
Diversified Funding Channels: Apart from equity markets, Ronshine
has access to the private and public domestic bond market,
offshore bond market, asset-backed securities, bank borrowings
and trust loans.
TAIZHOU HUAXIN: Fitch Publishes BB+ Long-Term IDR; Outlook Stable
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Fitch Ratings has published Taizhou Huaxin Pharmaceutical
Investment Co., Ltd.'s (THPI) Long-Term Foreign- and Local-
Currency Issuer Default Ratings (IDRs) of 'BB+' with a Stable
Outlook.
KEY RATING DRIVERS
Links to Taizhou Municipality: THPI's ratings are credit linked,
but not equalised, with those of Taizhou municipality in eastern
China. The link reflects the Taizhou government's ownership of
THPI and its strong level of control and oversight, as well as
the strategic importance of THPI to the municipality and the
development zone in which THPI operates.
Taizhou's Creditworthiness: Taizhou is one of 13 prefecture-level
cities within Jiangsu province. Taizhou has achieved considerable
success over the past two years in developing the pharmaceutical
industry as part of its economic transformation. Taizhou's gross
regional product (GRP) growth of 9.5% yoy in 2016 was the highest
in Jiangsu. Its GRP per capita was also above the peer average.
Taizhou's growth and its stable fiscal performance mitigate the
risks from the city's moderately high continent liabilities from
its public-sector entities.
Legal Status Mid-Range: THPI is registered as a state-owned
limited liability company and is 71.1% owned by Taizhou State-
owned Assets Supervision and Administration Commission (SASAC).
Taizhou SASAC expects to repurchase the remaining stake by 2019,
while the government has no plans to dilute its shareholding in
THPI. Under the current legal status, THPI's liabilities are not
automatically absorbed by the Taizhou municipality.
Control and Supervision Stronger: THPI is directly supervised by
Taizhou SASAC. The municipal government and the Taizhou Medical
High-tech Industry Development Zone's (Taizhou HTDZ) management
committee appoint THPI's board members, giving them oversight
over the company's major projects and financing plans.
Strategic Importance Mid-Range: THPI is Taizhou's largest
government-related entity (GRE) by total assets and plays a key
role in the development of the Taizhou HTDZ, an integral part of
the city's 13th five-year plan. In addition to urban development,
THPI also provides an ecosystem, ranging from construction and
leasing or sale of properties to the sale, distribution and
logistics services for pharmaceutical products. The attribute was
assessed at mid-range, as the Taizhou HTDZ's contribution to the
city's GRP is limited to about 5%.
Government Integration Mid-Range: THPI has established close
financial ties with the Taizhou municipality, which provides a
combination of recurring injections and subsidies. The government
injected CNY3.4 billion in capital between 2015 and 2016, while
subsidies averaged 26% and 139% of the company's revenue and
total profit, respectively, an indication of the government's
commitment. Fitch have therefore assessed this attribute at mid-
range.
Standalone Profile Weak: THPI is a public-sector entity whose
financial profile is characterised by sizeable capital
expenditure, negative free cash flow and high leverage. Its
standalone profile is unlikely to improve based on the zone's
expansion. THPI also faces geographical and industry
concentration risks, although recurring government support could
mitigate such risks.
RATING SENSITIVITIES
An upgrade of Fitch's internal credit assessment of the Taizhou
municipality could lead to a rating upgrade for the company. More
explicit support from the municipality and an increase in the
strategic importance of THPI may also trigger positive rating
action.
A significant weakening of THPI's strategic importance to the
municipality or a dilution of the municipality's shareholding may
result in a rating downgrade. A weaker fiscal performance or
increased indebtedness at the municipality, leading to
deterioration in the sponsor's internally assessed
creditworthiness, could also lead to a downgrade.
Fitch published an exposure draft on new criteria for government-
related entities on 27th November 2017, which would apply to THPI
if adopted as criteria. For further details, see Exposure Draft:
Government-Related Entities Rating Criteria.
Fitch will monitor both the application of existing and any new
central government laws, regulations and directives that will
effectively prohibit or restrict support by the local and
regional governments to the entities, with a practical impact on
the entities' future ability to service their debts. Fitch
interprets such initiatives as being undertaken by the central
government to disentangle GREs from public-sector balance sheets,
address indiscriminate GRE debt growth, and encourage greater
market discipline.
Depending on the degree of certainty and the extent of the
prohibition, the agency will take rating action, which could
result in either a widening of the notching or the adoption of a
bottom-up ratings approach, possibly even to the extent of the
removal of all support expectations.
TIMES PROPERTY: S&P Affirms 'B+' CCR With Stable Outlook
--------------------------------------------------------
S&P Global Ratings affirmed its 'B+' long-term corporate credit
rating on Times Property Holdings Ltd. The outlook is stable. At
the same time, S&P affirmed its 'B' long-term issue rating on
Times Property's outstanding senior unsecured notes.
S&P said, "We affirmed the ratings because we believe Times
Property will improve its leverage over the next 12 months from
the current high level. Our forecast of strong revenue growth,
stable margins, and more disciplined land acquisitions supports
our view. We estimate that the company's ratio of debt to EBITDA
will gradually reduce to around 5x over the next two years, from
our estimate of 6.0x-6.5x in 2017.
"The affirmation also reflects our expectation that Times
Property will continue to grow its scale with its carefully
planned regional focused strategy and stable margin. In our view,
the company has a good record of maintaining high operational and
financial stability even under less favorable market conditions
and tighter credit conditions.
"We believe Times Property's leverage has peaked in 2017,
following its large land acquisitions. We estimate the company's
land premium paid will have reached Chinese renminbi (RMB) 17
billion-RMB19 billion in 2017, including about RMB5 billion of
unpaid premium brought forward.
"At the same time, we believe the company will continue to build
its cash balances to meet its growing capital needs amid
tightening onshore financing. We estimate that Times Property's
gross debt will have increased to RMB33 billion-RMB35 billion in
2017, from RMB31 billion at the end of June 2017.
"We expect an acceleration in Times Property's revenue growth in
2018 and 2019, which will help the company deleverage. Times
Property's contracted sales have increased significantly to
RMB41.6 billion in 2017, from RMB19.5 billion in 2015. Given the
company's average post-sales recognition cycle of around 1.5
years, its revenue is likely to grow rapidly starting late 2017.
"In our base case, we expect revenue to reach RMB21 billion-RMB23
billion in 2017 and grow by 40% annually in 2018 and 2019. As a
result, we estimate the company's debt-to-EBITDA ratio to recover
to 5.0x-5.5x in 2018 and below 5x in 2019.
"We believe Times Property has been successful in implementing
its regional focused strategy. Unlike its peers, which have
expanded out of their home markets in recent years, Times
Property remains focused on Guangdong province, especially in
Guangzhou, Foshan, and Zhuhai. Such a strategy helps the company
to maintain a strong brand and local knowledge, benefiting its
sales execution and land acquisition. We view Guangzhou as a
relatively stable housing market among higher-tier cities in
China, with single-digit growth in 2017. As a result, Times
Property's margin is relatively stable, when compared to its
peers'.
Times Property has shown prudent financial management resulting
in a continuous improvement in its capital structure, in S&P's
view. The company maintains a widely spread debt maturity with
diverse funding channels. It also maintained a high cash balance
that could help it meet any unexpected cash uses and liquidity
tightening. Times Property's standing in the credit market has
also improved, which is reflected in its significantly lower cost
of offshore issuances.
S&P said, "The stable outlook reflects our view that Times
Property's strong revenue recognition will help the company
deleverage in the next 12 months. We also expect Times Property
to increase its contracted sales and maintain a stable margin
over the period.
"We could lower the rating if Times Property's debt-to-EBITDA
ratio consistently exceeds our expectation of around 6x with no
signs of improvement. This could happen if: (1) the company's
debt-funded expansion is more aggressive than we expect; or (2)
its profitability substantially declines because of rising land
costs and increasing competition in Guangzhou, Foshan, and
Zhuhai.
"We could raise the rating if Times Property continues to adopt a
more conservative financial policy and improve its leverage, such
that its debt-to-EBITDA ratio is sustainably below 5x."
XINYI CITY: Fitch Affirms BB- Long-Term IDR; Outlook Stable
-----------------------------------------------------------
Fitch Ratings has affirmed Xinyi City Investment & Development
Co., Ltd.'s (XCID) Long-Term Foreign- and Local-Currency Issuer
Default Ratings (IDRs) at 'BB-'. The Outlook is Stable. Fitch has
also affirmed the 'BB-' rating on the US$110 million 5.8% senior
unsecured notes due 2019 issued by Xingang International Holding
Limited.
The notes are unconditionally and irrevocably guaranteed by
Xingang International Investment Company Limited (XII), a wholly
owned subsidiary of XCID. The notes are senior unsecured
obligations of XII and rank pari passu with all other senior
unsecured obligations of XII.
In place of a guarantee, XCID has granted a keepwell and
liquidity support deed and a deed of equity interest purchase
undertaking to ensure that XII has sufficient assets and
liquidity to meet its obligations under the guarantee for the
notes.
The notes are rated at the same level as the Long-Term IDR of
XCID, given the strong link between XII and XCID, and the
keepwell and liquidity support deed and deed of equity interest
purchase undertaking, which provide additional support to XII and
transfer the ultimate responsibility of payment to XCID.
In Fitch's opinion, the deeds signal a strong intention from XCID
to ensure that XII has sufficient funds to honour the debt
obligations. The agency also believes XII intends to maintain its
reputation and credit profile in the international offshore
market, and is unlikely to default on offshore obligations.
Additionally a default by XII could have significant negative
repercussions on XCID for any future offshore funding.
KEY RATING DRIVERS
Linked to Xinyi City: XCID's ratings are credit-linked to Fitch's
internal assessment of the creditworthiness of Xinyi City. This
is based on XCID's 100% ownership by the city, strong city
oversight of its financial and operational activities, strategic
importance of XCID to the city and strong fiscal support to the
city. These factors result in a strong likelihood of
extraordinary support, if needed. Therefore, XCID is classified
as a credit-linked public-sector entity under Fitch's criteria.
Xinyi City's Evolving Creditworthiness: Located in eastern
coastal area of China, Xinyi City is a county in Jiangsu
Province. The city has fasting-growing and diversified socio-
economic profile and more fiscal flexibility than other counties
in Jiangsu due to its "county designated in provincial plan"
status. The city's strengths are offset by its volatile revenue
from land sales, high level of contingent liabilities arising
from its public-sector entities and small scale in terms of gross
regional product (GRP) and fiscal revenue.
Legal Status Attribute at Mid-Range: XCID is registered as a
state-owned limited liability company under Chinese company law.
It is wholly-owned by the State-owned Assets Supervision and
Administration Commission of Xinyi and supervised by the Xinyi
government.
Strategic Importance Attribute at Mid-Range: XCID is the primary
investment and financing platform of Xinyi City and plays an
important role in implementing the city government's blueprint
for urban planning and city construction. The company takes a key
role in assisting the government to develop large-scale city
infrastructure projects and water supply. Furthermore, XCID is
also commissioned by the city government as an exclusive
concessioner of primary land developer in several key areas.
Government Integration Attribute at Mid-Range: The Xinyi
government injected capital into XCID twice in 2008-2013, which
expanded its paid-in capital to CNY1 billion from CNY60 million.
XCID received another CNY2.6 billion in capital injections from
the Xinyi government in 2014-2016, equivalent to 22% of
shareholder equity at end-2016. XCID also received subsidies of
CNY200 million-300 million a year in the last few years, which
came to around 30% of each year's revenue.
Control & Supervision Attribute Stronger: As a wholly government-
owned entity, XCID's major business such as urban development and
primary land development needs approval from the city government.
Its financing plan and indebtedness level are also closely
monitored by the government. The senior management of the company
are also appointed by the government. In addition, XCID is also
required to report its operational and financial results to the
government on a regular basis.
Weak Standalone Financial Profile: XCID's financial profile has
been characterised by large capex, negative free cash flow and
high leverage. Its debt to EBITDA rose to 31x by end-2016 from
11.6x at end-2014 . XCID's standalone credit profile is
constrained by its public-service nature and is subject to
refinancing risk due to the small scale of its sponsor's budget.
RATING SENSITIVITIES
An upgrade of Fitch's internal assessment of Xinyi City's
creditworthiness as well as a stronger or more explicit
commitment of support from the city may trigger positive rating
action on XCID.
A significant weakening XCID's strategic importance to the city,
dilution of the city government's shareholding, and/or reduced
city support may result in a downgrade.
A downgrade may also stem from weaker fiscal performance or
increased indebtedness of the city, leading to deterioration to
Fitch's assessment of is creditworthiness.
A rating action on XCID will result in a similar action on the
rating on the US dollar senior unsecured notes.
Fitch will monitor both the application of existing and any new
central government laws, regulations and directives that will
effectively prohibit or restrict support by local and regional
governments to government-related entities (GREs) such as XCID,
which may have a practical impact on the entities' ability to
service their debts. Fitch interprets such initiatives as the
central government's efforts to disentangle GREs from public-
sector balance sheets, address indiscriminate GRE debt growth and
encourage greater market discipline.
Depending on the degree of certainty and the extent of the
prohibitions, the agency will take rating action that could
result in a widening of the notching or the adoption of a bottom-
up ratings approach, possibly even to the extent of the removal
of all support expectations.
Fitch published an exposure draft "Government-Related Entities
Rating Criteria" on Nov. 27, 2017 that would apply to XCID if
adopted as criteria.
================
H O N G K O N G
================
NOBLE GROUP: Nears Debt Restructuring Deal With Lenders
-------------------------------------------------------
The Financial Times reports that crisis-hit commodity trader
Noble Group is moving closer toward a debt restructuring deal
with its lenders.
The FT relates that the company's chairman Paul Brough told
shareholders at a meeting in Singapore on Jan. 25 that talks had
been "constructive" and were "moving forward".
"I'm hopeful that we will reach a conclusion at some point in the
near future," the report quotes Mr. Brough, a restructuring
expert who was appointed chairman in May, as saying.
He was speaking after a report on Debtwire claimed the Singapore-
listed group had struck an outline agreement with its creditors
to restructure $3.5 billion of debt, the FT states.
According to the FT, the shareholder meeting was called to
approve the disposal of dry-bulk carriers for $95 million to cut
debt. Noble has also sold its prized oil business, as well as its
US gas and power unit in an attempt to reduce leverage. It is now
planning to focus on its coal trading business in Asia, the
report notes.
The FT says Noble was plunged into crisis in February 2015, when
Iceberg Research, a previously unknown firm, produced the first
in a series of reports highly critical of the company and its
inability to convert profits into cash.
Noble, once Asia's largest commodity trader, has always defended
its accounting, the FT relates.
About Noble Group
Hong Kong-based Noble Group Limited (SGX:N21) --
http://www.thisisnoble.com/-- engages in supply of agricultural,
industrial and energy products. The Company supplies agricultural
and energy products, metals, minerals and ores. Agriculture
products include grains, oilseeds and sugar to palm oil, coffee,
and cocoa. Energy business includes coal, gas and liquid energy
products. In metals, minerals and ores (MMO), it supplies iron
ore, aluminum, special ores and alloys. The Company operates
nearly in 140 locations. It supplies growth demand markets in
Asia and Middle East. Alcoa World Alumina and Chemicals is the
subsidiary of this company.
As reported in the Troubled Company Reporter-Asia Pacific on
Nov. 22, 2017, Fitch Ratings downgraded Hong Kong-based
commodities trader Noble Group Limited's Long-Term Foreign-
Currency Issuer Default Rating (IDR), senior unsecured rating and
the ratings on all its outstanding senior unsecured notes to 'CC'
from 'CCC'. The Recovery Rating is 'RR4'. The downgrade follows
Noble's Nov. 15, 2017 announcement that it has commenced
discussions with stakeholders on its capital structure.
=========
I N D I A
=========
ACCORD PLUS: ICRA Reaffirms B+ Rating on INR13cr Term Loan
----------------------------------------------------------
ICRA Ratings has reaffirmed the long-term rating of [ICRA]B+ to
the INR13.00-crore term loan facility and the INR5.00-crore cash
credit facility of Accord Plus Ceramics Private Limited. ICRA has
also reaffirmed the short-term rating of [ICRA]A4 to the INR2.30-
crore non-fund based bank guarantee facility of APCPL. The
outlook on the long-term rating is Stable.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based-Term
Loan 13.00 [ICRA]B+ (Stable); Reaffirmed
Fund-based-Cash
Credit 5.00 [ICRA]B+ (Stable); Reaffirmed
Non-fund Based-
Bank Guarantee 2.30 [ICRA]A4; Reaffirmed
Rationale
The reaffirmation of ratings continues to favourably factor in
the experience of the promoters spanning more than a decade in
the ceramic industry, the locational advantage, which ensures
easy availability of raw materials and geographically diversified
clientele.
The ratings are, however, constrained by the company's moderate
scale of operations, with significant decline in operating
margins in FY2017 because of the increase in the raw material
cost and selling expenses as a percentage of the operating
income. The ratings also take into account the average financial
risk profile marked by high gearing and average debt coverage
indicators. The ratings also factor in the exposure of the
company's profitability to volatility in raw material and
gas/coal prices. Further, the cyclicality associated with the
real estate industry, although expected to be mitigated by its
export volume, and the highly fragmented nature of the ceramic
tiles industry that results in intense competitive pressures, are
other rating concerns.
Outlook: Stable
ICRA believes that Accord Plus Ceramics Private Limited will
continue to benefit from the past experience of its promoters.
The outlook may revised to Positive if the company sustains its
healthy revenues, improves its profitability and efficient
working capital management while ensuring regular debt
repayments, which is likely to strengthen the financial risk
profile. The outlook may be revised to Negative if cash accruals
are lower than expected, or lower than expected profitability or
stretch in working capital cycle, weakens the liquidity position
of the company.
Key rating drivers
Credit strengths
Experience of promoters in the ceramic industry: The key
promoters of the company have more than a decade's experience in
the ceramic industry through their association with other group
entities that operate in the same business sector.
Favourable location for raw material: The manufacturing facility
of the company is located in the ceramic tiles manufacturing hub
of Morbi (Gujarat), which provides easy access to quality raw
materials.
Credit weaknesses
Decline in operating margins: The company has a moderate scale of
operations, with operating income reported at INR55.58 crore in
FY2017. The operating margins declined significantly to 9.27% in
FY2017 from 17.90% in FY2016 due to an increase in raw material
cost and selling expenses as a percentage of the operating
income.
Average financial risk profile: The capital structure remained
stretched with gearing of 2.47 times as on March 31, 2017 because
of increase in the debt level to support incremental working
capital requirement. The coverage indicators stood moderate with
interest coverage of 3.31 times, Total Debt/OPBDITA of 3.39 times
and NCA/Total Debt of 19.93% for FY2017.
High Intense competition: The company faces stiff competition
from established tile manufacturers as well as unorganised
players, which limits its pricing flexibility.
Vulnerability of profitability to any adverse fluctuations in raw
material and gas/coal prices: The margins of the company are
largely affected by the raw material price and piped natural
gas/coal price fluctuations. Any adverse movement in the prices
of raw materials and fuel could have an adverse impact on the
company's margins, considering its limited ability to pass on the
price hike owing to high competitive intensity. The price
fluctuations also impact the realisations of the company.
Accord Plus Ceramics Private Limited was established as a private
limited company in 2013 by Mr. Khimjibhai Saidva and family. The
company manufactures digitally printed ceramic wall tiles. Its
manufacturing unit in Morbi, Gujarat, has an installed production
capacity of 4,00,000 boxes of wall tiles per annum in dimensions
of 12"X12", 12"X18", 12"X24" and 10"X30". The promoters of the
company have longstanding experience in the ceramic industry by
being associated with other ceramic entities.
In FY2017, the company reported a net profit of INR0.31 crore on
an operating income of INR55.58 crore, as compared to a net
profit of INR0.01 crore on an operating income of INR28.13 crore
in the previous year.
AISHWARYA IMPEX: Ind-Ra Affirms BB- Issuer Rating, Outlook Stable
-----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has affirmed Aishwarya
Impex's (Aishwarya) Long-Term Issuer Rating at 'IND BB-'. The
Outlook is Stable. The instrument-wise rating actions are:
-- INR150 mil. Fund-based working capital limit affirmed with
IND BB-/Stable/IND A4+ rating;
-- INR58.5 mil. (reduced from INR70 mil.) Term loan limit due on
March 2024 affirmed with IND BB-/Stable rating.
KEY RATING DRIVERS
The affirmation reflects continued moderate scale of operations.
In FY17, revenue increased to INR976.3 million from INR865.4
million in FY16, driven by higher shrimp sales. EBITDA margin was
low at 3.2% in FY17 (FY16: 2.3%); low EBITDA margin is inherent
in a trading business. The rise in EBITDA margin was primarily
driven by higher occupancy of cold storage.
The ratings reflect continued weak credit metrics in FY17, given
an INR100 million capex was successfully undertaken during the
period. During the period, net leverage (Ind-Ra-adjusted net
debt/operating EBITDAR) was 7.8x (FY16: 8.2x) and EBITDA interest
cover (operating EBITDA/gross interest expense) was 1.3x (1.3x).
Ind-Ra expects Aishwarya's credit metrics to improve in FY18 in
view of scheduled debt repayment and generation of revenue from
high-margin shrimp processing unit (processing capacity
750kg/hour), which commenced full operations in January 2018.
The ratings also reflect continued tight liquidity owing to high
working capital requirement, which is inherent in a trading
business. Its peak utilisation of the working capital facilities
was about 97% during the 12 months ended December 2017. In
addition, the ratings reflect Aishwarya's partnership structure
and the susceptibility of the business to disease outbreaks.
The ratings, however, continue to be supported by the founders'
around two decades of experience in shrimp trading and
processing, and Aishwarya's strong relationships with customers
and suppliers.
RATING SENSITIVITIES
Negative: A decline in revenue or EBITDA margin leading to
deterioration in the credit metrics on a sustained basis will be
negative for the ratings.
Positive: Substantial revenue growth leading to an improvement
in the credit metrics on a sustained basis will be positive for
the ratings.
COMPANY PROFILE
Formed in 2011, Aishwarya initially provided cold storage rental
services. It ventured into the trading of prawns in January 2015
and the processing of shrimps in FY18.
ARCADIA SHIPPING: CARE Lowers Rating on INR129.12cr Loan to D
--------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Arcadia Shipping Ltd, as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank
Facilities 129.12 CARE D Revised from CARE BB-
Short Term Bank
Facilities (BG) 10.00 CARE A4 Reaffirmed
Detailed Rationale & Key Rating Drivers
The revision in rating assigned to the long term bank facilities
of Arcadia Shipping Ltd take into account delays in servicing of
debt obligations. The short term Bank Guarantee (BG) facility has
been re-affirmed since there is no invocation of BG.
Detailed description of the key rating drivers
Delay servicing of debt obligation is on account of significant
decline in freight rates in view of unfavorable industry scenario
which has affected the company's cash accruals significantly.
Established by Mr. M.N. Shah in 1981, Arcadia Shipping Limited
(ASL) is engaged in ship owning & management, shipping
agents/liner operations, ship broking/chartering, lighter age
contractors, coastal cargo movements and support for offshore
activities in the oil and gas sector. The company also handles
around 200 vessels calling at various Indian Ports per year as
shipping agents and has well experienced staff/sub-agents in
all major ports in India. The company does all kinds of
husbanding work for foreign liners touching Indian ports.
BETTIAH MUNICIPAL: ICRA Assigns B+ Long-Term Issuer Rating
----------------------------------------------------------
ICRA Ratings has assigned a long-term issuer rating of [ICRA]B+
to the Bettiah Municipal Council (BMC). The outlook on the long-
term rating is 'Stable'.
Rationale
The assigned rating takes into consideration the BMC's importance
to the State Government of Bihar (GoB) as a provider of key
municipal services in Bettiah town and the rule-based transfers
of the assigned revenues and grants from the state government,
which assists the council in making non-discretionary payments
like salaries, pensions and electricity bills. The rating also
derives comfort from the BMC's revenue-surplus position in the
last three years. ICRA notes the significant growth in the
expenditure towards projects related to roads, streetlights,
sewerage, water-supply and solid-waste management (SWM), which
were funded by matching grants from the state government.
The rating, however, is constrained by the BMC's significantly
weak information systems with instances of inconsistency in data,
small size of the BMC's own revenues, which limits its ability to
fund the cash-flow mismatch in case of irregular transfers from
the GoB., The rating is also impacted by the less-than-
satisfactory service standards maintained by the council in the
areas of water supply, roads, street lights, solid-waste
management and drainage. Moreover, the poor service levels in key
services adversely impact the citizen's willingness to pay
various taxes and charges and accept any upward revision in
taxes. ICRA notes that, going forward, a significant amount of
capital expenditure will be required by the BMC to improve these
services to a desired level. ICRA believes that the ability of
the BMC to improve its own revenue base, by exploiting various
tax and non-tax avenues available to it under the Bihar Municipal
Act, 2007 (Act), would be critical to improve its financial
position, going forward.
ICRA notes that the BMC proposes a large outlay for various
projects (INR 113.5 crore2 during FY2017 to FY2019), which would
primarily (90%) be funded by the Government of India (GoI) and
the GoB under the Atal Mission for Rejuvenation and Urban
Transformation (AMRUT) scheme. The remaining 10% is proposed to
be contributed by the BMC (INR11.3 crore). ICRA notes that the
financial position of the BMC would be adversely impacted if the
project assets, after commissioning, are unable to generate
adequate revenues to part fund the Operations & Maintenance (O&M)
costs, which are expected to increase significantly, going
forward. Although the council has implemented reforms such as
regular audit of financial statements, and introduction of e-
governance in some functions till date, effective implementation
of other key initiatives such as shifting to accrual-based
accounting system and revenue-enhancement measures would be key
determinants of the BMC's ability to improve its overall
performance. Finally, adequate number of staff and continuity of
such staff, especially in critical functions, would be crucial
for timely implementation of key projects and reforms.
Outlook: Stable
ICRA believes that the BMC will continue to get support from the
state government in the form of rule-based transfers, and grants.
The outlook may be revised to 'Positive' if the BMC's own revenue
witnesses more-than-expected growth. The outlook may be revised
to 'Negative' if the already stretched liquidity position further
deteriorates on account of a decline in the revenues or/and more-
than-expected expenditure towards establishment.
Key rating drivers
Credit strengths
Rule-based transfers from the state government: The grants
released by the GoB as per the implementation of the State
Finance Commission's (SFC's) recommendations which supports the
council for payment of salaries, and operations and maintenance
of key municipal services such as water supply, roads and drains.
Revenue-surplus position in the last three years: Also, the BMC
has generated a revenue surplus in the past years on account of
support from the state government in the form of various grants.
Credit challenges
Weak information systems: The management information system (MIS)
of the council remains weak with instances of inconsistency in
data.
Low share of own revenues: The BMC's own sources of revenue have
remained low (although increasing) primarily on account of poor
coverage of residential and commercial properties under the
property tax ambit.
Moderate credit quality of the GoB, which provides significant
financial support to the BMC: The council's own revenue base is
limited at present and therefore it depends significantly on the
finances from the state government, the credit quality of which
is moderate.
Less-than-satisfactory service levels: The service levels for the
key functions have remained low especially in the areas of solid-
waste management, drainage, etc.
Risk related to execution of large projects: A sizeable capital
outlay is required for the execution of large drainage projects
under the Atal Mission for Rejuvenation and Urban Transformation
(AMRUT). This could stretch the cash flows of the council.
Moreover, given the limited track record of the council in
executing large projects, timely execution of these projects
within the budgeted costs would be critical for the BMC's
financial position, going forward.
The Bettiah Municipal Council (BMC), being an urban local body
(ULB), provides civic services to Bettiah city, the head-quarter
of West Champaran district. According to Census 2011, the BMC,
covering an area of 11.5 sq. km., serves a total population of
1.32 lakh people. The BMC is governed by the Bihar Municipal Act,
2007 (Act), which is administered by the Urban Development and
Housing Department (UDHD), Government of Bihar (GoB). The highest
decision-making authority of the ULB is its Council, which is
formed every five years by electing Ward Councillors from each of
the 39 municipal wards. The Council is headed by a Chairman, who
is elected by the Ward Councillors. The overall operations of the
ULB are managed by the Executive Officer (EO), who is appointed
by the state government. The heads of the respective departments
support the EO in managing the services of the BMC. The key
services extended by the ULB are construction and maintenance of
roads and drains, water supply, solid-waste management, street
lights and amenities such as shopping stalls, community hall,
playgrounds, parks/gardens etc.
In FY2016, the BMC generated a revenue surplus of INR2.70 crore
on a total revenue income of INR11.01 crore compared to a revenue
surplus of INR4.66 crore on a total revenue income of INR14.78
crore in FY2015.
BHUSHAN STEEL: Piramal to Join JSW Steel, JFE Steel in Bid
----------------------------------------------------------
The Press Trust of India reports that Piramal Enterprises Ltd.
will join JSW Steel Ltd. and its Japanese business partner JFE
Steel Corp. to bid for debt-laden Bhushan Steel, a source privy
to the development said.
According to initial plans, JFE Steel will keep over 50 percent
stake in the business and the rest will be divided between JSW
Steel and Piramal Enterprises, the source said, PTI relates.
"JSW Steel along with JFE Steel and Piramal Enterprises will bid
for Bhushan Steel. JSW Steel will keep minority stake with
itself, some will be with Piramal and a majority say of over 50-
60 percent will be with JFE Steel but the operational power will
be with the steel maker," PTI quotes a source as saying
requesting anonymity.
Piramal Enterprises is the flagship firm of Piramal Group and its
investments span across pharma, information management and
financial services, PTI discloses.
According to the report, the insolvency resolution professional
has already extended the last date for submitting bids for
Bhushan Steel till Feb. 3 from Jan. 25 earlier.
Japanese JFE Steel also holds about 15 percent stake in the
Sajjan Jindal-run steel firm, the report notes. The country's top
steel maker has entered into technological collaboration with JFE
Steel Corp to manufacture high strength and advanced high
strength steel for the automobile sector.
Tata Steel, JSW Steel and Vedanta are among players that have
shown interest in Bhushan Steel, the report adds.
About Bhushan Steel
India-based Bhushan Steel -- http://www.bhushan-group.org/--
manufactures auto-grade steel.
Bhushan Steel is one of the 12 non-performing assets referred by
the Reserve Bank of India for National Company Law Tribunal
(NCLT) proceedings.
NCLT admitted the bankruptcy plea against the steel company filed
by State Bank of India on July 26, 2017.
Bhushan Steel's total debt stood at around INR42,355 crore as of
March 31, 2017.
D P GARG: Ind-Ra Affirms B+ LT Issuer Rating, Outlook Stable
------------------------------------------------------------
India Ratings and Research (Ind-Ra) has affirmed D.P. Garg
Exports (Pvt.) Ltd.'s (DPGE) Long-Term Issuer Rating at 'IND B+'.
The Outlook is Stable. The instrument-wise rating actions are:
-- INR115 mil. Fund based working capital limit affirmed with
IND B+/Stable/IND A4 rating; and
-- INR5 mil. Non-fund-based limits affirmed with IND A4 rating.
KEY RATING DRIVERS
The affirmation reflects DPGE's continued small scale of
operations and weak EBITDA margin. The company is operating at
its maximum manufacturing capacity; thus, for operational growth,
it needs to expand the same. In FY17, DPGE's revenue fell to
INR219.57 million (FY16: INR235.53 million) and EBITDA margin
deteriorated to 4.76% (5.11%) due to a decline in operating
income and lower end-product prices.
The rating also factor in moderate credit metrics, with gross
interest coverage (operating EBITDA/gross interest expense) at
2.09x (FY16: 2.09x) and net financial leverage (adjusted net
debt/operating EBITDAR) at 8.39x (8.55x). In FY17, there has been
decrease in external borrowings and interest obligations.
The ratings, however, are supported by DPGE's comfortable
liquidity position, as reflected in its 78.43% average use of the
working capital limits during the 12 months ended December 2016.
The ratings are further supported by over three decades of
experience of DPGE's founders in manufacturing and exporting
hinges and ironmongery and the company's long operational history
of two decades.
RATING SENSITIVITIES
Negative: A further decline in the EBITDA margin leading to
deterioration in the credit metrics could lead to a negative
rating action.
Positive: Sustained revenue growth, along with improved credit
metrics, could lead to a positive rating action.
COMPANY PROFILE
Established in 1998 and promoted by B.M. Garg, DPGE manufactures
and exports hinges and ironmongery at its facility in Noida.
DIVINE MISSION: CARE Reaffirms 'B' Rating on INR7.56cr Loan
-----------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Divine Mission Educational Trust (DME), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 7.56 CARE B; Stable Reaffirmed
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of DME is constrained
by trust's small though growing scale of operations leveraged
capital structure and increasing competition & limited reach. The
rating is further constrained due to high regulation in the
educational sector in India. The rating, however, derives
strength from experienced and qualified trustees along with
competent teaching staff, moderate surplus margin &debt coverage
indicators and buoyant prospects of Pre-school and K-12 segment
in India.
Going forward, the ability of the trust to increase the enrolment
of students while improving its overall solvency position would
remain the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Small though growing scale of operations: Although the total
operating income of the trust increased from INR1.00 crore in
FY15 to INR5.42 crore in FY17 at a compounded annual growth rate
(CAGR) of approximately 133% due to increase in the cumulative
student strength, however, the scale of operations continued to
remain small. The small scale limits the trust's financial
flexibility in times of stress and deprives it of scale benefits.
In 6MFY18 (Provisional), the trust reported TOI of INR4.43 crore
along with surplus of INR1.17 crore. Leveraged capital structure:
The capital structure of the trust stood leveraged with overall
gearing ratio of 2.78x as on March 31, 2017 (PY: 3.01x) mainly on
account of high dependence upon borrowings to fund various
business requirements. Further, corpus fund also stood low which
resulted in leveraged capital structure.
Increasing competition and limited reach: The trust operates one
school in Fatehabad, Haryana. Single location of Haryana limits
the penetration level for the society. Further, due to increasing
focus on education in India, a number of schools have opened up
in close proximity and several established private and government
schools are already running in and around the city.
High regulation in educational sector in India: Educational
sector is regulated by Ministry of Human Resource at the national
level, by the education ministries in each state, as well as by
Central bodies like University Grant Commission (UGC) and 14
other professional councils. The operating and financial
flexibility of the education sector is limited, as regulations
governs almost all aspects of operations, including fee
structure, changes in curriculum and infrastructure requirements.
Key Rating Strengths
Experienced and qualified trustees along with competent teaching
staff: Mr. Jag Pal Hayer has an experience of two decades in the
education industry gained through his association with DME and
various schools in Chandigarh. Mr. Surender Singh (President) and
Mr. Kewal Krishan (Vice-President) have experience of 8 years and
5 years, respectively in the education industry, gained through
their association with various schools in Fatehabad. Furthermore,
DME has employed a highly experienced and qualified teaching
staff to support the academic requirements of the school.
Moderate surplus margins and debt coverage indicators: The trust
had moderate surplus margins as reflected by SBID margin of
28.48% and surplus margin of 19.52% in FY17. SBID margin declined
from 41.68% in FY15 due to increase in operational expenses like
employee costs, selling expenses etc. However, surplus margin
improved on y-o-y basis due to improvement in SBID in absolute
terms and decline in interest expenses in percentage terms.
Furthermore, the trust also had comfortable debt coverage
indicators marked by interest coverage ratio of 3.18x in FY17 and
total debt to GCA of 5.79x for FY17 (PY: 2.89X and 6.43x,
respectively).
Buoyant prospects of Pre-school and K-12 segment in India: The
Government's thrust on improving the country's literacy rate
through higher enrolments as well as ensuring lower drop-out
rates in the K- 12 education space is expected to drive the
growth in terms of opening-up of the new schools especially in
Tier-III cities and rural areas of the country, which will
facilitate more and more opportunities to students spread across
the nation.
Divine Mission Educational Trust (DME) got registered as a trust
on June 13, 2012. The trust was established by Mr. Jag Pal Hayer
with an objective to provide school education services and is
running a school under the name of "Divine International Public
School" (DIP) at Fatehabad, Haryana. DIP is Central Board of
Secondary Education (CBSE) affiliated, currently offering classes
from nursery up to senior secondary level including all four
courses viz. non-medical, medical, commerce and humanities.
ENERSHELL ALLOYS: CARE Raises Rating on INR34.76cr Loan to B
------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Enershell Alloys & Steel Private Limited (EASPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank
Facilities 34.76 CARE B; Stable Revised from
CARE D
Short term Bank
Facilities 15.20 CARE A4 Revised from CARE D
Detailed Rationale & Key Rating Drivers
The revision in the ratings assigned to the bank facilities of
EASPL takes into account the improvement in the profitability
margins at operational levels and increase in cash accruals. The
ratings continues to be constrained by its small scale of
operations, weak financial risk profile and working capital
intensive nature of operations. The rating is further constrained
by fluctuation in raw material prices and net losses. The rating,
however, draws comfort from experienced promoters.
Going forward, the ability of the company to improve its net
profitability margins, capital structure and effective management
of working capital shall be the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Weak financial risk profile: The company's overall gearing
deteriorated to 3.00x as on March 31, 2017 (PY: 2.67x) due to
decrease in net worth base of the company owing to net losses and
increased total debt. The interest coverage ratio moderated to
1.34x in FY17 (PY: 1.86x) on account of increase in interest
cost.
Small scale of operations: The company has small scale of
operations with operating income of INR81.57 cr during FY17
(PY: INR103.13 cr). The decline in the operating income in FY17
was on account of lower sales volume. The company reported a net
loss of INR0.55 cr during FY17 (PY: INR0.36 cr).
Working capital intensive nature of operations: The company's
operating cycle also deteriorated to 100 days as on March 31,
2017 (PY: 85 days) due to increase in inventory holding period to
245 days in FY17 (PY: 214 days). The working capital limits
utilisation remains almost full.
Exposure to raw material price volatility: The primary raw
materials for the company are sponge iron and ingots. The
sponge iron is sourced from the local suppliers from the spot
market on daily basis. Absence of any long term contracts
and lag effect in the order of raw material and delivery to the
manufacturing facilities exposes the company to vagaries of
commodities price cycle.
Key Rating strengths
Experienced promoters: The promoters of EASPL have almost a
decade of experience in trading of iron scrap, sponge iron and
ingots and about three years manufacturing experience of ingots.
In 2008, in order to increase the size of operations, EASPL was
incorporated for manufacturing of TMT bars (commercial operations
commenced from September 2010). EASPL is managed by Mr. Gaurav
Aseem, who is responsible for production, planning and marketing
of the company.
Enershell Alloys & Steel Pvt Ltd (EASPL) incorporated in year
2008 is promoted by Mr. Gaurav Aseem & his family members. EASPL
is engaged in manufacturing of TMT M.S Re-bars (TMT bars). It
manufactures a variety of TMT bars ranging from 8 mm to 32 mm.
The promoters of the company have almost a decade of experience
in trading of iron scrap, sponge iron and other related products.
The manufacturing facility is located at Chandpur (Dist. Bijnor),
Uttar Pradesh.
EXCEL METAL: CARE Moves D Rating to Not Cooperating Category
------------------------------------------------------------
CARE Ratings has been seeking information from Excel Metal
Processors Private Limited (EMPPL) to monitor the rating(s) vide
letter dated December 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. In line
with the extant SEBI guidelines CARE's rating on Excel Metal
Processors Private Ltd.'s bank facilities will now be denoted as
CARE D; ISSUER NOT COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank
Facilities 38.12 CARE D; Issuer not cooperating
Short term Bank
Facilities 20.00 CARE D; Issuer not Cooperating
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating(s).
Detailed description of the key rating drivers
At the time of last rating on July 07, 2017, the following was
the rating weakness
Key Rating Weaknesses
Due to the stressed liquidity position, there are devolvement in
LCs and on-going delays in servicing of debt obligations by the
company.
Excel Metal Processors Private Limited (EMPPL) is promoted by Mr
Mohammed Iqbal Khan and Mr Imran Khan, whose family has been in
the steel business for more than five decades. The other major
company of the promoters is Western India Metal Processors
Limited (WIMPL; rated 'CARE BBB-/ CARE A3') which is engaged in
trading in prime steel, metal scrap and chemical trading and
metal recycling processes for separation of scrap. EMPPL,
incorporated in May 2012, is engaged in processing of hot rolled
and cold rolled steel coils by cutting, slitting and then
marketing for retail requirements. EMPPL has set up a 160,000
MTPA (considering 1 shift) slitting and cutting plant at Taloja
MIDC Industrial Estate, Mumbai, Maharashtra. The plant has been
fully commissioned on March 24, 2015, with a total cost of
INR44.41 crore (funded by term debt of INR15 crore and promoter's
contribution of INR29.41 crore) at a conservative debt to equity
ratio of 0.51x.
GEETANJALI VASTRALAYA: Ind-Ra Assigns B+/Stable Issuer Rating
--------------------------------------------------------------
India Ratings and Research (Ind-Ra) has assigned Geetanjali
Vastralaya (GV) a Long-Term Issuer Rating of 'IND B+'. The
Outlook is Stable. The instrument-wise rating action is as
follows:
-- INR100 mil. Fund-based working capital limits assigned with
IND B+/Stable rating.
KEY RATING DRIVERS
The ratings reflect GV's small scale of operations and weak
profitability and credit metrics due to a small client base and
trading nature of business. Revenue improved to INR366 million in
FY17 (FY16: INR168 million) due to increased demand of spices,
leading to an increase in absolute EBITDA to INR13 million (INR8
million). Consequently, interest coverage (operating EBITDA/gross
interest expense) improved to 1.7x in FY17 (FY16 1.0x). However,
net leverage (adjusted net debt/operating EBITDAR) deteriorated
to 8.4x in FY17 (FY16: 5.5x) due to an increase in overall debt
to INR107 million (INR45 million). EBITDA margins fell to 3.4% in
FY17 (FY16: 4.8%) due to an increase in raw material cost.
The ratings are constrained by the proprietorship nature of the
business.
The ratings, however, are supported by GV's comfortable liquidity
position, indicated by average maximum utilisation of 52% for the
10 months ended December 2017, and its proprietor's over 25 years
of experience in spice trading.
RATING SENSITIVITIES
Positive: A substantial increase in the revenue leading to an
improvement in the credit metrics would lead to a positive rating
action.
Negative: A decline in the operating profit leading to
deterioration in the credit metrics would lead to a negative
rating action.
COMPANY PROFILE
Started in 1992, GV is a proprietorship firm of Manoj Kasat and
is engaged in the trading of coriander seeds. The firm is based
out of Kumbhraj which has one of the largest markets for
coriander seeds.
GLOBAL COPPER: ICRA Withdraws B Rating on INR10cr Cash Loan
-----------------------------------------------------------
ICRA Ratings has withdrawn the long-term rating of [ICRA]B
outstanding on the INR18.75 crore fund-based facilities of Global
Copper Private Limited (GCPL). ICRA has also withdrawn the short-
term rating of [ICRA]A4, outstanding on the INR5.90 crore non-
fund-based facility of GCPL.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund based-Cash
Credit 10.00 [ICRA]B; Withdrawn
Fund based-Term
Loan 8.75 [ICRA]B; Withdrawn
Short-term non-
fund based limits 5.90 [ICRA]A4; Withdrawn
Rationale
The long-term and short-term ratings assigned to Global Copper
Private Limited have been withdrawn at the request of the
company, based on the no-objection certificate provided by its
banker.
Incorporated in the year 2010, Global Copper Private Limited
(GCPL) is engaged in manufacturing of level wound copper coils,
pancake copper coils and copper tubes of various sizes. The
manufacturing facility of the company is located at Savli - GIDC,
Vadodara in Gujarat, with a production capacity of 3600 MT per
annum. The manufacturing process of GCL is ISO 9001:2008
certified. In June 2014, GCL was taken over by the current
management. The stake of earlier promoters, Mr. Vijendra Gupta
(~40%) and Mr. Dinesh Kothari (30%), was taken over by Mr. Hitesh
Vaghela & family (30%), Chechani family (30%) and Jethaliya
family (20%). Further, in May 2016, 70% of the company's shares
were acquired by Honest Enterprise Limited; closely held by
Hitesh Vaghela & family who also continue to hold the remaining
30% of GCL's shares. It was incorporated as a limited company,
which was converted into a private limited company in July 2016.
The management has a longstanding experience in the business of
trading and processing of metal based products.
HI-TECH RADIATORS: Ind-Ra Affirms 'BB+'/Stable Issuer Rating
------------------------------------------------------------
India Ratings and Research (Ind-Ra) has affirmed Hi-Tech
Radiators Private Limited's (HTRPL) Long-Term Issuer Rating at
'IND BB+'. The Outlook is Stable. The instrument-wise rating
actions are:
-- INR184 mil. Long-term loans affirmed with IND BB+/Stable
rating;
-- INR118.9 mil. Cash credit limits affirmed with IND BB+/Stable
rating;
-- INR20 mil. Proposed cash credit limits* assigned with
Provisional IND BB+/Stable/Provisional IND A4+ rating;
-- INR40 mil. Usance bills discounted under letter of credit a
affirmed with IND BB+/Stable rating;
-- INR140 mil. Letter of credit affirmed with IND A4+ rating;
and
-- INR40 mil. Proposed letter of credit* assigned with
Provisional IND A4+ rating.
*The ratings are provisional and shall be confirmed upon the
sanction and execution of the loan documents for the above
facilities by HTRPL to the satisfaction of Ind-Ra.
KEY RATING DRIVERS
The affirmation reflects HTRRL's improved-but-moderate credit
profile and ongoing debt-led capex. In FY17, revenue grew 7.5%
yoy to INR935 million, driven by an increase in order execution.
Profitability improved to 7.4% in FY17 from 6.2% in FY16, as the
company continued to benefit from the economies of scale and
revenue growth. In FY17, EBITDA interest coverage (operating
EBITDA/gross interest expense) was 3.4x (FY16: 2.6x) and net
leverage (total adjusted net debt/operating EBITDAR) was 3.3x
(3.9x). The improvement in the credit metrics was driven by a
rise in revenue and profitability.
The company is undertaking a capex of INR185.5 million for the
setup of a manufacturing site for hot dip galvanised radiators.
The capex is funded by term loans totalling INR125.7 million,
followed by unsecured loans and internal accruals (INR59.8
million). According to the management, the capex is progressing
as per schedule and the site will be online by end-July 2018.
According to Ind-Ra, the debt-led capex is likely to marginally
dent HTRPL's credit metrics in FY18. However, the incremental
benefit of the capex will lead to an improvement in the credit
metrics in FY19.
The ratings continue to remain constrained by volatility in the
prices of raw materials (cold-rolled coil steel and zinc) and a
foreign currency risk. HTRPL is majorly focused on exporting
radiators and corrugated tanks.
However, the ratings are supported by a moderate liquidity and a
significant promoter experience. HTRPL's average utilisation of
the working capital limits was about 93% for the 12 months ended
December 2017. The promoter has around three decades of
experience in manufacturing corrugated tanks and fin-type
radiators that has helped the company in establishing strong ties
with customers and suppliers.
RATING SENSITIVITIES
Negative: Any decline in profitability and/or significant delay
in the execution of the planned capex leading to any
deterioration in the credit metrics would be negative for the
ratings.
Positive: Substantial revenue growth, along with an improvement
in profitability driven by the successful implementation of the
planned capex, leading to any improvement in the credit metrics
would be positive for the ratings.
COMPANY PROFILE
Established in 1989, HTRPL manufactures corrugated tanks and fin-
type radiators for power and distribution transformers at its two
plants in Rabale (Navi Mumbai) and Khopoli (Raigad). It has a
total monthly manufacturing capacity of 1,200 metric tons.
HMT MACHINE: CARE Reaffirms C Rating on INR49.82cr LT Loan
----------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
HMT Machine Tools, as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank
Facilities 49.82 CARE C; Stable Reaffirmed
Short term
facilities 72.90 CARE A4 Reaffirmed
Detailed Rationale and Key Rating Drivers
The rating assigned to the bank facilities of HMT Machine Tools
continues to be constrained by its weak financial profile with
continuing losses and negative networth in addition to deferring
its dues on long-term loans extended by Government of India
(GOI). The rating is also constrained by instances of LC
devolvements and continuing overdrawals in cash credit account
though the same is being regularized within a month. These rating
weaknesses are partially offset by its parentage, experienced
management team and funding support from GOI.
Detailed description rating drivers
Key rating Weaknesses
Weak liquidity and financial risk profile: The company continues
to post losses during FY17 with company incurring net loss of
INR127.6 crore during the year (FY16: Loss of INR106.6 crore).
Low capacity utilization, ageing machineries, rising overhead
expenses, employee costs and ballooning capital charge is behind
the company's losses. As on March 2017, the company's accumulated
losses were at INR1,361 crore. There have been instances of CC
overdrawals and LC devolvement but the same is regularized within
a month.
Key Rating Strengths
Support from GOI: Being a part of HMT Ltd, a central Government
entity, HMTML has received support from GoI. During FY17, the
company received INR64.6 crore from GOI. During FY16 also,
company has received Rs 37.7 cr from GOI as a working capital
loan to help address the company's acute working capital
shortage.
Long track record of operation and experienced management: HMT
Machine Tools is a part of HMT group and is operating similar
line of business for more than six decades. Over the years, the
company has established itself in the industry. The day to day
operations are looked after by Shri B.M Shivashankar having
experience in similar line of business and is assisted by a team
of qualified and experienced professionals.
HMT Ltd (HMT) (parent of HMT Machine Tools Ltd) was incorporated
in 1953 by the Government of India (GOI) as a Hindustan Machine
Tools Pvt Ltd, subsequently renamed as HMT Limited on
August 31, 1978. HMTMTL is engaged in manufacturing of turning,
grinding, gear cutting, special purpose machines, die casting
machines and plastic injection molding machines, presses and
press brakes, printing machines, CNC control systems and
precision components. Its manufacturing plants are located at
Bangalore, Pinjore (Haryana), Hyderabad (Andhra Pradesh), Ajmer,
and Kalamassery (Kerala).
IDAA INFRASTRUCTURE: Ind-Ra Withdraws Senior Bank Loan Rating
-------------------------------------------------------------
India Ratings and Research (Ind-Ra) has withdrawn IDAA
Infrastructure Private Limited's bank loan rating as follows:
-- INR4,077.8* mil. Senior project bank loan withdrawn with WD
rating.
* outstanding INR3,284.6 million on 30 June 2016
KEY RATING DRIVERS
Ind-Ra is no longer required to maintain the bank loan rating,
based on the receipt of no dues certificates from most lenders.
Ind-Ra has communicated to the remaining lenders about withdrawal
of existing ratings.
COMPANY PROFILE
IDAA Infrastructure was incorporated to implement a lane
expansion and capacity augmentation project on a design, build,
finance, operate and transfer basis under a 15-year concession
from the National Highways Authority of India ('IND AAA'/Stable).
The road connects Surat with Bharuch in Gujarat and is part of
the National Highway NH-8. The project was transferred to IRB
InvIT Fund ('IND AAA'/Stable) and subsequently the entire bank
loan was repaid.
IRB JAIPUR: Ind-Ra Withdraws Senior Project Bank Loan Rating
------------------------------------------------------------
India Ratings and Research (Ind-Ra) has withdrawn IRB Jaipur
Deoli Tollway Private Limited's (IRBJD) bank loan rating as
follows:
-- INR7,000 mil. Senior project bank loans withdrawn with WD
rating.
-- USD39.723 mil. External commercial borrowing withdrawn
with WD rating.
KEY RATING DRIVERS
Ind-Ra is no longer required to maintain the ratings for IRBJD's
bank loans, based on the receipt of no dues certificates from
most lenders. Ind-Ra has communicated to the remaining lenders
about withdrawal of existing ratings.
COMPANY PROFILE
IRBJD is a special purpose vehicle, incorporated to implement a
145.06km lane expansion and capacity augmentation project on a
design, build, finance, operate and transfer basis under a 25-
year concession from the National Highways Authority of India
('IND AAA'/Stable). The project cost of INR17,330 million was
funded by term loan of INR9,000 million (part-financed by foreign
currency), sponsor equity of INR5,270 million and grant from the
National Highways Authority of India of INR3,060 million. The
project was transferred to IRB InvIT Fund ('IND AAA'/Stable) and
subsequently the entire bank loan was repaid.
IRB SURAT: Ind-Ra Withdraws Senior Project Bank Loan Rating
-----------------------------------------------------------
India Ratings and Research (Ind-Ra) has withdrawn IRB Surat
Dahisar Tollway Private Limited's bank loan rating as follows:
-- INR8,977 mil. Senior project bank loans withdrawn with WD
rating.
KEY RATING DRIVERS
Ind-Ra is no longer required to maintain the bank loans' rating,
based on the receipt of no dues certificates from most lenders.
Ind-Ra has communicated to the remaining lenders about withdrawal
of the existing rating.
COMPANY PROFILE
IRB Surat Dahisar Tollway is a special purpose vehicle, created
to implement the widening of a 239-km stretch between Dahisar
(just outside Mumbai) and Surat (in Gujarat) on National Highway
8 (NH-8) connecting Mumbai and Delhi from four to six lanes. The
project was transferred to IRB InvIT Fund (IND AAA/Stable) and
subsequently the entire bank loan was repaid.
ISKCON STRIPS: Ind-Ra Moves BB+ Issuer Rating to Non-Cooperating
----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has migrated Iskcon Strips
Private Limited's (ISPL) Long-Term Issuer Rating to the non-
cooperating category. The issuer did not participate in the
rating exercise despite continuous requests and follow-ups by the
agency. Therefore, investors and other users are advised to take
appropriate caution while using these ratings. The rating will
now appear as 'IND BB+(ISSUER NOT COOPERATING)' on the agency's
website. The instrument-wise rating actions are:
-- INR7.4 mil. Long-term loan migrated to non-cooperating
category with IND BB+(ISSUER NOT COOPERATING) rating; and
-- INR70 mil. Fund-based limits migrated to non-cooperating
category with IND BB+(ISSUER NOT COOPERATING) rating.
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
Dec. 21, 2016. Ind-Ra is unable to provide an update, as the
agency does not have adequate information to review the ratings.
COMPANY PROFILE
Incorporated in 2004, ISPL manufactures mild steel strips and
black pipes at its facility in Raipur, Chhattisgarh. The company
is run by Mr Panna Lal Bansal and his son Mr Ankush Bansal.
JAINEX METALIKS: Ind-Ra Moves B- Issuer Rating to Non-Cooperating
-----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has migrated Jainex Metaliks
Limited's (JML) Long-Term Issuer Rating to the non-cooperating
category. The issuer did not participate in the rating exercise,
despite continuous requests and follow-ups by the agency.
Therefore, investors and other users are advised to take
appropriate caution while using these ratings. The ratings will
now appear as 'IND B-(ISSUER NOT COOPERATING)' on the agency's
website. The instrument-wise rating actions are:
-- INR62.5 mil. Fund-based limits mil. migrated to non-
cooperating category with IND B-(ISSUER NOT COOPERATING)
rating; and
-- INR8 mil. Non-fund-based limits migrated to non-cooperating
category with IND A4(ISSUER NOT COOPERATING) rating.
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
July 18, 2014 Ind-Ra is unable to provide an update, as the
agency does not have adequate information to review the ratings.
COMPANY PROFILE
JML was incorporated in March 1996 by Prem Chand Jain. The
company produces iron ingots and its main raw materials include
melting steel scrap, sponge iron and ferro alloys.
JALARAM GINNING: CARE Reaffirms B+ Rating on INR0.32cr LT Loan
--------------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Jalaram Ginning Factory (JGF), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 0.32 CARE B+; Stable Reaffirmed
Long-term/Short 7.50 CARE B+/CARE A4; Stable
term Bank Reaffirmed
Facilities
Short-term Bank
Facilities 0.14 CARE A4 Reaffirmed
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of JGF is primarily
constrained on account of its moderate scale of operations, thin
profit margin, leveraged capital structure, moderate debt
coverage indicators coupled with moderate liquidity position.
Further, the ratings remained constrained on account of its
partnership nature of constitution, presence in highly fragmented
industry with limited value addition along with seasonality
associated with availability of cotton crop and linkages with
international cotton prices.
The ratings, however, continue to derive strength from experience
of partners and proximity to cotton growing areas of Gujarat.
JGF's ability to increase its scale of operations, improve profit
margins, capital structure and debt coverage indicators with
better working capital management are the key rating
sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Decline in total operating income (TOI) albeit improvement in
profit margins during FY17 (A): During FY17, JGF registered de-
growth of 6.78% in its TOI which stood at INR74.01 crore as
against INR79.39 crore during FY16. During FY17, PBILDT margin of
JGF improved by 36 bps and stood at 2.09% as against 1.73% in
FY16, resultantly, PAT margin of the company also improved by 33
bps during FY17 but stood low at 0.57% as against 0.24% during
FY16.
Leveraged capital structure and moderate debt coverage
indicators: As on March 31, 2017, capital structure of JGF
improved marginally but remained leveraged as marked by an
overall gearing ratio of 3.06 times as against 3.10 times as on
March 31, 2016 due to improvement in net worth position. Debt
coverage indicators improved marginally and stood moderate as
marked by total debt to gross cash accruals of 10.78 times as on
March 31, 2017 as against 11.83 times as on March 31, 2016 on
account improvement in gross cash accruals during FY17. Interest
coverage ratio improved marginally and stood moderate at 2.00
times for FY17 as against 1.69 times for FY16.
Moderate liquidity position: The liquidity position stood
moderate as marked by current ratio at 1.09 times as on March 31,
2017 which was in line as compared to previous year at 1.07
times. Working capital cycle remained moderate at 30 days during
FY17 as against 24 days during FY16.
Susceptibility of profitability to volatility in cotton prices:
The cotton prices in India are regulated through fixation of
Minimum Support Price (MSP) by the government, and fortunes of
cotton ginners depend on price parity between the price fixed by
the government and those prevailing in the market. Hence, any
adverse change in government policy i.e. higher quota for any
particular year, ban on the export may negatively impact the
prices of raw cotton in domestic market and could result in lower
realizations and profitability.
Presence in the highly fragmented cotton ginning industry: Cotton
ginning business involves very limited value addition and is
highly dominated by small and medium scale units resulting in
highly fragmented nature of the industry. The industry provides
low value addition in the overall textile value chain due to
which players operate on extremely thin margins. Furthermore, the
competition in the ginning industry remains stiff restricting the
profitability margins.
Key Rating Strengths
Vastly experienced management: Mr. Vishal Gandecha and Gautam
Gandecha are the two partners in JGF with equal profit-loss
sharing ratio. They both have experience of more than a decade in
cotton ginning, pressing and trading business.
Proximity to cotton producing area of Gujarat: The manufacturing
facility of JGF is located in Surendranagar; Saurashtra region in
the state of Gujarat which is one of the largest cotton producing
states in India. Gujarat produces majority of the total national
production of cotton while the Saurashtra region accounts
majority of cotton production in Gujarat. Its presence in cotton
producing region has a locational advantage in terms of lower
logistics cost and ready availability of raw materials.
Jalaram Ginning Factory (JGF) was originally formed in July 1995
as a partnership firm by five partners. Subsequently in September
2007, Mr Vishal Gandecha and Mr Gautam Gandecha took over the
firm with equal profit-loss sharing ratio and currently they
manage the overall operations of the firm. JGF is engaged in
cotton ginning and pressing with total installed capacity of
49,275 cotton bales per annum (8,130 Metric Tonnes Per Annum) as
on March 31, 2017 at its manufacturing facility located at
Dhrangadhra (Gujarat).
JANALAKSHMI FINANCIAL: ICRA Cuts Rating on INR4.10cr PTCs to D
--------------------------------------------------------------
ICRA Ratings has downgraded the rating for PTCs issued under a
securitisation transaction originated by Janalakshmi Financial
Services Limited (JFSL). The transaction is backed by the Small
Group (SG) loan contracts offered by JFSL. The transaction
involved 'at Par' transfer of receivables to the trust. The PTCs
carried an eventual promise of principal payouts and monthly
promise of interest payouts. PTC Series A2 is subordinate to PTC
Series A1, and interest payments were promised to PTC Series A2
only after maturity of PTC Series A1.
Issue Name: Goldstein IFMR Capital 2016
Initial Amount After
Amount 1/18 Payout
Instruments (INR cr) (INR cr) Ratings
----------- -------- ------------ -------
PTC Series A1 76.17 1.20 [ICRA]D (SO) downgraded
from [ICRA]C+ (SO)
PTC Series A2 4.10 4.10 [ICRA]D (SO) downgraded
from [ICRA]C+ (SO)
Rationale
The rating downgrade reflects the inadequacy of the pool
collections and the credit enhancement available in the
transaction to meet the promised payouts to the PTC investors on
the scheduled maturity date.
Key rating drivers
Credit Weaknesses
* Sustained weak collection performance leading to higher than
expected delinquency levels; pool collections together with the
available credit enhancement are insufficient to meet the
promised payout to the PTC investors on the maturity date
Description of key rating drivers:
The collection performance of the underlying loans was healthy
till October 2016 collection month. However, post the
demonetisation event, the monthly collection level declined
significantly. Collection from overdue contracts has also been
poor. Due to the sustained weaker-than-expected pool performance,
there has been a shortfall in meeting the scheduled payouts to
the PTC investors even after the utilisation of the entire credit
enhancement available in the transaction.
Janalakshmi Financial Services Ltd (JFSL) is a Bangalore-based
NBFC-MFI catering to the financial needs of urban poor women
through the Joint Liability Mechanism. The company was founded in
2006 by Mr. Ramesh Ramanathan as Janalakshmi Social Services
(JSS), whose portfolio was taken over by JFSL in 2008. The
promoter shareholding continues to be in JSS (now called Jana
Urban Foundation or JUF); the corpus funds in JUF are used for
social activities.
As on Nov. 30, 2017, JFSL had a portfolio of about INR9,158
crore. The company has a diversified presence across 18 states
and 2 union territories in India with the share of the top 3
states of Tamil Nadu, Karnataka and Maharashtra comprising of
about 49% of the overall portfolio as on Nov. 30, 2017. JFSL
registered a high compounded growth of 110% over the last four
years ended FY2017. The company raised INR1,030 crore equity
during Apr-Nov 2017 from existing and new investors.
In FY2017, JFSL reported a net profit of INR170.0 crore on a
total managed asset base of INR15,729.8 crore as against a net
profit of INR160.3 crore on a total managed assets base of
INR13,345 crore during FY2016. During H1FY2018, JFSL reported a
loss of INR1,192 crore on a managed asset base of INR10,332
crore.
ICRA has rated twelve standalone JFSL transactions till date
backed by Small Group (SG) loans, Enterprise Financial Services
(EFS) loans, Nano loans and Jana Kisan (JK) loans. Out of these,
three transactions have matured.
MADRAS MEDICAL: ICRA Reaffirms B+ Rating on INR34.94cr LT Loan
--------------------------------------------------------------
ICRA Ratings has reaffirmed the long-term rating at [ICRA]B+ for
the INR34.94-crore (previously INR35.13 crore) fund-based limits
of Madras Medical Mission (MMM). The outlook on the long-term
rating is 'Stable'. ICRA has also reaffirmed the short-term
rating at [ICRA]A4 for the INR43.30-crore (previously INR43.00
crore) fund-based facilities and the INR12.96-crore (previously
INR13.70 crore) non-fund-based facilities of MMM.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term: Fund-
based 34.94 [ICRA]B+(Stable); reaffirmed
Short-term: Fund-
based 43.30 [ICRA]A4; reaffirmed
Short-term: Non-
fund-based 12.96 [ICRA]A4; reaffirmed
Rationale
The ratings reaffirmation continue to factor in MMM's
longstanding presence in the healthcare sector with high
reputation in Tamil Nadu, with strong technical capabilities
backed by state-of-the art equipment and quality professionals.
The ratings also favorably factors in the healthy demand for
medical seats which aids in healthy growth in income from the
colleges. These apart, the ratings take comfort from the healthy
accretion to reserves over the past few fiscals as reflected in
improved capital structure, where the gearing improved from 5.6
times as on March 31, 2016 to 3.9 times as on March 31, 2017.
However, the ratings continue to be constrained by thin margins
due to concessions being extended to weaker section of the
society as MMM falls under "not for profit organization" coupled
with declining trend noted in the receipt of donations. ICRA also
takes note of the regular debt-funded capital expenditure leading
to large repayment obligations and heavy dependence on short term
loans exposing MMM to refinancing risks.
Outlook: Stable
The 'Stable' outlook reflects ICRA's belief that MMM will
continue to benefit from the extensive track record and
reputation of the hospital in Chennai. The outlook may be revised
to 'Positive' if there is substantial improvement in
profitability or capital structure. The outlook may be revised to
'Negative' if there is lower-than-expected occupancy rate in the
hospital, and donations leading to cash losses.
Key rating drivers
Credit strengths
* Established healthcare provider with high reputation in Tamil
Nadu: MMM is an established player in Tamil Nadu providing
healthcare services with four main specialized departments -
Institute of Cardio Vascular Diseases (ICVD), the Institute of
Reproductive Medicine and Women's Health, the Institute of
Gastroenterology and Liver disease. MMM was established in 1987
and has expanded over the years to transform itself into a multi-
speciality hospital operating 292 beds as of FY2017. The hospital
segment of MMM recorded a CAGR growth of 9.33% during FY2013-17.
* Healthy growth in college income aided by healthy demand for
medical seats coupled with recent fee increase: While income from
hospital is the mainstream income for the society, the medical
college-fee income, which constitutes ~25% of the total income,
has grown at a healthy rate in the last three fiscals owing to
higher demand for medical seats. While hospital income grew at a
stable rate of 12% in both FY2016 and FY2017, college-fee income
grew at 29% in FY2017 against 21% growth in FY2016. The medical
college segment of MMM recorded a CAGR growth of 15.01% during
FY2013-17.
* Superior technical capabilities backed by state-of-the-art
equipment and experienced consultants: Currently MMM employs
around 414 doctors in FY2017 increased from 390 doctors in FY2016
and 950 nurses on its rolls. Despite the significant challenge of
attracting and retaining quality medical practitioners in the
healthcare industry, MMM has been able to contain its attrition
levels due to its established reputation and maintaining its
compensation levels at par with industry benchmarks. MMM also
incurs significant capital expenditure every year to keep its
equipment in line with the latest available technology. These
initiatives provide MMM a competitive advantage over other
hospitals in the city as it is one of the few charitable
hospitals providing such facilities at an economical price.
* Improved gearing due to healthy accretion to reserves: The
gearing improved from 5.6 times in FY2016 to 3.9 times in FY2017
on account of healthy accretion to reserves in FY2017. The
interest-coverage ratio also improved from 0.9 times in FY2016 to
2.3 times in FY2017 on account of improved margins and reduction
in interest charges. However, the entity has sizable term loan
repayment obligation in the next three years which is expected to
weaken the debt-service coverage ratio in the near term.
Credit weaknesses
* Continuous concessions extended to patients coupled with
declining donations expected to affect margins: As MMM is as a
registered society falling under "not for profit organisation",
the hospital extends free work for the weaker section of the
society and the concessions provided accounts for around 12% of
the gross hospital income. This coupled with the declining trend
noted in the donations received by the society, is expected to
affect the margins of the society in the near term.
* Significant debt-repayment obligations in the near term due to
debt funded capital expenditure: MMM incurs significant capital
expenditure every year to keep its equipment in line with the
latest available technology. The same impacts the operating
margins with the utilization of these equipments being at sub-
optimal levels during the initial years of operations, especially
for new specialties provided. The capital expenditure is
generally debt-funded, leading to a weakened capital structure
and coverage indicators. The entity has sizable term loan
repayment obligation in the next three years which is expected to
weaken the debt-service coverage ratio in the near term.
* High dependence on short-term loans expose MMM to refinancing
risks: MMM's liquidity position is stretched and is dependent on
short-term loan for its long-term application including margin
money for purchasing fixed assets. The free cash flow is heavily
burdened with sizable term-loan repayment in the next three
fiscals which is also refinanced by the short-term loan. This
exposes MMM to high refinancing risk.
Madras Medical Mission (MMM), a registered society established in
1982 by Bishop Zachariah Mar Dionysius, operates a tertiary-care
hospital at a prime location in Chennai at Mogapair and also
operates the Pondicherry Institute of Medical Sciences (PIMS)
which was established by the society in 2000. The society started
its operations with a Cardiac Care unit in 1987 and expanded over
the years to transform into a multi-speciality hospital. MMM's
Chennai hospital is now well known for its specialised
departments with patient centric service mission which includes
the Institute of Cardio Vascular Diseases (ICVD), the Institute
of Reproductive Medicine and Women's Health and the Institute of
Gastroenterology and Liver Diseases and currently operates 292
beds. The educational institute offers MBBS UG and PG courses and
includes an associated teaching hospital operating 640 beds. MMM
also established 'College of Nursing' in the year 2008 in Chennai
offering both UG and PG courses in Nursing.
In FY2017, MMM reported a net profit of INR7.8 crore on an
operating income of INR296.5 crore, as compared to a net profit
of INR7.3 crore on an operating income of INR256.7 crore in the
previous year.
MANOR FLOATEL: IDBI Files Insolvency Case Over Unpaid Loans
-----------------------------------------------------------
The Economic Times reports that Manor Floatel Hotel, which runs
recreational facilities on the Ganges in Kolkata, has been taken
to the bankruptcy court for defaulting on loans.
According to ET, IDBI Bank dragged the company to the National
Company Law Tribunal (NCLT) as it failed to repay more than
INR32 crore loans taken to set up a floating hotel on the
Hooghly. Lenders are yet to file total debt claims, the report
says.
"The petition filed by the financial creditor . . . is hereby
admitted for initiating the corporate resolution process," V P
Singh and Jinan K R, member judges of the tribunal, said in the
order, ET relays.
The court has appointed Sanjay Gupta as the resolution
professional from AAA Insolvency Professionals, the report notes.
There may be some other lenders who could come up with their
claims against the defaulting company as the debt resolution
process progresses, sources, as cited by ET, said.
The borrower had hypothecated movable properties situated on the
Hooghly while taking loans, the report says.
"It seems the floating hotel may have been barred from holding
parties with 1,000 guests. This, in turn, may have marred its
business prospects," ET quotes an executive with the direct
knowledge of the matter as saying. "The committee of creditors
is expected to hold its first meeting in the first week of
February. The hotel property, given its location, would qualify
in the premium bracket," the person said.
NCLT, Kolkata, has listed the matter on January 30 for the filing
of the progress report, ET adds.
MARUTI ENTERPRISES: CARE Assigns 'B' Rating to INR7.25cr Loan
-------------------------------------------------------------
CARE Ratings has assigned these ratings to the bank facilities of
Maruti Enterprises (ME), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 7.25 CARE B; Stable Assigned
Short-term Bank
Facilities 6.00 CARE A4 Assigned
Detailed Rationale and key rating drivers
The ratings assigned to the bank facilities of ME are constrained
by small scale of operations with moderate profit margins,
volatility in input prices, working capital intensive nature of
operations, partnership nature of constitution, client
concentration as well as geographical concentration risk,
moderate debt coverage indicators and its presence in a highly
competitive industry. The ratings, however, derive strength from
its experienced partners, long track record of operations,
moderate order book position and comfortable capital structure.
Going forward, the ability of the firm to fetch new orders &
increase its scale of operations by timely execution of the same
coupled with regular & timely receipt of contract proceeds and
ability to manage its working capital effectively shall be the
key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Small scale of operations with moderate profit margins: The scale
of operations of the firm remained small marked by its total
operating income of INR5.01 crore (FY16:Rs. 15.20 crore) with a
PAT of INR0.22 crore (FY16: INR0.70 crore) in FY17 (refers to the
period April 1 to March 31). The profitability margins of the
firm remained moderate marked by PBILDT margin of 28.00% (FY16:
11.78%) and PAT margin of 4.49% (FY16: 4.60%) in FY17.
Volatility in input prices and working capital intensive nature
of operations: The major inputs for the firm are bitumen, stone
aggregate, murram and steel. Bitumen is a derivative of crude the
price of which is linked to crude oil prices. The prices of these
items are highly volatile. This apart, it does not enter into any
agreement with contractees to safeguard its margins against any
increase in labour prices and being present in a highly labour
intensive industry, it remains susceptible to the same. However,
some of the orders executed by the firm contains price escalation
clause, which mitigates the risk to a certain extent.
The operations of the firm remained working capital intensive
marked by its high operating cycle. The firm executes works for
government entities where payments come with procedural delays
and accordingly, the average collection period was on the higher
side during past years. Further, due to work uncertified by its
government clients as on account closing dates which lead to high
inventory period during past years. Due to delay in getting
payment from its clients, the firm stretches its creditors and
accordingly the average creditors' period was also on the higher
side in the past years. The average utilisation of working
capital limit was around 98% on the higher side during last 12
months ended in December 2017.
Partnership nature of constitution: ME, being a partnership firm,
is exposed to inherent risk of withdrawal of capital by the
partners, restricted access to funding and risk of dissolution on
account of poor succession planning. Furthermore, partnership
firms have restricted access to external borrowing as credit
worthiness of partners would be the key factors affecting credit
decision for the lenders.
Client concentration as well as geographical concentration risk:
Client base of ME is skewed towards government departments in
Bihar only. Thus it has client concentration risk. However,
considering the client profile of ME, the risk of default is very
minimal since the firm works only for various Government project
only. Furthermore, ME is a regional player and around 95% of the
projects are being executed in Bihar only which reflects
geographical concentration risk.
Moderate debt coverage indicators: The debt coverage indicators
remained moderate marked by interest coverage of 1.53x (FY16:
2.26x) and total debt to GCA of 14.34x (FY16: 7.00x) in FY17.
High competitive intensity on account of low complexity of work
involved with sluggish economic scenario: The firm has to bid for
the contracts based on tenders opened by various Government
entities. Upon successful technical evaluation of various
bidders, the lowest bid is awarded the contract. Since the type
of work done by the firm is mostly commoditized, the firm faces
intense competition from other players. The firm receives
projects which majorly are of a short to medium tenure (i.e., to
be completed within maximum period of 1-2 years).
Key Rating Strengths
Experienced partners and long track record of operations: The
firm is into civil construction business since 1986 and thus has
long track record of operations. Due to its long track record of
operations, the partners have established relationship with its
clients. Furthermore, Mrs. Vinita Sinha and Mr. Niket Kumar Sinha
are having around 15 years of experience in the construction
business. They look after the overall management of the firm,
with adequate support from other partners Mr. Abhishek Kumar and
Mr. Amit Kumar and a team of experienced personnel.
Moderate order book position: The value of orders in hand
(including on-going projects) was moderate at INR24.19 as on
Nov. 30, 2017, being 4.83x of TOI in FY17 which are to be
executed by January 2019. The moderate order book position
reveals moderate revenue visibility in near terms.
Comfortable capital structure: The capital structure of ME
remained comfortable marked by debt equity ratio of 0.14x and
overall gearing ratio of 0.63x as on March 31, 2017.
ME was established in 1986 as a partnership firm. Currently the
firm is managed by four partners namely, Mrs. Vinita Sinha, Mr.
Niket Kumar Sinha, Mr. Abhishek Kumar and Mr. Amit Kumar. The
registered office of the firm is situated at Vaishali, Bihar.
Since its inception, the firm has been engaged in civil
construction business in the segments like construction of road,
bridges etc. The firm procures orders through tender and executes
orders floated by the various Govt. entities. ME has an
unexecuted order book position of INR24.19 crore (4.83x of FY17
TOI) as on Nov. 30, 2017 which is to be executed by January 2019.
NAMASTHETU INFRATECH: ICRA Moves B Rating to Not Cooperating
------------------------------------------------------------
ICRA Ratings has moved the long term and short term ratings for
the bank facilities of Namasthetu Infratech Private Limited
(NIPL) to the 'Issuer Not Cooperating' category. The ratings are
now denoted as "[ICRA]B (Stable)/[ICRA]A4 ISSUER NOT
COOPERATING".
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund based-Cash 3.00 [ICRA]B (Stable) ISSUER NOT
Credit COOPERATING; Rating moved to
the 'Issuer Not Cooperating'
category
Fund based- 1.00 [ICRA]B (Stable) ISSUER NOT
Unallocated Limit COOPERATING; Rating moved to
the 'Issuer Not Cooperating'
category
Non-Fund based- 8.00 [ICRA]A4 ISSUER NOT
Bank Guarantee COOPERATING; Rating moved to
the 'Issuer Not Cooperating'
category
The rating is based on limited cooperation from the company since
the time it was last rated in July 2016. As part of its process
and in accordance with its rating agreement with Namasthetu
Infratech Private Limited, ICRA has been sending repeated
reminders to the company for payment of surveillance fee that
became due. However, despite multiple requests by ICRA, the
company's management has remained non-cooperative. In the absence
of requisite cooperation and in line with SEBI's Circular No.
SEBI/HO/MIRSD4/CIR/2016/119, dated Nove. 1, 2016, the company's
ratings have been moved to the "Issuer Not Cooperating" category.
Namasthetu Infratech Private Limited (NIPL) (erst. B.K. Infratech
Private Limited) was incorporated in 2006. The company is engaged
in civil construction activities such as construction, extension
and strengthening of airport runways, expansion and modification
of terminal buildings, construction of sewage disposal systems,
construction of boundary walls for government organizations etc.
NIPL is promoted by Mr. Ranjit Bhake, who has an experience of
more than a decade in civil construction industry. The company
has a reputed client base, which includes the Airport Authority
of India (AAI), the National Thermal Power Corporation Limited
(NTPC), the Public Works Department (PWD) of Maharashtra, and the
Defense Research and Development Organization (DRDO), among
others.
NEERAJ PAPER: Ind-Ra Assigns 'BB+' Issuer Rating, Outlook Stable
----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has assigned Neeraj Paper
Marketing Limited (NPML) a Long-Term Issuer Rating of 'IND BB+'.
The Outlook is Stable. The instrument-wise rating actions are:
-- INR600 mil. Fund-based working capital limits assigned with
IND BB+/Stable/IND A4+ rating;
-- INR200 mil. Non-fund-based working capital limits assigned
with IND A4+ rating.
KEY RATING DRIVERS
The ratings reflect low, albeit stable, EBITDA margin and
moderate-to-weak credit metrics, as the company operates in a
highly competitive paper industry. In FY17, EBITDA margin was
2.84% in FY17 (FY16: 2.80%), gross interest coverage (operating
EBITDA/gross interest expense) was 1.13x (1.11x) and net leverage
(total adjusted net debt/operating EBITDA) was 6.23x (6.36x). The
marginal improvement in credit metrics was due to a decrease in
finance cost and a stable EBITDA (FY17: INR105.93 million; FY16:
INR106.56 million).
Revenue was moderate at INR3,724.21 million in FY17 (FY16:
INR3,807.39 million). The fall in revenue was due to the impact
of demonetisation.
The ratings also reflect a tight liquidity, indicated by an
average 97% utilisation of the working capital facilities for the
12 months ended December 2017.
The ratings, however, are supported by the promoters' over two
decades of experience in the trading business.
RATING SENSITIVITIES
Negative: Any decline in the interest coverage ratio or any
deterioration in the liquidity position would be negative for the
ratings.
Positive: A rise in EBITDA margin leading to an improvement in
the interest coverage ratio on a sustained basis, along with an
improvement in the liquidity, will be positive for the ratings.
COMPANY PROFILE
Delhi-based NPML is a public limited company listed on the Bombay
Stock Exchange that was incorporated by established and
experienced promoters and their associates in 1995. It is engaged
in the trading and commissioning of all kinds and classes of
paper, paperboards, paper pulp, allied products and others.
According to interim financials for 1HFY18, revenue was
INR1,600.77 million, EBITDA margin was 3.09%, interest coverage
(operating EBITDA/gross interest expense) was 1.26x and net
leverage (total adjusted net debt/operating EBITDA) was 10.40x.
PAVAN AGRO: CARE Assigns 'B' Rating to INR5.48cr LT Loan
--------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Pavan
Agro Foods (PAF), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 5.48 CARE B; Stable Assigned
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of PAF is primarily
tempered by seasonal nature of availability of Bengal gram seeds
& Toor dal seeds resulting in working capital intensive nature of
the business, limited experience of promoters in managing pulses
milling business along with project implementation risk with
financial closure yet to be achieved. However, the rating
derives comfort from favorable demand for pulses and support from
government to increase production levels.
Going forward, the firm's ability to implement the project
without any cost or time overrun and achieve the envisaged sales
and profitability remain its key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Seasonal nature of availability of Bengal gram seeds &Toor dal
seeds resulting in working capital intensive nature of the
business: Bengal gram seeds and Toordal seeds in India is
harvested mainly at the end of three major agricultural seasons
Early Kharif (August to October), Kharif (June to September) and
Rabi (October to January). Adverse weather conditions directly
affect the supply and availability of seeds and raw material
price fluctuations. Dal milling is also a working capital
intensive business as the millers have to stock enough seeds by
the end of the each season as the price and quality of seeds is
better during the harvesting season. Moreover, the seeds are
procured generally against immediate payments while the millers
have to extend credit to the wholesalers and distributors
resulting in high working capital intensity.
Financial closure not achieved along with project implementation
risk: The financial closure of the firm has not been achieved and
the commercial operations of the firm are likely to start from
December 2018. The firm has received all the necessary statutory
clearances from the regulatory authorities from all the
departments like pollution control board, local municipality,
fire extinguishers etc. As on December 05, 2017, the total cost
incurred by the firm is INR0.45crore, which was funded through
partners' fund. The above cost has been incurred towards land
development of PAF. Furthermore, the construction of facility is
at nascent stage with majority of project cost remains to be
incurred. Any delay in achieving financial closure and project
implementation might lead to delay in start of commercial
operations as on prescribed date.
Limited experience of promoters in managing pulses milling
business: The promoters have only two years of experience in
managing pulses milling business. However, Mr. Prabakar & Mr.
Naresh spouses of Mrs. G. Subhadaramma & Mrs. K. Sri Lakshmi
respectively will be assisting in managing PAF. Both have
experience in the similar line of business through their Group
entities viz. Pavan Dal Mill (PDM) & Sri Pavan Traders (SPT).
Through group entities, they have established good relations with
the dealers and also with the agents facilitating the
business sales within the state which further facilitates revenue
visibility for PAF.
Key Rating Strengths
Favorable demand for pulses and support from government to
increase production levels: There is increasing demand for pulses
domestically and internationally. The government of India (GoI)
promotes production of pulses in the country through National
Food Security Mission (NFSM) which covers 622 districts in 27
states. Around 50% of total allocation of NFSM is made for pulses
for various interventions like demonstration of improved
technology, distribution of quality seeds of new varieties,
integrated pest management, water saving devices and capacity
building of farmers. The government expects pulse production to
come in at 20 million tonnes in 2017-18, 18% higher than the
17.06 million tonnes estimated for 2016-17. Overall sowing of
crops has also picked up pace with ample rains. The data released
recently shows that kharif crops like rice, pulses, coarse
grains, oilseeds, sugarcane and cotton have been planted in 69.3
million hectares so far, 3.3% higher than the 67.1 million
hectares sown by this time last year. The normal area sown under
kharif crops is 106 million hectares and sowing continues till
mid to end-July. India receives about 80% of its annual rainfall
during the June to September south-west monsoon, which irrigates
more than half of its farm land. The latest data on planting
shows that so far the area under the main kharif crop of rice
stands at 18.3 million hectares, marginally higher than last
year's 18.2 million hectares. The seasonal area under rice is
39.3 million hectares. However, farmers have cut down the area
under cotton in states like Gujarat, Punjab and Telangana due to
better prices of pulses, and damage to the cotton crop due to
pest attacks last year.
Pavan Agro Foods (PAF) was established on April 24, 2017 by Mrs.
K. Sri Lakshmi & Mrs. G. Subhadramma as a Partnership firm. The
firm has proposed to set up Dal Mill with capacity of 2000 tonne
per annum. The total cost of setting up facility (decorticating
pulses) is INR6.46 core which is being funded through bank term
loan to the extent of Rs 4.48 crore and remaining through
partners' fund of around INR1.98 crore. The firm has also applied
for the working capital facility of INR1 crore with the bank
which is under appraisal. The firm is expected to decorticate
(de-hull) pulses such as Bengal gram & Toor dal in the proposed
facility which is under construction. The firm proposes to
install machineries that will cater the end to end process right
from stripping the skin, cleaning, grading, splitting, grinding &
packing of pulses. The end product will be packed in bags upto 50
kgs and will be supplied to local wholesale dealers. The
commercial operations of the firm are expected to start from
December 2018. As on November 30, 2017, the total cost incurred
by the firm was INR0.45 crore which is approximately 7% of the
total project cost funded by promoters' capital. Bengal gram
seeds & Toor dal seeds are the main raw material which would be
procured from the farmers in and around Guntakal, Andhra Pradesh.
RIYA IMPEX: Ind-Ra Migrates B+ Issuer Rating to Non-Cooperating
---------------------------------------------------------------
India Ratings and Research (Ind-Ra) has migrated Riya Impex's
(RI) Long-Term Issuer Rating to the non-cooperating category. The
issuer did not participate in the rating exercise, despite
continuous requests and follow-ups by the agency. Therefore,
investors and other users are advised to take appropriate caution
while using these ratings. The ratings will now appear as 'IND
B+(ISSUERNOTCOOPERATING)' on the agency's website. The
instrument-wise rating actions are:
-- INR20 mil. Fund-based limit migrated to non-cooperating
category with IND B+(ISSUER NOT COOPERATING) rating; and
-- INR180 mil. Non-fund-based working capital limit migrated to
non-cooperating category with IND A4(ISSUER NOT COOPERATING)
rating.
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
Jan. 10, 2017. Ind-Ra is unable to provide an update, as the
agency does not have adequate information to review the ratings.
COMPANY PROFILE
Incorporated in 2010, RI is a proprietorship business engaged in
the import and export of steam coal, cashews, teak wood and raw
diamonds. The company is managed by Mr King Kakkar, and its
registered office is in New Delhi.
S.V. PATEL: ICRA Moves B+ Rating to Not Cooperating
---------------------------------------------------
ICRA Ratings has moved the long term rating for the bank
facilities of S.V. Patel & Sons (SVP) to the 'Issuer Not
Cooperating' category. The rating is now denoted as "[ICRA]B+
(Stable) ISSUER NOT COOPERATING".
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund based-Term
Loan 0.73 [ICRA]B+ (Stable) ISSUER NOT
COOPERATING; Rating moved to
the 'Issuer Not Cooperating'
category
Fund based-Cash
Credit 6.50 [ICRA]B+ (Stable) ISSUER NOT
COOPERATING; Rating moved to
the 'Issuer Not Cooperating'
category
ICRA has been trying to seek information from the entity so as to
monitor its performance, but despite repeated requests by ICRA,
the entity's management has remained non-cooperative. The current
rating action has been taken by ICRA basis best available/dated/
limited information on the issuers' performance. Accordingly the
lenders, investors and other market participants are advised to
exercise appropriate caution while using this rating as the
rating may not adequately reflect the credit risk profile of the
entity.
Established in 2005, S.V. Patel & Sons (SVP) is a partnership
firm which crushes cotton seeds and castor seeds. In November
2015, the firm also commenced the production of castor oil
derivative viz. Hydrogenated Castor Oil (HCO). The manufacturing
facility, located at Kapadvanj in Gujarat, is equipped with nine
expellers each for cotton seed and castor seed crushing, with a
total installed production capacity of 9,000 Metric Tonnes Per
Annum (MTPA) and 2,800 MTPA respectively. The total installed
capacity of HCO stands at 5,500 MTPA. The firm is promoted and
managed by Mr. Rajesh Patel along with his family members and
friends. The key promoter has an experience of more than a decade
in the oil manufacturing industry.
SAHARA ENGINEERING: Ind-Ra Affirms 'BB' LT Issuer Rating
--------------------------------------------------------
India Ratings and Research (Ind-Ra) has affirmed Sahara
Engineering Private Limited's (SEPL) Long-Term Issuer Rating at
'IND BB' with a Stable Outlook. The instrument-wise ratings
actions are:
-- INR120 mil. (increased from INR75 mil.) Fund-based working
capital limit affirmed IND BB/Stable rating;
-- INR2.5 mil. Non-fund-based limits assigned with IND A4+
rating.
KEY RATING DRIVERS
The ratings reflect SEPL's continued small scale of operations
and moderate credit metrics on account of slow order inflow.
During FY17, revenue increased slightly to INR484.67 million
(FY16 : INR480.53 million), while margins rose to 8.0% (6.1%) on
account of a decline in other expenses; however, net adjusted
debt/EBITDAR increased to 3.6x (3.2x) due to an increase in debt
and EBITDAR interest coverage deteriorated to 2.3x (2.6x) due to
an increase in interest cost.
The ratings also reflect SEPL's tight liquidity. Its use of the
working capital limits was around 99.79% on average during the 12
months ended December 2017.
The ratings factor in SEPL's moderate revenue visibility. The
company has an outstanding order book of INR1,026.4 million, to
be executed over the next one to one and half years. The company
undertakes short-term (one year) contracts.
The company has strong customer relationships in its major
segment of stevedoring, clearing and forwarding, cargo handling,
and transportation services.
The ratings are supported by the company's over 17 years of track
record in providing integrated ocean logistics services in India.
RATING SENSITIVITIES
Negative: Any deterioration in the liquidity profile or credit
metrics will be negative for the ratings.
Positive: Substantial improvements in the scale of operations and
liquidity profile will be positive for the ratings.
COMPANY PROFILE
Incorporated in 2000, SEPL was founded by Manoj Kumar Jena and is
engaged in providing comprehensive shipping services of clearing
and forwarding, cargo handling and transportation services at the
various ports of east coast of India.
SARAF TRADING: Ind-Ra Migrates B Issuer Rating to Non-Cooperating
-----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has migrated Saraf Trading
Corporation Private Limited's (STCPL) Long-Term Issuer Rating to
the non-cooperating category. The issuer did not participate in
the rating exercise despite continuous requests and follow-ups by
the agency. Therefore, investors and other users are advised to
take appropriate caution while using these ratings. The rating
will now appear as 'IND B(ISSUER NOT COOPERATING)' on the
agency's website. The instrument-wise rating actions are:
-- INR70 mil. Fund-based working capital limits migrated to non-
cooperating category IND B(ISSUER NOT COOPERATING)/IND
A4(ISSUER NOT COOPERATING) rating;
-- INR17.5 mil. Non-fund-based limits migrated to non-
cooperating category with IND A4(ISSUER NOT COOPERATING)
rating.
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
Dec. 16, 2016. Ind-Ra is unable to provide an update, as the
agency does not have adequate information to review the ratings.
COMPANY PROFILE
Incorporated in 1994, STCPL is a Kerala-based private limited
company engaged in the processing, blending and trading of
packaged tea under the brand, Suntips. The business was founded
by Shri. V.G. Saraf in 1948.
SIDDHI COTTON: ICRA Reaffirms B+ Rating on INR8cr Cash Loan
-----------------------------------------------------------
ICRA Ratings has reaffirmed the long-term rating of [ICRA]B+ to
the INR8.00 crore cash credit facility of Siddhi Cotton Ginning &
Pressing Private Limited. The outlook on the long-term rating is
Stable.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund based-Cash
Credit 8.00 [ICRA]B+ (Stable); Reaffirmed
Rationale
The ratings reaffirmation continues to remain constrained by the
company's weak financial profile as evident from its declining
scale of operations, low profitability, leveraged capital
structure and high working capital intensity. The rating also
remains constrained by the highly competitive and fragmented
industry structure resulting in pricing pressure and thereby low
profitability margins that further remain exposed to agro-
climatic conditions and regulatory policies.
The rating, however, continues to positively consider the
longstanding experience of the promoters in the cotton ginning
industry and the proximity of the company's manufacturing unit to
raw material sources, which eases procurement.
Outlook: Stable
ICRA believes Siddhi Cotton Ginning & Pressing Private Limited
will continue to benefit from the extensive experience of its
promoters as well as from its location advantages. The outlook
may be revised to Positive in case of substantial revenue growth
and profitability, improvement in capital structure and working
capital intensity that strengthen the financial risk profile. The
outlook may be revised to Negative in case of any substantial de-
growth in scale of operations and profitability, or stretch in
the working capital cycle.
Key rating drivers
Credit strengths
Extensive experience of promoters in the cotton ginning business:
SCGPPL's promoters have extensive experience in the cotton
industry through their association with other firms involved in
the same business sector.
Location advantage: The company benefits in terms of easy access
to quality raw material and lower transportation cost due to its
proximity to raw material suppliers.
Credit challenges
Weak financial risk profile: SCGPPL's operating income witnessed
a de-growth in the past three fiscals. The profit margins
remained weak with a net profit margin of 0.3% in FY2017 because
of low value-added operations and stiff competition. The capital
structure continued to remain leveraged with a gearing of 2.4
times as on March 31, 2017, because of higher working capital
debt requirements causing total debt to increase from INR4.3
crore in FY2016 to INR8.4 crore in FY2017. Low profitability and
a high debt level resulted in weak debt protection metrics with
interest coverage of 1.3 times and NCA/TD of 3% as on March 31,
2017. Increased inventory holding led to high working capital
intensity at 77% as on March 31, 2017.
Profitability remains vulnerable to fluctuations in raw material
prices and regulatory changes: The profit margins are exposed to
fluctuations in raw material (raw cotton) prices, which depend
upon various factors like seasonality, climatic conditions,
international demand and supply situations, export policy, etc.
It is also exposed to regulatory risks with regards to the
minimum support price (MSP) set by the Government.
Intense competition and fragmented industry: The company faces
stiff competition from other small and unorganised players in the
industry, which limits its bargaining power with customers and
suppliers, and hence, exerts pressure on its margins.
Incorporated in 2007, the Dhasa (Bhavnagar, Gujarat) based Siddhi
Cotton Ginning & Pressing Private Limited is involved in the
ginning and pressing of raw cotton. The plant is equipped with 48
ginning machines and a fully automatic pressing machine with a
production capacity of 17,952 metric tonnes (MT) of cotton bales
per annum. The company is promoted by Mr. Vikram Patel and
family, with long experience in the cotton industry. Some of the
shareholders of the company are associated with two other group
companies, namely Siddhi Cotton Industries and Shivam Cotton
Industries, which are also involved in the same business sector.
In FY2017, the company reported a profit after tax of INR0.04
crore on an operating income of INR14.03 crore, over a profit
after tax of INR0.02 crore on an operating income of INR18.68
crore in FY2016.
SIDDHI COTTON INDUSTRIES: ICRA Reaffirms B+ INR12cr Loan Rating
---------------------------------------------------------------
ICRA Ratings has re-affirmed the long-term rating of [ICRA]B+ to
the INR12.00 crore cash credit facility of Siddhi Cotton
Industries. The outlook on the long-term rating is Stable.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund based-Cash
Credit 12.00 [ICRA]B+ (Stable); Reaffirmed
Rationale
The rating re-affirmation continues to remain constrained by the
firm's weak financial profile as evident from its low
profitability, leveraged capital structure and high working
capital intensity. The rating also remains constrained by the
highly competitive and fragmented industry structure resulting in
pricing pressure and thereby low profitability margins that
further remain exposed to agro-climatic conditions and regulatory
policies. ICRA notes the partnership constitution of the firm and
the adverse impact on its credit profile in case of any
substantial withdrawal from its capital accounts.
The rating, however, continues to positively consider the
longstanding experience of the partners in the cotton ginning
industry and the proximity of the firm's manufacturing unit to
raw material sources, which eases procurement.
Outlook: Stable
ICRA believes Siddhi Cotton Industries will continue to benefit
from the extensive experience of its partners and its location
advantages. The outlook may be revised to Positive in case of
considerable revenue growth and profitability, improvement in
capital structure and working capital intensity that strengthen
the financial risk profile. The outlook may be revised to
Negative in case of any substantial de-growth in scale of
operations and profitability, or stretch in the working capital
cycle.
Key rating drivers
Credit strengths
Experience of partners in the cotton industry: SCI's partners
have extensive experience in the cotton industry through their
association with other entities involved in the same business
sector.
Location advantage: The firm benefits in terms of easy access to
quality raw material and lower transportation costs due to its
proximity to raw material suppliers.
Credit challenges
Weak financial risk profile: SCI's scale of operations remained
moderate with an operating income of INR34.27 crore for FY2017.
Further, the operating profit margin remained low at 2.30% in
FY2017, due to the low value-added nature of operations coupled
with stiff competition. The total debt of the company increased
from INR5.51 crore by the end of FY2016 to INR7.33 crore by the
end of FY2017 because of increased working capital borrowings
(69.14% of total debt). The capital structure continued to remain
leveraged, although moderated, with a gearing of 1.22 times as on
March 31, 2017. Low profitability and high debt level resulted in
weak debt protection metrics with NCA/TD at 1% and interest
coverage of 2.09 times as on March 31, 2017.
Profitability remains vulnerable to fluctuations in raw material
prices and regulatory changes: The profit margins are exposed to
fluctuations in raw material (raw cotton) prices, which depend
upon various factors like seasonality, climatic conditions,
international demand and supply situations, export policy, etc.
They are also exposed to regulatory risks with regards to the
minimum support price (MSP) set by the Government.
Intense competition and fragmented industry: The firm faces stiff
competition from other small and unorganised players in the
industry, which limits its bargaining power with customers and
suppliers, and hence, exerts pressure on its margins.
Impact on net worth: SCI, being a partnership firm, is exposed to
the risk of reduction in its net-worth in case of withdrawal by
the partners which may affect its capital structure.
Established in 1999 as a partnership firm, Siddhi Cotton
Industries is involved in ginning and pressing raw cotton. Its
manufacturing unit, located in Vijapur (Gujarat), is equipped
with 28 ginning machines and a fully automatic pressing machine
with a production capacity of 10,200 metric tonnes of cotton
bales per annum. The firm is owned and managed by Mr. Alpesh
Patel and family, with extensive experience in the cotton
industry. Some partners are associated with two other group
concerns, namely Siddhi Cotton Ginning and Pressing Private
Limited and Shivam Cotton Industries, which are also involved in
the same business sector.
In FY2017, the firm reported a profit after tax of INR0.37 crore
on an operating income of INR34.24 crore compared to profit after
tax of INR0.28 crore on an operating income of INR32.96 crore in
FY2016.
SUBHAMASTHU SHOPPING: ICRA Withdraws B+ Rating on INR6.5cr Loan
---------------------------------------------------------------
ICRA Ratings has withdrawn the long-term rating of [ICRA]B+
assigned to the INR6.50-crore fund-based limits of Subhamasthu
Shopping Mall.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term-Fund
Based-CC 6.50 [ICRA]B+(Stable) Withdrawn
Rationale
The rating is withdrawn in accordance with ICRA's policy on
withdrawal and suspension at the request from the company based
on no dues certificate provided by its lenders.
Subhamasthu Shopping Mall was established as a partnership firm
in February, 2012 by Mr. B. Srinivasulu and other family members
to set up a shopping mall in Nellore, Andhra Pradesh. The firm is
engaged in retailing of garments and accessories for men, women
and kids. The day to day management of the firm is overseen by
the two brothers, Mr. B. Srinivasulu and Mr. B. Ravi Kumar having
more than 20 years of experience in textile industry.
SVR CORPORATION: CARE Assigns B+ Rating to INR9.50cr LT Loan
------------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of SVR
Corporation Private Limited (SVR), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 9.50 CARE B+; Stable Assigned
Detailed Rationale& Key Rating Drivers
The rating assigned to the bank facilities of SVR is tempered by
short track record of the company, risk towards stabilization of
operations, climactic and technological risks and highly
fragmented industry with intense competition from large number of
players. However, the rating is underpinned by the experienced
promoters with short track record in renewable sector, power
purchase agreement (PPA) with Amara Raja Batteries Limited,
established PV module and inverter supplier and moderate profile
of suppliers and positive outlook of renewable power industry.
Going forward, the ability of the company to stabilize the
operations and generate the revenue and profit levels as
envisaged and expand its customer base and timely receipt of
payments from Amara Raja Batteries while maintaining its net PLF
shall remain the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Short track record of the company and risk towards stabilization
of operations: The company was incorporated in 2013 and started
its project activities in 2013. The promoters of the company have
set
up an unit with a total estimated cost of INR13.44 crore which is
funded through a bank term loan of INR5.30 crore, equity share
capital of INR4.69 and rest of INR3.45 crore unsecured loans from
promoters. The commercial operations of the company started from
December 2017 onwards. Therefore, the ability of the company to
stabilize the operations and generate the revenue and profit
levels as envisaged remains critical from credit perspective.
Climactic and technological risks: The solar panels and the
inverters used by the company are manufactured by M/s Canadian
Solar International Ltd. and M/s ABB Limited, respectively, which
have proven field performance across the world. However,
achievement of desired PLF going forward would be subject to
change in climatic conditions, amount of degradation of modules
as well as technological risks (limited track record of solar
technology in India).
Highly fragmented industry with intense competition from large
number of players: The company is engaged in generation,
accumulation, distribution and supply of electricity and all
forms of energy which is highly fragmented industry due to
presence of large number of organized and unorganized players in
the industry
resulting in huge competition.
Key Rating Strengths
Experienced promoters with short track record in renewable
sector:
Mr.R.Uday Kumar Reddy is a Civil Engineering graduate based in
Tirupathi. He is a well experienced person in execution of
infrastructure projects for both government and private sector
for 5 years. He is having more than 6 years of experience in
electrical industry.
Mr.S.V.Gowtham Reddy is a Electrical Engineering graduate based
in Hyderabad. He has around 5 years of experience in mining and
construction business.His engineering and management skills are
vital to the success of this project. He is having more than 6
years of experience in electrical industry. Power purchase
agreement with Amara Raja Batteries Limited SVR has entered into
Power Purchase Agreement (PPA) with Amara Raja Batteries Limited
for supply of 2 MW power at a tariff of INR7.00/KWh for 10 years
and escalated at 5% every year.
Established PV module and inverter supplier and moderate profile
of suppliers: The solar panels, horizontal single axis tracker
and the inverters used by the firm are manufactured by Canadian
Solar International Ltd (Hong Kong), ABB Limited (India) and
Petawatts Solar Solutions Private Limited, Hyderabad
respectively. The manufacturers have proven field performance
across the world. Cables, string combiner boxes and electrical,
substation and line works are provided by Siechem Technologies
Private Limited, Pondicherry, Trinity Touch Pvt Ltd, New Delhi
and Quality Electrical Company, Hyderabad.M/s Vijay Krishna
Constructions has taken the responsibility for execution of civil
works.Design and Supervision Charges are taken care by Petawatts
Solar Solutions Private Limited,Hyderabad.
Positive outlook of renewable power industry: Solar power sector
has generated enormous interest over the past few years, with the
cumulative installed capacity increasing from 35 MW as on March
31, 2011 to 3,744 MW as on March 31, 2015. The major drivers for
the growth have been various government initiatives and policies
(both Central and respective States) such as Preferential Feed-
in-Tariffs, Renewable Purchase Obligations (RPOs), Renewable
Energy Certificates (RECs) and Viability Gap Funding (VGF) etc.
to encourage investment from the private sector; decline in
equipment cost over the years in the global markets;
technological advancement and shorter implementation schedules as
compared to conventional sources of energy.
Solar projects have relatively lower execution risks, stable long
term cash flow visibility with long term offtake arrangements at
a fixed tariff and minimal O&M requirements. Though the sector is
new and has limited track record of operations, visibility has
emerged from the satisfactory operating performance in terms of
CUF (around 20% for projects under JNNSM, Phase-I with majority
of projects in Rajasthan) and timely receipt of tariff payments
from the utilities in the last 2-3 years. Till now average CUF
levels have been broadly on expected lines but level of
degradation of the solar modules and continuity in regular
payment receipt from the off taker would be an important factor
to watch for, from a long term perspective. Furthermore, MNRE has
made policy framework and mechanism for selection and
implementation of 750 MW Grid-connected solar PV power projects
with Viability Gap Funding under Batch-1 Phase-II of JNNSM. VGF
is expected to improve investment in solar energy sector.
SVR was incorporated in the year 2013 by Mr. R.Uday Kumar Reddy
and Mr.S.V.Gowtham Reddy. The company has proposed to set up a
unit for the generation, accumulation, distribution and supply of
electricity and all forms of energy at Chittoor, Andhra Pradesh.
The total installed capacity of the unit is 2MW SPV (Solar
Photovoltaic) new grid-tied projects per annum. The raw material
required for the production, to the extent of 56% will be
imported from Hongkong and remaining to be purchased from other
states in India. SVR has commenced its operations from December
2017 onwards. The total cost proposed for setting up the unit is
INR13.44 crore funded by equity share capital of INR3.36 crore
and remaining through term loan of INR10.08 crore in which
INR4.50 crore is FLC to be converted to term loan after 3 years
usance period.
VARDAAN LIFESTYLE: CARE Reaffirms B+ Rating on INR15cr LT Loan
--------------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Vardaan Lifestyle Limited (VLL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 15 CARE B+; Stable Re-affirmed
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of Vardaan Lifestyle
Limited (VLL) continues to be constrained on account of project
execution risk, high dependence on customers' advances and low
booking status. Furthermore, the rating is constrained by
competition from other real estate players in the region coupled
with inherent cyclicality associated with the real estate sector
and geographical concentration risk. The above weaknesses are
partially offset by experienced promoters group in the real
estate development business in Pune, strategic location of the
project and receipt of requisite approvals and clearances for the
project. The ability of the company to complete the project as
per the schedule and within envisaged cost and timely receipt of
receivables and sale of units at envisaged prices are the key
rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Project execution risk with high dependence on customer advances:
The construction of the project (Phase II) commenced from
January, 2016 and is expected to be completed by June 2019. As on
December 30, 2017, the company has incurred ~60% of the total
project cost. The project is expected to be funded by promoters'
contribution, debt and customer advances in a ratio mix of
0.23:0.33:0.44. The project is heavily dependent on customer
advances as it is
assumed to fund 44% of the total project cost. However, the debt
has been tied up for the projects. Moreover, the customer advance
to be receivable covers about ~11% of the balance construction
cost and total debt.
Presence in competitive and cyclical real estate industry coupled
with geographical concentration risk: The company is exposed to
the cyclicality associated with the real estate sector which has
direct linkage with the general macroeconomic scenario, interest
rates and level of disposable income available with individuals.
The real estate industry in India is highly fragmented with most
of the real estate developers having region-specific presence.
VLL also faces competition from other real-estate developers who
are coming up with residential projects near Mohammadwadi, NIBM
Road, Pune such as and such other upcoming projects.
Low booking status: VLL has sold around 10% of total saleable
area for its ongoing project and has already received ~45% of the
customer advances from the sold area. Furthermore, the total area
sold has been fully registered thereby mitigating the
cancellation risk to an extent.
Key Rating Strengths
Experienced promoter group in real estate development in Pune
resulting in marketing advantage: VLL is a part of Mittal
Brothers Group which is one of the established real estate groups
of Pune and has been engaged in real estate business since past
more than a decade. Moreover, VLL has a marketing advantage due
to strong presence of its group projects in the same vicinity and
hence reducing the risk of project execution and selling to some
extent.
Receipt of approvals and clearance for the project coupled with
moderate booking status: VLL has received all the necessary
clearances and approvals for the projects, related to land
acquisition and construction. Commencement certificate from the
Pune Municipal Corporation has been received. Furthermore, the
said land has also been converted to non-agriculture use and
environmental clearance for the project has also been obtained.
Strategic location of the project The project has a strategic
location being situated in one of the established localities of
Pune at NIBM Road which is around 5-6 kilometers from the centre
of Pune. In addition, the project has easy access to basic civic
amenities such as schools, hospitals, colleges, malls, situated
close by and has close proximity totoSwargate, MG Road, Camp,
Kalyani Nagar, which provides easy access to Pune Railway
Station, Kharadi IT Park, Pune International Airport .
VLL (VLL: earlier known as Ram India Mittal Township Limited) is
a special purpose vehicle of Mittal Brothers Group. The company
earlier in March 2007 was established as a partnership firm under
the name of "Ram India Mittal". In the year 2014, the company
changed its constitution to limited company. Later in September
2017, the company changed its name to VLL. Currently, VLL is
developing a residential cum commercial development under the
name "Cleveland Park-Phase II ( earlier known as Life Park
Plus)". The total cost of the project is expected to be funded
through promoter's contribution, term loan from bank and customer
advance in the ratio mix of 0.23:0.33:0.44.
VEGA ENTERTAINMENT: Ind-Ra Migrates D Rating to Non-Cooperating
---------------------------------------------------------------
India Ratings and Research (Ind-Ra) has migrated Vega
Entertainment Private Limited's Long-Term Issuer Rating to the
non-cooperating category. The issuer did not participate in the
rating exercise, despite continuous requests and follow-ups by
the agency. Therefore, investors and other users are advised to
take appropriate caution while using these ratings. The rating
will now appear as 'IND D(ISSUER NOT COOPERATING)' on the
agency's website. The instrument-wise rating actions are:
-- INR140 mil. Fund-based working capital limit (long-term)
migrated to non-cooperating category with IND D(ISSUER NOT
COOPERATING) rating; and
-- INR103.3 mil. Term loan (long-term) due on December 2020
migrated to non-cooperating category with IND D(ISSUER NOT
COOPERATING) rating.
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
Jan. 19, 2017. Ind-Ra is unable to provide an update, as the
agency does not have adequate information to review the ratings.
COMPANY PROFILE
Vega Entertainment is a Hyderabad-based mobile and internet-based
entertainment and film production company.
VIDEOCON INDUSTRIES: NCLT Moves SBI's Insolvency Plea to Feb. 21
----------------------------------------------------------------
Shivani Saxena at BloombergQuint reports that State Bank of
India's insolvency plea against Videocon Industries Ltd. was
adjourned till Feb. 21 by the National Company Law Tribunal.
India's largest lender will propose the name of an interim
insolvency professional in the next hearing, two people aware of
the development told BloombergQuint requesting anonymity.
Videocon is among the second list of debt-laden companies that
the Reserve Bank of India had identified for resolution under the
Insolvency and Bankruptcy Code, BloombergQuint discloses. The
appliances maker, according to a Care Ratings report of
June 2016, has a debt of INR43,000 core. More the half of it is
dollar-denominated and the rest is from Indian lenders, says
BloombergQuint.
The RBI had given lenders six months till December resolve bad
loans of companies on the second list, failing which insolvency
proceedings will be initiated in the NCLT. Videocon filed a writ
in the Bombay High Court challenging RBI's six-month timeframe,
the two people quoted above said, BloombergQuint relays.
BloombergQuint relates that a debt restructuring proposal has
already been submitted for Videocon, the people quoted above
said. The fate of SBI's plea may be tied to the writ and the
recast proposal, they said, the report adds.
Videocon Industries Limited engages in the manufacture, and
wholesale and retail trade of consumer electronics and home
appliances items.
WESTERN INDIA: CARE Moves D Rating to Not Cooperating Category
--------------------------------------------------------------
CARE has been seeking information from Western India Metal
Processors Limited to monitor the rating(s) vide letter dated
December 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. In line with the
extant SEBI guidelines CARE's rating on Western India Metal
Processors Ltd.'s bank facilities will now be denoted as CARE D;
ISSUER NOT COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank
Facilities 70.00 CARE D; Issuer not cooperating
Short term Bank
Facilities 23.00 CARE D; Issuer not Cooperating
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating(s).
Detailed description of the key rating drivers
At the time of last rating on July 07, 2017, the following was
the rating weakness
Key Rating Weaknesses
Due to the stressed liquidity position, there are devolvement in
LCs and on-going delays in servicing of debt obligations by the
company.
Western India Metal Processors Limited (WIMPL) was incorporated
as a public limited company in August 2006. The company is
engaged in trading in prime steel, metal scrap and chemical
trading and metal recycling processes for separation of scrap
(basic raw material for melting process in manufacturing of
steel) by shearing, shredding through magnets and air
classification and mechanical sorting methods. The company
procures scrap and after identification, segregates it into
various ferrous and non-ferrous items viz. iron and steel,
aluminum, brass and copper scrap for further sale to foundries,
rolling mills, and wholesalers. Although the company is in
existence from August 2006, the promoters have been in the
business for five decades. The company is a public limited
company but it is closely held with 100% stake held by the
promoters. The company has warehousing and processing facilities
at Kurla, Dahisar, Mori, Taloja and Thane.
WOMEN'S NEXT: CARE Assigns B Rating to INR12.50cr LT Loan
---------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of
Women's Next Loungeries Limited (WNLL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 12.50 CARE B; Stable Assigned
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of WNLL are
constrained by modest and fluctuating scale of operations coupled
with moderate profit margins, weak debt coverage indicators,
working capital intensive nature of operations and Project
execution and stabilization risk. The ratings are further
constrained by its customer concentration risk, susceptibility of
the profit margins due to volatile raw material prices, presence
in competitive and fragmented nature of operations.
The above weaknesses are partially offset by the experienced
promoters and management team and moderate capital structure.
The ability of WNLL; to increase its scale of operations while
improving its profit margins and capital structure amidst and
improvement in liquidity position with efficient management of
working capital requirement are the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Modest and fluctuating scale of operations with moderate profit
margins: Total operating income of the company increased
significantly to INR51.77 crore in FY17 from INR32.81 crore in
FY16 on account of more orders received by the company. However
scale of operations of the company remains at modest level and
fluctuating during past four years. Furthermore, profit margins
have also remained at moderate level but fluctuating during past
four years on account of fluctuation in realization which varies
based on type of products manufactured.
Weak debt coverage indicators: The debt coverage indicators
remained weak on account of higher dependence on working capital
borrowing and moderate profit margins. However, the same have
improved in FY17 due to decrease in borrowing level and improved
GCA during the year.
Highly working capital intensive nature of operation: Operations
of the WNLL are highly working capital intensive as the
significant funds are blocked in receivables and inventory which
resulted in stretched collection and inventory period. Therefore
gross current assets period stood significantly higher at 249
days during FY17. Furthermore the company receives around three
month's credit period from its suppliers. Due to the same,
operations of the company remained highly working capital
intensive and resulted in fully utilization of working capital
limits.
Project execution and stabilization risk: WNLL is planning to
purchase new 120 machineries at the existing manufacturing unit.
The total cost of project is INR2.70 crore which will be funded
through equity infusion. All the machineries will be installed by
January 2018 and commencement of operations will be starting from
January 2018. Thus going forward WNLL's ability to complete the
project in timely manner without any cost and time overrun shall
be critical from credit perspective.
Customer concentration risk: WNLL possesses customer
concentration risk as it sells around 70% of its products to
Ashapura Intimates Fashion Ltd. and rest is sold to its other
distributors through organized retail chains and distributors
Further company does not have any long term contracts with
customers. Moreover, the revenue segment is also concentrated
geographically as the company primarily deals locally across
Maharashtra.
Susceptibility of profit margins due to volatile raw material
prices: The raw material is the major cost driver (constituting
about 80% of total cost of sales in FY17) and the prices of the
same are volatile in nature therefore cost base remains exposed
to any adverse price fluctuations in the prices of the grey
fabric, elastic, buttons, buckles, hooks, etc. being major cost
components amongst all raw materials are volatile in nature.
Accordingly, the profitability margin of the firm is susceptible
to fluctuation in raw material prices with limited ability to
pass on the increase in raw material costs in a competitive
operating spectrum.
Presence in competitive and fragmented textile industry: WNLL
operates in the textile industry which is highly fragmented
industry with presence of numerous independent small-scale
enterprises owing to low entry barriers leading to high level of
competition in the processing segment. The intense competition in
highly fragmented textile processing industry also restricts
ability to completely pass on volatility in input cost to its
customers, leading to lower profit margins.
Key Rating Strengths
Experienced promoters and management team: WNLL is currently
managed by Mr. Bhavesh Bhanushali, Mr. Anand Bhanushali and Mrs.
Premila Bhanushali who have an experience of over a decade in the
textile industry. All the directors are supported by experienced
second line of management who are qualified and have extensive
experience in related field.
Moderate capital structure: WNLL's capital structure stood
moderate during last four years on account of moderate reliance
on external debt taken for working capital requirements. Capital
structure of the company remained moderate and improved with
overall gearing of 1.10x as on March 31, 2017 as compared to
1.27x as on March 31, 2016 due to lower utilization of working
capital limits with increase in net worth due to accretion of
profits.
Incorporated in December 2010 as Shiv Lingeries Private Limited
by Mr Bhavesh Bhanushali, & Mrs Premila Bhanushali and
subsequently converted to public limited company in 2012 with its
name changed to Women's Next Loungeries Ltd. (WNLL) and listed
with Bombay Stock Exchange in 2014. WNLL is engaged in the
business of manufacturing (constitutes 70% of total revenue in
FY17) of lingerie, loungerie, pajamas, t-shirts and night suits
and trading (constitutes 30% of total revenue in FY17) of fabric.
The company sells ~70% of products to Ashapura Intimates Fashion
Ltd.(AIFL) (CARE A; Stable and CARE SME 1) under their brand name
of 'Valentine' and rest is sold to its other distributors through
organized retail chains and distributors under the own brand name
of 'Women's Next'. Further company procures 65% of its total raw
materials viz. grey fabric and elastic from Momai Apparels Ltd.
(CARE A (SO) subsidiary of AIFL) and rest of the raw materials
viz. buttons, buckles, hooks, etc. from domestic suppliers. WNLL
has manufacturing unit which is located at Bhiwandi, Thane with
an annual installed capacity of 16.49 lakh pieces (as at end of
FY17).
=================
I N D O N E S I A
=================
MEDCO ENERGI: Fitch Gives Final 'B' Rating to US$500MM Sr. Notes
----------------------------------------------------------------
Fitch Ratings has assigned PT Medco Energi Internasional Tbk's
(Medco; B/Stable) US$500 million 6.75% senior notes due in 2025 a
final rating of 'B' and a Recovery Rating of 'RR4'.
The notes were issued by Medco's wholly owned subsidiary, Medco
Platinum Road Pte Ltd, and guaranteed by Medco and several of its
subsidiaries. The notes are rated at the same level as Medco's
Issuer Default Rating (IDR) as they constitute direct,
unsubordinated and unsecured obligations of the company.
The assignment of the final rating follows a review of the final
documentation, which conforms to the draft documentation
previously received. Indonesia-based Medco plans to use the
proceeds from the proposed notes to repay some of its existing
debt and spread out its debt maturity schedule.
KEY RATING DRIVERS
Small Oil and Gas Producer: Medco's 'B'/Stable IDR reflects the
nature of its business as a small upstream oil and gas producer,
with proved (1P) reserves of 227 mmboe and proved and probable
(2P) reserves of 316 mmboe as at June 2017. This translates to 1P
and 2P reserve life of about 7.5 years and 10.5 years,
respectively. Medco has mostly controlling interests in seven
main production assets in Indonesia from which it derives nearly
all of its production. Medco is the operator of all of its
fields. The company had developed 75% of its proved reserves as
at September 2017.
Fixed-Price Gas Sales: Around 36% of the company's revenue in
2017 stemmed from upstream gas production, which is sold in
Indonesia based on fixed-price take-or-pay contracts with the
Indonesian state, with in-built annual price escalations, while
the remaining 64% comprises oil revenue and take-or-pay gas
contracts that are indexed to crude oil prices, and are
contracted with large overseas counterparties. The contracts have
tenors of 10-15 years. The fixed or indexed-pricing and take-or-
pay nature of these contracts reduces the volatility of Medco's
operating cash flows to an extent.
Moderating Leverage: Fitch expect Medco's FFO adjusted net
leverage to drop to about 5.0x in 2017 from 15.5x in 2016, driven
by a USD195 million rights issue in 4Q17, an increase in
production volumes and better realised oil and gas prices
compared with 2016. Fitch expect Medco's leverage to continue
improving due to Fitch expectation that its production volume
will continue rising for the next three to four years and Fitch
forecast for oil and gas prices to improve modestly in the next
few years. Fitch estimate the company's cash costs dropped to
about USD8.10 per barrel in 9M17 from USD12 per barrel in 2015
due to increasing economies of scale and cost containment.
Medco continues to work on measures to cut leverage, some of
which Fitch have not incorporated into Fitch forecasts as these
are subject to circumstances outside of management control. These
may result in faster deleveraging in the next 12 months compared
with Fitch rating case, which could lead to positive rating
action. These measures include raising over USD200 million via
share warrants until 2020, a planned IPO of its non-consolidated
subsidiary, PT Amman Mineral Nusa Tenggara, a company that
effectively owns gold and copper mines in Indonesia, and disposal
of non-core assets of more than USD467 million over the next 12
to 18 months.
Growth from Acquisitions: Medco's production run-rate rose to 88
mboepd in 9M17 from an annual rate of 66 mboepd in 2016,
supported by the acquisition of a 40% stake in the South Natuna
Sea Block B in 2016. Fitch expect the company to maintain a
similar annual production rate over the next three to four years.
Medco plans capex of around USD600 million in the next two years,
nearly half of which will be allocated to develop phase one of
Block A in Aceh, where first gas is likely in 2018. Medco
increased its stake in the Block A Aceh deposit in 2016 by 41% to
85% - this asset has 2P reserves of 58 mmboe, of which 92% stems
from natural gas. The South Natuna Sea Block B has 27 mmboe of 2P
reserves, of which 52% is from natural gas.
Power Business Investments Factored In: Medco increased its stake
in PT Medco Power International Tbk (MPI) to 89% from 49% for
USD129 million on 3 October 2017. Fitch continues to treat MPI as
an equity investment when assessing Medco's credit risk as MPI's
operations are largely project-financed on a non-recourse basis
and there is limited fungibility of cash flow between the
businesses due to a lack of cross-default clauses linking MPI's
debt to Medco. Furthermore, MPI's business profile is sound and
it is able to finance its own operations.
MPI's cash flows stem from long-term take-or-pay contracts with
state-owned utility company PT Perusahaan Listrik Negara
(Persero) (PLN, BBB/Stable) with a robust cost pass-through
mechanism. MPI has a track record of operating nine of its own
power plants and a large number of third-party power plants to
the standards required by the contracts without significant
interruptions, which further mitigates the risks to its operating
cash flows.
DERIVATION SUMMARY
Medco's 'B'/Stable Long-Term IDR compares well with upstream oil
and gas producers that are rated in the 'B' category. Medco's
business risk profile is similar to that of PT Saka Energi
Indonesia (BB+/Positive), which is assessed at 'B+' on a
standalone basis. Medco has a larger production base and proved
reserves, longer reserve life, and a similar mix of operating
cash flows stemming from fixed-price gas contracts compared with
Saka. However, Fitch expect Saka's production base and reserves
to catch up with Medco's in the next two years. Medco's leverage
is higher than Saka's, resulting in Saka's standalone rating
being one notch higher than Medco's.
Medco is rated in line with Kosmos Energy Ltd. (B/Positive).
Medco's business risk profile is stronger than Kosmos' on account
of larger proved reserves and production volume, and lower
production costs. This is counterbalanced by Medco's higher
leverage.
KEY ASSUMPTIONS
Fitch's key assumptions within Fitch rating case for the issuer
include:
- Brent crude oil price to average US$52.50/barrel in 2018,
US$55.00/barrel in 2019 and US$57.50/barrel thereafter
- Oil and gas production of about 32 mmboe per annum from
2018 to 2020
- Cash operating costs per mmboe to remain between US$12 and
US$13 (all operating costs including selling, general and
administrative expenses)
- Annual capex of around US$300 million in 2017 and 2018
Fitch's key assumptions for bespoke recovery analysis include:
- The recovery analysis assumes that Medco would be considered a
going-concern in bankruptcy and that the company would be
reorganised rather than liquidated. Fitch have assumed a 10%
administrative claim.
- Medco's going-concern EBITDA is based on expected 2018 EBITDA,
which in Fitch's view reflects Medco's sustainable production and
price levels. It also captures production from Medco's new oil
and gas assets. However, the going-concern EBITDA is about 30%
below Fitch expected 2018 EBITDA to reflect the risks associated
with oil price volatility, potential challenges in maintaining
production of maturing fields, and other factors.
- An enterprise value multiple of 5.5x is used to calculate a
post-reorganisation valuation and reflects a mid-cycle multiple
for oil and gas and metals and mining companies globally, which
is somewhat higher than the observed lowest multiple of 4.5x. The
higher multiple considers that a majority of Medco's production
volume stems from long-term fixed-price and indexed take-or-pay
gas contracts, which provide the company with more cash flow
visibility across economic cycles than the average global
upstream oil and gas production company.
- Fitch have assumed secured and prior ranking debt of US$666
million to be repaid before Medco's senior unsecured creditors,
including the investors of the US dollar bonds. Prior ranking
debt include project-finance debt at non-guarantor subsidiaries
PT Medco E&P Tomori Sulawesi of US$159 million, drawdown of up to
US$360 million on a facility at PT Medco E&P Malaka, as well as a
US$147 million secured debt at PT Api Metra Graha.
- The payment waterfall results in a 65% recovery corresponding
to a 'RR3' recovery for the US$500 million unsecured notes.
However, Fitch have rated the senior unsecured bonds 'B'/'RR4'
because Indonesia falls into Group D of creditor-friendliness
under Fitch Country-Specific Treatment of Recovery Ratings
criteria, and the instrument ratings of issuers with assets in
this group are subject to a soft cap at the issuer's IDR.
RATING SENSITIVITIES
Developments That May, Individually or Collectively, Lead to
Positive Rating Action
- Ability to sustain FFO adjusted net leverage at less than
4.0x, while maintaining its current business risk profile.
Developments That May, Individually or Collectively, Lead to
Negative Rating Action
- A sustained increase in FFO adjusted net leverage to more than
5.0x
- A sustained decline in Medco's oil and gas business risk
profile, or a significant weakening in liquidity
LIQUIDITY
Manageable Refinancing Risk: Medco has debt maturities of US$348
million in 2018 and its liquidity is manageable with cash
balances of US$365 million and committed bank facilities of
US$290 million as at September 2017. Medco's liquidity is also
aided by the US$195 million raised in its rights issue in 4Q17.
Proceeds from the proposed notes will be used to repay some of
its debt due from 2018 to 2020, which would spread out the
company's debt maturity schedule. After the bond issuance, US$163
million of debt will be due in 2018.
WIJAYA KARYA: Fitch Rates IDR5.4 Tril. Sr. Unsecured Notes 'BB'
---------------------------------------------------------------
Fitch Ratings has assigned a final rating of 'BB' to Indonesia-
based construction company PT Wijaya Karya (Persero) Tbk's (WIKA;
BB/Stable) IDR5.4 trillion 7.7% senior unsecured notes due 2021.
The assignment of the final rating follows a review of the final
documentation, which conforms to the draft documentation
previously received. The final rating is the same as the expected
rating assigned on Jan. 14, 2018.
The notes, known as komodo bonds, are denominated in rupiah, but
both the coupon payments and principal on maturity are settled in
US dollars at the prevailing rupiah-dollar exchange rate. As
such, the investors bear the foreign-exchange risk due to a
weaker rupiah. The settlements are still subject to transfer and
convertibility risk on foreign exchange involving the rupiah and
the rating on the notes can be no higher than Indonesia's Country
Ceiling of 'BBB'.
The linkage of payments under the terms of the notes to the
prevailing exchange rate means that Fitch does not regard the
conversion of currencies at the transaction's initiation and
maturity as altering the underlying local-currency nature of the
note.
The unsecured notes will be a direct, unsecured and
unsubordinated obligation to the company, ranked pari passu with
all other unsecured and unsubordinated debt of the company, and
will be effectively subordinated to secured obligations of the
company and its subsidiaries. Part of the proceeds of the notes
will be used to repay secured debt, which, in Fitch estimate,
would cut the ratio of prior ranking debt to total debt to below
2.0x. Fitch considers a threshold of 2.0x-2.5x as the level above
which senior unsecured creditors' interests are materially
subordinated to the interests of secured or prior ranking
creditors. Fitch therefore rate the notes at the same level as
WIKA's Long-Term Local-Currency Issuer Default Rating (IDR) of
'BB'.
KEY RATING DRIVERS
Robust Order-Book Growth: By end-October 2017, WIKA achieved 80%
of its IDR43 trillion full-year 2017 target for new contracts.
The company expanded its order-book in 2016 to IDR83 trillion,
surpassing Fitch expectations. Fitch expect new contract wins
over the medium term to ease gradually as the company focuses
more on executing its existing order-book to improve its revenue
recognition and cash flows. Nevertheless, construction order-
book/revenue should remain high at between 3.5x-4.0x in 2018-
2020.
Large Flagship Projects: The strong order-book growth has been
supported by large strategically important flagship projects as
part of the government's infrastructure development program, such
as the IDR15.7 trillion Jakarta-Bandung High Speed Railway (HSR),
which contributed new orders of IDR54 trillion during 2016.
However, execution of the contracts has been slower than Fitch
expected, resulting in weaker cash generation and revenue
recognition.
Its projects were held up by delays in land acquisition. However,
the government recently announced new regulations (Peraturan
Pemerintah (PP) No 13/2017) to help expedite the land-clearing
process for national strategic projects, and this may help to
mitigate further delays in the execution of the HSR project. WIKA
also had to prioritise the delivery of the Balikpapan-Samarinda
toll road, the Kelapa Gading LRT project and a few others over
the HSR, as these other projects need to be completed ahead of
the Asian Games, which will be held in Jakarta in 2018.
Small Scale, Cash Flow Deficit: WIKA's standalone credit profile
of 'B+'/'A+(idn)' reflects its small operating scale relative to
global and national peers, as well as its negative free cash flow
(FCF) due to a requirement to fund the government's
infrastructure programme. Fitch see WIKA remaining in a high-
growth phase over the next few years as it executes its strong
order-book. Therefore, Fitch expect WIKA to post negative FCF
(after planned investments in joint operations and associates)
over the medium term, due to the high working capital needed to
fund the government's infrastructure projects and WIKA's
investment commitments.
Several strategic national projects, including the IDR5.9
trillion Balikpapan-Samarinda toll-road project, require the
company to pre-finance them. Fitch also expect WIKA to invest the
remaining IDR4 trillion from its 2016 rights issue into several
projects in 2018, such as the Serang-Panimbang Toll Road. The
negative FCF is supported by WIKA's strong access to domestic
credit markets because of its association with government and
government-sponsored construction projects and as well as its
track record.
Strategic Importance to Government: WIKA's ratings benefit from a
two-notch uplift over its standalone profile, based on Fitch's
Parent and Subsidiary Rating Linkage criteria. Fitch assesses
that WIKA has strong operational and strategic linkages, but a
weak legal link, with its parent, the government of Indonesia,
which owns a 65.05% stake. Fitch do not expect any change to
WIKA's rating uplift after the finalisation of Fitch rating
criteria on government-related entities following the publication
of an exposure draft in November 2017. Upon finalisation, a
strengthening of WIKA's standalone credit profile may not lead to
a positive rating action.
DERIVATION SUMMARY
WIKA's standalone IDR of 'B+' compares well with international
peers such as Italy's Astaldi S.p.A (B/Negative) and Spain's
Grupo Aldesa (B/Stable). WIKA's standalone National Long-Term
Rating of 'A+(idn)' compares well with PT Sri Rejeki Isman Tbk
(Sritex, A+(idn)/Stable) and PT Waskita Karya (Persero) Tbk
(WSKT, standalone rating of BBB+(idn)/Stable).
Aldesa's operations are more geographically diverse than WIKA's.
However, WIKA has a larger operating scale, as reflected in its
leading market position in Indonesia, and a substantially
stronger financial profile than Aldesa, leading to WIKA's higher
standalone IDR of 'B+' compared with Aldesa's 'B' IDR. Aldesa
faces multiple challenges in its end-markets and limited growth
prospects, while growth prospects for WIKA are brighter.
Astaldi's operating scale is larger than that of WIKA, although
its project-concentration risk is significantly higher. Its
larger scale is reflected in Astaldi's broader geographical
diversity than WIKA. However, Astaldi's heavy investments in
toll-road concessions have led to substantially higher leverage
and cash outflow due to working-capital increases compared with
WIKA. Therefore, Astaldi is rated one notch lower compared with
WIKA's 'B+' standalone IDR.
WIKA's cash flows would be more cyclical than those of Sritex's
as they are leveraged to the pace at which the government
executes its infrastructure programme. The company's order-book
and cash flows have expanded strongly in the last eight years due
to Indonesia's infrastructure investments. WIKA has a
considerably stronger financial profile than Sritex to compensate
for its more cyclical cash flows and is therefore rated at the
same National rating level as Sritex on a standalone basis.
WSKT is the largest Indonesian construction company and its
recent business growth has been due largely to a rapid increase
in toll-road investments and related order-book in 2016. Both are
equally strategically important to the state, albeit in different
infrastructure segments. However, WSKT's financial profile is
significantly weaker than that of WIKA, which drives its three-
notch lower standalone rating.
KEY ASSUMPTIONS
Fitch's key assumptions within Fitch rating case for the issuer
include:
- WIKA's order-book to increase to more than IDR100 trillion in
2017, and around IDR120 trillion in 2018
- EBITDA margins to hover between 10% and 11% in 2017-2020
- Aggregate capex and investments of around IDR9 trillion in
2017 and IDR2.5 trillion in 2018
- Dividend payout ratio of 30% in 2017-2020
RATING SENSITIVITIES
Future Developments That May, Individually or Collectively, Lead
to Positive Rating Action
- Stronger linkages between WIKA and the government of Indonesia
- A strengthening in WIKA's standalone profile, as reflected in
a substantial increase in its operating scale combined with
the ability to generate neutral FCF after investments in
projects, on average, while maintaining a stable credit
profile.
Future Developments That May, Individually or Collectively, Lead
to Negative Rating Action
- Weakening credit profile of the Republic of Indonesia and/or
weakening linkages between WIKA and the government
- Weakening in WIKA's standalone credit profile, as reflected by
an increase in its net adjusted debt/EBITDAR to more than
2.0x, or EBITDAR fixed-charge cover to less than 2.5x, both on
a sustained basis
LIQUIDITY
Adequate Liquidity: WIKA had readily available cash of IDR7.2
trillion at 30 September 2017, which was supported by its IDR6.1
trillion rights issue in end-2016. With the addition of the bond
issuance, Fitch believe WIKA has adequate liquidity to cover its
maturing term loans and Fitch projected negative FCF after
investments in 2018. WIKA also has strong access to domestic
credit markets, particularly to state-owned banks, given its
association with the state and its strong operating record, which
further underpin its liquidity profile.
=========
J A P A N
=========
HARENOHI: Court Starts Bankruptcy Process v. Kimono Rental Firm
---------------------------------------------------------------
The Yokohama District Court started bankruptcy procedures on
Jan. 26 for a rental kimono company that left many young women
without formal attire for their coming-of-age ceremonies.
Yoichiro Shinozaki, president of the Yokohama-based company
Harenohi, and its lawyer disclosed at a press conference that its
liabilities have so far totaled around JPY635 million and they
are expected to top JPY1 billion, the report says.
"I deeply apologize to our customers and companies having
business ties with us for having caused the problem and anxiety,"
the report Shinozaki as saying.
Of 1,600 creditors, 1,300 are customers of the company and their
estimated losses of over 300 million yen are not included in the
current liabilities, according to the lawyer, Japan Today relays.
Japan Today relates that on Jan 8, the company failed to provide
kimono to scores of customers, who had either rented or bought
the attire, after it went bust just before this year's Coming-of-
Age Day, leading its shops in Yokohama and Tokyo's Hachioji to be
closed.
In addition, the company had accepted reservations for kimono for
next year and even the following year's Coming-of-Age Day, the
report says.
The lawyer said the company is now in possession of 1,200 kimono
and that it plans to give them to customers, Japan Today adds.
====================
N E W Z E A L A N D
====================
CHRISTIAN SAVINGS: Fitch Hikes IDR to BB-; Outlook Stable
---------------------------------------------------------
Fitch Ratings has upgraded Christian Savings Limited's (CSL)
Long-Term Issuer Default Rating (IDR) to 'BB-' from 'B+'. The
Outlook is Stable. At the same time, Fitch has upgraded CSL's
Viability Rating (VR) to 'bb-' from 'b+'.
KEY RATING DRIVERS
IDRS AND VIABILITY RATING
The upgrade in CSL's IDRs and VR reflects the improvement in the
organisation's risk appetite, a significant uplift in
capitalisation, and earnings and profitability that were better
than Fitch expected.
Fitch does not consider CSL to be an aggressive lender, despite
strong growth in recent years, which has mainly been driven by
structural changes to the organisation. CSL's underwriting
standards are broadly in line with other non-bank deposit taker
(NBDT) peers in New Zealand. CSL has improved its risk appetite
in recent years through tighter risk controls and underwriting
although it continues to lag behind larger banking peers, partly
reflecting its niche focus, higher concentration and business
model that focuses on providing loans to churches and church-
related entities.
CSL's capitalisation, as measured by the Fitch Core Capital
ratio, has improved significantly over the last 18 months as a
result of a restructuring in September 2017 that facilitated the
introduction of new shareholders and additional common equity.
CSL's ability to raise additional equity provides it with more
financial flexibility, which is typically a limiting factor for
other NBDTs in New Zealand. Notwithstanding this, CSL's Fitch
Core Capital ratio remains towards the lower end of similarly
sized and larger peers. Fitch expects its capital ratios to
remain broadly stable in the financial year ending August 2018
(FY18).
CSL's earnings and profitability remain modest but were stronger
than Fitch's expectations in FY17, driven by greater management
focus on performance and loan growth. Fitch expects CSL's
earnings and profitability to continue improving at a gradual
rate over the next two years with key challenges being a
heightened level of investment expenditure and expense growth.
Fitch believes CSL's loan impairments and losses will remain
lower than other NBDT peers through the cycle, reflecting its
underwriting and low loan-to-value ratios across its portfolio.
However, it has significantly higher single-name concentration in
its loan book due to a smaller number of customers relative to
peers, which is unlikely to significantly change in the short-to-
medium term.
CSL's lending activities are fully funded by a combination of
church and household deposits and reinvestment rates remained
broadly stable in FY17. CSL's loan/deposit ratio deteriorated due
to a greater focus on margin and efficiency, which has resulted
in lower levels of excess liquidity held on its balance sheet.
Despite this, CLS's loan/deposit ratio remains ahead of most of
its NBDT peers, although it does not have access to the Reserve
Bank of New Zealand's repo facility.
SUPPORT RATING AND SUPPORT RATING FLOOR
CSL's Support Rating and Support Rating Floor are based on
Fitch's view that while support from the New Zealand sovereign
(AA/Stable) is possible, it cannot be relied upon. CSL is not
captured under the Open Bank Resolution scheme, which allows for
the imposition of losses on depositors and senior debt holders
when a deposit-taking institution fails. However, Fitch sees the
existence of such a framework as an indication of a lower
propensity for the sovereign to support its banks.
RATING SENSITIVITIES
IDRS AND VIABILITY RATING
Negative rating action may be taken if CSL's capitalisation were
to decline significantly, or if there was a weakening in its risk
appetite through a loosening in underwriting standards and
controls, or excessive growth. Positive rating action on the IDR
and VR would require a longer track record of successful strategy
execution that would be evident in a sustained improvement in the
company profile and overall financial profile.
SUPPORT RATING AND SUPPORT RATING FLOOR
The Support Rating and Support Rating Floor are sensitive to
changes in assumptions around the propensity, or ability, of the
New Zealand authorities to provide timely support to CSL. The
existence of a bank resolution framework means Fitch is unlikely
to upgrade these ratings.
The rating actions are as follows:
Christian Savings Limited
Long-Term Foreign-Currency IDR upgraded to 'BB-' from 'B+';
Outlook Stable
Long-Term Local-Currency IDR upgraded to 'BB-' from 'B+'; Outlook
Stable
Short-Term Foreign-Currency IDR affirmed at 'B'
Short-Term Local-Currency IDR affirmed at 'B'
Viability Rating upgraded to 'bb-' from 'b+'
Support Rating affirmed at '5'
Support Rating Floor affirmed at 'No Floor'
===============
P A K I S T A N
===============
PAKISTAN: Fitch Revises Outlook to Negative; Affirms B IDR
----------------------------------------------------------
Fitch Ratings has revised the Outlooks on Pakistan's Long-Term
Foreign- and Local-Currency Issuer Default Ratings (IDRs) to
Negative from Stable and affirmed both IDRs at 'B'.
KEY RATING DRIVERS
Pakistan's 'B' rating reflects a high public debt/GDP ratio, weak
governance standards as measured by World Bank indicators,
domestic political and security risks and a fragile external
position, which are balanced by relatively strong growth.
The revision of the Outlook on the Long-Term IDRs to Negative
reflects the following key rating drivers:
Since the successful completion of Pakistan's three-year IMF
Extended Fund Facility in September 2016, there has been a
partial reversal of gains made under the programme. In
particular, reserves have declined and the fiscal deficit has
widened. Measures have recently been taken to address these
trends, including some currency depreciation, tax rebates on
exports, and import duties on non-essential items. However, these
have proved insufficient thus far to arrest an ongoing decline in
reserves. Moreover, political uncertainty and upcoming elections
due by July 2018 are, in Fitch's view, likely to constrain the
government's ability to address them convincingly in the near
term.
Fitch forecasts that reserves (including gold) will fall to
US$16.8 billion at end-FY18 (2.9 months of external current
account payments), after having peaked at US$22.6 billion at the
end of the IMF-programme in October 2016. This forecast
incorporates proceeds from the US$2.5 billion in sukuk and
Eurobond issuances at end-November 2017. The deterioration could
be sharper in the absence of further currency flexibility and
tightening of macro policies sufficient to restrain domestic
demand.
The decline in reserves is driven by a rise in Pakistan's current
account deficit, which widened to 4.1% of GDP in the fiscal year
ending June 2017 (FY17) from 1.7% in FY16. The deficit reflects
rising capital imports for China-Pakistan Economic Corridor
(CPEC) projects, higher energy prices, sluggish exports and loose
macroeconomic policies. Fitch assumes a further modest widening
of the current account deficit to 4.7% of GDP in FY18 on the
basis of a pickup in exports and levelling off of imports
following recent currency depreciation as explained below.
The decision by the State Bank of Pakistan (SBP) in early
December to allow market forces to play a greater role in
determining the exchange rate would, if implemented, relieve some
of the pressure on Pakistan's reserves and current account.
Immediately after the announcement, the SBP allowed the rupee to
depreciate by nearly 5% against the US dollar, but the currency
has been held stable since then, and reserves have continued to
slide in recent weeks. It remains to be seen how much flexibility
the authorities will tolerate should there be sustained downward
pressure on the currency, especially given political resistance
in the past.
Fiscal consolidation efforts in Pakistan suffered a setback last
year, limiting progress in reducing the elevated public debt/GDP
ratio. The fiscal deficit surged to 5.8% of GDP in FY17 compared
with 4.6% in FY16 and a revised target of 4.2%, driven by higher
provincial government expenditures and an underperformance in
revenues. The government views last year's breach of the target
as temporary and aims to return to a path of fiscal
consolidation. Fitch projects the FY18 deficit to decline to 5.0%
of GDP based on rising revenues and expenditure constraint, which
would lead to a decline in the public debt ratio from 67.2% of
GDP in FY17 to 66.8% in FY18. Recent revenue performance has
improved, but risks remain as the upcoming elections could limit
near-term improvements to both revenue and expenditure.
Pakistan's 'B' IDRs also reflect the following key rating
drivers:
Despite the rising external and fiscal pressures, Pakistan's
growth performance has continued to improve, with annual GDP
growth accelerating to 5.3% in FY17. This compares favourably
with the 'B' country median of 3.5%. Fitch forecasts that growth
momentum will be sustained, at 5.5% in FY18 and FY19, bolstered
by recent investments under the CPEC initiative and reduced
capacity constraints. There have been improvements in electricity
generation and distribution networks, which should help to
alleviate capacity constraints in the manufacturing and export
sectors. A nascent export recovery may provide additional
support.
Inflation in FY17 was low relative to Pakistan's historical
average at 4.1%, but Fitch expects inflation to pick-up to around
5.5% over the next year due to pass-through from rupee
depreciation and higher energy prices. Credit growth in the
banking sector is robust. The system poses only limited risks to
the sovereign as it is well capitalised and small relative to
GDP. Non-performing loans have continued to decline from a peak
of 14.8% of total loans in end-June 2013, but remain elevated at
9.4%.
Domestic security has improved in recent years, as evidenced by a
decline in terrorist incidents and casualties. Nevertheless,
ongoing domestic threats and attacks near the Afghan border,
along with political uncertainty could weigh on investor
sentiment and the economic outlook. Elections in mid-2018
heighten uncertainty in the coming year, particularly given the
disqualification from office of Prime Minister Nawaz Sharif in
July 2017 and ongoing corruption investigations.
The accumulation of losses in public sector enterprises (PSE),
particularly electricity distribution companies, previously led
to fund injections from the federal government to clear debt.
Efficiency improvements, higher tariffs and relatively low global
energy prices have helped cut PSE losses from previous highs, but
losses have begun to trend upward again. The lack of faster
progress towards privatisation impedes further progress in this
area. PSE losses could rise considerably if Pakistan suffers an
economic shock or there is a sharp rise in energy prices,
ultimately feeding through to the government balance sheet.
Pakistan's rating is constrained by structural weaknesses
relating to the level of development and governance indicators.
Per capita GDP stands at US$1,541, well below the US$3,376 median
of its 'B' rated peers. Governance quality is low in Pakistan
with a World Bank governance indicator score in the 21st
percentile ('B' median 30th percentile).
SOVEREIGN RATING MODEL (SRM) and QUALITATIVE OVERLAY (QO)
Fitch's proprietary SRM assigns Pakistan a score equivalent to a
rating of 'B+' on the Long-Term Foreign-Currency IDR scale.
Fitch's sovereign rating committee adjusted the output from the
SRM to arrive at the final Long-Term Foreign-Currency IDR by
applying its QO, relative to rated peers, as follows:
- Structural Factors: -1 notch, to reflect domestic security
concerns, political uncertainty, and geopolitical risks arising
from tensions with neighbouring countries. Pakistan also has a
low rank on the World Bank's Ease of Doing Business index
relative to 'B' rated peers.
Fitch's SRM is the agency's proprietary multiple regression
rating model that employs 18 variables based on three-year
centred averages, including one year of forecasts, to produce a
score equivalent to a Long-Term Foreign-Currency IDR. Fitch's QO
is a forward-looking qualitative framework designed to allow for
adjustment to the SRM output to assign the final rating,
reflecting factors within Fitch criteria that are not fully
quantifiable and/or not fully reflected in the SRM.
RATING SENSITIVITIES
The main factors that could, individually or collectively, lead
to negative rating action are:
- Failure to implement and sustain an effective macroeconomic
policy mix to address external imbalances leading to a
heightened risk of economic and financial instability.
- A further rapid loss of reserves or shift in investor
confidence sufficient to undermine access to external funding,
generating heightened external financing risks.
- Deterioration in the fiscal position that leads to a rise in
government debt ratios or increase in exposure to contingent
liabilities from state-owned enterprises.
The main factors that could, individually or collectively, lead
to a positive rating action are:
- Implementation of an effective policy stance to address
external imbalances and halt the decline in reserves
- Sustained fiscal consolidation and containment of contingent
liabilities, for example, through a strengthening of the
revenue base.
- Sustained strong economic growth, for example resulting from
improvements in the business environment, an improved security
situation or decreased political risk.
KEY ASSUMPTIONS
- The global economy is assumed to perform broadly in line with
Fitch's latest Global Economic Outlook.
The full list of rating actions is as follows:
Long-Term Foreign-Currency IDR affirmed at 'B'; Outlook revised
to Negative from Stable
Long-Term Local-Currency IDR affirmed at 'B'; Outlook revised to
Negative from Stable
Short-Term Foreign-Currency IDR affirmed at 'B'
Short-Term Local-Currency IDR affirmed at 'B'
Country Ceiling affirmed at 'B'
Issue ratings on long-term senior unsecured foreign-currency
bonds affirmed at 'B'
Issue ratings on long-term senior unsecured local-currency bonds
affirmed at 'B'
Issue ratings on The Third Pakistan International Sukuk Company
Limited's foreign-currency global certificates affirmed at 'B'
=================
S I N G A P O R E
=================
UTAC HOLDINGS: S&P Assigns 'B' CCR, Outlook Stable
--------------------------------------------------
S&P Global Ratings assigned its 'B' long-term corporate credit
rating on Singapore-based outsourced assembly and test (OSAT)
company UTAC Holdings Ltd. The outlook is stable.
S&P said, "At the same time, we raised our long-term corporate
credit rating on UTAC's subsidiary Global A&T Electronics Ltd. to
'B' from 'D', and then withdrew the rating at the company's
request. We also withdrew the issue rating on Global A&T's
outstanding notes. Given the restructuring, our credit assessment
is moving from the subsidiary to the parent.
The rating reflects UTAC's position as a midsize OSAT company in
a volatile industry with limited free operating cash flow due to
high capital spending requirements. The company's sound cost
position and profit margins mitigate these constraints. In S&P's
view, UTAC's restructured balance sheet gives the company a
chance to execute its growth initiatives in the next couple of
years, with limited near-term liquidity constraints.
UTAC is exposed to the cyclicality, aggressive competition,
capital intensity, and high technology risk of the OSAT industry.
The sector is fragmented and price sensitive, with OSAT customers
able to switch suppliers relatively easily. Consolidation in the
past few years has further led to lower costs and increasing
pricing pressure. Additionally, relevant technologies change
quickly creating a need for significant investment in both new
machines and research and development. These fixed costs required
to compete in the industry amplify cash flow volatility in tough
markets. The semiconductor and OSAT industries had a relatively
strong year in 2017. However, S&P expects this growth to slow due
to increasing supply in China, with slowing end market growth in
the smartphone and auto markets.
S&P said, "We believe UTAC will maintain its place in the
industry in the next couple of years, with approximately 3.5%
market share. The company has been able to retain its customers
through its restructuring, and should be able to increase volumes
with renewed spending on production capacity and capability. We
expect these factors to lead to slowing declines in the mixed
signal and memory segments, while supporting growth in analog
products.
"We expect UTAC to maintain steady profitability with EBITDA
margins of 22%-25% in the next couple of years. We believe
management focus on cost reduction efforts at each plant will
preserve margins through price declines. Additionally, we expect
capital spending to be concentrated in higher-margin segments to
attract new business that replaces declining revenues in lower-
margin products. We believe UTAC's long-term growth prospects
remain intact, given the increasing complexity of packaging, and
growth in relatively new products such as sensors."
Restructuring will allow UTAC to maintain a debt-to-EBITDA ratio
of below 4x and EBITDA interest coverage of above 3.5x in the
next couple of years, with limited near-term liquidity pressures.
The company has lowered its debt obligations to US$665 million
with an 8.5% coupon, from over US$1.1 billion with a 10% interest
rate. Cash balances of around US$180 million at the end of 2017
also support near-term flexibility. However, private equity
sponsors Affinity Equity Partners and TPG Capital have maintained
controlling ownership, and S&P expect them to prioritize equity
returns in the future. As a result, UTAC's leverage could
increase from the current levels.
S&P said, "The stable outlook on UTAC reflects our expectation
that the company will stabilize operating performance and manage
investments carefully following its emergence from bankruptcy. We
believe this will lead to stable margins and breakeven free
operating cash flows.
"We may downgrade UTAC if the company's performance deteriorates,
leading to increased liquidity concerns over the next 12 months.
We may lower the rating if customers leave or reduce volumes such
that UTAC's debt-to-EBITDA ratio rises above 5.0x or EBITDA
interest coverage declines to below 2x, without potential for
improvement.
"Although unlikely in the next 12 months, we may raise the rating
if UTAC is able to grow the business while increasing margins
beyond 30%. Alternatively, we may raise the rating if there is a
change in control to owners with a financial policy of sustained
low leverage."
====================
S O U T H K O R E A
====================
CAFFE BENE: Wins Court Nod to Restructure Under Receivership
------------------------------------------------------------
Yonhap News Agency reports that a Seoul court said on Jan. 26 it
has approved the request by debt-ridden Caffe Bene, a local
coffee franchise, to begin restructuring under a court
receivership.
According to Yonhap, the Seoul Central District Court made the
decision on Jan. 25, two weeks after Caffe Bene filed for a
court-led restructuring scheme amid burgeoning losses.
Launched in 2008, Caffe Bene grew to become one of South Korea's
largest coffee franchises, opening more than 1,000 stores in five
years, but lost ground due to fierce competition in the saturated
coffee market.
Caffe Bene has repaid KRW70 billion (US$65.7 million), or 70% of
its total debts, since 2016, when it was taken over by an equity
fund and other foreign investors, but it is still suffering from
financial shortages, notes the report.
Rapid growth in the consumption of brewed coffee drove up the
industry's overall expansion in South Korea. The local brewed
coffee market was estimated at around 8.8 trillion won (US$8.3
billion) last year.
In stark contrast to Caffe Bene's decline, Starbucks Coffee Korea
Co., the local unit of the U.S. coffee giant, surpassed the
KRW100 billion (US$94 million) mark in operating profit for the
first time last year, Yonhap notes.
================
S R I L A N K A
================
SRILANKAN AIRLINES: Fitch Affirms B+ US$ Denominated Bonds Rating
-----------------------------------------------------------------
Fitch Ratings has affirmed SriLankan Airlines Limited's (SLA) US
dollar-denominated government guaranteed bonds at 'B+'.
KEY RATING DRIVERS
The national carrier's bonds are rated at the same level as its
parent, the Sri Lankan state (B+/Stable), due to the
unconditional and irrevocable guarantee provided by the state.
The state held 99.5% of SLA at end-2017 through direct and
indirect holdings.
DERIVATION SUMMARY
Fitch has rated SLA's US dollar-denominated bonds at the same
level as the sovereign due to the unconditional and irrevocable
guarantee provided by the government. The rating is not derived
from its issuer's standalone credit profile and thus is not
comparable to its industry peers.
KEY ASSUMPTIONS
Not applicable.
RATING SENSITIVITIES
Developments that May, Individually or Collectively, Lead to
Positive Rating Action
- An upgrade of the sovereign rating
Developments that May, Individually or Collectively, Lead to
Negative Rating Action
- A downgrade of the sovereign rating
For the sovereign rating of Sri Lanka, the following
sensitivities were outlined by Fitch in its Rating Action
Commentary of 9 February 2017.
The main factors that, individually or collectively, could
trigger positive rating action are:
- Continued improvement in public finances underpinned by a
credible medium-term fiscal strategy, including a broadening
of the government revenue base.
- Increase in foreign-exchange reserves supported by smaller
current-account deficits and higher non-debt capital inflows.
The main factors that, individually or collectively, could
trigger negative rating action are:
- Deterioration in policy coherence and credibility, leading
to a loss of investor confidence, or a derailment of the
International Monetary Fund supported programme that leads to
external funding stress.
- Reversal of fiscal improvements that leads to a failure to
stabilise government debt ratios.
*********
Tuesday's edition of the TCR-AP delivers a list of indicative
prices for bond issues that reportedly trade well below par.
Prices are obtained by TCR-AP editors from a variety of outside
sources during the prior week we think are reliable. Those
sources may not, however, be complete or accurate. The Tuesday
Bond Pricing table is compiled on the Friday prior to
publication. Prices reported are not intended to reflect actual
trades. Prices for actual trades are probably different. Our
objective is to share information, not make markets in publicly
traded securities. Nothing in the TCR-AP constitutes an offer
or solicitation to buy or sell any security of any kind. It is
likely that some entity affiliated with a TCR-AP editor holds
some position in the issuers' public debt and equity securities
about which we report.
A list of Meetings, Conferences and Seminars appears in each
Wednesday's edition of the TCR-AP. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com
Friday's edition of the TCR-AP features a list of companies with
insolvent balance sheets obtained by our editors based on the
latest balance sheets publicly available a day prior to
publication. At first glance, this list may look like the
definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical
cost net of depreciation may understate the true value of a
firm's assets. A company may establish reserves on its balance
sheet for liabilities that may never materialize. The prices at
which equity securities trade in public market are determined by
more than a balance sheet solvency test.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Asia Pacific is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez,
Julie Anne L. Toledo, Ivy B. Magdadaro and Peter A. Chapman,
Editors.
Copyright 2018. All rights reserved. ISSN: 1520-9482.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding,
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Information contained herein is obtained from sources believed
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*** End of Transmission ***