/raid1/www/Hosts/bankrupt/TCRAP_Public/180205.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, February 5, 2018, Vol. 21, No. 025
Headlines
A U S T R A L I A
CIVIL LOGIC: First Creditors' Meeting Slated for Feb. 12
FOCUS BUILDING: First Creditors' Meeting Set for Feb. 12
FOGO BRAZILIA: First Creditors' Meeting Set for Feb. 12
MATCH PLAY: First Creditors' Meeting Slated for Feb. 14
PERMANENT INVESTMENTS: Ferrier Hodgson Appointed as Liquidators
PETRA HAIR: Goes Into Liquidation After 52 Years in Business
H O N G K O N G
NOBLE GROUP: Fitch Cuts IDR to C on Debt Restructuring Plan
I N D I A
AATULYA LIFECARE: CARE Lowers Rating on INR5.20cr LT Loan to D
ALLIED ENERGY: ICRA Reaffirms B+ Rating on INR16.5cr LT Loan
AMIT POLYPIPES: ICRA Keeps B Rating in Not Cooperating Category
AVIRAT COTTON: CARE Reaffirms B+ Rating on INR17.52cr Loan
B.P ALLOYS: CARE Moves B+ Rating to Not Cooperating Category
BHAGAWATI DEVELOPMENT: CARE Reaffirms B+ Rating on INR3cr Loan
BHOPAL SWITCHGEARS: CARE Assigns B+ Rating to INR9.58cr LT Loan
BIHANI AGRO: CARE Moves B+ Rating to Not Cooperating Category
CRYSTAL CABLE: Ind-Ra Affirms 'D' Long Term Issuer Rating
DOLPHIN MARINE: ICRA Lowers Rating on INR2cr Cash Loan to B-
EVER ELECTRONICS: ICRA Upgrades Rating on INR5cr Loan to B+
GMR WARORA: CARE Raises Rating on INR3,191cr LT Loan to BB
GMW PRIVATE: Ind-Ra Assigns BB+ Issuer Rating, Outlook Stable
KALIKUND DEVELOPERS: Ind-Ra Migrates B+ Rating to Non-Cooperating
MM POLYMERS: Ind-Ra Migrates BB- Issuer Rating to Non-Cooperating
MADRAS FERTILIZERS: ICRA Reaffirms C Rating on INR191.4cr Loan
MAHADEV WEAVING: ICRA Assigns B- Rating to INR8.46cr Term Loan
NIDHI TEXTILES: CARE Assigns B+ Rating to INR11.50cr LT Loan
PNG TOLLWAY: ICRA Moves D Rating to Not Cooperating Category
PRAGATI GLASS: ICRA Moves D Rating to Not Cooperating Category
RADHA BALLABH: CARE Moves B+ Rating to Not Cooperating Category
RAJRAJESHWAR COTEX: CARE Hikes Rating on INR6.5cr LT Loan to B+
RUKSH ENTERPRISES: CARE Assigns B+ Rating to INR6.07cr Loan
SAMRAT GEMS: Ind-Ra Affirms BB Issuer Rating, Outlook Stable
SARAWAGI AUTO: ICRA Keeps B Rating in Not Cooperating Category
SHREE SHAKTI: ICRA Lowers Rating on INR9cr Loan to C+
SURENDRA STEELS: Ind-Ra Migrates BB+ Rating to Non-Cooperating
UDAY AUTOLINK: CARE Moves D Rating to Not Cooperating Category
UMADUTT INDUSTRIES: Ind-Ra Puts D/Issuer Not Cooperating Rating
VIJAY STEEL: CARE Reaffirms B+ Rating on INR1cr LT Loan
VIRINCHI HEALTHCARE: Ind-Ra Lowers INR679.5MM Loan Rating to 'D'
YOGI COTEX: CARE Reaffirms B+ Rating on INR13cr LT Loan
J A P A N
TOSHIBA CORP: Lenders See Improved Outlook for Struggling Company
M O N G O L I A
MONGOLYN ALT: Fitch to Rate Proposed USD Sr. Unsec. Notes CCC+
N E W Z E A L A N D
GROCER'S MARKET: Owner Allegedly Owes Supplier Thousands
S I N G A P O R E
TT INT'L: Enters Term Sheet as Part of Financial Restructuring
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A U S T R A L I A
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CIVIL LOGIC: First Creditors' Meeting Slated for Feb. 12
--------------------------------------------------------
A first meeting of the creditors in the proceedings of Civil
Logic Pty Ltd will be held at the offices of Veritas Advisory,
L5, 123 Pitt Street, in Sydney, NSW, on Feb. 12, 2018, at
12:00 p.m.
David Iannuzzi and Vincent Pirina of Veritas Advisory were
appointed as administrators of Civil Logic on Jan. 31, 2018.
FOCUS BUILDING: First Creditors' Meeting Set for Feb. 12
--------------------------------------------------------
A first meeting of the creditors in the proceedings of Focus
Building Repairs Pty Ltd will be held at the offices of Worrells
Solvency and Forensic Accountants, 8th Floor 102 Adelaide St, in
Brisbane, Queensland, on Feb. 12, 2018, at 10:30 a.m.
Christopher Richard Cook of Worrells Solvency was appointed as
administrator of Focus Building on Jan. 31, 2018.
FOGO BRAZILIA: First Creditors' Meeting Set for Feb. 12
-------------------------------------------------------
A first meeting of the creditors in the proceedings of Fogo
Brazilia Franchise Holdings Pty Ltd will be held at the offices
of The Boardroom of Servcorp, Level 26, 44 Market Street, in
Sydney, New South Wales, on Feb. 12, 2018, at 11:00 a.m.
Henry Kwok and Gavin Moss of Chifley Advisory Pty Ltd were
appointed as administrators of Fogo Brazilia Franchise on
Jan. 31, 2018.
MATCH PLAY: First Creditors' Meeting Slated for Feb. 14
-------------------------------------------------------
A first meeting of the creditors in the proceedings of Match Play
Management Pty Ltd will be held at the offices of RSM Australia,
Level 21, 55 Collins Street, in Melbourne, Victoria, on Feb. 14,
2018, at 3:00 p.m.
Peter W Marsden and David M Mutton of RSM Australia were
appointed as administrators of Match Play on Feb. 2, 2018.
PERMANENT INVESTMENTS: Ferrier Hodgson Appointed as Liquidators
---------------------------------------------------------------
Will Colwell, Tim Michael and George Georges of Ferrier Hodgson
were appointed joint and several Provisional Liquidators of
Permanent Investments Pty Ltd on Dec. 14, 2017 pursuant to an
Order of the Supreme Court of Queensland.
On Jan. 31, 2018, the Provisional Liquidators were Appointed
Liquidators of the Company pursuant to an Order of the Supreme
Court of Queensland.
Pursuant to Section 70-30 of the Insolvency Practice Rules
(Corporations) 2016 (Cth), creditors will receive the
Liquidators' initial notice to creditors advising of appointment
within 20 business days of the date of the Liquidation.
PETRA HAIR: Goes Into Liquidation After 52 Years in Business
------------------------------------------------------------
Cara Waters at The Sydney Morning Herald reports that Petra Hair
Care has collapsed into liquidation after 52 years in business.
SMH says the chain started business as a hairdressing salon in
Melbourne's Elizabeth Street in July 1966 where it became
apparent there was a market for selling hair care to the home.
Soon the salon was moved upstairs and the ground floor was
selling only hair care. Petra Hair Care grew to five stores
located in major shopping centres in Melbourne with qualified
hairdressers selling products, the report relates.
But the company went into liquidation last week with Con Kokkinos
-- Con.Kokkinos@worrells.net.au -- of Worrells Solvency &
Forensic Accountants appointed as liquidator, SMH relays.
According to the report, Mr. Kokkinos said though it is still
early in the liquidation process it appears competition in the
retail sector and excessive costs led to Petra Hair Care's
demise.
Petra Hair Care's five stores were shut late last month, the
report notes.
"The stores were closed before my appointment and I have chosen
not to reopen them. The landlord is moving on a few of them and
there are no resources and funds to reopen the stores," the
report quotes Mr. Kokkinos as saying.
Around 20 staff were let go when the stores were closed and some
leave entitlements for staff may still be owing, SMH says.
SMH adds that Mr. Kokkinos said he is still assessing what Petra
Hair Care owes but it is likely to be between $1 million and $2
million with the major creditors related parties.
"It appears they put in a lot of money themselves to try to prop
it up for a bit," Mr. Kokkinos, as cited by SMH, said.
================
H O N G K O N G
================
NOBLE GROUP: Fitch Cuts IDR to C on Debt Restructuring Plan
-----------------------------------------------------------
Fitch Ratings has downgraded Hong Kong-based commodities trader
Noble Group Limited's Long-Term Foreign-Currency Issuer Default
Rating (IDR) and the ratings on all its outstanding senior
unsecured notes to 'C' from 'CC'. The Recovery Rating of the
notes is 'RR5'.
The downgrade follows Noble's announcement on Jan. 29, 2018 of a
debt restructuring plan that Fitch views as a distressed debt
exchange (DDE) as it involves a material reduction in principal,
and the restructuring is necessary to avoid a traditional payment
default due to the liquidity shortfall of the company. Fitch will
downgrade the IDR to Restricted Default (RD) upon the completion
of the debt restructuring and following that, may assign an
appropriate IDR for the issuer's post-exchange capital structure,
risk profile and prospects.
KEY RATING DRIVERS
Principal Reduction, Debt-for-Equity Swap: The debt restructuring
proposal includes a reduction of all Noble's senior unsecured
debt of USD3.4 billion, comprising USD2.3 billion of senior
unsecured notes and USD1.1 billion of outstanding loans under
revolving credit facilities (RCF) due in May 2018, to around
USD1.7 billion, along with the debt's conversion into equity. The
new USD1.7 billion debt will comprise notes with differing levels
of structural subordination and security. The ratio of new debt
to equity that senior noteholders will receive will depend on the
level of current creditors' participation in a new trade finance
facility.
Noble has reached an in-principle agreement for the proposed
restructuring with a group of creditors representing 30% of its
existing senior debt holders. Completion of the restructuring is
subject to final documentation, regulatory and shareholder
approval, and implementation via inter-conditional schemes of
arrangement in relevant jurisdictions. Whatever the outcome,
senior noteholders will see a material reduction in principal and
swap their debt for equity. Fitch will subsequently downgrade the
rating to 'RD' in line with Fitch Distressed Debt Exchange Rating
Criteria.
Recovery Rating of 'RR5': The Recovery Rating of Noble's senior
unsecured notes was estimated based on the most conservative
scenario for noteholders under the proposed restructuring, i.e.
Fitch assume all RCF holders will participate in the new trade
finance facility but none of the noteholders will do so. This
will result in allocation of USD405 million of the proposed new
bonds to the existing noteholders, and the rest converted to
equity. The face value of the bonds is equivalent to 18% of the
outstanding USD2.3 billion senior notes. Upside to this estimate
will depend on the value of new equity received by noteholders,
but it is unlikely to exceed the 30% threshold needed to reach an
'RR4' Recovery Rating.
DERIVATION SUMMARY
Noble's ratings are driven by its announcement of the proposed
restructuring of its existing debt, which is considered a DDE as
per Fitch's criteria.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Fitch Rating Case for the Issuer
- Materialisation of DDE on the announced terms
RATING SENSITIVITIES
Developments That May, Individually or Collectively, Lead to
Positive Rating Action
- There are no upgrade sensitivities at this time; the existing
capital structure will cease to exist upon completion of the
restructuring
Developments That May, Individually or Collectively, Lead to
Negative Rating Action
- Execution of the DDE or entering into a standstill with its
existing debt holders
LIQUIDITY
Increase in Shortfall: Noble's liquidity shortfall increased
significantly at end-September 2017, with USD262 million of
unrestricted cash and USD800 million of undrawn credit
facilities, against more than USD1.7 billion in short-term debt,
excluding cash and cash equivalents and debt at Noble Americas
Corp. (NAC). Noble generated net cash proceeds of USD383 million
(excluding amounts held in escrow) and retired its senior secured
borrowing base facilities in full following the sale of NAC,
which was its US-based energy unit. Fitch estimate Noble has
current short-term debt outstanding of USD1.5 billion (comprising
USD1.1 billion of RCF due May 2018 and USD379 million of notes
due March 2018, and a cash balance of approximately USD489
million (calculated as unrestricted cash balance of USD262
million plus the USD383 million in net proceeds from NAC's
disposal, less Fitch assumed repayment of USD30 million of other
short-term loans, assuming everything else remained at status
quo).
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I N D I A
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AATULYA LIFECARE: CARE Lowers Rating on INR5.20cr LT Loan to D
---------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Aatulya Lifecare Private Limited (ALPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 5.20 CARE D Revised from
Facilities CARE B; Stable
Detailed Rationale & Key Rating Drivers
Ongoing delays in Debt servicing: The revision in the rating
assigned to the bank facilities of ALPL is primarily due to
irregularity in servicing its debt obligations.
Aatulya Lifecare Private Limited (ALPL) was incorporated in 2014
and started it operations from September 2016. ALPL has been
promoted by Dr Hirenkumar Patel, Dr Mehul Shah, Dr Manish Patel
and Dr Chirag Rathod. The company operates a hospital by the name
Aastha Multi Speciality Hospital, providing quality services and
patient care to the people in the vicinity of Vadodara (Gujarat).
The hospital has specialized departments in Gynaecology,
Orthopaedic, General surgery, Paediatric, Physiotherapy, Ears,
Nose and Throat (ENT), Critical Care and Pharmacy for its
patients and visitors. The hospital has capacity of 100 beds and
1 in-house ambulance, while the average occupancy rate for in-
patient department has remained between 20-30% during 7MFY17.
ALLIED ENERGY: ICRA Reaffirms B+ Rating on INR16.5cr LT Loan
------------------------------------------------------------
ICRA Ratings has reaffirmed the long-term rating of [ICRA]B+ on
the INR8.00-crore (enhanced from INR6.00-crore) fund-based
facility and INR16.50-crore (enhanced from INR0.50-crore)
unallocated limits of Allied Energy Systems Private Limited
(AESPL). ICRA has also reaffirmed the short-term rating of
[ICRA]A4 to the INR9.50-crore (enhanced from INR6.50-crore) bank
guarantee limit. The outlook on the long-term rating is Stable.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Fund-
based Limits 8.00 [ICRA]B+ (Stable); reaffirmed
Long-term
Unallocated 16.50 [ICRA]B+ (Stable); reaffirmed
Short-term Non-fund
based Limits 9.50 [ICRA]A4; reaffirmed
Rationale:
The rating reaffirmation takes into account the slight increase
in operating income (OI) and operating margins in FY2017 as well
as the reduction in debtor days. However, these factors have been
accompanied with a decline in interest coverage and an increase
in gearing levels.
The ratings continue to be constrained by the dependence of the
company's revenues on the timeliness of project execution by its
large clients, competition from other players in the industry and
the vulnerability of profitability to any unfavorable
fluctuations in prices of key raw materials, given the fixed-
price nature of contracts. The rating also continues to factor in
the high gearing and the elevated Total Debt/ OPBDITA of the
company, led by funding of working-capital requirements, mainly
through bank borrowings. Although ICRA's rating takes cognisance
of the diversification to the solid waste management division
with healthy orders, the company's revenue from this segment
would be largely dependent on the timely execution of these
projects, given the number of approvals and clearances involved.
ICRA also takes note of the company's dependence on the
availability of additional limits to manage its working-capital
requirements on the increased orders and to procure more orders
for the new segment, which would be critical for the increase in
the scale of operations. The rating action also factors in the
fact that the OI and the operating margin have been fluctuating
over the past few years as order execution has been erratic due
to the tender-based nature of the business.
However, the ratings continue to draw comfort from the extensive
experience of the promoters in fabrication business. In addition,
the company's established customer base, comprising reputed
companies, reduces its counterparty credit risk to some extent
and is a positive. ICRA also favourably takes into account
AESPL's healthy order book position.
Going forward, the ability of the company to execute the current
orders in a timely manner, increase the scale of its operations
and optimise its working-capital cycle will remain the key rating
sensitivities.
Outlook: Stable
ICRA believes that AESPL will continue to benefit from the
extensive experience of its promoters. The outlook may be revised
to Positive if substantial growth in revenue and profitability,
and better working-capital management strengthen the financial
risk profile. The outlook may be revised to Negative if cash
accrual is lower than expected or stretch in the working capital
cycle weakens liquidity.
Key rating drivers:
Credit strengths
Established and reputed clientele: AESPL has a reputed client
base comprising companies such as Steel Authority of India
Limited (SAIL) and Lanco, which results in healthy orders and low
counterparty credit risk
Strong outstanding order book at present: The company's healthy
order book of around ~INR176 crore is supported by the solid
waste management division and infrastructure division, which
provides prominent revenue visibility for FY2018 and FY2019.
Credit challenges
Modest scale of operations: The OI has remained modest and
fluctuating over the past few years as the revenue growth is
linked to the timeliness of project execution by large clients.
Further, the revenue generation often gets delayed because of
several approvals involved in project execution.
Profitability remains vulnerable to fluctuations in prices of key
raw materials: Given the fact that EPC contracts are of fixed
price nature, any change in the raw material prices directly
impacts the overall profitability of the company.
High working-capital intensity: The working-capital intensity has
remained high in the past few years. Further, management of
working capital remains crucial for the company for execution of
the increased order book size.
Highly fragmented and competitive nature of the industry limits
pricing flexibility of industry participants: The industry is
highly competitive and fragmented in nature because of the
presence of established players as well competition from numerous
small players in the unorganised sector. Given the low capex, the
entry barriers have remained low, resulting in the entry of large
number of small-to-medium scale enterprises.
Incorporated in 2005, AESPL is primarily involved in designing
fabrication and erection of deaerators for boilers, which are
used in industries such as chemicals, power, petrochemicals,
fertiliser, sugar, paper etc. The company is also engaged in
manufacturing steel-fabricated products such as pressure vessels,
heat exchangers, and evaporators. At present, the company has
diversified into solid waste management projects and have
received several orders for design, construction, and maintenance
of waste management plants.
AESPL recorded a net profit of INR0.50 crore on an OI of INR29.23
crore in FY2017 as against a net profit of INR0.41 crore on an OI
of INR28.25 crore in the previous year.
AMIT POLYPIPES: ICRA Keeps B Rating in Not Cooperating Category
---------------------------------------------------------------
ICRA Ratings said that the rating for the INR10.61 crore bank
facilities of Amit Polypipes Private Limited continues to remain
in the 'Issuer Not Cooperating' category. The rating is denoted
as "[ICRA] B (Stable)/[ICRA]A4 ISSUER NOT COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term-Fund 6.00 [ICRA]B (Stable) ISSUER NOT
Based/CC COOPERATING; Rating continues
to remain in the 'Issuer Not
Cooperating' category
Long Term-Fund 0.19 [ICRA]B (Stable) ISSUER NOT
Based TL COOPERATING; Rating continues
to remain in the 'Issuer Not
Cooperating' category
Long Term- 0.42 [ICRA]B (Stable) ISSUER NOT
Unallocated COOPERATING; Rating continues
to remain in the 'Issuer Not
Cooperating' category
Short Term-Non 4.00 [ICRA]A4 ISSUER NOT
Fund Based COOPERATING; Rating continues
to remain in 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 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.
Amit Polypipes Private Limited (APPL), established in 1987,
manufactures permanently lubricated high-density polyethylene
(HDPE) pipes, which are used for electrical and communication
applications, such as casing for optical fibres. The company
supplies most of its products to Bharat Sanchar Nigam Limited
(BSNL). The company has an installed capacity for manufacturing
2,500 km of HDPE pipes per month at its manufacturing units in
Jaipur, Rajasthan. As the tenders floated by BSNL had reduced in
FY2012, the company ventured into manufacturing and supplying
drip and sprinkler irrigation pipes.
AVIRAT COTTON: CARE Reaffirms B+ Rating on INR17.52cr Loan
----------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Avirat Cotton Industries Private Limited (ACIPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 17.52 CARE B+; Positive
Facilities Rating Reaffirmed and
outlook revised from
Stable to Positive
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of ACIPL continues to
remain constrained on account of thin profit margins, moderate
capital structure, weak debt coverage indicators and moderate
liquidity position. The rating also continue to remain
constrained owing to the susceptibility of operating margins to
cotton price fluctuations, regulatory changes governing cotton
industry, its presence in the lowest segment of textile value
chain and highly fragmented cotton ginning industry.
The rating, however, continues to derive strength from the
promoters' experience of more than a decade in cotton ginning
business and its proximity to cotton-producing area of Gujarat.
The rating also factored in increase in scale of operation during
FY17 (refers to period April 1 to March 31). ACIPL's ability to
increase its scale of operations and improve its profitability by
managing the volatility associated with prices in cotton and
improvement in capital structure and debt coverage indicators
coupled with efficient working capital management remains the key
rating sensitivities.
Outlook: Positive
The positive outlook reflects CARE's expectations of further
improvement in ACIPL's operating and financial profile resulting
in improved Total Operating Income (TOI) along with improvement
in solvency position, debt protection metrics. However, the
outlook may be revised to 'Stable' in case of lower than expected
improvement in overall operational and financial performance.
Detailed description of the key rating drivers
Key Rating Weaknesses
Thin profit margins, moderate capital structure, weak debt
coverage indicators and moderate liquidity position: The profit
margin of ACIPL remained thin on account of limited value
addition and presence in the highly competitive segment of the
cotton industry. The capital structure stood moderate marked by
overall gearing ratio of 1.74 times as on March 31, 2017 on
account of moderate networth base. As a result of its thin
profitability, the debt coverage indicators although improved
remained weak marked by high ratio of total debt to GCA of 29.33
times during FY17. The liquidity position stood moderate marked
by current ratio of 1.41 times as on March 31, 2017.
Susceptibility of operating margins to cotton price fluctuations,
regulatory changes governing cotton industry: The profitability
of ACIPL is exposed to fluctuations in raw material prices, which
is being agricultural commodity its prices are volatile in nature
and linked to production in the domestic market. Further, the
supply of key raw materials is primarily dependent upon monsoon
during a particular year as well as overall climatic conditions.
Hence any adverse movement in cotton prices would impact
profitability of the company.
Presence in the highly competitive and fragmented cotton ginning
industry: The profitability of ACIPL is exposed to fluctuations
in raw material prices, which is being agricultural commodity its
prices are volatile in nature and linked to production in the
domestic market. Further, the supply of key raw materials is
primarily dependent upon monsoon during a particular year as well
as overall climatic conditions. Hence any adverse movement in
cotton prices would impact profitability of the company.
Key rating strengths
Experienced promoters: ACIPL is promoted and managed by Mr.
Bhupendrabhai Tala and Mr. Bharatbhai Vataliya, who holds more
than a decade of experience in cotton ginning industry.
Proximity to the cotton-producing region of Gujarat: ACIPL's
plant is located in (Rajkot) Gujarat region which is the largest
producer of raw cotton in India. ACIPL's presence in cotton-
producing region results in benefit derived from lower logistics
expenditure (both on transportation and storage), easy
availability and procurement of raw materials at effective price
and consistent demand for finished goods resulting in sustainable
revenue visibility.
Increase in scale of operation: The scale of operation of ACIPL
as marked by TOI grew by 19.66% over previous year and stood at
moderate INR88.50 crore during FY17.
Rajkot based ACIPL was incorporated in 2005 as a partnership firm
under the name M/s. Avirat Cotton Industries (ACI) and then
converted into a private limited company in 2010. ACIPL is
involved in cotton ginning & pressing, cotton seed crushing and
trading in agro commodities. ACIPL operates from its sole
manufacturing unit located at Gondal with an installed processing
capacity to manufacture 8,250 metric tonne per annum (MTPA) of
cotton bales, 1,460 MTPA of oil extraction and 10,950 MTPA of de-
oiled cake as on March 31, 2017.
B.P ALLOYS: CARE Moves B+ Rating to Not Cooperating Category
------------------------------------------------------------
CARE Ratings has been seeking information from B.P Alloys Limited
to monitor the rating(s) vide e-mail communications/letters dated
December 29, 2017 and numerous phone calls. However, despite our
repeated requests, the company has not provided the requisite
information for monitoring the ratings. In line with the extant
SEBI guidelines, CARE has reviewed the rating on the basis of the
publicly available information which however, in CARE's opinion
is not sufficient to arrive at a fair rating. The rating on B.P
Alloys Limited bank facilities will now be denoted as CARE
B+/CARE A4; ISSUER NOT COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank 7.16 CARE B+; Stable "Issuer not
Facilities cooperating, based on best
available information"
Short term bank 7.00 CARE A4; "Issuer not
Facilities cooperating, based on best
available information"
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating(s).
The ratings take into account small scale of operations, low
profitability margins, weak solvency position, working capital
intensive nature of operations, competitive nature of industry
and
experienced promoters.
Detailed description of the key rating drivers
At the time of last rating on September 30, 2016 the following
were the rating strengths and weaknesses (updated for the
information available from website of mca)
Strengths
Experienced management: The company was incorporated in January,
1983 and is currently being managed by Mr Vipan Khanna and Mr
Pankaj Khanna. Mr Vipan Khanna and Mr Pankaj Khanna have work
experience of four and a half decades and one and a half decades
respectively. The directors have gained this experience through
their association with BPAL only. Additionally, the directors are
supported by team of qualified and experienced staff having
varied experience in technical, marketing and finance aspects of
business.
Weaknesses
Small and declining scale of operations along with losses at net
level: The total operating income of BPAL increased from INR18.04
crore in FY16 to INR20.69 crore in FY17 due to higher quantity
sold owing to higher orders received from the existing clients.
However, the scale continues to remain small. Furthermore, PBILDT
margin of the company remained low at 6.19% in FY17. BPAL
incurred net loss of INR0.31 crore in FY17.
Weak solvency position: The capital structure of the company is
leveraged as reflected by overall gearing ratio of 8.38x as on
March 31, 2017. Furthermore, the interest coverage ratio stood at
1.04x in FY17. The same improved from (-)0.57x in FY16 due to
increase PBILDT level in FY17. Furthermore, total debt to GCA
ratio continued to remain weak at 124.20 for FY17.
Working capital intensive nature of operations: The operations of
the company are working capital intensive in nature as reflected
by average operating cycle of 61 days for FY17 (PY 63 days). BPAL
is required to maintain adequate inventory in the form of raw
material which resulted in average inventory period of 80 days
for FY17. Furthermore, the company has an average collection
period of 74 days for FY17.
Cyclicality and fragmented nature of the industry: The steel
industry is sensitive to the shifting business cycles, including
changes in the general economy, interest rates and seasonal
changes in the demand and supply conditions in the market.
Furthermore, the value addition in the steel construction
materials like steel ingots/rods/flats is also low, resulting
into low product differentiation in the market.
BPAL is engaged in the manufacturing of steel ingots and steel
bar, rods & flats since 1987. The company has an installed
capacity (furnace unit) of 15,000 MTPA for manufacturing of steel
ingots and a Rolling Unit of 22,500 MTPA capacity for rolled
products, at its manufacturing facility located in Ludhiana,
Punjab. BPAL sells its products under the brand name "BP", which
is an established brand of steel bar, rods & flat across India
including states such as Punjab, New Delhi, Jammu & Kashmir,
Uttar Pradesh, Maharashtra, West Bengal, Tamil Naidu, Gujarat,
Haryana, Rajasthan etc.
BHAGAWATI DEVELOPMENT: CARE Reaffirms B+ Rating on INR3cr Loan
--------------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Bhagawati Development Services Private Limited (BDSPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 3.00 CARE B+; Stable Reaffirmed
Short-term Bank
Facilities 5.25 CARE A4 Reaffirmed
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of BDSPL continue to
remain constrained on account of moderate profitability,
leveraged capital structure, weak debt coverage indicators and
stressed liquidity position. The ratings, further, continue to
remain constrained on account of exposure to risk related to
strong linkage to the agricultural output. The ratings, however,
derive strength from the experienced management and established
presence of group in Madhya Pradesh.
The ability of BDSPL to improve its scale of operation along with
profitability and efficient management of working capital would
be the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Weak solvency position: Capital structure of BDSPL improved
marginally but remained leveraged marked by overall gearing of
4.79 times as on March 31, 2017. The debt coverage indicators
also stood with high total debt to GCA and low Interest coverage
ratio.
Stressed liquidity position: Liquidity position remained stressed
marked by low current ratio, below unity quick ratio, elongated
operating cycle and high utilization of working capital limits.
The cash flow from operating activities stood negative during
FY17.
Modest scale of operations and moderate profitability: Total
Operating Income (TOI) of BDSPL has increased by 25.05% in FY17
over FY16 however remained modest. PBILDT margin for FY17 has
decreased by 411 bps and stood at 5.45%. However, PAT margin has
increased by 24 bps in FY17 and remained at 0.84% as compared to
0.60% in FY16 owing to lower interest and depreciation cost. As a
result of increase in profitability GCA also increased
marginally.
Exposure to risk related to strong linkage to the agricultural
output: BDSPL derives majority of its income from sales of
tractors and the demand for the same largely depend on number of
factors including ease availability of credit from bank,
agriculture output and rural income. It's business activities are
dependent on the output level of agriculture which in turn is
dependent upon monsoon. Hence, any adverse movement in the farm
output would impact the debt servicing capability of the company.
Key Rating Strengths
Experienced promoters and established presence of group in Madhya
Pradesh: Mr. Saurabh Singh, Director, who has done his
Engineering and is actively involved in business with an
experience of nearly eight years. BDSPL being a family business
all the key management positions are being held by family members
of promoter. The promoters also engaged in similar business
through its group concern.
Incorporated in November 2005, BDSPL is a private limited company
promoted by Mr.Vikram Singh Kirar. BDSPL is engaged into the
warehousing and trading of commodities since 2005. BDSPL also
offers finance against warehouse receipt to farmers. Further,
during FY12 (refers to the period April 1 to March 31), BDSPL
took the distributorship of Indo Farm tractors for the entire
Madhya Pradesh (MP) region. Its group concern Bhagawati Cools
Private Limited is the distributor of Mahindra and Mahindra (M&M)
tractors in Gwalior, Agra Mandal and Bhopal region and is also
engaged into the trading and warehousing of commodities, cold
storage like BDSPL.
The group incorporated Bhagawati India Motorizer Private Limited
in October 2013 to take up the dealership of Mahindra & Mahindra
(M&M) vehicles and servicing of auto parts in four districts of
Madhya Pradesh (MP) namely Shahdol, Mandla, Dindori and Anuppur.
The group also extends warehousing facilities through Bhagawati
Estate Warehouse, Kolaras. Another group entity named Bhagawati
Estate Warehouse; Ashoknagar is also engaged in warehousing and
trading of agro-commodities like potatoes and wheat.
BHOPAL SWITCHGEARS: CARE Assigns B+ Rating to INR9.58cr LT Loan
---------------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Bhopal
Switchgears Private Limited (BSPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 9.58 CARE B+; Stable Assigned
Short-term Bank
Facilities 4.25 CARE A4 Assigned
Detailed rationale and key rating drivers
The ratings assigned to the bank facilities ofBSPL are primarily
constrained on account of its financial risk profile marked by
modest scale of operation, leveraged capital structure and
stressed liquidity position. The ratings are further constrained
on account of project implementation risk and vulnerability of
margins to fluctuation in raw material prices. The ratings,
however, derive strength from experienced and professionally
qualified management, reputed clientele base of BSPL with
moderate order book position and healthy profitability margins.
The ability of the company to increase its scale of operations
along with speedy execution of existing contracts and better
management of working capital would be key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weakness
Financial risk profile marked with modest scale of operation,
leveraged capital structure and stressed liquidity position: The
scale of operations of the company stood modest with TOI and PAT
of INR17.18crore and INR0.19crore respectively in FY17 and net-
worth of INR4.27crore as on March 31, 2017.
The capital structure of the company stood leveraged marked by
overall gearing of 2.84 times as on March 31, 2017, deteriorated
from 2.58 times as on March 31, 2016. The debt coverage
indicators of the company stood weak marked by total debt to GCA
of 29.16 times as on March 31, 2017. The interest coverage ratio
of the company stood at 1.63 times in FY17. The liquidity
position of the company stood moderate marked by fully
utilization of its working capital bank borrowings during last
twelve months ended November 2017. Due to high inventory, the
current ratio of the company stood moderate at 1.53 times as on
March 31, 2017; however, quick ratio stood below unity at 0.40
times as on March 31, 2017.
Project implementation risk: In November, 2017, BSPL undertook a
project to set up plant for expansion of its capacity with total
project cost of INR1.75 crore which envisaged to be funded
through term loan of INR1.33 crore and remaining through
unsecured loans of INR0.42 crore. However, the project execution
has been postponed till April, 2018 owing to necessity to execute
contracts in hand within time frame.
Vulnerability of margins to fluctuation in raw material prices
with absence of price escalation clause: The main raw material of
the company is air circuit breaker, copper wires, copper strips,
PVC granules and it purchases raw material mainly from approved
vendors. The prices of these raw materials are governed by
demand-supply dynamics and had shown huge fluctuations in past
few years. Further, its presence in the highly fragmented
industry with presence of few number of organized and large
number of unorganized players exposed to the company to raw
material price fluctuation risk. Further, in all the contracts,
the company does not have any price escalation clause that led to
vulnerability of margins to fluctuation in materials as well as
employee cost.
Key Rating Strengths
Experienced and professionally qualified management: BSPL was
incorporated in 1992, hence, it has a track record of around two
decades in the industry and has executed various assignments for
consultancy business. Mr. Nirmal Mehta, Managing Director, B.E.
in electric engineering by qualification, has more than three
decades of experience in the industry. Further, top management of
the company are assisted by second tier management.
Reputed clientele base of the company with moderate order book
position: The company mainly deals with government entities and
renowned private players. Being present in the industry since
long period of time, it has established relationship with its
customers. The customers of the company include Department of
Space, Bharat Heavy Electricals Limited (BHEL) Bhopal, India
Space Research Organization (ISRO), ISRO Bhopal, Inspros
Engineers Private Limited, Public Works Department (PWD), Madhya
Pradesh Housing and Infrastructure Development Board etc. The
company has received repeated orders from the clients as
reflected by moderate order book position of INR23.67crore as on
December 25, 2017 which is 1.38 times of TOI in FY17. Till
November 30, 2017, the company has achieved TOI of INR10.27crore.
Healthy profitability margins: The profitability margins of the
company stood comfortable with PBILDT and PAT margin of 16.50%
and 1.10% respectively during FY17. Gross Cash Accruals (GCA) of
the company has declined from INR0.52 crore in FY16 to INR0.42
crore in FY17.
Bhopal (Madhya Pradesh) based Bhopal Switchgear Private Limited
(BSPL) was incorporated in March, 1992 by Mr. Nirmal Mitna and
Mr. Shalabh Mitna. The company is engaged in business of design,
manufacture, supply and installation of electric equipment such
as control panels, AC panel, starter panel, fiddler pillar panel,
MV panel, LT panel, Bus duct and accessories of panels, cable
tray, extension chamber and switchgears etc. which find its
application in various industries such as steel, sponge iron,
cement, sugar, chemicals etc.
BIHANI AGRO: CARE Moves B+ Rating to Not Cooperating Category
-------------------------------------------------------------
CARE Ratings has been seeking information from Bihani Agro Foods
Private Limited to monitor the rating(s) vide e-mail
communications/letters dated December 29, 2017 and numerous phone
calls. However, despite our repeated requests, the company has
not provided the requisite information for monitoring the
ratings. In line with the extant SEBI guidelines, CARE has
reviewed the rating on the basis of the publicly available
information which however, in CARE's opinion is not sufficient to
arrive at a fair rating. The rating on Bihani Agro Foods Private
Limited bank facilities will now be denoted as CARE B/CARE A4;
ISSUER NOT COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank
Facilities 9.65 CARE B+; Issuer not cooperating
Short term bank
Facilities 0.03 CARE A4; 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).
The ratings take into account small scale of operations, low
profitability margins, weak solvency position, working capital
intensive nature of operations, competitive nature of industry
and
experienced promoters.
Detailed description of the key rating drivers
At the time of last rating on September 30, 2016 the following
were the rating strengths and weaknesses (updated for the
information available from website of mca).
Key Rating Strengths
Experienced promoters: The company is promoted by Mr Ram Niwas
Bihani, Mr Inder Chand Bihani, Mr Shri Niwas Bihani, Mr
Govind Bihani, Mr Gopal Bihani and Mr Raghav Bihani. Mr Ram Niwas
Bihani, Mr Inder Chand Bihani, Mr Shri Niwas Bihani, Mr Govind
Bihani, Mr Gopal Bihani and Mr Raghav Bihani looks after the
overall operations of the company and have experience of 23
years, 23 years, 23 years, 8 years, 8 years and 2 years,
respectively, in the business of processing of paddy through
their association with BAF and Fazilka Agro Private Limited, a
group concern, engaged in the same business since 1992.
Key Rating Weaknesses
Small scale of operations with low profitability margins: The
total operating income of BAF increased from INR37.98 crore in
FY16 to INR40.79 crore in FY17 mainly due to higher quantity sold
owing to higher orders received for basmati rice as well as
nonbasmati rice. The scale of operations, however, continue to
remain small. The PBILDT margin of the company stood low at 6.63%
in FY17 as compared to 7.31% in FY16. PAT margin continued to
remain low and stood at below unity level during last two
financial years on account of high depreciation and interest
costs.
Leveraged capital structure: The capital structure of the company
continues to remain leveraged marked by overall gearing ratio
of 10.05x as on March 31, 2017 (PY: 10.27x as on March 31, 2015)
mainly on account of company's high dependence upon external
borrowings to fund various business requirements.
Weak debt coverage indicators: The company has weak debt coverage
indicators marked by interest coverage ratio of 1.33x in FY17
and Total debt to Gross Cash Accruals (GCA) of 34.54x for FY17 in
comparison to interest coverage ratio of 1.31x in FY16 and total
debt to GCA of 33.42x for FY16.
Elongated operating cycle: Owing to the seasonality of rice
harvest, the company has to maintain suitable raw material
inventory to ensure uninterrupted production throughout the year.
Furthermore, the basmati rice requires higher ageing of the semi-
finished rice for better quality thereby elongating the working
capital cycle. This resulted in average inventory period of 173
days for FY17. Furthermore, the company extends a credit period
of around one month to its customers and gets almost the same
credit period from its suppliers.
Competitive and fragmented industry with high government
regulation: The industry in which company operates is highly
fragmented and competitive in nature marked by the presence of
various large and small players. The players in the industry,
especially the small players, do not have any pricing power and
are exposed to competition induced pressures on profitability.
Additionally, the raw material (paddy) prices are regulated by
government to safeguard the interest of farmers, which in turn
limits the bargaining power of the rice millers.
BAF was incorporated in the year 2014 and is promoted by Mr. Ram
Niwas Bihani, Mr. Inder Chand Bihani, Mr. Shri Niwas Bihani, Mr.
Govind Bihani, Mr. Gopal Bihani and Mr. Raghav Bihani. The
company started its operations in December 2014. BAF is engaged
in the processing of paddy at its manufacturing unit located at
Fazilka, Punjab, with total installed capacity of 14,400 metric
ton per annum (MTPA), as on October 25, 2016. The company
procures paddy from local grain markets through dealers and
agents mainly from the state of Haryana and sells its products
i.e. basmati and non-basmati rice in the states of Delhi, Uttar
Pradesh, Haryana, Rajasthan, Maharashtra, Andhra Pradesh and
Punjab through a network of commission agents and traders. The
company has a group concern by the name-Fazilka Agro Private
Limited engaged in processing of paddy since 1992.
CRYSTAL CABLE: Ind-Ra Affirms 'D' Long Term Issuer Rating
---------------------------------------------------------
India Ratings and Research (Ind-Ra) has affirmed Crystal Cable
Industries Limited's (CCIL) Long-Term Issuer Rating at 'IND D'.
The instrument-wise rating actions are as follows:
--INR15.2 (reduced from INR29.3) mil. Term loan (Long-term) due
on June 2020 affirmed with IND D rating;
-- INR497.4 mil. Fund-based working capital limit (Long-term)
affirmed with IND D rating; and
--INR250 mil. Non-fund-based working capital limit (Short-term)
affirmed with IND D rating.
KEY RATING DRIVERS
The ratings reflect CCIL's delays in the debt servicing during
the 12 months ended December 2017 on account of tight liquidity
position, resulting from an elongated working capital cycle.
RATING SENSITIVITIES
Positive: Timely debt servicing for three consecutive months
could result in a positive rating action.
COMPANY PROFILE
CCIL was incorporated in 1965 as a private limited company, and
was converted into a public limited company in 1989. The company
manufactures various types of electrical cables including cross-
linked polyethylene, poly vinyl chloride power, mining and
control, as well as aerial bunch cables. Its registered office is
located in Kolkata and manufacturing facility at Andul in Howrah,
West Bengal.
DOLPHIN MARINE: ICRA Lowers Rating on INR2cr Cash Loan to B-
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ICRA Ratings has downgraded the long-term rating to [ICRA]B- from
[ICRA]B to the INR2.00 crore cash credit facility of Dolphin
Marine Foods & Processor (India) Private Limited. ICRA has
reaffirmed the short-term rating at [ICRA]A4 to the INR9.00 crore
fund based bank facilities of the company. ICRA has also
downgraded the long-term rating to [ICRA]B- from [ICRA]B and
reaffirm the short-term rating at [ICRA]A4 to the INR4.00 crore
(enhanced from the INR1.92 crore) unallocated limit. The outlook
on the long-term rating is 'Stable'. The rating is removed from
non-cooperating category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based-Cash 2.00 [ICRA]B- (Stable); Downgraded
Credit from [ICRA]B (Stable) and
removed from non cooperation
category
Fund-based-FDBP/ 9.00 [ICRA]A4; Reaffirmed and
FIDBP removed from non cooperation
category
Fund-based-Packing (9.00) [ICRA]A4; Reaffirmed and
Credit removed from non cooperation
category
Unallocated 4.00 [ICRA]B- (Stable)/[ICRA]A4;
Downgraded from [ICRA]B
(Stable)/[ICRA]A4 and removed
from non cooperation
category
Rationale
The rating downgrade reflect deterioration in Dolphin's liquidity
profile emanating from significant increase in inventory holding
period resulting from seasonal stocking of raw materials as on
March 31, 2017 leading to high working capital intensity which
has also entailed near to full utilisation of the working capital
limits. Further, the ratings also remain constrained by the
company's weak financial profile characterised by moderated
operating income, continued net losses in the last two years with
low accruals and weak return indicators. The risk is further
accentuated by the company's adverse capital structure following
the erosion of net worth in the past, which has weakened coverage
indicators as indicated by a gearing of 40.14 times, TD/OPBDITA
of 10.64 times, TOL/TNW of 55.08 times and interest coverage
ratio of 0.96 times as on March 31, 2017. ICRA notes the intense
competition due to highly fragmented nature of seafood industry
and inherent risks such as susceptibility to diseases, climate
change risks and regulatory changes. The ratings, however,
favorably factor in the extensive experience of the promoters
spanning over two decades in the sea food industry.
Outlook: Stable
ICRA believes Dolphin will continue to benefit from the extensive
experience of its promoters. The outlook may be revised to
'Positive' if substantial growth in revenue and profitability,
and better working capital management, strengthens the financial
risk profile. The outlook may be revised to 'Negative' if cash
accrual is lower than expected or stretch in the working capital
cycle, weakens liquidity position.
Key rating drivers
Credit strengths
Extensive experience of the promoters in the sea food industry of
over two decade: Incorporated in 1996, the company is engaged in
processing sea food products which are mainly exported to Asia
and Africa. The extensive experience of the promoters in the sea
food processing industry helps the company in securing business
from established customers.
Credit challenges
Weakened liquidity profile emanating from rise in inventory
levels which has in turn entailed full limit utilization: The
company's liquidity position remains stretched due to high
inventory period of more than 500 days as on March 31, 2017 as
compared to 297 days as on March 31, 2016 which led to increased
working capital intensity from 66% to 102% during the same
period. Dolphin maintains an inventory of about INR14-15 crore at
any year end, consisting of various types of processed sea foods
given the need of the seasonal procurement in February-March
every year leading to high working capital requirement in March.
Decreased revenue and constant absolute inventory level increased
the inventory-holding period and exposed the company to the risk
of inventory losses.
Financial profile characterized by continued net losses in past
two years with low accruals and weak return indicators: The
company has a small scale of operations and has witnessed
continuous revenue de-growth over the last three-year period. The
operating income stood at INR12.39 crore in FY2017 as against
INR37.54 crore in FY2014, translating into a CAGR of negative
31%. Continuously declining operating income and high fixed costs
have also resulted in continuous net losses since FY2015.
High gearing levels given erosion of net worth base as result of
sizable accumulated losses over the years: The total Debt of the
company mainly consists of working capital borrowings from the
bank, unsecured loans from promoters and term loans from NBFCs.
High debt level along with continuously eroding net worth has
resulted in highly leveraged capital structure and further
weakened coverage indicators as indicated by a gearing of 40.14
times, TD/OPBDITA of 10.64 times, TOL/TNW of 55.08 times and
interest coverage ratio of 0.96 times as on March 31, 2017.
Intense competition, given the low complexity of work involved:
The company faces stiff competition from other domestic as well
as international players which limits its pricing flexibility and
bargaining power with customers, thereby putting pressure on its
revenues and margins.
Exposure to regulatory, environmental and foreign exchange
fluctuations risks: Dolphin majorly derives its revenue from
overseas market. The export of seafood to foreign countries is
subject to regulatory approvals. Any major change in the trade
policies of importing country can have an impact on the
operations of the company. Due to high dependence on exports, the
profitability remains vulnerable to adverse fluctuations in
foreign exchange. The profitability further remains susceptible
to risks inherent in the seafood industry such as diseases and
climate change.
Incorporated in 1996 by Mr. Rosario D'Souza, Dolphin is involved
in processing of sea food products which are mainly exported to
Asia and Africa. It commenced operations in 1999 from its 5000
square meter plot in Taloja, MIDC. From 1999 to 2009, DMPL was
only involved in pre-processing activities like cleaning, washing
and peeling. It started exporting in 2009 as a merchant exporter
from the rented facility of Sumraj Sea Foods. It set up its own
freezing and cold storage unit in July 2010. The construction of
plant was completed in September 2011 and after receiving
licences from The Marine Products & Export Development Authority
(MPEDA) and Export Incentive Agency (EIA), it commenced operation
in October 2011.
In FY2017, the company reported a net loss of INR1.27 crore on an
operating income of INR12.39 crore, as compared to a net loss of
INR0.52 crore on an operating income of INR21.92 crore in the
previous year.
EVER ELECTRONICS: ICRA Upgrades Rating on INR5cr Loan to B+
-----------------------------------------------------------
ICRA Ratings has upgraded the long-term rating to [ICRA]B+ from
[ICRA]B to the INR5.00-crore fund-based facility of Ever
Electronics Private Limited and has reaffirmed the short-term
rating of [ICRA]A4 to the INR7.00-crore non-fund based facility.
ICRA has also upgraded the long-term rating of [ICRA]B+ and has
reaffirmed the short-term rating of [ICRA]A4 to the INR15.00-
crore unallocated facility of EEPL. The outlook on the long-term
rating is Stable. The rating has also been removed from the
'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund based-Term 5.00 [ICRA]B+(Stable), Upgraded
Loan from [ICRA]B and Removed
from 'Issuer Not
Cooperating' category
Non-fund based- 7.00 [ICRA]A4; Reaffirmed, and
Bank Guarantee Removed from 'Issuer Not
Cooperating' category
Unallocated 15.00 [ICRA]B+(Stable) Upgraded
from [ICRA]B and [ICRA]A4
Reaffirmed; and Removed
from 'Issuer Not
Cooperating' category
Rationale
The long-term rating upgrade takes into consideration the
increasing scale and improvement in cost structure which has led
to recovery from losses in FY2017. Further in H1FY2018, the
company has diversified its product profile to manufacture
printed circuit boards (PCBs) used in automotive sector which has
led to improved sales momentum in the current fiscal. The rating
continues to take into account the long-standing experience of
promoters and the company's track record with its major principal
LG Electronics India Private Limited (LG) for which it is a sole
supplier for Pune region. With LG generating ~95% of the total
revenues of EEPL, there is low counter party credit risk and a
favorable working capital cycle due to prompt realisations and
credit period available from LG and LG approved suppliers which
has helps the company function without working capital debt. As
EEPL is a supplier of PCBs used in consumer electronics like
Televisions, LCDs, Refrigerators, the positive outlook for
consumer durables goods industry driven by a widening middle
class it is expected to provide revenue growth potential.
The ratings, however, continue to remain constrained by high
client concentration risk as majority of the revenues (~95%) are
generated from LG, which exposes the company's operations to
performance of its principal. The company also has limited
bargaining power and pricing flexibility vis-a-vis its major
customer (LGEIL) and its raw material suppliers which has
resulted in pressures on operating margins. The accumulated net
losses have led to the depletion of net worth base leading to
strain on the capital structure and adverse total outside
liabilities to net worth ratio. EEPL also faces the risk of
technology obsolescence, though it is partly mitigated by
introduction of new product lines and constant upgradations as
per market demand. The rating also takes note of the highly
competitive and fragmented nature of telecom and electronics
component manufacturing business due to presence of various
players which limits the ability to significantly scale up
operations.
Going forward, any decline in market share of LG Electronics
could negatively impact EEPL's revenue growth. Diversification in
new product lines and new customers will positively impact the
operating scale and mitigate concentration risks.
Outlook: Stable
ICRA believes EEPL will continue to benefit from the extensive
experience of its promoters and operational comfort from being
the sole supplier for LG Pune. The outlook may be revised to
Positive if substantial growth in revenue and stable
profitability is reported with diversification into new product
lines strengthens the financial risk profile. The outlook may be
revised to Negative if there is a decline in market share of LG
Electronics impacting revenues of EEPL, or any strain on the
capital structure or the working capital profile which may weaken
the overall financial profile of the company.
Key rating drivers
Credit strengths Promoters experience in the electronics industry
and long-established relations with a reputed OEM: The company
was taken over by a new management in December 2013. The current
Managing Director; Mr. H.C. Sim is a graduate with over 8 years
of industrial experience in Korea and over 6 years of
manufacturing PCBs in India. He has vast technical experience in
manufacturing and assembly as well as procurement and marketing
which has been instrumental in gaining new businesses from LG for
manufacturing PCBs used in air conditioners, washing machines and
microwave ovens and maintaining healthy relationships with LG.
Sole supplier of LG for Pune region; low counter party credit
risk: The company is a single source supplier for LG Electronics,
Pune for Colour Televisions, LCD Televisions, DVD players and
other electronic equipments. The company is now developing PCBs
for Smart TVs of LG. LG has remained the largest contributor to
EEPL's revenue (~95%) in the last three years. The key
competitive advantage for the company is its long relation with
such reputed players and the fact that it is a sole supplier of
LG for Pune region which limits counter-party credit risk and
assures a stable sales off-take. LG Electronics India Private
Limited is one of India's leading players in the consumer-
durables industry, with sustained market leadership in the
refrigerator, washing machine, and air conditioner (AC) segments,
and a strong market position in the panel television segment.
Customers like LG have stringent induction process for including
a new supplier which also acts as an entry barrier for new
entrants.
Increasing scale and improvement in cost structure has led to
recovery from net losses in FY2017; the company has diversified
its product profile to manufacturing printed circuit boards used
in auto which has reflected in improved sales momentum in
H1FY2018: The company has been able to utilize its existing
capacity better in FY2017 with new variants in existing product
categories leading to 20.1% growth in FY2017. The company has
started supplying PCBs to automobile industry as a part of its
diversification strategy in FY2016 which led to addition of
reputed auto ancillary players in the customer profile. While the
share of automotive sector is less than 5% of the total revenues
currently, it is expected to grow going forward. Higher value-
added PCBs which command better realisations have led to
improvement in operating margins. Scaling up of operations has
led to better absorption of overheads and has led to led to
recovery from net losses in FY2017.
Favorable working capital cycle, no working capital debt on
books: The production is entirely order backed and based on the
monthly production and delivery schedule given by LG at monthly
indicative price. LG switches between job work and sales basis
contracts with the company. Starting FY2016, LG has decided to
award everything on sales basis except for LCD and Smart TV PCBs
which would be completely on job work basis. In case of job work,
the working capital cycle remains lean due to lower inventory
holding requirements. On the other hand, operations on sales
basis typically have higher inventory requirements. The company's
working capital position is comfortable with prompt realisations
from its key customer and credit period extended for its
procurements from LG or approved suppliers while inventory is
stocked for ~1 month. As of September 2017, there is no working
capital debt on books.
Positive outlook for consumer durables goods industry driven by a
widening middle class, provides strong revenue growth potential:
Consumer durables or light electricals market in India grew at a
CAGR of 11% between FY2012-2017. Urban markets account for the
major share (65%) of total revenues in the consumer durables
sector in India. There is a lot of scope for growth from rural
markets with consumption expected to grow in these areas as
penetration of brands increases. Also demand for durables like
refrigerators as well as consumer electronic goods are likely to
witness growing demand in the coming years in the rural markets
as the government plans to invest significantly in rural
electrification which provides revenue prospects for EEPL.
Credit weaknesses
Risk associated with single client concentration where ~95% of
the revenue is generated from LG Electronics India Private
Limited: The company over the years has derived ~95% of the sales
from LG which makes the company susceptible to concentration
risk. Though LG India is one of India's leading players in the
consumer-durables industry, any decline in market share or shift
of part of operations out of India poses risk to the company.
Limited bargaining power and pricing flexibility vis-a-vis its
major customer (LG) and raw material suppliers has resulted in
pressures on profitability margins: LG dominates in fixing the
prices of raw materials, as either the same are supplied by LG or
it is to be obtained from approved suppliers of LG. Final sales
to LG is at fixed price defined on a monthly rolling basis,
ensuring fixed contribution margins to EEPL. The company's
concentrated customer base and LG being a large player in
relation to operations of EEPL, there is limited bargaining power
and pricing flexibility.
Risk of technology obsolescence, though partly mitigated by
introduction of new product lines: The risk of technology
obsolescence is prevalent in the consumer electronics industry.
The company has halted assembling PCBs used in CRT TV production
as the demand for LCD/LED TV PCBs has been on the rise. The
company is now developing PCBs for Smart TVs of LG which are
advanced version of LCD/LED TV.
Highly competitive and fragmented nature of telecom and
electronics component manufacturing business: The electronics
component manufacturing business is highly competitive and
fragmented due to presence of various players and new entrants.
However, EEPL is an approved supplier and has an association of
over a decade with its key customer LG which is a highly reputed
and established player in the industry they operate in.
Incorporated in 2004, EEPL assembles PCBs for Colour Televisions,
LCD Televisions, DVD players, refrigerators and other electronic
equipment of LG. The company has also diversified into PCB
manufacturing for automobile industry and is supplying to auto
ancillary players in Pune. The company is owned by Vision
Creative Limited (VCL), which is a Hong Kong based company which
was acquired by new management hence giving them ownership of
EEPL in December 2013.
In FY2017, the company reported a net profit of INR2.85 crore on
an operating income of INR141.45 crore, as compared to a net loss
of INR3.86 crore on an operating income of INR117.79 crore in the
previous year.
GMR WARORA: CARE Raises Rating on INR3,191cr LT Loan to BB
----------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
GMR Warora Energy Limited (GWEL) as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
(i) Long Term Bank
Facilities
(Term Loan) 3,191.00 CARE BB; Stable Revised from
CARE D
(ii) Long/Short Term
Bank Facilities
(CC/LC) 390.00 CARE BB; Stable/CARE A4
Reaffirmed
(iii) Short Term Bank
Facilities (BG) 230.00 CARE A4 Reaffirmed
(iv) Non-Convertible
Debentures (75.00) CARE BB; Stable Reaffirmed
Detailed Rationale & Key Rating Drivers
The revision in rating ([i] above) of GMR Warora Energy Limited
(GWEL) takes into account the delay free track record in
servicing of term loans by the company. The rating reaffirmation
([ii] to [iv] above) continues to be constrained by the below
average financial risk profile of GWEL characterized by high
overall gearing, low debt coverage indicators and relatively weak
credit profile of its off-takers.
The ratings however continue to derive strength from the
experience of its promoters in operating power projects, its
long-term power off-take arrangement for sale of power and Fuel
Supply Agreement (FSA) for coal supply with South Eastern
Coalfields Ltd (SECL).
Going forward, the company's ability to achieve the envisaged
revenue and profitability, timely receipt of the receivables from
the DISCOMs and improvement in the capital structure shall be the
key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Strengths
Experienced promoter group with experience in developing power
projects: GWEL is a part of GMR group which is a major player in
the infrastructure sector (GMR Infrastructure Limited, rated CARE
BB; Stable/CARE A4) and has been developing projects in India and
abroad in areas such as airports, energy, transportation, etc.
Over the years GMR group has successfully implemented various
power projects and has substantial experience in developing
and operating diversified fuel based power projects. Also, the
promoters have supported the company by regular infusion of
funds in the form of equity and unsecured loans. In FY17, Tenaga
Nasional Berhad invested $300 million (Rs. 2,000 crore) in
GEL and acquired 30% equity stake in it. The proceeds were used
to reduce debt in GEL at a standalone level.
Long-term PPAs in place providing revenue visibility: The company
has long term PPAs for entire capacity including PPA for 200MW
with DNH, 200 MW with MSEDCL and 150MW with TANGEDCO while the
balance power is for auxiliary consumption. This arrangement with
its clients ensures long term revenue visibility for GWEL with
100% of net capacity of its plant. All the PPA provides tariff
recoverable in the form of capacity charge & energy charges.
Long term fuel supply agreement in place with SECL: GWEL has FSA
of 2.6 MPTA with SECL for feeding both the units of 300 MW each.
Presence of FSA with SECL safeguards GWEL against any fuel supply
risks. In cases of any short supply from SECL, GWEL meets the
same through e auction and imported coal. The inventory level of
GWEL has been negatively impacted in last one year due to nation-
wide coal supply constraint.
Gradual recovery of the change in law receivables with respect to
MSEDCL: GWEL had raised bills of INR 109.80 crore to MSEDCL in
FY17 with respect to CERC's favourable verdict on change in
duties and taxes in the construction period, duties/ taxes on
coal and transportation during the operational period. Till
October 31, 2017, GWEL had received INR 70.30 crore from MSEDCL.
GWEL is expecting to receive the remaining due by March 31, 2018.
The incremental cash flows from regulatory receivables and future
incremental cash flows are expected to improve the liquidity
position of the company going forward.
Key Rating Weaknesses
Sluggish collection of regulatory arrears from DNH: GWEL had
raised bills of INR 48.20 crore to DNH in FY17 with respect to
change in law. It had received only INR 4.70 crore from DNH till
October 31, 2017. However, the bills raised to DNH in the current
year are getting cleared regularly.
Pending order on coal cost pass-through for all the DISCOMs and
change in law for TANGEDCO: GWEL had appealed for coal cost pass
through DNH and MSEDCL in APTEL which is under process. GWEL has
also applied for change in law and coal cost pass through
TANGEDCO in CERC. With respect to change in law, the order is
expected soon in line with the order received from MSEDCL and DNH
in Feb'17, which is expected to improve cash flows.
Weak financial risk profile marked by leveraged capital
structure: GWEL has below average financial risk profile
characterised by high overall gearing and low debt coverage
indicators. The networth of the company stood low at INR 105.31
crore during FY17 largely on account of accumulated losses. The
company has high debt levels which stood at INR 3,680.67 crore as
on March 31, 2017. Although, the PLF remained lower in FY17 as
compared to that in FY16 due to shut down for close to 40 days,
the improved realization per unit due to favourable order from
CERC in Feb'17 resulted in improvement in total operating income
and profitability. The company reported PBILDT of INR 755.12
crore and posted positive PAT for the first time of INR 142.68
crore on a total operating income of INR 1,715.35 crore in FY17.
Counterparty credit risk with respect to delay in receivables:
GWEL is supplying power to DNH, MSEDCL and TANGEDCO. Among the
three utilities, TANGEDCO is having a relatively weak financial
profile as reflected by high AT&C losses, significant subsidy
support from the government, and relatively long payable cycle.
Going forward, GWEL's ability to realize the dues from discoms in
a timely manner would remain important for its liquidity profile.
GMR Warora Energy Limited (GWEL) was previously known as EMCO
Energy Limited (EEL) - a Special Purpose Vehicle (SPV) promoted
by the EMCO group on August 04, 2005 to set up a 2x135 MW coal
based power plant at Maharashtra Industrial Development
Corporation (MIDC), Warora, Dist. Chandrapur, Maharashtra. The
promoters of EEL sold the entire stake to GMR Energy Limited
(GEL, rated ICRA B/ICRA A4) in July 2009 making it a 100%
subsidiary of GEL. After the acquisition, scope of the project
was enhanced from 2x135 MW to 2x300 MW in view of the demand for
power in western India. The Unit 1 and Unit 2 (each having
capacity of 300 MW) achieved COD on March 19, 2013 and September
01, 2013 respectively.
The project cost was initially envisaged at INR 3,480.00 crore to
be funded in the ratio of 75:25 for debt and equity. During FY15,
it was revised to INR 4,250.00 crore to meet the increased scope
of work and funding of IDC. The increased scope of work included
construction of weir (already implemented) on the Wardha river
and for new township (construction is in progress currently) for
employees. GWEL has incurred INR 29.00 crore out of envisaged
cost of INR 81.00 crore for the township. The weir system has
been constructed on Wardha River to store four to six months of
water given the low flow period in the river and meet the plants
requirement. GWEL reported PLF of 70.46% during FY17 (PY:76.15%)
with an availability factor of 85.90% (PY: 94.8%).
GMW PRIVATE: Ind-Ra Assigns BB+ Issuer Rating, Outlook Stable
-------------------------------------------------------------
India Ratings and Research (Ind-Ra) has assigned GMW Private
Limited (GMW) a Long-Term Issuer Rating of 'IND BB+'. The Outlook
is Stable. The instrument-wise rating actions are given below:
-- INR155 mil. Fund-based limitsassigned with IND BB+/Stable
rating; and
-- INR725 mil. Non-fund-based limitsassigned withIND A4+
rating.
KEY RATING DRIVERS
The ratings reflect GMW's moderate credit profile owing to the
company's focus of increasing margins at the cost of revenue.
Revenue grew to INR564 million in FY17 (FY16: INR519 million)
owing to higher order execution. The company had a healthy order
book of INR5,513 million (9x of FY17 revenue) as of November
2017, to be executed over FY18-FY20. It achieved revenue of
INR269 million in 1HFY18. Net leverage (net debt/operating
EBITDA) was 1.8x in FY17 (FY16: 2x) and interest coverage
(operating EBITDA/gross interest expense) was 2.1x (2.1x).
The ratings are constrained by the company's elongated net cash
cycle of 229 days in FY17 (FY16: 207) owing to long debtors days
and inventory period. Debtor days ranged between 198 and 268 over
FY14-FY17 (FY17: 263, FY16: 268), due to slow realization and the
company's requirement of maintaining retention money of up to 12-
24 months following project completion. GMW had an inventory
holding period of 27-94 days during FY14-FY17 (FY17: 94 days,
FY16: 80 days). However, the company was able to extend its
creditor period (FY17: 128 days, FY16: 140 days) to meet its
working capital requirement.
The ratings also factor in GMW's moderate liquidity position as
reflected by 95% average utilization of fund-based facilities
during the 12 months ended December 2017.
However, the ratings draw comfort from the company's healthy
EBITDA margins, given high entry barriers in hydro mechanical
equipment works. Also, GMW has patented technology for hydraulic
trash raking mechanism. The EBITDA margins ranged between 7.6%
and 15.5% over FY14-FY17 (FY17: 15.5%, FY16: 15.3%).
The ratings are also supported by the promoters more than 30
years of experience in executing engineering, procurement, and
construction contracts.
RATING SENSITIVITIES
Positive: A substantial improvement in revenue and/or operating
profitability leading to an improvement in the credit metrics,
along with a strong order book position will be positive for the
ratings.
Negative: A substantial decline in the revenue or operating
profitability leading to a stress on the liquidity position as
well as the credit metrics could be negative for the ratings.
COMPANY PROFILE
Incorporated in 1986, GMW is engaged in installation of hydro
mechanicals equipment such as hydel gates, stop log gates, piping
work and penstock piping for various power projects. The company
is promoted by Mr. Onkar Singh, Mr. Nagindar Singh, Mr. Jasbir
Singh and their family.
KALIKUND DEVELOPERS: Ind-Ra Migrates B+ Rating to Non-Cooperating
-----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has migrated Kalikund
Developers' (KD) 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 action is as follows:
-- INR295 mil. Term loan due on October 2018 migrated to Non-
Cooperating Category with IND B+(ISSUER NOT COOPERATING)
rating.
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
January 23, 2017. Ind-Ra is unable to provide an update, as the
agency does not have adequate information to review the ratings.
COMPANY PROFILE
KD is a registered partnership firm constituted in 2007 for the
construction of residential towers. The firm is promoted by
Naresh R Mehta.
MM POLYMERS: Ind-Ra Migrates BB- Issuer Rating to Non-Cooperating
-----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has migrated M M Polymers
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 ratings will
now appear as 'IND BB-(ISSUER NOT COOPERATING)' on the agency's
website. The instrument-wise rating actions are as follows:
--INR30 mil. Term loans due on 31 March 2023 migrated to
Non- Cooperating Category with IND BB- (ISSUER NOT
COOPERATING)rating; and
-- INR60 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
January 11, 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, M M Polymers manufactures PET preforms
which are used in the packaging of drinking water, beverages,
edible oils, food products, chemicals, and pharmaceutical
products.
MADRAS FERTILIZERS: ICRA Reaffirms C Rating on INR191.4cr Loan
--------------------------------------------------------------
ICRA Ratings has reaffirmed the ratings of [ICRA]C and [ICRA]A4
on the INR524.24 crore bank facilities of Madras Fertilizers
Limited.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term; Fund
based facilities 191.40 [ICRA]C; reaffirmed
Long Term;
Proposed fund
based facilities 2.84 [ICRA]C; reaffirmed
Short term; Non
fund based
facilities 330.00 [ICRA]A4; reaffirmed
Rationale
The ratings reaffirmation reflects the weak financial profile of
the company with substantially negative net worth position and
continuing default on the repayment of the Government of India
loans drawn down for the factory revamp project. Owing to the
inadequate cash flows, the company has ceased to service the
interest and principal on the Government of India loans drawn for
the revamp completed in the 1990s. However, as part of the
restructuring proposal, the management expects waiver of the GoI
loan repayments/conversion to equity which could substantially
improve the capital structure of the entity.
Key Rating Drivers
Credit Strengths
Strong sponsor profile with GoI (~60%) and Naftiran (~26%) as the
promoters: The company has one the vintage urea units in the
country and was promoted as a Indo-Iranian Joint Venture (with
Naftiran, NIOC, being the shareholder). The company also has
logistical advantages being present in the vicinity of Chennai
Petrochemical Corporation Limited's (CPCL) refinery, from where
naphtha is being sourced, and Ennore port from where R-LNG will
be imported.
One of the largest manufacturers of urea in South India: The
company has an established market position as one of the largest
urea manufacturers in South India with reputed brands, wide
dealer network and a leading market share in Tamil Nadu (~50%).
Credit Weakness
Continuing defaults on the GoI debt due to the poor operational
performance of the company: Owing to the weak financial profile
and inadequate cash flows, the company has ceased to service the
interest and principal on the Government of India loans drawn for
the revamp project completed in the 1990s.
Old plant with poor operational efficiency and high energy
consumption: The energy consumption levels have been high for MFL
owing to the vintage of the plant and usage of naphtha as fuel;
inability to maintain the energy consumption levels within the
Govt mandated limits might result in under-recoveries and impact
the profitability.
MFL's plant is of old vintage having been operational for close
to 50 years and is one among the only three urea plants in the
country still operating with naphtha as feedstock. It falls under
the pre-1992 naphtha group and the existing NPS-III mandated
liquid fuel-based players like MFL to switch over to gas
feedstock. MFL has undertaken the conversion project and incurred
most of the capex, but it could not switch over due to lack of
gas availability. In June 2015, GoI approved the continuation of
the production of urea using naphtha as feedstock, till
availability of gas.
Madras Fertilizers Limited (MFL) was incorporated on December 8,
1966 as a joint venture between GOI and AMOCO India incorporated
of U.S.A (AMOCO) in accordance with the Fertilizer Formation
Agreement executed on 14.5.1966 with equity contributions of 51%
and 49% respectively. National Iranian Oil Company (NIOC), an
undertaking of Government of Iran, acquired part of AMOCO's
shareholding and with the company going public in 1997 the
current shareholding pattern is as follows: Government of
India- 59.5%; NIOC - 25.8%; Public - 14.7%. MFL is engaged in the
manufacture of Ammonia, Urea, Complex Fertilizers and
Biofertilizers. MFL has its plant facilities and head quarters
located on 329 acres of freehold land at Manali, about 20 km
north of Chennai city.
MAHADEV WEAVING: ICRA Assigns B- Rating to INR8.46cr Term Loan
--------------------------------------------------------------
ICRA Ratings has assigned the long-term rating of [ICRA]B- to the
INR12.00 crore bank facilities of Mahadev Weaving Industries LLP.
The outlook on the long-term rating is Stable.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based-Cash
Credit 2.50 [ICRA]B- (Stable); Assigned
Fund-based-Term
Loan 8.46 [ICRA]B- (Stable); Assigned
Unallocated Limits 1.04 [ICRA]B- (Stable); Assigned
Rationale
The assigned rating takes into account the firm's weak financial
profile characterised by its small scale of operations, leveraged
capital structure, weak debt coverage indicators and high working
capital intensity with almost full utilisation of working capital
limits. Further, the ratings remain constrained by the
vulnerability of profitability margins to the fluctuations in raw
material prices and intense competition from organised players
that limits its pricing flexibility. ICRA also notes the risk
associated with capital withdrawal as inherent in the partnership
nature of the firm.
The ratings, however, positively factor in the experience of the
promoters in the textile industry and MWI's location advantage
providing easy access to key raw materials.
Outlook: Stable
ICRA believes Mahadev Weaving Industries LLP will benefit from
the extensive experience of its promoters and expects the
operating income to show moderate growth supported by
diversification into a new product line. The outlook may be
revised to Positive in case of substantial revenue growth with
substantial equity infusion and better working capital management
strengthening the financial risk profile. The outlook may be
revised to Negative if cash accruals are lower than expected to
cover impending debt repayments, or major capital withdrawals or
stretch in the working capital cycle, weakens liquidity.
Key rating drivers
Credit strengths
Experience of promoters in the textile industry: MWI's partners
have extensive experience in the textile industry through their
engagement with its associate concern, Mahadev Yarns Private
Limited, engaged in manufacturing yarn.
Location advantage from being situated near Surat, Gujarat: The
firm's location near Surat, Gujarat, which is a textile hub,
ensures easy availability of raw materials. Moreover, MWI has
easy access to its customers, who are retailers, traders and
wholesalers based out of Surat.
Credit challenges
Weak financial risk profile: The operations for firm remained
small with an operating income of INR9.2 crore in FY2017, which
was its first full year of operations. The capital structure
remained highly leveraged with a gearing of 7.9 times as on March
31, 2017, because of initial debt funded capex and high working
capital requirements. Low profitability and high debt level
resulted in weak debt protection metrics with TD/OPBITDA of 7.9
times and NCA/TD of 6% as on March 31, 2017. Further, the working
capital intensity remained high as reflected by NWC/OI at 34% in
FY2017, coupled with a stretched liquidity profile as evident
from its full utilisation of working capital limits.
Intense competition due to low entry barriers: Being a relatively
small-sized player in the industry, MWI's operations remain
susceptible to intense competition from established domestic
players as well as its peers.
Profitability remains susceptible to raw material price
fluctuations: Polyester and nylon yarn are the major raw
materials for the firm, which are crude oil derivative.
Accordingly, the profitability of the firm remains vulnerable to
adverse movement in raw material prices.
Risks associated with being a partnership concern: MWI's net-
worth has remained low due to capital withdrawals in FY2017.
Thus, any substantial withdrawals from its capital account could
adversely impact the capital structure in future.
Established in November 2004, Mahadev Weaving Industries LLP
(MWI) is engaged in manufacturing knitted fabric used for
manufacturing sarees, dress materials, women's ethnic wear, night
wear, shirts, track suits and lingerie. It is also used as
furnishing fabrics for curtains, upholstery, nets, sportswear,
automotive seat covers, etc. MWI has an installed manufacturing
capacity of 1,800 MTPA of knitted fabric. Commercial production
commenced from August 2015 at its weaving unit. The firm also
trades a variety of yarn.
MWI is promoted by the Jhawar and the Mundra families, with its
promoters enjoying extensive experience in the textile sector
vide the group concern, Mahadev Yarns Private Limited, which has
been engaged in processing texturised yarn since 1991.
In FY2017, the firm reported a profit after tax of INR0.2 crore
on an operating income of INR9.2 crore, over a profit after tax
of INR0.02 crore on an operating income of INR3.9 crore inFY2016
(8 months of operations).
NIDHI TEXTILES: CARE Assigns B+ Rating to INR11.50cr LT Loan
------------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Nidhi
Textiles (NT), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 11.50 CARE B+; Stable Assigned
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of NT are constrained
on account of Fluctuating scale of operation with low
capitalization , low profitability margins, Moderate capital
structure and weak debt coverage indicator and working capital
intensive nature of operation. The ratings are also constrained
on account of its presence in highly competitive and fragmented
industry.
The rating however, derives strength from and experienced and
resourceful partners and Support of group company. The ability of
NT to increase its scale of operations and improve capital
structure along with efficient management of working capital
requirement are the key rating sensitivities.
Detailed description of Key rating drivers
Key rating Weakness
Fluctuating scale of operation with low capitalization: Despite
its long track record of operation its scale of operation
continues to remain fluctuating and moderate on account of
fluctuating demand due to market scenario; thereby limiting its
financial flexibility.
Low profitability margins: NT's PBILDT margin stood low at 3.84%
in FY17 on account of increase in employee cost and increase in
other expenses (increase in sundry and motor car expenses) .
Further net profit margin improved slightly but stood low due to
decrease in interest cost in FY17 (due to reduction in debt
level). Nevertheless it continues to remain low due to trading
nature of operation.
Leveraged capital structure: NT's capital structure marked by
overall gearing stood leveraged as on March 31, 2017 on account
of higher reliance on external debt to fund the business
operation coupled with low networth base.
Moderate capital structure and weak debt coverage indicator: NT's
capital structure marked by overall gearing improved and stood
moderate at 1.16 xs as on March 31, 2017 (vis-a-vis 1.55x as on
March 31, 2016) on account of repayment of term loan coupled and
conversion of unsecured loan amounting to INR2.02 crore into
equity in FY17. Also comfort can be drawn from the fact that out
of the total debt outstanding as on March 31, 2017 around 27% of
the debt is in the form of interest bearing unsecured loans
having no fixed repayment schedule. Further due to high debt
level and low profitability due to trading nature of operation,
the debt coverage indicators improved but remained weak during
FY17.
Working capital intensive nature of operation: The liquidity
position is marked by moderate current ratio and high operating
cycle. Its working capital limit was utilized at around 90-100%
percent over the past 12 months ended December 2017. The
operations are highly working capital intensive in nature as the
entity trades in textile fabric whose prices fluctuate and also
they have to maintain the stock in order to avoid the shortage.
The entity purchase textile fabric from domestic market and gets
30 days from domestic suppliers and it supplies majorly to
domestic customers and offers a credit period of 90-120 days and
above due to maintain competitive edge and it reflects into
higher receivables during FY17.
Project execution risk: The entity has undertaken a project worth
INR 20 lakhs for expansion and modernization of existing capacity
which is still at project phase. Entire funding will be done
through owned funds. The entity wants to expand and improve the
current warehousing facilities and working towards bringing
complete computerized dispatches. Project will be completed
within a year.
Operations in the competitive and fragmented industry: NT
operates in a highly competitive and fragmented textiles
industry. The company witnesses intense competition from both
organized and unorganized players. This fragmented and highly
competitive industry results into price competition thereby
affecting the profit margins of the companies operating in the
industry.
Key rating Strengths
Experienced and resourceful partners: The entity is supported by
experienced partners, Mr. Vijay Kumar Jain and Mr. Devendra Jain
who have an average experience of more than four decades in
textiles industry and are looking after finance and sales and
marketing functions respectively. Furthermore they are supported
by personnel having adequate and relevant experience in their
respective fields to carry out day-to-day operations.
Support of group company: NT receives operational support from
group concerns in terms of procurement and marketing of its
products. Following is the group financials for the period
FY17.Through various modes as well they receive orders like
through brokers, word of mouth publicity and established
relationships with existing customers.
Nidhi Textiles (NT) was established in November 1983 as
partnership firm by two partners namely Mr. Vijay Kumar Jain and
Mr. Devendra Jain. The firm is engaged in the business of trading
of textile products primarily textile fabric (of all types) which
sells mostly to garment manufacturers. The entity sometimes does
the processing of fabric in a customized manner by outsourcing
from domestic mills. At present the entity has a capacity to sell
250,000-3,00,000 meters of fabric per month. NT receives
operational support from group concerns in terms of procurement
and marketing of its products. Following is the group financials
for the period FY17.Through various modes as well they receive
orders like through brokers, word of mouth publicity and
established relationships with existing customers.
The entity primarily deals with domestic customers namely Blazo
Clothing manufacturing Company Private Limited, Revolution
Apparels, Jay Enterprises and others. The entity has marketing
tie up with numerous textile agencies throughout India and sells
its products in around 12 states across India and has product
sourcing tie up with Vardhaman Fabrics; a unit of Vardhaman
Textiles Limited. Out of the total purchases during FY17, 90 % of
the fabric is purchased from Vardhaman Fabrics.
PNG TOLLWAY: ICRA Moves D Rating to Not Cooperating Category
------------------------------------------------------------
ICRA Ratings has moved the long term ratings for the bank
facilities of PNG Tollway Limited (PNG) to the 'Issuer Not
Cooperating' category. The rating is now denoted as "[ICRA]D
ISSUER NOT COOPERATING ON INFORMATION & FEES" ICRA has been
trying to seek information from the entity so as to monitor its
performance and has also sent repeated reminders to the company
for payment of surveillance fee that became overdue, 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.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Term Loans 1,198.91 [ICRA]D ISSUER NOT COOPERATING;
Rating moved to the 'Issuer Not
Cooperating' category
PNG Tollway Limited is a SPV promoted jointly by L&T group (L&T
Infrastructure Development Projects Ltd. - 48% shareholding and
L&T Limited-26% shareholding) and Ashoka Buildcon Limited (26%
shareholding) for the six-laning of National Highway 3 from
Pimpalgaon to Gonde in Maharashtra. The Project Highway, with a
total length of 60.0 kms, was awarded on the Design-Build-
Finance-Operate-Transfer (DBFOT) model under the NHDP phase III.
L&T Infrastructure Development Projects Ltd. (L&T IDPL) is a
subsidiary company of Larsen & Toubro Limited and is the holding
company of various infrastructure projects being developed under
the public private partnership (PPP) model. ABL undertakes EPC
contracts in segments like road, bridges, commercial buildings,
power transmission and distribution, etc. and has strong presence
in states of Maharashtra and Madhya Pradesh.
PRAGATI GLASS: ICRA Moves D Rating to Not Cooperating Category
--------------------------------------------------------------
ICRA Ratings has moved the long-term and short-term ratings for
the bank facilities of Pragati Glass Private Limited (PGPL) to
the 'Issuer Not Cooperating' category. The rating is now denoted
as "[ICRA]D ISSUER NOT COOPERATING".
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based-Term 4.00 [ICRA]D ISSUER NOT COOPERATING;
Loan Rating moved to the 'Issuer Not
Cooperating' category
Fund-based-Cash 17.50 [ICRA]D ISSUER NOT COOPERATING;
Credit Rating moved to the 'Issuer Not
Cooperating' category
Non-Fund Based 4.00 [ICRA]D ISSUER NOT COOPERATING;
Limits Rating moved to the 'Issuer Not
Cooperating' category
The rating is based on no updated information on the entity's
performance since the time it was last rated in July 2016. The
lenders, investors and other market participants are thus advised
to exercise appropriate caution while using this rating as the
rating does not adequately reflect the credit risk profile of the
entity. The entity's credit profile may have changed since the
time it was last reviewed by ICRA; however, in the absence of
requisite information, ICRA is unable to take a definitive rating
action.
As part of its process and in accordance with its rating
agreement with Pragati Glass Private Limited, 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. In the absence of
requisite information, and in line with SEBI's Circular No.
SEBI/HO/MIRSD4/CIR/2016/119, dated November 1, 2016, ICRA's
Rating Committee has taken a rating view based on the best
available information.
Pragati Glass Private Limited (Pragati Glass) was incorporated in
1982 by Mr Dinesh Gupta to manufacture glass tableware and
bottles. The company primarily caters to the cosmetics and
perfumes industries, with a small presence in food and beverages
(F&B). Almost 60% of the company's sales are made to exports
markets, while around 15-20% of these are deemed exports to SEZs.
The company's manufacturing facility is located at Kosamba,
Gujarat.
RADHA BALLABH: CARE Moves B+ Rating to Not Cooperating Category
---------------------------------------------------------------
CARE Ratings has been seeking information from Radha Ballabh
Health Care & Research Institute Pvt. Ltd. (RHCPL) to monitor the
ratings vide letters/e-mails communications dated June 20, 2017,
October 4, 2017, January 4, 2017 and numerous phone calls.
However, despite our repeated requests, the company has not
provided the requiste information for monitoring the ratings. In
line with the extant SEBI guidelines, CARE has reviewed the
rating on the basis of the publicly available information which
however, in CARE's opinion is not sufficient to arrive at a fair
rating. The rating on RHCPL's bank facilities will now be denoted
as CARE B+; ISSUER NOT COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank 20.00 CARE B+; Issuer not cooperating;
Facilities based on best available
information
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above ratings.
Detailed description of the key rating drivers
At the time of last rating on March 6, 2017 the following were
the rating weaknesses and strengths; (updated for the information
available from Registrar of Companies):
Key Rating Weaknesses:
Small scale of operations: The size of the operations of the
company remained small marked by total operating income of
INR6.51 crore with a PAT of INR1.42 crore in FY17 (refers to the
period April 1 to March 31). Furthermore, the networth base of
the company also remained low at INR6.14 crore as on March 31,
2017. Stringent regulatory framework for healthcare sector:
Despite the increasing trend of privatization of healthcare
sector in India, the sector continues to operate under stringent
regulatory control. Accordingly, regulatory challenges continue
to pose a significant risk to private healthcare as the same is
highly susceptible to changes in regulatory framework.
Reputational intensive sector: Healthcare is a highly sensitive
sector where any mishandling of a case or negligence on part of
any doctor and/or staff of the unit can lead to distrust among
the masses. Thus, all the healthcare providers need to monitor
each case diligently and maintain standard of services in order
to avoid the occurrence of any unforeseen incident. They also
need to maintain high vigilance to avoid any malpractice at any
pocket.
Fragmented healthcare industry: The healthcare sector is highly
fragmented with few large players in the organized sector and
numerous small players in the unorganized sector leading to high
level of competition in the business. Thus, differentiating
factors like range of services offered, quality of service,
parentage of doctors, success rate in treatment of complex cases,
etc. will be crucial in order to attract patients and to maintain
healthy occupancy.
Key Rating Strengths
Satisfactory track record with qualified & experienced promoter
and management: The promoter director, Dr. Dr.Rabindra Narain
Singh has around four decades of experience in the medical field
with various hospital & institutions. He holds degree like
M.B.B.S., MS Ortho, FRCS and FIAMS degrees and is a renowned
person (in the field of Orthopaedic and awarded Padmashri by the
President of India) in the state. He looks after the overall
management of the hospital with adequate support from co-director
Dr V.P. Singh (MBBS, MS Ortho) having an experience of 13 years
in the health care industry.
Satisfactory profitability margins: The profit margins of the
company remained satisfactory marked by PBILDT margin of 50.46%
and PAT margin of 21.84% in FY17. Comfortable capital structure
with strong debt coverage indicators: The capital structure of
the company remained comfortable marked by debt equity and
overall gearing ratios at 0.35x and 0.80x, respectively, as on
March 31, 2017. The debt protection metrics remained strong
marked by interest coverage of 6.24x and total debt to gross cash
accruals at 2.28x for FY17.
RHCPL was incorporated on April 01, 2004, for setting up
healthcare facilities by the Singh family of Patna, Bihar.
Presently, RHCPL is running an orthopaedic hospital in the name
of Anup Institute of Orthopedics & Rehabilitation (AIOR) located
at Patna, Bihar with bed capacity of 150.
RAJRAJESHWAR COTEX: CARE Hikes Rating on INR6.5cr LT Loan to B+
---------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Rajrajeshwar Cotex Private Limited (RCPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 6.50 CARE B+; Stable Revised
Facilities from CARE B
Detailed Rationale & Key Rating Drivers
The revision in the long-term rating of RCPL takes into
consideration on account of the significant growth in total
operating income and improvement in solvency position.
The rating, however, continues to remain constrained on account
of thin profitability margins in the highly fragmented industry
with limited value addition. The rating, further, continues to
remain constrained on account of moderate liquidity position and
raw material price fluctuation risk.
The ratings, however, derive strength from the experienced
promoters and location advantage by way of proximity to raw
material as well as customer.
RCPL's ability to improve the scale of operations and overall
financial risk profile with improvement in profitability margins,
solvency position and efficient working capital management are
the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Modest Scale of operation albeit improvement along with
fluctuating operating margins: During FY17, TOI of RCPL has
increased significantly by 89.80% over FY16 and registered
INR21.39 crore as against INR11.27 crore in FY16 mainly on
account of increase in sales volume of lint cotton and cotton
seed. The profitability margins of the company remained
fluctuating during last three years ended FY17 owing to
fluctuation in the prices of
cotton.
Moderately leveraged capital and liquidity position: During FY17,
the overall gearing of the company remained moderately leveraged
at 1.90 times as on March 31, 2017 mainly on account of repayment
of unsecured loan and lower utilization of working capital bank
borrowing. Further, debt coverage indicators remained weak marked
by total debt to GCA of 13.81 times as on March 31, 2017. However
interest coverage ratio remained moderate at 2.00 times in FY17.
The liquidity position of RCPL remained moderate as indicated
by 70-80% average utilization of its working capital bank
borrowing and operating cycle of 95 days.
Key Rating Strengths
Experienced promoters: RCPL was incorporated by Mr. Kedar Mittal
and Mr. Pawan Purohit in 2011. Mr. Kedar Mittal has more than a
decade of experience in cotton trade; agro processing and trading
industry. He looks after production and maintenance functions at
RCPL. He is accompanied by Mr Pawan Purohit who also has more
than a decade long experience in cotton trade, marketing and
development.
RCPL was incorporated in May 2011 by Mr. Kedar Mittal and Mr.
Pawan Mittal as a private limited company with an objective for
setting up of new ginning and pressing unit. RCPL deals in 'NCH
BT Cotton' type of cotton which is being sourced through local
farmers from Maharashtra. RCPL operates from its sole
manufacturing plant located at Parbhani (Maharashtra) with an
installed capacity to process 250 cotton bales per day and 650
quintal of cotton seeds per day as on March 31, 2015. RCPL sells
cotton cake in the brand names of "Surbhi" and "Rajmalai"
RUKSH ENTERPRISES: CARE Assigns B+ Rating to INR6.07cr Loan
-----------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Ruksh
Enterprises (RE), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 6.07 CARE B+; Stable Assigned
Detailed Rationale & Key rating Drivers
The rating assigned to the bank facilities of RE is primarily
constrained on account of its modest and fluctuating scale of
operations owing to its presence in a highly regulated and
fragmented industry, weak debt coverage indicators and working
capital intensive nature of operations. The rating, further,
constrained on account of vulnerability of margins to
fluctuations in raw material prices and foreign exchange rate.
The rating, however, derives strength from the experienced
management with established track record of operations and
moderate order book position. The rating, further, derive comfort
from location advantage by virtue of being situated in leather
city of India and moderate profitability margins and capital
structure.
Increase in scale of operations with efficient working capital
management is the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weakness
Modest and fluctuating scale of operations owing to its presence
in a highly competitive and fragmented industry with weak debt
coverage indicators: During FY17, TOI has dipped by 18.46% over
FY16 mainly due to decline in export of finished leather and
saddlery. Further, debt service coverage indicators of the
company stood weak with total debt to GCA of 19.23 times as on
March 31, 2017 and the interest coverage ratio also stood
moderate at 1.69 times in FY17.
Working capital intensive nature of operations: The operating
cycle of the company stood elongated at 235 days in FY17 mainly
due to higher inventory period of 250-350 days. The key raw
material of the company is leather which is a seasonal based
product, thus the company has to hold high inventory for the
month of January to April. Furthermore, the firm has utilized
upto 90% of its working capital bank borrowing during the last
twelve months ended on December 31, 2017.
Vulnerability of margins to fluctuation in raw material prices
and foreign exchange rates: The profitability of the firm is
vulnerable to any adverse movement in raw material prices as the
firm will not be immediately able to pass on the increased price
to its customers, results in increase in raw material inventory
holding period. Further, RE being an export-oriented unit is
generating its entire revenues through exports, thereby exposing
the company to foreign exchange fluctuations. The firm does not
have any active hedging policy.
Presence in highly regulated fragmented and competitive leather
industry: With increasing concerns for the Ganga and the animals,
the regulations are increasing which affects the Kanpur leather
industry in current scenario time. Further, with increasing
awareness for the polluting effluents, many environmental
regulations have been imposed in the tanning industry. Thus, RE
operates in the regulated, fragmented and competitive industry
which affects the overall affairs of the company.
Key Rating Strengths
Experienced management: Mr. Mohammad Khalid, partner, is graduate
by qualification having 25 years of experience and looks after
the overall affairs of the Firm. He is assisted other partners,
Mr Zohaib Anwar, graduate, Mrs Anrjumand Bano and Mr Mohammad
Shumair Anwar having a decade of experience each in the leather
industry.
Renowned clientele base with moderate order book position: Being
present in the industry since 2003, it has an established track
record of operations in the leather industry and has long-
standing relationship with its customer and suppliers base.
Further, the company is majorly into exports and sells its
products to Europe, China, Germany and France.
Location advantage by virtue of being situated in leather city of
India: The main raw material of the company is leather. The
company is located at Kanpur which is the leather city of India
and majority of these industries are engaged in the manufacturing
of various leather items such as bags, shoes and other
accessories etc. HGE's presence in the leather manufacturing
region results in benefit derived from cheap and easy
availability of raw material, as well as low transportation and
storage cost.
Moderate profitability margins with moderate capital structure:
During FY17, profitability of the firm stood moderate with PBILDT
and PAT margin of 8.54% and 0.81% respectively in FY17 as against
8.46% and 1.80% respectively in FY16. The capital structure of
the firm stood moderate with overall gearing of 1.84 times as on
March 31, 2017.
Uttar Pradesh based Rukush Enterprises (RE), was initially formed
as a partnership concern in 2003 by Mr Mr Mohammad Khalid, Mrs
Arjumand Bano, Mr Zohaib Anwar and Mr Mohammad Shumair Anwar
sharing profit and loss in the ratio of 35:25:20:20. RE is
engaged in the business of manufacturing and export of various
leather items such as finished leather, shoes, and saddler. The
manufacturing facility is located in the leather city of India,
Kanpur with an installed capacity of 3,00,000 pair per annum for
footwear and 25,00,000 square foot per annum for finished leather
and it utilizes 70-80% of its installed capacity. Further the
company is ISO certified ISO 9001:2008 with SAA-8000
certification.
SAMRAT GEMS: Ind-Ra Affirms BB Issuer Rating, Outlook Stable
------------------------------------------------------------
India Ratings and Research (Ind-Ra) has affirmed Samrat Gems
ImpexPvtLtd's (SGIPL) Long-Term Issuer Rating at 'IND BB'. The
Outlook is Stable. The instrument-wise rating actions are as
follows:
-- INR299.5 mil. Fund-based working capital limit affirmed with
IND BB/Stable/IND A4+ rating; and
-- INR70.0 (increased from INR50.0) mil. Non-fund-based working
capital limitaffirmed with IND A4+ rating.
KEY RATING DRIVERS
The affirmation reflects continued moderate scale of operations
and credit metrics. Revenue declined to INR1,054 million in FY17
from INR1,218 million in FY16 owing to a low order flow. EBITDA
margin declined to 4.3% in FY17 from 4.7% in FY16, as few bad
debts to the tune of INR28.02 million were written off during the
year. Net leverage deteriorated to 8.5x in FY17 from 6.5x in FY16
because of the decline in EBITDA. Meanwhile, gross interest
coverage was stable at 1.3x in FY17 (FY16: 1.3x). Ind-Ra
considers the write-off an extraordinary event and does not
expect the event to occur in the next two-three years.
According to interim financials for 9MFY18, revenue was INR923
million. As of December 2017, SGIPL had an order book INR317.23
million, which is likely to be executed by March 2018.
The ratings continue to reflect SGIPL's moderate liquidity,
indicated by an average 90.3% utilisation of its working capital
limits for the 12 months ended December 2017.
The ratings, however, continue to benefit from the founders'
three decades of experience in manufacturing ready-made garments
and SGIPL's strong customer base, including Toys R Us, Punto FA,
Scotch and Soda, Inditex Group (brand - Pull & Bear) and
Fallabella De Columbia.
RATING SENSITIVITIES
Negative: Any deterioration in the credit metrics will be
negative for the ratings.
Positive: Any rise in the scale of operations, along with any
improvement in the credit metrics, will lead to a positive rating
action.
COMPANY PROFILE
SGIPL was incorporated in 1984 by Shyamlal Sharma and Rajiv
Sharma, who both hold the position of directors. The company's
registered office is in Mumbai and its manufacturing units are in
Bengaluru and Bhiwandi.
SGIPL manufactures and exports ready-made garments to retailers.
In addition, the company trades fabrics in the domestic market.
SARAWAGI AUTO: ICRA Keeps B Rating in Not Cooperating Category
--------------------------------------------------------------
ICRA Ratings said that the rating for the INR8.38 crore bank
facilities of Sarawagi Automobiles Private Limited (SAPL)
continues to remain in the 'Issuer Not Cooperating' category. The
rating is denoted as "[ICRA] B (Stable) ISSUER NOT COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund Based Limits- 7.50 [ICRA]B (Stable) ISSUER NOT
Long Term COOPERATING; Rating continues
to remain in the 'Issuer Not
Cooperating' category
Unallocated-Long 0.88 [ICRA]B (Stable) ISSUER NOT
Term COOPERATING; Rating continues
to remain in 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 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.
SAPL was incorporated in May 2009 and is an authorized dealer of
TML. SAPL is engaged in the sale of vehicles, spares and also
provides after sales support. Presently, the company has 3S
(Sales, Service and Spares) facilities at Sri Ganganagar and
Hanumangarh districts and Sales facilities at Suratgarh,
Raisinghnagar, Anoopgarh, Nohar and Bhadra, in Rajasthan.
SHREE SHAKTI: ICRA Lowers Rating on INR9cr Loan to C+
-----------------------------------------------------
ICRA has revised the long-term rating for INR9.90 crore fund-
based limits of Shree Shakti Agro Industries (SSAI) to [ICRA]C+
from [ICRA]B+.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund based-Working 9.00 [ICRA]C+; revised from
Capital Facilities [ICRA]B+
Fund based-Term 0.90 [ICRA]C+; revised from
Loan [ICRA]B+
Rationale
ICRA's rating action takes into account SSAI's weak performance
in its first full year of operations wherein it recorded
operating income of INR11.88 crore and net profit of INR0.07
crore. The financial and operating performance of the firm was
significantly lower than what was envisaged during the last
rating exercise. Further the firm has extended significant
advances to others weakening its own liquidity. The rating also
considers high working capital intensity of the company on the
back of higher inventory, receivables and lower creditor days
resulting in constrained liquidity position with higher average
utilization of working capital limits over the past 12 months.
The rating continues to be constrained by the highly fragmented
nature of the mustard oil industry and the vulnerability of the
firm's profitability to agro climatic risks, which may impact the
availability as well as the price of mustard oil and oilseeds.
The rating is also constrained by the weak financial profile and
the risks associated with the partnership nature including risk
of capital withdrawal, etc
The rating, however, positively factor in the favorable demand
outlook in the domestic market for mustard oil, which is one of
the most widely consumed edible oils in the country.
Key rating drivers
Credit strengths
Favorable demand prospects for mustard oil: The industry is well
placed given the favorable demand prospects within which the
branded edible oil segment is expected to show higher growth in
line with the growing affluence and preference of consumers for
quality products.
Credit challenges
High working capital intensity resulting from high inventory
levels which impacts liquidity: The Company has high working
capital intensity resulting from long operating cycle which
impacts liquidity of the company as reflected by almost full
utilisation of working capital limits.
Vulnerability of profitability to any adverse fluctuation in
input costs: The key raw material for the firm is mustard seed
with the demand for the industry being seasonal in nature. Hence,
the firm remains exposed to any supply disruption and has limited
ability to pass on the price increases.
Fragmented industry characterized by intense competition from
large number of players: With the presence of large number of
established as well as unorganised players the firm faces high
competition from cheaper varieties of imported edible oils. Along
with this, the vulnerability of demand and profitability to
movements in global edible oil prices and changes in duty
structure which can impact competitiveness of various oils.
Weak Financial Profile of the firm: The firm has a weak financial
profile as reflected by low profitability of INR0.07 crore, high
gearing of 2.36 times as on March 31, 2017 and weak coverage
indicators reflected by Interest coverage of 0.43 times.
Risks associated with the partnership nature- The firm also faces
the risks associated with its status as a partnership firm
including risk of capital withdrawal, etc.
Incorporated in 2015, Shree Shakti Agro Industries (SSAI) is
engaged in the extraction of of mustard and cottonseed oil and
oil cake from the seeds. The manufacturing unit of the firm is
located in Ellenabad, Haryana. The firm procures mustard seed
from the local mandis either on cash payments or on a credit
period of 3-10 days.
SURENDRA STEELS: Ind-Ra Migrates BB+ Rating to Non-Cooperating
--------------------------------------------------------------
India Ratings and Research (Ind-Ra) has migrated Surendra Steels
Private Limited's (SSPL) 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 BB+(ISSUER NOT COOPERATING)' on the agency's
website. The instrument-wise rating actions are as follows:
-- INR36.1 mil. Long-term loanmigrated to Non-Cooperating
Category with IND BB+ (ISSUER NOT COOPERATING) rating; and
-- INR410 mil. Fund-based facilities migrated to Non-Cooperating
Category with IND BB+(ISSUER NOT COOPERATING) rating.
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
December 2, 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 1989, SSPL is an authorized dealer for JSW Steel
Limited ('IND AA-'/Negative) in Guwahati, Assam. In addition, the
company manufactures colour-coated roofing sheets, pre-painted
roofing sheets and poly steel roofing sheets. SSPL is managed by
Mr.SitaramAgarwal, Mr.Surendra Kumar Agarwal and Mr. Pradeep
Kumar Agarwal, who each have two decades of related experience.
UDAY AUTOLINK: CARE Moves D Rating to Not Cooperating Category
--------------------------------------------------------------
CARE Ratings has been seeking information from Uday Autolink
Private Limited (UAPL) to monitor the ratings vide e-mail
communications/ letters dated September 6, 2017, October 5, 2017,
November 13, 2017, December 23, 2017 and numerous phone calls.
However, despite our repeated requests, the company has not
provided the requisite information for monitoring the ratings. In
line with the extant SEBI guidelines, CARE has reviewed the
rating on the basis of the publicly available information which
however, in CARE's opinion is not sufficient to arrive at a fair
rating. The rating on Uday Autolink Private Limited's bank
facilities and instruments will now be denoted as CARE D; ISSUER
NOT COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 34.59 CARE D; Issuer not cooperating;
Based on best available
Information
Detailed description of the key rating drivers
Ongoing delays in debt servicing: There are on-going delays in
debt servicing owing to stretched liquidity position.
Ahmedabad based UAPL was incorporated in July, 2011 by Mr Uday
Bhatt & Ms Mohiniben Bhatt. UAPL is an authorized dealer of
Maruti Suzuki India Limited. It is engaged in selling of Maruti
Suzuki India Limited's passenger cars & provides after sales
services to the customers. UAPL's showroom/workshop is located at
Kathwada village in Ahmedabad district of Gujarat. UAPL is a part
of Galaxy Group having diverse business interests in real estate,
hospitality, etc.
UMADUTT INDUSTRIES: Ind-Ra Puts D/Issuer Not Cooperating Rating
---------------------------------------------------------------
India Ratings and Research (Ind-Ra) has migrated Umadutt
Industries Limited's (UIL) 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 as follows:
-- INR76.19 mil. Term loans (long-term)migrated to Non-
Cooperating Category with IND D (ISSUER NOT COOPERATING)
Rating; and
-- INR54 mil. Fund-based limitsmigrated to Non-Cooperating
Category with IND C (ISSUER NOT COOPERATING) rating.
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
January 3, 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 2001, UIL manufactures woven sacks. It has an
annual installed capacity of 5,040 metric tons in Meghalaya.
VIJAY STEEL: CARE Reaffirms B+ Rating on INR1cr LT Loan
-------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Vijay Steel Industries (VSI), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank
facilities 1.00 CARE B+; Stable Reaffirmed
Long Term/Short 8.00 CARE B+; Stable/CARE A4
Term Bank Reaffirmed
Facilities
Detailed rationale
The ratings assigned to the bank facilities of VSI continue to
remain constrained on account of its small scale of operations,
thin profit margins and elongated operating cycle during FY17
(refers to the period April 1 to March 31). The ratings are
further constrained by its weak debt coverage indicators and
working capital intensive nature of operations in highly
fragmented and competitive timber trading industry coupled with
susceptibility of profit margins to fluctuation in exchange rates
and susceptibility towards government policies of timber
exporting countries. The ratings, however, continue to derive
benefits from the wide experience of the partners in the timber
trading industry. The ratings also take into consideration
comfortable solvency position of VSI. The ability of VSI to
increase its scale of operations and improve profitability in the
highly competitive timber industry along with better working
capital management thereby improving overall liquidity position
remains the key rating sensitivities.
Detailed description of key rating drivers
Key Rating Weaknesses
Decline in Total Operating Income (TOI) with thin profit margins:
Total Operating Income of VSI declined by 12.29% during FY17 and
stood small at INR12.43 crore as compared to INR14.17 crore
during FY16. Overall, margins stood thin as marked by PAT margin
of 0.10% during FY17 owing to low value addition nature of
operations.
Weak debt coverage indicators: The debt protection metrics as
marked by total debt to GCA, deteriorated and continued to remain
weak at 86.81 times as on March 31, 2017 as compared to 43.08
times as on March 31, 2016 owing to low level of cash accruals.
Interest coverage ratio remained stable as compared to previous
year and stood at 1.09 times during FY17 (1.11 times during
FY16).
Elongated operating cycle: Liquidity position of VSI remained
moderate marked by current ratio which stood at 1.81 times as on
March 31, 2017 as against 1.89 times as on March 31, 2016.
However, working capital cycle stood significantly high and
remained elongated to 328 days as against 285 days during FY16.
On account of this, average working capital utilization for past
twelve months ended December 2017 remained high at 95%.
Presence in the highly competitive timber trading industry and
small scale of operations: VSI is into trading of timber logs /
sale of sawn timber wherein the value addition is very low. This
coupled with its presence in a very competitive timber trading
industry characterized by presence of numerous players in the
unorganized segment results into inherently very thin margins.
Susceptibility of its margins to volatility in foreign exchange
rate and risks related to unfavorable regulatory changes in the
timber exporting countries: VSI's trading operations involve
import of round timber logs which is subsequently sawn and sized
at its saw mill into various commercial sizes as per the
requirement of its customers. VSI meets most of its requirement
of
round timber logs through imports from Malaysia, New Zealand and
European Countries. As VSI do not hedge its foreign exchange
exposure, its margins are susceptible to the volatility in the
foreign exchange rates.
Key Rating Strengths
Experienced promoters in timber industry: The promoters of VSI
namely Mr. Tinu Gandhi, Mr. Bipin Gandhi, Mr. Pinank Gandhi and
Mr. Vijay Gandhi have wide experience in the timber industry and
have developed long-standing relationship with their key
suppliers and customers.
Comfortable capital structure: As on March 31, 2017, capital
structure of VSI deteriorated marginally and remained comfortable
marked by an overall gearing of 0.59 times as against 0.29 times
as on March 31, 2016.
VSI, formed in December 1984, is engaged in the business of
timber trading at Gandhidham (Gujarat). VSI imports timber logs
from Malaysia, New Zealand and European Countries and cut it into
commercial sizes as per the requirement of its customers. As on
March 31, 2017 it had a total sawing capacity of 40 cubic meters
(CMT) per day. VSI supplies timber to its customers in the export
market like Dubai and Italy and in domestic market including
Gujarat, Rajasthan, Maharashtra, Karnataka and West Bengal.
VIRINCHI HEALTHCARE: Ind-Ra Lowers INR679.5MM Loan Rating to 'D'
----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has downgraded Virinchi
Healthcare Private Limited's (VHPL) term loans as follows:
-- INR679.5 (reduced from INR687.5)mil. Term loans (Long-term)
due on November 2025downgraded with IND D rating.
KEY RATING DRIVERS
The downgrade reflects one to two weeks of delay in debt
servicing by VHPL owing to cash flow mismatch, on account of
project cost overrun and delay in obtaining the required cash
from its parent, Virinchi Limited ('IND BBB-/RWN').
RATING SENSITIVITIES
Positive: Timely debt servicing for three consecutive months
could result in a rating upgrade.
COMPANY PROFILE
Incorporated in 2013, VHPL is a 100% subsidiary of Virinchi
Limited - a public listed company on the Bombay Stock Exchange
and part of the Virinchi group. The company operates a 500-bed
multi-specialty hospital in Banjara Hills, Hyderabad, which
started operations in August 2016.
YOGI COTEX: CARE Reaffirms B+ Rating on INR13cr LT Loan
-------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Yogi Cotex Private Limited (YCPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank
Facilities 13.00 CARE B+; Stable Reaffirmed
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of YCPL continue to
be constrained by modest scale of operations and low
profitability margins, leveraged capital structure and weak debt
coverage indicators, working capital intensive nature of
operations. The rating further continues to be constrained by its
presence in the highly competitive and fragmented textile
industry and susceptibility of operating margins to the raw
material price fluctuation. The rating, continue to derive
strength from experienced and resourceful promoters, operational
support from group entities with presence across textile value
chain and location advantage.
Ability of YCPL to increase its overall scale of operations along
with an improvement in profitability and capital structure and
efficient management of the working capital are the key rating
sensitivities.
Detailed description of Key rating drivers
Key rating Weakness
Modest scale of operations and low profitability margin: The
total operating income has declined by 5.26% in FY17 vis-Ö-vis
FY16 on account of diversion of sales among its sister companies
who does the job work for YCPL. Further the operating margins
have declined by 4bps during FY17 on account increase in employee
cost and remained at 4.28% in FY17, moreover owing to higher
depreciation & interest cost the profit margin remained low at
0.28% in FY17.
Nevertheless the scale of operations continued to remain modest,
thereby limiting financial flexibility of the company.
Leveraged capital structure and weak debt coverage indicators:
The overall gearing of the company has improved and stood at
3.86x as on March 31, 2017 (vis-a-vis 4.63x in FY16) due to
repayment of loans and increase in net reserves during FY17 on
account of subsidy received against technology up gradation.
Though the overall gearing has improved it remained highly
leveraged due to increased reliance on working capital borrowings
to fund operations. However, some comfort can be drawn from the
fact that out of total debt around 9.65% are unsecured loans of
promoters and group companies. Due to these debt coverage
indicator, also marginally improved with total debt to GCA at
18.63x as on March 31, 2017 (vis-a-vis 19.16x as on March 31,
2016). Furthermore, the interest coverage ratio improved slightly
to 1.44x in FY17 from 1.40x in FY16 owing to lower interest cost.
Working capital intensive nature of operations: The operations
continue to remain working capital intensive in nature with funds
blocked in receivables as the company offers its customers an
extended credit period owing to an established relationship as
well as intense competition prevalent in the industry. On account
of this, the utilization of the working capital limit remained
high.
Presence in the highly competitive and fragmented textile
industry: YCPL operates in the textiles industry and is engaged
into manufacturing of grey fabrics which is characterized as a
highly fragmented industry having low entry barriers with
strong presence of organized and unorganized players and stiff
competition from fabrics imported from China thereby limiting
bargaining power with its customers.
Profit margins susceptible to fluctuations in raw material
prices: Raw material (Cotton yarn) prices are volatile in nature
with prices correlated with cotton and also yarn export demands.
Moreover, considering low net profit margins and nascent stage of
operations, YCPL's ability to pass on adverse change in raw
material price is critical.
Key rating Strengths
Experienced and resourceful promoters: YCPL is promoted by Mr
Chintan Patel and Mr Jagat Kilawala who look after the overall
management of the company. Together they have a combined
experience of 16 years in the textiles industry with Mr Jagat
Kilawala being associated with the Deesan group since its
inception.
Operational support from group entities: YCPL is a part of the
Deesan group which has been in the business of textile
manufacturing since 1996 and has various companies operating
under it (including YCPL). It has presence in all segments of
cotton textiles starting from cultivation of cotton to
manufacturing of garments. YCPL receives operational support from
the other group companies in terms of procurement of materials
and building customers.
Location advantage: YCPL's manufacturing facility is located at
the Integrated Textile Park in Shirpur, Dhule, Maharashtra which
is in close proximity to cotton producing belts of Dhule,
Amravati and Parbhani and is surrounded by multiple yarn and
textile manufacturing units within the textile park thereby
facilitating in procurement of raw materials.
Incorporated in 2012 by Mr Chintan Patel and Mr Jagat Kilawala,
Yogi Cotex Private Limited (YCPL) is engaged into manufacturing
of woven grey fabrics used for shirting and dress material. It
started commercial operations from September 2013, and at
present, the company has 16 looms with capacity to manufacture
29000 meters per day of grey fabric per month. Its facility is
located at Dahiwad, Shirpur, Dhule. YCPL sale's its products into
domestic market majorly to fabric processing units in Delhi and
Ahmedabad.
YCPL's plant is established under the "Group Work Shed Scheme"
(Scheme of Integrated Textile Park (SITP) of Ministry of Textile,
the Government of India) and consists of 13 SSI units under it.
The GWSS further operates 80 looms via the SSI units which
provide job work services (viz. weaving, warping and sizing of
grey cloth) to YCPL. YCPL is a part of the Deesan group which has
been in the business of textile manufacturing since 1996 and has
various companies operating under it (including YCPL). It has
presence in all segments of cotton textiles starting from
cultivation of cotton to manufacturing of garments. YCPL receives
operational support from the other group companies in terms of
procurement of materials and building customers.
=========
J A P A N
=========
TOSHIBA CORP: Lenders See Improved Outlook for Struggling Company
-----------------------------------------------------------------
Nikkei Asian Review reports that the major Japanese banks that
shoulder a growing share of lending to Toshiba Corp. may upgrade
their internal ratings of the troubled technology company in a
reflection of its progress back toward financial health, but
doubts surrounding plans to sell its memory chip unit are a
source of concern.
According to Nikkei, top two lenders Sumitomo Mitsui Banking and
Mizuho Bank held around JPY210 billion ($1.92 billion) each in
outstanding loans to Toshiba as of Dec. 31, and Sumitomo Mitsui
Trust Bank held about JPY135 billion. The combined figure
accounts for 62% of the overall JPY900 billion in loans owed by
Toshiba, a share that grew by 16 percentage points over 2017's
last three months, Nikkei discloses. The trio's outstanding
lending grew by JPY220 billion over that period, as Toshiba
tapped JPY680 billion in credit lines to secure necessary funding
at the end of the year, the report says.
The Tokyo-based company's top seven lenders accounted for 82% of
total outstanding lending to Toshiba as of Dec. 31, Nikkei notes.
Meanwhile, regional banks have been pulling back as lenders to
the conglomerate, especially since last year after the company
fell into negative net worth in late 2016, the report relates.
With little demand for funding in their local markets, these
lenders had once considered Toshiba -- which operated factories
across Japan -- a prime borrower. That all changed when the
company's problems surfaced, and regional banks accounted for
just 3% of outstanding loans to Toshiba as of Dec. 31, down from
15% a year earlier, according to Nikkei.
Nikkei says the Bank of Yokohama slashed its outstanding lending
by more than 70%, while Chiba Bank, Bank of Fukuoka and Chugoku
Bank also reduced their exposures. A syndicate involving multiple
regional banks apparently turned down a request from Toshiba to
roll over its lending near the end of the year, the report
states.
Life insurers, which focus on longer-term loans of 10 years or
so, have not seen a change in their outstanding lending because
maturities have not come due yet, relates Nikkei. Dai-ichi Life
Insurance, Nippon Life Insurance and three others have lent a
combined JPY80 billion to Toshiba.
But the main lenders are now considering hiking their Toshiba
ratings after it raised JPY600 billion in fresh capital in
December via a private placement involving an array of overseas
investors. Toshiba also sold claims against former U.S. unit
Westinghouse Electric in January, paving the way for the Japanese
company to emerge from negative net worth by March, Nikkei adds.
The ratings upgrades would boost the lenders' earnings, because
loss provisions booked in the past would then be freed up.
According to the report, the biggest remaining concern for
Toshiba is over the planned sale of Toshiba Memory, which the
parent aims to complete by the end of March. Antitrust screening
in China is the most critical challenge.
Some of the foreign investment funds that became Toshiba
shareholders in the third-party offering are demanding that the
sale be canceled because of the improved financial standing. But
nixing the sale could push lenders to withdraw credit lines
premised on it. Toshiba is facing the difficult task of
satisfying both fussy shareholders and cautious lenders, Nikkei
adds.
About Toshiba Corp
Toshiba Corporation (TYO:6502) -- http://www.toshiba.co.jp/-- is
a Japan-based manufacturer involved in five business segments.
The Digital Products segment offers cellular phones, hard disc
devices, optical disc devices, liquid crystal televisions, camera
systems, digital versatile disc (DVD) players and recorders,
personal computers (PCs) and business phones, among others. The
Electronic Device segment provides general logic integrated
circuits (ICs), optical semiconductors, power devices, large-
scale integrated (LSI) circuits for image information systems and
liquid crystal displays (LCDs), among others. The Social
Infrastructure segment offers various generators, power
distribution systems, water and sewer systems, transportation
systems and station automation systems, among others. The Home
Appliance segment offers refrigerators, drying machines, washing
machines, cooking utensils, cleaners and lighting equipment. The
Others segment leases and sells real estate.
As reported in the Troubled Company Reporter-Asia Pacific on
Jan. 24, 2018, S&P Global Ratings said it has raised two notches
to 'CCC+' from 'CCC-' both its long-term corporate credit and
senior unsecured debt ratings on Japan-based capital goods and
diversified electronics company Toshiba Corp. S&P said, "We also
placed the ratings on CreditWatch with positive implications. We
have kept our 'C' short-term corporate credit and commercial
paper program ratings on Toshiba on CreditWatch with positive
implications."
The TCR-AP on Dec. 15, 2017, reported that Moody's Japan K.K.
affirmed Toshiba Corporation's Caa1 corporate family rating and
senior unsecured debt ratings, and its Ca subordinated debt
rating. Moody's has also changed the ratings outlook to stable
from negative. At the same time, Moody's has affirmed Toshiba's
commercial paper rating of Not Prime.
===============
M O N G O L I A
===============
MONGOLYN ALT: Fitch to Rate Proposed USD Sr. Unsec. Notes CCC+
--------------------------------------------------------------
Fitch Ratings expects to assign Mongolia-based coal mining
company Mongolyn Alt (MAK) LLC a Long-Term Issuer Default Rating
(IDR) of 'CCC+(EXP)'. Fitch has also assigned the company's
proposed US dollar senior unsecured notes an expected rating of
'CCC+(EXP)' with a Recovery Rating of 'RR4'.
The ratings are based on the capital structure and liquidity of
MAK assuming it completes the proposed bond deal and a debt
restructuring. The company plans to repay some of its existing
loan facilities that are in default, with proceeds from the
proposed bond. The remaining loans will be restructured based on
terms outlined in the signed consents and waivers from each
respective lender, which have been reviewed by Fitch.
The final ratings are contingent upon successful issuance of the
proposed bond and completion of the restructuring in line with
the terms already received, and upon receipt of final documents
conforming to information already received. Fitch thinks there is
minimal risk that the terms of the restructuring will be amended
by both MAK and the lenders after the bond issue.
The Long-Term IDR reflects Fitch's expectation that MAK's
liquidity and debt maturity profiles will be adequate after the
planned bond issue and restructuring of the remaining debt. The
rating also incorporates Fitch's expectation that the company
will be able to generate positive free cash flows over the medium
term, barring a significant deterioration in coal prices. This is
based on the assumption that MAK will be able to reduce
production costs and capex during moderate coal price weakness.
These expectations are counterbalanced by MAK's history of
aggressive debt-funded investments, and limited access to
external funding, which may heighten the company's liquidity risk
if there is a sharp, sustained coal price or demand downturn and
unfavourable capital market conditions.
KEY RATING DRIVERS
Refinancing, Restructuring Plan: MAK plans to use most of the
proceeds of the proposed bond to refinance some of its existing
loan facilities. MAK has been behind principal and/or interest
payments on over 90% of its existing debt (all bank loans) since
end-2017 due to large capex projects, including a cement plant, a
concrete block plant and a copper mine in the last commodity down
cycle. The lenders have issued consents and waivers for the loans
in default, including a restructuring plan for the loans that
will remain outstanding after the proposed bond issuance.
If MAK is able to raise USD200 million in the proposed bond
issuance, it plans to repay loans from the European Bank for
Reconstruction and Development (EBRD) and Deutsche Investitions-
und Entwicklungsgesellschaft mbH (DEG) in full and 50% of the
overdue amount (excluding principal) on loans from Eksport Kredit
Fonden (EKF). The remaining loans in default, including those
from the Development Bank of Mongolia (DBM), BHF-BANK
Aktiengesellschaft (BHF) and EKF, will be restructured based on
terms in the lenders' consents and waivers.
Liquidity Depends on Plan: Fitch expects MAK to have a better
spread-out debt maturity profile and adequate internal liquidity
over the next three years, if the company successfully issues the
bond and completes the restructuring before expiry of the
consents and waivers. These consent and waivers have expiry dates
of 28 February 2018 (EBRD, DEG which MAK intends to repay with
bond proceeds), 31 May 2018 (EKF), 30 June 2018 (DBM) and 31
August 2018 (BHF).
Credit Profile in 'CCC' Category: Fitch expect MAK to post
positive free cash flow and its credit metrics to improve based
on Fitch rating case assumptions of a moderate correction in coal
prices and a ramp-up in production. However, Fitch believe MAK
will need to reduce or delay its discretionary capex plans to
meet its debt repayment requirements in 2018, under Fitch lower
coal price assumptions. MAK's expected rating is capped at
'CCC+(EXP)' due to unproven financial discipline and limited
access to external funding, which leaves it more vulnerable if
coal prices are weak for a prolonged period, demand for coal from
China declines, or capital market conditions are unfavourable.
Small Scale, Reliance on Mine: MAK's produced 4.7 million tonnes
of coal in 2017, with the company expecting to increase
production to close to 8 million tonnes over the next three to
four years. However, this will remain small relative to peers in
the region. The company's coal mining operation is also almost
100% reliant on the New Naryn Sukhai (NNS) mine, which has a
large reserve size, with a mix of both thermal and coking coal
reserves and a mine life of 80 years based on the 2018 production
target. As of January 2017, the company had proved reserves of
446 million tonnes and gross reserves of 479.9 million tonnes.
The NNS mine is one of the largest coal mines in Mongolia and has
relatively low cash costs driven by its proximity to the Chinese
border and low labour costs. Coal is sold at the mine gate and
the transportation costs are borne by the buyers. The company
maintained a low and flexible strip ratio and managed to reduce
unit cash cost in the previous commodity downturn.
Concentration Risk: The company is subject to customer
concentration risk with the top five customers accounting for 70%
of total revenue in January-October 2017. These top five
customers are end-users and/or traders of its thermal or coking
coal products. Fitch believe the risk is only partly mitigated by
the receipt of advance payments. MAK is the second-largest
exporter of coal in the country as measured by total volume of
exports as of end-2016.
Diversification Efforts: The company completed a concrete block
plant in 2015 and a cement plant in 2017, both of which have
begun production, to diversify from coal, which accounted for
nearly 100% of revenue and profit in 2016. Nevertheless, Fitch
believe the non-coal business would account for less than 10% of
EBITDA over the next two to three years.
Investment in Copper Mine: Fitch has not factored in additional
investment or funding for the Tsagaan Suvarga copper mine that
MAK is developing. The mine is the third largest copper deposit
in Mongolia. According to management, 46% of the development
process is completed and 35% of the required USD1 billion
investment has been spent so far. However, according to the
company, the start of construction would depend on securing the
necessary funds of about USD650 million. MAK has indicated that
the additional investment is discretionary and as of January
2018, there are no concrete plans for the funding.
Management says that if the company decides to proceed with
construction, MAK will likely seek project financing and aim to
obtain funding in 2019-2020. The entity owning the copper project
is outside the restricted group, thus the indenture of the
proposed US dollar bond restricts the company's investment in
this project through the restricted payments covenants. Fitch
will monitor MAK's strategy on this copper mine project to assess
management's financial discipline.
DERIVATION SUMMARY
MAK's credit profile is constrained by its small production
scale, concentration risk and weak liquidity. The company has a
long reserve life and relatively low cost position. Its credit
metrics after the bond issuance and restructuring would be
stronger than mining peers such as Foresight Energy LP (B-
/Stable) and Yanzhou Coal Mining Company Limited (B/Stable).
However MAK's business profile is considerably weaker than
Yanzhou's in terms of scale and diversification. In addition MAK
has a limited liquidity buffer because it has yet to show it can
maintain consistent access to external funding and financial
discipline, which place its credit profile in a lower category.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Fitch Rating Case for the Issuer
- Coal production volume: 6 million tonnes/year in 2018, 6.8
million in 2019 and 7.7 million in 2020
- Coal realised prices to fall by 5%-10% in 2018, 5% in 2019,
- Unit cash cost of around MNT27,000/tonne for 2018-2020
- Capex assumptions of MNT112 billion for 2018, MNT140 billion
for 2019 and MNT166 billion for 2020. Fitch have assumed a
discretionary railway investment would be partially delayed
and to be completed in 2020, which is one year later than
company assumptions
- Fitch have assumed no investment in the copper project
- Fitch have assumed no dividend payments
- Successful issue of USD200 million of new bonds
- Restructuring of the loans that remain after the bond issue in
line with terms of the consents and waivers
Fitch's key assumptions for bespoke recovery analysis include:
- MAK would be considered a going-concern in bankruptcy and
would be reorganised rather than liquidated. Fitch have
assumed a 10% administrative claim.
- Fitch have assumed that MAK's going-concern EBITDA is equal to
estimated EBITDA for 2017 with a 20% discount.
- An enterprise value (EV) / EBITDA multiple of 4x is used to
calculate the post-reorganisation valuation and Fitch believe
this is closer to a distressed multiple, considering
historical EV multiple for companies in the natural resources
sector ranged from 5.8x-11x, with a median of 8.7x.
- Fitch used pro forma secured and unsecured debt as of January
2018, including the proposed bond issue
- Fitch have assumed that the unsecured loans from EKF and BHF
would rank pari passu with the proposed bonds
- The recovery waterfall results in a 90% recovery estimate
corresponding to a 'RR2' Recovery Rating for the proposed
USD200 million notes. Nevertheless, Fitch has rated the senior
notes at 'CCC+(EXP)' with a Recovery Rating of 'RR4' because
Mongolia's Resolving Insolvency Distance-to-Frontier score in
the 2018 Doing Business report of the World Bank at 43.5 is
consistent with a Group D classification as per Fitch's
Country-Specific Treatment of Recovery Ratings criteria.
Recovery Ratings are subject to a soft cap of 'RR4' for
countries in 'Group D' of creditor friendliness under Fitch's
criteria.
RATING SENSITIVITIES
Developments that May, Individually or Collectively, Lead to
Positive Rating Action
- Improvement in MAK's liquidity profile, including a build up
in cash to enable the company to weather volatility in coal
prices
- Proven track record of financial discipline
Developments that May, Individually or Collectively, Lead to
Negative Rating Action
- Failure to issue proposed bonds before the end of February,
2018
- Failure to complete restructuring of the loans which will
remain outstanding after the bond issue as per terms outlined
in the consents & waivers
- Deterioration in coal prices or MAK's liquidity position which
could affect the company's ability to meet its debt
LIQUIDITY
Contingent upon Refinancing, Restructuring: The company's
liquidity is extremely vulnerable as over 95% of the company's
outstanding debt was in default at 31 December 2017. Any
improvement in liquidity is contingent upon the successful issue
of the proposed bond and completion of the restructuring of
existing loans. The company would have a better spread-out debt
maturity profile after the bond issue and restructuring, with
debt coming due during 2018 reduced to MNT131 billion, which the
company should be able to cover with its December 2017 cash
position of MNT23 billion and expected positive free cash flow of
MNT114 billion in 2018.
====================
N E W Z E A L A N D
====================
GROCER'S MARKET: Owner Allegedly Owes Supplier Thousands
--------------------------------------------------------
Madison Reidy at Stuff.co.nz reports that a fruit and vegetable
company is taking High Court action against the owner of a
rebranded Auckland Nosh store.
It's hoping to claw back thousands it's allegedly owed for
produce, the report says.
Stuff relates that a spokesman for Vision Fresh Produce and
Marketing who did not wish to be named, said The Grocer's Market
chief executive Aaron Drever owed his company NZ$25,000.
According to the report, the spokesman said Vision Fresh lodged
legal proceedings in December requesting Mr. Drever pay back at
least NZ$13,000. The unmade payments date back to when Mr.
Drever bought the Mount Eden Nosh store and rebranded it, he
said.
Mr. Drever admitted that Vision Fresh was owed "some money," the
report says.
He said he disputed the amount owed because some of the produce
was allegedly sub-standard and could not be sold.
"We did not agree and subsequently since that point we have taken
legal action," the report quotes Mr. Drever as saying. He said
his business had faced accounting and stock management issues and
he took full responsibility for the problems, the report relays.
At least 380 companies supply stock for The Grocer's Market
shelves. Stuff adds that Mr. Drever said no supplier would be
left unpaid.
According to Stuff, Mr. Drever was proud of The Grocer's Market,
although taking over the former Nosh store was "a far larger and
far more complex challenge than I ever envisaged".
Companies Office Records show Drever owns two other companies --
9 Racing and Speedway Track Promotions.
He took over Auckland's Point Chevalier Mad Butcher store after
his father, the former sole owner, died in March, the report
discloses. Six months later he placed the store in receivership
because he was unable to transfer his father's shares into his
name, says Stuff.
It was one of at least 10 Mad Butcher stores to face financial
strife in the past two years, Stuff discloses.
=================
S I N G A P O R E
=================
TT INT'L: Enters Term Sheet as Part of Financial Restructuring
--------------------------------------------------------------
Navin Sregantan at The Strait Times reports that distressed
consumer electronics trader TT International Limited on Feb. 2
announced that it entered into a term sheet agreement on Jan. 31
with an unnamed potential investor as part of the company's
financial restructuring efforts.
The proposed investment, which could be worth up to
SGD125 million, will be undertaken by a fund set up by the said
investor, and may take the form of either or both of a loan to TT
International and a subscription to new TT International shares,
the Strait Times relates citing a filing to the Singapore
Exchange.
If the investment takes the form of a new capital commitment,
this may result in the investors receiving at least 24.5 per cent
of the enlarged shareholding of the reorganised company, TT
International added, the report relays.
According to the report, the company intends to use proceeds from
the proposed investment to make statutory payments in relation to
the Big Box building owned by its subsidiary, Big Box.
Funds will also be used for working capital, payment for debts
owed under the scheme of arrangement from April 19, 2010; and
other existing indebtedness and payables, the report relays.
TT International said the long stop date of the term sheet is
May 31, unless extended in writing by the investor and the
company, the Strait Times relates.
The report says the proposed investment is subject to among other
conditions, an extension of time for the statutory payments in
relation to the Big Box building, the Economic Development
Board's approval for the renewal of the Warehouse Retail Scheme
for the remaining 19 years and court sanctions of the
restructuring exercise.
TT International was granted in September 2017 a moratorium
application to restrict all creditors from taking further action
against the company for the above mentioned period until Feb. 11,
the report discloses.
*********
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,
electronic re-mailing and photocopying) is strictly prohibited
without prior written permission of the publishers.
Information contained herein is obtained from sources believed
to be reliable, but is not guaranteed.
TCR-AP subscription rate is US$775 for 6 months delivered via e-
mail. Additional e-mail subscriptions for members of the same
firm for the term of the initial subscription or balance
thereof are US$25 each. For subscription information, contact
Peter Chapman at 215-945-7000.
*** End of Transmission ***