/raid1/www/Hosts/bankrupt/TCRAP_Public/180830.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
A S I A P A C I F I C
Thursday, August 30, 2018, Vol. 21, No. 172
Headlines
A U S T R A L I A
ABCD GROUP: Second Creditors' Meeting Set for Sept. 6
ASDEN DEVELOPMENTS: ASIC Accepts CEU From Liquidator
AUSCAN EQUIPMENT: Second Creditors' Meeting Set for Sept. 4
BIG UN: First Creditors' Meeting Set for Sept. 5
COUNTRY WELLNESS: First Creditors' Meeting Set for Sept. 5
FLOODLIGHT DISTRIBUTION: First Creditors' Meeting Set for Sept. 5
IRDC PTY: Second Creditors' Meeting Set for Sept. 7
PEET BAYONET: First Creditors' Meeting Set for Sept. 5
POWER COACHING: BRI Ferrier Appointed as Liquidator
VIRGIN AUSTRALIA: Posts Full-Year Loss of AUD653 Million
C H I N A
SEVEN STARS: Incurs $8.6 Million Net Loss in Second Quarter
SHANDONG YONGTAI: Tire Maker Enters Bankruptcy
H O N G K O N G
NOBLE GROUP: Debt Deal Won't Fix Firm, Ex-Temasek Executive Warns
I N D I A
AHAMMED KUTTY: CRISIL Migrates B Rating to Not Cooperating
ANJANEE CEMENT: CARE Lowers Rating on INR9.07cr LT Loan to B-
ASHA ENTERPRISE: CARE Reaffirms B+ Rating on INR10cr LT Loan
BAIJNATH SCRAP: CRISIL Migrates B- Rating to Not Cooperating
BAJAJ AGRO: CARE Lowers Rating on INR7.71cr LT Loan to D
ENN AAR: CARE Assigns B+ Rating to INR5cr LT Loan
FLEXI PLAST: CARE Reaffirms B Rating on INR5.04cr LT Loan
FREEDOM CERAMIC: CARE Assigns B Rating to INR14.74cr LT Loan
GARG INDUSTRIES: CARE Lowers Rating on INR20cr LT Loan to B+
GEORGE MAIJO: Ind-Ra Maintains 'BB-' LT Rating in Non-Cooperating
GOYAL ENTERPRISES: CARE Assigns B+ Rating to INR11.25cr LT Loan
JAIN STONE: CARE Assigns B- Rating to INR4.84cr LT Loan
JET AIRWAYS: Posts INR1,323 Crore First-Quarter Loss
KAVERI ENGINEERING: Ind-Ra Raises Long Term Issuer Rating to BB+
KOTKAPURA MUKTSAR: Ind-Ra Migrates 'D' Rating to Non-Cooperating
MAGNOLIA LIMITED: Ind-Ra Maintains BB+ Rating in Non-Cooperating
RAYAT & BAHRA: CARE Lowers Rating on INR85.35cr LT Loan to D
RAYAT EDUCATIONAL: CARE Lowers Rating on INR33.36cr Loan to D
S.K. CREATIONS: CARE Reaffirms B+ Rating on INR8.50cr LT Loan
SADASHIVA OIL: CARE Raises Rating on INR5.37cr LT Loan to BB-
SAI CONSTRUCTIONS: CARE Assigns B+ Rating to INR1cr LT Loan
SANRHEA TECHNICAL: CARE Hikes Rating on INR8.30cr Loan to B+
SHREE JEE: CARE Assigns B+ Rating to INR6.38cr LT Loan
SHREE RADHA: CARE Assigns 'B' Rating to INR9cr LT Loan
SHYAMA AGRO: CRISIL Assigns 'B' Rating to INR6cr Bank Loan
SOBHA PROJECTS: Ind-Ra Affirms 'BB+' LT Rating, Outlook Positive
SONIC CERAMIC: CARE Assigns B+ Rating to INR21cr LT Loan
WELCOS SPUNFAB: CARE Assigns B+/A4 Ratings to INR9.50cr Loan
* INDIA: Court Allows Bankruptcy Action V. India Power Producers
T H A I L A N D
* THAILAND: Panel to Tackle Cooperative Loan Default Risk
- - - - -
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A U S T R A L I A
=================
ABCD GROUP: Second Creditors' Meeting Set for Sept. 6
-----------------------------------------------------
A second meeting of creditors in the proceedings of ABCD Group
Holdings Australasia Pty Ltd has been set for Sept. 6, 2018, at
10:30 a.m. at Regus, Level 22, 127 Creek Street, in Brisbane,
Queensland.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the
Company be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by Sept. 5, 2018, at 4:00 p.m.
Ginette Muller of Jirsch Sutherland were appointed as
administrators of ABCD Group on Aug. 3, 2018.
ASDEN DEVELOPMENTS: ASIC Accepts CEU From Liquidator
----------------------------------------------------
Australian Securities and Investments Commission has accepted a
court enforceable undertaking (CEU) from Brisbane-based registered
liquidator, Mr. Peter Dinoris, of Artemis Insolvency.
The CEU requires Mr. Dinoris to engage a suitably qualified
independent quality reviewer to undertake a review of four
external administrations selected by ASIC. The reviewer must
assess Mr. Dinoris' compliance with his duties regarding
investigations and contact with directors and produce a report of
his/her findings to ASIC.
The CEU follows a Court finding in 2016 by His Honour Justice
Reeves, and subsequently in 2017 by the Full Court of the Federal
Court, that in December 2010, Mr. Dinoris, while he was working at
a previous firm, had breached section 180(1) of the Corporations
Act (the Act) by failing to discharge his duties as the liquidator
of Asden Developments Pty Ltd with the degree of care and
diligence of a reasonably competent liquidator.
The Court found Mr. Dinoris did not personally contact the
director of the company by telephone after becoming aware that the
director withdrew AUD236,500 from the company's bank account one
day prior to his appointment. The Court also concluded that there
was no loss or damage incurred as a result of the breach.
Based on the Courts' findings, ASIC gave Mr. Dinoris a show cause
notice under section 40-40(1) of Schedule 2 of the Act to explain
why his registration should continue. Mr. Dinoris provided ASIC
with information regarding changes in his practices and procedures
and ASIC determined ASIC required independent corroboration to be
satisfied that Mr. Dinoris has implemented those systems and
procedures.
ASIC Commissioner John Price said the outcomes achieved under the
CEU show ASIC's commitment to addressing instances of non-
compliance and working co-operatively with registered liquidators
to ensure high standards across the profession are maintained.
AUSCAN EQUIPMENT: Second Creditors' Meeting Set for Sept. 4
-----------------------------------------------------------
A second meeting of creditors in the proceedings of Auscan
Equipment Pty Ltd has been set for Sept. 4, 2018, at 2:00 p.m. at
Commodore on the Park, Corner of Jubilee Highway and Penola Road,
in Mount Gambier, SA.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the
Company be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by Sept. 3, 2018, at 4:00 p.m.
Ian Wayne Burford of Macks Advisory was appointed as administrator
of Auscan Equipment on Aug. 1, 2018.
BIG UN: First Creditors' Meeting Set for Sept. 5
------------------------------------------------
A first meeting of the creditors in the proceedings of Big Un
Limited will be held at the offices of Deloitte Financial Advisory
Pty Ltd, Eclipse Tower, Level 19, 60 Station Street, in
Parramatta, NSW, on Sept. 5, 2018, at 11:00 a.m.
Neil Robert Cussen and Matthew James Donnelly of Deloitte
Financial were appointed as administrators of Big Un on Aug. 24,
2018.
COUNTRY WELLNESS: First Creditors' Meeting Set for Sept. 5
----------------------------------------------------------
A first meeting of the creditors in the proceedings of:
- Country Wellness Lifestyle Zuccoli Pty Ltd
(Trading name: Rainmaker CafÇ)
- Country Wellness Pharmacy Berry Springs Pty Ltd
(Trading name: Berry Springs Country Wellness Pharmacy)
- Country Wellness Pharmacy Capalaba Park Pty. Ltd.
(Trading name: Direct Chemist Outlet Capalaba Park)
- Country Wellness Pharmacy Cumberland Park Pty Ltd
(Trading name: TerryWhite Chemmart Cumberland Park)
- Country Wellness Pharmacy Hibiscus Pty Ltd
(Trading name: TerryWhite Chemmart Hibiscus)
- Country Wellness Pharmacy Palmerston No. 2 Pty Ltd
(Trading name: TerryWhite Chemmart Palmerston Gateway)
- Country Wellness Pharmacy Palmerston Pty Ltd
(Trading name: Priceline Pharmacy Palmerston)
- Country Wellness Pharmacy Pty Ltd
(Trading name: Save Mart Pharmacy)
- Country Wellness Pharmacy Rosanna Pty Ltd
(Trading name: TerryWhite Chemmart Rosanna)
- Country Wellness Pharmacy Toowoomba Pty Ltd
(Trading name: TerryWhite Chemmart Grand Central)
- Country Wellness Pharmacy Wynnum Pty Ltd
(Trading name: TerryWhite Chemmart Selina Street)
- Country Wellness Pharmacy Zuccoli Pty. Ltd.
(Trading name: TerryWhite Chemmart Zuccoli)
- Country Wellness Pharmacy Seaford Pty Ltd
will be held at University of Queensland Business School,
Executive Venue, Level 6, 293 Queen Street, in Brisbane,
Queensland, on Sept. 5, 2018, at 10:00 a.m.
Ian Alexander Currie and Stefan Dopking of BRI Ferrier were
appointed as administrators of Country Wellness on Aug. 27, 2018.
FLOODLIGHT DISTRIBUTION: First Creditors' Meeting Set for Sept. 5
-----------------------------------------------------------------
A first meeting of the creditors in the proceedings of Floodlight
Distribution Pty Ltd will be held at the offices of PKF, 755
Hunter Street, in Newcastle West, NSW, on Sept. 5, 2018, at
11:00 a.m.
Simon Thorn of PKF was appointed as administrator of Floodlight
Distribution on Aug. 24, 2018.
IRDC PTY: Second Creditors' Meeting Set for Sept. 7
---------------------------------------------------
A second meeting of creditors in the proceedings of IRDC Pty Ltd
has been set for Sept. 7, 2018, at 10:00 a.m. at the offices of
Pearce & Heers, Level 12, 127 Creek Street, in Brisbane,
Queensland.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the
Company be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by Sept. 6, 2018, at 2:00 p.m.
Mark William Pearce of Pearce & Heers was appointed as
administrator of IRDC Pty on Aug. 7, 2018.
PEET BAYONET: First Creditors' Meeting Set for Sept. 5
------------------------------------------------------
A first meeting of the creditors in the proceedings of Peet
Bayonet Head Syndicate Limited will be held atLevel 3, 46 Ord
Street, in West Perth, WA, on Sept. 5, 2018, at 9:00 a.m.
Alan Edson Ledger of Ledger Corporate was appointed as
administrator of Peet Bayonet on Aug. 24, 2018.
POWER COACHING: BRI Ferrier Appointed as Liquidator
---------------------------------------------------
Peter Krejci of BRI Ferrier was appointed Liquidator of Power
Coaching College (Sydney) Pty Limited by a special resolution
passed at a duly convened meeting held on Aug. 17, 2018 pursuant
to Section 491 of the Corporations Act 2001.
Power Coaching College (Sydney) Pty Limited provided private
academic tuition to primary and secondary school students.
VIRGIN AUSTRALIA: Posts Full-Year Loss of AUD653 Million
--------------------------------------------------------
Patrick Hatch at The Sydney Morning Herald reports that Virgin
Australia has reported its sixth consecutive full-year after-tax
loss as asset write-downs drove it AUD653 million into the red,
compared to an AUD185 million loss a year ago.
On an underlying level, which strips out the impact of impairments
and the costs of Virgin's three-year business restructuring and
turnaround plan, the airline reported a AUD109 million profit - up
from a AUD3.7 million loss in 2017, SMH relates.
According to SMH, Virgin chief executive John Borghetti said it
was the group's strongest underlying result in a decade, and was
driven by record-high earnings in its core domestic business.
"T[he] financial results show that the business is in a good
position to achieve sustainable profitability going forward," SMH
quotes Mr. Borghetti as saying.
SMH says the net loss was driven by a review of asset values that
resulted in the company no longer recognizing about AUD452 million
in deferred tax assets.
The company also wrote down the value of its international
business by AUD120 million.
SMH relates that Mr. Borghetti said the accounting adjustments
were non-cash and did not affect the fundamentals of Virgin's
underlying business.
"We are confident in the performance of the Group's underlying
business and that long-term benefits from our growth plans will be
delivered," the report quotes Mr. Borghetti as saying.
Mr. Borghetti said the company expected to be profitable at both
an underlying and statutory level in the current half-year, even
with fuel costs set to be AUD85 million higher, SMH relays.
Virgin's fleet simplification and other business restructuring
costs ran at AUD148.5 million in 2018, meaning the company would
have ran at a net loss even without the accounting impairments,
according to SMH.
The company is 90 per cent owned by five of its airline partners:
Etihad, Singapore Airlines, HNA Group, Nanshan Airlines, and
Richard Branson's Virgin Group.
About Virgin Australia
Headquartered in Brisbane, Virgin Australia Holdings Limited is
Australia's second largest airline following its launch in 2000
and listing on the Australian Securities Exchange in 2003. As of
June 2015 it generated revenues of AUD4.7 billion and around
23.5 million revenue passengers including Tigerair Australia
(Tigerair). VAH operates 157 aircraft, including the fleet of
Tigerair, its low cost carrier.
As reported in the Troubled Company Reporter-Asia Pacific on
May 22, 2018, Moody's Investors Service assigned a (P)B3 rating to
the senior unsecured debt issuance program of Virgin Australia
Holdings Limited (B2 Corporate Family Rating, B3 senior unsecured
debt, stable outlook). The outlook on the rating is stable. The
(P)B3 rating for the program is in-line with Virgin's existing B3
senior unsecured ratings.
=========
C H I N A
=========
SEVEN STARS: Incurs $8.6 Million Net Loss in Second Quarter
-----------------------------------------------------------
Seven Stars Cloud Group, Inc. has filed with the Securities and
Exchange Commission its Quarterly Report on Form 10-Q reporting a
net loss of $8.61 million on $132.98 million of revenue for the
three months ended June 30, 2018, compared to a net loss of $3.86
million on $43.32 million of revenue for the same period during
the prior year.
For the six months ended June 30, 2018, the Company reported a net
loss of $12.42 million on $318.92 million of revenue compared to a
net loss of $2.30 million on $76.49 million of revenue for the six
months ended June 30, 2017.
As of June 30, 2018, Seven Stars had $153.57 million in total
assets, $117.53 million in total liabilities, $1.26 million in
convertible preferred stock, and $34.77 million in total equity.
As of June 30, 2018, the Company had cash of approximately $1.8
million. Approximately $0.8 million was held in the Company's
Hong Kong, US and Singapore entities and $1.0 million was held in
its mainland China entities. The Company has no plans to
repatriate these funds.
The Company has incurred significant continuing losses in 2018 and
2017, and total accumulated deficits were $138.7 million and
$126.7 million as of June 30, 2018 and Dec. 31, 2017,
respectively. The Company also used cash for operations of
approximately $11.4 million and $1.7 million for the six months
ended June 30, 2018 and 2017, respectively.
"We must continue to rely on proceeds from debt and equity
issuances to fund ongoing operating expenses to date, which could
raise substantial doubt about the Company's ability to continue as
a going concern. The consolidated financial statements included
in this report have been prepared assuming that the Company will
continue as a going concern and, accordingly, do not include any
adjustment that might result from the outcome of this
uncertainty," the Company stated in the Quarterly Report.
A full-text copy of the Form 10-Q is available for free at:
https://is.gd/EzVZP7
About Seven Stars
Seven Stars Cloud Group, Inc., formerly Wecast Network, Inc. --
http://www.sevenstarscloud.com/-- is aiming to become a next
generation Artificial-Intelligent (AI) & Blockchain-Powered,
Fintech company. By managing and providing an infrastructure and
environment that facilitates the transformation of traditional
financial markets such as commodities, currency and credit into
the asset digitization era, SSC provides asset owners and holders
a seamless method and platform for digital asset securitization
and digital currency tokenization and trading. The company is
headquartered in Tongzhou District, Beijing, China.
Seven Stars reported a net loss of $10.19 million for the year
ended Dec. 31, 2017, compared to a net loss of $28.50 million for
the year ended Dec. 31, 2016.
B F Borgers CPA PC's report on the consolidated financial
statements for the year ended Dec. 31, 2017, contains an
explanatory paragraph expressing substantial doubt regarding the
Company's ability to continue as a going concern. The auditors
stated that the Company incurred recurring losses from operations,
has net current liabilities and an accumulated deficit that raise
substantial doubt about its ability to continue as a going
concern.
SHANDONG YONGTAI: Tire Maker Enters Bankruptcy
----------------------------------------------
Sunny Chao at Epoch Times reports that Shandong Yongtai Group Co.,
the 10th-largest maker of tires in China, declared bankruptcy
earlier this month, at least partly because of pressure from the
U.S.-China trade war.
On Aug. 2, the Dongying City Intermediate People's Court in
Shandong Province received the company's bankruptcy filing. The
company, which was established in 1996, was ranked 32nd in 2016 on
U.S. magazine Tire Business's list of the world's most powerful
tire companies. At its peak, the company had more than 5,000
employees.
It's the biggest bankruptcy case in China's tire industry, Epoch
Times discloses citing an Aug. 18 report from trade publication
China Tire Dealer.
Epoch Times says the U.S. Department of Commerce has levied anti-
dumping and countervailing duties on Chinese tire imports since at
least 2008, accusing tire makers of selling goods in the United
States at less than fair value, and saying the Beijing regime
provides companies with subsidies that undermine competition.
Epoch Times relates that the Yongtai Group bankruptcy was caused
by a number of internal and external factors. In recent years,
China's tire industry has had serious overproduction, leading to
more supply than demand, the report states.
================
H O N G K O N G
================
NOBLE GROUP: Debt Deal Won't Fix Firm, Ex-Temasek Executive Warns
-----------------------------------------------------------------
Bloomberg News reports that Noble Group Ltd.'s foes aren't going
away. Less than 24 hours after the commodity trader won
shareholder approval for its $3.5 billion debt-for-equity deal,
long-standing critic Michael Dee said the revamped company will
struggle to recover and shouldn't be allowed to list shares in
Singapore, the report says.
"I really don't believe that we're going to be in any different
situation," Mr. Dee, a former senior managing director at
Singapore state investment firm Temasek Holdings Pte, said in a
Bloomberg Television interview on Aug. 28. "The interest rate on
the debt is way too high for a commodity trader," he said.
According to Bloomberg, Noble Group took a major step toward
restructuring on Aug. 27 as shareholders backed the deal, paving
the way for the trader to seek approval from senior creditors, as
well as from courts in England and Bermuda for schemes of
arrangement. Along with Iceberg Research, Mr. Dee's been one of
the company's most vocal adversaries as it lost billions,
defaulted and faced criticism of its accounts, which it's
rejected. Mr. Dee has also been critical of Singapore's
regulators, who've stood by their actions as the crisis unfolded.
The hedge funds backing the restructuring are "going to exit stage
left, right, front and center, top and bottom: they're not long-
term holders, they're making a trade," Mr. Dee told Haidi Lun and
Rishaad Salamat, Bloomberg relays. "What will happen after this is
that there'll be a lot of hype, a lot of people will come out and
try to push the line that this is going to be a New Noble, very
successful, that it is going to go back up to its great grandeur
and glory. It's not."
A spokesperson for Noble Group declined to comment on the remarks
from Mr. Dee, who's also a former regional chief executive officer
at Morgan Stanley, Bloomberg notes.
According to Bloomberg, the restructuring circular outlined New
Noble's planned borrowings, including up to $1.7 billion in bonds,
in addition to trade finance. Interest rates on the bonds ranged
from 5 to 10 percent, with some rising over time. Some have
payable-in-kind terms, while others are pay-if-you-can in cash or
payable-in-kind. That means unpaid interest would become part of
the principal, it said.
Mr. Dee highlighted the notes' terms. "It's very telling that in
the new debt they're going to issue, they're going to have a 'PIK'
structure," he said.
Under the plan, 70 percent of the equity in the revamped company
will go to creditors, 10 percent to management, and the rest to
shareholders, while the debt burden will be halved, Bloomberg
says. On Aug. 28, Noble's shares initially rose, then sank as much
as 26 percent, while the 2018 bonds touched a five-month high.
"I have to call a spade a spade," Mr. Dee, as cited by Bloomberg,
said on the regulators' role overseeing Noble Group. "This has
been a complete catastrophic meltdown."
In the city-state, Singapore Exchange Ltd. has front-line
responsibility for maintaining fair, orderly and transparent
markets, backed by up the de facto central bank, the Monetary
Authority of Singapore. Both have defended their roles as Noble
Group imploded, most recently in remarks in response to comments
from retail investors who've lost money, Bloomberg adds.
About Noble Group
Hong Kong-based Noble Group Limited (SGX:N21) --
http://www.thisisnoble.com/-- engages in supply of agricultural,
industrial and energy products. The Company supplies agricultural
and energy products, metals, minerals and ores. Agriculture
products include grains, oilseeds and sugar to palm oil, coffee,
and cocoa. Energy business includes coal, gas and liquid energy
products. In metals, minerals and ores (MMO), it supplies iron
ore, aluminum, special ores and alloys. The Company operates
nearly in 140 locations. It supplies growth demand markets in
Asia and Middle East. Alcoa World Alumina and Chemicals is the
subsidiary of this company.
As reported in the Troubled Company Reporter-Asia Pacific on
March 23, 2018, S&P Global Ratings lowered its long-term issuer
credit rating on Noble Group to 'D' from 'CC'. S&P lowered the
ratings because Noble has missed the principal and coupon payment
for its 2018 notes due March 20, 2018. Noble also missed the
coupon payment on its 2022 notes due March 9, 2018. In addition,
the company said it would not make the payments despite being
given 30-day grace periods to meet both obligations. The failure
to make these payments will trigger cross-defaults on the
company's other obligations. S&P does not expect Noble to meet
any outstanding obligations as the company preserves its assets
during the restructuring process. Noble is undergoing a debt
restructuring and S&P will conduct another review the company's
credit profile after the restructuring is complete.
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I N D I A
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AHAMMED KUTTY: CRISIL Migrates B Rating to Not Cooperating
----------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Ahammed Kutty
Haji M (AKH) to 'CRISIL B/Stable/CRISIL A4 Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Bank Guarantee 0.9 CRISIL A4 (ISSUER NOT
COOPERATING; Rating Migrated)
Cash Credit 7.0 CRISIL B/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
Proposed Working 0.5 CRISIL B/Stable (ISSUER NOT
Capital Facility COOPERATING; Rating Migrated)
CRISIL has been consistently following up with AKH for obtaining
information through letters and emails dated May 31, 2018 and
June 30, 2018 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of Ahammed Kutty Haji M, which
restricts CRISIL's ability to take a forward looking view on the
entity's credit quality. CRISIL believes information available on
Ahammed Kutty Haji M is consistent with 'Scenario 1' outlined in
the 'Framework for Assessing Consistency of Information with
CRISIL BB' rating category or lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of Ahammed Kutty Haji M to 'CRISIL B/Stable/CRISIL A4
Issuer not cooperating.
AKH, a proprietorship firm based in Malappuram, Kerala, undertakes
civil construction contracts relating to buildings and bridges.
AKH undertakes construction work for public works departments and
private companies.
ANJANEE CEMENT: CARE Lowers Rating on INR9.07cr LT Loan to B-
-------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Anjanee Cement Corporation (ACC), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 9.07 CARE B-; Stable Revised from
Facilities CARE B+; Stable
Detailed Rationale & Key Rating Drivers
The revision in the long term rating assigned to the bank
facilities of ACC is mainly on account of decline in profit
levels, profitability margins, deterioration in debt coverage
indicators and stretched liquidity condition in FY18 (as per
provisional numbers). Moreover, the rating continues to be
constrained by its partnership nature of constitution, short track
record and small scale of operation, susceptible to volatility of
raw material prices, intensely competitive nature of the industry
with exposure to geographical concentration risk, working capital
intensive nature of business and cyclical nature of the cement
industry. However, the aforesaid constraints are partially offset
by its experienced partners and the entity's wide dealer network.
Ability of the firm to grow its scale of operations, improve
profitability margins and ability to manage working capital
effectively would be the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Partnership nature of constitution: ACC, being a partnership firm,
is exposed to inherent risk of the partner's capital being
withdrawn at time of personal contingency and firm being dissolved
upon the death/retirement/insolvency of the partners. Moreover,
partnership firms have restricted access to external borrowing as
credit worthiness of partners would be the key factors affecting
credit decision for the lenders.
Short track record and small scale of operations with low
profitability margin: ACC is into manufacturing of cement business
since 2014 and accordingly has short track record of operations of
about four years. Furthermore, ACC is a small player in the cement
industry marked by total operating income of INR20.23 crore with a
PAT of (INR0.55) crore in FY18. Further, the net worth base and
total capital employed was low at INR8.54 crore and INR16.71
crore, respectively, as on March 31, 2018. The firm has achieved
turnover of INR4.90 crore in 4MFY19. The small size restricts
financial flexibility in times of stress. The PBILDT margin
declined from last year due to higher cost of materials and
freight and the same stood at 1.57% in FY18 as against 17.48% in
FY17. Furthermore, the PAT margin also declined and the same stood
at (2.74%) in FY18 as against 5.79% in FY17.
Susceptible to volatility of raw material prices: ACC is engaged
in manufacturing of cements and does not have its own clinker
unit. Hence, it has to procure it from other cement manufacturers.
The firm procures its major raw material i.e. clinker mainly from
large cement players. Furthermore, it does not have any long term
agreement with its suppliers. The raw material cost continues to
be the major cost component of ACC constituting around 90% of the
total cost of sales in FY18. Thus, it affects the profitability of
the firm.
Working capital intensive nature of business: The firm is into
manufacturing of cement. ACC has to maintain a large quantity of
raw material inventory to mitigate the raw material price
fluctuations risk and smooth running of its production process.
Accordingly the average inventory period of the firm remained at
31 days during FY18 though improved from 50 days in FY17.
Furthermore, the firm allows around 14 days credit to its
customers. Accordingly, the average fund based bank limit
utilization remained on the higher side at about 90% during last
12 months ended July, 2018.
Cyclical nature of the cement industry: Cement demand is derived
from real estate, infrastructure & industrial sectors. The
slowdown in the real estate sector and delay in take-off of
various infrastructural projects took a toll on the cement demand.
Spiraling cost of capital, delays in execution of infrastructure
as well as industrial projects and the overall economic slowdown
adversely affected the off take of cement.
Deterioration in debt coverage indicators: The interest coverage
ratio declined to 0.82x in FY18 from 2.61x in FY17 on account of
lower operating profit achieved in FY18. Other debt coverage
indicators also deteriorated significantly FY18 due to cash loss
incurred by the firm in FY18 (Provisional). However, the capital
structure of the firm remained satisfactory marked by overall
gearing ratio of 0.95x as on March 31, 2018.
Intensely competitive nature of the industry with exposure to
geographical concentration risk: ACC is operating in a highly
competitive market, dominated by the large cement manufactures
with wide brand acceptability. High competition restricts the
pricing flexibility of the industry participants and has a
negative bearing on the profitability. Furthermore, the operations
of the firm are confined in the state of Assam only. Hence,
presence in only a single state leads to geographical
concentration risk for the firm.
Key Rating Strengths
Experienced partners: ACC is currently managed by Mr. Naba Kumar
Basumatary who has around two decades of experience in cement
industry, looks after the day to day operations of the firm. He is
being duly supported by the other partners Mr. Debasis Das, Mr.
Apurba Talukdar, Mr. Debi Lal Choudhary, Mr. Harish Chandra
Tripathi, Mr. Mrinal Jyoti Das and Mr. Durgesh Chandra Choudhary
along with a team of experienced personnel. Wide dealer network
The firm has around 80 local dealers for the distribution of its
products in the state of Assam. The firm has commenced operations
from June 2014 and since then has built up a strong dealer network
in Assam.
ACC was established as a partnership firm in 2009 by Mr. Naba
Kumar Basumatary and Debasis Das for setting up a cement grinding
unit. The firm has been engaged in the business of manufacturing
cement at its plant located at Baska, Assam with aggregate
installed capacity of 99000 metric ton per annum. The firm has
started commercial operations from June, 2014 onwards. The cement
manufactured by the firm is marketed under the brand name of
'NEERMAAN' in the state of Assam.
ASHA ENTERPRISE: CARE Reaffirms B+ Rating on INR10cr LT Loan
------------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Asha Enterprise (AE), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank
Facilities 10.00 CARE B+; Stable Reaffirmed
Short term Bank
Facilities 0.30 CARE A4 Assigned
Detailed Rationale and key rating drivers
The ratings assigned to the bank facilities of AE are continue to
remain constrained by its nascent stage with small size of
operations, partnership nature of constitution, geographical
concentration risk, cyclical and competitive nature of hotel
industry. The ratings, however, continue to derive strength from
experienced partners and locational advantage of its properties.
Going forward, the ability of the firm to increase its scale of
operations along with improvement in profitability margins
and effective management of working capital will be the key rating
sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Nascent stage with small size of operations: The firm has recently
concluded its project for setting up hotel properties in Siliguri,
a famous tourist destination of West Bengal and started commercial
operations from January 2018. The firm has reported total
operating income of INR0.86 crore with a net loss of INR0.98 crore
in FY18 (Provisional). Furthermore, AE has achieved turnover of
around INR3.50 crore during Q1FY19. Going forward, the ability of
the firm to increase its scale of operations along with
improvement in profitability margins will be crucial for the firm.
Partnership nature of constitution: AE, being a partnership firm,
is exposed to inherent risk of the partner's capital being
withdrawn at time of personal contingency and firm being dissolved
upon the death/retirement/insolvency of the partners. Furthermore,
partnership firms have restricted access to external borrowing as
credit worthiness of partners would be the key factors affecting
credit decision for the lenders.
Geographical concentration risk: The firm is operating through its
a single hotel property which is located in Siliguri, West Bengal,
therefore its earnings and profitability is susceptible to adverse
movements in the local hospitality market in and around Siliguri,
West Bengal.
Cyclical and competitive nature of hotel industry: The Indian
hotel industry is highly fragmented in nature with presence
of large number of organized and unorganized players spread across
various regions. Further, the hotel industry is region based and
is highly sensitive to the untoward events such as slowdown in the
economy. Cyclical nature of the hotel industry and increasing
competition from already established branded hotels may impact the
performance of AE.
Key Rating Strengths
Experienced partners: Mr. Kedar Somani is a recognized government
contractor since last 30 years. He has successfully undertaken
various construction works for the Government of Sikkim. However,
he lacks experience in hospitality industry. Further, Mr. Bineet
Somani also has long experience in construction industry; however
he also lacks experience in hospitality business. Both the
partners are new in the hospitality business as AE being their
first venture in this field.
Locational advantage: The hotel property of the firm is located
near Sevoke road, Siliguri which is the most famous tourist
destination, a prime location and is easily accessible through
rail, buses and other means of transportation. The area also has
other facilities like hospitals, shopping mall and restaurants
within 2 minutes walking distance in its vicinity.
Asha Enterprises (AE) was established as a partnership firm in
February 2015 by Mr. Kedar Somani, Mr. Bineet Somani, Mr. Amit
Somani and Mrs. Asha Somani. The firm has recently set up a hotel
property 'Hotel Saffrom Crest' in Siliguri, a famous tourist
destination of West Bengal. The hotel consists of 61 rooms, food &
beverages outlets, banquet halls, conferencing facilities and
other recreational facilities. The hotel spread with an area of 76
katthas (basement+ 6 floors) equipped with state of the art
technology and well qualified & experienced staffs. The firm has
commenced operations from January 2018 and the average occupancy
rate was around 80% during FY18.
BAIJNATH SCRAP: CRISIL Migrates B- Rating to Not Cooperating
------------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Baijnath
Scrap Centre (BSC) to 'CRISIL B-/Stable Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit/ 6 CRISIL B-/Stable (ISSUER NOT
Overdraft COOPERATING; Rating Migrated)
facility
CRISIL has been consistently following up with BSC for obtaining
information through letters and emails dated May 31, 2018 and
June 30, 2018 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of Baijnath Scrap Centre, which
restricts CRISIL's ability to take a forward looking view on the
entity's credit quality. CRISIL believes information available on
Baijnath Scrap Centre is consistent with 'Scenario 1' outlined in
the 'Framework for Assessing Consistency of Information with
CRISIL BB' rating category or lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of Baijnath Scrap Centre to 'CRISIL B-/Stable Issuer
not cooperating'.
BSC was set up as a sole proprietorship firm, by the promoter, Mr.
Baijnath Aggarwal, in 1984. Operations are managed by his son, Mr
Kartikey Aggarwal. The Agra-based firm trades in iron casting and
scrap, and caters to local customers.
BAJAJ AGRO: CARE Lowers Rating on INR7.71cr LT Loan to D
--------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Bajaj Agro Industries (BAI), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 7.71 CARE D; ISSUER NOT COOPERATING;
Facilities Revised from CARE B+; Issuer
not cooperating; based on best
available information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from BAI to monitor the rating
vide letters/e-mails communications dated May 4, 2018, May 14,
2018, May 21, 2018, May 29, 2018 and June 13, 2018 and numerous
phone calls. However, despite CARE's repeated requests, the entity
has not provided the requisite information for monitoring the
rating. 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
fair rating. The rating on Bajaj Agro Industries' bank facilities
will now be denoted as CARE D; ISSUER NOT COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while
using the above rating.
Detailed description of the key rating drivers
The revision in the rating assigned to the bank facilities of
Bajaj Agro Industries is on account of on-going delays in debt
servicing due to stressed liquidity condition of the entity.
Going forward, the ability to regularize the debt servicing
obligations and timely repayment of debt will be the key rating
sensitivities.
Key Rating Weaknesses
Ongoing delays in repayment of bank facilities: As reported by the
banker, there are on-going delays in servicing of term loans and
continuous overdrawal in the cash credit account. The delays were
due to stretched liquidity position owing to lower accruals from
business operations and higher dependence on external borrowings.
Proprietorship nature of constitution: Bajaj Agro Industries being
a proprietorship entity is exposed to inherent risk of the
proprietor's capital being withdrawn at time of personal
contingency and entity being dissolved upon the death/insolvency
of the proprietor. Furthermore, proprietorship entities have
restricted access to external borrowing as credit worthiness of
proprietor would be the key factors affecting credit decision for
the lenders.
Bajaj Agro Industries (BAI) was established as a proprietorship
entity in 2011 by Mr. Naresh Bajaj for setting up a rice milling
unit. The entity has been engaged in rice milling activities at
its plant located at Dhamtari, Chhattisgarh with aggregate
installed capacity of 14592 MTPA. The entity has started
commercial operations from December, 2011 onwards.
ENN AAR: CARE Assigns B+ Rating to INR5cr LT Loan
-------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Enn Aar
Poles (EAP), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 5.00 CARE B+; Stable Assigned
Short-term Bank
Facilities 5.00 CARE A4; Assigned
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of EAP are constrained
by its small scale of operation with moderate profitability
margins, exposure to volatility in input prices and working
capital intensive nature of business, proprietorship nature of
constitution, Risk of delay in project execution coupled with
client concentration risk, Intense competition with tender driven
process risk. However, the aforesaid constraints are partially
offset by its experienced proprietor with long track record of
operations, comfortable capital structure and strong debt coverage
indicators and satisfactory order book position indicating
satisfactory revenue visibility.
Going forward, ability of the firm to maintain a healthy order
book and receipt of contract proceeds on a regular basis and
ability to execute orders within stipulated time period and
increase its scale of operations and profitability margins.
Detailed description of the key rating drivers
Key Rating Weaknesses
Small scale of operations with moderate profitability margins: The
scale of operation of the entity remained small as reflected by
its operating income of INR9.72 crore (Rs.6.18 crore in FY17) with
a PAT of INR0.78 crore (Rs.0.31 crore in FY17) in FY18,
Provisional. Further, the tangible networth and total capital
employed was low at INR4.15 crore and INR7.57 crore, respectively,
as on March 31, 2018. Furthermore, the profitability margins also
remained moderate marked by PBILDT margin of 10.92% (FY17: 11.42%)
and PAT margin of 8.03% (FY17: 5.03%) in FY18, Provisional.
Exposure to volatility in input prices and working capital
intensive nature of business: The major input materials required
for the entity are wires, iron & steel, insulators, isolators etc.
the prices of which are volatile in nature. Thus the entity is
exposed to volatility in prices of input materials. Furthermore,
EAP being engaged in installation of transformers and rural
electrification works which is working capital intensive in nature
as the entity allows credit of around two months to its customers.
Accordingly, the average utilization of working capital was around
90% during last 12 months ended July 31, 2018.
Proprietorship nature of constitution: EAP, being a proprietorship
entity, is exposed to inherent risk of proprietor' capital being
withdrawn at time of his personal contingency and entity being
dissolved upon the death/insolvency of the proprietor. Moreover,
proprietorship entities have restricted access to external
borrowing as credit worthiness of proprietor would be the key
factors affecting credit decision for the lenders.
Risk of delay in project execution coupled with client
concentration risk: As EAP is fully dependent on flow of orders
from Assam Power Distribution Co. Ltd. where steady flow & timely
execution acquires greater importance, especially in view of the
stringent rules involved in government contracts. EAP's business
is also susceptible to financial loss arising out of delay in
project execution, as generally penalty clause exists for delay in
execution of construction projects involving liquidated damages,
etc. EAP is Assam based entity having its operations only in the
state of Assam. As such the entity is also exposed to geographical
concentration risk.
Intense competition with tender driven process risk: The entity
has to bid for the contracts based on tenders opened by the
various public sector units. Upon successful technical evaluation
of various bidders, the lowest bid is awarded the contract. The
entity receives projects which majorly are of a short to medium
tenure (i.e. to be completed within maximum period of one to two
years). Furthermore, orders are generally tender driven floated by
government units indicating a risk of non-receipt of contract in a
competitive industry.
Key Rating Strengths
Experienced proprietor with long track record of operations: EAP
is into electrical contractor business since 2003 and thus has 15
years of track record of operations. Being in the same line of
business since long period, the proprietor has built up
established relationship with its clients and the entity is
deriving benefits out of this. The proprietor, Mr. Sumit Sovasaria
has an experience of more than a decade in the industry, look
after the day to day operations of the entity.
Comfortable capital structure and strong debt coverage indicators:
The capital structure of the entity remained comfortable marked by
overall gearing ratios at 0.82x as on March 31, 2018. Furthermore,
the debt coverage indicators also remained strong marked by
interest coverage ratio of 3.90x (FY17: 2.06x) and total debt to
GCA of 4.33x (FY17: 7.67x) in FY18, provisional.
Satisfactory order book position: The entity has an order book
position of INR25.09 crore (2.58x of FY18 total operating income)
as on August 16, 2018 which is to be executed by June 2019,
providing a satisfactory near to medium term revenue visibility
for the entity.
Enn Aar Poles (EAP) was established in 2003 as a proprietorship
entity by Mr. Sumit Sovasaria based out of Guwahati, Assam. Since
its inception, the entity has been engaged in rural
electrification, installation of transformers and its allied
activities. The entity participates in tender and mainly executes
work contracts for the Assam Power Distribution Company Limited.
The entity has an order book position of INR25.09 crore (2.58x of
FY18 total operating income) as on Aug. 16, 2018 which is to be
completed by June 2019. Mr. Sumit Sovasaria is associated with the
entity since its inception and has more than a decade of
experience in electrical construction. He looks after the day to
day operations of the firm.
FLEXI PLAST: CARE Reaffirms B Rating on INR5.04cr LT Loan
---------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Flexi Plast Industries (FPI), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 5.04 CARE B; Stable Reaffirmed
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of FPI continues to
remain constrained on account of its nascent stage of operations
with net and cash loss in FY18 (FY refers to the period from
April 1 to March 31), weak solvency position and stressed
liquidity position. The rating is, further, constrained on account
of its presence in a highly competitive and regulated packaging
industry and its constitution as a partnership concern.
The rating, however, continues to remain favorable on account of
experienced management with reputed customer base and stable
demand indicators from end user industries mainly packaging.
The ability of the firm to increase its scale of operations
coupled with efficient working capital management would be the
key rating sensitivities.
Detailed Description of the Key Rating Drivers
Key Rating Weaknesses
Nascent stage of operations: The Greenfield project of FPI was
completed in October, 2016 and FY18 is first full year of
operations of the company. In FY18, it has registered Total
Operating Income (TOI) of INR17.45 crore with operating profit of
INR0.82 crore in FY18 as against operating loss of INR0.38 crore
in 6MFY17. However, it has registered continuous net loss and cash
loss in FY18 owing to high depreciation and interest expenses.
Moderate capital structure and weak debt coverage indicators The
capital structure of FPI remained moderate with an overall gearing
of 1.79 times as on March 31, 2018, deteriorated from 1.43 times
as on March 31, 2017 on account of continue net losses along with
higher utilization of working capital bank borrowings and infusion
of unsecured loans which set off to an extent by infusion of share
capital of INR0.23 crore with schedule repayment of term loan.
Furthermore, debt service coverage indicators of the firm remained
weak with negative total debt to GCA as on March 31, 2018 and
below unity interest coverage ratio.
Working capital intensive nature of operations: The liquidity
position stood stressed with 90-95% of utilization of its working
capital bank borrowings in last twelve months ended on July, 2018
and moderate operating cycle of 54 days in FY18.
Key Rating Strengths
Experienced management: Mr. Rakesh Jain, Partner, is graduate by
qualification and looks after the production, technical and
commercial functions of the firm. Further, he is supported by
other partner, Mr. Pushpendra Sharma who is also graduate by
qualification and has 5 years of experience in the industry.
Further, top management is assisted by second tier management in
smooth functioning of the firm.
Reputed customer base and stable demand indicators from end user
industries mainly packaging: Within initial stage of operations,
the firm received recurring orders from reputed clients. It has an
order book position of INR0.80 to 1.00 crore as on August 13,
2018. Indian packaging industry is estimated to be worth US$ 13
billion, which gives employment to around 1.50 million people
directly and around 4 million people indirectly. Further, a
developing organized retail sector has increased consumption
of food packaging. Factories are spread out in all parts of India,
even in the remote industrially backward areas. Factors such as
economic growth, growth in retail segments, urbanization, rise in
disposable income, changing consumer behaviour & lifestyle and the
growing demand from end-use industries are likely to support
growth in India in the medium to long term.
To meet the growing demand for international quality packaging,
manufacturers in India are speedily moving on the path
of modernization - adopting evolving technologies, installing high
speed automatic machines, ensuring quality assurance
and incorporating management systems and techniques for efficient
operation of the plants.
Pali-based (Rajasthan) FPI was formed as a partnership concern in
February 2015 by Mr. Pushpendra Sharma, Mr. Sunil Singhvi and Mr.
Rakesh Jain with an objective to set up greenfield project for
manufacturing of flexible packaging laminates. The project of the
firm has been completed and started commercial production from
October, 2016. It has incurred total project cost of INR7.52 crore
towards the project, which funded through term loan of INR2.00
crore, partner's capital of INR3.72 and balance through unsecured
loans. The plant of the firm has processing capacity of 2400 MTPA
of flexible packaging laminates. The product will be majorly
catered in food packaging industry and currently caters its
product in Rajasthan, Gujarat, Jharkhand, Maharashtra, Madhya
Pradesh and Uttar Pradesh.
FREEDOM CERAMIC: CARE Assigns B Rating to INR14.74cr LT Loan
------------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Freedom
Ceramic Private Limited (FCPL) as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank
Facilities 14.74 CARE B; Stable Assigned
Short Term Bank
Facilities 1.70 CARE A4 Assigned
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of FCPL is constrained
on account of its nascent stage of operations along with
stabilization risk associated with recently completed green field
project and financial risk profile marked by reporting net losses,
leveraged capital, weak debt coverage indicators and modest
liquidity position with working capital intensive nature of
operation. The ratings are also constrained on account of its
presence in a highly competitive ceramic industry and fortunes
linked to demand from cyclical real estate sector along with
susceptibility of operating margins to volatility in raw material
and fuel costs.
The ratings, however, derive strength from experienced promoters
and locational advantage in form of easy access to raw material,
fuel and labour.
FCPL's ability to stabilize recently commissioned manufacturing
operations along with increase in the scale of its operations and
achieving envisaged level of sales and profitability are the key
rating sensitivity.
Detailed description of the key rating drivers
Key Rating Weaknesses
Nascent stage of operation along with stabilization risk
associated with recently completed green field project: FCPL
completed its green field project at a total cost of INR22.74
crore, funded through debt/equity mix of 2.49 times and commenced
commercial operations from March 2018 onwards. FCPL has reported
TOI of INR0.40 crore during FY18(Provisional, refers to period
April 01 to March 31). However, FCPL remains exposed to post
implementation risk in the form of stabilization of operations in
terms of achieving envisaged level of sales and profitability.
FCPL has achieved total operating income (TOI) of INR6.42 crore
till August 14, 2018 in current year provisional (refers to period
April 1 to March 31).
Financial risk profile marked by reporting net losses, leveraged
capital, weak debt coverage indicators and modest liquidity
position with working capital intensive nature of business
operation.
During FY18 (Provisional), FCPL has reported operating loss and
net loss of INR0.81 crore and INR1.40 crore respectively on TOI of
INR0.40 crore. The capital structure remained leveraged marked by
an overall gearing ratio of 2.40 times as on March 31, 2018 on
account of higher amount of debt. Debt coverage indicators of FCPL
remained weak on account of operating and cash losses reported
during the year coupled with high debt outstanding. Liquidity
position remained modest marked by current ratio of 1.30 times as
on March 31, 2018. The operations are working capital intensive
marked by high average utilization of working capital bank
borrowing (i.e. 70% for last five months ended on July, 2018).
Presence in a highly competitive ceramic industry and fortune
linked to demand from cyclical real estate sector: FCPL operates
in a highly competitive segment of the ceramic industry marked by
low entry barriers, presence of large number of organized and
unorganized players with capex planned by existing players in the
industry as well as new entrants. This situation increases the
level of competition, which is expected to put pressure on
profitability of the manufacturers. Further, most of the demand
for the tiles comes from the real estate industry, which, in India
is highly fragmented and cyclical. The real estate industry is
also highly sensitive to the interest rates and liquidity position
in market. Thus any negative impact on real estate industry will
adversely affect the prospects of ceramic tiles industry as well
as the company.
Susceptibility of operating margins to volatility in raw material
and fuel costs: Prices of raw material i.e. clay is market driven
and puts pressure on the margins of tile manufacturers in case of
volatility into the same. Another major cost component is fuel
expenses in the gas form which is to fire the furnace. The
profitability of FCPL remains exposed to volatile LNG prices,
mainly on account of its linkages with the international
demand-supply of natural gas. Hence any adverse movement in
material and fuel prices impacts profitability of the
company.
Key Rating Strengths
Experienced promoters: FCPL is currently managed by three
directors namely Mr. Hasmukh Karshan Bhoraniya, Mr. Bharatbhai
Bhagvanjibhai Bhoraniya and Mr. Jagdishbhai Laljibhai Merja. All
the directors of FCPL hold an average experience of more than two
decade in similar line of business activities.
Location advantage: FCPL is located in Morbi, a ceramic cluster,
which provides the firm with easy access to raw materials, primary
fuel and all other utilities. Further, the cluster is well
connected by a good road network which provides logistical
benefits as well.
Morbi (Gujarat) based FCPL was incorporated in March, 2017 as a
Private Limited Company by Mr. Hasmukh Karshan Bhoraniya, Mr.
Bharatbhai Bhagvanjibhai Bhoraniya and Mr. Jagdishbhai Laljibhai
Merja. FCPL has recently completed its green field project for
manufacturing Porcelain Floor Tiles having total cost of INR22.74
crore, which was funded through debt-equity mix of 2.49 times.
FCPL has commenced its commercial operations from March 2018. FCPL
is operating from its sole manufacturing unit located in Morbi
(Gujarat) having installed capacity of 60000 Metric tonne per
annum for manufacturing Ceramic Porcelain Floor Tiles as on
July 31, 2018.
Swiss Ceramic Private Limited (engaged in to business of
manufacturing of ceramic tiles since 2014) is associate concern
of FCPL.
GARG INDUSTRIES: CARE Lowers Rating on INR20cr LT Loan to B+
------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Garg Industries Limited (GIL) as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 20.00 CARE B+; Stable; Issuer not
Facilities cooperating; Revised from
CARE BB+; Stable on the basis
of best available information
Long-term Bank 2.00 CARE A4; Stable; Issuer not
Facilities cooperating; Revised from
CARE A4+; on the basis of best
Available Information
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from GIL to monitor the rating
vide e-mail communications dated August 3, 2018; June 19, 2018;
June 14, 2018; June 12, 2018; June 8, 2018; May 29, 2018; May 25,
2018; May 18, 2018; May 17, 2018; May 15, 2018 and numerous phone
calls. However, despite CARE's repeated requests, the firm 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 Garg Industries Limited's bank
facilities will now be denoted as CARE B+; Stable/ 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.
The revision in the ratings take into account the elongated
operating cycle and susceptibility of margins to raw material
price variability. The ratings are further constrained by the
inherent cyclicality of the steel industry. These constraints are,
however, partially offset by the strength derived from GIL's
experienced promoters and strategic location of the
manufacturing facility.
Detailed Description of the Key Rating Drivers
Key Rating Weaknesses
Elongated operating cycle: The operating cycle of GIL stood
elongated at about 107 days, as on March 31, 2017 (PY: 103 days)
primarily on account of elongated average collection days.
Cyclicality inherent in the steel 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.
Volatility in raw material prices: The value addition in the steel
construction materials like ingots, rounds, wire rods, flats, etc.
is also low, resulting into low product differentiation in the
market. The producers of steel construction materials are
essentially price-takers in the market, which directly expose
their cash flows and profitability to volatility in the steel
prices. Furthermore, for GIL, the raw material costs constituted
~90% of the total cost of sales in FY17, thus any volatility in
the prices of the same has bearing on the profitability of the
company.
Key Rating Strengths
Experienced promoters: The promoters have more than two decades of
experience in the steel industry. All the major business functions
of GIL are looked after by the key directors according to their
previous business experience. The directors are assisted by a team
of professionals who are highly experienced in their respective
domains.
Strategic location of the plant: Ludhiana is a well-established
hub of bicycle and fasteners manufacturing industry. Thus,
the company benefits from the location advantage in terms of easy
accessibility to customer base for wire rods manufactured by it.
Additionally, steel products like billets and ingots, which are
used as raw material by GIL are readily available owing to
established supplier base in the same location as well, which
helps in lower transit cost for GIL.
Moderate Financial Risk Profile: The scale of operations of the
company declined marginally in FY17 to INR114.37 cr. from
INR115.32 cr. in FY16. The PBILDT margins of the company have
remained moderate and range bound in the past due to competitive
nature of the industry and declined to 4.08% in FY17 from 4.23% in
FY16. The capital structure of the company has remained
comfortable with long-term debt to equity and overall gearing
ratios of 0.22x and 1.00x, respectively, as on March 31, 2017. The
debt coverage indicators of the company, however, remained
moderate marked by total debt to GCA of 11.85x, as on March 31,
2017 (PY: 12.53x) and interest coverage ratio of 1.82x in FY17
(PY: 1.66x).
Garg Industries Limited (GIL) is a part of Garg group of Punjab
and was incorporated in January-1991 as a closely held public
limited company, however, the operations of the company started in
1994. The company is engaged in the manufacturing of wire rods in
the range of 6-20 mm thickness at its sole manufacturing facility
located in Ludhiana, Punjab. GIL has an installed capacity of
36,000 Metric Tonnes Per Annum (MTPA) as on March 31, 2017, caters
to several industries including fasteners and bicycle industry,
among others and supplies to around 200 manufacturers located in
and around Amritsar & Ludhiana cities in Punjab. The main raw
materials used by the company are steel ingots and billets which
are majorly procured from the vendors located at Ludhiana, Punjab.
GEORGE MAIJO: Ind-Ra Maintains 'BB-' LT Rating in Non-Cooperating
-----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has maintained M/s George
Maijo Industries Private Limited's Long-Term Issuer Rating in 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
continue to appear as 'IND BB- (ISSUER NOT COOPERATING)' on the
agency's website.
The instrument-wise rating action is:
-- INR100 mil. Fund-based facilities maintained in non-
cooperating category with IND BB- (ISSUER NOT COOPERATING)/
IND A4+ (ISSUER NOT COOPERATING) rating.
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
June 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 1962, M/s George Maijo Industries is the sole
distributor for Yamaha Motor Co. Ltd., Japan for the last three
decades in India.
GOYAL ENTERPRISES: CARE Assigns B+ Rating to INR11.25cr LT Loan
---------------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Goyal
Enterprises (GE) as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 11.25 CARE B+; Stable Assigned
Detailed rationale and key rating drivers
The rating assigned to the bank facilities of GE is constrained by
its small scale of operations, low profitability margins, coverage
indicators and leveraged capital structure. The rating is further
constrained on account of working capital intensive nature of
operations, competitive nature of industry and constitution of the
entity being a proprietorship firm. The rating, however, draws
comfort from experienced management and growing scale of
operations. Going forward, the ability of the firm to increase its
scale of operations while improving its profitability margins,
capital structure and to effectively manage its working capital
requirements shall be its key rating sensitivity.
Detailed description of the key rating drivers
Key Rating Weakness
Small scale of operations: The scale of operations stood small as
marked by the total operating income of INR23.56 crore in FY18
(refers to period starting from April 1 to March 31; based on
provisional results). The small scale limits the firm's financial
flexibility in times of stress and deprives it from scale
benefits.
Low profitability margins and coverage indicators: The firm is
engaged in trading of surgical equipment's, scientific chemicals
where value addition is low. The profitability margins of the firm
stood low owing to its presence in highly competitive industry.
The PBILDT and PAT margin of the firm stood around 3% and 0.75%
for the past two financial years i.e. FY17-FY18. Further, the
interest coverage indicators also stood low owing to low
profitability; as marked by interest coverage ratio of 1.39x and
total debt to gross cash accruals of 27.94 times for FY18.
Leveraged capital structure: The capital structure of the firm
stood leveraged owing to higher dependence on external borrowings
to meet its working capital requirement as marked by overall
gearing ratio which remained around 3x for the balance sheet date
of the past two financial years i.e. FY17-FY18.
Working capital intensive nature of operations: The business
operations of Goyal Enterprise are working capital intensive in
nature as reflected by higher utilization of sanctioned working
capital limits. Since Goyal Enterprise operates in a competitive
industry, it has limited bargaining power and is required to offer
high credit period of around 2 months to its customers. The firm
generally purchases on cash or advance basis resulting with a
maximum credit period of 2 days in FY18. Further, being in the
healthcare sector, GE also maintains inventory in the form of
finished goods to meet the immediate needs of its customers. The
working capital limits remained almost fully utilized for the past
12 months, period ending June 30, 2018.
Competitive nature of industry: Goyal Enterprise faces direct
competition from various organized and unorganized players in the
market. There are number of small and regional players and
catering to the same market, which can exert pressure on its
margins.
Constitution of the entity being a proprietorship firm: The
constitution of Goyal Enterprise is proprietorship firm which has
the inherent risk of possibility of withdrawal of the proprietor
capital at the time of personal contingency and firm being
dissolved upon the death/retirement/insolvency of proprietor.
Moreover, proprietorship firms have restricted access to external
funds as credit worthiness of proprietor would be the key factors
affecting credit decision for the lenders.
Key Rating Strengths
Experienced management: The overall operations of the firm are
managed by Mr. Ambuj Goyal. He is a post graduate by qualification
and has a vast experience of around two decades in trading of lab
testing, surgical equipment and scientific chemicals. He is
further supported by a team of experienced professionals.
Growing scale of operations: Goyal Enterprises has witnessed
growth in its TOI over the past three years (FY16 to FY18) at a
compounded annual growth rate (CAGR) of 20%. During FY18, the firm
registered growth of 37.94% in its total operating income which
stood at INR23.56 crore as against INR17.08 crore in FY17. The
growth was attributed due to increase in quantity sold to new
and existing customers. Furthermore, the firm has achieved total
operating income of INR10.69 crores during 3MFY19 (period from
April 1 to June 30; based on provisional results).
Meerut based Goyal Enterprises (GE) was established as
proprietorship firm by Mr. Ambuj Goyal in 2001. GE is engaged in
the wholesale trading of surgical equipment such as sputum
container, urine container, slide box, dropping bottle etc and
various type of scientific chemicals. The firm procures the
products from domestic distributors and sells these products to
pathology laboratory, hospitals and medical colleges across India.
JAIN STONE: CARE Assigns B- Rating to INR4.84cr LT Loan
-------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Jain
Stone Industries Private Limited (JISPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 4.84 CARE B-; Stable Assigned
Long-term/Short-
Term Bank
Facilities 0.90 CARE B-; Stable/CARE A4
Assigned
Short-term Bank
Facilities 0.35 CARE A4 Assigned
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of JISPL are primarily
constrained on account of modest as well as fluctuating scale of
operations in the highly competitive stone industry with linkage
to cyclical real estate sector, weak solvency position and
stressed liquidity position. The ratings, further, constrained on
account of vulnerability of margins to fluctuation in raw material
prices and foreign exchange rates. The ratings, however, favorably
take into account experienced management with long track record of
operations and moderate profitability margins.
The ability of the company to enhance its operations while
maintaining profitability with improvement in solvency position
and efficient management of working capital would be the key
rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Fluctuating as well as modest scale of operation and customer
concentration risk: JISPL exports 70-80% of its product to UK and
remaining supplies to exporters in domestic market hence the scale
of operation of the company are fully exposed to fluctuation in
the demand of international market. During FY18, Total Operating
Income (TOI) of the company has increased by 5.18% over FY17 and
stood modest at INR15.10 crore owing to higher sales volume.
Further, JISPL is also exposed to customer concentration risk as
around 40% of total sales sale generated from single customer of
UK.
Weak solvency position along with stressed liquidity position:
Capital structure of the company stood leveraged marked by overall
gearing of 2.99 times as on March 31, 2018. Further, debt coverage
indicators of JSIPL also stood weak marked by Total debt to GCA of
16.09 times as on March 31, 2018.
The company receives payment from its customer in 90-100 days
while it has to make payment to its suppliers within 30-40 days.
Further, it takes 3-4 month for conversion from raw material to
finished goods. Hence owing to high inventory holding period and
debtor collection period, operating cycle of the company stood
elongated at 212 days in FY18. Due to blockage of funds in debtors
and inventory, JISPL has fully utilized its cash credit limit
during past 12 months ended July 2018. Further, there is
overdrawing of 5-10 days in its overdraft account in each month
during past twelve month.
Vulnerability of margins to fluctuation in raw material prices and
foreign exchange rates: The profitability of the company is
vulnerable to any adverse movement in raw material prices as the
company will not be immediately able to pass on the increased
price to its customers and its raw material inventory holding
period. Further, JISPL generates major revenues through exports,
thereby exposing the company to foreign exchange fluctuations and
the same was reflected during Brexit which caused to decline in
the rate to GBP.
Presence in a highly competitive stone industry with linkage to
cyclical real estate sector: It is considered to be highly
fragmented with presence of large number of organized and
unorganized player. The entry barriers to the industry are very
low and the operating margin is susceptible to new capacity
additions in the industry.
The industry is primarily dependent upon demand from real estate
and construction sector across the globe. The real estate industry
is cyclical in nature and is exposed to various external factors
like the disposable income, interest rate scenario, etc.
Key Rating Strengths
Experienced promoters with long track record of operations in the
marble industry: JSIPL was initially formed in 1985 as a
proprietorship concern and hence, it has long track record of
operation of more than three decade and established relationship
with local sandstone supplier and customer in international
market. Mr. Mahendra Kumar Jain, Director, has more than three
decade of experience in the industry and looks after finance
function of the company.
Moderate profitability margins: Profitability margins of JISPL has
witnessed continuously improving during past three financial years
ended FY18 owing to decline in material cost. During FY18, PBILDT
margin of the company has improved by 164 bps over FY17 owing to
decline in material cost and stood moderate at 9.18% in FY18 as
against 7.55 times in FY17. However, due to high interest
expenses, PAT margin stood low during past years. Further, JISPL
has reported GCA of INR0.50 crore in FY18 as against INR0.37 crore
in FY17.
Gwalior (Madhya Pradesh) based JSIPL was initially formed as a
proprietorship concern in 1985 by Mr Mahendra Kumar Jain with an
aim to deliver optimum variety of products and finishing according
to customer specifications. Subsequently, it was converted into
Private Limited Company in August 2007. JSIPL is ISO 9001:2008
certified company and engaged in the business of processing and
export natural stone and building stones. The promoters of the
company also run another firm in the name of Indo Plast
Corporation which is engaged in the manufacturing of plastic
bucket, tub etc. at one of the existing factory located in Gwalior
having overall installed capacity of 30 Tonne Per Month.
JET AIRWAYS: Posts INR1,323 Crore First-Quarter Loss
----------------------------------------------------
Business Today reports that Jet Airways on Aug. 27 reported a
massive loss of INR1,323 crore for the April-June quarter as high
fuel prices, a weakening rupee and low fares battered the finances
of the Naresh Goyal-led airline. This is the second consecutive
quarterly loss for the airline which had posted a profit of
INR53.50 crore in the same quarter last year, the report says.
"The company has incurred a loss during the current quarter and
has a negative net worth as of June 30," Jet Airways said in a
regulatory filing on Aug. 27, Business Today relays. A negative
net worth means that the total liabilities of the airline exceed
the total value of its assets.
According to Business Today, the total income of the company
during the quarter rose to INR6,010 crore from INR5,648 crore in
the year ago quarter. However aircraft fuel expenses for the
quarter surged 53 per cent to INR2,332 crore. The report adds that
Jet Airways said it would inject funds and cut costs in excess of
INR2,000 crore in two years as it seeks to turnaround the
business.
The struggling airline will inject capital and reduce debt to cut
its interest costs, the statement said, without elaborating on the
size of the funds' injection, Business Today relays. It also plans
to monetise some of its assets, including the Jet-Privilege
programme, which has 8.5 million members.
Based in Mumbai, India, Jet Airways (India) Limited --
https://www.jetairways.com/EN/PH/Home.aspx -- provides passenger
and cargo air transportation services. It operates through two
segments, Air Transportation and Leasing of Aircraft. The company
also leases aircrafts. It operates flights to 64 destinations in
India and international countries, including Abu Dhabi, Amsterdam,
Bahrain, Bangkok, Colombo, Dammam, Dhaka, Doha, Dubai, Hong Kong,
Jeddah, Kathmandu, Kuwait, London Heathrow, Muscat, Paris, Riyadh,
Sharjah, Singapore, and Toronto. As of August 31, 2017, the
company had a fleet of 113 aircraft, which includes a mix of
Boeing 777-300 ERs, Airbus A330-200/300 aircraft, Next Generation
Boeing 737s, and ATR 72-500/600s. Jet Airways (India) Limited was
founded in 1992 and is based in Mumbai, India.
KAVERI ENGINEERING: Ind-Ra Raises Long Term Issuer Rating to BB+
----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has upgraded Kaveri
Engineering Projects Private Limited's (KEPPL) Long-Term Issuer
Rating to 'IND BB+' from 'IND BB (ISSUER NOT COOPERATING)'. The
Outlook is Stable.
The instrument-wise rating actions are:
-- INR55.0 mil. Fund-based working capital limits Long-term
rating upgraded; Short-term rating affirmed with IND
BB+/Stable/IND A4+ rating;
-- INR245.0 mil. (increased from INR120.0 mil.) Non-fund-based
working capital limit affirmed with IND A4+ rating;
-- INR145.0 mil. Proposed fund-based working capital limit*
assigned with Provisional IND BB+/Stable/Provisional IND A4+
rating; and
-- INR155.0 mil. Proposed non-fund-based working capital limit*
assigned with Provisional IND A4+ rating.
* The ratings are provisional and shall be confirmed upon the
sanction and execution of the loan documents for the above
facilities by KEPPL to the satisfaction of Ind-Ra.
KEY RATING DRIVERS
The upgrade reflects Ind-Ra's expectations of KEPPL registering
significant revenue in FY19-FY20 on account of a strong order book
(mix of direct contracts and subcontracts) of about INR5,553
million (6.4x of FY18 revenue) as of April 2018. The revenue
growth is contingent upon KEPPL's ability to timely tie up working
capital funds and/or equity infusion. FY18 financials are
provisional.
The ratings continue to be supported by KEPPL's comfortable
liquidity. Its average working capital limit utilization was about
58.0% over the 12 months ended July 2018.
The ratings also continue to be supported by the promoter's
significant experience of over 10 years in civil contracting. The
extensive experience enables the company to obtain repeat orders,
primarily subcontracts.
The ratings, however, continue to reflect KEPPL's modest scale of
operations, albeit its revenue rose to INR865.6 million in FY18
from INR851.4 million in FY17. It registered about INR760 million
in revenue for April-July 2018.
The ratings also continue to reflect KEPPL's continued modest
credit metrics in FY18 despite an increase in debt and interest
expenses on account of a substantial increase in absolute EBITDA.
During the period, its net leverage (adjusted net debt/operating
EBITDAR) was 1.6x (FY17: negative 0.7x) and EBITDA interest
coverage (operating EBITDA/gross interest expense) was 5.8x
(5.6x). Ind-Ra expects the metrics to remain at the current level
in FY19 in view of the absence of any major debt-led capex and the
likely revenue growth.
The ratings continue to be constrained by a high geographical
concentration risk, considering all orders are concentrated in
Telangana.
Moreover, the ratings are constrained by a volatile-but-average
EBITDA margin (FY18: 7.7%; FY17: 4.3%; FY16: 6%). The margin is
dependent on the stage, size and scope of projects. Almost all
contracts executed by the company have built-in escalation clauses
that safeguard its margins from input price volatility.
RATING SENSITIVITIES
Negative: Any decline in the revenue and/or the EBITDA margin,
leading to any deterioration in the credit metrics and the
liquidity, will be negative for the ratings.
Positive: Any substantial increase in the revenue, along with the
geographical diversification of the order book, and/or a rise in
the EBITDA margin, leading to an improvement in the credit
metrics, on a sustained basis, will lead to a positive rating
action.
COMPANY PROFILE
KEPPL undertakes civil and infrastructure construction, primarily
for irrigation.
KOTKAPURA MUKTSAR: Ind-Ra Migrates 'D' Rating to Non-Cooperating
----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has migrated Kotkapura Muktsar
Tollways Private Limited's senior project bank loan rating to the
non-cooperating category. The issuer did not participate in the
surveillance exercise, despite continuous requests and follow-ups
by the agency. Therefore, investors and other users are advised to
take appropriate caution while using the rating. The rating will
now appear as 'IND D (ISSUER NOT COOPERATING)' on the agency's
website.
The detailed rating action is:
-- INR750 mil. Senior project bank loan migrated to non-
cooperating category with IND D (ISSUER NOT COOPERATING)
rating.
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
August 4, 2017. Ind-Ra is unable to provide an update, as the
agency does not have adequate information to review the ratings.
COMPANY PROFILE
Kotkapura Muktsar Tollways is a special purpose vehicle promoted
by Supreme Infrastructure BOT Holdings Private Limited (48%),
Supreme Infrastructure India Limited (26%) and SPML Infra Limited
(26%). It has been set up to build, operate and maintain a 30km
stretch on State Highway 16. The project progress details are not
available.
MAGNOLIA LIMITED: Ind-Ra Maintains BB+ Rating in Non-Cooperating
----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has maintained Magnolia
Limited's Long-Term Issuer Rating in 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 the rating. The rating will continue to appear as 'IND
BB+ (ISSUER NOT COOPERATING)' on the agency's website.
The instrument-wise rating actions are:
-- INR23.95 mil. Term loan maintained in non-cooperating
category with IND BB+ (ISSUER NOT COOPERATING) rating; and
-- INR65 mil. Fund-based facilities maintained in non-
cooperating category with IND BB+ (ISSUER NOT COOPERATING)/
IND A4+ (ISSUER NOT COOPERATING) rating.
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
June 2, 2016. Ind-Ra is unable to provide an update, as the agency
does not have adequate information to review the ratings.
COMPANY PROFILE
M/s Magnolia develops, manufactures and markets chemicals and
intermediates, active pharmaceutical ingredients and finished
dosage forms.
RAYAT & BAHRA: CARE Lowers Rating on INR85.35cr LT Loan to D
------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Rayat & Bahra Group Of Institutes: An Educational & Charitable
Society (RBGI) as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 85.35 CARE D Revised from
Facilities CARE B; Stable
Short-term Bank 1.00 CARE D Revised from
Facilities CARE A4
Detailed Rationale & Key Rating Drivers
The revision in the ratings assigned to the bank facilities of
RBGI takes into account ongoing delays in the servicing of the
debt obligation.
Detailed description of the key rating drivers
Ongoing delays in debt servicing: There are ongoing delays in the
servicing of the interest and principle repayments for the term
loans availed. Furthermore, the over-draft limit has remained
overdrawn for more than 30 days.
Rayat & Bahra Group Of Institutes (RBGI) was established in 2003.
RBGI is a part of Punjab based Rayat-Bahara group. Currently, RBGI
is running two campuses having twelve colleges located in Mohali
and Hoshiarpur, Punjab. Apart from the above, the society is also
running two K-12 schools, one each under the Mohali and Hoshiarpur
campus. The Society was established by Mr. Gurvinder Singh Bahra
(Chairman) and Mr. Nirmal Singh Rayat (President) with an
objective to provide education in the field of engineering and
technology, management and pharmacy. The different courses offered
are duly approved by AICTE (All India Council of Technical
Education), PTU (Punjab Technical University) - Jalandhar, SCERT
(State Council of Educational Research and Training) - Punjab, PU
(Punjab University) - Chandigarh and PSBTE (Punjab State Board of
Technical Education) - Chandigarh. Apart from RBGI, the group
operates three entities namely Rayat Educational & Research Trust
(RERT; rated 'CARE D') established in 2001 and operating 6
colleges and 3 schools through its campuses located in Ropar
(Punjab), Bahra Educational & Charitable Society (BECS; rated
'CARE B; Stable') established in 2009 and operating 6 colleges
through a campus located in Shimla and Shri Balaji Literary &
Charitable Society established in 2009 and operating 5 colleges
through a campus located in Patiala.
RAYAT EDUCATIONAL: CARE Lowers Rating on INR33.36cr Loan to D
-------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Rayat Educational & Research Trust (RERT) as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 33.36 CARE D Revised from CARE B;
Facilities Stable
Detailed Rationale & Key Rating Drivers
The revision in the rating assigned to the bank facilities of RERT
takes into account ongoing delays in the servicing of the debt
obligation.
Detailed description of the key rating drivers
Ongoing delays in debt servicing: There are ongoing delays in the
servicing of the interest and principle repayments for the term
loans availed. Furthermore, the over-draft limit has remained
overdrawn for more than 30 days.
Apart from RERT, the group operates three societies namely Rayat
Bahra Group of Institutes (RBGI; rated 'CARE D') established in
2005 and operates 12 colleges & 2 schools through its 2 campuses
located in Mohali and Hoshiarpur, Bahra Educational & Charitable
Society (BECS; rated 'CARE B; Stable') established in 2009 and
operates 6 colleges through a campus located in Shimla and Shri
Balaji Literary & Charitable Society established in 2009 and
operates 5 colleges through a campus located in Patiala.
S.K. CREATIONS: CARE Reaffirms B+ Rating on INR8.50cr LT Loan
-------------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
S.K. Creations (SKC), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 8.50 CARE B+;Stable Reaffirmed
Detailed Rationale and key rating drivers
The rating assigned to the bank facilities of SKC continues to
remain constrained by small scale of operations, leveraged capital
structure and weak coverage indicators. The rating further
continue to remain constrained by elongated collection period
along with its presence in competitive industry. The ratings,
however, draws comfort from experienced partners and moderate
profitability margins.
Going forward, the ability of the company to profitably increase
its scale of operations while improvement in the capital
structure and effective management of the working capital
requirements.
Detailed description of the key rating drivers
Key Rating Weaknesses
Small scale of operations: The scale of operations continues to
remain small marked by a total operating income (TOI) and gross
cash accruals of INR6.70 crore and INR1.58 crore respectively
during FY18 (FY refers to the period April 1 to March 31; based on
provisional results).Furthermore, the firm's net worth base stood
small at INR3.66 crore as on March 31, 2018.The small
scale limits the company's financial flexibility in times of
stress and deprives it from scale benefits.
Leveraged capital structure and weak coverage indicators: The
capital structure of the firm continues to remain leveraged as
marked by overall gearing ratio which remained above 1.50x as on
past three balance sheet dates ending March 31 '16-18' on account
of high reliance on external borrowings. Further, the debt
coverage indicators of the firm continues to remain weak as marked
by interest coverage which remained below 3x for the past three
financial years i.e. FY16-FY18 and total debt to GCA which
remained above 3.50x for the past three financial years i.e. FY16-
FY18.
Elongated collection period: The collection period of the firm
continues to remain elongated as the firm operates in a highly
competitive and fragmented nature of industry where the average
collection period given by the firm to its customers is up to 3 to
4 months. Further, the company receives credit period of around 3-
4 months from its suppliers, as they pay to their suppliers once
they receive payments from its customers. The firm maintains
inventory of around one month for smooth production processes. The
working capital requirement of the company largely met through
working capital borrowings which resulted into almost full
utilization of the working capital limits during the past 12
months ending July 31, 2018.
Highly competitive nature of the industry: SKC operates in a
highly competitive nature of industry where the presence of large
number of players in the organized sector. The industry is
characterized by low entry barriers due to low technological
inputs and easy availability of standardized machinery for
production. This further leads to high competition among the
various players and low bargaining power with the suppliers.
Key Rating Strengths
Experienced partners: SKC is a partnership firm established in
2014 by Mr. Deepak Prakash Aggarwal, Mr. Ajay Kumar Aggarwal and
Mr. Ankit Aggarwal Mr. Ajay Kumar Aggarwal is a graduate by
qualification, having an experience of around three decades in the
garment manufacturing and embroidery works industry through his
association with SKC and other associate entities. He is well
supported by his son, Mr. Ankit Aggarwal who is a graduate by
profession and has an experience of around 1.5 years in the
garment manufacturing and embroidery works industry through his
association with SKC. Mr. Deepak Prakash Aggarwal is also a
graduate by qualification, having experience of around one and
half decades in the garment manufacturing and embroidery works
industry through his association with his own proprietorship firm
i.e. Textile India Sale (operations discontinued in 2014). All the
three partners look after the overall operations of the firm.
Moderate profitability margins: The profitability margins of the
firm remained moderate in the past three financials years' i.e.
FY16-FY18 on account of revenue mainly based on job work where
margins largely depend on quality of work required. The PBILDT and
PAT margin stood above 35% and around 3.50% for the past three
financial years i.e. FY16-FY18.
New Delhi based, S.K. Creations (SKC) is a partnership firm
established in 2014 and started its commercial operations from
December 2015. It is currently being managed by Mr. Deepak Prakash
Aggarwal, Mr. Ajay Kumar Aggarwal and Mr. Ankit Aggarwal sharing
profit and loss in the ratio of 5:1:4. The firm is engaged in
manufacturing of garments and job work for embroidery on fabrics.
The firm has manufacturing facility located in Greater Noida
(Gautam Budh Nagar) and has the total capacity to manufacture
6,000 garments per month as on March 31, 2018. The firm has two
associate companies, S. K. Embroidery Private Limited and S.K.
Textile both engaged in manufacturing of garments and embroidery
works.
SADASHIVA OIL: CARE Raises Rating on INR5.37cr LT Loan to BB-
-------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Sadashiva Oil Industries (SOI), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 5.37 CARE BB-; Stable Revised
Facilities from CARE B+; Stable
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of SOI continue to be
tempered by short track record with small scale of operations,
geographic concentration risk and constitution of entity as
partnership firm with inherent risk of capital withdrawal. The
rating also factor in increase in total operating income,
improvement in capital structure although remained leveraged,
improved operating cycle days, moderate debt coverage indicators
and decrease in PBILDT margin albeit increase in PAT margin in
FY18 (Prov.) (refers to period from April 1 to March 31). The
rating, however, derive strength from experience of partners in
cotton industry, location advantage and stable outlook of cotton
industry. Going forward, ability of the company to increase its
scale of operations and improve profitability margins in
competitive environment and ability of the firm to improve capital
structure and debt coverage indicators would be the key rating
sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Short track record and small scale of operations: The firm came
into existence in 2015 and started its commercial operations in
March 2016. The total operating income of the firm stood at
INR30.05 crore during FY18 (Prov.) with low net worth of INR1.52
crore as on March 31, 2018 (Prov.) as compared to other peers in
the industry.
Moderate debt coverage indicators: The debt coverage indicators of
the firm stood moderate in FY18 (Prov.). The total debt to GCA has
improved from 7.38x in FY17 to 6.64x in FY18 (Prov.) due to
decrease in debt levels at the back of repayment of term loan.
However, the interest coverage ratio has marginally deteriorated
from 2.95x in FY17 to 2.24x in FY 18 (Prov.) due increase in
interest cost at the back of higher utilisation in working capital
limits.
Decrease in PBILDT margin albeit increase in PAT margin: The
PBILDT margin has decreased from 8.25% in FY17 to 5.47% in FY18
(Prov.) due to increase in trading activity of the firm coupled
with increase in raw material costs. The firm realizes relatively
lesser operating margins in trading of cotton lint and cotton seed
as compared to manufacturing of cotton oil and cotton cake. The
PAT margin was marked at 1.82% in FY18 (Prov.) as compared to
losses in FY17 due to increase in scale of operations and
absorption of fixed overheads such as interest and depreciation
costs.
Constitution of entity as partnership firm with inherent risk of
capital withdrawals: With the entity being partnership firm, there
is an inherent risk of instances of capital withdrawals by
partners resulting in lesser of entity's networth. Further, the
partnership firms are attributed to limited access to funding.
Geographic concentration risk: The firm is engaged in
manufacturing of cotton oil and cotton cakes and supplies the
finished products to its customers who are located in Telangana.
The firm has around 50 customers with them and all the customers
are based in Telangana. Even though the revenue of the firm is
going up y-o-y, it has geographic risk as all the customers are
based in only one region.
Key Rating Strengths
Experience of partners in cotton industry: SOI partnership firm
was started by Mr. Aakula Umapathi and his family members. Mr.
Aakula Umapathi is one of the active partners of the firm who has
around two decades of experience in the cotton industry and two
years of experience in the edible oil industry. Mr. Aakula
Umapathi is the Managing Partner who takes care of day to day
operations of the firm and the other partners are also actively
involved in day to day operation of the firm.
Increase in Total Operating Income (TOI): The total operating
income of the firm has increased at a growth rate of 84.24% from
INR16.31 crore in FY17 to INR30.05 crore in FY18 (Prov.). The firm
started its operation in March 2017. FY 18 is the first full year
of operation. The total operating income has increased due to
stabilization of manufacturing operations of the firm coupled with
increase in trading of cotton seeds and cotton lint. The firm has
earned 64% of the revenue from trading activity and 36 % of
revenue from trading activity in FY17 whereas the firm earned 67%
of the revenue from trading activity and 33 % of revenue from
trading activity in FY18 (Prov.).
Improved capital structure although leveraged: The capital
structure of the firm stood leveraged marked by debt equity ratio
and overall gearing ratio of 1.66x and 3.80x respectively as on
March 31, 2018 (Prov.) (as against 4.87x and 10.13x respectively
as on March 31, 2017). The debt equity and overall gearing ratio
improved due to repayment of term loan coupled with increase in
net-worth at the back of accretion of profits and infusion of
capital by the partner to the tune of INR0.33 crore in FY18
(Prov.).
Improved operating capital cycle days: The operating cycle of the
firm improved from 63 days in FY17 to 42 days in FY18 (Prov.) due
to decrease in inventory days. The operations of the firm have
started in March 2016. FY17 being the first full year of
operations, the firm has maintained high level of inventory
(cotton seed). However, in FY18, the firm reduced the level of
stocks to be maintained.
Due to the above said factor, the average inventory days has
decreased from 101 days in FY17 to 56 days in FY18 (Prov.).
The firm receives payment from its customers within 1-10 days from
the date of invoice. The firm pays its suppliers within
1-45 days from the date of invoice depending upon relationship
with the supplier. The average utilization of cash credit
facility was 90% for the last 12 months ended July 31, 2018.
Location advantage: SOI is located in one of the major cotton
growing areas in Telangana. Availability of raw material is not
expected to be an issue as the firm procures raw material (cotton
and seed) from the local suppliers Eashwara Sai Cotton Industries,
Sri Varshini Agro Industries and Sai Balaji Industries located in
and around Pidiched Village.
Stable outlook for cotton industry: Cotton plays an important role
in the Indian economy as the country textile industry is
predominantly cotton based. India is one of the largest producers
as well as exporters of cotton yarn. The Indian textile industry
contributes around 4 per cent to country's gross domestic product.
14 per cent to industrial production and 15 per cent to total
exports earnings. The industry is also the second largest employer
in the country after agriculture, providing employment to over 51
million people directly and 68 million people indirectly,
including unskilled women. The states of Gujarat, Maharashtra,
Telangana, Andhra Pradesh, Karnataka, Madhya Pradesh, Haryana,
Rajasthan and Punjab are the major cotton producers
in India.
Telangana Based, Sadashiva Oil Industries (SOI) was established in
the year 2015 and promoted Mr. Umapathi and their relatives. The
firm is engaged into manufacturing of cotton oil and cotton cake
by crushing cotton seeds. The firm purchases its raw material from
local suppliers in Hyderabad and converts them into oil and cakes
used in poultry farms for feeding purposes. The firm supplies its
finished products of cotton oil and cotton cake to the local
customers located in Telangana.
SAI CONSTRUCTIONS: CARE Assigns B+ Rating to INR1cr LT Loan
-----------------------------------------------------------
http://www.careratings.com/upload/CompanyFiles/PR/Sai%20Constructi
ons-08-20-2018.pdf
CARE Ratings has assigned rating to the bank facilities of Sai
Constructions (SC), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 1.00 CARE B+; Stable Assigned
Short-term Bank
Facilities 5.00 CARE A4 Assigned
Detailed Rationale& Key Rating Drivers
The ratings assigned to the bank facilities of SC are tempered by
small scale of operations with fluctuating total operating income,
short term revenue visibility from current order book position,
working capital intensive nature of operations, customer
concentration risk, tender based nature of operations, highly
fragmented industry with intense competition from large number of
players, profitability margins are susceptible to fluctuation in
raw material prices and constitution of the entity as partnership
firm with inherent risk of withdrawal of capital. The ratings are,
however, underpinned by long track record of the firm and
experienced partners in the construction industry, satisfactory
profitability margins albeit fluctuating during review period,
comfortable capital structure, debt coverage indicators and
stable outlook for construction industry.
Going forward, ability of the firm to increase its scale of
operations and maintain profitability margins in competitive
environment, ability to bag with new orders and manage the working
capital requirements effectively would be key rating
sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Small scale of operations with fluctuating total operating income:
The scale of operations of the firm is relatively small marked by
total operating income of INR6.25 crore in FY18 (11M CA Certified
Prov.) with low net worth base of INR3.11 crore as on February 28,
2018 (CA Certified Prov.) as compared to other peers in the
industry. The TOI of the firm has been fluctuating during the
review period. The TOI of the firm has increased steadily y-o-y at
a CAGR of 135.94% i.e., from INR2.47 crore in FY15 to INR13.75
crore in FY17 as the firm could successfully bid and execute
orders. Further the firm has achieved a TOI of INR13.00 crore in
FY18(Prov) as the firm could not secure new orders in FY18 at the
back of high competition coupled with customer concentration in
terms of procurement of the project as the firm is majorly
executing the work orders from ministry of defense.
Short term revenue visibility from current order book position:
The firm has an order book of INR11.93 crore as on July 18, 2018
and the same is likely to be completed by April 2019. The said
order book is related to civil works and allied services to
buildings pertaining to different departments of ministry of
defense. However, the order in hand provides revenue visibility to
the firm for short term.
Working capital intensive nature of operations with high customer
concentration risk: The firm operates in working capital intensive
nature of operations. The operating cycle of the firm has improved
from 63 days in FY16 to 47 days in FY17 mainly on account of
decrease in inventory period from 62 days in FY16 to 48 days in
FY17. The firm is engaged in civil construction works primarily
for ministry of defense wherein receipt of payments for works
completed takes around 15 days from the date of bill raised. The
firm purchases the raw material on cash basis. Furthermore, 100%
of the revenue comes from single customer i.e. ministry of defense
resulting in high customer concentration risk.
Tender based nature of operations: The firm receives its work
orders from Ministry of Defense which are tender- based. The
revenues of the firm are dependent on the ability of the partners
to bid successfully for the tenders and execute the same
effectively. However, the partner's long experience in the
industry and long term association with different departments of
ministry of defense for more than two decades mitigates the risk
to an extent. Nevertheless, there are numerous fragmented &
unorganized players operating in the segment which makes the
industry highly competitive. Furthermore, the profitability
margins also come under pressure because of competitive nature of
the tender based contract works of the firm.
Highly fragmented industry with intense competition from large
number of players: The firm is engaged in civil construction which
is highly fragmented industry due to presence of large number of
organized and unorganized players in the industry resulting in
huge competition.
Constitution of the entity as partnership firm with inherent risk
of withdrawal of capital: The firm being a partnership firm is
exposed to inherent risk of capital withdrawal by partners due its
nature of constitution. Any substantial withdrawals from capital
account would impact the net worth and thereby the gearing levels.
Key Rating Strengths
Long track record and experienced partners for more than two
decades in the construction industry: SC was established in the
year 1992, hence, it has long track record. The partners of the
firm Mr. B. Madhava reddy (Managing Partner), Mr. M. Janardhan
reddy and Mr. C. Narsimha reddy all are qualified LLB graduates
and have more than two decades of experience in the line of
construction. The directors have established good relationship
with suppliers and customers due to long track record and presence
in the business for a long period of time.
Satisfactory profitability margins, although remained fluctuating
The firm has satisfactory profitability margins due to better
margins associated with projects under execution. However the
PBILDT margins have been fluctuating during the review period due
to volatility in raw material prices. The PBILDT margin of the
firm has increased from 9.64% in FY16 to 10.61% in FY17 due to
increase in total operating income. Further the PBILDT margin
stood at 10.24% in 11MFY18 (CA Certified Prov.). The PAT margin
has also been increased from 6.04% in FY16 to 7.02% in FY17 on
account of increase in PBILDT. Further the PAT margin stood at
6.56% in 11MFY18 (CA Certified Prov.).
Comfortable capital structure and debt coverage indicators The
capital structure and debt coverage indicators of the firm
remained comfortable during review period. Debt equity ratio and
overall gearing ratio of the firm remained below unity for the
last three balance sheet date ended March 31st 2017. As on
February 28, 2018(11M CA Certified Prov.), the same continued on
account of increase in tangible net worth due to accretion of
profits. The overall gearing ratio of the firm has improved from
0.06X as on March 31st, 2016 to 0.02x as on March 31st, 2017 due
to decrease in total debt. The total debt of the firm consisting
of vehicle loan of INR0.07 crore as on March 31, 2017. Further the
overall gearing ratio deteriorated to 0.33x as on
February 28, 2018(11M CA Certified Prov.) due to increase in total
debt levels at the back of higher utilization of working capital
bank borrowings.
The debt coverage indicators marked by interest coverage and
TD/GCA remained comfortable during the review period. The interest
coverage ratio has improved from 6.18x in FY16 to 7.91x in FY17
due to increase in PBILDT. Further the interest coverage ratio
stood at 7.11x in 11M-FY18 (CA Certified Prov.). The TD/GCA has
improved from 0.22x in FY16 to 0.07x in FY17 due to decrease in
total debt. Further in 11MFY18 (CA Certified Prov.) TD/GCA stood
at 2.06x due to increase in utilization of working capital bank
borrowings along with decrease in gross cash accruals.
Stable outlook for construction industry: The construction
industry contributes around 8% to India's Gross domestic product
(GDP). Growth in infrastructure is critical for the development of
the economy and hence, the construction sector assumes an
important role. The sector was marred by varied challenges during
the last few years on account of economic slowdown, regulatory
changes and policy paralysis which had adversely impacted the
financial and liquidity profile of players in the industry. The
Government of India has undertaken several steps for boosting the
infrastructure development and revive the investment cycle. The
same has gradually resulted in increased order inflow and movement
of passive orders in existing order book.
The focus of the government on infrastructure development is
expected to translate into huge business potential for the
construction industry in the long-run. In the short to medium term
(1-3 years), projects from transportation and urban development
sector are expected to dominate the overall business for
construction companies. The implementation of Goods and Service
Tax might result in short run operational issues and pressure on
working capital until the process is streamlined. Going forward,
firms with better financial flexibility would be able to grow at a
faster rate by leveraging upon potential opportunities.
Hyderabad based, Sai Constructions (SC), was incorporated in the
year 1992 as a partnership firm, with its registered office at
Barkatpura, Hyderabad. The partners of the firm are Mr. B. Madhava
reddy (Managing Partner), Mr. M. Janardhan reddy and Mr. C.
Narsimha reddy who have experience for more than two decades in
construction industry. The firm is primarily engaged in civil
construction works relating to laying of roads, constructing of
buildings, water pipe lines. The firm procures its work orders
through online tenders majorly from Ministry of Defense. The firm
has order book position of INR11.93 crore as on July 17, 2018 and
the same is likely to be completed by April 2019.
SANRHEA TECHNICAL: CARE Hikes Rating on INR8.30cr Loan to B+
------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Sanrhea Technical Textile Limited (STTL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term/Short 8.30 CARE B+; Stable/CARE A4
Term Bank Rating revised from CARE B;
Facilities Stable/CARE A4 and removed
From issuer not cooperating
Short term Bank 0.18 CARE A4 Rating reaffirmed
Facilities and removed from issuer not
cooperating
In the absence of minimum information required for the purpose of
rating, CARE was unable to express an opinion on the ratings of
STTL and in line with the extant SEBI guidelines, CARE revised the
ratings of bank facilities of the company to 'CARE B; ISSUER NOT
COOPERATING' and 'CARE A4; ISSUER NOT COOPERATING'. However, the
company has now submitted the requisite information to CARE. CARE
has carried out a full review of the ratings and the ratings stand
at 'CARE B+; Stable' and 'CARE A4'.
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of Sanrhea Technical
Textile Limited (STTL) are continue to remain constrained on
account of fluctuating profitability, moderately leveraged capital
structure, moderate debt coverage indicators and moderate
liquidity position in FY18 (refers to the period April 1 to March
31). The ratings further constrained on account ongoing capex for
technology up gradation along with its presence in the fragmented
nature of industry with high degree of competition.
The ratings continue to derive strength from its growing scale of
operations along with experience of the promoters, established
track record and reputed clientele. The ability of STTL to
increase its scale of operations by timely execution of orders in
hand and strengthening its order book with efficient working
capital management will remain the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Fluctuating profit margins: Profit margins stood fluctuating for
past three years. During FY18, PBILDT margin has declined by 213
bps and stood at 8.48% as against to 10.62% during FY17.
Consequently, the PAT margin has also declined by 167 bps and
stood at 1.59% during FY18 as against to 3.27% during FY17 due to
higher depreciation and interest & finance cost during the year.
Gross Cash Accruals (GCA) declined marginally and stood at INR1.47
crore for FY18 as compared to INR1.56 crore during FY17.
Moderately leveraged capital structure and moderate debt coverage
indicators: As on March 31, 2018, the capital structure of STTL
has improved over the previous year and stood moderately leveraged
as marked by an overall gearing ratio stood at 1.46x as against
2.53x as on March 31, 2017. In FY18, Debt coverage indicators
stood at moderate position marked by an interest coverage ratio
stood moderate at 2.07x as against 2.28x during FY17 due to
increase in interest & finance charges. Total debt to GCA has
deteriorated and stood at 5.49x as on March 31, 2018 as against
6.50x as on March 31, 2017 due to decrease in the total debt.
Moderate Liquidity: Liquidity position stood moderate as on
March 31, 2018 as marked by current ratio stood at 1.22 times as
against 1.04 times as on March 31, 2017. During FY18, working
capital cycle stood elongated at 118 days as against 121 days
during FY17 on account of decline in inventory period. Average
utilization of its working capital facilities remained 95% during
past 12 months period ended July 2018.
On-going capex: STTL is ongoing a capex for replacement of old
machineries with new machineries for technology up-gradation
amounting to INR1.08 crore which will be completed by December
2018. The same is to be funded through term loan of INR0.60 crore
and internal accruals and unsecured loans of INR0.48 crore.
Key Rating Strengths
Growing scale of operations: During FY18, Total Operating Income
(TOI) of the company grew by 15.05% and stood at INR30.53 crore as
against INR26.54 crore during FY17 mainly on account of demand
from existing customers.
Experienced promoters: Mr Tushar Patel has experience of more than
two decades in fabric industry. He is engaged with STTL from its
incorporation. He handles overall operations of STTL. Other
directors also hold moderate experience in same line of business.
Established track record of operations and reputed clientele
STTL is in operations from the year 1983. It has long standing
relations with the suppliers and customers. The company imports
raw material mainly from China, Turkey and Germany. STTL has
association with reputed clientele for more than a decade.
Gandhinagar (Gujarat) based STTL was incorporated in June 1983 and
named as of "Kruti Marketing Limited" and later renamed as
"Mahendra Polycot Limited". In April 1997, entity was named as
Sanrhea Technical Textile Limited (STTL) and got listed on
platform of Bombay Stock Exchange. STTL is engaged in
manufacturing of technical fabrics namely dipped chafer fabric,
liner fabric, belting fabrics and various types of nylons and
polyesters. These products are used in tyre industry, conveyer
belts, rubber vulcanizing industry, RFL dipping plants, etc. STTL
is an ISO 9001:2008 certified company. The company has 29
projectile looms with an installed capacity of 160 tons per month
based on type of fabric manufactured from installed looms as on
March 31, 2018.
SHREE JEE: CARE Assigns B+ Rating to INR6.38cr LT Loan
------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Shree
Jee Educational and Welfare Society (SJEWS), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 6.38 CARE B+; Stable Assigned
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of SJEWS is primarily
constrained on account of modest scale of operations with
continuous decline in profitability margins and reported net loss
in FY18 (FY refers to period from April 1 to March 31). The
rating, further, constrained on account of weak solvency position
and its presence in regulated and competitive education sector.
The rating, however, favorably takes into account the vide
experience of the qualified promoters and stable outlook of
educational industry. The rating, further, derives strength from
comfortable liquidity position.
The ability of the society to increase fresh enrolments in view of
highly competitive market scenario and its ability to increase
profitability and maintain solvency position are the key rating
sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Modest albeit growing scale of operations coupled with net loss in
FY18: Total Operating Income (TOI) of SJEWS has shown a growing
trend in past three financial year ending FY18 owing to increase
in number of student and tuition fees. During FY18, TOI has
increased by 26.43% over FY17 however stood modest at INR7.25
crore mainly due to increase in total number of students from 2029
in AY17 to 2050 in AY18.
The fresh enrolments of the students in SJEWS have continuously
declined in past three academic year ended AY18 mainly on account
of decline in enrolment in Hindi Medium.
SBID margin of the society has witnessed continuous declined
during past three financial year ended FY18 owning to higher
employee cost as well as other administration expenses. During
FY18, SBID margin has significantly declined by 595 bps over FY17
owing to higher other expenses and stood moderate at 14.45% and
owing to significant decline in SBID margin and higher
depreciation expenses, SJEWS has reported net loss of INR0.65
crore in FY18.
Weak solvency position: The capital structure of SJEWS stood
leveraged with an overall gearing of 3.33 times as on March 31,
2018, deteriorated from 1.86 times as on March 31, 2017 mainly due
to disbursement of new term loan, higher utilization of working
capital bank borrowing. Further, debt service coverage indicators
of SJEWS stood weak with total debt to GCA of 14.81 times as
on March 31, 2018. Owing to disbursement of new term loan,
interest cost has gone up in FY18 and hence, interest coverage
ratio also declined from 2.30 times in FY17 to 1.58 times in FY18.
Regulatory risk associated with education sector: The main driver
for growth in the education sector is India's booming population
increasing at more than 2% annual rate and the increasing
propensity of the middle income class to spend on education.
However, since the privatization of education commenced in India,
several private colleges and institutes have been established in
different parts of country. There is an increasing preference for
quality private educational institutions amongst the urban
population. In the absence of any umbrella regulatory body
governing K-12 schools and education being covered under
'Concurrent List', regulation confusion pervades with some states
permitting "for profit" and others forbidding "commercialization"
of education.
Key Rating Strengths
Experienced and qualified management: SJEWS was formed in 1988 by
Mr. Hemant Kumar Sharma (Director) who has more than three decade
of experience in the industry and looks after overall management
of the school including financial control, development plan etc.
Mrs. Sadhana Hemant Shamra (Deputy Director) who also have
experience of more than two decade in the industry and looks after
coordination between educational and administrative staff.
Further, Mr. Hari Das Parikh, Principal who has more than four
decades in the education industry and looks after educational
aspect of the school. Top management are assisted by team of 79
qualified teachers and staff of 38 members for general
administration.
Stable outlook of educational services industry: The education
sector in India is poised to witness major growth in the years to
come as India will have world's largest tertiary-age population
and second largest graduate talent pipeline globally by the end of
2020. As of now the education market is worth US$ 100 billion.
Currently, India's higher education system is the largest in the
world enrolling over 70 million students while in less than two
decades, India has managed to create additional capacity for over
40 million students.
Comfortable liquidity position: The fees realization structure of
the school is monthly basis, i.e. April to March. Further, its
major repayment of term loans is also monthly. Prior to any other
operating expenses, the cash generated from fees collection is
utilized in servicing of its debt liability which results in
timely servicing of its debts. Furthermore, the average
utilization of its working capital limit remained between 50-60%
during past 12 months ended June 2018.
Shree Jee Educational and Welfare Society (SJEWS) were formed as a
society in 1988, under the Rajasthan Society Registration Act,
1958. The society was established with a view to establish and
operate school. Currently, SJEWS is operating a school in the name
of Shree Jee Public Sr. Sec. School (SJPS) which is affiliated
with Rajasthan Board of Secondary Education (RBSE) to provide full
time education in English and Hindi Medium up to Senior Secondary
level in Commerce and Science Stream and located at Nathdwara,
Rajsamand. SJPS offers classes Nursery to 12th in English Medium
along with 10th to 12th in Hindi Medium also for Academic Year
2018-19.
The society provides the hostel facility with total capacity of 30
students which is fully occupied and transportation facility
with fleet of 23 buses to the students.
SHREE RADHA: CARE Assigns 'B' Rating to INR9cr LT Loan
------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Shree
Radha Krishna Alloys Private Limited (SRKAPL) as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 9.00 CARE B; Stable Assigned
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of SRKAPL is
constrained by its limited and modest scale of its operations
coupled with revenue de-growth during FY15-FY17 however has
improved during FY18, weak solvency and debt coverage indicators,
exposure of margins to the volatility in raw material prices,
highly fragmented and competitive nature of industry and inherent
cyclicality associated with the steel industry. The rating however
derive strength from the experience and resourcefulness of its
promoters and geographical advantage of manufacturing facility
being located in close proximity to raw material sources and its
customer base. Going forward the ability of the company to scale
up its operations profitably would be the key rating
sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Modest scale of operations coupled with revenue de-growth: The
size of the operations of the firm is modest and its net worth
base is small (INR8.92 crore as on March 2018). TOI has dropped
from INR215.3 crore in FY15 to INR81.2 crore in FY17, however has
witnessed improvement in FY18 to INR105 crore. The small scale
limits the firm's financial flexibility in times of stress.
Weak solvency position and debt coverage indicators: With
significant burden of interest on working capital borrowings,
interest coverage ratios was moderate 1.51x in FY18 (1.28x in
FY17). As against present cash accruals of INR1.03 crore in
FY18 (FY17: INR0.83 crore), company has loan repayments of INR0.88
crore p.a. Therefore sustenance of GCA at present
levels will be critical for timely debt repayment.
Low profitability margins owing to low value addition and remain
susceptible to raw material price fluctuations: The PBILDT margin
and PAT margin of the company stood low at 3.07% and 0.03%
respectively in FY18 (Prov.). The value addition in the steel
construction materials like TMT bars, MS angles and channels, etc.
is low, resulting into low product differentiation in the market.
Profitability margin of the company has been historically on the
lower side owing to low value addition. This apart, interest
burden on working capital borrowing also restricts the net
profitability of the company.
Highly fragmented and competitive industry: The spectrum of the
steel industry in which the firm operates is highly fragmented and
competitive marked by the presence of numerous regional players in
the region. Given the fact that the entry barriers to the industry
are low, the players in the industry do not have pricing power and
are exposed to competition induced pressures on profitability.
Also, threat from imports always remains high.
Susceptible to cyclicality of the steel industry and raw material
price fluctuations: 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. Apart from the demand side
fluctuations, the highly capital intensive nature of steel
projects along-with the inordinate delays in the completion
hinders the responsiveness of supply side to demand movements.
Furthermore, the firm has no long-term contract with any raw
material suppliers and the firm sources the material on need basis
as per the price prevailing in the market. This exposes the firm's
margins to fluctuations in the prices of raw materials.
Key Rating Strengths
Experienced & resourceful promoters: The day to day activities of
the company is taken care by the promoters Mr. Vinod Kumar Agarwal
and Mr. Sanjay Kumar Agarwal. The promoters of SRKAPL have
considerable experience of more than twenty five years in the
steel industry.
Manufacturing facility located in close proximity to raw material
sources and its customer base: SRKAPL's manufacturing facility is
located in Hindupur, strategically located in one of the major
steel producing regions of South India with many players located
in the same region and SRKAPL acquires raw materials from its
suppliers located in close proximity resulting in benefits derived
from lower logistic cost, easy and timely availability and
procurement of raw materials. With close to 65% of the sales of
SRKAPL coming from Karnataka and with Hindupur being less than 150
km away from Bengaluru, company enjoys easy access to its customer
base.
Incorporated on March 13, 2003, Shree Radha Krishna Alloys Private
Ltd (SRKAPL) was established by the promote directors Mr. Vinod
Kumar Agarwal, Mr. Sanjay Kumar Agarwal. About five Acres of land
developed by APIIC, Andhra Pradesh was acquired in Hindupur and
company owns and manages 4 units and is engaged in the manufacture
of ingots, angles, girders and TMT bars.
SRKAPL is involved in manufacturing of TMT Bars with German
technology license from THERMEX (GERMANY) with brand Name of 'VVS
THERMEX TMT BARS'. Company's day to day operations are managed by
its directors. SRKAPL has an installed capacity of 12000 MT for
ingots, 48000 MT for TMT bars and 26500 MT for angles, girders.
SHYAMA AGRO: CRISIL Assigns 'B' Rating to INR6cr Bank Loan
----------------------------------------------------------
CRISIL has assigned its 'CRISIL B/Stable' rating to the long-term
bank facility of Shyama Agro Foods (SAF). The rating reflects
exposure to high project implementation risks and expected small
scale of operations. These weaknesses are partially offset by the
extensive experience of the proprietor in the construction
industry.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Fund-based Bank
Facilities 6.00 CRISIL B/Stable (Assigned)
Key Rating Drivers & Detailed Description
Weaknesses
* Exposure to risks related to timely implementation of the
ongoing project: The firm is in the process of constructing a cold
storage. While it has prospective customers, it is exposed to
implementation risks owing to the early stage of construction and
the absence of funding closure for the project. Timely completion
of the project will be a rating sensitivity factor.
* Expected small scale of operations: The scale is likely to
remain small in the initial years of operations.
Strength
* Experience of the proprietor: The proprietor has an experience
of over a decade in the construction industry and has established
relationships with suppliers and prospective customers.
Outlook: Stable
CRISIL believes SAF will continue to benefit from the extensive
industry experience of the proprietor. The outlook may be revised
to 'Positive' upon timely completion of the project and
stabilisation and scaling up of operations thereafter, leading to
substantial net cash accrual. The outlook may be revised to
'Negative' if there is any delay in project execution and hence in
commencement of operations.
SAF was established in 2018 by Mr Amarnath Jha. The firm is
currently setting up a cold storage facility in Darbhanga, Bihar.
SOBHA PROJECTS: Ind-Ra Affirms 'BB+' LT Rating, Outlook Positive
----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has revised Sobha Projects and
Trade Private Limited's (SPTPL) Outlook to Positive from Stable
while affirming its Long-Term Issuer Rating at 'IND BB+'.
The instrument-wise rating actions are:
-- INR250 mil. Long-term loans due on October 2020 assigned with
IND BB+/Positive rating;
-- INR390 mil. (reduced from INR490 mil.) Fund-based facilities
rating affirmed; Outlook revised to Positive from Stable with
IND BB+/Positive/IND A4+ rating;
-- INR360 mil. (increased from INR260 mil.) Non-fund-based
facilities rating affirmed; Outlook revised to Positive from
Stable with IND BB+/Positive/IND A4+ rating;
-- INR50 mil. (reduced from INR100 mil.) Proposed fund-based
facilities* rating affirmed; Outlook revised to Positive from
Stable with Provisional IND BB+/Positive/Provisional IND A4+
rating; and
-- INR450 mil. (reduced from INR650 mil.) Proposed non-fund-
based facilities* rating affirmed; Outlook revised to
Positive from Stable with Provisional IND BB+/Positive/
Provisional IND A4+ rating.
* The ratings are provisional and shall be confirmed upon the
sanction and execution of loan documents for the above facilities
by SPTPL to the satisfaction of Ind-Ra.
KEY RATING DRIVERS
The Positive Outlook reflects a healthy growth in SPTPL's revenue
to INR1,558 million in FY18 (FY17: INR1,020 million) due to higher
order execution, backed by a strong order book of INR5.2 billion
(3.34x of FY18 revenue) as of July 2018. The scale of operations
was medium. A successful execution of the order book will cause
revenue to more than double in FY19. The company had achieved
revenue of around INR617 million during 3MFY19. It received around
20% of advances from related party during FY18. FY18 financials
are provisional in nature.
The ratings remain constrained by the company's concentrated order
book with the top five customers accounting more than 80% and the
top five projects contributing more than 66%. However, the
concentration risk is partly mitigated due to its strong
clientele, which consists of reputed players in the real estate
industry such as Prestige Estate Projects Limited, Sobha Limited,
Mantri Developers Private Limited and Emami Limited.
The ratings continue to reflect SPTPL's elongated working capital
cycle of 109 days in FY18P (FY17: 127 days) with receivable period
of 179 days (165 days) and inventory period of 227 days (156
days). Return on capital employed was 25% in FY18P (FY17: 16%) and
EBITDA margin was healthy at 13%-14% over FY14-FY18 (FY18P: 13.8%,
FY17: 13.7%). Ind-Ra expects the margins to remain at similar
levels over the medium term owing to execution of higher
mechanical electrical and plumbing projects.
The ratings factor in SPTPL's continued modest credit metrics with
interest coverage (operating EBITDA/gross interest expense) of
2.5x in FY18P (FY17: 1.8x) and net leverage (adjusted net
debt/operating EBITDA) of 3.1x (4.0x). The improvement in the
credit metrics was mainly on account of an increase in operating
EBITDA to INR215 million in FY18 (FY17: INR140 million), resulting
from the improvement in the revenue.
The ratings are also constrained by project execution and funding
risks inherent to the real estate business.
However, the ratings are supported by SPTPL's comfortable
liquidity position as indicated by 76% average use of its fund-
based facilities during the 12 months ended June 2018.
The ratings continue to benefit from the promoter's more than two
decades of experience in the real estate and construction industry
in India and the Middle East.
RATING SENSITIVITIES
Positive: Successful execution of the order book, improvement in
the working capital cycle and receipt of advances from related
parties, leading to a significant improvement in the credit
metrics, all on a sustained basis, could lead to a positive rating
action.
Negative: Inability to improve the working capital cycle or a fall
in the operating profitability leading to weakening of the
liquidity position on a sustained basis will be negative for the
ratings.
COMPANY PROFILE
SPTPL is a part of the STC Group, headed by Mr. PNC Menon. The
group has interests in real estate and construction businesses in
Oman, the UAE, Qatar and India. Sobha Limited, a Bangalore-based
real estate company, is the group's flagship company.
SPTPL was engaged in providing fire and safety services to the
civil construction industry, but has now expanded into mechanical,
electrical and plumbing services.
SONIC CERAMIC: CARE Assigns B+ Rating to INR21cr LT Loan
--------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Sonic
Ceramic Private Limited (SCPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 21 CARE B+; Stable Assigned
Short-term Bank
Facilities 1 CARE A4 Assigned
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of SCPL are
constrained on account of implementation and stabilization risk
associated on-going debt funded project. The ratings further
remained constrained on accounts of its presence in the highly
competitive ceramic industry and fortune linked with demand from
real estate industry along with susceptibility of profit margins
to volatility in raw material and fuel prices.
The ratings, however, derive strength from experienced promoters
in the ceramic tiles industry with established marketing network
of other group entities and strategic location of its proposed
tile manufacturing unit.
SCPL's ability to quick stabilization of operations and achieve
envisaged level of revenue and profitability will remain the key
rating sensitivity.
Detailed description of the key rating drivers
Key Rating Weaknesses
Implementation and stabilization risk associated ongoing debt
funded project: SCPL is undertaking greenfield project for
manufacturing of wall tiles having total cost of INR31.10 crore,
envisaged to be funded by debt/equity mix of 1.21times. Till
January 31, 2018, SCPL has incurred 59% of total cost of project
and envisaged to commence operation by end of March 31, 2018. As
part of the cost is yet be incurred the firm is exposed to project
implementation and consequent post implementation risk mainly
comprising of stabilization of operations from the new plant and
salability risk.
Presence in a highly competitive ceramic industry and fortunes
linked to demand from cyclical real estate sector: SCPL operates
in a highly competitive segment of the ceramic industry marked by
low entry barriers, presence of large number of organized and
unorganized players with capex planned by existing players in the
industry as well as new entrants. Most of the demand for the tiles
comes from the real estate industry, which, in India is highly
fragmented and cyclical. Thus any negative impact on real estate
industry will adversely affect the prospects of ceramic tiles
industry as well as the company.
Susceptibility of operating margins to volatility in raw material
and fuel costs: Prices of raw material i.e. clay & feldspar is
market driven and expected to put pressure on the margins of tile
manufacturers. Another major cost component is fuel expenses in
the gas form which is required to fire the furnace. The
profitability of SCPL remains exposed to volatile LNG prices,
mainly on account of its linkages with the international
demand/supply of natural gas. Hence, SCPL's ability to control its
cost structure would be crucial going forward especially
in light of competitive environment.
Key Rating Strengths
Experienced promoters and well established presence in the ceramic
industry: SCPL has been promoted by six directors Mr. Ratilal
Nagarbhai Matholiya, Mr. Rameshkumar Bhudarbhai Lakhani, Mr.
Bharatbhai Mathurbhai Khambhaliya, Mr. Pratapbhai Bhupatbhai
Matholiya, Mr. Shailesh Gopalbhai Kanetiya, Mr. Vishal
Ghanshyambhai Kanetia. All the promoters hold long experience of
more than a decade in same line of business through their
association other associate firms. These associate entities are
engaged into manufacturing of either vitrified tiles or wall tiles
and has over 300 dealers based all over India. SCPL has an
advantage of this established selling and distribution network of
its associate entities SCPL will also get benefits of existing
marketing and distribution network of its other associate firms.
Located in the ceramic hub with easy access to raw material, fuel
and labor: SCPL is located in Morbi and being located in a cluster
provides the company with easy access to raw materials, primary
fuel and all other utilities. Further, the cluster is well
connected by a good road network which provides logistical
benefits as well.
Morbi (Gujarat) based SCPL was incorporated in October 2007 as a
private limited company by six promoters to undertake a green
field project for manufacturing of wall tiles. SCPL is setting-up
a new plant in Morbi (Gujarat) with a proposed installed capacity
of 52800 Metric Tonnes of wall tiles Per Annum (MTPA). The total
project cost is envisaged at INR31.10 crore, which is to be funded
through debt/equity mix of 1.21x.
The promoters of the company have long experience in the ceramic
industry through their association with different established
entities. These entities are engaged in manufacturing of vitrified
tiles, wall tiles and floor tiles. These associate concerns of
SCPL are Suzlon Ceramic, Shubham Ceramic, Mega Vitrified Private
Limited and Armano Vitrified LLP. SCPL envisages commencing
operations by end of March, 2018 onwards.
WELCOS SPUNFAB: CARE Assigns B+/A4 Ratings to INR9.50cr Loan
------------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Welcos
Spunfab (WS), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term/Short- 9.50 CARE B+; Stable/CARE A4
Term Bank Assigned
Facilities
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of Welcos Spunfab (WS)
are primarily constrained on account of its modest scale of
operations with thin profitability, leveraged capital structure
and moderate liquidity position. The ratings, further, constrained
on account of highly fragmented, competitive and seasonal industry
with vulnerability of margins to fluctuation in raw material
prices, constitution as a partnership concern and risks associated
with the export markets. The ratings, however, favourably take
into account wide experience of the partners in the textile
industry and location advantage by virtue of being situated in
textile cluster of Bhilwara.
WS's ability to increase its scale of operations while improving
profitability along with capital structure and efficient
management of working capital would be the key rating
sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Modest scale of operations with thin profitability, leveraged
capital structure and moderate liquidity position: The scale of
operations of the firm stood modest with Total Operating Income
(TOI) of INR46.89 crore and PAT of INR0.24 crore in FY18 and
tangible net-worth of INR2.28 crore as on March 31, 2018. However,
TOI of the firm has witnessed continuous growth and has grew at a
Compounded Annual Growth Rate (CAGR) of around 57.03% in the last
three financial years ended FY18 on account of increase in trade
sale.
The firm is engaged in the trading of fabrics and hence,
profitability margins stood thin with PBILDT and PAT margin of
2.24% and 0.52% respectively in FY18. PBILDT margin has declined
by 51 bps on account of higher cost of traded goods sale. Despite
decline in PBILDT margin, PAT margin has increased marginally in
FY18 as compared to FY17 on account of lower interest and
depreciation cost. GCA has also improved by 10.77% in FY18 as
compared to FY17.
Capital structure of the firm stood leveraged with an overall
gearing of 2.96 times as on March 31, 2018, deteriorated from 2.39
times as on March 31, 2017 on account of withdrawal of capital.
Debt service coverage indicators stood weak marked by Total debt
to GCA of 17.02 times as on March 31, 2018, although improved from
20.19 times as on March 31, 2017 on account of lower utilisation
of working capital bank borrowings as on Balance Sheet date and
increase in gross cash accruals. Interest coverage also improved
from 1.77 times in FY17 to 1.92 times in FY18 on account of higher
proportionate lower interest cost in FY18 as compared to FY17.
The operating cycle of the firm stood moderate at 62 days in FY18
improved from 82 days in FY17 on account of decline in inventory
and collection period. Further the firm also exports its products
owing to which the operating cycle remains elongated. Current
ratio stood moderate at 1.10 times whereas quick ratio stood below
unity at 0.67 times as on March 31, 2018. The firm has utilized
around 85% of its working capital bank borrowings during the past
12 months ended July 31, 2018.
Highly fragmented, competitive and seasonal industry with
vulnerability of margins to fluctuation in raw material prices:
The Indian textile industry is highly fragmented in nature. The
industry is characterized by a large number of small players
due to the low entry barriers in the industry. The high degree of
fragmentation also leads to stiff competition amongst the
manufacturers. Smaller companies in general are more vulnerable to
intense competition and have limited pricing flexibility, which
constrains their profitability as well. Yarn is the main raw
material used by the company. The price of key raw material has
been volatile in nature and the company is exposed to the raw
material price fluctuation risk due to high inventory holding
period.
Risks associated with the Export Markets: WS is currently
exporting in Afghanistan, UAE & Saudi Arabia and is currently
generating 75% of its Total Operating Income from these countries.
Any global event may affect the trade in adverse manner and can
result in decline in the export sales.
Constitution as a partnership concern: Further, its constitution
as a partnership concern with moderate net worth base restricts
its overall financial flexibility in terms of limited access to
external fund for any future expansion plans. Furthermore, there
is an inherent risk of possibility of withdrawal of capital and
dissolution of the firm in case of death/insolvency of proprietor.
Key Rating Strengths
Wide experience of the partners in the textile industry: Mr Naresh
Jain, post graduate by qualification, has experience of more than
a decade in the textile industry and looks after production
functions of the firm. Mrs Manjula Jain (Mr Naresh Jain's mother),
post graduate by qualification, also looks after the overall
operations of the firm and is also having experience of more than
a decade. Further, the partners are supported by a team of highly
qualified managerial personnel having long standing experience in
the industry.
Location advantage by virtue of being situated in textile cluster
of Bhilwara: The firm is located at Bhilwara which is one of the
largest textile clusters in India and majority of these industries
are engaged in the manufacturing of synthetic yarn accounting for
nearly 40% of India's total synthetic yarn production and nearly
50% of India's total polyester fabrics and suiting production.
WS's presence in the textile manufacturing region results in
benefit derived from cheap and easy availability of raw material,
processing of grey fabrics at cheaper cost and low transportation
and storage cost.
Welcos Spunfab (WS) was formed as a partnership concern in 2005 by
Mr Naresh Jain and Mrs Manjula Jain. The firm is engaged in the
trading of unstitched fabrics which it gets manufactured on job
work basis. WS deals mainly in four major types of fabric namely -
- cotton, polyester, suiting and shirting. The firm procures yarn
and from local markets and exports in Afghanistan, UAE and Saudi
Arabia.
* INDIA: Court Allows Bankruptcy Action V. India Power Producers
----------------------------------------------------------------
Rajesh Kumar Singh and Upmanyu Trivedi at Bloomberg News report
that an Indian court rejected a plea by the nation's power
producers to exempt generators from central bank's rules on
repaying loans, according to the Independent Power Producers
Association of India.
The court's order allows lenders to start bankruptcy proceedings
against defaulting generators, officials with knowledge of the
matter said, asking not to be identified as they were not
authorized to speak to the media, Bloomberg relates. The court
asked the government to discuss with the Reserve Bank of India on
possibilities of relaxing the rules for the power sector, Harry
Dhaul, director general of the lobby group, told Bloomberg.
In February, India's central bank, battling the world's worst bad-
loan ratio after Italy, introduced new rules, ordering lenders to
restructure stressed debt within 180 days, Bloomberg recalls.
Creditors were asked to initiate bankruptcy proceedings after the
deadline, which ends Aug. 27. Bloomberg says Power generators,
led by IPPAI, had challenged the RBI rules, citing cash-flow woes
that make timely debt-servicing difficult.
The court also directed a government panel examining issues
including fuel allocation, bad loan norms and regulations to come
up with its report in two months, he said, Bloomberg relays.
India's banks are beset by mounting bad loans and are under
pressure to resolve their stressed accounts. Banks had 5.65
trillion rupees ($81 billion) of exposure to the power sector as
of March, Bloomberg discloses citing a report by a lawmakers'
panel.
According to Bloomberg, stressed loans worth as much as
INR700 billion in India's power sector are in the process of being
resolved, State Bank of India Ltd. Managing Director Arijit Basu
said in an interview on Aug. 27. The lender has identified 34
stressed accounts with dues of about INR1.8 trillion in the power
sector, he said.
Bloomberg relates that the new debt-servicing norms could push
nearly 75 gigawatts of projects into bankruptcy, the power
producers said in March, seeking relaxation in the new norms as
generators are plagued by challenges including fuel shortages,
delayed payment by distribution utilities that buy electricity and
slow resolution of tariff claims by regulators.
Their appeals were backed by the power ministry and later a
lawmakers' panel, which said treating the power sector in the same
way as others will be counter-productive, Bloomberg notes.
===============
T H A I L A N D
===============
* THAILAND: Panel to Tackle Cooperative Loan Default Risk
---------------------------------------------------------
The Nation reports that fearing a large number of defaults on
loans given out by savings and credit union cooperatives,
Agriculture and Cooperatives Minister Grisada Boonrach has set up
a sub-committee to find solutions within 30 days.
The sub-committee's findings will then be proposed to the Cabinet
before a ministerial regulation is created to govern the behavior
of cooperatives regarding deposits, investments, and approval of
loans, as well as dividends and bonus payments, he said.
According to the Nation, Mr. Grisada said on Aug. 28 that the
sub-committee will include representatives from four agencies -
the Agriculture and Cooperatives Ministry, the Bank of Thailand,
the Securities and Exchange Commission and the Cooperative League
of Thailand.
The move was made after an advisory committee resolved on Aug. 27
to call for improved management and supervision at the
institutions, the report says.
It followed a recent report that THB2 trillion had poured into
savings and credit union cooperatives, with THB1.9 trillion of
that being loaned to 3,213,937 members at 1,461 cooperatives. The
report concluded the level of debt could pose a risk to the
economy, Mr. Grisada said.
"With such a close gap between the two amounts, there is a worry
that some credit union cooperatives could not adequately manage
the money. This is because cooperatives give loans to members to
make their financial status liquid, to repay old debts or to cover
personal expenses. Hence there is a risk of people not repaying
the loans on time and the cooperatives could suffer illiquidity.
However, the cooperatives' system has nothing to support tackling
this issue -- unlike other financial institutes," the report
quotes Mr. Grisada as saying.
He also said the potential of such a scenario had prompted the
cooperatives to hike the rate of allowance for doubtful accounts
in the past five years. The Nation says the rate was at THB4.9
billion (0.36 per cent of the loans in the cooperatives' system)
in 2013, THB4.5 billion (0.29 per cent) in 2014, THB8.5 billion
(0.50 per cent) in 2015, THB9.6 billion (0.53 per cent) in 2016,
and THB11.6 billion (0.60 per cent) in 2017.
The Nation relates that the minister said the phenomenon of people
depositing money in the savings and credit union cooperatives was
due partially to the fact that commercial banks and other
financial institutes had lowered their savings account interest
rates, while cooperatives kept theirs at 3 to 4 per cent.
A July 31 audit found flaws at 51 savings and credit union
cooperatives covering damages worth THB9.6 billion, the Nation
discloses. They included 13 graft cases worth THB373 million, six
cases of accounting flaws worth THB34.39 million, 11 cases of
financial administration flaws worth THB144 million, 12 cases of
spending on purposes other than what they had stated resulting in
THB667.7 million damages and 17 cases of "behaviour that can cause
damages" worth THB8.4 billion, the minister, as cited by the
Nation, said.
A source at the Cooperative Promotion Department said three
savings cooperatives - one for teachers, another for railway
personnel and the third for policemen - were facing illiquidity
due to alleged graft, the report discloses. The committee was
working to investigate and solve the problems as bankruptcy could
affect many members, the source added.
*********
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.
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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,
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Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez,
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Editors.
Copyright 2018. All rights reserved. ISSN: 1520-9482.
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