/raid1/www/Hosts/bankrupt/TCRAP_Public/181119.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
A S I A P A C I F I C
Monday, November 19, 2018, Vol. 21, No. 229
Headlines
A U S T R A L I A
8 ON THE POINT: First Creditors' Meeting Set for Nov. 26
BILLABONG CUSTOM: Second Creditors' Meeting Set for Nov. 26
COASTAL CARAVANS: Second Creditors' Meeting Set for Nov. 26
COFFEYS EMS: First Creditors' Meeting Set for Nov. 27
FOODORA AUSTRALIA: Creditors Accept Deed of Company Arrangement
FOODORA AUSTRALIA: Delivery Rider Wins Unfair Dismissal Case
MESOBLAST LIMITED: US$55.1 Million in Cash at Sept. 30, 2018
PAN ASIA: Sells Indonesian Thermal Coal Project for $4.6 Million
SAI NIDHI: First Creditors' Meeting Set for Nov. 22
WATER WINE: Second Creditors' Meeting Set for Nov. 26
VALPAK (AUSTRALIA): Second Creditors' Meeting Set for Nov. 26
C H I N A
AGILE GROUP: S&P Assigns 'BB' Rating to New USD Unsecured Notes
CHINA AUTOMATION: S&P Cuts Long-Term ICR to CC, Outlook Negative
EHI CAR: S&P Affirms 'BB-' Issuer Credit Rating, Outlook Stable
KWG GROUP: Fitch Gives BB-(EXP) Rating on Proposed USD Sr. Notes
SHANDONG YUHUANG: S&P Affirms B+ Long-Term ICR, Outlook Negative
SHARING ECONOMY: Incurs $18.6 Million Net Loss in Third Quarter
H O N G K O N G
IDEANOMICS INC: Reports $7.44 Million Net Loss for Third Quarter
I N D I A
AARSON MOTORS: CARE Assigns B+ Rating to INR6cr LT Loan
ANTONY ROAD: Ind-Ra Assigns 'BB' LT Issuer Rating, Outlook Stable
ASHIANA DWELLINGS: ICRA Assigns B- Rating to INR114.81cr Loans
ASHIANA LANDCRAFT: ICRA Assigns B- Rating to INR79.95cr Loans
BRIJBASI HI-TECH: CARE Raises Rating on INR8cr Loan to B
C.P. ARORA: ICRA Lowers Rating on INR6.75cr Cash Loan to C
CALISTA PROPERTIES: CARE Reaffirms B- Rating on INR15cr LT Loan
CHENNAMANAGATHIHALLI SOLAR: CARE Reaffirms B on INR13.85cr Loan
GARG INDUSTRIES: ICRA Lowers Rating on INR22cr Loan to B
HUKKERI SOLAR: CARE Reaffirms 'B' Rating on INR9cr LT Loan
INTERNATIONAL FRESH: ICRA Moves D Rating to Not Cooperating
MANDOVI CASTING: ICRA Lowers Rating on INR2.76cr Loan to B
MANGALORE MINERALS: Ind-Ra Assigns 'B+' LT Rating, Outlook Stable
REGEN INFRASTRUCTURE: ICRA Lowers Rating on INR20cr Loan to D
SHREE BABA: CARE Assigns B+ Rating to INR9cr LT Loan
SHREE SANGAMESWARA: ICRA Reassigns C+ LT Rating on INR3cr Loan
SHREE SHIVAM: ICRA Withdraws 'B' Rating on INR4.98cr Loans
SILVER OAK: Ind-Ra Migrates BB+ Issuer Rating to Non-Cooperating
SOLIZO VITRIFIED: ICRA Assigns B+ Rating to INR26.69cr Term Loan
STANDARD CONSULTANTS: ICRA Maintains B+ Rating in Not Cooperating
SUNSTAR OVERSEAS: ICRA Maintains D Rating in Not Cooperating
TARA FOODS: ICRA Reaffirms B+/A4 Ratings on INR12cr Loan
TASHKENT OIL: Ind-Ra Affirms BB+ LT Issuer Rating, Outlook Stable
TATA MOTORS: Moody's Changes Outlook on Ba2 CFR to Negative
VAULT AGRITECH: CARE Assigns B+ Rating to INR9.73cr LT Loan
VIVEKANAND PROJECTS: CARE Assigns B+ Rating to INR10cr LT Loan
YARGANVI SOLAR: CARE Reaffirms B Rating on INR12.63cr LT Loan
S I N G A P O R E
AVATION PLC: S&P Places 'B' Unsec. Notes Rating on Watch Positive
TOYS 'R' US: Noteholders to Acquire 85% Stake in Toys 'R' Us Asia
VISTRA GROUP I: Moody's Puts B2 CFR on Review for Downgrade
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A U S T R A L I A
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8 ON THE POINT: First Creditors' Meeting Set for Nov. 26
--------------------------------------------------------
A first meeting of the creditors in the proceedings of 8 On The
Point Pty Ltd will be held at BGC Conference Room, BGC Centre
Plaza Level, 28 The Esplanade, in Perth, WA, on Nov. 26, 2018, at
11:00 a.m.
Clifford Stuart Rocke and Jeremy Joseph Nipps of Cor Cordis were
appointed as administrators of 8 On The Point on Nov. 15, 2018.
BILLABONG CUSTOM: Second Creditors' Meeting Set for Nov. 26
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A second meeting of creditors in the proceedings of Billabong
Custom Caravans Pty Ltd. has been set for Nov. 26, 2018, at 2:00
p.m. at Chartered Accountants Australia and New Zealand, at
Level 18, 600 Bourke Street, in Melbourne, Victoria.
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 Nov. 23, 2018, at 5:00 p.m.
Barry Wight and Bruno Secatore of Cor Cordis were appointed as
administrators of Billabong Custom on Oct. 21, 2018.
COASTAL CARAVANS: Second Creditors' Meeting Set for Nov. 26
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A second meeting of creditors in the proceedings of Coastal
Caravans Pty Ltd has been set for Nov. 26, 2018, at 9:00 a.m. at
Christies Conference Spaces, Room Q, at Level 2, 320 Adelaide
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 Nov. 23, 2018, at 5:00 p.m.
Barry Wight and Bruno A Secatore of Cor Cordis were appointed as
administrators of Coastal Caravans on Oct. 22, 2018.
COFFEYS EMS: First Creditors' Meeting Set for Nov. 27
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A first meeting of the creditors in the proceedings of Coffeys
EMS Pty Ltd will be held at the offices of Nicols + Brien, at
Level 2, 350 Kent Street, in Sydney, NSW, on Nov. 27, 2018, at
11:00 a.m.
Steven Nicols of Nicols + Brien was appointed as administrator of
Coffeys EMS on Nov. 15, 2018.
FOODORA AUSTRALIA: Creditors Accept Deed of Company Arrangement
---------------------------------------------------------------
The Joint Administrator of Foodora Australia Pty Limited, Simon
Cathro of Worrells Solvency & Forensics, confirms that at the
meeting of creditors held on Nov. 16, 2018, creditors present
voted to accept the Deed of Company Arrangement (DOCA) proposal.
"This now means that once the DOCA has been executed, creditors
including riders that have now been classified as employees, will
have their claims against the Company accessed and can
participate in a distribution to creditors in accordance with the
terms of the DOCA," Worrells Solvency said in a statement.
"Creditors should lodge any claim they may have against the
Company as soon as possible with the Administrators in this
regard. If you would like to make contact with Worrells
surrounding any potential claim, please send an email to
patrick.skippen@worrells.net.au."
Simon Cathro and Ivan Glavas of Worrells Solvency were appointed
as administrators of Foodora Australia on Aug. 17, 2018.
FOODORA AUSTRALIA: Delivery Rider Wins Unfair Dismissal Case
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news.com.au reports that a food delivery rider sacked after
publicly criticising the conditions he and other workers endured
has won a landmark unfair dismissal case against Foodora
Australia.
Josh Kluger, 28, was fired by the food delivery giant in March
after speaking out at a public rally in Melbourne against
worsening conditions in the gig economy, according to the report.
news.com.au relates that on Nov. 16, the Fair Work Commission
found he had been unfairly dismissed.
Its decision found Mr. Kluger was an employee of the company, not
a contractor, as Foodora had argued, news.com.au says.
"The true substantive reason for the dismissal of the applicant
was not sound, defensible or well-founded," the Commission's
report found, news.com.au relays.
Earlier in the day, creditors voted to accept the company's offer
of paying AUD3 million of the more than AUD8 million it owes to
riders and local tax authorities.
According to news.com.au, the Transport Workers Union said
Foodora parent company Delivery Hero owed riders unpaid
superannuation, while the Australian Tax Office and Revenue New
South Wales were also undercut.
TWU spokesman Tony Sheldon said the Fair Work Commission's
decision was a world first.
"We have now seen for the first time in the world (that) an
institution such as an employment tribunal has designated riders
as being employees," news.com.au quotes Mr. Sheldon as saying.
news.com.au relates that Mr. Kluger, who will receive more than
AUD15,000 in compensation from Foodora, said he at points doubted
he would succeed in his case against a global company.
"I didn't think that all this could eventuate," Mr Kluger told
reporters in Sydney," news.com.au relays. "Riders should be able
to earn a decent living and not see their wages continually
slashed."
Foodora ceased operating in Australia in August, with the company
who owned it saying it was due to a "shift in focus towards other
markets".
Delivery staff criticised the business for an "oppressive"
culture that saw riders pitted against one another to get the
best shifts, the report notes.
Simon Cathro of Worrells Solvency was appointed as administrator
of Foodora Australia on Aug. 17, 2018.
MESOBLAST LIMITED: US$55.1 Million in Cash at Sept. 30, 2018
------------------------------------------------------------
Mesoblast Limited has filed with the U.S. Securities and Exchange
Commission its Quarterly report for entities subject to Listing
Rule 4.7B for the period ended Sept. 30, 2018.
At the beginning of the quarter, Mesoblast had US$37.76 million.
During the quarter, net cash used in operating activities was
US$19.54 million, net cash used in investing activities was
US$39,000, and net cash from financing activities was US$37.10
million. As of Sept. 30, 2018, Mesoblast had US$55.14 million.
Additionally US$40.0 million in gross cash proceeds were received
from Tasly Pharmaceutical Group on Oct. 11, 2018 pursuant to a
Development and Commercialization Agreement (US$20.0m) and an
Investment Agreement (US$20.0m) signed on July 17, 2018.
On March 6, 2018, Mesoblast entered into a Loan and Security
Agreement with Hercules Capital, Inc. for a US$75.0 million
secured four-year credit facility. Mesoblast drew the first
tranche of US$35.0 million on closing. An additional US$15.0
million may be drawn during Q4 CY2018, and a further US$25.0
million may be drawn prior to or during Q3 CY2019, in each case
as certain milestones are met.
At closing date, the interest rate was 9.45%. On Sept. 27, 2018,
in line with the increase in the U.S. prime rate, the interest
rate on the loan increased to 10.20%.
Loan facility with NovaQuest Capital Management, L.L.C.
On June 29, 2018, Mesoblast entered into a Loan and Security
Agreement with NovaQuest Capital Management, L.L.C. for a
non-dilutive US$40 million secured eight-year term loan.
Mesoblast drew the first tranche of US$30 million of the loan on
closing. An additional US$10 million from the loan will be drawn
on marketing approval of remestemcel-L by the United States Food
and Drug Administration (FDA).
Prior to maturity in July 2026, the loan is only repayable from
net sales of remestemcel-L (MSC-100-IV) in the treatment of
pediatric patients who have failed to respond to steroid
treatment for acute Graft versus Host Disease (aGvHD), in the
United States and other geographies excluding Asia. Interest on
the loan will accrue at a rate of 15% per annum with the interest
only period lasting 4 years. Interest payments will be deferred
until after the first commercial sale. The financing is
subordinated to the senior creditor, Hercules Capital.
On Oct. 12, 2018, the Company announced the completion of a
strategic cardiovascular alliance with Tasly Pharmaceutical Group
in China. On Oct. 11, 2018, the Company received gross cash
proceeds of US$40 million, comprising an upfront technology
access fee of US$20 million and a US$20 million share
issuance.
Mesoblast is in advanced negotiations with selected
pharmaceutical companies with respect to potential partnering of
certain Tier 1 product candidates. Mesoblast does not make any
representation or give any assurance that such a partnering
transaction will be concluded.
Up to an additional US$50 million is available to Mesoblast,
subject to achievement of certain milestones, under the financing
arrangements with Hercules Capital and NovaQuest.
Mesoblast established an equity facility in 2016 with Kentgrove
Capital for up to A$120 million/US$90 million over the next 9
months to be used at its discretion to provide additional funds
as required.
A full-text copy of the Quarterly Report is available for free
at: https://is.gd/DIaWhv
About Mesoblast
Headquartered in Melbourne, Australia, Mesoblast Limited
(ASX:MSB; Nasdaq:MESO) -- http://www.mesoblast.com/-- is a
global developer of innovative cell-based medicines. The Company
has leveraged its proprietary technology platform to establish a
broad portfolio of late-stage product candidates with three
product candidates in Phase 3 trials - acute graft versus host
disease, chronic heart failure and chronic low back pain due to
degenerative disc disease.
Through a proprietary process, Mesoblast selects rare mesenchymal
lineage precursor and stem cells from the bone marrow of healthy
adults and creates master cell banks, which can be industrially
expanded to produce thousands of doses from each donor that meet
stringent release criteria, have lot to lot consistency, and can
be used off-the-shelf without the need for tissue matching.
Mesoblast has facilities in Melbourne, New York, Singapore and
Texas and is listed on the Australian Securities Exchange (MSB)
and on the Nasdaq (MESO).
Mesoblast reported a net loss attributable to the owners of
Mesoblast of US$35.29 million for the year ended June 30, 2018,
compared to a net loss attributable to the owners of Mesoblast of
US$76.81 million for the year ended June 30, 2017. As of
June 30, 2018, Mesoblast had US$692.4 million in total assets,
US$146.4 million in total liabilities and US$546.0 million in
total equity.
PricewaterhouseCoopers, in Melbourne, Australia, the Company's
auditor since 2008, issued a "going concern" opinion in its
report on the consolidated financial statements for the year
ended June 30, 2018. The auditors noted that the Company has
suffered recurring losses from operations that raise substantial
doubt about its ability to continue as a going concern
PAN ASIA: Sells Indonesian Thermal Coal Project for $4.6 Million
----------------------------------------------------------------
Angela East at Stockhead report that Pan Asia Corporation Limited
has finally sealed a deal to sell its Indonesian thermal coal
project for US$4.6 million, about 18 months after first
announcing the deal. But it's had to take a hair cut on the deal
-- the original price was about US$6 million after costs.
The struggling minnow told investors on Nov. 8 that it had now
struck a binding deal with Toplus for the sale of its 75 per cent
stake in its thermal coal business, PT Transcoal Minergy.
According to the report, Pan Asia will issue 30 million shares
priced at 0.2c each to its Indonesian joint venture partners to
acquire their 25 per cent stake so it can sell 100 per cent of
TCM to Toplus.
Stockhead says the company originally signed a heads of agreement
in May last year for the sale of TCM to Glory Merry. Toplus is an
associate of Glory Merry. But the volatile coal market put a
dampener on things and Pan Asia has had to accept less than it
would like for the sale.
"During this time, Pan Asia has continued to experience difficult
operating conditions in Indonesia, with progress on our forestry
permits and port access proving elusive," the report quotes
chairman Gary Williams as saying. "Pan Asia, as an Australian
public company, is limited in how it can deal with local
Indonesian issues to facilitate on ground approvals (including
forestry permits) and gain critical access to port capacity,
meaning that the value of TCM is otherwise significantly
impaired."
Stockhead relates that Mr. Williams said that while the sale
price was lower than originally proposed, "Glory Merry and Toplus
have made significant concessions."
The report says the buyers have agreed to waive the conditions
precedent outlined in the May 2017 heads of agreement - the most
significant of which was the requirement for Pan Asia to obtain
forestry permits and port access, which it had been unable to do.
Pan Asia, which has been suspended from trading since February,
wants to get out of the volatile low-grade thermal coal business
in Indonesia and into high-grade thermal and coking coal assets
in Australia, Stockhead notes.
According to Stockhead, the company is working to complete the
acquisition of New Emerald Coal, which has coal projects in
Queensland's Bowen Basin.
New Emerald was placed in receivership in May this year and Pan
Asia is working with creditors to reach a deed of company
arrangement, the report adds.
Sydney, Australia-based Pan Asia Corporation Limited explores for
and develops coal projects. It owns a 75% interest in its
flagship CV thermal coal project, the PT Transcoal Minergy
project located in South Kalimantan, Indonesia.
SAI NIDHI: First Creditors' Meeting Set for Nov. 22
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A first meeting of the creditors in the proceedings of Sai Nidhi
Pty Ltd, trading as Dehli 6 Fine Indian Cuisine, will be held at
Level 2, 14 Moore Street, in Canberra, ACT, on Nov. 22, 2018, at
2:30 p.m.
Anthony Graeme Lane and Steven Neville Staatz of Vincents were
appointed as administrators of Sai Nidhi on Nov. 12, 2018.
WATER WINE: Second Creditors' Meeting Set for Nov. 26
-----------------------------------------------------
A second meeting of creditors in the proceedings of Water Wine &
Juice Pty Ltd has been set for Nov. 26, 2018, at 3:00 p.m. at the
offices of Hall Chadwick Chartered Accountants, at Level 40, 2
Park Street, in Sydney, NSW.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the
Company be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by Nov. 23, 2018, at 5:00 p.m.
David Allan Ingram of Hall Chadwick Chartered Accountants was
appointed as administrator of Water Wine on Nov. 1, 2018.
VALPAK (AUSTRALIA): Second Creditors' Meeting Set for Nov. 26
-------------------------------------------------------------
A second meeting of creditors in the proceedings of Valpak (Aust)
Pty Ltd has been set for Nov. 26, 2018, at 2:00 p.m. at the
offices of Hall Chadwick Chartered Accountants, at Level 40, 2
Park Street, in Sydney, NSW.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the
Company be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by Nov. 23, 2018, at 4:00 p.m.
David Allan Ingram and David Ross of Hall Chadwick Chartered
Accountants were appointed as administrators of Valpak (Aust) on
Oct. 22, 2018.
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C H I N A
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AGILE GROUP: S&P Assigns 'BB' Rating to New USD Unsecured Notes
---------------------------------------------------------------
S&P Global Ratings said it has assigned its 'BB' long-term issue
rating to a proposed issue of U.S. dollar-denominated senior
unsecured notes by Agile Group Holdings Ltd. (BB/Stable/--).
Agile intends to use the net proceeds primarily to refinance
existing debt. The rating is subject to S&P's review of the final
issuance documentation.
S&P said, "We equalize the issue rating with our issuer rating on
Agile, given the debt is not significantly subordinated relative
to other debt in the company's capital structure. As of June
2018, Agile's capital structure consisted of RMB32.6 billion of
secured debt, RMB41.9 billion of unsecured debt issued at the
parent level, and RMB15.3 billion of unsecured debt (including
financial guarantee to borrowings of joint ventures and
associates) issued by its subsidiaries. S&P anticipatea Agile
will continue to utilize its diversified offshore channels to
refinance debt, as onshore credit conditions remain tight. The
company has issued senior perpetual securities and syndicated
loans in the first half of 2018, and drawn down senior unsecured
notes in July.
S&P said, "The stable outlook reflects our expectation that Agile
will maintain steady sales growth and good margins in 2018. We
also believe that the company will only moderately increase its
leverage because its margins and fast revenue growth will offset
the impact of rising capital spending."
CHINA AUTOMATION: S&P Cuts Long-Term ICR to CC, Outlook Negative
----------------------------------------------------------------
S&P Global Ratings lowered its long-term issuer credit rating on
China Automation Group Ltd. (CAG) to 'CC' from 'CCC'. The outlook
is negative.
S&P said, "At the same time, we lowered to 'C' from 'CCC-' our
long-term issue rating on the US$24 million 8.75% senior
unsecured notes due December 2018 that Tri-Control Automation Co.
Ltd. (Tri-Control) issued. CAG unconditionally and irrevocably
guarantees the notes.
"We lowered the ratings following Tri-Control's announcement on
Nov. 14, 2018, of an exchange offer to holders of its 8.75%
senior unsecured notes due December 2018.
"We view the proposed transaction as a distressed exchange
tantamount to a default. In our opinion, this exchange is not
purely opportunistic because we believe CAG's non-payment and
default risk will remain high over the next 12 months even if the
exchange is completed." This is because of CAG's very tight
liquidity and large debt maturities.
Under the exchange offer, noteholders can exchange the 8.75%
notes for new 11% senior unsecured notes due November 2019. The
payment right of the new notes would be at least equal with that
of the existing notes. The company will exchange the notes only
if at least US$10 million worth of notes are offered for
exchange. The targeted settlement date is Nov. 23, 2018.
S&P said, "The negative outlook on CAG reflects the likelihood
that we will lower our issuer credit rating on the company to
'SD' and the issue rating on the guaranteed senior unsecured
notes to 'D' when the distressed exchange is complete.
"Following the conclusion of the exchange, we will reassess CAG's
business, financial, and liquidity position before arriving at
the ratings."
As of Dec. 31, 2017, CAG's capital structure consists of Chinese
renminbi (RMB) 611 million of secured debt and RMB855 million of
unsecured debt issued by the company. In addition, RMB140 million
of unsecured debt is issued by CAG's subsidiaries.
S&P rates the US$24 million senior unsecured debt issued by Tri-
Control 'C', one notch lower than the issuer credit rating on the
guarantor, reflecting the high structural subordination risk.
EHI CAR: S&P Affirms 'BB-' Issuer Credit Rating, Outlook Stable
---------------------------------------------------------------
S&P Global Ratings affirmed its 'BB-'long-term issuer credit
rating on eHi Car Services Ltd. and the 'BB-' issue rating on its
senior unsecured notes.
China-based eHi is a provider of car rentals and services. The
company is listed on the New York Stock Exchange.
S&P said, "We affirmed the ratings based on our expectation that
eHi will face limited near-term refinancing risk and the company
will likely maintain good liquidity management amid potential
privatization.
"We expect the company to be able to repay the US$200 million
senior unsecured notes due Dec. 8, 2018. The company is on track
to secure a syndicated loan within the next week, which together
with the company's offshore cash, should cover this bullet
maturity."
Uncertainties around eHi's potential privatization has resulted
in a delayed timeline of the company's recent refinancing
initiative amid tightening capital markets, despite the company's
operating performance remaining largely stable. S&P said, "The
syndicated loan arrangement process has been lengthier than we
expected, but we understand the company has maintained sufficient
liquidity management during the process and secured back-up
financing to ensure timely bond repayment."
S&P said, "Nonetheless, we expect the company's debt structure to
continue to feature material bullet maturities despite the
absence of near-term liquidity risk. Although eHi's ongoing
vehicle disposals are an important liquidity source, we believe
the company will remain exposed to some refinancing risk given
the large size of bullet maturities. The next major bullet
maturity would be the company's new syndicated loan maturing in
2021.
"eHi's reduced financial transparency will likely continue to
hamper its credit market standing, in our view. Lack of timely
and reliable financial disclosure has significantly reduced
bondholders' ability to monitor the company's operational and
financial performance, and liquidity standing.
"We expect the company to disclose its 2018 interim results
towards the end of this year. The company stopped quarterly
disclosures from November 2017. eHi chose to lower the frequency
of its financial disclosure due to legal hurdles amid ongoing
privatization plan, only complying with minimum disclosure
requirements of the U.S. Securities and Exchange Commission and
the New York Stock Exchange.
"The stable outlook on eHi reflects our expectation that the
company will gradually improve its profit margins and cash flows
over the coming 12-24 months. We expect the company to see
relatively stable rental rates and utilization rates as it
expands its fleet. The increased scale should enable cost
efficiencies. We expect eHi's EBIT margin to be 15%-25% and its
EBIT interest coverage to be 1.3x-1.7x, generally improving but
still likely somewhat volatile driven by its aggressive debt-
funded growth plan.
"We may downgrade eHi if its utilization or pricing declines due
either to rising competition in China's car rental industry or
more aggressive capital expenditures. This scenario could result
in its EBIT coverage dropping below 1.3x or the ratio of FFO to
debt falling below 12% on a prolonged basis. We may also consider
a downgrade if the company's liquidity buffer diminishes, driven
by even higher levels of committed capital expenditures or
difficulty in disposing of used vehicles.
"We may also downgrade eHi if financial transparency remains low
for a prolonged period, such that the company's access to capital
markets is materially impaired.
"We may consider an upgrade if eHi can maintain its EBIT margin
above 18%, EBIT coverage above 1.7x, and if its ratio of FFO to
debt exceeds 20% for a sustained period. If the company is able
to prudently expand its fleet while increasing its utilization
and rental rates, it may be able to achieve these credit
measures."
KWG GROUP: Fitch Gives BB-(EXP) Rating on Proposed USD Sr. Notes
----------------------------------------------------------------
Fitch Ratings has assigned China-based KWG Group Holdings
Limited's (BB-/Stable) proposed US dollar senior notes a 'BB-
(EXP)' expected rating.
The proposed notes are rated at the same level as KWG's senior
unsecured rating because they will constitute its direct and
senior unsecured obligations. The final rating is subject to the
receipt of final documentation conforming to information already
received.
KWG's ratings are supported by its established homebuilding
operations in Guangzhou, strong brand recognition in higher-tier
cities across China, consistently high margin, strong liquidity
and healthy maturity profile. The ratings are constrained by the
small scale of the company's development and investment property
business as well as its higher leverage after land purchases in
2016.
KEY RATING DRIVERS
Diverse Coverage: KWG's landbank is diversified across China's
Greater Bay Area, which includes Guangzhou, Foshan and Hong Kong,
as well as eastern and northern China. KWG ranked among the top-
10 homebuilders by sales in Guangzhou, the capital of Guangdong
province, in 2017. The company had 20 million square metres (sqm)
of attributable land as at August 2018, spread across 39 cities
in mainland China and Hong Kong, which had an average cost of
CNY4,800/sqm (excluding Hong Kong) and was sufficient for four to
five years of development. KWG has a prudent approach when
entering new cities, conducting due diligence for around three
years, usually with one or two projects in partnership with
reputable local developers.
Strong Brand Name: KWG has established strong brand recognition
in its core cities by focusing on first-time buyers and
upgraders. It appeals to these segments by engaging international
architects and designers and setting high building standards.
KWG's 1H18 pre-sales rose by 82% yoy to CNY32.4 billion after a
29% yoy increase in 2017, with the average selling price reaching
CNY17,089/sqm (2017: CNY16,819/sqm).
High Margin through Cycles: KWG's EBITDA margin has remained at
30%-35% through various business cycles and is one of the highest
among Chinese homebuilders. Protecting the margin is one of KWG's
key business objectives and is achieved by maintaining higher-
than-average selling prices through consistently high-quality
products. The company's experienced project teams also ensure
strong execution capability and strict cost control.
Moreover, KWG has a low unit land cost of 20%-25% of its average
selling price due to its strong foothold in Guangzhou, where land
prices have not increased as much as in other tier 1 cities.
KWG's EBITDA margin was at 34% in 2017 and Fitch expects the
margin to remain above 35% in the next two years as the product
mix improves.
Worsening Leverage: KWG's leverage on an attributable basis, as
measured by net debt/adjusted inventory, was around 36% in 1H18
(2017: 34%). Fitch expects leverage to continue increasing
gradually, as it is correlated with KWG's contracted sales growth
rate and landbank replenishment strategy.
Joint Ventures with Leading Peers: KWG's prudent expansion
strategy has created a long record of partnerships with leading
industry peers, including Sun Hung Kai Properties Limited
(A/Stable), Hongkong Land Holdings Limited, Shimao Property
Holdings Limited (BBB-/Stable), China Vanke Co., Ltd.
(BBB+/Stable), China Resources Land Ltd (BBB+/Stable) and
Guangzhou R&F Properties Co. Ltd. (BB-/Negative). These
partnerships helped KWG achieve lower project financing costs,
reduce competition in land bidding and improve operational
efficiency. Joint venture presales made up 52% of KWG's total
attributable presales in 2017 and 47% in 2016.
Joint venture cash flow is well-managed and investments in new
joint venture projects are mainly funded by excess cash from
mature joint ventures. Leverage is also lower at the joint-
venture level because land premiums are usually funded at the
holding company level and KWG pays construction costs only after
cash is collected from pre-sales.
DERIVATION SUMMARY
KWG's ratings are supported by its established homebuilding
operations in Guangzhou and strong higher-tier cities across
China, consistently high margin, strong liquidity and healthy
maturity profile. KWG has maintained one of the highest margins
among Chinese homebuilders throughout the cycle. Its 30%-35%
EBITDA margin is comparable with that of Yuzhou Properties
Company Limited (BB-/Stable) and Logan Property Holdings Company
Limited (BB-/Stable) and some investment-grade peers, such as
Poly Developments and Holdings Group Co., Ltd. (BBB+/Stable) and
China Jinmao Holdings Group Limited (BBB-/Stable), and is higher
than some 'BB' peers, including Future Land Holdings Co., Ltd.
(BB/Stable) and CIFI Holdings (Group) Co. Ltd. (BB/Stable).
KWG's ratings are constrained by the small scale of its
development and investment property business as well as higher
leverage, following its high-cost land purchase in 2016. Fitch
expects KWG's leverage, measured by net debt/adjusted inventory,
to reach 36% by end-2018 (2017: 34%) due to high land premiums as
the company expands.
KEY ASSUMPTIONS
Fitch's key assumptions within its rating case for the issuer
include:
- Contracted sales gross floor area to rise by 25% in 2018
(2017: 29%)
- Average selling price to increase by 5% in 2018 due to better
sales mix in higher-tier cities and then remain flat (2017:
19%)
- EBITDA margin, excluding capitalised interest, to remain
stable at 33%-34% in 2018-2020
- Land replenishment rate of 1.5x contracted sales gross floor
area (attributable) in 2018-2021 (2016-2017: 1.6x-2.1x)
- Leverage to deteriorate to about 36%-38% for 2018-2019
RATING SENSITIVITIES
Developments that may individually or collectively, lead to
positive rating action include:
- EBITDA margin sustained above 30%
- Net debt/adjusted inventory sustained below 35%
Developments that may individually or collectively, lead to
negative rating action include:
- EBITDA margin below 25% for a sustained period
- Net debt/adjusted inventory above 45% for a sustained period
LIQUIDITY
Adequate Liquidity: KWG has well-established diversified funding
channels and strong relationships with most foreign, Hong Kong
and Chinese banks. KWG has strong access to both domestic and
offshore bond markets and was among the first few companies to
issue panda bonds. KWG had available cash of CNY42 billion in
1H18, including restricted cash, which was enough to cover the
repayment of its CNY9 billion in short-term borrowing and
outstanding land premiums. Fitch expects the group to maintain
sufficient liquidity to fund development costs, land premium
payments and debt obligations in 2018-2019 due to its diversified
funding channels, healthy maturity profile and flexible land
acquisition strategy.
SHANDONG YUHUANG: S&P Affirms B+ Long-Term ICR, Outlook Negative
----------------------------------------------------------------
S&P Global Ratings said it has affirmed its 'B+' long-term issuer
credit rating on Shandong Yuhuang Chemical Co. Ltd. (Yuhuang).
The outlook is negative. S&P also affirmed our 'B+' long-term
issue rating on the senior unsecured notes that Yuhuang
guarantees. Yuhuang is an oil refiner and chemicals manufacturer
based in Heze City in China's Shandong province.
S&P said, "We affirmed the rating on Yuhuang because we believe a
recent capital injection and a reduction in restricted cash have
eased liquidity pressure on the company for the next 12 months.
However, Yuhuang's liquidity is likely to remain tight over the
period. We except the company to continue to rely on short-term
financing or internal cash to repay its substantial short-term
debt maturities."
In October 2018, Yuhuang received a capital injection of RMB850
million from Heze Development Zone Municipal Investment
Development Co., a local government financing vehicle (LGFV) of
Heze City. The LGFV acquired a 21.8% stake in Yuhuang's
subsidiary Shandong Yuhuang Shengshi Chemical Co. Yuhuang used
part of the proceeds to repay its RMB550 million bond due on
Nov. 9, 2018, and intends to use the rest to repay its RMB135
million bond due on Nov. 25, 2018.
S&P believes Yuhuang will be able to roll over its short-term
bank loans, given the agreement reached between banks and the
Heze government. The government has been coordinating
negotiations with creditors to liquidate the bankrupt Hongye
Chemical Group Co. Ltd., the issuer of the debt, which Yuhuang
guarantees. All creditors have agreed to not accelerate repayment
of Hongye's loans or require Yuhuang to repay the guaranteed debt
on behalf of Hongye.
Yuhuang would also benefit from support extended by banks in the
form of lower pledged deposit requirements on the company's bank
acceptance bills and letters of credit. Yuhuang has therefore
significantly reduced its restricted cash since the second
quarter of 2018. It has also converted some of these bank
facilities to working capital loans. Yuhuang's share of cash
pledged for bank acceptance bills and letters of credit has
fallen to less than 10%, from about 50% in the past.
S&P said, "However, we see limited evidence that Yuhuang can
refinance its maturing bonds by securing new long-term bank
loans. The company's unused uncommitted banking facilities are
mainly short-term and for working capital purposes. Yuhuang's
liquidity position could deteriorate sharply if its relationships
with banks weaken or its access to the capital markets remains
restricted.
"We expect Yuhuang to continue to rely on self-generated cash or
short-term bank loans to repay its notes due in the next 12
months. This is due to the company's restricted access to the
bond market." Yuhuang has not issued any short-term or long-term
notes in the domestic bond market since November 2016. The
company repaid RMB1 billion notes due in January and October 2018
with its own cash. It has onshore bonds of about RMB135 million
due in the rest of 2018, and RMB2.2 billion bonds due in 2019,
assuming all bondholders exercise their put options.
Yuhuang's cross-guarantee on the Hongye debt remains an overhang
on its credit profile. Yuhuang's financing flexibility has
reduced because it is unable to issue domestic bonds pending the
resolution of the Hongye case. S&P expects Yuhuang's liquidity
buffer to remain constrained even if the liquidation of Hongye
does not result in cash outflows for the company. Yuhuang has not
yet repaid any of the Hongye loans it guarantees. As of Sept. 30,
2018, Yuhuang has provided total external guarantees of RMB1.93
billion, of which RMB873 million is to Hongye.
S&P said, "We affirmed the rating on Yuhuang because we expect
the company to continue to generate steady operating cash flows
over the next 12 months based on our assumption of stable
refining and chemical margins.
"The negative outlook reflects our view that Yuhuang's liquidity
will remain tight over the next 12 months as the company will
have to run down its cash balance to repay domestic bonds. We
expect Yuhuang to be able to roll over its short-term bank loans.
However, the company will find it difficult to obtain long-term
funding. We also anticipate that Yuhuang's operations will remain
stable and generate steady cash flows."
The negative outlook also reflects the payment risk related to
Yuhuang's external guarantees, especially to Hongye.
S&P said, "We could lower the rating by more than one notch if
Yuhuang fails to come up with a concrete refinancing plan to
improve its liquidity. This could happen if: (1) the company's
banking relationships weaken such that it is unable to roll over
its short-term debt; or (2) its access to long-term funding
remains restricted for a prolonged period; or (3) the company has
to pay down debt on behalf of Hongye.
"We could also lower the rating if: (1) Yuhuang's capital
structure weakens as indicated by a weighted average debt
maturity profile of less than two years; or (2) the company's
operating performance deteriorates or capital spending exceeds
our base case, such that the ratio of FFO to debt falls below 12%
on a sustainable basis.
"We may revise the outlook to stable if Yuhuang's liquidity
position improves. This could happen if the company is able to
refinance its upcoming notes maturities with long-term funding."
SHARING ECONOMY: Incurs $18.6 Million Net Loss in Third Quarter
---------------------------------------------------------------
Sharing Economy International Inc. has filed with the Securities
and Exchange Commission its Quarterly Report on Form 10-Q
reporting a net loss of $18.57 million on $2.51 million of
revenues for the three months ended Sept. 30, 2018, compared to a
net loss of $4.25 million on $2.62 million of revenues for the
three months ended Sept. 30, 2017.
For the nine months ended Sept. 30, 2018, the Company reported a
net loss of $29.46 million on $7.65 million of revenues compared
to a net loss of $4.91 million on $10.99 million of revenues for
the same period during the prior year.
As of Sept. 30, 2018, the Company had $59.80 million in total
assets, $9.46 million in total liabilities and $50.33 million in
total equity.
The net cash used in operations was approximately $3,204,000 for
the nine months ended Sept. 30, 2018. During the three and nine
months ended Sept. 30, 2018, revenues, substantially all of which
are derived from the manufacture and sales of textile dyeing and
finishing equipment, decreased by 4.3% and 30.4% as compared to
the three and nine months ended Sept. 30, 2017, respectively.
Additionally, the Company recorded an impairment loss of
approximately $1,923,000 related to the write off of its patent
use rights and in September 2018. Due to significance doubt
about the status and recoverability of the Company's equity
method investment in Shengxin, the Company fully impaired the
value of its investment in Shengxin. Management believes that
these matters raise substantial doubt about the Company's ability
to continue as a going concern. Management cannot provide
assurance that the Company will ultimately achieve profitable
operations or become cash flow positive or raise additional debt
and/or equity capital.
Management believes that its capital resources are not currently
adequate to continue operating and maintaining its business
strategy for twelve months from the date of this report (Nov. 13,
2018).
A full-text copy of the Form 10-Q is available for free at:
https://is.gd/eZzZQH
About Sharing Economy
Headquartered in Jiangsu Province, China, Sharing Economy
International Inc. -- http://www.seii.com/-- through its
affiliated companies, designs, manufactures and distributes a
line of proprietary high and low temperature dyeing and finishing
machinery to the textile industry. The Company's latest business
initiatives are focused on targeting the technology and global
sharing economy markets, by developing online platforms and
rental business partnerships that will drive the global
development of sharing through economical rental business models.
Throughout 2017, the Company made significant changes in the
overall direction of the Company. Given the headwinds affecting
its manufacturing business, the Company is targeting high growth
opportunities and has established new business divisions to focus
on the development of sharing economy platforms and related
rental businesses within the company. These initiatives are
still in an early stage. The Company did not generate
significant revenues from its sharing economy business
initiatives in 2017.
RBSM LLP's audit opinion included in the company's Annual Report
on Form 10-K for the year ended Dec. 31, 2017 contains a going
concern explanatory paragraph stating that the Company had a loss
from continuing operations for the year ended Dec. 31, 2017 and
expects continuing future losses, and has stated that substantial
doubt exists about the Company's ability to continue as a going
concern.
RBSM has served as the Company's auditor since 2012.
Sharing Economy incurred a net loss of $12.92 million in 2017 and
a net loss of $11.67 million in 2016. As of June 30, 2018,
Sharing Economy had $74.97 million in total assets, $9.83 million
in total liabilities and $65.13 million in total stockholders'
equity.
================
H O N G K O N G
================
IDEANOMICS INC: Reports $7.44 Million Net Loss for Third Quarter
----------------------------------------------------------------
Ideanomics, Inc. has filed with the Securities and Exchange
Commission its Quarterly Report on Form 10-Q reporting a net loss
of $7.44 million on $43.70 million of revenue for the three
months ended Sept. 30, 2018, compared to a net loss of $3 million
on $30.22 million of revenue for the three months ended Sept. 30,
2017.
For the nine months ended Sept. 30, 2018, the Company reported a
net loss of $19.86 million on $362.62 million of revenue compared
to a net loss of $5.30 million on $106.72 million of revenue for
the same period during the prior year.
As of Sept. 30, 2018, Ideanomics had $167.72 million in total
assets, $123.10 million in total liabilities $1.26 million in
convertible redemable preferred stock, and $43.35 million in
total equity.
Cost of revenues was $42.8 million for the quarter ended
Sept. 30, 2018, as compared to $28.3 million for the quarter
ended Sept. 30, 2017. The Company's cost of revenues increased
by $14.6 million, which is in line with its increase in revenues.
Gross profit for the quarter ended Sept. 30, 2018 was
approximately $0.9 million, or 2.0%, as compared to a gross
profit of $2.0 million, or 6.5%, during the same period in 2017,
a decrease of approximately $1.1 million, or -56%, mainly due to
a decrease of the gross profit ratio of the Company's consumer
electronics business as compared to the same period in 2017.
Selling, general and administrative expense for the third quarter
was $4.3 million as compared to $3.7 million for the same period
in 2017, an increase of approximately $0.6 million or 18%. The
majority of the increase was due to the Company's efforts in
building out its management team in the U.S. and investing in
establishing its fintech infrastructure as part of its
transformation year.
Professional fees for the three months ended Sept. 30, 2018 were
$1.9 million as compared to $0.8 million for the same period in
2017, an increase of approximately $1.1 million. The increase
was related to public company reporting and governance expenses,
as well as legal fees related to the Company's business
transformation and expansion and the continued build out of its
technology ecosystem, establishing strategic partnerships, deal
origination, and strategic M&A activity. The majority of the
increase was due to required professional services for legal,
audit and tax.
Loss per share for the three months ended Sept. 30, 2018 was
$0.10 per share, as compared to a loss per share for same period
in 2017 of $0.05 per share. As of Sept. 30, 2018, the company
had cash of $15.7 million, total assets of $167.7 million, total
equity of $43.4 million.
Over the past three quarters, Ideanomics has been able to
continue its transformation from its legacy business, with a goal
of becoming a prominent player for fintech services and asset
digitization through establishing a global network of financial
technology, user community, and digital asset production. The
Company's team of seasoned digital strategists and technology
leaders is key to the success of the Ideanomics transformation to
become further "Westernized," and the Company believes that this
will assist in unlocking blockchain related revenue for 2019.
The Company has several signed customer revenue deals in its
pipeline, and its product and tech teams are diligently building
out these new digital products to unlock this revenue in the near
term and position the company towards a strong 2019.
"The strain on our bottom line performance is primarily a result
of the investments needed for our transformation, as well as a
delay in products we intended to release to the market in Q4
2018. We have addressed the issues and believe we have positioned
the products for a successful launch in early 2019.
"We are committed to these successful product launches, which
will be done in a regulatory and compliant manner, while
continuing to enhance our deal origination and customer pipeline
activities well into 2019. We believe that these deals have the
potential to derive significant revenues and prove the long-term
viability of our business model," said Ideanomics in a press
statement.
During the third quarter, the Company continued to focus on
right-sizing the staffing levels of its legacy business, in
addition to hiring a best-in-class executive team capable of
positioning the business to be competitive and successful in the
continued evolution of its business in 2019. Costs associated
with building out our U.S. infrastructure and hiring our new
executive team have put a strain on its bottom line performance,
resulting in its increased net loss for the third quarter of 2018
as compared to the third quarter of 2017. As a result of these
factors, the Company does not anticipate meeting its EBITDA
guidance of $35 million for fiscal year 2018.
Further, Ideanomics announced it has received its new trading
letters. Effective Nov. 14, 2018, the Company will trade on the
Nasdaq Capital Market under the ticker symbol "IDEX."
A full-text copy of the Form 10-Q is available for free at:
https://is.gd/mnoxrw
About Ideanomics
Ideanomics, formerly Seven Stars Cloud Group, Inc., seeks to
become a next generation fintech company by leveraging blockchain
and artificial intelligence technologies. The Company is
headquartered in New York, NY, and has planned a "Fintech
Village" Center for Technology and Innovation in West Hartford,
CT, and have offices in London, Hong Kong and 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. 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 redeemable preferred
stock, and $34.77 million in total equity.
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.
=========
I N D I A
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AARSON MOTORS: CARE Assigns B+ Rating to INR6cr LT Loan
-------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Aarson
Motors, as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 6.00 CARE B+; Stable Assigned
Detailed Rationale and Key Rating Drivers
The rating assigned to the bank facilities of Aarson Motors is
constrained by its partnership nature of constitution, moderate
scale of operations and low profit margins, intense competition
in the auto dealership industry, risk of nonrenewal of dealership
agreement, working capital intensive nature of operation.
However, the aforesaid constraints are partially offset by its
experienced management and long track record of operation and
authorized dealer of Hero Motocrop Limited and stable demand
outlook of Indian automobile industry. Going forward, the ability
of the entity to grow its scale of operations and improve its
profit margins and ability to manage working capital effectively
would be the key rating sensitivities.
Key Rating Weaknesses
Declining and small scale of operations with erratic profit
margins: The scale of operations remains small and declining with
erratic profitability level and margins during last three
financial years. The total operating income of the firm is
INR44.15 crore (INR52.84 crore in FY17) with a PAT of INR0.98
crore (INR0.52 crore in FY17) in FY18 (provisional). Furthermore,
the profit margins of the firm remained low marked by PBILDT and
PAT margins were 4.69% (2.55% in FY17) and 2.21% (0.99% in FY17)
in FY18 (Provisional). This apart, the net worth base was also
low at INR1.91 crore (INR2.03 crore as on March 31, 2017) as on
March 31, 2018 (Provisional). Apart from this, the firm has
achieved revenue of INR22.50 crore during 5MFY19.
Risk of non-renewal of dealership agreement: The firm has entered
into a dealership agreement with Hero Motocrop Limited (Two
wheelers). The dealership agreements with the above companies are
subject to renewal from time to time. Furthermore, the agreements
may get terminated at any time on violation of certain clauses.
Working capital intensive nature of operation: The business of
two wheeler dealership is having inherent high working capital
intensity due to high inventory holding period. The firm has to
maintain the fixed level of inventory for display and to guard it
against supply shortages. Furthermore, Hero Motorcrop (Two
wheeler) having its association, demands payment in advance,
resulting in higher working capital requirements. Accordingly,
the average fund based working capital utilization remained high
at 95% during the last 12 months ended August, 2018.
Partnership nature of constitution: Aarson Motors, 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.
Intense competition in the auto dealership industry: The
automobile industry is very competitive on the back of the
presence of a large number of players dealing with similar
products. Moreover, in order to capture the market share, the
auto dealers offer better buying terms like providing credit
period or allowing discounts on the purchase. Such discounts
offered to the customers create a margin pressure and negatively
impact the earning capacity of the firm.
Key Rating Strengths
Experienced partners along with long track record of operations:
Mr. Sharad Goel (aged 47 years) have 18 years of experience and
Mrs. Banti Agrawal (aged 43 years) have six years of experience
in the automobile industry. Both of them look after the overall
management of the firm with adequate support from a team of
experienced personnel. Further, the firm is into business of
automobile dealership since 2001 and thus has a long track record
of operations of around 17 years.
Authorised dealer of Hero Motorcrop Limited: Aarson Motors enjoys
the reputation of being an authorized dealer of Hero Motorcrop
Limited for its two wheelers. Currently, the firm has fully
automated workshops with firm trained mechanics located at
Siddarth Chowk, Tikarapara, Raipur and Pathak Hospital Road,
Fafadih, Raipur. Apart from this, they also have seven
sub-dealers in the region. The entity has been one of market
leaders in the region in the two-wheeler segments for decades and
has a wide & established distribution network of sales and
service centres, providing it a competitive advantage over its
peers.
Stable demand outlook of Indian automobile Industry: The Indian
Automobile Industry is one of the largest in the world. It
contributes 7.1% to GDP and provides employment to 29 million
people and contributes 13% to excise revenue. India's annual
production of vehicles stood at 29.08 mn in FY18 as against 25.33
mn in FY17, registering a growth of 14.8% y-o-y vis-a-vis a
growth of 5.5% during the same period last year. Going forward,
in FY19 auto industry will continue to witness healthy growth as
the disruptions caused by various policy implementations have
almost moderated. Also, demand is expected to improve on back of
various initiatives taken by the government in the Union Budget
2019 for the Agriculture and Infrastructure sectors.
Aarson Motors was established in year 2001 with an objective to
enter into two wheeler dealership business. The entity started
its operation from 2001 and managed by two partners namely Mr.
Ashok Kumar Singh and Mrs. Banti Agarwal.
The entity is authorized dealer of Hero Motocrop Limited (Two
wheeler division) with its office located at Vidhan Sabha Road,
Pandri, Raipur-492005. Currently the entity has fully automated
workshops with firm trained mechanics, the only dealership with
two additional fully automated workshops located at Siddarth
Chowk, Tikarapara, Raipur and Pathak Hospital Road, Fafadih,
Raipur. Apart from this, they also have seven sub-dealers in the
region.
ANTONY ROAD: Ind-Ra Assigns 'BB' LT Issuer Rating, Outlook Stable
-----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has assigned Antony Road
Transport Solutions Pvt Ltd (ARTS) a Long-Term Issuer Rating of
'IND BB' The Outlook is Stable.
The instrument-wise rating action is:
-- INR200.0 mil. Term loan due on May 2022 assigned with
IND BB/Stable rating.
KEY RATING DRIVERS
The ratings reflect the project risk associated with ARTS's
ongoing capex to expand its fleet. The company has received new
contracts for deploying more buses in New Delhi from the
Department of Transport, the government of National Capital
Territory of Delhi, and expects to operationalize them in FY20.
According to the contracts, ARTS will deploy 600 more buses in
New Delhi over FY19-FY21 at a total cost of around INR2,600
million with debt funding of about 90%.
Moreover, the company's free cash flow was negative INR32 million
in FY18 (FY17: negative INR52 million) on account of the capex.
The company's cash flows will remain under pressure till all the
buses are deployed and operations are stabilized.
The ratings also reflect ARTS's modest scale of operations, with
revenue of INR789 million in FY18 (FY17: INR517 million). The
28.32% yoy increase in revenue in FY18 was due to an increase in
the deployment of buses. The company has recorded the revenue of
INR489 million till September 2018.
The ratings factor in ARTS's business exclusivity. The company
has a 10-year agreement, expiring in June 2025, with the
Department of Transport, to operate 238 private stage carriage
services in Delhi under the public private partnership model.
The ratings also factor in ARTS's comfortable credit metrics,
supported by healthy EBITDA margins. EBITDA margin fell to 26.8%
in FY18 (FY17: 29.6%) because of an increase in the overhead
expenses and ROCE was 20% (15%). Gross interest coverage
(operating EBITDAR/gross interest expense) improved to 3.3x in
FY18 (FY17: 2.2x) and net financial leverage (adjusted net
debt/operating EBITDA) reduced to 2.3x (4.0x), attributed to
improved operating EBITDA of INR211 million (INR153 million) from
higher revenue. Ind-Ra however expects the credit metrics to
weaken due to the debt funded capex.
The ratings are supported by a decade-long experience of the
company's promoter in the public bus transport services business.
RATING SENSITIVITIES
Negative: Substantial deterioration in the credit metrics due to
a larger-than-expected capex or because of a fall in the revenue
or profitability and stretch in the liquidity, all on a sustained
basis, could lead to a negative rating action.
Positive: A significant increase in the scale and profitability
leading to an improvement in credit metrics, all on a sustained
basis, would be positive for the ratings.
COMPANY PROFILE
Incorporated in 2011, ARTS is a special purpose vehicle and
wholly owned subsidiary of Antony Garages Private Limited. ARTS
provide public transport services in the form of about 258 buses
in cluster 7 of New Delhi.
ASHIANA DWELLINGS: ICRA Assigns B- Rating to INR114.81cr Loans
--------------------------------------------------------------
ICRA has assigned the long-term rating of [ICRA]B- for the
INR64.81-crore optionally convertible debentures (OCD), INR40.00-
crore term loan and INR10.00-crore non-fund based facilities of
Ashiana Dwellings Private Limited (ADPL). The outlook on the
long-term rating is Stable.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based-
Term Loan 40.00 [ICRA]B-(Stable); assigned
Non-fund
Based-BG 10.00 [ICRA]B-(Stable); assigned
Optionally
Convertible
Debenture 64.81 [ICRA]B-(Stable); assigned
Rationale
The rating takes into consideration the Group's [with flagship
Ashiana Homes Private Limited (AHPL)] track record and experience
in the real estate industry, and intermediate execution stage of
the phase-1 of the project with structural work completed.
However, the rating is constrained by the stretched liquidity
position of the company due to weak sales velocity and inadequate
customer advances, leading to high dependence on borrowings. High
debt repayments, coupon payments and redemption premium payments
in the near term are expected to keep the cashflows of the
company under pressure, thereby necessitating reliance on timely
promoter support, refinancing/extension of debt repayments, and
higher incremental sales. The execution risk remains high as only
60% of the construction cost has been incurred for phase-1 and
the company has a target completion date of June 2019. Further,
the execution of the project remains highly dependent on fund
availability.
The company's ability to bring in additional funds or refinance
existing debt/receive extension for debt, as well as increase its
sales velocity, will remain crucial for timely debt payments and
timely completion of the project.
Outlook: Stable
ICRA expects ADPL's credit profile to remain modest and in line
with the rating. The outlook may be revised to Positive if the
company is able to extend its debt maturity profile and improve
customer collections, easing its liquidity position. The outlook
may be revised to Negative if the liquidity position remains weak
for a prolonged period of time, thereby impacting debt servicing
and project execution capacity.
Key rating drivers
Credit strength
Established track record of AHPL and experience of promoters: The
company, which is a special purpose vehicle (SPV) of AHPL, is
promoted by the Modi family that has been involved in the real
estate industry for more than 30 years. AHPL has built over 34
lakh square feet (lsft) of residential and commercial space.
ICRA's rating draws comfort from the company's track record and
experience of more than 30 years of promoters in the industry.
Credit challenges
Substantial debt repayments in near term despite extension of
earlier repayments: The company has taken extension in the due
date of the first instalment of INR22.0-crore OCDs along with the
applicable coupon and redemption premium from February 16, 2018
to December 31, 2018. However, the incremental sales and customer
collections remain weak, resulting in stretched liquidity
position for the company. It remains highly dependent on timely
promoter support or additional funding support and incremental
sales for the timely payment of debt due in December 2018 and
February 2019. This apart, the company has been regular in making
the monthly interest payments against term loan, while it has
also taken extension in the principal payment of the term loan.
Low sales velocity and exposure to market risk: The market risk
continues to be high as is evident from the moderate sales (~58%
of phase-1 area sold till September 2018) and customer
collections due to the subdued market conditions, high supply in
the real estate market in Gurgaon, and under-construction status
of the project. The sales velocity has remained very weak in the
last 12 months. Timely completion of the project remains crucial
for improvement in the incremental sales velocity and sales price
of the project.
High execution risk: The execution risk remains for phase-1 as
the target completion date is June 2019. The company remains
highly dependent on timely fund availability for completion of
phase-1 of the project on time. Further, execution risk is high
for the remaining phases.
Ashiana Dwellings Pvt Ltd (ADPL) is an SPV of AHPL, incorporated
in 2014 for the purpose of development of Ashiana Mulberry
project. AHPL holds ~80% stake in the company, while the
remaining 20% is held by Indiareit, the real estate private
equity arm of the Piramal Group. AHPL was incorporated in 1987,
with presence mostly in north India, and has developed more than
3.4 msf (million square feet) of area. Ashiana Mulberry is a
residential project located in Sector 2, Sohna, Gurugram with
total saleable area of 0.95 msf. The company plans to develop the
project in phases, wherein 2.62 msf of area is part of Phase-I
(which is under development), while the other phases are yet to
be launched. Phase-1 consists of two towers of G+13 floors and 1
tower of G+17 floors with four flats per floor. The total project
cost for phase-1 is INR115.82 crore and full project is INR460.02
crore.
ASHIANA LANDCRAFT: ICRA Assigns B- Rating to INR79.95cr Loans
-------------------------------------------------------------
ICRA has assigned the long-term rating of [ICRA]B- for the
INR79.95-crore non-convertible debentures (NCD) of Ashiana
Landcraft Realty Private Limited (ALRPL). The outlook on the
long-term rating is Stable.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Non-convertible
Debenture Series I 63.72 [ICRA]B-(Stable); assigned
Non-convertible
Debenture Series II 16.23 [ICRA]B-(Stable); assigned
Rationale
The rating takes into consideration the Ashiana and Landcraft
Groups' [with flagship Ashiana Homes Private Limited (AHPL) and
Landcraft Projects Private Limited (LPPL) respectively] track
record and experience in the real estate industry, and
intermediate execution stage of the phase-1 of the project with
structural work completed. However, the rating is constrained by
the stretched liquidity position of the company due to weak sales
velocity and inadequate customer advances, leading to high
dependence on borrowings. High debt repayments, coupon payments
and redemption premium payments in the near term are expected to
keep the cashflows of the company under pressure, thereby
necessitating reliance on timely promoter support,
refinancing/extension of debt repayments, and higher incremental
sales. The execution risk remains high as around 74% of the
construction cost has been incurred for phase-1 and the company
has a target completion date of June 2019. Further, the execution
of the project remains highly dependent on fund availability.
The company's ability to bring in additional funds or refinance
existing debt/receive extension for debt, as well as increase its
sales velocity, will remain crucial for timely debt payments and
timely completion of the project.
Outlook: Stable
ICRA expects ALRPL's credit profile to remain modest and in line
with the rating. The outlook may be revised to Positive if the
company is able to extend its debt maturity profile and improve
customer collections, easing its liquidity position. The outlook
may be revised to Negative if the liquidity position remains weak
for a prolonged period of time thereby impacting debt servicing
and project execution capacity.
Key rating drivers
Credit strengths
Established track record of AHPL and experience of promoters: The
company, which is a special purpose vehicle (SPV) of AHPL and
LPPL, is promoted by the Modi and Garg family respectively that
have been involved in the real estate industry for more than 30
years and 10 years respectively. AHPL and LPPL has built over 34
lakh square feet (lsft) and 20.04 lsf of residential and
commercial space. ICRA's rating draws comfort from the track
record and experience of promoters in the industry.
Credit challenges
Substantial debt repayments in near term despite extension of
earlier repayments: The company has taken extension on March 27,
2018 for payment of interest on the outstanding NCDs and OCDs
which were due on March 31, 2017 and for payment of interest
amount, applicable principal amount and redemption premium amount
due on March 31, 2018. The payments were deferred till
February 28, 2019 subject to receipt of INR35.00 crore by April
15, 2018 (which has been repaid through funds raised by issuance
of fresh NCD of about INR78.67 crore). However, the incremental
sales and customer collections continue to remain weak resulting
in stretched liquidity position for the company. It remains
highly dependent on timely promoter support or additional funding
support and incremental sales for the timely payment of debt due
in February 2019 and March 2019. This apart, the company has been
regular in making the monthly interest payments against term
loan, while the repayments for the same will start in January
2019.
Low sales velocity and exposure to market risk: The market risk
continues to be high as is evident from the moderate sales (~55%
of phase-1 area sold till Sep-2018) and customer collections due
to the subdued market conditions, high supply in the real estate
market in Gurgaon, and under-construction status of the project.
The sales velocity has remained very weak in the last 12 months.
Timely completion of the project remains crucial for improvement
in the incremental sales velocity and sales price of the project.
High execution risk: The execution risk remains for phase-1 as
the target completion date is June 2019. The company remains
highly dependent on timely fund availability for completion of
phase-1 of the project on time. Further, execution risk is high
for the remaining phases.
Incorporated in 2012, Ashiana Landcraft Realty Private Limited
(ALRPL) is a joint development between Ashiana Homes Pvt Ltd
(AHPL) and Landcraft Projects Private Limited (LPPL) (rated
[ICRA]BB+) formed solely for a premium real estate residential
project development named 'The Center Court' located at Sector
88A, Gurgaon with a saleable area of 1.72 msf (million square
feet). LPPL was incorporated in 2007, and is the real estate
vertical of Garg group with the presence in Ghaziabad.
BRIJBASI HI-TECH: CARE Raises Rating on INR8cr Loan to B
--------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Brijbasi Hi-Tech Udyog Limited (BHUL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 8.00 CARE B; Stable Revised from
CARE B-; Stable
Short-term Bank
Facilities 8.00 CARE A4 Reaffirmed
Detailed rationale and key rating drivers
The revision in the long term ratings of BHUL factors improvement
in the profitability margins and coverage indicators. Further,
the ratings continue to draw comfort from experienced and
resourceful promoters.
The ratings further continue to remain constrained by small and
fluctuating scale of operations and leveraged capital structure.
The rating is further constrained by working capital intensive
nature of operations, competitive nature of business and tender
driven nature of business.
Going forward, ability of the company to improve its scale of
operations, its profitability margins and to manage its working
capital effectively and efficiently shall be the key rating
sensitivities.
Detailed description of the key rating drivers
Key Rating Strengths
Experienced and resourceful promoters: Mr. Mahesh Chandra
Agarwal, Mr. Suresh Chandra Agarwal and Mr. Rajesh Kumar Agarwal
are directors of the company, have more than four decades of
experience in manufacturing industry. The company's overall
operations are managed by Mr Mahesh Chandra Agarwal. Mr. Suresh
Chandra Agarwal and Mr. Rajesh Kumar Agarwal who look over supply
chain and marketing division.
Improvement in the profitability margins and coverage indicators
The profitability margins of BHUP are directly associated with
technical aspect of the contract. Further, the profitability
varies with the project due to tender driven nature of the
business owing to varying margins in the different projects
undertaken by the company. The profitability margins of the
company improved as marked by the PBILDT and PAT margins, which
stood at 12.27% and 1.37% respectively in FY18 as against PBILDT
and PAT margins of 3.49% coupled with net losses respectively in
FY17. The improvement was on account of execution of orders with
higher profitability margins.
The coverage indicators improved and stood moderate marked by
interest coverage ratio and total debt to gross cash accruals,
which stood at 1.27x and 34.34x respectively in FY18 as against
0.36x and -15.78x in FY17. The improvement in the coverage
indicators is owing to improvement in the profitability margins
resulting in higher GCA levels.
Key Rating Weaknesses
Small and fluctuating scale of operations: The scale of
operations continues to remain small as marked by total operating
income (TOI) of INR17.47 crore and GCA of INR0.40 crore for FY18
(refers to the period April 1 to March 31). Besides, the
company's capital base also continues to remain relatively modest
at INR7.01 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. Furthermore, company's total operating
income has been fluctuating over the past three years i.e. FY17-
FY18 due to tender driven nature of business. The company has
achieved total operating income of INR10.00 crore in 6MFY19
(refer to period April 1-September 30, 2018; based on provisional
results).
Leveraged Capital Structure: The capital structure of the company
continues to remain leveraged on account of high dependence on
bank borrowings to meet the working capital requirements coupled
with modest net worth base as marked by overall gearing ratio
stood above 1.80x for the past three balance sheet dates ending
March 31'16-18'.
Working capital intensive nature of operations: The liquidity
position of the company continues to remain stressed as reflected
by almost full utilization of bank borrowings. Furthermore, BHUL
has high operating cycle on account of high inventory holdings
and collection period of 279 days and 140 days respectively in
FY18. High inventory days are on account of offering of varied
range of variants', for which they need to maintain stock of
spare and parts in order to meet the customer's demand, which
also necessitates maintaining of adequate inventory in form of
raw material and work-in-progress for smooth running of its
production process. BHUL's high collection period is owing to
long clearance process with the government departments with
regards to clearance of bills raised to customers. The company
procures raw material from traders and manufactures located in
overseas and domestic market and enjoys a credit period of 2-3
months resulting in an average creditor period of 85 days in
FY18.
Competitive nature of business and tender driven nature of
business: BHUL operates in a competitive market for fire-fighting
vehicles marked by the presence of number of players in the
unorganized sector and organized sector. The company majorly
supplies fire-fighting vehicles to government organizations,
which are awarded through tender-based system. The company is
exposed to the risk associated with tender-based business, which
is characterized by intense competition. The growth of business
depends on its ability to successfully bid for the tenders and
emerge as the lowest bidder. Furthermore, any changes in the
procurement policy or government organization's spending on fire-
fighting are likely to affect the revenues of the company.
Mathura (Uttar Pradesh) based Brijbasi Hi-Tech Udhyog Limited
(BHUL) incorporated in 1972 by Mr. Mahesh Chandra Agarwal, Mr.
Suresh Chandra Agrawal and his family members. The company is
engaged in the manufacturing and assembling of fire fighting
vehicles viz. fire vans, water tanks, water bourses, foam tender,
DCP tenders, crash fire tenders. BHUL is selling its product
under its own brand name i.e. "Brijbasi". Hot Rolled (HR), Cold
Roll (CR) coil, Aluminum sheet, diesel engine etc. are key raw
material for the manufacturing and assembling of fire fighting
vehicles. The company normally procures HR/CR coil from the
traders located in the Delhi-NCR and imports other equipments.
C.P. ARORA: ICRA Lowers Rating on INR6.75cr Cash Loan to C
----------------------------------------------------------
ICRA has revised the long-term rating to [ICRA]C from [ICRA]BB
and short-term rating to [ICRA]A4 from [ICRA]A4+ for the INR15.00
crore bank facilities of C.P. Arora Engineers-Contractors Pvt.
Ltd. (CPA).
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund Based- 6.75 [ICRA]C; revised from
Cash Credit [ICRA]BB (Stable)
Short term 8.22 [ICRA]A4; revised from
Non-fund-based [ICRA]A4+
Short term- 0.03 [ICRA]A4; revised from
Unallocated [ICRA]A4+
Rationale
The rating action takes into account delay in servicing of a loan
not rated by ICRA. The delay was on account of stretched
liquidity position of the company.
Credit strengths
Established track record of the promoters: CPA has been involved
in road construction for more than 50 years. CPA is currently
managed by Mr. Karun Arora (son of Mr. C.P. Arora) who has a
long-standing experience in the road construction sector. The
company primarily undertakes road construction projects for
government entities and also for clients in the private sector,
on a sub-contract basis.
Credit challenges
Recent delays in debt servicing: There has been delays in debt
servicing by the company.
High utilisation of working capital limits and consistent
dependant on unsecured loans from promoters: The Company utilises
approximately 95% of its total working capital limits and is
consistently dependant on unsecured loans from promoters to fill
any funding gap.
CPA was incorporated in 2003 and was promoted by late Mr. C.P.
Arora. His family members took over the running business of the
proprietorship firm after his death. The company has been
involved in road construction for more than 50 years. CPA is
currently managed by Mr. Karun Arora (son of Mr. C.P. Arora) who
has long experience in the road construction sector. The company
primarily undertakes road construction projects for government
entities (Public Works Department) and also for clients in the
private sector, on a sub-contract basis. The company is also
involved in various ancillary works, required for the completion
of a road project, including construction of footpaths, walkways,
cross drainage works, culverts, sewer lines, water supply lines,
landscaping, and horticulture jobs.
In FY2018, on a provisional basis, the company reported profit
after tax (PAT) of INR2.7 crore on an operating income (OI) of
INR303.3 crore compared to a PAT of INR2.4 crore on an OI of
INR341.9 crore in the previous year.
CALISTA PROPERTIES: CARE Reaffirms B- Rating on INR15cr LT Loan
---------------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Calista Properties Private Limited (CPPL)), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 15.00 CARE B-; Stable Reaffirmed
Detailed Rationale & Key Rating Drivers
The rating assigned to the bank facilities of CPPL continues to
remain constrained on account of moderate track record of
operations, moderate occupancy levels and high operating costs
translating into losses and risk associated with revenue
concentration on single property. The rating also takes into
account weak capital structure and debt coverage indicators along
with inherent cyclicality associated with the hotel industry.
The rating, however, continues to derive strength from experience
of the promoters in hotel management, marketing cummanagement
contract with 'Radisson Hotels International Inc'. (RHI) and
favorable location of the hotel in Pune.
The ability of CPPL to improve occupancy levels and average room
rent (ARR) in light of competitive nature of industry while
reducing its operating costs thus improving its operating margin
and capital structure is the key rating sensitivities.
Furthermore, efficient management of working capital requirement
and improvement in liquidity position is also crucial.
Detailed description of the key rating drivers
Key Rating Weaknesses
Weak solvency and liquidity position: The liquidity position of
the company continues to be weak with below unity current and
quick ratio as on March 31, 2018. The operating cycle of company
stood at -31 days as on March 31, 2018. Furthermore, CPPL
continues to suffer losses on account of higher fixed capital
charges resulting in deterioration of networth base leading to
weak solvency profile. With weak solvency and low profit margins,
the debt coverage indicators also stood weak.
Inherent cyclicality with the hotel industry: CPPL is exposed to
the cyclicality associated with the hotel industry, which has
a direct linkage with level of disposable income available with
individuals.
Risk associated with Single Property: The company derives its
total revenue from single property and has to solely depend on
its own for revenue generation. The fortunes of CPPL are linked
to hospitality segment and slow down in hospitality industry
could cause an adverse effect on its business operations.
Moderate track record of operations and continuous losses: CPPL
has a track record of operations of more than half decade and has
a moderate scale of operations, which stood at INR27.06 cr in
FY18, however on account of high interest and depreciation
expenses, the company, reported continuous losses at net level.
Likely effect on supply glut on ARR and occupancy levels in Pune
market: The company faces high competition from large number of
hotels located in same vicinity and its presence in highly
fragmented industry. Such industry is characterized with high
entry barriers and high number of players operational.
Hence, this limits bargaining power of companies operating in the
sector. Further, CPPL is likely to be effected in terms of
average occupancy and room rent rates.
Key Rating Strengths
Experienced promoters: CPPL is promoted by the Kalmadi group and
Mr. Vijay Kumar Gupta. Mr. Gupta was earlier associated with Le
Meridien (name changed to The Grand Sheraton, Pune), in his
capacity as promoter and managing director for tenure of one and
half decade (2002-2017).The Kalmadi Group is the owner of
automobile company viz. Sai Service Station Ltd. (SSSL) which has
an automobile dealership. The experience of promoters in diverse
industry, aids in day today decision making process of CPPL.
Contract with reputed brand: CPPL has a management-cum-marketing
contract for 10 years, with Radisson Hotels International Inc.
(RHI) for 'Radisson' brand. RHI is a subsidiary of the Carlson
Rezidor Hotel Group, of which Carlson is the main stakeholder. It
operates the brands Radisson, Radisson blu, Radisson RED and Park
Inn by Radisson brand with more than 990 locations in 73
countries. Marketing of CPPL is taken care of by the Global
Distribution System (GDS) of Carlson.
Favourable location: The Hotel is located in the Kharadi area at
Nagar Road in Pune and has close proximity to the Pune Airport,
railway station and IT parks.
Positive long-term outlook for hospitality industry: The
prospects of the hospitality industry in India in the long term
are bright. The Indian hospitality industry especially the Mid-
market/Budget category is expected to witness a strong growth of
about 15% going ahead thereby surpassing the growth in inventory
additions in the segment. With the expected improvement in
investment cycle and with revival in the global as well as Indian
economy and subsequently the increase in disposable income of the
individuals, people are expected to spend on events like
marriages, parties, hang-outs etc, which augurs well for the
hospitality industry and for existing players such as CPPL.
CPPL, incorporated in March, 2006, is promoted by the Kalmadi
group and Mr. Vijay Kumar Gupta. CPPL owns a 5-star hotel with
141 rooms on Nagar Bypass Road, Kharadi, Pune operating under the
brand "Radisson". CPPL has entered into 10 year management-cum-
marketing arrangement with Radisson Hotels International, Inc.
The hotel started its commercial operations from November 2009.
CHENNAMANAGATHIHALLI SOLAR: CARE Reaffirms B on INR13.85cr Loan
---------------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Chennamanagathihalli Solar Power Project LLP (CSPPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 13.85 CARE B; Stable Reaffirmed
Detailed Rationale & Key Rating Drivers
The ratings of the bank facilities of CSPPL continues to be
constrained by lower than expected profitability as lower tariff
is realized as against the PPA tariff due to its ongoing dispute
with KERC regarding the tariff rate, further accentuated by
revenue sharing with landowner. The rating is also tempered by
generation susceptible to climatic conditions and technological
risks. These rating weaknesses are partially offset by
Experienced promoter in renewable energy segment, long term PPA
with Bangalore Electricity Supply Company Limited (BESCOM) for 25
years and satisfactory operating performance during FY18
(Audited) and 5MFY19 (unaudited). The rating also factors in the
Government of India's initiatives encouraging the use of solar
power for both residential and commercial purposes.
Going forward, the ability of the firm to receive favorable order
from KERC for revision in tariff, achieve envisaged generation
levels and timely receipt of payments from BESCOM are key rating
sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Ongoing dispute with KERC regarding the Tariff Rate: The
operations commenced on June 30, 2017 against the envisaged COD
of December 2016. BESCOM had agreed to an extension of COD by 6
months with an agreed rate of INR6.51 per unit. However, the same
was disputed by KERC (Karnataka Electricity Regulatory
Commission). Presently, CSPPL has been billing at tariff rate of
INR4.36 per unit as against the PPA rate INR8.4 per unit vide an
interim order. The firm has taken up the matter with KERC for
revision in tariff and the matter is pending.
Fixed cost associated with LLP agreement: The firm is required to
pay fixed amount of INR1.25/- unit of power generation to Mr
Mahesh, land owner. Furthermore, CSPPL has to pay O&M charges to
REL (Ravindra Energy Limited; group company) starting with
INR0.31 crore in first year with 5% escalation each year. Such
fixed expenses are expected to impact profitability further for
the firm.
Climactic and technological risks: Achievement of desired CUF
(Capacity Utilization Factor) is subjected to change in climatic
conditions, amount of degradation of modules as well as
technological risks (limited track record of solar technology in
India).
Key Rating Strengths
Experience of the promoters with established track record in
renewable sector: CSPPL is promoted by Mr. Sidram Kaluti who is
also CEO of Ravindra Energy Limited (REL). REL (erstwhile
Ravindra Trading & Agencies Limited) was incorporated in 1980 and
was promoted by the Murkumbi family of Shree Renuka Group. The
company currently has existing businesses under various
subsidiaries in coal trading, sugar trading and production and
solar pumps trading.
Power purchase agreement with Bangalore Electricity Supply
Company Limited (BESCOM): CSPL has entered into a long-term power
purchase agreement (PPA) for 25 years with Bangalore Electricity
Supply Company Limited (BESCOM) dated June 29, 2015 for supply of
3 MW power.
Satisfactory operational performance of CSPPL in FY18 (Jul'17 to
March 18) & 5MFY19 Post commencement of operations in Jul'17, the
firm has generated 2.98 MU till March 18 and earned revenue of
INR2.55 crore. During 5MFY19 (from Apr'18 to Aug'18) the firm has
generated 1.83MU with an estimated revenue of 1.54 crore.
Government initiative in promoting solar projects: The Government
has set a solar power target of 100 GW to be achieved within 2022
and in line with promoting use of solar powers has come up with
various incentives and is actively encouraging the use of solar
power for both residential and commercial purposes.
Chennamanagathihalli Solar Power Projects (CSPL) was promoted by
Mr. Ravindra Gundappa Patil, MD of Ravindra Energy Limited, and
Mr. G Mahesha in the year 2016. CSPPL has 3MW grid connected
solar photovoltaic (PV) power plant at Chennamanagathihalli
village, Chitradurga district, Karnataka. CSPPL has entered into
Limited Liability Partnership agreement with, M/s. Ravindra
Energy Limited, Mr. Ravindra Gundappa Patil and Mr. G Mahesha
(landowner).
GARG INDUSTRIES: ICRA Lowers Rating on INR22cr Loan to B
--------------------------------------------------------
ICRA has downgraded the long-term rating for the INR22.01 crore
fund-based limits of Garg Industries Limited to [ICRA]B ISSUER
NOT COOPERATING from [ICRA]BB ISSUER NOT COOPERATING. The outlook
on the long-term rating is Stable. Further, ICRA has reaffirmed
the short-term rating for the INR2.0 crore non-fund based limits
of GIL at [ICRA]A4 ISSUER NOT COOPERATING. The ratings continue
to remain in the 'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based limits 22.00 [ICRA]B (Stable) ISSUER NOT
COOPERATING; Revised from
[ICRA]BB (Stable), Rating
continues to remain under
'Issuer Not Cooperating'
category
Non-fund based 2.00 [ICRA]A4 ISSUER NOT
limits COOPERATING; Rating continues
to remain under 'Issuer Not
Cooperating' category
As part of its process and in accordance with its rating
agreement with GIL, ICRA has been trying to seek information from
the entity so as to monitor its performance, but despite repeated
requests by ICRA, the entity's management has remained non-
cooperative. In the absence of requisite information, and in line
with SEBI's Circular No. SEBI/HO/MIRSD4/CIR/2016/119, dated
November 01, 2016, ICRA's Rating Committee has taken a rating
view based on the best available information. Accordingly, the
lenders, investors and other market participants are advised to
exercise appropriate caution while using this rating as the
rating may not adequately reflect the credit risk profile of the
entity, despite the downgrade.
Rationale
The rating revision takes into account ICRA's expectation of
deterioration in GIL's financial profile post the significant
weakening in the overall credit profile of other group entities
namely Raipur Power and Steel Limited (RPSL, rated [ICRA]D ISSUER
NOT COOPERATING) and Parth Concast Limited (PCL, rated [ICRA]D
ISSUER NOT COOPERATING).
Incorporated in 1991, GIL manufactures wire rods from steel
billets (capacity of 36,000 tonne per annum or TPA) at its
manufacturing facilities in Ludhiana. The company is promoted by
the Garg family of Ludhiana: Mr. N.D. Garg, Mr. Vinod Garg and
Mr. Balraj Garg. The promoters of the company have set-up two
other companies: RPSL and PCL. RPSL manufactures sponge iron,
ferro alloys, billets, iron ore pellets, wire rods and HB wires
in Durg, Chattisgarh. PCL manufactures billets from sponge iron
at its manufacturing facilities located adjacent to those of RPSL
in Durg.
HUKKERI SOLAR: CARE Reaffirms 'B' Rating on INR9cr LT Loan
----------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Hukkeri Solar Power Project LLP (HSPPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 9.00 CARE B; Stable Reaffirmed
Detailed Rationale & Key Rating Drivers
The ratings of the bank facilities of HSPPL continues to be
constrained by lower than expected profitability as lower tariff
is realized as against the PPA tariff due to its ongoing dispute
with KERC regarding the tariff rate, further accentuated by
revenue sharing with landowner. The rating is also tempered by
generation susceptible to climatic conditions and technological
risks. These rating weaknesses are partially offset by
Experienced promoter in renewable energy segment, long term PPA
with Hubli Electricity Supply Company Limited (HESCOM) for 25
years and satisfactory operating performance during FY18
(Audited) and 5MFY19 (unaudited). The rating also factors in the
Government of India's initiatives encouraging the use of solar
power for both residential and commercial purposes.
Going forward, the ability of the firm to receive favorable order
from KERC for revision in tariff, achieve envisaged generation
levels and timely receipt of payments from HESCOM are key rating
sensitivities.
Detailed Description of the Key Rating Drivers
Key Rating Weaknesses
Ongoing dispute with KERC regarding the Tariff Rate: The
operations commenced on May 8, 2017 against the envisaged COD of
Jan'17. HESCOM had agreed to an extension of COD by 6 months with
an agreed rate of INR6.51 per unit. However, the same was
disputed by KERC (Karnataka Electricity Regulatory Commission).
Presently, HSPPL has been billing at tariff rate of INR4.36 per
unit as against the PPA rate INR8.4 per unit vide an interim
order. The firm has taken up the matter with KERC for revision in
tariff and the matter is pending.
Fixed cost associated with LLP agreement: The firm is required to
pay fixed amount of INR1.25/- unit of power generation to Mr
Ishwar S Matagar, land owner. Furthermore, HSPPL has to pay O&M
charges to REL (Ravindra Energy Limited; group company) starting
with INR0.21 crore in first year with 5% escalation each year
going forward. Such fixed expenses are expected to impact
profitability further for the firm.
Climactic and technological risks: Achievement of desired CUF
(Capacity Utilization Factor) is subjected to change in climatic
conditions, amount of degradation of modules as well as
technological risks (limited track record of solar technology in
India).
Key Rating Strengths
Experience of the promoters with established track record in
renewable sector: HSPPL is promoted by Mr. R.G.Patil who is also
a director of Ravindra Energy Limited (REL). REL (erstwhile
Ravindra Trading & Agencies Limited) was incorporated in 1980 and
was promoted by the Murkumbi family of Shree Renuka Group. The
company currently has existing businesses under various
subsidiaries in coal trading, sugar trading and production and
solar pumps trading.
Power purchase agreement with Hubli Electricity Supply Company
Limited (HESCOM): HSPPL has entered into a long-term power
purchase agreement (PPA) for 25 years with Hubli Electricity
Supply Company Limited (HESCOM) dated July 07, 2015 for supply of
2 MW power.
Satisfactory operational performance of HSPPL in FY18(May'17 to
March 18) & 5MFY19 Post commencement of operations in May'17, the
firm has generated 1.34 MU till March 18 and earned a revenue of
Rs.1.12 crore. During 5MFY19 (from Apr'18 to Aug'18) the firm has
generated 0.70 MU with an estimated revenue of 0.59 crore.
Government initiative in promoting solar projects: The Government
has set a solar power target of 100 GW to be achieved within 2022
and in line with promoting use of solar powers has come up with
various incentives and is actively encouraging the use of solar
power for both residential and commercial purposes.
Hukkeri Solar Power Project (HSPPL) was promoted by Mr. Sidram
Maleppa Kaluti, CEO of Ravindra Energy Limited and Mr. Ravindra
Gundappa Patil in the year 2016. HSPPL has 2 MW grid connected
solar photovoltaic (PV) power plant at Taluka Hukkeri, Belgavi
district, Karnataka. HSPPL has an entered into Limited Liability
Partnership agreement with Mr. Ishwar S Matagar, M/s. Ravindra
Energy Limited and Mr. Ravindra Gundappa Patil.
INTERNATIONAL FRESH: ICRA Moves D Rating to Not Cooperating
-----------------------------------------------------------
ICRA said the rating for the INR30.00-crore bank facility of
International Fresh Farm Products Private Limited (IFFPL) has
been moved to the 'Issuer Not Cooperating' category. The rating
is denoted as [ICRA]D ISSUER NOT COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Cash Credit 13.00 [ICRA]D ISSUER NOT COOPERATING;
Rating moved to 'Issuer Not
Cooperating' category
Term Loan 17.00 [ICRA]D ISSUER NOT COOPERATING;
Rating moved to 'Issuer Not
Cooperating' category
ICRA has been seeking information from the entity to monitor its
performance. Despite repeated requests by ICRA, the entity's
management has remained non-cooperative. The current rating
action has been taken by ICRA based on the best available/dated
/limited information on the issuer's performance. Accordingly,
lenders, investors and other market participants are advised to
exercise appropriate caution while using this rating as it may
not adequately reflect the credit risk profile of the entity.
Incorporated in 1996, International Fresh Farm Products India
Limited (IFPIL) is a limited company promoted by Mr. Sukhinder
Singh and his family members. Initially the company was engaged
in the business of providing cold storage and warehousing
facility on a rental basis. In FY2012, the company ventured into
processing of wheat and started manufacturing various Wheat
Products like Atta, Maida, Suji, Bran and other by products. In
FY2014, the company commenced processing of vegetables and
installed a cold chain facility for frozen vegetables. The
company mainly store vegetables like Peas and Potatoes (~80%).
The company procures most of its requirement of Peas from
farmers, local vendors, and from open market. IFPIL sells its
frozen food products under its own in-house brands "Fresh Farm".
MANDOVI CASTING: ICRA Lowers Rating on INR2.76cr Loan to B
----------------------------------------------------------
ICRA has downgraded the long-term rating assigned to the INR7.81
crore1 bank limits of Mandovi Casting Private Limited from
[ICRA]BB- to [ICRA]B. ICRA has reaffirmed the short-term rating
of [ICRA]A4 assigned to the bank limits of the company. The
outlook on the long-term rating is 'Stable'. The ratings have
been removed from the 'Issuer Not Co-operating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term fund 2.76 [ICRA]B(Stable); Downgraded
based limits from [ICRA]BB-(Stable) and
removed from 'Issuer Not
Co-operating' category
Short-term non 4.61 [ICRA]A4; Reaffirmed and
fund based limits removed from 'Issuer Not
Co-operating' category
Unallocated limit 0.44 [ICRA]B(Stable)/[ICRA]A4;
Downgraded/reaffirmed and
removed from 'Issuer Not
Co-operating' category
Rationale
The ratings are constrained by the worsening cost structure of
the company caused by increase in input costs which was not
neutralised by increase in realisations, resulting in net losses
during FY2017 and FY2018. The capital structure has further
weakened during the past two fiscals due to erosion of net worth.
The ratings are also constrained by high product concentration
risk with presence only in manufacturing of billets, which is
susceptible to cyclicality in steel industry. ICRA also notes the
high geographic and customer concentration risks faced by the
company. These apart, the ratings remain tempered by the highly
commoditised and fragmented nature of secondary steel industry
resulting in intense competition, thus restricting the company's
pricing flexibility. However, the ratings draw comfort from the
extensive experience of the promoters in the steel industry and
the backward integration within the group for supply of a major
portion of MCPL's raw material requirement. The ratings also
factor in the favourable demand outlook in the steel industry
over the medium-term.
Outlook: Stable
ICRA believes that MCPL will benefit from the operational
linkages with its group companies, the experience of its
promoters and the favourable demand outlook in steel industry in
the medium-term. The outlook may be revised to 'Positive' if
consistent growth in revenue and profitability strengthen the
financial risk profile of the company. The outlook may be revised
to 'Negative' if the earnings and cash accruals are lower than
expected, or if there is any major debt-funded expenditure or
elongation of its working capital cycle, which would weaken its
capital structure and liquidity position.
Key rating drivers
Credit strengths Established experience of the promoters in the
steel industry; group companies enable supply of major raw
materials: MCPL has its production facility of billets in Kundaim
(Goa). The promoters are associated with the steel industry for
more than two decades. The company procures a major portion of
its sponge iron requirement (35% and 31% in FY2017 and FY2018
respectively) from its group company, Hare Krishna Metallics
Private Limited (rated [ICRA]BBB-(Stable)/[ICRA]A3).
Favourable demand outlook in steel industry: The demand from the
steel sector picked up from Q4FY2018 onwards supported by
government's thrust on infrastructure projects, leading to steel
demand uptick in India. The domestic steel demand is likely to be
in upswing for the next 12 to 18 months.
Credit challenges
Worsening cost structure of the company caused by increase in
input costs resulting in net losses for the past two years: There
was an increase in input costs for the manufacturing of billets.
The rise in costs was not neutralised by increasing realisations,
leading to net losses for the company in FY2017 and FY2018. The
net losses further led to deterioration of the capital structure
of the company due to erosion of net worth in those years.
High product concentration risk: With presence only in
manufacturing of billets, the company is exposed to cyclicality
in the steel industry as witnessed in the past. The company's
revenues were impacted on account of sluggish demand in the steel
industry leading to lower price realisations, thus resulting in
operating losses in FY2017.
Geographic concentration risks along with a highly concentrated
customer base: MCPL's sales have been geographically concentrated
with Goa accounting for 90% of the total sales in the last three
years. Also, the revenue contribution from the top five customers
stood for almost 90% of the total sales in the last two years,
which indicates a high customer concentration risk. Any loss of
client due to stiff competition in the market, may adversely
affect the operating income of the company. However, repeat
orders from the clients lend comfort to an extent.
Intense competition limits pricing flexibility: The billet/ingots
and structural manufacturing business is characterised by intense
competition from across the value chain due to low product
differentiation, and consequent high fragmentation and low entry
barriers, which limit the pricing flexibility of the
participants, including MCPL.
Mandovi Casting Private Limited was incorporated in 1996 and it
manufactures billets with an installed capacity of 25,000 metric
tonnes per annum (MTPA). The billets manufactured by the company
are primarily used in steel rolling mills and sold entirely in
the domestic market. MCPL's sales are concentrated in Goa,
followed by Maharashtra and Karnataka. It has its registered
office and manufacturing facility in Goa. It has two group
companies: Hare Krishna Metallica Private Limited and Mohit Steel
Industries Private Limited.
MCPL recorded a net loss of INR0.50 crore on an operating income
of INR69.84 crore for the year ending March 31, 2018 and a net
profit of INR0.84 crore on an operating income of INR49.39 crore
for the six months ending September 30, 2018 (provisional
numbers).
MANGALORE MINERALS: Ind-Ra Assigns 'B+' LT Rating, Outlook Stable
-----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has assigned Mangalore
Minerals Private Limited (MMPL) a Long-Term Issuer Rating of 'IND
B+'. The Outlook is Stable.
The instrument-wise rating actions are:
-- INR110 mil. Fund-based facilities assigned with
IND B+/Stable/IND A4 rating;
-- INR133.87 mil. Term loan due on March 2022 assigned with
IND B+/Stable rating;
-- INR50 mil. Proposed fund-based limits* assigned with
Provisional IND B+/Stable/Provisional IND A4 rating.
*The ratings are provisional and shall be confirmed upon the
sanction and execution of loan documents for the above facility
by MMPL to the satisfaction of Ind-Ra.
Ind-Ra has taken a consolidated view of the financials of MMPL
and its subsidiaries, namely Mandovi Minerals Private Limited
(85.8% shares held by MMPL), Hari Mandir Minerals Private Limited
(73.97%) and Hari Mandir Mineral Traders (90%), for arriving at
the ratings. This is because since these entities are in a
similar line of business and have common management and cash
fungibility.
KEY RATING DRIVERS
The ratings reflect by the group's small scale of operations with
two mining licenses in the name of MMPL and its subsidiary Hari
Mandir Mineral Traders, marked by revenue of INR613 million in
FY18 (FY17: INR564 million) and INR260.2 million during 6MFY19..
The increase in revenue in FY18 was mainly due to an increase in
the number of orders obtained and executed. Ind-Ra expects the
revenue to grow further over the medium term, on account of
repeat orders and addition of new customers. FY18 and 6MFY19
financials are provisional in nature.
The ratings also reflect the volatile and modest consolidated
EBITDA margin in the range of 24%-32% over FY15-FY18 with ROCE at
5.1% in FY18. This results in modest credit metrics for the
group, with net leverage (net debt/operating EBITDA) of 1.9x
(FY17: 2.9x) and interest coverage (operating EBITDA/gross
interest expense) of 3.7x (6.0x) in FY 18. The interest coverage
deteriorated in FY18 primarily on account of an increase in
interest expenses while the net leverage improved because of a
reduction in total debt led by scheduled repayments.
The ratings are constrained by the group's stretched working
capital cycle of 131 days in FY18 (FY17: 94 days) due to high
inventory and debtor days. This has resulted in a tight liquidity
position for the group with near full utilization of the working
capital limits over the 12 months ended September 2018.
The ratings, however, are supported by over five decades of
experience of the group promoter in the silica industry which has
resulted in strong customer relationships.
RATING SENSITIVITIES
Negative: A decline in the revenue and operating EBITDA, leading
to deterioration in the credit metrics or a further stretch in
the liquidity position, all on a sustained basis, would be a
negative for the ratings.
Positive: An increase in the revenue and operating EBITDA while
maintaining the credit metrics or an improvement in liquidity
position, all on a sustained basis, would be positive for the
ratings.
COMPANY PROFILE
MMPL is the flagship entity of the MMPL group. It processes
industrial silica sand and resin coated sand. MMPL's customers
are from pump and motor casting foundries, engine block foundries
and other general engineering industries.
REGEN INFRASTRUCTURE: ICRA Lowers Rating on INR20cr Loan to D
-------------------------------------------------------------
ICRA has revised the long-term rating assigned to the INR20 crore
fund based limits and INR20 crore non-fund based limits of Regen
Infrastructure and Services Private Limited (RISPL) to [ICRA]D
ISSUER NOT COOPERATING from [ICRA]C ISSUER NOT COOPERATING. The
short-term rating assigned to the INR20 crore non-fund based bank
limits of the company has been revised to ISSUER NOT COOPERATING
from [ICRA]A4 ISSUER NOT COOPERATING. The ratings continue to
remain in the 'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund Based 20.00 [ICRA]D ISSUER NOT
Bank Limits COOPERATING; Revised from
(Long-term) [ICRA]C and continues to
remain in 'Issuer Not
Cooperating' category
Non-Fund Based 20.00 [ICRA]D/[ICRA]D ISSUER NOT
Bank Limits COOPERATING; Long-term rating
(Long-term/ revised from [ICRA]C and
Short-term) short-term rating revised from
[ICRA]A4. Ratings continue to
remain in 'Issuer Not
Cooperating' category
Rationale
The rating downgrade follows the delays in debt servicing by
RISPL to the lender(s), as confirmed by them to ICRA. ICRA has
limited information on the entity's performance since the time it
was last rated in November 2013. As part of its process and in
accordance with its rating agreement with RISPL, ICRA has been
trying to seek information from the entity so as to monitor its
performance, but despite repeated requests by ICRA, the entity's
management has remained non-cooperative. In the absence of
requisite information and in line with SEBI's Circular No.
SEBI/HO/MIRSD4/CIR/2016/119, dated November 01, 2016, ICRA's
Rating Committee has taken a rating view based on the best
available information.
RISPL, incorporated in January 2008, is a wholly owned subsidiary
of Regen Powertech Private Limited (RPPL). This company primarily
handles the infrastructure requirements in commissioning a wind
turbine generator (WTG), including facilitation of land
acquisition, and the civil works w.r.t. erection and
commissioning of WTGs supplied by RPPL. The company also provides
O&M services to WTGs installed by RPPL.
SHREE BABA: CARE Assigns B+ Rating to INR9cr LT Loan
----------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Shree
Baba Exports (SBE), 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 SBE is constrained
by its modest scale of operations, low profitability margins,
leveraged capital structure and working capital intensive nature
of operations. The rating is further constrained by raw material
price fluctuation risk, firm's presence in highly competitive and
fragmented industry and proprietorship nature of its
constitution. The rating, however, derives strength from
experienced proprietor with long track record of operations and
positive demand outlook for menthol products.
Going forward, the ability of the firm to increase the scale of
operations while improving its profitability margins and capital
structure would remain the key rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Modest scale of operations along with low profitability margins:
The firm's scale of operations has remained modest marked by
Total Operating Income (TOI) of INR78.81 crore in FY18. Further,
the firm's GCA was relatively small at INR0.76 crore for FY18.
Although, the total operating income of the firm has increased
from INR48.37 crore in FY16 to INR78.81 crore in FY18 at
compounded annual growth rate (CAGR) of ~28%, the same continues
to remain modest. The firm reported total operating income of
INR49.87 crore in H1FY19 (Provisional) results. The profitability
margins of the firm stood low marked by PBILDT margin and PAT
margin of 1.92% and 0.90%, respectively, in FY18. The PBILDT
margin moderated from 3.75% in FY17 due to increase in raw
material costs and selling expenses, which could not be
transferred to customers. Moreover, the PAT margin remained below
unity for the past two years mainly due to high interest costs.
Leveraged capital structure and weak total debt to GCA ratio: SBE
has a leveraged capital structure marked by overall gearing ratio
of 3.41x as on March 31, 2018 on account of high dependence upon
borrowings to meet various business requirements. The overall
gearing ratio improved from 3.94x as on March 31, 2017 due to
partial accretion of profits into net worth base. Furthermore,
the interest coverage ratio stood moderate at 2.00x in FY18.
Interest coverage ratio improved from 1.52x in FY17 mainly due to
decrease in interest expenses due to lower utilization of working
capital limit during the year. However, the total debt to GCA
ratio stood weak at 15.34x for FY18. The total debt to GCA
improved from 22.38x for FY17 due to improvement in gross cash
accruals.
Working capital intensive nature of operations: The average
operating cycle of the firm stood at 50 days for FY18 (PY: 90
days). The firm is required to maintain adequate inventory of raw
material and finished goods to ensure smooth production process
and to meet the immediate demand of the customers, which resulted
in average inventory period of 44 days for FY18 (PY: 74 days).
Furthermore, the firm has to offer reasonable credit period to
its customers due to firm's presence in highly competitive
industry, which resulted in average collection period of around
one month. SBE receives credit period of up to one month from its
suppliers. The average utilization of working capital limits
stood around 90% for 12 months period ended September, 2018.
Highly competitive and fragmented industry albeit positive demand
outlook: The menthol products industry in which the firm operates
is highly competitive on account of presence of large number of
organized and unorganized players. The intense industry
competition will continue to exert pricing pressures on SBE and
will continue to limit the bargaining power with customers and
suppliers. However, the demand outlook for menthol products
remains positive owing to growth in consuming industries driven
by growing disposable incomes and increasing popularity of
lifestyle products.
Raw material price fluctuation risk: Mentha Oil is the primary
raw material required for production of menthol powder, menthol
crystals and de menthe oil. The raw material cost forms major
part of the cost of sales. Any wide fluctuation in price of its
key raw material and inability to timely pass on the complete
increase in the prices to its customers is likely to affect its
profitability margins.
Constitution of the entity being a proprietorship firm: SBE's
constitution as a proprietorship firm has the inherent risk of
possibility of withdrawal of the proprietor's capital at the time
of personal contingency and firm being dissolved upon the
death/retirement/insolvency of proprietor.
Key Rating Strengths
Experienced proprietor with long track record of operations: SBE
was established in 1980 and is currently being managed by the
proprietor Mrs. Jyotsana Agarwal, herself along with the help of
her husband, Mr. Ramesh Agarwal. Mrs. Jyotsana Agarwal and Mr.
Ramesh Agarwal have an industry experience of 18 years and 38
years, respectively, gained through their association with SBE
only. Furthermore, over the years, the firm has established
healthy relationships with suppliers which has led to smooth
procurement processes.
The entity, an ISO 9001:2008 certified firm was established in
April, 1980 as a partnership firm by Mr. Ramesh Agarwal and Mrs.
Batsoo Devi as 'Shree Baba Enterprises'. In April, 2000 the name
of the firm was changed to Shree Baba Exports and the
constitution also got converted to proprietorship concern. The
firm is currently being managed by Mrs. Jyotsana Agarwal. SBE is
engaged in the manufacturing of menthol powder, menthol crystals
and de menthe oil at its manufacturing facility located at
Rampur, Uttar Pradesh, which has a total installed capacity of
manufacturing 1 lakh tonnes of products per annum, as on June 30,
2018.
SHREE SANGAMESWARA: ICRA Reassigns C+ LT Rating on INR3cr Loan
--------------------------------------------------------------
ICRA has downgraded the long-term rating and short-term ratings
to [ICRA]D from [ICRA]B+ (stable) for the INR10.00 crore bank
limits of Shree Sangameswara Electricals (SSE) and ICRA has
reassigned the long-term rating of [ICRA]C+ and a short-term
rating of [ICRA]A4 for the INR10.00 crore bank limits of SSE.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund based limits 3.00 Ratings downgraded to [ICRA]D
from [ICRA]B+ (Stable) and
reassigned to [ICRA]C+
Non fund-based 7.00 Ratings downgraded to [ICRA]D
Limits from [ICRA]A4 and reassigned
to [ICRA]A4
Rationale
The rating action factors in continuous overutilization of
overdraft account for over 30 days in the months of May and June
2018 owing to LC devolvements and constrained liquidity position
on account of high debtors. However, the utilisation of the
overdraft facility has been regular over the past four months
(July 2018 to October 2018) with receipt of receivables from its
customers. The ratings are constrained by SSE's small scale of
operations with revenues of INR41.3 crore in FY2018 in the
transformer manufacturing industry, and its moderate financial
profile with thin margins and moderate coverage indicators for
FY2018. The ratings consider high customer concentration with
Shirdi Sai Electricals Ltd (SSEL) as the single largest customer
of the firm. ICRA also notes the low entry barriers and presence
of several established players leads to intense competition in
the transformer manufacturing industry. The ratings are further
constrained by risks arising from proprietorship nature of the
firm.
The ratings are however supported by the extensive experience of
SSE's proprietor of over two decades in the transformers
manufacturing industry. The ratings also consider healthy growth
in operating income in FY 2018 owing to increase in work orders
from SSEL.
Key rating drivers
Credit strengths
Significant experience of the proprietor in the transformer
manufacturing industry: The proprietor Mr. N.Visweswara Reddy has
significant experience of over 20 years in transformer
manufacturing industry.
Significant revenue growth in FY2018: SSE has recorded a
significant revenue growth of ~299% in FY2018 aided by increased
orders from SSEL. Despite improvement in revenues in FY2018,
SSE's scale remained small with a revenue of INR43.1 crore.
Credit weaknesses
Constrained liquidity position and LCs' devolvement lead to over
utilisation of its working capital limits: SSE's working capital
limits (overdraft facility) have been overutilised for over 30
days during the months of May and June 2018 owing to constrained
liquidity position with LC devolvements and significant increase
in receivables. While, utilisation of overdraft facility has been
within limits since July 2018 with receipt of payments from its
customers, liquidity continues to remain stretched as indicated
by high average utilisation of working capital limits.
Moderate financial profile: SSE's financial profile has been
moderate with thin operating margins of 4.4% and moderate
coverage indicators with interest coverage ratio of 2.5 times in
FY2018.
High customer concentration: SSE has high customer concentration
with Shirdi Sai Electricals Ltd accounting for over 95% of its
revenues in FY2017 and FY2018.
Competitive nature of industry: The transformer manufacturing
industry is highly competitive with presence of a large number of
unorganized players and a few established players, limiting its
margin expansion.
Risks arising from proprietor ship nature of the firm: SSE is
exposed to the risks inherent to the proprietor ship nature of
firm including capital withdrawal risk.
Founded in May 2012, M/s Shree Sangameswara Electricals is a
proprietary concern and commenced its operations in January 2014.
The entity is engaged in manufacturing of transformer tanks.
Proprietor, Mr. N. Visweswara Reddy, is an Engineering graduate
with a vast experience of more than 20 years in transformer
manufacturing field. He is also Managing Director of Shirdi Sai
Electricals Ltd, which is also into transformer manufacturing.
SSE has reported an operating income(OI) of INR43.1 crore and net
profit of 0.8 crore in FY2018 as against an OI of INR10.8 crore
and net profit of 0.6 crore in FY2017.
SHREE SHIVAM: ICRA Withdraws 'B' Rating on INR4.98cr Loans
----------------------------------------------------------
ICRA has withdrawn the long-term rating of [ICRA]B ISSUER NOT
COOPERATING with a Stable outlook assigned to the INR4.98 crore
bank facilities of Shree Shivam Cotton Industries (SSCI).
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund based- 4.00 [ICRA]B (Stable) ISSUER NOT
Cash Credit COOPERATING; Withdrawn
Fund based- 0.98 [ICRA]B (Stable) ISSUER NOT
Term Loan COOPERATING; Withdrawn
Rationale
The ratings assigned to Shree Shivam Cotton Industries have been
withdrawn at its request based on the no objection certificate
provided by its banker.
Established in 2012, Shree Shivam Cotton Industries is engaged in
cotton ginning, pressing and cotton seed crushing facility with
24 ginning machines and 4 crushing machines having installed
capacity of producing 200 cotton bales and crushing 30 MT of
cotton seed per day. In July 2014, SSCI was reconstituted and is
currently managed by Mr. Chandu Bediya along with six other
partners. The firm's plant is located in Rajkot (Gujarat).
SILVER OAK: Ind-Ra Migrates BB+ Issuer Rating to Non-Cooperating
----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has migrated Silver Oak Shops
Offices Co. Op. Housing Society Limited's bank facilities'
ratings to the non-cooperating category. The issuer did not
participate in the rating exercise, despite continuous requests
and follow-ups by the agency. Therefore, investors and other
users are advised to take appropriate caution while using these
ratings. The rating will now appear as 'IND BB+ (ISSUER NOT
COOPERATING)' on the agency's website.
The instrument-wise rating actions are:
-- INR199.57 mil. Term loan due on August 2018-March 2022
migrated to non-cooperating category with IND BB+ (ISSUER NOT
COOPERATING) rating; and
-- INR100.00 mil. Overdraft migrated to non-cooperating category
with IND BB+ (ISSUER NOT COOPERATING) rating.
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
November 15, 2017. Ind-Ra is unable to provide an update as the
agency does not have adequate information to review the ratings.
COMPANY PROFILE
Incorporated in 2006, Silver Oak Shops Offices Co. Op. Housing
Society manages two engineering colleges in Ahmedabad, Gujarat.
SOLIZO VITRIFIED: ICRA Assigns B+ Rating to INR26.69cr Term Loan
----------------------------------------------------------------
ICRA has assigned the long-term rating of [ICRA]B+ to the
INR26.69-crore term loans and the INR10.23-crore cash credit
facility of Solizo Vitrified Pvt. Ltd. ICRA has also assigned the
short-term rating of [ICRA]A4 to the INR3.00-crore non-fund based
bank guarantee of SVPL. The outlook on the long-term rating is
Stable.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based-
Term Loans 26.69 [ICRA]B+ (Stable); Assigned
Fund-based-
Cash Credit 10.23 [ICRA]B+ (Stable); Assigned
Non-fund Based-
Bank Guarantee 3.00 [ICRA]A4; Assigned
Rationale
The assigned ratings are constrained by the initial phase of the
company's operations (commenced from May 2018) and the risk
associated with the successful scale-up of operations, as per the
expected parameters. The ratings also consider the below-average
financial profile, marked by lower-than-expected accruals in the
initial phase of operations, the leveraged capital structure, and
the below-average debt coverage indicators due to the
predominantly debt-funded capex. The ratings also remain
constrained by the highly fragmented nature of the ceramic tiles
industry, which results in intense competition. Furthermore, the
ratings reflect the cyclicality inherent the real estate
industry, which is the main end-user sector and the exposure of
the company's profitability to volatility in raw material and gas
prices.
The ratings, however, favorably factor in the vast experience of
SVPL's promoters in the ceramic industry, the benefits derived
from its associate concern's marketing and distribution network
and the location-specific advantage, which ensures easy
availability of raw materials.
Outlook: Stable
ICRA believes that Solizo Vitrified Private Limited will continue
to benefit from the past experience of its promoters and the
distribution network of its associate concerns. The outlook may
be revised to Positive if the company successfully increases the
scale of operations, reports healthy revenue and profitability,
efficiently manages the working capital while ensuring regular
debt repayment, which is likely to strengthen the financial risk
profile. The outlook may be revised to Negative if cash accruals
are lower than expected or delay in debt repayments or stretch in
working capital cycle weakens the company's liquidity position.
Key rating drivers
Credit strengths
Experience of promoters in ceramic industry: The key promoters of
the company have more than a decade-long experience in the
ceramic industry vide their association with other ceramic
entities that operate in the same business sector. SVPL also
derives support from the marketing and distribution network of
its associate concerns.
Favourable location for raw material procurement: The company's
manufacturing facility is located in the ceramic tiles
manufacturing hub of Morbi (Gujarat), which provides easy access
to quality raw materials and allows savings on the transportation
cost.
Credit challenges
Limited track record of operations: Being in the nascent stage
(operations commenced from May 2018), the company remains exposed
to risks associated with successful scale up of operations of
SVPL's plant as per the expected parameters.
Below average financial risk profile: The capital structure is
likely to remain adverse with high gearing levels (~5.25 times as
on March 31, 2019 at projected level) in the medium term, given
the debt-funded nature of the capex and the dependence on working
capital borrowings. The debt coverage indicators are also
estimated to remain below average, because of low expected
accruals in the initial phase of operations and the relatively
high debt obligations.
Intense competition in ceramic industry: The company faces stiff
competition from established tile manufacturers as well as
unorganised players, which limits its pricing flexibility.
Vulnerability of profitability and cash flows to cyclicality
inherent in real estate industry: The real estate industry is the
key end user of vitrified tiles. Hence, the profitability and
cash flows are likely to remain vulnerable to the inherent
cyclicality of the real estate industry.
Vulnerability of profitability to any adverse fluctuations in raw
material and fuel prices: The margins of the company are
primarily affected by the raw material price and the piped
natural gas price fluctuation. Any adverse movement in the prices
of raw materials and fuel could have an adverse impact on SVPL's
margins, considering the limited ability to pass on the price
hike owing to intense industry competition. The price
fluctuations also impact the company's realisations.
SVPL was incorporated in May 2017 as a private limited company by
Mr. Gautam Kanjiya and his family members and relatives. The
company has set up a greenfield project at Wankaner in Morbi
district, Gujarat, to manufacture glazed vitrified tiles, with an
annual production capacity of ~73,500 metric tonne of vitrified
tiles of 600mmX600mm, 600mmX1200mm and 200mmX1200mm dimensions.
The company's operation commenced from May 2018. SVPL's
promoters, Mr. Dipak Moradiya and Mr. Gautam Kanjiya have more
than a decade's experience in the ceramic industry through their
association with other ceramic entities.
STANDARD CONSULTANTS: ICRA Maintains B+ Rating in Not Cooperating
-----------------------------------------------------------------
ICRA said the ratings of INR22.0-crore bank limits of Standard
Consultants Limited continue to remain under 'Issuer not
cooperating' category. The ratings are denoted as "[ICRA]B+
(Stable)/[ICRA]A4 ISSUER NOT COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
LT-Fund based- 7.00 [ICRA]B+ (Stable) ISSUER NOT
cash credit COOPERATING; Rating continues
to remain under 'Issuer Not
Cooperating' category
ST-Non-fund 15.00 [ICRA]A4 ISSUER NOT
Based COOPERATING; Rating continues
to remain under 'Issuer Not
Cooperating' category
ICRA has been trying to seek information from the entity so as to
monitor its performance, but despite repeated requests by ICRA,
the entity's management has remained non-cooperative. The current
rating action has been taken by ICRA basis best available
information on the issuers' performance. Accordingly, the
lenders, investors and other market participants are advised to
exercise appropriate caution while using this rating as the
rating may not adequately reflect the credit risk profile of the
entity.
Standard Consultants Limited (SCL), incorporated in May 1992, had
been involved in importing and trading in Compressed Natural gas
(CNG) and Liquefied Petroleum gas (LPG) kits till 2012, following
which it ventured into the execution of electrical turnkey
projects, supplying erection testing commissioning and
construction of sub-stations and transmission lines from 33/11KV
to 300KV.
SUNSTAR OVERSEAS: ICRA Maintains D Rating in Not Cooperating
------------------------------------------------------------
ICRA said the rating of INR825.00 crore bank facilities of
Sunstar Overseas Limited (SOL) continues to remain under 'Issuer
Not Cooperating' category. The rating is now denoted as "[ICRA]D;
ISSUER NOT COOPERATING".
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund based 568.45 [ICRA]D ISSUER NOT COOPERATING;
Limits Rating continues to remain under
'Issuer Not Cooperating'
category
Term Loans 211.44 [ICRA]D ISSUER NOT COOPERATING;
Rating continues to remain under
'Issuer Not Cooperating'
category
Unallocated
Limits 45.11 [ICRA]D ISSUER NOT COOPERATING;
Rating continues to remain under
'Issuer Not Cooperating'
category
The rating takes into account continued delays in debt servicing
by the entity as per the lender's feedback. As part of its
process and in accordance with its rating agreement with SOL,
ICRA has been trying to seek information from the entity so as to
monitor its performance, but despite repeated requests by ICRA,
the entity's management has remained non-cooperative. In the
absence of requisite information, and in line with SEBI's
Circular No. SEBI/HO/MIRSD4/CIR/2016/119 dated November 1, 2016,
ICRA's Rating Committee has taken a rating view based on the best
available information.
SOL commenced operations as a partnership firm in 1989. Its
founder promoters are Mr. Man Mohan Sarup Aggarwal, Mrs. Navita
Aggarwal, Mrs. Rama Rani and Mrs. Sadhna Aggarwal. SOL was
converted into a public limited company in 1995. In the same
year, three new promoters, namely Mr. Naresh Aggarwal, Mr. Rakesh
Aggarwal and Mr. Kapil Aggarwal joined the company.
TARA FOODS: ICRA Reaffirms B+/A4 Ratings on INR12cr Loan
--------------------------------------------------------
ICRA has reaffirmed the long-term rating at [ICRA]B+ and the
short-term rating at [ICRA]A4 for the INR12.00-crore line of
credit of Tara Foods. The outlook on the long-term rating is
Stable.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term/short- 12.00 [ICRA]B+ (Stable)/[ICRA]A4;
Term-Unallocated Reaffirmed
Rationale
For arriving at the ratings, ICRA has taken a consolidated view
of Tara Foods and Tara Exports (referred to as the Group or Tara
Group), on account of their common promoter and similar nature of
business operations.
The ratings continue remain constrained by the Group's moderate
scale of operations, which restricts the financial flexibility
and the benefits from economies of scale. The ratings consider
the modest financial profile of the Group as characterised by a
leveraged capital structure. The ratings also factor in the
vulnerability of the Group's revenues and profits to volatility
in the prices of cashew kernels and raw cashew nuts (RCN), and
fluctuations in foreign exchange rates.
The ratings reaffirmation, nevertheless, positively factors in
the extensive experience of the promoters in the cashew
processing industry and the advantages arising from being a part
of the broader K Parameswaran Pillai (KPP) Group, which has an
established brand in cashew industry in Kerala, as the same
supports Tara Group in acquiring new customers and sourcing raw
materials. ICRA also takes note of the Tara Group's established
relationship with its suppliers and key customers, which ensures
competitive procurement and repeat orders, respectively.
Outlook: Stable
The Stable outlook reflects ICRA's expectation that the Group
will continue to benefit from the extensive experience of the
promoter in the cashew industry. The outlook may be revised to
Positive if the company achieves significant growth in revenues
while improving its profitability and capital structure. The
outlook may be revised to Negative if the firm's operations are
adversely impacted by the sluggish market conditions prevailing
in the cashew segment and the same results in weakening of its
liquidity position.
Key rating drivers Credit strengths
Extensive experience of the promoter - The Tara Group's promoter
Mr. Narayan Bharathan has an extensive experience of nearly two
decades in the cashew processing industry. Besides, the firms
Tara Exports and Tara Foods are a part of the Kerala-based KPP
Group, which has an established presence in the cashew processing
industry.
Established sourcing network: The Tara Group enjoys advantages
arising from being a part of the wider KPP Group, which has an
established brand in the cashew industry. The same has enabled
the Tara Group in establishing strong ties with the suppliers and
ensures competitive procurement of raw material.
Credit challenges
Profitability remains vulnerable to price fluctuation of RCN and
cashew kernels: The Indian cashew processing segment, especially
the export sector, is under pressure because of the high and
volatile RCN prices, coupled with relatively higher processing
costs, resulting in lower profitability. Hence, the company's
profitability, especially for the cashew kernel processing
segment, remains critically dependent on correction in the spread
between kernel and RCN prices.
Stagnation in the Group's kernel volume in the recent past: The
Group's cashew kernel volume has witnessed stagnation in FY2018
owing to stiff competition from the overseas cashew processors,
coupled with the unfavourable movement in cashew kernel prices as
against a steep increase in RCN prices.
Exposure of margins to foreign exchange fluctuations: The Group
primarily relies on imports for RCN procurement, primarily from
the African countries. The Group also derives nearly 50% of its
revenues from exports. The Group's profit margins are therefore
exposed to forex variations to the extent of its un-hedged net
foreign exchange exposure.
Risk of cash withdrawals: Being a partnership concern, the firm
is exposed to the risk of cash withdrawals by the partner.
Tara Foods, established as a partnership firm in 2010, primarily
processes cashew kernels from RCNs. Besides, the firm is also
involved in trading of RCNs. It procures RCNs from the African
countries such as Ivory Coast, Tanzania, Ghana and Senegal, among
others and outsources the cashew kernel processing to its Group
entity, Malayalam Exports, which has eight processing facilities
with a total capacity of ~5,000 MT per annum. The firm's promoter
Mr. Narayan Bharathan has an extensive experience of nearly two
decades in the cashew processing industry. Tara Foods is the
successor company to 'Asiatic Export Enterprises', a partnership
firm, which was wound up on 2010 following the demise of its
founder Mr. P. Bharathan Pillai (father of Mr. Narayan
Bharathan). The Asiatic Export Enterprises has been in the cashew
business for more than four decades and was a part of the broader
KPP Group, which had an established presence in Kerala.
TASHKENT OIL: Ind-Ra Affirms BB+ LT Issuer Rating, Outlook Stable
-----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has affirmed Tashkent Oil
Company Private Limited's (TOCPL) Long-Term Issuer Rating at 'IND
BB+'. The Outlook is Stable.
The instrument-wise rating actions are:
-- INR70 mil. Fund-based working capital limit affirmed with
IND BB+/Stable/IND A4+ rating; and
-- INR20 mil. (increased from INR8 mil.) Non-fund-based limit
affirmed with IND A4+ rating.
KEY RATING DRIVERS
The affirmation reflects TOCPL's continued volatile and average
operating margins due to its high susceptibility to fluctuations
in raw material prices. This along with high debt results in
moderate credit metrics. Also, any adverse change in government
policies regarding crude oil imports may hamper its operations
severely. EBITDA margin fell to 8.89% in FY18 (FY17: 10.94%),
with return on capital employed standing at 13.77% (16.00%),
driven by raw material price volatility. Also, net leverage (Ind-
Ra-adjusted net debt/operating EBITDAR) increased to 2.86x in
FY18 (FY17: 2.27x) and EBITDA interest coverage (operating
EBITDA/gross interest expense) reduced to 3.23x (4.21x), due to
increased utilization of the fund-based limits, leading to a
higher debt and interest burden on the company.
Moreover, the company's scale of operations remained small in
FY18, despite overall revenue increasing to INR394.57 million
(FY17: INR318.57 million) on account of a higher quantity of the
products sold.
Also, TOCPL's liquidity continues to be modest, marked by average
working capital utilization of 90% during the 12 months ended
September 2018 coupled with a long net cash cycle of 165 days in
FY18 (FY17: 167 days) because of high receivables days.
The ratings are supported by the company's established track
record of more than three decades in manufacturing oil and
lubricants, resulting in long and established customer
relationships.
RATING SENSITIVITIES
Negative: A decline in the revenue and operating profitability
leading to deterioration in the overall credit metrics, all on a
sustained basis, will be negative for the ratings.
Positive: A substantial increase in the revenue backed by volume
growth while EBITDA margin and credit metrics being maintained
and/or improving, all on a sustained basis, could lead to a
positive rating action.
COMPANY PROFILE
TOCPL was incorporated as a private limited company in 1980 and
manufactures a wide range of lubricants and oils such as gear
oil, transformer oil and grease. The company sells its product
under the brand Tashoil to various government and private
organizations.
TATA MOTORS: Moody's Changes Outlook on Ba2 CFR to Negative
-----------------------------------------------------------
Moody's Investors Service has changed the outlook on Tata Motors
Limited's corporate family rating to negative from stable.
At the same time, Moody's has affirmed the corporate family
rating and the company's senior unsecured instruments ratings at
Ba2.
RATINGS RATIONALE
"The negative outlook reflects its expectation that the weak
operating performance of TML's wholly owned subsidiary, Jaguar
Land Rover Automotive Plc (JLR), will likely continue over at
least the next 12-18 months, in turn weighing on TML's earnings
and consequently also the rating trajectory," says Kaustubh
Chaubal, a Moody's Vice President and Senior Credit Officer.
On November 13, Moody's downgraded JLR's ratings to Ba3 negative
from Ba2 stable, reflecting the sustained deterioration in the
operating and credit profiles of the UK-headquartered premium car
manufacturer.
Over the first half of the fiscal year ending March 2019 (1H
FY2019), JLR's operating performance further weakened and has
remained well below Moody's expectations. This has been mainly
caused by more difficult market conditions in China and the
continued weakness in diesel car sales in Europe and the UK.
During 1H FY2019, JLR reported a decline in retail volumes of
4.1% -- while wholesale volumes were down 10.1% -- compared with
1H FY2018.
This fall resulted in a decline in revenues of 8.9% or GPB1.1
billion to GBP10.9 billion and EBITDA of GBP836 million (7.7%
reported EBITDA margin), down from GBP1,188 million in 1H FY2018.
Reported EBIT was a negative GBP232 million versus a GBP398
million profit in 1H FY2018.
JLR's leverage -- expressed as adjusted debt/EBITDA -- increased
to 4.8x at September 2018, up from 2.5x at March 2018, as a
result of negative free cash flow of GBP2.2 billion in 1H FY2019
compared with GBP1.1 billion of negative free cash flows in
FY2018.
While JLR has announced cost savings and an efficiency plan
yielding GBP2.5 billion in cost savings over the next 18 months,
Moody's cautions against the prospects of a rapid turnaround
within 2H FY2019.
Heightened market risks -- including uncertainties regarding
Brexit risks and associated costs, weakening car demand in China,
rising input costs from higher raw material prices, and rising
fuel prices -- could dent the extent of costs savings or the
timelines for the proposed turnaround.
Meanwhile, TML's ex-JLR operations, in particular, its commercial
vehicles (CVs) and passenger vehicles (PVs) businesses in India,
continue to improve, mirroring favorable industry dynamics, the
company's recent product launches, and the focus on cost
rationalization measures.
Moody's favorably notes that the strongly performing ex-JLR
operations now account for one half of the company's consolidated
EBITDA. Consequently, as of September 30, 2018, in contrast to
JLR's adjusted debt/EBITDA of 4.8x, Moody's estimates TML's
consolidated leverage was around 4.3x.
Looking ahead, Moody's expects the strongly performing ex-JLR
businesses to continue providing cushion to consolidated metrics,
with adjusted debt/EBITDA comfortably maintained at levels of
3.4x-3.8x over the next 12-18 months.
Moody's expects rising commodity prices and a challenging
operating environment for JLR to keep TML's EBITA margins below
3%. And while somewhat reduced, JLR's capital and product
development expenditure of around GBP4 billion annually is still
high and will keep free cash flows negative.
Moody's expects India's commercial vehicle sales volumes to grow
by mid-teen percentages over the next 12-18 months. TML is the
market leader in this segment -- commanding a solid 46% share --
and will likely continue to introduce new products, sustaining
its track record of above-industry-average growth rates, and thus
modestly strengthening its overall market share.
TML's share of the Indian PV market also increased to an
estimated 6.2% in 1H FY2019 from 4.6% in FY2016 with the business
finally achieving breakeven after years of being a drag. The PV
business' ability to sustain this improvement will therefore
remain a key rating sensitivity, especially amid slowing,
although still high single-digit, growth rates and tightening
financing conditions in India.
TML's ratings continue to incorporate a one-notch uplift from its
parent Tata Sons Ltd., reflecting Moody's expectation of
extraordinary support from Tata Sons, should the need arise.
OUTLOOK
The negative outlook reflects JLR's weakening credit profile and
the significant challenges in accomplishing a rapid turnaround
amid heightened market risks and headwinds from rising input
costs and fuel prices, as well as adverse impacts from the
outcome of the Brexit negotiations.
The negative outlook also reflects the execution risks associated
with JLR's ability to achieve its announced cost and efficiency
improvements, against its need to maintain high levels of
investments towards reducing emissions and for its
electrification strategy.
WHAT COULD CHANGE THE RATING DOWN/UP
The ratings could be downgraded if: (1) there is any pressure on
JLR's ratings; or (2) TML's ex-JLR businesses deliver sub-par
performances because of weak market conditions, input cost
pressures, disappointing new products, or a significant ceding of
market share, all potentially resulting in lower revenue and
declines in earnings and cash flow.
Specific credit metrics Moody's will watch for a downward rating
action include consolidated debt/EBITDA exceeding 4.5x, and EBITA
margins remaining below 4%, both on a sustained basis.
Any revision to Moody's support assumptions from Tata Sons will
also prompt a revision to the one-notch uplift in TML's ratings.
Given the negative outlook, an upgrade within the next 12-18
months is less likely. However, it could be envisaged if: (1)
JLR's operating performance improves; (2) TML further strengthens
market shares in India in CVs and PVs; (3) the improving
profitability of TML's ex-JLR operations is sustained; and (4)
TML maintains consolidated debt/EBITDA below 3.5x, generates
positive free cash flows, and demonstrates EBITA margins in
excess of 5.5%, all on a sustained basis.
A stabilization in JLR's outlook would be a precursor for TML's
ratings outlook to return to stable.
The principal methodology used in these ratings was Automobile
Manufacturer Industry published in June 2017.
Tata Motors Limited (TML), incorporated in 1945, is the largest
manufacturer of commercial vehicles and a leading manufacturer of
passenger vehicles in India. Its products include light, medium,
and heavy-duty commercial vehicles, such as trucks, pick-ups and
buses, utility vehicles and passenger cars.
TML's acquisition of JLR in June 2008 has diversified the group's
profile through JLR's presence in key markets, such as the UK,
Europe, the US, China, Russia and Brazil, and the introduction of
a diversified product range that now includes the addition of
JLR's luxury cars and vehicles.
TML is listed on the Bombay Stock Exchange, the National Stock
Exchange of India and the New York Stock Exchange. It was 37.3%
owned by the Tata group entities as of September 30, 2018.
VAULT AGRITECH: CARE Assigns B+ Rating to INR9.73cr LT Loan
-----------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Vault
Agritech Private Limited (VAPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 9.73 CARE B+; Stable Assigned
Detailed Rationale and key rating drivers
The rating assigned to the bank facilities of VAPL is constrained
by project funding as well as implementation risk, volatile agro-
commodity prices with linkages to vagaries of the monsoon and
competitive and fragmented nature of industry. The rating,
however, derives comfort from experienced promoters albeit lack
of experience in pasta manufacturing industry, close proximity to
raw material sources and satisfactory demand outlook for pasta.
Going forward, the ability of the company to achieve financial
closure for the debt portion of the project, complete the
on-going project without any major cost and time overrun and
derive benefits out of it as envisaged would remain the key
rating sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Project funding as well as implementation risk: VAPL is presently
setting up a pasta manufacturing unit with aggregate project cost
of INR9.73 crore which is to be financed through promoter's
contribution of INR2.00 crore and term loan from bank of INR7.73
crore. The financial closure for the debt portion of the project
is yet to be tied up. Therefore it is crucial for the company to
get project debt funding in time. However, the company has
already acquired 1 acre of land for the project. Moreover, the
company has spent around INR0.25 crore (i.e. 2.57% of total
project cost) towards the project funded through promoter's
contribution till October 30, 2018. Therefore it is crucial for
the company to complete the ongoing project as envisaged without
any major cost and time overrun. The project is expected to
become operational by
May 2019.
Volatile agro-commodity prices with linkages to vagaries of the
monsoon: VAPL is primarily engaged in the processing of pasta.
Pasta products contain milled durum wheat (semolina, durum
granular, and durum flour) along with oil, Italian herbs,
dehydrated vegetables, sugar, salt and occasionally eggs and/or
optional ingredients. Most pasta manufacturers prefer semolina,
which consists of fine particles of uniform size and produces the
highest quality pasta product. Since its basic raw material is
derivative of wheat and the prices of wheat are also sensitive to
seasonality, which is highly dependent on monsoon. Any volatility
in the wheat prices will have an adverse impact on the
performance of the pasta mill and any adverse climatic conditions
will have negative effect in the revenue earnings.
Competitive and fragmented nature of industry: Pasta industry is
highly fragmented and competitive due to satisfactory demand of
pasta in the market. Accordingly various players in the industry
are constantly trying to penetrate the market along with
organized as well as unorganized domestic players. Within the
organized sector it faces competition from many established
players at domestic level.
Key Rating Strengths
Experienced promoters albeit lack of experience in pasta
manufacturing industry: The promoter; Mr. Prasanta Kumar
Patra has around a decade of experience in telecommunication and
renewable energy industry. He is a graduate in Science
(Chemistry) and Information Technology and Management from Utkal
University, Vani Vihar. After leaving the college, he joined
Hinduja Telecom as an Engineer in 2004 and continued up to 2006,
and then he joined M/s Videsh Sanhar Nigam Ltd. and M/s Mustafa
Sultan Telecommunications as an Engineer (Enterprise). He left
the said company in 2010 and formed one company with M/s Omani
Partner dealing with telecommunication parts for VSAT in the name
and style of "M/s ASTELE". He is also a co-founder of Abu
Shumookh Projects, an IT & telecom company in Muskat, Oman since
2009. He is the founder of M/s Vault Communications Private
Limited (an IT security & Renewable energy company solar Energy
design, supply and installation) in India, established in 2011.
Mrs. Amrita Patra, (W/o Mr Prashanta Patra), a graduate in
Tourism Services since 2007 from Fakir Mohan College, Balasore.
She joined HUTCH at New Delhi, and then joined GE Money at New
Delhi. After leaving GE Money, she joined HDFC Bank as Executive
in 2006. Then she left HDFC Bank and joined CITI Bank in 2007. In
Muskat, she joined M/s Agility Logistics as Assistant Manager
(Operation) in 2008.
She left M/s Agility Logistics and joined M/s DB Shenkar as
Manager (Oil & Gas), another MNC logistic Company based at
Germany where she served till her come back in May, 2018 to
India. Both the promoters are having 11 years of rich business
experience in Middle East, Africa and Gulf countries. Looking at
the ever growing food processing and instant foods sector in
India, the promoters with their experience in logistics from
foreign countries, have developed a promising project to launch a
niche product in India. Mr. Prasanta Kumar Patra will looks after
the day to day operations of the company supported by his wife,
Mrs. Amrita Patra.
Close proximity to raw material sources: VAPL's plant is located
at Bolangir, Odisha which is close to the vicinity to a major
wheat growing area and has an advantage of its dry climate of
Odisha which is suitable for its production. The area is under
Odisha's government priority area for industrial development. The
land that the company is acquired is under 99 years lease by the
Odisha Government. The site is also suitable for pan India
distribution, since it is close to Mumbai & Haldia port for
export to Middle East and Africa along with road connectivity to
Nepal & Bangladesh. The entire raw material requirement is met
locally from local farmers/agents, which helps the company to
save substantial amount of transportation cost and also procure
raw materials at effective price.
Satisfactory demand outlook for pasta: Pasta refers to the staple
food of tradition Italian cuisine which is made using dough,
water, eggs, vegetables, and oil. The dough is kneaded into
various shapes some of which are known as penne, spaghetti,
farfalle, fettuccine, barbine, etc. Pasta is associated with
several health benefits owing to a high concentration of vitamins
and minerals. Currently, the demand for pasta is gaining immense
popularity in India, particularly amongst the younger population,
due to expansion in food-service restaurants. The primary factors
catalysing the growth of the pasta market in India include rising
urbanisation, changing lifestyles and surging demand for ready-
to-eat products. In addition to this, the market is also
influenced by an increasing women employment rate coupled with
rising disposable incomes. Further, the health-conscious
consumers are demanding food products with healthier ingredients,
which has led to a rise in the demand for pasta made with whole-
wheat and quinoa. Some of the other forces that have been
proactive in maintaining the market growth are longer shelf-life
and ease of preparation.
Incorporated in December 2017, VAPL was promoted by Mr. Prasanta
Kumar Patra and Mrs. Amrita Patra for setting up a manufacturing
plant for instant pasta (ready to eat; upon addition of hot
water) and normal pasta. The company is presently setting up a
manufacturing unit with aggregate project cost of INR9.73 crore
which is to be financed through promoter's contribution of
INR2.00 crore and term loan from bank of INR7.73 crore. The
financial closure for the debt portion of the project is yet to
be tied up. The manufacturing facility of the company is proposed
to locate at Bolangir, Odisha, with an installed capacity of
276.48 metric tons per annum (MTPA). The company has already
acquired 1 acre of land for the proposed project. The cost
incurred till October 30, 2018 is around INR0.25 lakh (i.e.2.57%
of total project cost) towards the project funded through
promoter's contribution. The company is expected to start its
commercial operation from May 2019. The company will sell its
products in a precooked and dried loose granulated form, with
flavoring powder and/or seasoning oil. The products have
different shapes and packed in cups. Initially the products will
be sold through a third party labeling across India and Gulf
countries. The company has already tied up with "Symega Savoury
Technology Limited" to manufacture its various types of pasta
masala. The technology will be completely Italian and the
machineries will be supplied by the renowned M/s Storci Pasta
Machinery, is the technology provider (who provides purely
Italian technology and is pioneer in pasta manufacturing).
VIVEKANAND PROJECTS: CARE Assigns B+ Rating to INR10cr LT Loan
--------------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of
Vivekanand Projects LLP (VPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 10.00 CARE B+; Stable Assigned
Detailed Rationale and key rating drivers
The ratings assigned to the bank facilities of VPL are
constrained by its partnership nature of business, short track
record with small scale of operations, exposure to volatility in
input prices and working capital intensive nature of operations,
intensely competitive industry. The ratings, however, drive
strength from experienced partners and comfortable capital
structure with satisfactory debt coverage indicators.
The ability to maintain a healthy order book position, achieve
envisaged revenue and moderate profitability margins, ability
to execute orders within stipulated time period and effective
management of working capital will be the key ratings
sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses:
Short track record with small scale of operations: The firm
established in August 2013; however, it has commenced operations
from April 2017 and thus has only over one completed year of
operational track record. Furthermore, the scale of operations of
the firm also remained small marked by total operating income of
INR14.12 crore with PAT of INR0.83 crore in FY18. The total
capital employed also remained low at INR5.59 crore as on
March 31, 2018. During H1FY19, the firm has booked revenue of
INR18.06 crore.
Exposure to volatility in input prices and working capital
intensive operations nature of operations: The major inputs
required for the firm are cables, electrical poles, electrical
conductors, transformers etc. and the prices of which are
volatile. However, some of the contracts executed by the firm
contain price escalation clause but the same is not sufficient to
guard against volatile input material prices. This apart, it does
not enter into any agreement with contractees to safeguard its
margins against any increase in labour prices and being present
in a highly labour intensive industry, it remains susceptible to
the same. The operations of the firm also remained working
capital intensive and the same is reflected by its high working
capital utilization at around 80% during last 12 month ended on
August 31, 2018.
Intensely competitive industry: VPL faces stiff competition from
the organized as well as unorganized players in the industry.
This apart, the firm faces tough competition from various
regional and local players with unorganized industry being highly
fragmented. High competitive pressure limits the pricing
flexibility of the industry participants, which induces pressure
on profitability.
Key Rating Strengths
Experienced partners: Mr. Gangadhar Laxmipati Devsani (Key
partner) has around two decades of experience in civil
construction industry through his family business. He looks after
the overall management of the firm supported by others partners
Mr. Anil Devsani and Mr. Vivek Gangadhar Devsani.
Comfortable capital structure with satisfactory debt coverage
indicators: The capital structure of the firm remained
comfortable marked by overall gearing ratio of 0.67x as on March
31, 2018. The debt coverage indicators also remained satisfactory
marked by interest coverage of 4.05x and total debt to GCA of
2.71x in FY18.
Moderate profitability margins and healthy order book position:
The profitability margins of the firm remained moderate marked by
PBILDT margin of 7.83% and PAT margin of 5.87% in FY18. The firm
has an unexecuted order book position of INR88.69 crore (6.3x of
FY18 turnover) as on August 31, 2018, which is expected to be
completed by March 2019. The healthy order book position reflects
good revenue visibility in near term.
Vivekanand Projects LLP (VPL) was constituted as a limited
liability partnership firm in August 2013 by Mr. Gangadhar
Laxmipati Devsani, Mr. Vivek Gangadhar Devsani, and Mr. Anil
Damodar Devsani based out of Solapur, Maharashtra. The firm has
commenced its operations from April 2017 and it is engaged in
installation and maintenance of power transmission and
telecommunication lines. VPL has an unexecuted order book
position of INR88.69 crore (6.3x of FY18 turnover) as on
August 31, 2018 which is to be completed by March 2019.
YARGANVI SOLAR: CARE Reaffirms B Rating on INR12.63cr LT Loan
-------------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Yarganvi Solar Power Project LLP (YSPPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank
Facilities 12.63 CARE B; Stable Reaffirmed
Detailed Rationale & Key Rating Drivers
The ratings of the bank facilities of YSPPL continues to be
constrained by lower than expected profitability as lower tariff
is realized as against the PPA tariff due to its ongoing dispute
with KERC regarding the tariff rate, further accentuated by
revenue sharing with landowner. The rating is also tempered by
generation susceptible to climatic conditions and technological
risks. These rating weaknesses are partially offset by
Experienced promoter in renewable energy segment, long term PPA
with Hubli Electricity Supply Company Limited (HESCOM) for 25
years and satisfactory operating performance during FY18
(Audited) and 5MFY19 (unaudited). The rating also factors in the
Government of India's initiatives encouraging the use of solar
power for both residential and commercial purposes.
Going forward, the ability of the firm to receive favorable order
from KERC for revision in tariff, achieve envisaged generation
levels and timely receipt of payments from HESCOM are key rating
sensitivities.
Detailed description of the key rating drivers
Key Rating Weaknesses
Ongoing dispute with KERC regarding the Tariff Rate: The
operations commenced on July 12, 2017 against the envisaged COD
of Dec'16. HESCOM had agreed to an extension of COD by 6 months
with an agreed rate of INR6.51 per unit. However, the same was
disputed by KERC (Karnataka Electricity Regulatory Commission).
Presently, YSPPL has been billing at tariff rate of INR4.36 per
unit as against the PPA rate INR8.4 per unit vide an interim
order. The firm has taken up the matter with KERC for revision in
tariff and the matter is pending.
Fixed cost associated with LLP agreement: The firm is required to
pay fixed amount of INR1.25/- unit of power generation to Mr Babu
G Kallur, land owner. Furthermore, YSPPL has to pay O&M charges
to REL (Ravindra Energy Limited; group company) starting with
INR0.31 crore in first year with 5% escalation each year going
forward. Such fixed expenses are expected to impact profitability
further for the firm.
Climactic and technological risks: Achievement of desired CUF
(Capacity Utilization Factor) is subjected to change in climatic
conditions, amount of degradation of modules as well as
technological risks (limited track record of solar technology in
India).
Key Rating Strengths
Experience of the promoters with established track record in
renewable sector: YSPPL is promoted by Mr. R.G. Patil who is also
a director of Ravindra Energy Limited (REL). REL (erstwhile
Ravindra Trading & Agencies Limited) was incorporated in 1980 and
was promoted by the Murkumbi family of Shree Renuka Group. The
company currently has existing businesses under various
subsidiaries in coal trading, sugar trading and production and
solar pumps trading.
Power purchase agreement with Hubli Electricity Supply Company
Limited (HESCOM): YSPPL has entered into a long-term power
purchase agreement (PPA) for 25 years with Hubli Electricity
Supply Company Limited (HESCOM) dated June 30, 2015 for supply of
3 MW power.
Satisfactory operational performance of YSPPL in FY18 (July 2017
to March 18) & 5MFY19: Post commencement of operations in July
2017, the firm has generated 2.12 MU till March 18 and earned a
revenue of INR1.79 crore. During 5MFY19 (from Apr'18 to Aug'18)
the firm has generated 1.43 MU with an estimated revenue of 1.20
crore.
Government initiative in promoting solar projects: The Government
has set a solar power target of 100 GW to be achieved within 2022
and in line with promoting use of solar powers has come up with
various incentives and is actively encouraging the use of solar
power for both residential and commercial purposes.
Yarganvi Solar Power Project (YSPPL) was promoted by Mr. Sidram
Maleppa Kaluti, CEO of Ravindra Energy Limited and Mr. Ravindra
Gundappa Patil in the year 2016. YSPPL has 3 MW grid connected
solar photovoltaic (PV) power plant at Taluka Savadatti, Belgavi
district, Karnataka. YSPPL has an entered into Limited Liability
Partnership agreement with Mr. Babu G Kallur, M/s. Ravindra
Energy Limited and Mr. Ravindra Gundappa Patil.
=================
S I N G A P O R E
=================
AVATION PLC: S&P Places 'B' Unsec. Notes Rating on Watch Positive
-----------------------------------------------------------------
S&P Global Ratings placed the 'B' issue-level rating on Avation
PLC's (B+/Positive/--) senior unsecured notes on CreditWatch with
positive implications. The CreditWatch placement follows
Avation's proposal to add US$50 million to its existing US$300
million unsecured issuance due May 2021. The company intends to
use the proceeds to repay US$49 million in senior secured debt.
If the transaction is completed, S&P believes it will improve the
recovery prospects for Avation's unsecured debt, which could lead
to a one-notch upgrade.
S&P said, "In our view, the proposed changes to Avation's capital
structure would aid the recovery of the senior unsecured debt in
the event of a payment default because we would expect more value
to flow to the unsecured lenders. Therefore, we anticipate our
evaluation of the senior unsecured debt will improve to a '4'
recovery rating from '5'. This would translate into an uplift in
our issue rating on Avation's senior unsecured notes to 'B+' from
'B', on par with the issuer credit rating.
"We expect the transaction will also provide additional financial
flexibility that the company can use to grow their fleet of
aircraft. The transaction is not deleveraging and does not alter
the company's credit metrics nor affect the rating. However, we
view as slightly positive Avation's proactive approach to
lengthening the debt maturity profile and adding to undrawn bank
line availability.
"We will resolve the CreditWatch when the transaction is either
cancelled or executed."
TOYS 'R' US: Noteholders to Acquire 85% Stake in Toys 'R' Us Asia
-----------------------------------------------------------------
The Strait Times reports that noteholders of Toys 'R' Us Inc are
set to take over its 85 per cent equity stake in Toys (Labuan)
Holding in a move to separate the Asian business of the toy
retailer from its ultimate parent in the US.
According to the report, holders of the TRU Taj LLC's senior
secured notes, or the Taj noteholders, are to acquire the stake
in Toys (Labuan) Holding, the entity that will operate and
license Toys 'R' Us stores in Asia.
The Strait Times relates that the Taj noteholders and Fung
Retailing, which holds the remaining 15 per cent interest in
Toys (Labuan), have agreed to new partnership terms in a
transaction that values Toys (Labuan) at about US$900 million
(SGD1.2 billion).
Fung Retailing has also agreed to raise its stake to 21 per cent,
making it the largest shareholder of Toys (Labuan), the report
says.
The Taj noteholders include several investment funds and
financial institutions with extensive experience investing in and
owning international businesses and retail companies.
The Strait Times notes that the new owners of Toys (Labuan) have
decided to retain the current president and CEO, Mr Andre Javes,
and his management team.
According to the Strait Times, Mr. Javes said the company "will
be making a significant investment in technology to boost its
infrastructure for the future".
"As a sign of the confidence we have in the management team and
future success of Toys 'R' Us in the region, we are pleased to
increase our shareholding in the company, reflecting our
commitment to support Toys "R" Us Asia in reaching new heights,"
the report quotes Mr. Pieter Schats, executive director of Fung
Retailing, as saying.
A spokesman for the Taj noteholders pointed out that this
transaction is "a significant step in separating the valuable and
growing Toys 'R' Us Asia operation from the rest of the
business," The Strait Times relays.
"The company's growth prospects in Greater China, Japan and
South-east Asia are bright and we are excited about investing in
and owning the company in partnership with Fung Retailing," the
spokesman, as cited by The Strait Times, said.
The Strait Times notes that the conclusion of this transaction
will bring clarity to ownership over Toys 'R' Us Asia operations,
which cover over 450 stores in Japan, Greater China and South-
east Asia and 85 other licensed stores in the Philippines and
Macau.
Toys 'R' Us stores in Asia have carried on business as usual
despite the winding down of retail operations in the US after
Toys 'R' Us Inc filed for bankruptcy protection in September
2017.
As at September 2017, there were 11 Toys 'R' Us stores in
Singapore employing 350 staff.
About Toys "R" Us
Toys "R" Us, Inc., was an American toy and juvenile-products
retailer founded in 1948 and headquartered in Wayne, New Jersey,
in the New York City metropolitan area. Merchandise was sold in
880 Toys "R" Us and Babies "R" Us stores in the United States,
Puerto Rico and Guam, and in more than 780 international stores
and more than 245 licensed stores in 37 countries and
jurisdictions. Merchandise was also sold at e-commerce sites
including Toysrus.com and Babiesrus.com.
On July 21, 2005, a consortium of Bain Capital Partners LLC,
Kohlberg Kravis Roberts, and Vornado Realty Trust invested $1.3
billion to complete a $6.6 billion leveraged buyout of the
company.
Toys "R" Us is a privately owned entity but still files with the
U.S. Securities and Exchange Commission as required by its debt
agreements.
The Company's consolidated balance sheet showed $6.572 billion in
assets, $7.891 billion in liabilities, and a stockholders'
deficit of $1.319 billion as of April 29, 2017.
Toys "R" Us, Inc., and certain of its U.S. subsidiaries and its
Canadian subsidiary voluntarily filed for relief under Chapter 11
of the Bankruptcy Code (Bankr. E.D. Va. Lead Case No. Case No.
17-34665) on Sept. 19, 2017. In addition, the Company's Canadian
subsidiary voluntarily commenced parallel proceedings under the
Companies' Creditors Arrangement Act ("CCAA") in Canada in the
Ontario Superior Court of Justice. The Company's operations
outside of the U.S. and Canada, including its 255 licensed stores
and joint venture partnership in Asia, which are separate
entities, were not part of the Chapter 11 filing and CCAA
proceedings.
Grant Thornton is the monitor appointed in the CCAA case.
Judge Keith L. Phillips presides over the Chapter 11 cases.
In the Chapter 11 cases, Kirkland & Ellis LLP and Kirkland &
Ellis International LLP serve as the Debtors' legal counsel.
Kutak Rock LLP serves as co-counsel. Toys "R" Us employed Alvarez
& Marsal North America, LLC as its restructuring advisor; and
Lazard Freres & Co. LLC as its investment banker. It hired Prime
Clerk LLC as claims and noticing agent. Consensus Advisory
Services LLC and Consensus Securities LLC, serve as sale process
investment banker. A&G Realty Partners, LLC, serves as its real
estate advisor.
On Sept. 26, 2017, the U.S. Trustee for Region 4 appointed an
official committee of unsecured creditors. The Committee
retained Kramer Levin Naftalis & Frankel LLP as its legal
counsel; Wolcott Rivers, P.C., as local counsel; FTI Consulting,
Inc. as financial advisor; and Moelis & Company LLC as investment
banker.
VISTRA GROUP I: Moody's Puts B2 CFR on Review for Downgrade
-----------------------------------------------------------
Moody's Investors Service has placed Vistra Group Holdings I
Limited's B2 corporate family rating on review for downgrade
following its announcement of plans to raise $222 million of debt
to finance a dividend for shareholders.
At the same time, Moody's has placed Vistra's B2 rating on the
first lien term loan B due 2022 and revolving credit facility due
2020 on review for downgrade.
Moody's has also placed the B3 rating on the second lien term
loan due 2023 on review for downgrade.
RATINGS RATIONALE
The review for downgrade will focus on Vistra's proposed $222
million dividend recapitalization and will likely result in a one
notch downgrade, if completed.
Vistra has proposed a shareholder distribution that will be
financed through up-sizing its existing first and second lien
term loans, by $96 million and $126 million, respectively.
As a result, the company's debt/EBITDA leverage ratio post-
transaction is expected to remain over 7.0x over the next 12-18
months, which is well above Moody's 6.5x downgrade trigger.
"The review for downgrade of Vistra's ratings reflect the
company's aggressive financial posture, as evidenced by its
willingness to further leverage its balance sheet to fund a
dividend recapitalization," says Brian Grieser, a Moody's Vice
President and Senior Credit Officer.
"At the same time, Moody's expects Vistra's high leverage to be
partially offset by the company's solid operating momentum, with
both acquired and organic revenue growth and synergies from its
cost-saving initiatives driving ongoing earnings expansion," says
Grieser.
Vistra's ratings benefit from its strong business profile as
evidenced by its predictable revenue streams, of which around 70%
are recurring, EBITDA margins of above 30%, and low working
capital and capital spending requirements which translate into
consistent free cash flow generation.
Vistra's rating also reflects its strong liquidity profile.
Moody's expects free cash flow generation, existing cash balances
of $98 million at September 30, 2018, and full access to a $75
million revolver due 2020 to provide a substantial liquidity
buffer throughout 2019.
Vistra's ratings will likely be downgraded if the company moves
forward with its proposed dividend recapitalization bringing
leverage above 7.0x for an extended period and further delaying
expected deleveraging.
Given the review for downgrade, upgrade pressure is unlikely.
However, the rating could return to stable if Vistra demonstrates
a more balanced appetite for acquisitions and refrains from debt-
financed dividends, such that leverage is maintained around 6.5x
on a sustained basis.
The principal methodology used in these ratings was Business and
Consumer Service Industry published in October 2016.
Vistra Group Holdings I Limited is a provider of corporate &
trust services for companies (private companies, SMEs, listed
companies), high net worth individuals and funds, with around 50%
of gross fees generated in Asia, and the balance primarily
generated in Europe. Services include company formation and
renewal services, corporate administration services, trustee and
fiduciary services, fund services and family office services.
Vistra employs over 4,000 employees in 46 countries.
Vistra was acquired by Baring Private Equity Asia in October
2015. At the same time, BPEA acquired the Orangefield Group and
integrated the two businesses. The two acquisitions cost
approximately $1.4 billion. The acquisitions were funded with a
combination of proceeds from the $700 million term loans and an
equity injection by BPEA.
*********
Tuesday's edition of the TCR-AP delivers a list of indicative
prices for bond issues that reportedly trade well below par.
Prices are obtained by TCR-AP editors from a variety of outside
sources during the prior week we think are reliable. Those
sources may not, however, be complete or accurate. The Tuesday
Bond Pricing table is compiled on the Friday prior to
publication. Prices reported are not intended to reflect actual
trades. Prices for actual trades are probably different. Our
objective is to share information, not make markets in publicly
traded securities. Nothing in the TCR-AP constitutes an offer
or solicitation to buy or sell any security of any kind. It is
likely that some entity affiliated with a TCR-AP editor holds
some position in the issuers' public debt and equity securities
about which we report.
A list of Meetings, Conferences and Seminars appears in each
Wednesday's edition of the TCR-AP. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com
Friday's edition of the TCR-AP features a list of companies with
insolvent balance sheets obtained by our editors based on the
latest balance sheets publicly available a day prior to
publication. At first glance, this list may look like the
definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical
cost net of depreciation may understate the true value of a
firm's assets. A company may establish reserves on its balance
sheet for liabilities that may never materialize. The prices at
which equity securities trade in public market are determined by
more than a balance sheet solvency test.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Asia Pacific is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez,
Julie Anne L. Toledo, Ivy B. Magdadaro and Peter A. Chapman,
Editors.
Copyright 2018. All rights reserved. ISSN: 1520-9482.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding,
electronic re-mailing and photocopying) is strictly prohibited
without prior written permission of the publishers.
Information contained herein is obtained from sources believed
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TCR-AP subscription rate is US$775 for 6 months delivered via e-
mail. Additional e-mail subscriptions for members of the same
firm for the term of the initial subscription or balance
thereof are US$25 each. For subscription information, contact
Peter Chapman at 215-945-7000.
*** End of Transmission ***