/raid1/www/Hosts/bankrupt/TCRAP_Public/200507.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
A S I A P A C I F I C
Thursday, May 7, 2020, Vol. 23, No. 92
Headlines
A U S T R A L I A
CRITERION CONFERENCES: First Creditors' Meeting Set for May 14
HALLMARK (ADELAIDE) 1: Second Creditors' Meeting Set for May 13
ONETOUCH TECHNOLOGIES: First Creditors' Meeting Set for May 15
QIKID PTY: Second Creditors' Meeting Set for May 13
RE HOLDCO: Second Creditors' Meeting Set for May 14
REGINE'S PATISSERIE: Second Creditors' Meeting Set for May 12
VALEO SCAFFOLD: First Creditors' Meeting Set for May 13
C H I N A
LAI FUNG: S&P Suspends 'B+' LongTerm Issuer Credit Rating
MIE HOLDINGS: Fitch Affirms 'C' IDR, Then Withdraws Ratings
H O N G K O N G
METROPOLITAN LIGHT: Fitch Affirms LT IDRs at 'BB', Outlook Stable
I N D I A
A2Z INFRA: CARE Lowers Rating on INR721.01cr LT Loan to 'D'
APEEX SURATGARH: CARE Lowers Rating on INR8.94cr Loan to 'B'
B. D. OVERSEAS: CARE Keeps D on INR21.3cr Loans in Not Cooperating
BILTECH BUILDING: CARE Keeps D on INR62cr Loans in Not Cooperating
CONSOLIDATED CONSTRUCTION: CARE Keeps D Ratings in Not Cooperating
DEWAN HOUSING: CARE Lowers Ratings on Various Certs. to B
ENERSAN POWER: CARE Lowers Rating on INR42.35cr LT Loans to D
GRS ENGINEERING: CARE Keeps B+ on INR6cr Loans in Not Cooperating
IL&FS LTD: Court Quashes Temporary Bail Granted to Ex-Official
JADEJA INDUSTRIES: CARE Keeps D on INR9.9cr Loans in NonCooperating
K. P. INDUSTRIES: CARE Keeps D on INR9.69cr Debt in Not Cooperating
K.V CHINNAIAH: CARE Lowers Rating on INR3.50cr Loan to 'B'
KGP GOLD: CARE Lowers Rating on INR5cr LT Loan to 'C'
KILBURN ENGINEERING: CARE Lowers Rating on INR95cr Loan to D
LEITWIND SHRIRAM: CARE Keeps 'D' Debt Ratings in Not Cooperating
MAHAVIR FOODS: CARE Keeps D on INR22cr Loans in Not Cooperating
MUNIRAJ ENTERPRISE: CARE Lowers Rating on INR6.75cr Loan to D
MURALIKRISHNA INFRACON: CARE Keeps 'D' Ratings in Not Cooperating
NAINITAL TARAI: CARE Lowers Rating on INR9.0cr LT Loan to 'B'
OM COTTEX: CARE Keeps D on INR6cr Bank Loans in Not Cooperating
PANYAM CEMENTS: CARE Keeps D Debt Ratings in Not Cooperating
RONGOGE MEGA: CARE Lowers Rating on INR12.07cr LT Loan to B+
SADARAM JINING: CARE Keeps C in INR8.19cr Loans in Not Cooperating
SAGA AUTOMOTIVE: CARE Keeps D on INR2.71cr Loans in Not Cooperating
SAHDEV JEWELLERS: CARE Reaffirms 'D' Rating on INR38.20cr Loan
SHIV PARVATI: CARE Lowers Rating on INR7cr LT Loan to 'B+'
SHIVALIK VYAPAAR: CARE Keeps C on INR9cr Loans in Not Cooperating
SHREEJI SALES: CARE Keeps D on INR5.49cr Loan in Not Cooperating
SHUBH PLY: CARE Assigns 'D' Ratings to INR14.5cr Bank Loans
T. R. POLY PET: CARE Keeps D on INR5.26cr Loans in Not Cooperating
UDIPTA ENERGY: CARE Lowers Rating on INR22.50cr Loan to 'D'
VISHAL AROGYA: CARE Lowers Rating on INR30cr LT Loan to B+
I N D O N E S I A
MASKAPAI REASURANSI: Fitch Affirms BB+ IFS Rating, Outlook Stable
REASURANSI NASIONAL: Fitch Affirms BB+ IFS Rating, Outlook Stable
N E W Z E A L A N D
FIRST INSURANCE: Fitch Affirms BB+ IFS Rating, Outlook Stable
FP IGNITION 2019-1: Fitch Puts B+ on Class F Notes on Watch Neg.
MANCHESTER UNITY: Fitch Affirms BB- IFS Rating, Outlook Stable
MARAC INSURANCE: Fitch Affirms BB+ IFS Rating, Outlook Stable
NEW ZEALAND OFFICE: Placed Into Voluntary Administration
ROSS ASSET: Court Declines ANZ's Bid to Throw Out Investors' Claim
SKYLINE ENTERPRISES: Slash More Than Half of Workforce
SMITHS CITY: Set to Restructure; Likely to Close Store, Cut Jobs
S I N G A P O R E
HTL INTERNATIONAL: Files for Insolvency Protection
UTAC HOLDINGS: S&P Lowers ICR to 'B-' on Economic Weakness
ZENROCK COMMODITIES: HSBC Seeks Judicial Management for Trader
S R I L A N K A
DFCC BANK: Fitch Cuts LT IDRs to 'B-' on Sovereign Downgrade
NATIONAL SAVINGS: Fitch Cuts LT IDR to 'B-', Outlook Still Negative
- - - - -
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A U S T R A L I A
=================
CRITERION CONFERENCES: First Creditors' Meeting Set for May 14
--------------------------------------------------------------
A first meeting of the creditors in the proceedings of Criterion
Conferences Pty Ltd will be held on May 14, 2020, at 10:00 a.m. at
One Wharf Lane, Level 20, 171 Sussex Street, in Sydney, NSW.
Alan Walker & Andre Lakomy of Cor Cordis were appointed as
administrators of Criterion Conferences on May 4, 2020.
HALLMARK (ADELAIDE) 1: Second Creditors' Meeting Set for May 13
---------------------------------------------------------------
A second meeting of creditors in the proceedings of Hallmark
(Adelaide) 1 Pty Ltd and Hallmark (Perth) Pty Ltd has been set for
May 13, 2020, at 3:00 p.m. via teleconference.
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 May 12, 2020, at 5:00 p.m.
Anne Meagher of SV Partners was appointed as administrator of
Hallmark (Adelaide) and Hallmark (Perth) on March 30, 2020.
ONETOUCH TECHNOLOGIES: First Creditors' Meeting Set for May 15
--------------------------------------------------------------
A first meeting of the creditors in the proceedings of Onetouch
Technologies (TAS) Pty Ltd will be held on May 15, 2020, at 10:00
a.m. via teleconference.
Shelley-Maree Brooks of Rodgers Reidy was appointed as
administrator of Onetouch Technologies on
May 5, 2020.
QIKID PTY: Second Creditors' Meeting Set for May 13
---------------------------------------------------
A second meeting of creditors in the proceedings of QikID Pty
Limited has been set for May 13, 2020, at 10:00 a.m. via virtual
meeting.
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 May 12, 2020, at 4:00 p.m.
Anthony Elkerton of DW Advisory was appointed as administrator of
QikID Pty on March 31, 2020.
RE HOLDCO: Second Creditors' Meeting Set for May 14
---------------------------------------------------
A second meeting of creditors in the proceedings of:
- RE Holdco Pty Ltd
- RSE Holdco Pty. Ltd.
- SC Australian Holdings 1 Pty Ltd
- Sargon CT Holdings Pty Ltd
- SC International Holdings 2 Pty Ltd
- Sargon Superannuation Holdings Pty Ltd
- Sargon Superannuation Holdings SPV Pty Ltd
- Sargon Services Pty Ltd
has been set for May 14, 2020, at 2:00 p.m. via teleconference.
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 May 13, 2020, at 12:00 p.m.
Stewart McCallum and Adam Nikitins of Ernst & Young were appointed
as administrators of RE Holdco et al. on Feb. 3, 2020.
REGINE'S PATISSERIE: Second Creditors' Meeting Set for May 12
-------------------------------------------------------------
A second meeting of creditors in the proceedings of Regine's
Patisserie Pty Ltd has been set for May 12, 2020, at 12:30 p.m. at
Unit 18, 28 Belmont Avenue, in Rivervale, WA.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the Company
be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by May 11, 2020, at 2:00 p.m.
Stephen Robert Dixon of Hamilton Murphy was appointed as
administrator of Regine's Patisserie on March 26, 2020.
VALEO SCAFFOLD: First Creditors' Meeting Set for May 13
-------------------------------------------------------
A first meeting of the creditors in the proceedings of Valeo
Scaffold Pty Ltd will be held on May 13, 2020, at 11:00 a.m. via
video conference or telephone.
Nicarson Natkunarajah of Roger and Carson was appointed as
administrator of Valeo Scaffold on May 1, 2020.
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C H I N A
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LAI FUNG: S&P Suspends 'B+' LongTerm Issuer Credit Rating
---------------------------------------------------------
S&P Global Ratings, on May 5, 2020, suspended its 'B+' long-term
issuer credit rating on Lai Fung Holdings.
The rating suspension reflects the lack of sufficient, timely, and
reliable information to assess the creditworthiness of Lai Fung.
S&P has not been able to obtain key information from the company
since LSD made a conditional voluntary general cash offer to
acquire all outstanding shares of Lai Fung in February.
Lai Fung's liquidity may have deteriorated, based on the company's
interim report for the six months ending January 2020. S&P said,
"However, we do not have sufficient information on the company's
capital expenditure (capex) or other financing plans to fully
assess its liquidity profile. Lai Fung's ratio of unrestricted cash
to short-term debt fell to 1.1x as on Jan. 31, 2020, from 2.4x as
at end-July 2019. In our view, this decline could be due to heavy
capex related to the company's Hengqin Novotown project. The capex
plan for the project could be a key swing factor for Lai Fung's
liquidity, in our view. Phase 1 of the project should have been
completed, but we are unclear about the timing and magnitude of the
spending for Phase 2."
Lai Fung's financial leverage, in terms of last-12-month EBITDA
interest coverage, deteriorated to 1.8x as at January 2020 from
5.6x as at July 31, 2019. However, S&P is unable to gauge the
future trend due the company's lack of guidance on sales launches,
the operating status of phase 1 of the Novotown project amid the
COVID-19 pandemic, and likely cash flows over the next few years.
S&P said, "Furthermore, we have insufficient information to fully
assess the credit profile of Lai Fung's ultimate parent Lai Sun
Garment Ltd. (LSG). We believe Lai Fung will remain a core
subsidiary of LSG.
"We may reinstate our ratings if we can secure more information
from Lai Fung once the offer is closed. We may withdraw the ratings
if timely and adequate information is unavailable."
MIE HOLDINGS: Fitch Affirms 'C' IDR, Then Withdraws Ratings
-----------------------------------------------------------
Fitch Ratings has affirmed and withdrawn MIE Holdings Corporation's
Long-Term Issuer Default Rating of 'C'. The rating on MIE's
USD248.4 million 13.75% senior notes due April 2022 has also been
affirmed at 'C' with a Recovery Rating of 'RR6' and withdrawn.
The ratings were withdrawn with the following reason: For
Commercial Purposes.
KEY RATING DRIVERS
The IDR was affirmed at 'C' because MIE was unable to pay the
semi-annual coupon of USD17 million on its USD248.4 million 13.75%
notes. The coupon was due on April 12, 2020 and the company has a
30-day grace period until May 11, 2020 to satisfy the payment
obligation. The affirmation of the rating on MIE's US dollar senior
notes reflects an unchanged Recovery Rating of 'RR6'.
RATING SENSITIVITIES
Rating sensitivities are no longer relevant as the ratings have
been withdrawn.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
=================
H O N G K O N G
=================
METROPOLITAN LIGHT: Fitch Affirms LT IDRs at 'BB', Outlook Stable
-----------------------------------------------------------------
Fitch Ratings has affirmed Metropolitan Light Company Limited's
Long-Term Foreign- and Local-Currency Issuer Default Ratings at
'BB'. The Outlook is Stable. The agency has simultaneously affirmed
the rating on the USD536 million of outstanding 5.5% senior
unsecured notes due 2022 at 'BB'.
The Stable Outlook reflects Fitch's expectation that MLCL's FFO net
leverage for the financial year ending August 2021 (FY21) will
improve and remain below 4.6x (FY19 pro-forma: 4.4x), the threshold
above which Fitch may consider a negative rating action, despite a
temporary breach of this level in FY20. Fitch expects enterprise
broadband and data revenue to be depressed in FY20 due to financial
pressure on customers amid the coronavirus outbreak. MLCL's
business risk profile is underpinned by its position as the
second-largest residential broadband provider in the Hong Kong
market and its strong position in the enterprise market, serving
both large corporates and SMEs.
MLCL has diversified operations spanning residential broadband,
voice, pay-TV, corporate data and enterprise broadband. The
business profile has improved following the full integration of WTT
Holding Corp in April 2019 and that of system-integration service
provider JOS CI Group in December 2019, which have strengthened
MLCL's position in the enterprise market.
KEY RATING DRIVERS
Moderate Impact from COVID-19: Fitch expects MLCL's FY20 revenue,
excluding the recently acquired JOS and consolidating a full year
of WTT's performance in FY19, to rise by a low-single-digit
percentage. MLCL's enterprise business will be affected in FY20 by
subdued demand from SMEs, especially those in retail and
hospitality. However, the downturn in the enterprise business will
be partly offset by the steady residential broadband business, as
users adopt remote working.
Fitch expects revenue growth to bounce back to 15%-20% in FY21, on
a pro forma basis, including 12 months of JOS's results in FY20.
Fitch expects MLCL's larger enterprise customers to weather the
coronavirus-led disruption and increase data demand in the medium
term.
Leverage to Improve: Fitch expects MLCL's FFO net leverage to
improve to 3.6x-4.0x in FY21-FY22 (pro-forma FY20: 4.7x), driven by
a recovery in demand from enterprise customers, steady residential
revenue growth and cost savings after the merger with WTT. Fitch
expects MLCL to realise HKD60 million in capex savings on full
integration with WTT in FY20. However, the ratings continue to be
constrained by higher leverage compared with other 'BB' rated telco
peers and MLCL's shareholder-friendly dividend distribution
policies.
Fitch has treated HKBN Ltd.'s vendor loan notes of HKD1.9 billion
as equity, as the notes are perpetual, non-voting, zero-coupon
instruments and are only convertible into HKBN's shares. MLCL is
HKBN's intermediate investment holding company and controls all the
group's operating entities. The loan notes are subordinated and
rank behind all of MLCL's present and future unsecured
obligations.
Robust Market Share: MLCL is the second-largest residential
broadband service provider by revenue in Hong Kong with a solid
market share in the local enterprise telecom service segment. The
company has a strong network position with extensive fibre coverage
connecting 7,300 commercial buildings in Hong Kong and offers a
full suite of services, spanning residential quad-play bundled
broadband, enterprise broadband and data, as well as wholesale
carrier businesses. The residential and enterprise businesses
accounted for around 30% and 70% of pro-forma revenue respectively
in 1HFY20.
Tariff Increase, Challenge to Incumbent: Fitch expects MLCL to
increase its residential tariff by a low single digit percentage in
FY20 as it tries to close the tariff gap with the incumbent, HKT
Limited. MLCL is the only telco that has the network quality, fibre
coverage and breadth of offerings to compete with HKT in the
residential segment.
In the enterprise market, Fitch believes MLCL is well-positioned to
use its abundant network capacity to compete for first-line
connections and sell bundled services to its large corporate
customers. The company managed to increase its average revenue per
user (ARPU) for enterprise telecom service to HKD2,775 in 1HFY20
(1HFY19: HKD1,508) and Fitch expects the enterprise ARPU to recover
to pre-coronavirus levels in 2HFY21, due to the larger blue-chip
customer base and more diversified service offerings following the
M&As in 2019.
IDR Based on Consolidated Profile: Fitch rates MLCL based on the
consolidated credit profile of HKBN Ltd. and the surviving WTT
entities given the strong legal, operational and strategic linkages
between the entities. HKBN Group Limited, a key subsidiary of MLCL,
and the surviving WTT entities account for almost all of MLCL's
EBITDA and cash flows. HKBN Group Limited and the surviving WTT
entities collectively guarantee the USD536 million of senior
unsecured notes maturing in 2022.
Risk of Higher-Than-Expected Dividends: MLCL's shareholder-friendly
policies are a credit weakness, as it is committed to distribute
90%-100% of its adjusted free cash flow (AFF) - equivalent to
Fitch-defined pre-dividend free cash flow minus some non-recurring
items - as dividends. Higher-than-expected dividends could limit
FCF generation and delay deleveraging. MLCL distributed 124% of AFF
in 1HFY20 as interim dividends to normalise some one-off items.
DERIVATION SUMMARY
MLCL is rated two notches lower than Sunrise Communications
Holdings S.A. (Sunrise; BBB-/Stable). Sunrise has a better business
risk profile as it is the second-largest mobile-fixed convergent
service provider in Switzerland with much larger revenue than MLCL.
However, Sunrise's advantage as an integrated telecom service
provider is counterbalanced by its challenger position in a market
dominated by incumbent Swisscom. MLCL has a weaker financial risk
profile with forecast FY20 FFO net leverage of 4.7x, compared with
2.3x for Sunrise.
MLCL's business risk profile is better than that of Axtel S.A.B de
C.V. (Axtel; BB-/Positive), the second-largest enterprise telecom
service provider in Mexico with about 20% market share. Axtel
serves Mexico's competitive enterprise and government sector. In
comparison, Hong Kong's enterprise market is much more stable with
benign competitive dynamics. MLCL has a weaker financial risk
profile than Axtel, which Fitch forecasts to have FY20 FFO net
leverage of 3.4x. Fitch forecasts Axtel's leverage to fall to 2.5x
over the medium term, aided by improved cash generation on
divestures of non-core assets, which is captured in the Positive
Outlook.
Compared to UK-based TalkTalk Telecom Group PLC (TalkTalk;
BB-/Stable), MLCL benefits from its solid market position in Hong
Kong's residential and enterprise broadband sectors and sound fibre
coverage extending to 90% of commercial buildings while TalkTalk
focuses on a niche value-for-money telecom segment relying on
purchase from wholesale products to gain local access. Therefore,
MLCL merits a one-notch higher rating than TalkTalk despite its
smaller scale and weaker financial risk profile as Talktalk's FY20
FFO net leverage is forecast at 2.9x.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within its Rating Case for the Issuer:
- FY20 revenue excluding JOS to increase by a low single-digit
percentage, with FY19 revenue consolidating 12 months of WTT's
results;
- Revenue growth of 15%-20% in FY21, with FY20 revenue
consolidating 12 months of JOS's results
- Operating EBITDA margin of 22%-23% in FY20-FY22 (FY19: 34%)
- Capex-to-revenue ratio of 5%-7% in FY20-FY22 (FY19: 12%)
- Dividend payout ratio of more than 120% MLCL-defined AFF in
FY20 before returning to 100% ratio in FY21-FY22
- Shareholder loan notes treated as 100% equity
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
An upgrade is unlikely in the near term given MLCL's high leverage.
However, Fitch may consider positive rating action if:
- Growth in MLCL's share of the residential broadband and
enterprise markets leads to FFO net leverage sustained below 3.3x
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- FFO net leverage sustained above 4.6x, or
- Deterioration in MLCL's market position
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: At end-February 2020, MLCL had readily
available cash of HKD692 million, undrawn uncommitted revolving
facilities of HKD1,834 million and undrawn committed credit
facilities of HKD200 million, sufficient to cover short-term loans
of HKD779 million. Around 82% of its total debt falls due after
FY22.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
=========
I N D I A
=========
A2Z INFRA: CARE Lowers Rating on INR721.01cr LT Loan to 'D'
-----------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of A2Z
Infra Engineering Limited (A2Z), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 293.32 CARE D; Stable; Revised
Facilities from CARE D; ISSUER NOT
COOPERATING;
Long-term Bank 721.01 CARE D; Stable; Revised
Facilities from CARE D; ISSUER NOT
COOPERATING;
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of A2Z takes into
account the ongoing delay in repayment of its debt obligations by
the company due to its stretched liquidity position.
Rating Sensitivities
Positive Rating Sensitivities
* Timely track record of debt servicing by the company for
continuous 3 months
* Sustainable improvement in the operations of the company
* DSCR improves to >1x
Detailed description of the key rating drivers
Key Rating Weaknesses
* Ongoing delays in debt servicing: There are ongoing delays in
servicing of its debt obligations due to the stretched liquidity
position.
* Weak financial performance: The collection period of the company
remained relatively higher to about 731 days in FY19 indicates slow
realization of debtors. The company's overall gearing has improved
to 0.59x (PY: 1.21) on account of decrease in total debt, however
total debt to GCA and total debt to PBILDT have remained higher to
7.84 times and 6.08 times respectively. Along with this, the
company reported revenue of INR 521.51 crore during FY19 (PY:
INR370.74 crore) with profit at operating level of INR56.34 crore
in FY19 (PY: Loss of INR10.44 crore). During 9MFY20, A2Z reported
total operating income and PBILDT of
Rs 331.83 crore and INR11.11crore respectively.
Liquidity: Poor
The liquidity of the company is poor, owing to delays in debt
servicing. The company had cash and bank balance of INR 8.42 crore
as on March 31, 2019.
Incorporated in January 2002 as A2Z Maintenance Services Private
Ltd, the company was renamed 'A2Z Maintenance & Engineering
Services Private Ltd' in May 2005. Subsequently, the company
became a public limited company in March 2010. A2Z came up with an
IPO in December 2010 and raised INR776.2 crore. The company got its
present name in December 2014 and is primarily engaged in providing
Engineering, Procurement and Construction (EPC) services in power
transmission and distribution sector.
APEEX SURATGARH: CARE Lowers Rating on INR8.94cr Loan to 'B'
------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Apeex Suratgarh Multispecialty Hospital Private Limited (ASMHPL),
as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 8.94 CARE B; Stable; ISSUER NOT
Facilities COOPERATING; Revised from
CARE B+; Stable on the basis
of best available information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated March 5, 2019, placed the
ratings of ASMHPL under the 'issuer non-cooperating' category as
ASMHPL had failed to provide information for monitoring of the
rating and had not paid the surveillance fees for the rating
exercise as agreed to in its Rating Agreement. ASMHPL continues to
be non-cooperative despite repeated requests for submission of
information through e-mails, phone calls and an email dated April
21, 2020. In line with the extant SEBI guidelines, CARE has
reviewed the rating on the basis of the best available information
which however, in CARE's opinion is not sufficient to arrive at a
fair rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
The rating has been revised on account of leveraged capital
structure.
The rating, further, continue to remained constrained on account of
its short track record of operations with challenges of attracting
and retaining quality doctors and medical professionals in the
competitive healthcare industry and stretched liquidity position.
The rating, however, continues to derive strength from
well-qualified and experienced promoters addressing various
healthcare segments along with positive long-term outlook for the
healthcare sector in India. The rating, further, derives strength
from increase in PBILDT margin and registration of net profit in
FY19 (FY refers to period from April 01 to March 31) against net
loss in FY18.
Detailed description of the key rating drivers
At the time of last rating on March 6, 2019, the following were the
rating strengths and weaknesses. (Updated for the information
available from Registrar of Companies):
Key Rating Weakness
* Short track record of operations with leveraged capital
structure, moderate debt coverage indicators and stretched
liquidity position: ASMHPL commenced the operations from December
2016 onwards. In FY19, the scale of operations as indicated by
Total Operating Income (TOI) increased by 19.14% over FY18 although
remained modest at INR14.49 crore. The capital structure continue
to remain leveraged with overall gearing of 3.09 times as on March
31, 2019 improved from 4.31 times as on March 31, 2018 owing to
accretion of profit to reserve. Debt coverage indicators stood
moderate with total debt to GCA and interest coverage of 3.67 times
and 3.69 times in FY18. The liquidity ratio stood moderate with
current ratio of 1.57 times and quick ratio stood below unity at
0.92 times as on March 31, 2019.
* Challenges of attracting and retaining quality doctors and
medical professionals in the competitive healthcare industry:
Success of a new hospital project or expansion of existing
facilities requires availability of adequate trained doctors and
medical personnel. Due to the scarcity of trained medical persons,
including doctors, owing to intense competition in the healthcare
sector, it becomes relatively difficult to attract and retain a
skilled pool of medical personnel. Further, the ability of the
company to retain its current medical fraternity would be a key
differentiator.
Key Rating Strengths
* Well-qualified and experienced promoters addressing various
healthcare segments: The key Promoters of ASMHPL, Dr. Sachin
Jhanwar, Dr. Vijay Beniwal, Dr. Sanjay Bajaj and Dr. Rajendra Kumar
Chhabra are qualified medical practitioners with an experience in
the medical field for around more than two decades. Dr. Sachin
Jhanwar and Dr. Vijay Beniwal have specialization in different
surgeries, while Dr. Sanjay Bajaj and Dr. Rajender Kumar Chhabra
are physicians.
* Healthy PBILDT margin with net profit in FY19: PBILDT margin
improved significantly by 621 bps over FY118 and stood healthy at
23.24% in FY19. Furthermore the company registered net profit of
INR0.69 crore against net loss of INR0.01 crore in FY18. The GCA
level stood moderate at INR2.49 crore in FY19
Apex Suratgarh Multispecialty Hospital Private Limited (ASMHPL) was
incorporated in 2014 and started it operations from December 2016.
The company operates a hospital providing quality services and
patient care to the people in the vicinity of Sri Ganganagar
(Rajasthan). The hospital has specialized departments in
Cardiology, Endoscopy, Radiology, Cytology, Histopathology and few
others for its patients and visitors. The hospital has 100 beds and
1 rented ambulance.
B. D. OVERSEAS: CARE Keeps D on INR21.3cr Loans in Not Cooperating
------------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of B. D.
Overseas & Fiscal Services Limited (BDO) continues to remain in the
'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 20.30 CARE D: Issuer not cooperating;
Facilities Based on best available
Information
Short-term Bank 1.00 CARE D: Issuer not cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated February 14, 2019 placed the
ratings of BDO under the 'issuer non-cooperating' category as BDO
had failed to provide information for monitoring of the ratings as
agreed to in its Rating Agreement. BDO continues to be
non-cooperative despite repeated requests for submission of
information through phone calls and emails dated April 08, 2020,
April 13, 2020, April 15, 2020 and April 20, 2020. In line with the
extant SEBI guidelines, CARE has reviewed the ratings on the basis
of the best available information which however, in CARE's opinion
is not sufficient to arrive at a fair rating. The ratings on BDO's
bank facilities will now be denoted as CARE D; ISSUER NOT
COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above ratings.
Detailed description of the key rating drivers
At the time of last rating done on February 14, 2019 the following
were the rating weaknesses:
Detailed description of key rating drivers
Key Rating Weaknesses
* Ongoing delays in debt servicing: BDO has been irregular in
servicing its debt obligation due to weak liquidity position of the
company.
Ahmedabad-based (Gujarat) B. D. Overseas and Fiscal Services
Limited (BDO) is a part of BD Patel Group and was incorporated in
1994 for trading of various metal products. During FY14 BDO stopped
trading business and entered into manufacturing of various steel
products such as Stainless Steel Flat, Ingots, angles and other
Rolled products and targets to cater demand of various steel
utensils manufactures, steel furniture manufacturer and steel pipes
manufacturers. BDO has commenced its manufacturing operations from
January 2014. BDO is operating from its sole manufacturing unit
located at Bavla (Gujarat) having installed capacity of 66,500
Metric Tonne per Annum (MTPA) as on March 31, 2017.
BILTECH BUILDING: CARE Keeps D on INR62cr Loans in Not Cooperating
------------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Biltech
Building Elements Limited (BBEL) continues to remain in the 'Issuer
Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 62.99 CARE D: Issuer not cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated November 13, 2018, continues
to place the ratings of BBEL under the 'Issuer Not Cooperating'
category as the company had failed to provide the requisite
information required for monitoring of the ratings as agreed to in
its rating agreement. Biltech Building Elements Limited continues
to be non-cooperative despite repeated requests for submission of
information through phone calls and a letter/email dated April 2,
2020. In line with the extant SEBI guidelines, CARE has reviewed
the rating on the basis of the best available Information which
however, in CARE'S opinion is not sufficient to arrive at a fair
rating. The rating of bank facilities of Biltech Building Elements
Limited will now be denoted as CARE D; ISSUER NOT COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating(s).
Detailed description of the key rating drivers
CARE couldn't contact the banker and no other information is
available. However, at the time of last review, the rating took
into account cash flow mismatches as there were ongoing delays in
servicing of debt obligations by the company.
Biltech Building Elements limited (BBEL), an Avantha group company,
was incorporated in 2004. It is engaged in manufacturing
'Autoclaved Aerated Concrete Blocks, i.e. AAC-Blocks for 'green
building' process by utilizing fly-ash, lime, cement, gypsum and
aluminium powder as major raw materials. Avantha group (erstwhile
Thapar Group) is a renowned group of India with over seven decades
of existence. The group is currently led by Mr. Gautam Thapar and
has business interest in sectors like, pulp and paper
manufacturing, power transmission and services equipment, food
processing, power, chemicals, IT & ITES etc. Presently, BBEL has
seven plants in operation- Palwal in Haryana (taken over from group
company Ballarpur Industries Ltd in FY05), Bhigwan in Pune (set up
in FY09), Palghar in Maharashtra (acquired in FY12), Budge Budge in
Kolkata (set up in FY12) and Surat in Gujarat (acquired in FY13),
Tumkur in Karnataka and Pune in Maharashtra acquired from Siporex
India Pvt Ltd (owned by the BG Shirke Group) in FY17. Total
installed capacity of BBEL aggregates to 13.40 lakh cubic metres
per annum.
CONSOLIDATED CONSTRUCTION: CARE Keeps D Ratings in Not Cooperating
------------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of
Consolidated Construction Consortium Limited (CCCL) continues to
remain in the 'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 597.89 CARE D: Issuer not cooperating;
Facilities Based on best available
Information
Short-term Bank 602.00 CARE D: Issuer not cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated February 18, 2019 placed the
ratings of Consolidated Construction Consortium Limited (CCCL)
under the 'issuer non-cooperating' category as CCCL had failed to
provide information for monitoring of the rating. CCCL continues to
be non-cooperative despite repeated requests for submission of
information through e-mails, phone calls and a letter dated April
6, 2020. In line with the extant SEBI guidelines, CARE has reviewed
the rating on the basis of the best available information which
however, in CARE's opinion is not sufficient to arrive at a fair
rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating(s).
The ratings take into account the on-going delays in debt servicing
by the company.
Detailed description of the key rating drivers
Key Rating Weaknesses
* On-going delays in debt servicing: CARE as a part of its due
diligence exercise interacts with various stakeholders of the
company including lenders to the company and as a part of its
exercise ascertained that there are delays in debt servicing.
CCCL was incorporated in 1997 by first-generation entrepreneurs Mr
R Sarabeswar, Mr S Sivaramakrishnan and Mr V G Janarthanam. CCCL is
primarily engaged in construction activities in commercial,
infrastructure, industrial and residential domain. CCCL has other
subsidiaries, namely, Consolidated Interiors Ltd (interior
contracts and fit out services), Noble Consolidated Glazing Ltd
(Glazing Services) and CCCL Power Infrastructure Ltd (BOP Orders
for Power Projects and food processing).
DEWAN HOUSING: CARE Lowers Ratings on Various Certs. to B
---------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Dewan Housing Finance Corporation Limited (DHFL), as:
Principal
Outstanding
Transaction Instrument (INR cr) Ratings
----------- ---------- -------- -------
Nirmaan RMBS Series A1 PTC 66.85 CARE B (SO) Revised
Trust-Series II– Series A2 PTC 2.79 from CARE BBB
(SO)
2013
Nirmaan RMBS Series A1 PTC 77.94 CARE B (SO) Revised
Trust-Series III– Series A2 PTC 3.25 from CARE BBB
(SO)
2013
Nirmaan RMBS Series A1 PTC 43.82 CARE B (SO) Revised
Trust-Series IV– Series A2 PTC 1.81 from CARE BBB
(SO)
2013
Nirmaan RMBS Series A1 PTC 5.78 CARE B (SO) Revised
Trust-Series I– Series A2 PTC 0.24 from CARE BBB
(SO)
2014
Nirmaan RMBS Series A1 PTC 26.09 CARE B (SO) Revised
Trust-Series III– Series A2 PTC 1.09 from CARE BBB
(SO)
2014
Nirmaan RMBS Series A PTC 26.09 CARE B (SO) Revised
Trust-Series IV– from CARE BBB
(SO)
2014
Nirmaan RMBS Series A1 PTC 77.80 CARE B (SO) Revised
Trust-Series I– Series A2 PTC 2.32 from CARE BBB
(SO)
2015
Nirmaan RMBS Series A1 PTC 105.23 CARE B (SO) Revised
Trust-Series II– Series A2 PTC 3.25 from CARE BBB
(SO)
2015
Nirmaan RMBS Series A PTC 77.24 CARE B (SO) Revised
Trust-Series I– from CARE BBB
(SO)
2016
Nirmaan RMBS Series A PTC 89.81 CARE B (SO) Revised
Trust-Series II– Second Loss 7.24 from CARE BBB
(SO)
2016 Facility
Detailed Rationale & Key Rating Drivers
CARE has revised the outstanding ratings of the Pass Through
Certificates (PTCs) of DHFL's securitized pools at "CARE B (SO)
(Under Credit Watch with Negative Implications)" from "CARE BBB
(SO) (Under Credit Watch with negative Implications)", and the
credit opinion for the respective Second Loss Facility (SLF, where
provided) equivalent to "CARE B (SO) (Under Credit Watch with
Negative Implications)" from Equivalent to "CARE BBB (SO) (Under
Credit Watch with Negative Implications)".
Detailed description of the key rating drivers
The rating action takes into account the current scenario wherein,
due to the COVID-19 pandemic, a countrywide lockdown has been
instituted by Central Government of India starting from March 25,
2020. CARE expects deterioration in collections from the underlying
pool post the moratorium period announced by the RBI, which is
likely to impact the credit profile of the above mentioned
transactions.
In addition that, CARE has also considered the event regarding the
Appointment of Administrator and Commencement of Corporate
Insolvency Resolution Process under the Insolvency and Bankruptcy
Code, 2016 for DHFL. The Administrator has deemed that the credit
enhancement kept in the form of FD is the asset of DHFL and the
same would not be available for future shortfalls. CARE has
factored this aspect as well in to its rating action.
Key Rating Strengths
1. Cumulative collection efficiency of the pool is very high.
2. The delinquencies are lower than expected.
Key Rating Weaknesses
1. Impact of moratorium on pool collections.
Liquidity Position:
The liquidity position of the transaction is poor as the credit
enhancement is unavailable to cover for any shortfalls in the
collections from the underlying contracts. The ability of the
servicer to transfer the collections to the C&P Account, due to the
COVID-19 pandemic and the lockdown is likely to result in delays in
making the scheduled payouts. Due to the uncertainty associated
with the insolvency proceedings, there is lack of clarity on the
transfer of collections and availability of collateral for
utilization in case of shortfalls.
Rating Sensitivities:
Positive Factors
1. Funding in C&P Account in timely manner
2. Impact of moratorium and disruption due to lockdown on pool
collections.
Negative Factors
1. Deterioration in pool performance post moratorium
Key Rating Assumptions: NA
Incorporated in 1984, DHFL is registered as housing finance company
in India with total asset size of INR1,06,475 crore as on March 31,
2019. DHFL had a loan portfolio of INR97,977 crore as on March 31,
2019. The company operates through a network of over 330 offices
(incl. branches and service centres). The Reserve Bank of India
(RBI) has filed insolvency proceeding against Dewan Housing Finance
Limited (DHFL) with NCLT on 29th November 2019. Mr. R
Subramaniakumar, exMD and CEO of Indian Overseas Bank, has been
appointed as the administrator of DHFL.
ENERSAN POWER: CARE Lowers Rating on INR42.35cr LT Loans to D
-------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Enersan Power Private Limited (EPPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 42.35 CARE D; Revised from CARE BB;
Facilities Stable; ISSUER NOT COOPERATING
on the basis of best available
information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated April 3, 2020, placed the
rating of EPPL under the 'Issuer non-cooperating' category as EPPL
had failed to provide information for monitoring of the ratings.
EPPL continues to be non-cooperative despite repeated requests for
submission of information. In line with the extant SEBI guidelines,
CARE has reviewed the rating on the basis of the best available
information which however, in CARE's opinion is not sufficient to
arrive at a fair rating. The rating on EPPL's bank facilities will
now be denoted as CARE D; ISSUER NOT COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating(s).
The revision in the rating assigned to the bank facilities of EPPL
takes into account recent delays in servicing of its debt
obligations, as per interaction with its lender.
Detailed Rationale & Key Rating Drivers
Key Rating Weaknesses
* Delays in debt servicing obligations: As per recent telephonic
interaction with the lenders of EPPL, the lenders have confirmed
that there were recent delays in debt servicing by the company. The
principal and interest installment for the month of January 2020
(quarterly scheduled payment) was serviced with significant delay.
As indicated by the lenders, moratorium has been applied for the
repayments due in the month of April as per RBI circular related to
covid-19 crisis. The delays are mainly due to stretched liquidity
of the company on account of moderate cash accruals and delay in
receipt of Viability Gap Funding.
Incorporated in May 2013, EPPL is promoted by Mr. Kishor Virangama
and Mr. Dipak Sangani and operates a 10 megawatt (MW) solar power
plant in the Kutch region of Gujarat. In March 2014, EPPL entered
into a PPA, for entire power produced for 25 years with SECI, a
Government of India (GoI) undertaking under the administrative
control of Ministry of New and Renewable Energy (MNRE), under the
Jawaharlal Nehru National Solar Mission (JNNSM) Phase II Batch I
with VGF support.
GRS ENGINEERING: CARE Keeps B+ on INR6cr Loans in Not Cooperating
-----------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of GRS
Engineering Private Limited (GRSEPL) continues to remain in the
'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 6.00 CARE B+: Issuer not cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated February 20, 2019, placed
the rating(s) of GRSEPL under the 'issuer non-cooperating' category
as GRSEPL had failed to provide information for monitoring of the
rating. GRSEPL continues to be non-cooperative despite repeated
requests for submission of information through e-mails, phone calls
and email dated April 7, 2020 to April 14, 2020. In line with the
extant SEBI guidelines, CARE has reviewed the rating on the basis
of the publicly available information which however, in CARE's
opinion is not sufficient to arrive at a fair rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
Detailed description of the key rating drivers
The rating assigned to the bank facilities of GRS Engineering
Private Limited continues to be tempered by modest scale of
operations, leverage capital structure, weak debt coverage
indicators, working capital intensive nature of operations,
profitability margins are susceptible to fluctuation in foreign
exchange prices. The rating also considers satisfactory
profitability margins. The rating however continues to draw its
strength from long track record and experience of the promoters for
more than three decades in casting industry, growing demand for
alloy based products.
Key Rating Weakness
* Modest scale of operations: The scale of operations of the
company stood at INR106.36 crore in FY19 as compared to INR75.95
crore in FY18 as against net worth of INR23.45 crore in FY19.
* Leverage capital structure: The overall gearing ratio though
improved stood leverage at 2.05x as on March 31, 2019 as compared
to 2.77x as on March 31, 2018 due to increase in net worth due to
accretion of profits.
* Weak debt coverage indicators: The debt coverage indicators
marked by total debt/GCA and interest coverage deteriorated and
stood at 5.02x and 3.83x in FY19 as compared to 3.26x and 4.18x in
FY18 due to increase in the total debt levels. The TD/CFO stood at
5.29x in FY19.
* Working capital intensive nature of operations: The operating
cycle stood at 79 days in FY19 as compared to 83 days in FY18 due
to elongated inventory holding period of 55 days. The average
collection period stood at 47 days and the average creditor's
period of 23 days in FY19.
* Profitability margins are susceptible to fluctuation in foreign
exchange prices: The company receives payment from its customers
at current exchange rate. The firm does not have any hedging
mechanism to avoid fluctuation in foreign exchange prices.
Key Rating Strengths
* Long track record and experience of the promoters for more than
three decades in casting industry: GRSEPL is promoted by Mr. B
Subraya Baliga along with family members and friends. The other
directors are Mrs. M Pushpalatha, Mr. M. Yogesh Dange, Mr. K
Dayanand Kudva and Mr. M. Manjunath Nayak. All the directors are
qualified graduates and have more than three decades of experience
as the promoters in same line of business. Due to long term
presence in the market by the partners, the firm has good relation
with customers and suppliers.
* Growing demand for alloy based products: The firm is engaged in
manufacturing alloy based products like valves, pumps, bushes,
forgings, casted sleeves, flanges and fittings which finds its
application primarily in heavy engineering sectors like ship
building, refineries, chemical process plants etc. The engineering
sector is a growing market. Spending on engineering services is
projected to increase to US$ 1.1 trillion by 2020, which is to
benefit SBT.
* Satisfactory profitability margins: The PBILDT margin and PAT
margin though declined stood satisfactory at 15.40% and 7.68%,
respectively in FY19 as compared 18.83% and 8.51%, respectively in
FY18 due to increase in the scale of operations.
Mysore based, GRS Engineering Private Limited (GRSEPL) was
established on April 25, 2006 as a Private Limited. The company is
promoted by Mr. B Subraya Baliga along with family members and
friends. The company is engaged in manufacturing, forging of alloy
based products and carbon Steels. Some of the major products of
GRSEPL are automotive parts, machinery spares, parts of pumps etc.
The firm purchases raw materials such as castings and bought out
items from its local suppliers.
IL&FS LTD: Court Quashes Temporary Bail Granted to Ex-Official
--------------------------------------------------------------
The Economic Times reports that setting aside a lower court order,
the Bombay High Court on May 5 quashed the temporary bail of eight
weeks granted to former IL&FS vice chairman Hari Sankaran, arrested
in connection with the alleged irregularities caused at the
infrastructure lender and its subsidiaries.
In a related development, the high court also rejected the bail
plea of IL&FS Transportation Networks' former managing director
Karunakaran Ramchand, who sought bail on medical grounds, citing
Covid-19 infection risks at Taloja jail, where he is currently
lodged, ET relates.
Sankaran was behind bars since April last year. Karunakaran was
arrested in June of 2019.
ET, citing a government ( SFIO) charge sheet, notes that six
executives - Ravi Parthasarathy, Hari Sankaran, Ramesh Bawa, Arun
Saha, Vibhav Kapoor and Karunakaran Ramchand - had formed the
"coterie" that allegedly committed fraud with an intent to injure
the interest of IFIN, its shareholders and creditors, resulting in
wrongful loss to the company.
About IL&FS
Infrastructure Leasing & Financial Services Limited (IL&FS) --
https://www.ilfsindia.com/ -- is an infrastructure development and
finance company based in India. It focuses on the development and
commercialization of infrastructure projects, and creation of value
added financial services. The company operates in Financial
Services, Infrastructure Services, and Others segments.
As reported in the Troubled Company Reporter-Asia Pacific, the
Indian Express related that the Indian government, in October 2018,
stepped in to take control of crisis-ridden IL&FS by moving the
National Company Law Tribunal (NCLT) to supersede and reconstitute
the board of the firm which has defaulted on a series of its debt
payments. This was said to be an attempt to restore the confidence
of financial markets in the credibility and solvency of the
infrastructure financing and development group.
JADEJA INDUSTRIES: CARE Keeps D on INR9.9cr Loans in NonCooperating
-------------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Jadeja
Industries Private Limited (JIPL) continues to remain in the
'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 9.90 CARE D: Issuer not cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated February 21, 2019 placed the
ratings of JIPL under the 'issuer non-cooperating' category as JIPL
had failed to provide information for monitoring of the ratings as
agreed to in its Rating Agreement. JIPL continues to be
non-cooperative despite repeated requests for submission of
information through phone calls and emails dated April 08, 2020,
April 13, 2020, April 15, 2020 and April 20, 2020. In line with the
extant SEBI guidelines, CARE has reviewed the ratings on the basis
of the best available information which however, in CARE's opinion
is not sufficient to arrive at a fair rating. The ratings on JIPL's
bank facilities will now be denoted as CARE D; ISSUER NOT
COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above ratings.
Detailed description of the key rating drivers
At the time of last rating done on February 21, 2019, the following
were the rating weaknesses:
Detailed description of key rating drivers
Key Rating Weaknesses
* Ongoing delays in debt servicing: JIPL had been irregular in
servicing its debt obligation due to weak liquidity position of the
company.
Morbi-based (Gujarat) JIPL was incorporated as a private limited
company during September, 2004 as Jadeja Refractories Private
Limited (JRPL). Subsequently, JRPL was converted into JIPL during
December, 2013. JIPL is managed by three promoters namely Mr.
Keshrisinh Jadeja, Mr. Hitendrasinh Jadeja and Mr. Devendrasinh
Rana. Currently JIPL is engaged in to manufacturing of refractory
bricks which is used in lining furnaces, kilns, fireboxes, and
fireplaces. JIPL operates from its sole manufacturing facility
located in Morbi (Gujarat).
K. P. INDUSTRIES: CARE Keeps D on INR9.69cr Debt in Not Cooperating
-------------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of K. P.
Industries (KPI) continues to remain in the 'Issuer Not
Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 9.69 CARE D; Issuer not cooperating;
Facilities Based on best available
information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated February 14, 2019, placed
the rating of KPI under the 'issuer noncooperating' category as KPI
had failed to provide information for monitoring of the rating for
the rating exercise as agreed to in its Rating Agreement. KPI
continues to be non-cooperative despite repeated requests for
submission of information through e-mails, phone calls and an email
dated April 10, 2020, April 14, 2020 and April 15, 2020. In line
with the extant SEBI guidelines, CARE has reviewed the rating on
the basis of the best available information which however, in
CARE's opinion is not sufficient to arrive at a fair rating. The
ratings on KPI's bank facilities will now be denoted as CARE D;
ISSUER NOT COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above ratings. The rating assigned to the bank facilities of KPI
factored in ongoing irregularity in debt servicing.
Detailed description of the key rating drivers
At the time of last rating on February 14, 2019, the following were
the rating strengths and weaknesses:
Key Rating Weaknesses
* Ongoing delay in debt servicing: KPI has been irregular in
servicing its debt obligation due to weak liquidity position of
the
firm.
Established in the year 2009, Ahmedabad-based K.P. Industries (KPI)
is a partnership firm engaged in the processing of nonbasmati rice.
Key partners include Mr. Dhaval Prajapati and Mr. Atul Prajapati
who manage the day to day operations. As on March 31, 2016, it had
a total installed capacity of 69,120 Metric Tonnes per annum and
operates through its sole manufacturing unit at Kheda.
K.V CHINNAIAH: CARE Lowers Rating on INR3.50cr Loan to 'B'
----------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of K.V
Chinnaiah (KVC), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 3.50 CARE B; Stable Issuer not
Facilities cooperating; Revised from
CARE B+; Stable; Issuer Not
Cooperating on the basis of
best available information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated March 26, 2019, placed the
rating(s) of KVC under the 'issuer not cooperating' category as KVC
had failed to provide information for monitoring of the rating. KVC
continues to be noncooperative despite repeated requests for
submission of information through phone calls and e-mails dated
April 8, 2020 to April 17, 2020. In line with the extant SEBI
guidelines, CARE has reviewed the rating on the basis of the best
available information which however, in CARE's opinion is not
sufficient to arrive at a fair rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
Detailed Rationale& Key Rating Drivers
At the time of last rating on March 26, 2019, the following were
the rating strengths and weaknesses:
Key Rating Weakness
* Small scale of operations with low net worth base: The scale of
operations of the firm is small of INR19.02 crore in FY17
considering the track record of around eighteen years since its
incorporation in 2000. The proprietor's capital remains low at
INR3.38 crore as on March 31, 2017.
* Decline in total operating income: The total operating income of
the firm reduced from INR24.76 in FY16 to INR19.06 crore in FY17 at
the back of lack of orders. Further the firm achieved turnover of
INR25.10 crore from April 2017 to February 2018 (Provisional).
* Leveraged capital structure albeit to improvement: The debt
equity ratio and overall gearing ratio of the firm improved from
3.77x and 7.06x respectively as on March 31, 2016 to 1.74x and
3.28x as on March 31, 2017 due to repayment of term loans coupled
with increase in networth at back of accretion of profits and
infusion of capital by the proprietor in FY17.
* Highly competitive industry: The Indian construction sector is
highly fragmented with presence of many mid and large-sized
players. Given the volatile economic environment, there has been a
slowdown in release of new contracts, which has resulted in
sluggish growth being witnessed by the construction industry.
However the long term outlook appears satisfactory on the back of
major investment expected from the government sector. Furthermore
the total income earned and profit margins of the firm depend upon
the bargaining power of KVC to receive work orders with better
margins.
* Constitution of the entity as proprietor firm with inherent risk
of withdrawal of capital: The sole proprietor typically makes all
the decisions and runs the entire business operation. If he becomes
ill or disabled, there may be nobody else who can step in and keep
the business going. Running a business single-handedly can also
pose a risk due to heavy burden. Constitution as a proprietorship
has the inherent risk of possibility of withdrawal of the capital
at the time of personal contingency which can adversely affect its
capital structure.
Key Rating Strengths
* Experienced promoter with long track record of operations: The
proprietor of KVC has experience of over 4 decades in the civil
construction industry. It undertakes various projects for the PWD
Karnataka like NH road work, underpass construction etc. The
proprietor has interest in various other businesses like Hotel
industry and owns a crusher from where the raw materials for the
construction business are purchased.
* Improved debt coverage indicators: The PBILDT interest coverage
ratio of the firm improved from 2.45x in FY16 to 4.09x in FY17 due
decrease in interest cost at the back of repayment of term loans
and decrease in utilisation of working capital limits. The total
debt to gross accruals (TD/GCA) improved marginally from 5.34x in
FY16 to 5.23x in FY17 due decrease in debt levels at the back of
repayment of term loans.
K.V. Chinnaiah (KVC) is proprietorship concern established in the
year 2000 by Mr. K.V. Chinnaiah. KVC is a Class I Government
contractor registered with the Public Works Department (PWD)
Karnataka. The firm majorly does NH road works, underpass
construction for PWD. The proprietor also runs two hotels KVC
International in Mysore town and in KRS, Karnataka and has
experience of over 20 years in hotel industry.
KGP GOLD: CARE Lowers Rating on INR5cr LT Loan to 'C'
-----------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of KGP
Gold & Diamond (KGD), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank 5.00 CARE C; Stable; Issuer Not
Facilities Cooperating; Revised from
CARE B-; Stable; Issuer Not
Cooperating on the basis of
best available information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated March 22, 2019, placed the
rating of KGD under the 'issuer noncooperating' category as KGD had
failed to provide information for monitoring of the rating. KGD
continues to be noncooperative despite repeated requests for
submission of information through phone calls and emails dated
April 13, 2020 to April 17, 2020. In line with the extant SEBI
guidelines, CARE has reviewed the rating on the basis of the best
available information which however, in CARE's opinion is not
sufficient to arrive at a fair rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
Detailed description of the key rating drivers
At the time of last rating on March 22, 2019, the following were
the rating strengths and weaknesses considered:
Key Rating Weakness
* Proprietorship nature of constitution: KGDJ, being a
proprietorship firm, is exposed to inherent risk of the promoter's
capital being withdrawn at time of personal contingency and firm
being dissolved upon his death. Moreover, proprietorship firm
business has restricted avenues to raise capital which could prove
a hindrance to its growth.
* Risk towards project implementation and stabilization of
operations with financial closure yet to be achieved: The firm has
not achieved the financial closure for setting up its store at
Gangavati, Karnataka. The business operations of KGD shall begin
from April, 2018. The firm needs working capital requirement of
INR6.67 crore of which it has proposed to avail INR5 crore as a
bank borrowing. As on March 9, 2018, the firm has incurred total
expenditure of INR2 crore and the same has been funded by the
promoter's contribution. Further, stabilization of business
operations shall remain critical from credit perspective.
* Susceptibility of operating profitability to volatile gold
prices: Gold prices have exhibited sharp volatility depending up
on the demand & supply scenario and volatility in the foreign
currency exchange rates. Supply of gold is also being continuously
regulated by the Government of India (GOI) and Reserve Bank of
India (RBI) interventions. The volatility in the gold prices and
the regulatory controls has an impact on the margins of players in
the gems & jewellery industry. The changes in the gold prices could
also impact the profitability to the extent of KGD's inventory
holding which is very long.
* Presence in a highly competitive and fragmented Gems & Jewellery
(G&J) industry: The G&J industry is highly unorganized with
organized market accounting for a mere 5-6% of the jewellery retail
market. This is because of the buyers' preference and trust in
their neighborhood goldsmith. Even the standardization of designs
is not possible due to varying local tastes. Presence of large
number of small and big players in the retail jewellery market
leads to pressure on profitability. With many regional and national
jewellery retailers as well as hitherto jewellery manufacturers and
exporters lining up aggressive expansion plans, the competition is
expected to further intensify.
Key Rating Strengths
* Experienced promoter: Mr Ganesh D Shet, the proprietor of the
firm has more than two decades of experience in the jewellery
field. The firm also has two associate concerns, K.G.P Gold Palace
(reaffirmed CARE B; Stable on March 5, 2018) and K.G.P.Jewellers
(reaffirmed CARE B, Stable on March 05, 2018) which are also
involved in the similar line of business. Due to his long presence
in the market, the promoter enjoys long association and good
relations with the suppliers and customers.
* Increasing demand for gold and other precious stones: In 2017,
India's gold demand grew by 9.1 percent to 727 tonnes from 666
tonnes in 2016. The total jewellery demand in India for the year
was up by 12 percent at 562.7 tonnes, as compared to 504.5 tonnes
in 2016. Further, the demand for gold and other precious stones
rises during the festivals and other auspicious occasions round the
year. Looking ahead, the 2018 Budget confirmed various positive
initiatives for gold including the development of a comprehensive
policy and the creation of a gold exchange. Thus, with the
increasing demand for gold jewellery, KGDJ stands to gain growth in
the business in the coming years.
Gangavati based K.G.P.Gold and Diamond (KGD) is a proprietorship
concern established in 2018 by Mr Ganesh D Shet and is involved in
the retail trade of gold, diamond and other precious stones
jewelery. The firm also has two associate concerns – K.G.P Gold
Palace (reaffirmed CARE B-; Stable on February 24, 2020) and
K.G.P.Jewellers (reaffirmed CARE B-; Stable on February 24, 2020)
which are also involved in the similar line of business. The firm
intends to procure its raw materials from local market and
outsources its manufacturing activities on job work basis to
manufacturers in local markets.
KILBURN ENGINEERING: CARE Lowers Rating on INR95cr Loan to D
------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Kilburn Engineering Limited (KEL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 95.00 CARE D Revised from CARE B;
Facilities- Negative
Term Loan
Long-term Bank 25.00 CARE C Revised from CARE B;
Facilities– Negative
Cash Credit
Long-term/Short 75.00 CARE C/CARE A4 Revised from
term Bank CARE B; Negative/CARE A4
Facilities–
BG/LC
Detailed Rationale & Key Rating Drivers
The revision in rating of bank facilities is on account of delay in
servicing of its existing debt obligation.
Detailed description of the key rating drivers
Key Rating Weaknesses:
* Delay in servicing of debt obligations: There have been ongoing
delays in servicing of interest payment for the Term loans.
Incorporated on September 7, 1987, KEL is a Williamson Magor Group
Enterprise listed on Bombay Stock Exchange (BSE) and Calcutta Stock
Exchange (CSE). KEL manufactures drying systems, pneumatic handling
systems, heat exchangers, etc with specialized expertise in design,
engineering, manufacturing and installation of drying systems for
solids, liquids and gases. KEL caters to various industries ranging
from Chemicals, Petrochemicals to Food, Oil & Gas, Refinery, Power
Plants & Steel. KEL also provides services for erecting,
commissioning and annual maintenance of the equipment manufactured.
LEITWIND SHRIRAM: CARE Keeps 'D' Debt Ratings in Not Cooperating
----------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Leitwind
Shriram Manufacturing Private Limited (LSML) continues to remain in
the 'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 470.86 CARE D: Issuer not cooperating;
Facilities Based on best available
Information
Short-term Bank 162.01 CARE D: Issuer not cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated February 19, 2019, placed
the ratings of LSML under the 'issuer non-cooperating' category as
LSML had failed to provide information for monitoring of the
rating. LSML continues to be non-cooperative despite repeated
requests for submission of information through e-mails, phone calls
and a letter dated April 6, 2020. In line with the extant SEBI
guidelines, CARE has reviewed the rating on the basis of the best
available information which however, in CARE's opinion is not
sufficient to arrive at a fair rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above ratings.
The ratings take into account on-going delays in debt servicing by
LSML ascertained by CARE as a part of its due diligence exercise.
Detailed description of the key rating drivers
At the time of last rating on February 19, 2019, the following were
the rating strengths and weaknesses (updated for the information
available from ROC):
Key Rating Weaknesses
* Delays in debt servicing: CARE as a part of its due diligence
exercise interacts with various stakeholders of the company
including lenders to the company and as a part of its exercise
ascertained that there are on-going delays in debt servicing.
LSML is a joint venture between Shriram Group's SVL limited
[Formerly known as Shriram Industrial Holding Ltd. (SIHL)] and
Italy based Windfin BV, was incorporated to provide wind power
solution on turnkey basis. LSML is engaged in the manufacturing,
installation, commissioning of Wind Electric Generators (WEG),
creating infrastructure such as site development and proving power
evacuation facility for wind power projects, and their maintenance.
The company has a fully integrated manufacturing facility in
Chennai with a capacity of 144 WEG per annum and offers 1.5MW/1.8
MW WEG with different variants.
MAHAVIR FOODS: CARE Keeps D on INR22cr Loans in Not Cooperating
---------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Mahavir
Foods continues to remain in the 'Issuer Not Cooperating'
category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 7.00 CARE D: Issuer not cooperating;
Facilities Based on best available
Information
Short-term Bank 15.00 CARE D: Issuer not cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated February 8, 2019, placed the
ratings of Mahavir Foods under the 'issuer noncooperating' category
as the firm had failed to provide information for monitoring of the
rating. Mahavir Foods continues to be non-cooperative despite
repeated requests for submission of information through numerous
phone calls and emails dated April 16, 2020 and April 13, 2020. In
line with the extant SEBI guidelines, CARE has reviewed the rating
on the basis of the best available information which however, in
CARE's opinion is not sufficient to arrive at a fair rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above ratings.
Detailed description of the key rating drivers
At the time of last rating on February 8, 2019, the following were
the rating weaknesses:
Key Rating Weaknesses
The ratings take into account the ongoing delays in the servicing
of interest obligations due to stressed liquidity position.
Mahavir is a partnership concern established in 1998. Mr. Suresh
Kumar and Mr. Amit Kumar are the partners with equal profit sharing
ratio in the firm. The partners have two decades of experience in
processing of rice. The firm is engaged in the business of milling,
processing and trading of rice. The processing facility of the firm
is located at Taraori, Karnal (Haryana). The firm procures the raw
material (paddy) from Haryana, Uttar Pradesh and Punjab on cash or
advance basis. The firm is mainly focusing on the international
market especially to Middle East countries. The firm has a group
associate concern, SidhiVinayak Rice Mills engaged in milling and
processing of rice.
MUNIRAJ ENTERPRISE: CARE Lowers Rating on INR6.75cr Loan to D
-------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Muniraj Enterprise (MUE), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 6.75 CARE D Revised from
Facilities CARE B+; Stable
Detailed Rationale & Key Rating Drivers
The revision in the ratings assigned to the bank facilities of MUE
is primarily due to on-going delay in servicing its debt
obligations.
Detailed description of the key rating drivers
Key Rating Weaknesses
* Ongoing delays in debt servicing: MUE has been irregular in
servicing its term loan interest obligations for more than 30 days
due to weak liquidity position of the firm.
Liquidity Analysis: Poor
Liquidity position of MUE remained poor. There have been delays of
more than 30 days in its debt servicing. The bookings status of the
project and booking advances received remained low. Till August 31,
2019 MUE had sold 12 units and received booking for 49 units which
formed ~20% of total units for its 'Meena Bazar' project, while it
has received cumulatively proceeds worth INR1.70 crore against 90%
of cost incurred for 'Meena Bazar' reflecting low receipt of
advances against cost incurred and thereby reflecting high risk
associated with timely receipt of remaining booking advances.
Surat-based (Gujarat) MUE was established as a partnership firm in
2011 by five partners i.e. Mr Harish Patel, Mr Vivek Poddar, Mr
Mirang Shah, Mr Sushil Poddar and Mr Jayendra Patel. Later on, Mr
Jayendra Patel retired from firm and Mrs Nayna Shah, Mrs Rita
Morakhiya & Mrs Deepika Patel were added as partners. The firm is
engaged into the real estate activities. Currently, the firm is
executing a commercial project 'MEENA Bazaar' (RERA Registration
no. - PR/GJ/SURAT/SURAT CITY/SUDA/CAA03436/180918) consisting of
215 shops, 82 offices, 1 warehouse and 7 halls at Pal area of
Surat, Gujarat. The construction of said project started in May,
2015 with the (revised) total estimated cost of INR19.34 (Initial
total estimated cost was INR16.57 crore). The firm has incurred 90%
of total estimated cost till August 31, 2019. The firm has applied
for extensions of validity of RERA registration with Gujarat RERA
vide application no. PA/SURAT/SURATCITY/SUDA/190828/004171/A1.
MURALIKRISHNA INFRACON: CARE Keeps 'D' Ratings in Not Cooperating
-----------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of
Muralikrishna Infracon (Bangalore) Private Limited (MKI) continues
to remain in the 'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 23.50 CARE D: Issuer not cooperating;
Facilities Based on best available
Information
Short-term Bank 9.00 CARE D: Issuer not cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated April 1, 2019, placed the
rating of MKI under the 'issuer non-cooperating' category as the
company had failed to provide information for monitoring of the
rating. The company continues to be non-cooperative despite
repeated requests for submission of information through phone calls
and emails dated April 13, 2020 to April 17, 2020. In line with the
extant SEBI guidelines, CARE has reviewed the rating on the basis
of the best available information which however, in CARE's opinion
is not sufficient to arrive at a fair rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using
the above rating.
Detailed description of the key rating drivers
The ratings assigned to the bank facilities of Muralikrishna
Infracon (Bangalore) Private Limited (MIBPL) continue to remain
constrained by ongoing delays in meeting debt obligations.
Key Rating Weakness
* Ongoing delays in meeting debt obligations: The account has been
classified as Non-performing asset (NPA) since February 2019.
Key Rating Strengths
* Experienced promoters: Mr. M. Muralikrishna, the managing
director of MKI, has an experience of more than two decadesin the
construction industry. The company has completed projects like
construction of storm water drains and culverts, construction of
ground level reservoirs with drinking water hydrant, construction
of integrated omni bus stand in Madurai region and execution of six
laning road work in Kavali- Nellore section amongst others.
Muralikrishna Infracon (B) Private Limited (MKI), incorporated on
December 27, 2013, was formed by conversion of proprietary concern,
MK Builders & developers, operational since 2009, owned by
proprietor Mr M. Muralikrishna. The company is a Class 1 Government
contractor registered with PWD of Tamil Nadu. MKI mainly undertakes
construction of water drains, culverts, and sewage systems. The
company has also entered into laying of roads. The business
activities are majorly limited to Tamil Nadu region.
NAINITAL TARAI: CARE Lowers Rating on INR9.0cr LT Loan to 'B'
-------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Nainital Tarai Seeds Limited (NTS), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 9.00 CARE B; Issuer not cooperating;
Facilities Revised from CARE B+; Issuer
not cooperating; Based on best
available information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated November 02, 2017 placed the
rating of NTS under the 'issuer non-cooperating' category as NTS
had failed to provide information for monitoring of the rating. NTS
continues to be non-cooperative despite repeated requests for
submission of information through e-mails, phone calls and dated
March 28, 2020 and March 30, 2020. In line with the extant SEBI
guidelines, CARE has reviewed the rating on the basis of the best
available information which however, in CARE's opinion is not
sufficient to arrive at a fair rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating(s).
The rating has been revised taking into account non-availability of
information due to non-cooperation by Nainital Tarai Seeds Limited
with CARE'S efforts to undertake a review of the rating
outstanding. CARE views information availability risk as a key
factor in its assessment of credit risk.
Detailed description of the key rating drivers
At the time of last rating on January 28, 2019, the following were
the rating strengths and weaknesses:
Key Rating Weaknesses
* Below Average Financial Risk Profile: The scale of operations of
the company remained small. The small scale limits the company's
financial flexibility in times of stress and deprives it of scale
benefits. The profitability margin continues to remain low owing to
low value addition and its operation in a highly competitive nature
of industry. Further high financial charges restricted the net
profitability of the firm below unity The capital structure of the
firm stood leveraged on account of higher total debt as compared to
its net worth. The debt service coverage indicators of the company
continues to remain weak mainly on account of higher total debt and
low profitability.
* Working capital intensive nature of business: The business model
of NTS continues to entails high working capital requirement. The
company purchases breeder seeds (initial level or raw seeds) and
finally processes them into certified seeds which take a conversion
period of around three months. This requires the company to hold
the high inventory during the months April to December.
Consequently, it needs to rely majorly on working capital
borrowings to fund its day-do-day operations, thereby resulting in
higher utilization of working capital limit. The average fund based
working capital utilization remained almost full.
* Presence in Agro Cluster at Kashipur: NTS is favorably located
in the vicinity of major wheat growing areas of the country. Here
the company has easy access to raw material and also to farmers who
germinate seeds for NTS. Its presence in the region gives
additional advantage over the competitors in term of easy
availability of the raw material as well as favourable pricing
terms. Owing to its location, it is in a position to save on the
freight component of incoming of raw material and outgoing finished
goods.
Key Rating Strengths
* Experienced promoters: NTS is promoted by Mr Ajay Kumar Agarwal,
a post graduate having more than three decades of experience in
this industry. He is the current director of Kumaun Garhwal Chamber
of Commerce &Industries (KGCCI). He manages the
entire operations of the company.
Kashipur, Uttarakhand based Nainital Tarai Seeds Limited (NTS was
incorporated in January, 2007 by Mr. Ajay Agarwal, Mr. Priyanshu
Agarwal and Mrs. Priti Agarwal. The company is engaged in
processing and trading of wheat and paddy seeds. The company is
also engaged in milling and processing of paddy. NTS purchases the
breeder seeds (initial level or raw seeds) of wheat and paddy from
the state authorities or Agriculture Universities. These seeds are
sold to farmers for upgradation to foundation seeds. Foundation
seeds are then repurchased back from farmers for further
germination and for producing final seeds as per specifications of
State Certification Agency (for agriculture seed). Post
certification, these certified seeds are sold in packed form to
wholesalers and retailers in Uttar Pradesh, Bihar and West Bengal.
NTS sells these certified seeds under the brand name of 'NTS'.
OM COTTEX: CARE Keeps D on INR6cr Bank Loans in Not Cooperating
---------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Om Cottex
(OMC) continues to remain in the 'Issuer Not Cooperating'
category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 6.00 CARE D: Issuer not cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated February 20, 2019 placed the
ratings of OMC under the 'issuer noncooperating' category as OMC
had failed to provide information for monitoring of the ratings as
agreed to in its Rating Agreement. OMC continues to be
non-cooperative despite repeated requests for submission of
information through phone calls and emails dated April 08, 2020,
April 13, 2020, April 15, 2020 and April 20, 2020. In line with the
extant SEBI guidelines, CARE has reviewed the ratings on the basis
of the best available information which however, in CARE's opinion
is not sufficient to arrive at a fair rating. The ratings on OMC's
bank facilities will now be denoted as CARE D; ISSUER NOT
COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above ratings.
Detailed description of the key rating drivers
At the time of last rating done on February 20, 2019, the following
were the rating weaknesses:
Detailed description of key rating drivers
Key Rating Weaknesses
* Ongoing delays in debt servicing: OMC was irregular in servicing
its debt obligation due to weak liquidity position of the firm.
Botad (Gujarat) based Om Cottex (OMC) was established in 2008 as a
partnership firm. Currently, OMC is managed by six partners with
unequal profit and loss sharing agreement between them. OMC is into
the business of cotton ginning & pressing and crushing of cotton
seeds. While cotton bales are used in manufacturing of cotton yarn,
cotton seeds are further processed for extraction of edible oil.
OMC operates from its sole manufacturing facility located in Botad
(Gujarat) and has an installed capacity of 6,048 metric tons per
annum (MTPA) for cotton bales, 756 MTPA for cotton seed oil & 5,418
MTPA for cake as on March 31, 2016. OMC markets its products in the
states of Gujarat, Tamil Nadu and Maharashtra.
PANYAM CEMENTS: CARE Keeps D Debt Ratings in Not Cooperating
------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Panyam
Cements and Mineral Industries Limited (PCMIL) continues to remain
in the 'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 30.00 CARE D: Issuer not cooperating;
Facilities Based on best available
Information
Short-term Bank 9.32 CARE D: Issuer not cooperating;
Facilities Based on best available
Information
Non-Convertible 97.86 CARE D; Issuer not cooperating;
Debentures Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated December 26, 2018, placed
the rating(s) of PCMIL under the 'issuer non-cooperating' category
as PCMIL had failed to provide information for monitoring of the
rating as agreed to in its Rating Agreement. PCMIL continues to be
non-cooperative despite repeated requests for submission of
information through e-mails, phone calls and an email dated April
6, 2020 In line with the extant SEBI guidelines, CARE has reviewed
the rating on the basis of the best available information which
however, in CARE's opinion is not sufficient to arrive at a fair
rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating(s).
Detailed description of the key rating drivers
At the time of last rating in December 26, 2018 the following were
the rating strengths and weaknesses (updated from information
available from BSE and NCLT:
Key Rating Weaknesses
* Continued delays in debt servicing owing to weak liquidity
position: There are continued delays in debt servicing on account
of liquidity constraint. The company suspended operations from
December 2018 and continued to incur cash losses during FY19 which
has led to stretched liquidity position and consequently delays.
The same have also been mentioned in the audit report of the
company. The operating cycle for the company has deteriorated
further from 53 days in FY18 to 91 days in FY19, owing to stretched
collection period, which declined from 54 days in FY18 to 131 days
during FY19. Further, as on March 31, 2019, the company had cash
and bank balance of INR0.13 crore. Further, debenture trustee has
filed case against the company in NCLT.
* Significant decline in operations: The total operating revenue
(TOI) for the company reduced by 54.34% to INR82.28 crore during
FY19 from INR180.22 crore during FY18. Similarly, the company
incurred operating loss of INR14.70 crore during FY19 as against
PBILDT of INR11.54 crore during FY18. Along similar lines, the loss
levels of the company increased from INR31.44 crore during FY18 to
INR67.39 crore during FY10.
* Continued leveraged capital structure with further deterioration:
The capital structure of the company continues to remain
leveraged. The net worth of the company has completely eroded as in
March 31, 2019.
* Significant exposure to group companies: The company's exposure
towards group companies continues to remain high in the form of
equity, advances, Inter Corporate Deposits and also Corporate
Guarantees given for debt availed by group entities.
Key Rating Strengths
* Experienced promoters with long track record of operations in
diversified business: PCMIL belongs to Nandi Group of Industries,
which has presence in diversified businesses such as cements,
dairy, construction, PVC pipes, etc mainly in Andhra Pradesh. The
main promoter, Mr S.P.Y. Reddy (Chairman) has business experience
of more than three decades. The business operations of the group
have benefited from Mr. Reddy's long established track record in
different businesses and the vast industry network developed over
the years.
Panyam Cements &Mineral Industries Limited (PCMIL), incorporated in
June 1955, is part of Nandi Group of Industries based out of
Nandyal in Andhra Pradesh. PCMIL is currently engaged in
manufacturing of Ordinary Portland Cement (OPC) 53 grade & 43 grade
and Pozzolona Portland cement (PPC) with installed capacity of 1
million tons per annum (MTPA) at its manufacturing facilities
located at Kurnool District, Andhra Pradesh. PCMIL was acquired by
Nandi Group from its earlier promoters Mr. M. V. Subba Rao and
Associates during September 2004 when it was a sick company. Over
the years, Nandi Group has successfully revived the company and
furthermore, promoters have undertaken large modernization and
expansion projects to increase scale of operations and reduce
operational costs. Since 1978, the Nandi group has built a
diversified presence of businesses such as cement, dairy, PVC
pipes, construction, TMT bars etc.
RONGOGE MEGA: CARE Lowers Rating on INR12.07cr LT Loan to B+
------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Rongoge Mega Food Park Private Limited (RMFPPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 12.07 CARE B+; Stable; Revised from
Facilities CARE BB; Stable; ISSUER NOT
COOPERATING on the basis of
best available information.
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from RMFPPL to monitor the rating
vide e-mail communications/letters dated April 7, 2020, April 9,
2020, April 13, 2020 and numerous phone calls. However, despite
CARE's repeated requests, the entity has not provided the requisite
information for monitoring the ratings. In line with the extant
SEBI guidelines, CARE has reviewed the rating on the basis of the
publicly available information which however, in CARE's opinion is
not sufficient to arrive at a fair rating. The rating on RMFPPL's
bank facilities will now be denoted as CARE B+; Stable; ISSUER NOT
COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
The revision in the rating takes into account the non-availability
of information and no due diligence conducted due to
non-cooperation by Rongoge Mega Food Park Private Limited with
CARE'S efforts to undertake a periodic review of the rating
outstanding.
Detailed description of the key rating drivers
At the time of last rating in February 26, 2019 the following were
the rating strengths and weaknesses; (Updated the information
available from Ministry of Corporate Affairs).
Key Rating Weaknesses
* Project risk: RMFPPL has got the In-Principle Approval from
Ministry of Food Processing Industries (MFPI) for setting up of a
mega food park in the district of Papum Pare, Arunachal Pradesh
under a new central sector scheme as Pradhan Mantri Kisan SAMPAD
Yojana. The company has already prepared with all the necessary
documents to be submitted to the MFPI except bank sanction letter
along with bank appraisal report to get the final approval like
detailed project report, proof for possession of at least 50 acres
of land, proof for incorporation of the company, execution of share
subscription agreement, plan to fund the project, proof of
appointment of project management consultant etc. It is crucial for
the company to get the final approval from the Ministry after
fulfilment of certain conditions set by the Ministry. The proposed
site for the food park has 50 acres of leased land and the total
project cost is INR73.02 crore (excluding land cost) which is to
funded by government grant of INR50.00 crore, contribution by the
company of INR10.95 crore and term loan of INR12.07 crore. The
financial closure for the debt portion of the project is yet to be
tied up therefore project funding risk yet to be taken care off.
Since the project is into initial stage of implementation, the
project implementation risk also exits. Furthermore, as an anchor
investor of the project, the company has proposed to set up an
owned unit for aseptic pulping line having capacity of 4 metric
tonnes per hour with an aggregate cost of INR20.68 crore which will
be funded by the company promoters only. Moreover, the mega food
park is estimated to become operational by October 2020.
* Risk associated with lease out of the mega food park land to food
processors: Though, the company has received letter of intents
from various food processors like Cremica Food Industries Ltd., FIL
Industries Ltd., Ananda Group of Companies, etc., for taking the
land on lease for setting up food processing units in the mega food
park, the final tie up is yet to be happened. Therefore, going
forward, it is very crucial for the company to lease out its entire
leasable land of the mega food park in time.
Key Rating Strengths
* Resourceful and experienced promoters: The key promoter of
RMFPPL, Mr. Likha Maj (aged about 44 years), has more than a decade
of experience in agri food industry. Mr. Maj was a Member of
District Planning Committee, Govt. of Arunachal Pradesh, Lower
Subansari District in 2004, subsequently he became Chairman of
State Level Monitoring & Vigilance Committee, department of Food &
Civil Supplies, Govt. of Arunachal Pradesh in 2006, then he became
a Member of Consultative Committee, Food Corporation of India,
Govt. of India during 2009 to 2012 and finally he was a Chairman of
Arunachal Pradesh State Rubber Board during 2015 to 2016. Further
he has networth of INR302.98 crore as on September 17, 2017 and he
is also supported by other two Directors namely Mr. Likha Akash and
Likha Chada who are also having more than 4 years of experience in
the same line of business. Currently Mr. Likha Akash is having
networth of INR26.45 crore and Mr. Likha Chada is having networth
of INR5.36 crore as on September 17, 2017.
* Entitlement for Capital Grant from Ministry of Food Processing
Industries: As per the scheme, the company is entitled for capital
grant of 50.00% of the eligible project cost in general areas and
at the rate of 75% of the eligible project cost in difficult and
hilly areas i.e. North East Region including Sikkim, J&K, Himachal
Pradesh, Arunachal Pradesh etc. subject to a maximum of INR50.00
crore per project. Further as per the guidelines, the eligible
project cost is defined as total project cost which excludes cost
of land, pre-operative expenses, contingency and margin money for
working capital.
The total project cost of the company is INR73.02 crore (excluding
land cost) and out of which INR69.30 crore is eligible project
cost. So the company is entitled to get INR50.00 crore as capital
grant from the Ministry. The grant amount will be released in four
instalments with 30 months' time period and each instalment will be
released only after fulfilment of certain conditions set by the
Ministry.
Moreover director from Department of Industries, Government of
Arunachal Pradesh vide its letter dated September 15, 2017 has
conveyed that they will provide all the necessary support to the
proposed Mega Food Park project at Dolikoto Village, Banderdewa
Circle, Papum Pare District, Arunachal Pradesh.
* Strategic location of the mega food park: RMFPPL is setting up
of a mega food park in Papum Pare district of Arunachal Pradesh.
The proposed site has 50 acre of land and is located around 600
mtrs away from national highway 15, nearest railway station is
Harmuti which is 7 km away from site, nearest local markets are
Banderdeva, Harmuti, Nirjuli, Naharlagun, Akasdeep, North Lakhimpur
and Ganga markets which are 3 km, 7 km, 12 Km, 20 km, 30 km away
from the site. Therefore, the proposed site is well connected to
highway, railway and various markets for marketing its finished
products. Furthermore, with its diversified agro climatic
conditions, Arunachal Pradesh is a home for the production of
variety of agriculture and horticultural crops. Also the major
occupation of the population in the region is agro-based, so taking
into consideration its close proximity to raw material sources and
chip available of labour.
* Backward linkages: The strategies proposed by RMFPPL for driving
backward linkages are like contractual arrangements will be entered
into with Farmer Producer Organizations (FPOs) for necessary crops
ensuring interrupted supply of raw material, local growers will be
supported with saplings of horticultural plants with buy back
policy, procurement of raw material through mandis, agents, agri
business firms etc.
Incorporated on August 31, 2017, Rongoge Mega Food Park Private
Limited (RMFPPL) was promoted by Mr. Likha Maj, Mr. Likha Chada and
Mr. Likha Akash and its registered office is situated at Papum Pare
District of Arunachal Pradesh. RMFPPL has got In-Principle Approval
from Ministry of Food Processing Industries (MFPI) for setting up
of a mega food park in the district of Papum Pare, Arunachal
Pradesh under a new central sector scheme as Pradhan Mantri Kisan
SAMPAD Yojana. The primary objective of the scheme is to provide
state of art infrastructure facilities for the food processing,
storage facilities along with the comprehensive supply chain
facilities. The expected outcome is increased realization for
farmers, creation of high quality processing infrastructure,
reduction in wastage, capacity building of producers, processors
and creation of an efficient supply chain along with significant
direct and indirect employment generation.
Currently, the company has proposed to establish one Central
Processing Centre (CPC) at Papum Pare District of Arunachal Pradesh
and two Primary Processing Centres (PPC) one at Yachuli, Arunachal
Pradesh and another at Bhalukpong, Arunachal Pradesh. The core
processing infrastructure for CPC and PPC includes dry warehouse,
cold storages, manual sorting & grading line, individual quick
freezer (IQF), pre-processing line for IQF, blast freezer, boilers,
aseptic brick filling line and reefer vans. The proposed site for
the food park has 50 acres of land and the total project cost is
INR73.02 crore (excluding land cost) which is to funded by
government grant of INR50.00 crore, contribution by the company of
INR10.95 crore and term loan of INR12.07 crore. The financial
closure for the debt portion of the project is yet to be tied up.
However the company has already prepared with all the necessary
documents to be submitted to the MFPI to get the final approval
except bank sanction letter along with bank appraisal report and
the project is estimated to become operational by October 2020.
SADARAM JINING: CARE Keeps C in INR8.19cr Loans in Not Cooperating
------------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Sadaram
Jining and Pressing Industries (SJPI) continues to remain in the
'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 8.19 CARE D: Issuer not cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated February 14, 2019, placed
the rating of SJPI under the 'issuer non-cooperating' category as
SJPI had failed to provide information for monitoring of the rating
for the rating exercise as agreed to in its Rating Agreement. SJPI
continues to be non-cooperative despite repeated requests for
submission of information through e-mails, phone calls and an email
dated April 10, 2020, April 14, 2020 and April 15, 2020. In line
with the extant SEBI guidelines, CARE has reviewed the rating on
the basis of the best available information which however, in
CARE's opinion is not sufficient to arrive at a fair rating. The
ratings on SJPI's bank facilities will now be denoted as CARE D;
ISSUER NOT COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above ratings.
Detailed description of the key rating drivers
At the time of last rating on February 14, 2019 the following were
the rating strengths and weaknesses.
Key Rating Weaknesses
* Ongoing delay in debt servicing: SJPI has been irregular in
servicing its debt obligation due to weak liquidity position of the
firm.
SJPI Patan-Gujarat based partnership firm was established in 2014
by Mr. Bharat Bhatiya, Mr. Bhavesh Patel, Mr. Chandanji Thakor, Mr.
Dashrat Bhatiya and Mr. Mafa Modi. The firm is engaged in cotton
ginning and pressing of raw cotton. SJPI has commenced its
operation from August 2014. The manufacturing unit of the firm is
located in Patan, Gujarat which has an installed capacity of 14,400
Metric tonnes per annum (MTPA) as on March 31, 2016 for raw cotton
processing.
SAGA AUTOMOTIVE: CARE Keeps D on INR2.71cr Loans in Not Cooperating
-------------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Saga
Automotive (India) Private Limited (SAIPL) continues to remain in
the 'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 21.21 CARE D: Issuer not cooperating;
Facilities Based on best available
Information
Short-term Bank 0.50 CARE D: Issuer not cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated February 15, 2019, placed
the ratings of SAIPL under the 'issuer non-cooperating' category as
SAIPL had failed to provide information for monitoring of the
rating and had not paid the surveillance fees for the rating
exercise as agreed to in its Rating Agreement. SAIPL continues to
be noncooperative despite repeated requests for submission of
information through e-mails, phone calls and an email dated April
21, 2020. In line with the extant SEBI guidelines, CARE has
reviewed the rating on the basis of the best available information
which however, in CARE's opinion is not sufficient to arrive at a
fair rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
The rating continues to take into account delay in debt servicing
in the past.
Detailed description of the key rating drivers
At the time of last rating on February 18, 2020 the following were
the rating strengths and weaknesses:
Key rating weaknesses
* Irregularity in debt servicing: There were instances of delay in
debt servicing in the past. Further, as per records on MCA website
the company is under Corporate Insolvency Resolution Process.
Jaipur (Rajasthan) based Saga Automotive India Private Limited
(SAIPL) was incorporated in 2006 by Mr. Sanjay Maheshwari, Mrs.
Kanak Biyani, Mr. Harmeet Singh Anand and Mr. Naveen Maheshwari.
SAIPL is an authorised dealer of Skoda Auto India Private Limited
(Skoda) since the beginning of incorporation and currently, the
company operates four showrooms, two at Jaipur, one at Sikar and
Kota respectively and has two workshops at Jaipur and one at Kota.
The company has been awarded with respect to "Best Dealership",
"Most Fastest Dealer Award" etc in many a times in previous years.
It also has highest market share in Rajasthan for D-segment.
SAHDEV JEWELLERS: CARE Reaffirms 'D' Rating on INR38.20cr Loan
--------------------------------------------------------------
CARE Ratings reaffirmed ratings on certain bank facilities of
Sahdev Jewellers (SJW), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Short term Bank 13.20 CARE D; ISSUER NOT COOPERATING
Facilities Reaffirmed
(Fund Based)
Short term Bank 38.20 CARE D; ISSUER NOT COOPERATING
Facilities Reaffirmed
(Non-fund based)
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated February 15, 2019, placed
the ratings of SJW under the 'issuer noncooperating' category as
SJW had failed to provide information for monitoring of the rating.
SJW continues to be noncooperative despite repeated requests for
submission of information through e-mails, phone calls and a letter
dated April 14, 2020. In line with the extant SEBI guidelines, CARE
has reviewed the rating on the basis of the best available
information which however, in CARE's opinion is not sufficient to
arrive at a fair rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating(s).
The ratings assigned to the bank facilities of Sahdev Jewellers
(SJW) continue to take into account delays in debt servicing.
Detailed description of the key rating drivers
At the time of last rating on February 19, 2019 the following were
the rating strengths and weaknesses):
Key Rating Weaknesses
* Delays in the servicing of debt obligations: The weak financial
profile is marked by the delays in the servicing of debt
obligations in the PCFC account. The company had defaulted on the
debt servicing in the PCFC account and had LC devolvements.
Mr. Ravi Sahdev (son of Mr. Vasdev Sahdev) as partners. During
FY17, the constitution of the firm has been changed to a
proprietorship firm following demise of Mr. Vasdev Sahdev. The firm
is an export oriented unit and is engaged in manufacturing, trading
and export of plain gold Jewellery. The firm has a manufacturing
unit at SEZ (Special Economic Zone) in Noida, Uttar Pradesh and has
a wholesale outlet in Karol Bagh, Delhi.
SHIV PARVATI: CARE Lowers Rating on INR7cr LT Loan to 'B+'
----------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of Shiv
Parvati Solar Energy (SPSE), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long term Bank 7.00 CARE B+; Stable; Issuer Not
Facilities Cooperating; Revised from
CARE BB-; Stable; Issuer Not
Cooperating on the basis of
best available information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release March 26, 2019, placed the
rating(s) of SPSE under the 'issuer noncooperating' category as
SPSE had failed to provide information for monitoring of the
rating. SPSE continues to be noncooperative despite repeated
requests for submission of information through e-mails, phone calls
and email dated April 6, 2020 to April 13, 2020. In line with the
extant SEBI guidelines, CARE has reviewed the rating on the basis
of the best available information which however, in CARE's opinion
is not sufficient to arrive at a fair rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
Detailed description of the key rating drivers
At the last time of last press release dated March 26, 2019, the
following were the rating strengths and weaknesses:
Key Rating Weakness
* Limited experience of the promoter in solar industry and short
operational track: The firm has a short operational track record
as it was established in the year 2015 and the commercial
operations started from February 2017. Furthermore, the promoter
Mr. Ramappa Siddappa Talewad Jambgi has only a decade of experience
in solar business. However, the promoter has more than a decade of
experience in an unrelated business and has established good
contacts and business relations in the industry.
* Leveraged capital structure and weak debt coverage indicators:
The capital structure of the firm marked by overall gearing was
leveraged at 9.16x as on March 31, 2017 due to high debt levels
(the firm has availed a term loan of INR 6.26 crore in FY17). The
debt coverage indicators marked by interest coverage and TD/GCA
also stood weak at 1.98x and 51.08x as on March 31, 2017 due to low
PBILDT levels and gross cash accruals as a result of it being
initial year of operation.
* Operations exposed to climatic conditions and technological
risks: The firm has used poly-crystalline technology considering
that it has a proven history worldwide, suffers relatively lower
degradation and requires lesser land leading to reduction in
Balance of Systems cost. However, achievement of desired CUF going
forward would be subject to change in climatic conditions, amount
of degradation of modules as well as technological risks (limited
track record of solar technology in India).
Key Rating Strengths
* Achieved reasonable revenue and comfortable PBILDT margin within
1 month of operations: The firm has achieved total operating
income of INR0.25 crore in FY17 (for one month of operations) due
to achievement of satisfactory plant load factor (PLF) resulting in
generation of power and subsequent sale of electricity to Hubli
Electricity Supply Company Limited (HESCOM). The PBILDT margin
stood comfortable at 91.84% in FY17. However, being the first year
of operations, the firm has incurred a net loss of INR 0.26 crore
due to high depreciation provisions and financial expenses.
Furthermore, the company achieved revenue of INR1.42 crore in
11MFY18 (refers to the period April 2017- February 2018).
* Long term power purchase agreement (PPA) with HESCOM: The firm
has long term power purchase agreement with Hubli Electricity
Supply Company Limited (HESCOM) for 25 years at an average sales
realization of INR 8.40 per unit. Presence in the niche segment and
the long tenure of agreement is likely to benefit the firm at
large.
* Established solar panel and inverter supplier: The firm has
imported the solar panel from Hanwha Q Cells Company Limited (South
Korea). Hanwha Q Cells is one of the wellknown brands in
photovoltaic ("PV") modules, solutions, and services. SPSE has
purchased the inverter and tracker from ABB India Limited (ABB).
ABB is one of the India's largest integrated power equipment
manufacturers and has been operational for more than 7 decades.
* Positive outlook of renewable power industry: 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. The major
drivers for the growth in solar capacity addition have been various
government initiatives and policies including feed in- tariffs and
renewable purchase obligations (RPO), decline in equipment cost
over the years, technological advancement, shorter implementation
schedules and lower fuel availability risks as compared with
conventional sources of energy. Owing to improving
cost-competitiveness of solar power coupled with favourable policy
support from both central and state governments, the long-term
demand outlook for renewable power sector look positive.
Shiv Parvati Solar Energy (SPSE) was established in 2015 as a
proprietorship concern at Mudhol, Karnataka by Mr. Ramappa Siddappa
Talewad Jambgi. The company has set-up a 1 MW solar photovoltaic
(PV) power plant located in Jambagi K D village, Bagalkot district
of Karnataka. The project achieved commercial operational from
February, 2017.
SHIVALIK VYAPAAR: CARE Keeps C on INR9cr Loans in Not Cooperating
-----------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Shivalik
Vyapaar Private Limited (SVPL) continues to remain in the 'Issuer
Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 9.00 CARE C: Issuer not cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated March 14, 2019, placed the
rating(s) of SVPL under the 'Issuer not Cooperating' category as
SVPL had failed to provide information for monitoring of the rating
and had not paid the surveillance fees for the rating exercise as
agreed to in its rating agreement. SVPL continues to be
non-cooperative despite repeated requests for submission of
information through e-mails, phone calls and an email dated April
22, 2020. In line with the extant SEBI guidelines, CARE has
reviewed the rating on the basis of the best available information
which however, in CARE's opinion is not sufficient to arrive at a
fair rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating(s).
The rating assigned to the bank facilities of SVPL continue to
remain constrained on account of fluctuating total operating income
along with continuous net and cash losses, weak solvency position
and stressed liquidity. The rating, further, continues to remain
constrained on account of its presence in competitive and
fragmented nature of industry along with vulnerability to
fluctuation in raw material prices. The rating, however, continues
to remain favourable on account of experienced management.
Detailed description of the key rating drivers
At the time of last rating on March 14, 2019, the following were
the rating strengths and weaknesses:
Key Rating Weaknesses
* Fluctuating total operating income along with continuous net and
cash losses, weak solvency position: Total Operating Income of
SVPL has shown increasing trend over the past three financial years
ended FY18 owing to its presence in a competitive industry. During
FY18, TOI of the company improved by 32.21% over FY17 due to higher
increase in sales of manufactured goods. PBILDT margin of the
company stood comfortable at 9.60% in FY18, improved by 691 bps
over FY17 mainly due to decline in consumable stores and power
power and fuel expenses. However, the company has registered
continuous net loss and cash loss in last three financial years
ended FY18 mainly on account of higher depreciation and interest
and finance cost. The capital structure of the company stood
leveraged marked by overall gearing at 2.72 times as on March 31,
2018, deteriorated from 2.34 times as on March 31, 2017 mainly on
account of continuous losses in the company. However, the repayment
of term loan is done by infusion of unsecured loans from the
related parties. Further, the debt coverage indicators stood weak
with total debt to GCA at 95.64 times in FY18 mainly on account of
low gross cash accruals couples with higher debt.
* Stressed liquidity position: The company gets the payment from
customers around 4-5 months and makes the payment to its suppliers
within 5-6 months. The company maintains inventory of 8-8.5months
due to higher value addition in the product. Due to higher
inventory holding, current ratio of the company stood at 1.20 times
whereas quick ratio remained at below unity level at 0.47 times as
on March 31, 2018.
* Competitive and fragmented nature of industry along with
vulnerability to fluctuation in raw material prices: The company
is engaged in the trading of steel and aluminium scrap where many
players are operating in the same business with many unorganized
players and few organized players. Further, the profitability
margins of the company remain lower due to trading nature of
operations and its inability to pass on rise in prices to its
customers due to highly fragmented and competitive nature of the
industry. The prices of scrape have exhibited volatile trend in the
past and same volatility is expected to continue in future on
account of domestic and international demand scenario.
Key rating strengths
* Experienced management: Mr. Rajendra Agrawal, director has wide
experience of more than two decade in the auto component industry
and looks after overall affairs of the company. He is assisted by
his son, Mr. Goldi Agrawal who has experience of 7 years in the
auto component industry. Due to longstanding presence in the
industry, the promoters of the company have established better
relations with customers and suppliers.
Indore (Madhya Pradesh) based Shivalik Vyapaar Private Limited
(SVPL) was incorporated in 2006 by Mr. Rajendra Agrawal along with
his family members. SVPL is engaged in the business of
manufacturing of batteries and lead. The manufacturing unit of the
company is located around Indore with total installed capacity of
45 lakh batteries and 3250 Metric Ton Per Annum (MTPA) of lead as
on March 31, 2017. The company procure raw material from local
market. The company markets its product under the brand name of
"Copro". SVPL sells its products in Maharashtra, Gujarat,
Hyderabad, Delhi, Kolkata and Uttar Pradesh. The company is also
engaged in the business of trading of batteries which it procures
from local markets.
SHREEJI SALES: CARE Keeps D on INR5.49cr Loan in Not Cooperating
----------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Shreeji
Sales Corporation (SSC) continues to remain in the 'Issuer Not
Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 5.49 CARE D: Issuer not cooperating;
Facilities Based on best available
Information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated February 27, 2019 placed the
ratings of SSC under the 'issuer non-cooperating' category as SSC
had failed to provide information for monitoring of the ratings as
agreed to in its Rating Agreement. SSC continues to be
non-cooperative despite repeated requests for submission of
information through phone calls and emails dated April 08, 2020,
April 13, 2020, April 15, 2020 and April 20, 2020. In line with the
extant SEBI guidelines, CARE has reviewed the ratings on the basis
of the best available information which however, in CARE's opinion
is not sufficient to arrive at a fair rating. The ratings on SSC's
bank facilities will now be denoted as CARE D; ISSUER NOT
COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above ratings.
Detailed description of the key rating drivers
At the time of last rating done on February 27, 2019 the following
were the rating weaknesses:
Detailed description of key rating drivers
Key Rating Weaknesses
* Ongoing delays in debt servicing: SSC was irregular in servicing
principal and interest obligations of term loan obligation due to
weak liquidity position of the company.
SSC was established as proprietorship firm in 2012 by Mr Bharat
Shah. SSC was established for trading of di-calcium phosphate and
mono-calcium phosphate. SSC is recently completed project of
manufacturing di-calcium phosphate and mono-calcium phosphate from
raw phosphate instead of trading with total project cost of INR
4.64 crore. The plant is located at Vadodara (Gujarat) with area of
1 lakh sq. ft. with an installed capacity of 300 tonnes per month.
SHUBH PLY: CARE Assigns 'D' Ratings to INR14.5cr Bank Loans
-----------------------------------------------------------
CARE Ratings has assigned rating to the bank facilities of Shubh
Ply & Veneers Private Limited (SPVL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 8.40 CARE D Assigned
Facilities
Short Term Bank
Facilities 6.10 CARE D Assigned
Detailed Rationale & Key Rating Drivers
The ratings assigned to the bank facilities of SPVL are primarily
constrained on account of ongoing delays in its debt servicing.
Rating Sensitivities
Positive Factors
* Establishing clear repayment track record for consecutive three
months
Detailed description of the key rating drivers
Key Rating Weaknesses
* On-going delays in debt servicing: There are on-going delays in
debt servicing due to poor liquidity position of the company.
Liquidity: Poor
Liquidity of SPVL remained poor marked by negative cash flow from
operating activities of INR1.02 crore during FY19 as well as
negligible level of unencumbered cash and bank balance as on March
31, 2019. Further, operating cycle of SPVL elongated to 267 days
during FY19 as against 86 days during FY18 on account of
significant increase in average collection period as well as
inventory period. As a result, average utilization of working
capital facilities remained full during previous twelve months
ended in March, 2020. The company does not have sufficient
liquidity to service its debt obligations.
Gandhidham (Gujarat) based Shubh Ply and Veneers Private Limited
(SPVPL) was incorporated in 2007 as a private limited company by
Mr. Mohanlal Lalwani and family and is engaged into manufacturing
and trading of plywood, block board, flush doors and veneers with
installed capacity of 6,000 National Area per Day for plywood, 700
Square Meters per Day for Veneers and 6000 National Area per Day
for Block Boards.
T. R. POLY PET: CARE Keeps D on INR5.26cr Loans in Not Cooperating
------------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of T. R. Poly
Pet Industries (TRPP) continues to remain in the 'Issuer Not
Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 4.86 CARE D; Issuer not cooperating;
Facilities Based on best available
information
Short-term Bank 0.40 CARE D; Issuer not cooperating;
Facilities Based on best available
information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated January 31, 2019, placed the
rating(s) of TRPP under the 'issuer non-cooperating' category as
TRPP had failed to provide information for monitoring of the
rating. TRPP continues to be non-cooperative despite repeated
requests for submission of information through e-mails, phone calls
and a letter/email dated March 28, 2020, March 30, 2020. In line
with the extant SEBI guidelines, CARE has reviewed the rating on
the basis of the best available information which however, in
CARE's opinion is not sufficient to arrive at a fair rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating(s).
The ratings have been reaffirmed on account of ongoing delays in
meeting the debt obligations.
Detailed description of the key rating drivers
At the time of last rating on January 31, 2019, the following were
the rating strengths and weaknesses:
* Delays in servicing of debt obligation: There are ongoing delays
in debt servicing due to stretched liquidity position.
Lucknow (Uttar Pradesh) based TRPP was established in 2009 by Mr
Chandra Shekhar Verma as a proprietorship concern. The firm is
engaged in manufacturing of pet preform and jar with an installed
capacity of 8 tonnes Pet preform per day at its manufacturing
facility located in Barabanki (Uttar Pradesh). It caters to the
packaging needs of distillery, beverages, FMCG, pharmaceuticals and
others. TRPP procures raw material majorly from Uttar Pradesh and
Gujarat. It majorly sells its products in Northern India.
UDIPTA ENERGY: CARE Lowers Rating on INR22.50cr Loan to 'D'
-----------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Udipta Energy and Equipment Private Limited (UEEPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 22.50 CARE D; Stable; Revised from
Facilities CARE BB+; Stable
Short-term Bank
Facilities 13.00 CARE D Revised from CARE A4+
Detailed Rationale & Key Rating Drivers
The revision in the ratings assigned to the bank facilities of
UEEPL takes into account the recent delay in term debt servicing of
the company owing to cash flow mismatch.
Rating Sensitivities
Positive Factors
* Track record of timely servicing of debt obligations for at least
90 days.
* Sustained improvement in financial risk profile, especially
liquidity.
Detailed description of the key rating drivers
Key Rating Weaknesses
* Delays in debt servicing: There was a recent instance of delay
in term debt servicing owing to cash flow mismatch which has
resulted into poor liquidity of the company.
Liquidity Indicator
Liquidity: Poor - Poor liquidity as reflected by delay in debt
servicing of the company. This could constrain the ability of the
company to repay its debt obligations on a timely basis.
Udipta Energy & Equipment Private Limited (UEPL) was incorporated
in 2002 by Mr. Sanjib Kakaty and Mrs Manisha Kakaty based out of
Sivasagar, Assam for carrying out the business of servicing
activities incidental to oil and gas extraction. The company is
engaged in providing oil and gas field service activities like
directional drilling, drilling fluid services, services with mobile
rigs, mud engineering services, operations & maintenance services
for nitrogen pumping units, coil tubing units, hot coil circulation
units, drilling tool and tubular supplies, non-destructive testing
of tubing and drill string components & other service activities on
contract basis for Oil and Natural Gas Corporation Limited, Oil
India Limited, GAIL (India) Limited, etc. However, in a bid to
diversify its revenue stream and to take advantage of the growing
demand of solar power, UEPL has ventured into solar PV segment
also. The company has already set up and commenced operations of a
5 MW grid connected solar power plant at Banka, Bihar. The company
has entered into a Power Purchase Agreement (PPA) with North Bihar
Power Distribution Company Ltd. (NBPDCL) and South Bihar Power
Distribution Company Ltd. (SBPDCL) for tenure of 25 years from the
date of its commercial operations i.e. April 2017. NBPDCL and
SBPDCL undertake to pay tariff of INR7.98 per KWh (Kilowatt hour)
for all the energy supplied at the Delivery Point corresponding to
Contracted Capacity. Both NBPDCL and SBPDC are the subsidiaries of
Bihar State Power (Holding) Company Limited (BSPHCL).
The company has entered into a joint venture with SARL Algeria
Environment Services Aux Puits (SARL-AESP) for participation in
tenders and execution of mud engineering and drilling fluid
services in Algeria. The aggrement is for 10 years with effect from
June 2017 and profit sharing ratio is decided at 51%-SARL-AESP and
49% of UEPL.
VISHAL AROGYA: CARE Lowers Rating on INR30cr LT Loan to B+
----------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Vishal Arogya Sampat Private limited (VASPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term Bank 30.00 CARE B+; Stable; ISSUER NOT
Facilities COOPERATING; Revised from
CARE BB-; Stable on the basis
of best available information
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated December 27, 2018, placed
the ratings of VASPL under the 'issuer non-cooperating' category as
VASPL had failed to provide information for monitoring of the
rating. VASPL continues to be non-cooperative despite repeated
requests for submission of information through e-mails, phone calls
and a letter/email dated April 2, 2020 and April 17, 2020. In line
with the extant SEBI guidelines, CARE has reviewed the rating on
the basis of the best available information which however, in
CARE's opinion is not sufficient to arrive at a fair rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
The rating have been revised on account of decline in revenue and
profit margin during the period FY17-19 (FY refers to the period
April 1 to March 31). The rating continues to factor in low profit
margins associated with trading nature of business, leveraged
capital structure with weak debt coverage ratios, working capital
intensive nature of the business and highly fragmented and
competitive industry. The ratings also take cognizance of
experience of the promoters, diversified product portfolio and the
company being sole distributor for sale of products of Patanjali
Ayurvedic Limited in States of Andhra Pradesh (A.P.) and
Telangana.
Detailed description of the key rating drivers
At the time of last rating in December 2018, the following were the
rating strengths and weaknesses (updated for the information
available from Registrar of Companies):
Key rating weakness:
* Low profit margins: The company is engaged in distributorship
business wherein the profit margins are relatively low due to low
value additive nature of business. As the margins on products are
set by Patanjali Ayurved Limited, it restricts the company to earn
incremental income. Consequently, the PBILDT margin has been thin
at 2.89% in FY17 and continued to remain thin during FY18 & FY19.
* Highly leveraged capital structure and weak debt coverage ratios:
The capital structure of the company remains highly leveraged with
overall gearing ratio at 6.61x as on March 31, 2017 (6.60x as on
March 31, 2016). While it improved to 3.76x as on March 31, 2019,
it continues to remain leveraged. The other debt coverage
indicators also weakened over the last three years.
* Working capital intensive nature of the business: The company
operates in a working capital intensive industry wherein the
requirement of working capital is high. The company on an average
has inventory days of about 45-50 days. The credit period availed
from Patanjali Ayurved Limited is relatively low which along with
requirement of maintaining an adequate level of inventory results
in high operating cycle. The average working capital utilization
has been at about 80% in the last 12 months ended August 2017.
* Intense competition in the segment: The distributorship business
in FMCG industry has low entry barriers and is also highly
competitive due to presence of innumerable unorganized players in
the Industry. But the aggressive marketing strategies and brand
potential of FMCG companies is likely to have a positive impact on
the distribution business of FMCG sector.
Key rating strengths:
* Experienced promoters: VASLP has been promoted by Mr. Sridhar
Rao and Ms. G. Anuroopa. Mr. G. Sridhar Rao, Managing Director of
the company is a Civil Engineer and has about 19 years of
experience in construction industry. Another promoter, Ms. G.
Anuroopa also has an experience of about 10 years in administration
and operation works of the company.
* Exclusive distributorship of Patanjali products in states of
Andhra Pradesh and Telangana: The company is the exclusive
distributor (Super Distributor) for Patanjali products in Andhra
Pradesh and Telangana. Therefore, the company faces minimal
competition in distribution of Patanjali products to the whole sale
traders. The company directly procures the products from Patanjali
Ayurved Limited (PAL) and distributes it to more than 700
sub-distributors (400 sub-distributors in FY16) in the state of
Andhra Pradesh and Telangana. Significant increase in the revenue
during FY17: The company has achieved a revenue growth of about 72%
during FY17 to INR233.86 crore. In line with the revenue, the
PBILDT level also almost doubled to INR6.7 crore in FY17. However,
the financial performance weakened during FY18 with reduced revenue
and profit. While it rebounded in FY19, the PAT level has witnessed
continuous decline.
Vishal Arogya Sampat Private Limited (VASPL), originally
incorporated as a partnership firm under the name Vishal Arogya
Sampat (during October, 2009) was converted into a private limited
company incorporated on October 25, 2015 and its name was changed
to present nomenclature. The company has been promoted by Mr.
Sridhar Rao (Managing Director) and Ms. G. Anuroopa. VASPL is
engaged in distribution of food products, health care products as
well as personal care and house hold products. The company is sole
distributor of products of Patanjali Ayurvedic Limited (PAL), Divya
Pharmacy and Divya Yog Mandir (Trust) in Andhra Pradesh and
Telangana. There has been increasing demand for PAL products in
both rural as well as urban areas.
=================
I N D O N E S I A
=================
MASKAPAI REASURANSI: Fitch Affirms BB+ IFS Rating, Outlook Stable
-----------------------------------------------------------------
Fitch Ratings has affirmed PT Maskapai Reasuransi Indonesia Tbk's
Insurer Financial Strength Rating at 'BB+' (Moderately Weak). Fitch
Ratings Indonesia has also affirmed the company's National IFS
Rating of 'AA-(idn)'. The Outlooks are Stable.
'AA' National IFS Ratings denote a very strong capacity to meet
policyholder obligations relative to all other obligations or
issuers in the same country or monetary union, across all
industries and obligation types.
KEY RATING DRIVERS
The rating actions are based on Fitch's current assessment of the
impact of the coronavirus pandemic, including its economic impact,
under a set of rating assumptions. These assumptions were used by
Fitch to develop pro forma financial metrics for Marein that Fitch
compared with both the rating guidelines defined in its criteria
and the previously established rating sensitivities for Marein.
The affirmation reflects Marein's 'Strong' capitalisation, 'Strong'
financial performance and 'Moderate' business profile.
Marein's 'Strong' capitalisation is measured by the company's
risk-based capital ratio of 342% at end-December 2019 (2018: 364%),
which comfortably exceeded the 120% regulatory requirement. Fitch
expects Marein's pro forma capitalisation to be commensurate with
its rating category.
Fitch believes the company's premium growth will be dampened by the
economic downturn caused by the pandemic, although its pro forma
combined ratio and return on equity will remain well above its
rating category under its rating assumptions. Marein's ROE was 12%
at end-2019 (2018: 10%). The non-life combined ratio was 93% at
end-2019 with a three-year average of 95% underpinned by its
selective underwriting practices, premium growth and manageable
claims.
Fitch has assessed Marein's business profile as 'Moderate' due to
its substantive domestic franchise, which is balanced by its 'Least
Favourable' operating scale compared with its international peers.
It also takes into account a risk appetite that is on a par with
the sector and somewhat diversified business lines. Therefore,
Fitch scores Marein's business profile at 'bb-' under its
credit-factor scoring guidelines in line with the ranking.
The company's investment mix is conservative with cash equivalents
and fixed-income instruments accounting for more than 80% of
invested assets at end-2019. Exposure to risky assets is manageable
relative to equity capital. Fitch expects the company to maintain
the equity capital proportion in light of its prudent investment
approach.
Assumptions for Coronavirus Impact (Rating Case):
Fitch used the following key assumptions, which are designed to
identify areas of vulnerability, in support of the pro forma rating
analysis:
- Decline in key stock market indices by 35% relative to January
1, 2020.
- Increase in two-year cumulative high-yield bond default rate to
16%, applied to current non-investment-grade assets, as well as 12%
of 'BBB' assets.
- Both upward and downward pressure on interest rates, with
spreads widening (including high yield by 400 basis points) coupled
with notable declines in government rates.
- Capital-market access is limited for issuers at senior debt
levels of BBB and below.
- A COVID-19 infection rate of 5% and a mortality rate (as a
percentage of infected) of 1%.
- For the non-life and reinsurance sectors, a negative impact on
the industry-level accident-year loss ratio from COVID-19-related
claims at 3.5 percentage points, partially offset by a favourable
impact from the auto line averaging 1.5 percentage points.
RATING SENSITIVITIES
The ratings remain sensitive to any material change in Fitch's
rating case assumptions with respect to the coronavirus pandemic.
Periodic updates to its assumptions are possible given the rapid
changes in government action in response to the pandemic, and the
pace with which new information is available on the medical aspects
of the outbreak.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
IFS and National IFS Ratings:
- A material adverse change in Fitch's ratings assumptions with
respect to the coronavirus impact.
- Weakening capitalisation with the local statutory ratio below
200% on a sustained basis.
- Material deterioration in business profile in term of marketing
franchise and operating scale.
- Significant deterioration in operating performance with a
non-life combined ratio consistently higher than 100%.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
IFS and National IFS Ratings:
- A material positive change in Fitch's ratings assumptions with
respect to the coronavirus impact.
- A positive rating action is prefaced by Fitch's ability to
reliably forecast the impact of the coronavirus pandemic on the
financial profile of both the Indonesian reinsurance industry and
Marein.
- Significant and sustained improvement in the company's business
profile in terms of operating scale
- Maintaining strong profitability, with a non-life combined
ratio consistently below 93%
Stress Case Sensitivity Analysis
- Fitch's stress case assumes a 60% stock market decline,
two-year cumulative high-yield bond default rate of 22%, high-yield
bond spreads widening by 600 basis points and more prolonged
declines in government rates, heightened pressure on capital-market
access, a COVID-19 infection rate of 15% and mortality rate of
0.75%, an adverse non-life industry-level loss ratio impact of 7
percentage points for COVID-19 claims partially offset by a
favourable 2 points for motor, and decline in the value of
investment property and mortgages by 16.5%.
- The implied rating impact under the stress case would be a
downgrade of no more than one notch.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
REASURANSI NASIONAL: Fitch Affirms BB+ IFS Rating, Outlook Stable
-----------------------------------------------------------------
Fitch Ratings has affirmed PT Reasuransi Nasional Indonesia's
Insurer Financial Strength Rating at 'BB+' (Moderately Weak). At
the same time, Fitch Ratings Indonesia has affirmed the National
IFS Rating at 'AA-(idn)'. The Outlooks are Stable.
'AA' National IFS Ratings denote a very strong capacity to meet
policyholder obligations relative to all other obligations or
issuers in the same country, across all industries and obligation
types.
KEY RATING DRIVERS
The affirmations are based on Fitch's current assessment of the
impact of the coronavirus pandemic, including its economic impact,
under a set of ratings assumptions. These assumptions were used by
Fitch to develop pro forma financial metrics for NasionalRe that
Fitch compared with both ratings guidelines defined in its
criteria, and relative to previously established rating
sensitivities for NasionalRe.
The affirmations reflect the company's 'Strong' financial
performance, 'Favourable' business profile and 'Moderately Weak'
capitalisation.
Fitch sees NasionalRe's financial performance as 'Strong'.
Underwriting performance has been sound, with a combined ratio of
below 95% for the last three years. In addition, the company's
return on equity was 20% at end-2019 (2018: 17%). Fitch expects the
pandemic-driven economic downturn to dampen premium growth,
nonetheless, the pro forma combined ratio should align with the
median range for NasionalRe's rating category under its rating
assumptions.
NasionalRe's regulatory risk-based capital ratio was 207% at
end-2019 (2018: 182%), well in excess of the 120% regulatory
minimum. Fitch views NasionalRe's pro forma capitalisation to be
commensurate with its rating category. Fitch also expects
NasionalRe to improve its capital position to keep up with its
business expansion and ensure sufficient capital buffers against
adverse shocks.
NasionalRe's rating reflects its 'Favourable' business profile
compared with that of all other reinsurance companies in Indonesia
due to its leading business franchise, a business risk profile that
is on a par with the sector and diverse business lines. Therefore,
Fitch scores NasionalRe's business profile at 'bb+' under its
credit-factor scoring guidelines.
NasionalRe's investment mix is prudent and liquid, with cash
equivalents and fixed-income instruments accounting for more than
half of its invested assets at end-2019. Exposure to risky assets
remained low relative to capitalisation.
The company uses mainly excess-of-loss treaties to mitigate
catastrophe exposure and regularly monitors its risk accumulation.
The reinsurer also periodically collaborates with external brokers
to assess its catastrophe exposure through various modelling tools.
Its retrocession is adequate to cover its aggregate probable
maximum loss for a return period of more than 250 years.
Assumptions for Coronavirus Impact (Rating Case):
Fitch used the following key assumptions, which are designed to
identify areas of vulnerability, in support of the pro forma
ratings analysis:
-- Decline in key stock market indices by 35% relative to January
1, 2020.
-- Increase in the two-year cumulative high-yield bond default
rate to 16%, applied to current non-investment grade assets and to
12% of 'BBB' assets.
-- Both upward and downward pressure on interest rates, with
spreads widening (including high-yield by 400 basis points),
coupled with notable declines in government rates.
-- Capital markets access is limited for issuers at senior debt
levels of 'BBB' and below.
-- A COVID-19 infection rate of 5% and a mortality rate (as a
percent of those infected) of 1%.
-- For the non-life and reinsurance sectors, a negative impact on
the industry-level accident year loss ratio from COVID-19-related
claims at 3.5 percentage points, partially offset by a favorable
impact from the auto line averaging at 1.5 percentage points.
RATING SENSITIVITIES
The ratings remain sensitive to any material change in Fitch's
rating-case assumptions with respect to the coronavirus pandemic.
Periodic updates to its assumptions are possible given the rapid
pace of changes in government actions in response to the pandemic,
and the pace with which new information is available on the medical
aspects of the outbreak.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
IFS and National IFS Ratings:
- A material adverse change in Fitch's ratings assumptions with
respect to the impact of the coronavirus pandemic.
- Significant deterioration in capitalisation, with a regulatory
risk-based capital ratio persistently below 160%.
- A weakening business profile in terms of market franchise and
operating scale.
- Significant deterioration in operating performance, with a
non-life combined ratio above 105% over a prolonged period.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
IFS and National IFS Ratings
- A material positive change in Fitch's ratings-assumptions with
respect to the impact of the coronavirus pandemic.
- A positive rating action that is prefaced by Fitch's ability to
reliably forecast the impact of the coronavirus pandemic on the
financial profile of both the Indonesia reinsurance industry and
NasionalRe.
- Sustained improvement in NasionalRe's capitalisation, with its
regulatory risk-based capital ratio consistently above 200%.
- Maintenance of NasionalRe's business profile, including market
position and further diversification.
- Maintaining operating performance, with a non-life combined
ratio consistently below 93%.
Stress Case Sensitivity Analysis
Fitch's stress case assumes a 60% stock market decline, a two-year
cumulative high-yield bond default rate of 22%, high-yield bond
spreads widening by 600 basis points and prolonged declines in
government rates, heightened pressure on capital markets access, a
COVID-19 infection rate of 15% and a mortality rate of 0.75%, an
adverse non-life industry-level loss ratio impact of 7 percentage
points for COVID-19 claims, partially offset by a favorable 2
percentage points for motor, and a decline in the value of
investment property and mortgages of 16.5%.
The implied rating impact under the stress case would be a
downgrade of no more than one notch.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
NasionalRe has an ESG relevance score of 4 for exposure to
environmental impact, as the company sources most of its premium
income from the domestic market. Indonesia is geographically
widespread and faces multiple hazards, including flooding,
earthquakes, landslides, tsunamis and volcanoes, which could
negatively affect NasionalRe's credit profile and are relevant to
the ratings in conjunction with other factors.
Except for the matters discussed, the highest level of ESG credit
relevance, if present, is a score of 3. This means ESG issues are
credit-neutral or have only a minimal credit impact on the
entity(ies), either due to their nature or to the way in which they
are being managed by the entity(ies).
=====================
N E W Z E A L A N D
=====================
FIRST INSURANCE: Fitch Affirms BB+ IFS Rating, Outlook Stable
-------------------------------------------------------------
Fitch Ratings has affirmed New Zealand-based First Insurance
Limited's Insurer Financial Strength Rating at 'BB+' (Moderately
Weak). The Outlook is Stable.
KEY RATING DRIVERS
The affirmation is based on Fitch's current assessment of the
impact of the coronavirus pandemic, including its economic impact,
under a set of ratings assumptions. These assumptions were used by
Fitch to develop pro forma financial metrics for FIL that Fitch
compared with the ratings guidelines defined in its criteria and
relative to previously established rating sensitivities for FIL.
The affirmation reflects FIL's 'Less Favourable' business profile
and 'Good' capitalisation and leverage. FIL's rating also
incorporates operational benefits it receives from being fully
owned by First Credit Union (FCU, BB/Stable).
Fitch expects pro forma profitability to somewhat moderate as a
result of the pandemic-driven economic downturn under its rating
assumptions. FIL could see a spike in redundancy and disability
claims stemming from its loan protection insurance portfolio.
However, Fitch does not expect pro forma losses to be of a
magnitude that causes significant capital depletion under its
rating assumptions. Fitch believes FIL's fundamental operating
profile will remain intact and its operating performance will
normalise after the pandemic runs its course.
FIL's capitalisation, as measured by Fitch's Prism model score, was
'Extremely Strong' end-June 2019 and is commensurate with its
rating under Fitch's pro forma capital analysis. Its regulatory
solvency ratio was 123% at end-June 2019. The insurer has a low
absolute capital level, which leaves its susceptible to changes in
the external operating environment and to remote operational risk.
FIL has not been greatly affected by the financial market
disruption under its pro forma analysis, as its investments are in
high-quality bank deposits, which results in a zero risky asset
ratio.
Fitch ranks FIL's business profile as 'Less Favourable' against
other insurers in New Zealand due to its modest market presence,
limited product offering and dependence on the parent's member base
to sell products. FIL started operations on June 1, 2018. It
underwrites loan protection insurance and funeral plans for FCU's
members. FIL has no direct employees - all services are performed
by FCU for a fee. As such, Fitch scores the business profile at
'bb' under its credit-factor scoring guidelines.
KEY ASSUMPTIONS
Assumptions for Coronavirus Impact (Rating Case):
Fitch used the following key assumptions, which are designed to
identify areas of vulnerability, in support of the pro forma
ratings analysis:
- Decline in key stock market indices by 35% relative to January
1, 2020.
- Increase in the two-year cumulative high-yield bond default
rate to 16%, applied to non-investment grade assets, and 12% for
'BBB' assets.
- Both upward and downward pressure on interest rates, with
spreads widening (including for high-yield debt by 400bp), coupled
with notable declines in government rates.
- Capital markets access is limited for issuers at senior debt
levels of 'BBB' and below.
- A coronavirus infection rate of 5% and a mortality rate as a
percentage of those infected of 1%.
- For the non-life and reinsurance sectors, a negative impact on
the industry-level accident year loss ratio from
coronavirus-related claims at 3.5pp points, partially offset by a
favourable impact from the auto line averaging 1.5pp.
- Redundancy claim frequency of 5%.
RATING SENSITIVITIES
The ratings remain sensitive to a change in Fitch's rating-case
assumptions with respect the coronavirus pandemic. Periodic updates
to its assumptions are possible given the rapid pace of changes in
government actions in response to the pandemic, and the pace with
which new information is available on the medical aspects of the
outbreak.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- An adverse change in Fitch's ratings assumptions with respect
to the effect of the pandemic.
- A reduction in FIL's operational synergies with FCU; for
example, the franchise may be damaged in the event that FIL becomes
less important to FCU and access to its distribution channels is
restricted.
- Regulatory capital ratio falling below 115% (2019: 123%)
without management plans to rectify this.
- Financial performance significantly below expectations.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- A positive change in Fitch's ratings assumptions with respect
to the effect of the pandemic.
- Positive rating action that is prefaced by Fitch's ability to
reliably forecast the effect of the pandemic on the financial
profile of the New Zealand insurance industry and FIL.
- Improvements in the business profile, which will be evident
from greater operational scale, a stronger business franchise and
more diverse distribution channels, while maintaining strong
financial performance and capitalisation metrics.
Stress Case Sensitivity Analysis
Fitch's stress case assumes a 60% stock market decline, two-year
cumulative high-yield bond default rate of 22%, high-yield bond
spreads widening by 600bp and more prolonged declines in government
rates, heightened pressure on capital market access, a coronavirus
infection rate of 15% and mortality rate of 0.75%, an adverse
non-life industry-level loss ratio impact of 7pp for
coronavirus-related claims, partially offset by a favourable 2pp
for motor, and a redundancy claim frequency of 10%.
The implied rating impact under the stress case would be a
downgrade of no more than one notch.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
FP IGNITION 2019-1: Fitch Puts B+ on Class F Notes on Watch Neg.
----------------------------------------------------------------
Fitch Ratings has placed the class D, E and F notes of Series
2019-1 of the FP Ignition Trust 2011-1 New Zealand on Rating Watch
Negative and revised the Outlooks on the class B and C notes to
Negative from Stable.
The social and market disruptions caused by the coronavirus
outbreak and related containment measures was one of the factors
leading to the negative rating actions.
Series 2019-1 of the FP Ignition Trust 2011-1 New Zealand
- Class B NZFPID1015R8; LT AAsf; Affirmed
- Class C NZFPID1016R6; LT Asf; Affirmed
- Class D NZFPID1017R4; LT BBBsf; Rating Watch On
- Class E NZFPID1018R2; LT BBsf; Rating Watch On
- Class F NZFDIP1019R0; LT B+sf; Rating Watch On
KEY RATING DRIVERS
Expected Coronavirus Scenario
Fitch has made assumptions about the spread of the coronavirus and
the economic impact of the related containment measures. Under its
base-case (most likely) scenario, Fitch assumes a global recession
in 1H20 driven by sharp economic contractions in major economies
with a rapid spike in unemployment, followed by a solid recovery
that begins in 3Q20 as the health crisis subsides. For New Zealand,
Fitch's baseline scenario includes GDP shrinking by 5.9% in 2020
with unemployment rising to an annual average of 7.9%, which would
result in a material deterioration of asset performance. This
deterioration in macroeconomic conditions will be partly offset by
a low Official Cash Rate of 0.25% and stimulus measures from the
central bank and government. The New Zealand government has
implemented specific support for the SME sector, but this support
may not be enough for all small businesses to service their debt.
Coronavirus Exposure and Sensitivity to Assumptions
Fitch expects the economic impact of the coronavirus and the
associated containment measures in New Zealand to be particularly
significant for SME borrowers, and more so for those that operate
in non-essential sectors such as accommodation, hotel, tourism,
transport and discretionary retail. Fitch's analysis of the FP
Ignition 2019-1 portfolio shows that 65.4% of borrowers in the
portfolio were operating in non-essential sectors as defined by the
New Zealand government. To make an initial assessment of the
vulnerability of the ratings to increased defaults on this section
of the portfolio, Fitch increased base case defaults from the
original assessment of 1.3% to 3.7%.
Fitch also reduced recovery values by 10% to reflect the price
uncertainty for passenger, light commercial and heavy commercial
vehicles as the supply of repossessed cars increases, demand falls
and the recovery and sale timelines extend under the expected
economic scenario.
The transaction has significant exposure to residual value risk and
is likely to be adversely impacted by any fall in car values or
extension of time frames to sell vehicles. FleetPartners are
experienced at dealing with residual value risk and have been
actively managing this risk, including through offering customers
the opportunity to extend leases. For the purposes of the analysis,
Fitch assumed an additional 5% residual value loss, which took into
consideration the strength of recent sales performance for light
and heavy commercial vehicles, and a stress on leases maturing in
2020 or 2021.
When modelling these adjustments, preliminary results show the
performances of the tranches placed on RWN are sensitive to the
assumptions and negative rating action would result if the
assumptions materialise. The tranches placed on Negative Outlook
are less sensitive to the assumptions used in this analysis, but
the buffers currently in place will likely be eroded over time if
the current economic environment persists.
Liquidity: Fitch has reviewed the ability of these transactions to
survive a significant proportion of borrowers being offered, and
taking up, a payment holiday. The transaction can withstand 15% of
the portfolio in delinquency or receiving payment holidays before
needing to draw upon liquidity support. In addition, the
transaction benefits from a facility sized at 2% of outstanding
asset balance, which would be able to cover at least 86.0% of the
portfolio with a payment holiday for six months, assuming the
remaining 14% pays on interest-only terms and there are no
principal collections.
Portfolio Analysis: At the most recent monthly trustee report, FP
Ignition 2019-1 is performing as expected with 1.15% of loans 30+
days past due with no losses experienced since closing. As part of
resolving the RWN, Fitch will conduct a full analysis, including an
assessment of asset credit quality, asset security and portfolio
composition, which are captured in the rating default rate and
rating loss rate produced by Fitch's Portfolio Credit Model. The
PCM output will be based on the current portfolio composition and
the coronavirus sensitivity analysis. The PCM output will be
compared with the PCM output corresponding to the Fitch stressed
portfolio at the initial rating assignment, as well as to the rated
notes' current credit enhancement levels.
Obligor Concentration: FP Ignition 2019-1 has obligor concentration
levels that are higher than that usually observed in consumer ABS
transactions. Therefore, Fitch has derived default assumptions that
take into account lessee concentration and correlation risk, in
line with its SME Balance Sheet Securitisation Rating Criteria.
RATING SENSITIVITIES
Fitch will update the coronavirus stress scenario in line with
greater clarity on the unfolding macroeconomic environment, default
performance and recovery data and resolve the RWN status within the
next six months.
The main factors that could, individually or collectively, lead to
positive rating action/upgrade:
Fitch does not currently anticipate developments with a high
likelihood of triggering an upgrade as three tranches are on RWN
and two on Negative Outlook. The main constraint on the
transaction's ratings is the transaction's exposure to SME
obligors, which is considered negative. An upgrade would most
likely be caused by the macroeconomic environment outcome being
substantially better than Fitch's current baseline expectation and
car prices performing much better than expected at the same time as
the transaction deleveraging.
The main factors that could, individually or collectively, lead to
negative rating action/downgrade:
- For the purpose of the evaluation of the vulnerability of this
transaction to stress stemming from the coronavirus and related
containment measures, Fitch has tested the transaction for an
increase in the default probability of the non-essential SME
borrowers as well as lower recoveries and increased residual value
losses in 2020 and 2021 maturing leases. The ratings on the Class
D, E and F notes are sensitive to these stresses and are likely to
be downgraded if they materialise.
- Fitch conducted rating sensitivity analysis on the closing date
of this transaction, which demonstrated the notes were sensitive to
increased levels of defaults and reduced levels of recovery rates
as well as increased losses on residual value risk:
Rating sensitivity to increased default rates:
Notes: A/B/C/D/E/F
Original rating: AAAsf/AAsf/Asf/BBBsf/BBsf/B+sf
Defaults increase by 25%: AA+sf/AA-sf/A-sf/BBB-sf/BB-sf/B+sf
Defaults increase by 50%: AA-sf/A+sf/BBB+sf/BBB-sf/B+sf/Bsf
Rating sensitivity to reduced recovery rates:
Notes: A/B/C/D/E/F
Original rating: AAAsf/AAsf/Asf/BBBsf/BBsf/B+sf
Recoveries decrease by 25%: AA+sf/AA-sf/A-sf/BBB-sf/BB-sf/Bsf
Recoveries decrease by 50%: AAsf/A+sf/BBB+sf/BB+sf/B+sf/Bsf
Rating sensitivity to increased defaults and reduced recovery
rates:
Notes: A/B/C/D/E/F
Original rating: AAAsf/AAsf/Asf/BBBsf/BBsf/B+sf
Defaults increase by 25%/Recoveries reduce by 25%:
AA-sf/A+sf/BBB+sf/BB+sf/B+sf/Bsf
Defaults increase by 50%/Recoveries reduce by 50%:
Asf/A-sf/BBB-sf/BBsf/Bsf/B-sf
Rating sensitivity to reduced sales proceeds:
Notes: A/B/C/D/E/F
Original rating: AAAsf/AAsf/Asf/BBBsf/BBsf/B+sf
Reduce sales proceeds by 10%: AA+sf/AA-sf/BBB+sf/BB+sf/
Reduce sales proceeds by 25%: A+sf/A-sf/BB-sf/
Reduce sales proceeds by 50%: BB+sf/
In accordance with Fitch Ratings' policies, the issuer appealed and
provided additional information to Fitch Ratings that resulted in a
rating action that is different than the original rating committee
outcome.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset
pools and the transactions. There were no findings that were
material to this analysis. Fitch has not reviewed the results of
any third-party assessment of the asset portfolio as part of its
ongoing monitoring.
SOURCES OF INFORMATION
The information used to assess these ratings was sourced from
periodic servicer reports and the public domain. Fitch also used
additional data provided by FleetPartners flagging the obligors'
classification as an essential service.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
The issuer has informed Fitch that not all relevant underlying
information used in the analysis of the rated notes is public.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
MANCHESTER UNITY: Fitch Affirms BB- IFS Rating, Outlook Stable
--------------------------------------------------------------
Fitch Ratings has affirmed Manchester Unity Friendly Society's
Insurer Financial Strength Rating at 'BB-' (Moderately Weak). The
Outlook is Stable.
KEY RATING DRIVERS
The affirmation is based on Fitch's current assessment of the
impact of the coronavirus pandemic, including its economic impact,
under a set of ratings assumptions described below. These
assumptions were used by Fitch to develop pro forma financial
metrics for MUFS that Fitch compared with ratings guidelines
defined in its criteria and relative to previously established
rating sensitivities for MUFS.
The affirmation reflects the insurer's 'Least Favourable' business
profile, 'Moderately Weak' financial performance and earnings as
well as 'Good' capitalisation and leverage.
Fitch assesses MUFS's business profile as 'Least Favourable'
compared with that of other New Zealand life insurers, due to its
limited competitive positioning and diversification. MUFS's
membership continues to decline as member deaths outpace new
joiners, while the society's strategies do not include business
development or selling objectives to maximise its membership base.
Therefore, Fitch scores MUFS' business profile at 'b+' under its
credit-factor scoring guidelines.
Fitch does not expect pandemic-driven pro forma losses to be of a
magnitude that would cause significant capital depletion under its
rating assumptions. Most of MUFS' life products have been closed to
new business since 2012 and, although it continues to offer
low-cost funeral and medical insurance to members, product uptake
is low. As a result, Fitch expects the trend of falling premiums,
which dropped by 4% in the financial year ending May 2019 (FY19)
and FY18, to continue. MUFS is not a profit-maximising entity due
to its mutual ownership.
MUFS's capitalisation, as measured by Fitch's Prism model score,
was 'Extremely Strong' at FYE19 and is commensurate with its rating
under its pro forma capital analysis. Its regulatory solvency ratio
was 142% at end-November 2019. The regulatory solvency position is
sensitive to duration mismatch of asset and liabilities. Management
says the mismatch has declined following the purchase of long-dated
bonds in April 2020.
KEY ASSUMPTIONS
Assumptions for Coronavirus Impact (Rating Case)
Fitch used the following key assumptions, which are designed to
identify areas of vulnerability, in support of the pro forma
ratings analysis:
- Decline in key stock market indices by 35% relative to January
1, 2020.
- Increase in two-year cumulative high-yield bond default rate to
16%, applied to current non-investment grade assets as well as 12%
of 'BBB' assets.
- Both upward and downward pressure on interest rates, with
spreads widening (including for high-yield debt by 400bp) coupled
with notable declines in government rates.
- Capital markets access is limited for issuers at senior debt
levels of 'BBB' and below.
- A coronavirus infection rate of 5% and a mortality rate as a
percentage of those infected of 1%.
- Decline in the value of investment property and mortgages of
6.5%.
RATING SENSITIVITIES
The ratings are sensitive changes in Fitch's rating-case
assumptions with respect the coronavirus pandemic. Periodic updates
to its assumptions are possible in light of the rapid pace of
changes in government actions in response to the pandemic, and the
pace with which new information is available on the medical aspects
of the outbreak.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- An adverse change in Fitch's ratings assumptions with respect
to the pandemic impact
- A fall in coverage of the regulatory capital requirement below
140% for an extended period
- Continued deterioration in the weak business profile, including
a decrease in the number of lodges and significant reduction in the
membership base
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- A positive change in Fitch's ratings-assumptions with respect
to the pandemic impact
- Positive rating action that is prefaced by Fitch's ability to
reliably forecast the impact of the pandemic on the financial
profile of New Zealand's insurance industry and MUFS
- A sustained improvement in MUFS' business profile
- Maintain coverage of the regulatory capital requirement above
170% on a sustained basis
Stress Case Sensitivity Analysis
Fitch's stress case assumes a 60% stock market decline, two-year
cumulative high-yield bond default rate of 22%, high-yield bond
spreads widening by 600bp and prolonged declines in government
rates, heightened pressure on capital market access, a coronavirus
infection rate of 15% and a mortality rate of 0.75% and a decline
in the value of investment property and mortgages of 13%.
The implied rating impact under the stress case would be a
downgrade of no more than one notch.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
MARAC INSURANCE: Fitch Affirms BB+ IFS Rating, Outlook Stable
-------------------------------------------------------------
Fitch Ratings has affirmed New Zealand-based MARAC Insurance
Limited's Insurer Financial Strength Rating at 'BB+' (Moderately
Weak). The Outlook is Stable.
KEY RATING DRIVERS
The rating actions are based on Fitch's current assessment of the
impact of the coronavirus pandemic, including its economic impact,
under a set of ratings assumptions. These assumptions were used by
Fitch to develop pro-forma financial metrics for MIL that Fitch
compared to both ratings guidelines defined in its criteria and
relative to previously established rating sensitivities for MIL.
The rating reflects MIL's business profile, which Fitch ranks as
'Least Favourable' against other insurers in New Zealand given its
run-off status. The insurer stopped underwriting new policies after
ending the distribution agreement with its parent, Heartland Bank
Limited (HBL, BBB/Stable), in January 2020.
Fitch expects HBL to continue prioritising the preservation of
MIL's capital ahead of dividend payments to meet regulatory
requirements during the run-off period. Fitch also expects
operational synergies between MIL and HBL to remain, facilitating
an orderly and effective run-off of MIL's existing insured
portfolio. Fitch therefore continues to regard ownership as
positive to the rating.
Fitch does not expect pro-forma losses driven by the pandemic to be
of a magnitude to cause significant capital depletion under its
rating assumptions. MIL could see a potential spike in redundancy
claims stemming from its lifestyle protection insurance portfolio
as a result of the pandemic-driven economic downturn. However,
MIL's LPI policies, which cover the insured's financial
commitments, contain specific pandemic exclusions, which should
limit the overall impact from the coronavirus.
MIL's capitalisation, as measured by Fitch's Prism model score, was
'Extremely Strong' at the end of the financial year to June 2019
(FYE19) while its regulatory solvency ratio was 111%, above the
regulatory minimum of 100%. Under Fitch's pro-forma capital
analysis, MIL's Fitch Prism model score is commensurate with its
rating. Pro forma losses from the current financial market
disruption has very limited impact on MIL, as a vast majority of
its investments are in high-quality bank deposits, which results in
a zero risky assets ratio.
KEY ASSUMPTIONS
Assumptions for Coronavirus Impact (Rating Case):
Fitch used the following key assumptions, which are designed to
identify areas of vulnerability, in support of the pro-forma
ratings analysis:
- Decline in key stock market indices by 35% relative to January
1, 2020.
- Increase in two-year cumulative high-yield bond default rate to
16%, applied to current non-investment grade assets, as well as 12%
of 'BBB' assets.
- Both upward and downward pressure on interest rates, with
spreads widening (including high yield
by 400bp) coupled with notable declines in government rates.
- Capital markets access is limited for issuers at senior debt
levels of 'BBB' and below.
- A COVID-19 infection rate of 5% and a mortality rate (as a
percentage of infected) of 1%.
- For the non-life and reinsurance sectors, a negative impact on
the industry-level accident year loss ratio from COVID-19-related
claims at 3.5 percentage points, partially offset by a favuorable
impact from the auto line averaging 1.5 percentage points
- Redundancy claims frequency of 5%.
RATING SENSITIVITIES
The ratings remain sensitive to any material change in Fitch's
rating case assumptions with respect the coronavirus pandemic.
Periodic updates to its assumptions are possible given the rapid
pace of changes in government actions in response to the pandemic,
and the pace with which new information is available on the medical
aspects of the outbreak.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- A material adverse change in Fitch's ratings assumptions with
respect to the coronavirus impact.
- A reduction in the operational synergies MIL enjoys with HBL
that could affect the orderly run-off.
- A fall in its regulatory capital ratio to close to 105%.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- An upgrade of MIL's rating is unlikely as its business is in
run off.
Stress Case Sensitivity Analysis
- Fitch's stress case assumes a 60% stock market decline,
two-year cumulative high-yield bond default rate of 22%, high-yield
bond spreads widening by 600bp and more prolonged declines in
government rates, heightened pressure on capital markets access, a
COVID-19 infection rate of 15% and mortality rate of 0.75%, an
adverse non-life industry-level loss ratio impact of 7 percentage
points for COVID-19 claims partially offset by a favourable 2
points for motor, and redundancy claims frequency of 10%.
- The implied rating impact under the stress case would be a
downgrade of no more than one notch.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
NEW ZEALAND OFFICE: Placed Into Voluntary Administration
--------------------------------------------------------
Anuja Nadkarni at Stuff.co.nz reports that New Zealand Office
Supplies has been placed into voluntary administration despite
receiving NZD239,000 in wage subsidies.
The stationery distributor that acquired the exclusive distributor
rights for Fuji Xerox paper products last year, was placed into
voluntary administration by its sole-director Michael Manikas,
Stuff says.
Stuff relates that Khov Jones administrator Steven Khov --
steven@khovjones.co.nz -- was appointed on May 1, and said the
company's sales "dropped to the floor" because of the Covid-19
level 4 lockdown restrictions.
According to Stuff, Mr. Khov said the company was trading through
the administration and paying the 34 staff the wage subsidy at the
minimim regardless of whether they were working or not.
"A lot of the businesses [NZ Office Supplies] distributed to
weren't operating during the level 4 lockdown. They weren't able to
achieve the sales they normally achieve," the report quotes Mr.
Khov as saying. "The company applied for the wage subsidy and the
director put this into a separate bank account, away from their
normal bank account."
Mr. Khov said the company had interest from New Zealand buyers and
hoped a sale would go through soon, the report relays.
He said NZ Office Supplies had a few large creditors who were
suppliers, but did not disclose how much the company owed them.
Stuff notes that the NZD585 a week subsidy requires employers to
use their "best endeavours" to pay people up to 80 per cent of
their pre-lockdown wage.
One worker, who Stuff agreed not to name, said full-time staff were
being paid NZD585 a week, about 40 per cent of the worker's normal
wages.
The worker's hours had also dropped from about 40 hours a week to
15.
"After lockdown started, about five weeks ago, we were told to
accept the reduced pay and hours, or face redundancy," the worker
said.
The worker said the news of the company's voluntary administration
came as a shock, Stuff relays.
Stuff adds that Mr. Khov said when he was appointed as liquidator
the wage payment arrangements had already been put in place by
Manikas.
"We are continuing to pay staff the wage subsidy regardless of
whether they are working or not."
ROSS ASSET: Court Declines ANZ's Bid to Throw Out Investors' Claim
------------------------------------------------------------------
Radio New Zealand reports that investors from the collapsed Ross
Asset Management fund are one step closer to taking the ANZ Bank to
court.
They claim ANZ knew, or should have known that David Ross' accounts
were operating like a Ponzi scheme, RNZ says.
RNZ notes that the Wellington financial adviser was jailed in 2013
for a fraud that left investors NZD115 million out of pocket.
In March, ANZ argued in the High Court in Wellington that the claim
should be struck out because it lacked specifics, and it had been
brought too late, according to RNZ.
However, investors argued the claim was clear, the report says.
In a judgement released on May 5, the court declined to strike out
the claim, RNZ reports.
About Ross Asset
In late 2012, the High Court appointed PricewaterhouseCoopers
partners John Fisk and David Bridgman as Receivers and Managers to
Ross Asset Management Limited and nine other associated entities
following application by the Financial Markets Authority. The
associated entities are Bevis Marks Corporation Limited; Dagger
Nominees Limited; McIntosh Asset Management Limited; Mercury Asset
Management Limited; Ross Investment Management Limited; Ross Unit
Trusts Management Limited; United Asset Management Limited; Chapman
Ross Trust; Woburn Ross Trust; Ace Investments Limited or Ace
Investment Trust Limited or Ace Investment Trust; Vivian
Investments Limited; and Ross Units Trusts Limited. The Receivers
and Managers have also been appointed to Wellington investment
adviser David Robert Gilmore Ross personally. Mr. Fisk said they
have identified investments of nearly NZD450 million held on behalf
of more than 900 investors across 1,720 individual accounts.
The High Court in Dec. 17, 2012, ordered John Fisk and David
Bridgman be appointed liquidators of these companies:
-- Ross Asset Management Limited (In Receivership);
-- Bevis Marks Corporation Limited (In Receivership);
-- McIntosh Asset Management Limited (In Receivership);
-- Mercury Asset Management Limited (In Receivership);
-- Dagger Nominees Limited (In Receivership);
-- Ross Investment Management Limited (In Receivership);
-- Ross Unit Trust Management Limited (In Receivership); and
-- United Asset Management Limited (In Receivership).
SKYLINE ENTERPRISES: Slash More Than Half of Workforce
------------------------------------------------------
Tracey Roxburgh at Otago Daily Times reports that more than half of
Skyline Enterprises' complement of 1,200 staff, spread across New
Zealand and at its international sites, will be made redundant.
On May 4, Skyline chief executive Geoff McDonald, of Queenstown,
confirmed more than half his 1,200 staff in New Zealand and
overseas will be laid off from the end of next month, when the
Government's wage subsidy ends.
However, the company still plans to continue with a NZD200 million
redevelopment of its Queenstown gondola/restaurant complex,
including car-parking building, and has applied for assistance from
the Government's infrastructure fund.
In Queenstown, it employs about 400 staff, largely at its gondola
operation.
According to the report, Mr. McDonald said redundancy percentages
varied from business to business.
"We've basically had to build completely new structures [for each
business], so that means that roles affected are affected pretty
well at most levels."
Skyline started consulting staff a fortnight ago, the report
notes.
Staff and shareholders were informed of redundancies on May 4.
"It's very unpleasant . . . It's not something that you enjoy doing
at all," the report quotes Mr. McDonald as saying.
Staff had been "incredibly professional", despite the pressures
they and their families were facing.
Last month, Skyline chairwoman Jan Hunt, in an email to
shareholders, said the company aimed to ensure it could "ride out
these tough times and emerge on the other side as a strong and
sustainable business for the future," the report adds.
Skyline Enterprises operates the Queenstown gondola and luge, and
similar operations in Rotorua, along with luges in Singapore, South
Korea and Canada. It also has property interests in Queenstown,
Dunedin and Christchurch.
SMITHS CITY: Set to Restructure; Likely to Close Store, Cut Jobs
----------------------------------------------------------------
Radio New Zealand reports that one of New Zealand's oldest
furniture and appliance retailers, Smiths City, is to restructure,
which may see stores close and jobs go.
RNZ says the company is starting consultation with its employees
and negotiations with its landlords.
It anticipates subdued trading conditions when its stores re-open
under alert level 2.
RNZ relates that the company said the Covid-19 pandemic and the
temporary closure of its store network since late March continue to
have a significant impact on its business.
According to RNZ, Chairperson Alastair Kerr said it was likely the
restructure would result in the closure of some stores and job
losses, but the final outcome was dependent on how the process
unfolds.
"We expect this consultation process to be concluded in just over
two weeks with the board then to make a decision on adopting a
final restructuring plan," RNZ quotes Mr. Kerr as saying.
The decision to start talks had been hard as the company had long
benefited from a loyal customer base and committed staff, Mr. Kerr
said.
"Through the lockdown this has also included a reduction in pay.
"We are grateful for the sacrifices the whole team has made and we
regret having to take further action to ensure the future for the
business."
RNZ adds that Mr. Kerr said a restructuring was clearly necessary
in order to secure investment and have a sustainable post-pandemic
retail business.
At the end of March, Smiths City reached an agreement with ASB Bank
to delay a NZD1.5 million repayment of a loan which was due, RNZ
recalls.
It also said it was starting talks with potential investors to
support the business.
In March, the company anticipated its net loss in its financial
result for the year to April 30 would be greater than the NZD1.9
million net loss recorded in the prior financial year, RNZ
discloses. At that time the company said it had been focused on
transforming its business over the past two years and the work had
been progressing well.
Given the new uncertainties, management was now revisiting its
transformation plan and looking for additional gains and further
efficiencies.
According to Stuff, the company told the stock exchange on May 6 it
was continuing discussions with potential strategic investors as
foreshadowed in its announcement in March.
It said the company continued to retain the support of ASB Bank to
see these discussions through to conclusion.
Smiths City was founded in Christchurch in 1918 and was floated on
the stock exchange in 1972. It has 34 stores throughout New
Zealand and employs more than 450 people.
=================
S I N G A P O R E
=================
HTL INTERNATIONAL: Files for Insolvency Protection
--------------------------------------------------
Selina Lum at The Straits Times reports that Singapore-based sofa
maker HTL International, which owes various banks US$46 million
(SGD65 million), has filed for insolvency protection, citing a
cash-flow crunch as a result of the Covid-19 pandemic.
The Straits Times relates that the previously public-listed
company, which has more than 5,000 employees worldwide, is seeking
judicial management (JM) after DBS issued a legal demand for full
repayment under its banking facilities.
In an affidavit seen by The Straits Times, HTL chief operations
officer and director Robert Chew said that the company is not able
to obtain temporary relief under the Covid-19 (Temporary Measures)
Act that kicked in on April 20.
Under the Act, businesses that are unable to fulfil certain
contractual obligations due to the coronavirus pandemic can get
legal reprieve for six months.
But the banking facilities granted to HTL are not covered under the
specified categories eligible for relief, said Mr. Chew.
HTL, represented by lawyers Pradeep Pillai and Joycelyn Lin, filed
an application for JM on April 24, according to the report.
On May 5, interim judicial managers from Deloitte & Touche were
appointed by the High Court, the report discloses. Hearing dates
for the JM application are expected to be fixed in early June.
Deloitte partner Tan Wei Cheong told The Straits Times that HTL was
still functioning but facing "short-term financing difficulties"
because of delays in collection of payment from customers in Europe
and the United States.
Hence, the JM application was made in respect of parent company HTL
International Holdings, in order not to affect the operations of
the various subsidiaries.
"We do not foresee a disruption to the functioning of the group as
a whole. Our intention as interim judicial managers is to find a
way to help to restructure the group, to find a white knight," the
report quotes Tan as saying.
According to the report, Mr. Chew said HTL's core manufacturing
activities in China were severely affected as a result of factory
closures and movement restrictions imposed to control the spread of
the coronavirus.
As the outbreak spiralled into a pandemic, lockdown restrictions
around the world led to an overall delay in deliveries, while
customers have also asked for payments to be deferred until June or
July, he said.
"The delays in collection of revenue have caused serious cash-flow
problems," said Mr. Chew.
Attempts were made to reach out to Yihua, but no funding has been
provided to date, he added.
On April 3, DBS told HTL it was cancelling banking facilities and
demanded payment of all outstanding sums. A statutory demand was
issued five days later, the Straits Times relates.
As at April 21, HTL owed US$7.8 million to DBS, the report
discloses.
The Straits Times adds that Mr. Chew said that, based on its
current financial position, HTL is unable to pay what is due to DBS
and other lenders.
He asked for "breathing space" from its creditors, so that judicial
managers can consider a potential deal for Mr Phua Yong Tat - who
is not a shareholder - to buy out the company.
About HTL
Singapored-based HTL International Holdings Limited --
http://www.htlinternational.com/-- is an investment holding
company. Through its subsidiaries, the Company manufactures,
imports, and exports furniture and sofa. HTL also operates leather
tanning, cutting, sewing, designing, and finishing, and wholesales
leather, fabrics and other furnishing materials.
UTAC HOLDINGS: S&P Lowers ICR to 'B-' on Economic Weakness
----------------------------------------------------------
S&P Global Ratings, on May 5, 2020, lowered the long-term issuer
credit rating on Singapore-based outsourced semiconductor assembly
and test (OSAT) services provider UTAC Holdings Ltd. to 'B-' from
'B'.
S&P said, "Our downgrade reflects our view that the deterioration
of economic conditions will exacerbate UTAC's already-weakened
performance. The downgrade also reflects our view of UTAC's high
business vulnerability, which is commensurate with a lower 'B-'
rating level.
"UTAC's performance and credit metrics will be hurt in 2020, due to
weakened global IT spending. We forecast a 3%-5% decline in revenue
and EBITDA for UTAC in 2020, down from our previous expectation of
a moderate 2%-3% revenue growth. Globally, we expect IT spending to
decline 4% in 2020, compared with our projection of 3%-4% growth
prior to the pandemic. This will cascade into lower semiconductor
industry revenues. As a result, we expect UTAC's ratio of debt to
EBITDA to be almost 6x in 2020.
"We believe UTAC's decreasing revenue, scale, and market share over
the past few years have worsened its ability to weather downturns,
as compared with larger peers. Combined with strong competition in
the industry, the company's competitiveness has weakened. UTAC's
revenue declined almost 20% to US$710 million in 2019 from US$874
million in 2017. With the persistently high capital intensity
necessary to keep up with rapid technological advances for OSAT
players, scale is of paramount importance. The decline in UTAC's
revenue base therefore increases its longer-term vulnerability, in
our view.
"We expect UTAC's strong cash holdings to provide buffer to meet
its financial obligations over the next 12 months, despite negative
free operating cash flows. We forecast that UTAC's free operating
cash flows (FOCF) will decline to negative US$50 million-US$60
million in 2020, from about negative US$18 million in 2019. Amid
weakened performance, we also expect UTAC's capital expenditure
(capex) to remain heightened in 2020 in a bid to clinch new
assembly and testing contracts to boost its performance. We
estimate capex at US$100 million-US$110 million in 2020, similar to
the level in 2019, and up from an average of US$90 million in 2017
and 2018.
"We do not expect UTAC to incur more debt through 2022. The company
had about US$192 million of cash on hand as of Dec. 31, 2019. We
believe cash will be adequate to fund the negative FOCF that we
project, in the absence of debt maturities until 2023. At the same
time, we believe the cash level will provide liquidity buffer
against moderate further downside to UTAC's performance.
"The stable outlook reflects our view that, despite challenging
operating conditions, UTAC will be able to meet its financial
obligations over the next 12 months. This is because the company's
only large debt maturity is a US$665 million bond due in January
2023.
"We may lower the rating if UTAC does not improve the
sustainability of its capital structure over the next 12-18 months.
This could happen if UTAC's FOCF remains negative or if its bonds
due in January 2023 are not refinanced or repaid. We could also
lower the rating if UTAC's EBITDA interest coverage ratio falls
below 2x. This may happen if UTAC is unable to gain sufficient new
revenue streams, or if the company's margins decline more than we
expect. This could also happen if UTAC takes on debt-funded capital
expenditure or acquisitions more than we anticipate.
"An upgrade is unlikely in the next 12 months due to the
challenging operating environment. We may ultimately raise the
rating if UTAC increases its business scale substantially, such
that we believe the resilience in its performance has improved,
while the company maintains sound liquidity and an EBITDA interest
coverage ratio well above 2x."
Founded in 1997, UTAC is a midsize OSAT services provider for
mixed-signal and logic, analog, and memory products. The company,
headquartered in Singapore, generated about US$710 million of
revenue in 2019.
UTAC's customers consist mostly of fabless companies, integrated
device manufacturers, and wafer foundries. The end-market
applications for the integrated circuits on which UTAC performs
assembly and test services include those in communications, mobile
devices, automobiles, and industrials. The company has production
facilities in Singapore, Thailand, Taiwan, China, Malaysia, and
Indonesia.
UTAC is majority owned by two private equity sponsors, namely
Affinity Equity Partners and TPG Capital.
ZENROCK COMMODITIES: HSBC Seeks Judicial Management for Trader
--------------------------------------------------------------
The Straits Times reports that HSBC Holdings has filed an
application to the Singapore High Court to place ZenRock
Commodities Trading under judicial management, three people
familiar with the matter said on May 6.
Under judicial management, an independent judicial manager is
appointed to manage the affairs of a company, the report says.
The Straits Times notes that the news follows the collapse of
Singapore oil trader Hin Leong Trading, which last month was placed
under interim judicial management with debts of some US$4 billion
(SGD5.7 billion) to more than 20 banks.
The Commercial Affairs Department (CAD), the white-collar crime
unit of Singapore police, is investigating Hin Leong, one of Asia's
largest independent oil traders, after its founder Lim Oon Kuin
(also known as O.K. Lim) admitted to hiding US$800 million in
losses incurred from trading in oil futures.
Just late last month, ZenRock issued a statement to reassure
clients that it was not under financial duress after news of Hin
Leong's troubles, according to the Straits Times.
The Straits Times relates that ZenRock and another firm, Winson
Group, which buy and sell fuels such as gas oil and bunker oil
across Asia, had said in separate statements on April 23 that their
financial positions were sound, and that neither of them had
open-account dealings with Hin Leong.
ZenRock had also said that it was not under statutory or insolvency
protection in its statement. It added that while its business had
been affected by slowing Chinese demand, the global coronavirus
lockdown, oversupply and negative oil prices, it has "the ability
and experience to work through them profitability," the report
relays.
The company was founded in Singapore in 2014 by a group of traders,
including Mr Xie Chun, ZenRock's president, formerly from Unipec,
and Mr Tony Lin, formerly Vitol's China head.
Singapore-based ZenRock Commodities trades crude, oil products and
petrochemicals. ZenRock has offices in Singapore, Shanghai and
Geneva.
=================
S R I L A N K A
=================
DFCC BANK: Fitch Cuts LT IDRs to 'B-' on Sovereign Downgrade
------------------------------------------------------------
Fitch Ratings has downgraded Sri Lanka-based DFCC Bank PLC's
Long-Term Foreign- and Local-Currency Issuer Default Ratings to
'B-' from 'B' and its Viability Rating to 'b-' from 'b'. The
Outlook on the Long-Term IDR is Negative. The Short-Term IDR has
been affirmed at 'B'. The Support Rating and Support Rating Floor
have been affirmed at '5' and 'No Floor', respectively.
The rating actions follow the downgrade of Sri Lanka's sovereign
rating to 'B-' on April 24, 2020, which reflects the impact of the
escalating coronavirus pandemic on Sri Lanka's economy.
Fitch has revised its assessment of Sri Lankan bank's operating
environment to 'b-'/negative, from 'b'/negative, primarily to
reflect the heightened risk of doing business in the jurisdiction.
Under Fitch's base case scenario, Fitch forecasts the world economy
and the Sri Lankan economy to contract by 3.9% and 1.0%,
respectively, in 2020. Fitch expects the banks' financial profiles
to come under stress from the more challenging operating
environment, and their key credit metrics are likely to be weaker
than its previous expectations, despite regulatory reliefs.
Fitch expects GDP growth of 4% for Sri Lanka in 2021 as tourism
receipts gradually recover from late 2020, but this forecast is
subject to an unusually high degree of uncertainty and downside
risk, as it depends on the evolution of the pandemic within Sri
Lanka and globally. Correspondingly the outlook for the operating
environment assessment is maintained at negative to reflect the
possibility of further downside should the potential impact of the
economic fallout from the coronavirus pandemic become more
pronounced or linger.
KEY RATING DRIVERS
IDRS AND VR
DFCC's IDRs are driven by its VR, the downgrade of which is driven
by its assessment of the operating environment, which Fitch
believes continues to have a high influence on bank ratings through
its impact on financial and non- financial rating factors. Downside
risks to DFCC's financial metrics include weaker asset quality and
earnings, as well as pressure on capital and funding and liquidity
amid the Covid-19 pandemic.
The Negative Outlook on DFCC's IDR reflects the outlook for the
operating environment assessment, which is maintained at negative
to reflect the possibility of further downside.
Fitch believes that extension of the impact of the virus could
intensify the asset quality pressures the bank already faces, and
as such Fitch has revised the outlook on DFCC's asset quality
rating factor to negative from stable. DFCC's impaired loans (stage
3) ratio increased to 8.4% by end-2019 from 5.8% at end-2018,
driven by loans to government institutions where the facilities
carry a full Treasury guarantee (56% of the incremental stage 3
loans in 2019). The bank's stressed regulatory non-performing loans
ratio (including rescheduled and restructured loans) continues to
be high.
DFCC has one of the weakest earnings and profitability profiles
among Fitch-rated large private banks in Sri Lanka and its earnings
were under stress in 2019 due to slower loan growth, heavy trading
losses on its equity stake in Commercial Bank of Ceylon PLC (COMB:
AA(lka)/Negative), and higher credit costs. Fitch expects margin
pressure through lower interest rates amid subdued credit demand
and higher provisioning and credit losses stemming from the
pandemic to worsen DFCC's profitability metrics. Fitch has
therefore lowered the mid-point of the earnings and profitability
assessment to 'b-' and revised the outlook to negative to reflect
further downside to earnings should the downturn prove to be
significantly worse than its base case.
DFCC's common equity Tier 1 ratio stood at 11.3% at end-2019, lower
than that of similarly rated peers. While Fitch believes that
access to capital is greater for DFCC via its 13.5% stake in COMB,
the realizable gains from this could remain low in the medium term
given the weak performance of Sri Lanka's stock market. Fitch has
lowered the mid-point of the capitalisation and leverage rating
factor to 'b' and revised the outlook to negative to reflect its
view that there is further risk to capital buffers should the
downturn prove to be significantly worse than its base case.
DFCC is funded mainly by deposits, but its deposit franchise lags
behind that of larger and more-established peers. The bank also has
a significant amount of foreign-currency funding, which accounted
for 20% of total funding at end-2019 (13% in deposits and 7% in
wholesale funding). Fitch believes that accessing such
foreign-currency funding could become more challenging, both in
terms of accessibility and pricing, to due increasing country
risks. As such, Fitch has revised the outlook on the funding and
liquidity mid-point score of 'b-' to negative.
SUPPORT RATING AND SUPPORT RATING FLOOR
Fitch's assessment is that state support may be possible for DFCC,
but timely sovereign support cannot be relied upon in light of the
sovereign's weakened financial ability. Furthermore, the bank's
franchise is small with market share of around 3% of system assets
against 8%-11% for the larger private banks.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
IDRS AND VR
DFCC's ratings are constrained by the sovereign rating. Fitch does
not currently anticipate developments with a high likelihood of
leading to an upgrade given the pressure on the sovereign rating
and deteriorating operating environment.
The Outlook on DFCC's IDR could be revised to Stable if its
assessment of the operating environment improves.
SUPPORT RATING AND SUPPORT RATING FLOOR
An upgrade of DFCC's Support Rating and upward revision of the
bank's Support Rating Floor would be contingent on a positive
change in the sovereign's ability to provide support, which Fitch
does not expect in the near to medium term.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
IDRS AND VR
DFCC's IDRs and VR could be downgraded if the operating environment
deteriorates significantly beyond its base case scenario, likely
triggered by a downgrade of the sovereign rating or caused by a
larger GDP contraction or slower economic recovery than Fitch
expects, which would also result in a lowering of its assessment of
most of the bank's financial profile factors.
In particular, such an environment would see greater and more
prolonged asset-quality deterioration with an increase in its
impaired loans/ gross loans to over 14%, which would put further
pressure on DFCC's earnings and capitalisation.
SUPPORT RATING AND SUPPORT RATING FLOOR
DFCC's Support Rating and Support Rating Floors are already at
their lowest level and no downside is possible.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
NATIONAL SAVINGS: Fitch Cuts LT IDR to 'B-', Outlook Still Negative
-------------------------------------------------------------------
Fitch Ratings has downgraded Sri Lanka-based National Savings
Bank's Long-Term Foreign- and Local-Currency Issuer Default Ratings
to 'B-' from 'B'. The Outlook remains Negative.
The rating action follows the downgrade of the Sri Lankan sovereign
rating on April 24, 2020, which reflects the impact of the
escalating coronavirus pandemic on Sri Lanka's economy. Fitch
revised its 2020 outlook on Sri Lanka's banking sector to negative
in March 2020 as the coronavirus pandemic poses increased risks to
the previously anticipated expansion in the economy, which will
affect performance of the banks.
Fitch has revised its assessment of Sri Lankan banks' operating
environment to 'b-'/negative, from 'b'/negative, primarily to
reflect the heighted risk of doing business. Under Fitch's
base-case scenario Fitch forecasts the world economy and the Sri
Lankan economy to contract in 2020, by 3.9% and 1.0%, respectively.
Fitch expects banks' financial profiles to come under stress from
the heightened challenges in the operating environment, and their
key credit metrics are likely to be weaker than its previous
expectations, notwithstanding regulatory reliefs on loan
classification and provisioning, minimum capital requirements, and
income recognition on loans under moratorium.
Fitch expects GDP growth of 4% for Sri Lanka in 2021 on the basis
of a gradual recovery in tourism receipts beginning in late 2020,
while this forecast is subject to an unusually high degree of
uncertainty and downside risk, depending on the evolution of the
pandemic both within Sri Lanka and globally. Correspondingly, the
outlook for the operating environment assessment is maintained at
negative - to reflect the possibility of further downside risks
should the potential impact of the economic fallout from the
pandemic become more pronounced or linger.
KEY RATING DRIVERS
NSB's IDRs are driven by its expectation of modest sovereign
support, as indicated by its Support Rating Floor, which is aligned
with the sovereign's IDR. Fitch has not assigned a Viability Rating
to NSB, as it is a policy bank. Fitch believes extraordinary state
support stems from its policy mandate of mobilising retail savings
and investing them in government securities. The NSB Act contains
an explicit deposit guarantee, and Fitch believes the authorities
would support the bank's depositors and senior unsecured creditors
to maintain confidence and stability in the system.
SUPPORT RATING AND SUPPORT RATING FLOOR
The Support Rating and the Support Rating Floor of NSB are
constrained by the sovereign rating, and have been downgraded to
'5' and 'B-' from '4 and 'B', respectively, following the sovereign
rating downgrade. This indicates the state's reduced ability to
provide support, and, consequently a more limited probability that
the bank would receive timely support, if needed. This is despite
the state's strong propensity to provide support to NSB - given its
high importance to the state, underpinned by its policy role.
RATING SENSITIVITIES
NSB's Long-Term IDRs, SR and SRF are sensitive to perceived changes
in the state's ability and propensity to support the bank.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
An upgrade in the sovereign rating is most likely to lead to an
upgrade in the bank's IDRs, SR and SRF, but the prospects of an
upgrade in the near term are very low in view of the Negative
Outlook on Sri Lanka 's sovereign rating.
The revision of NSB's outlook on its IDR to stable will be
contingent upon a similar action on the sovereign rating.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Conversely, a downgrade in the sovereign rating would most likely
lead to a similar downgrade of the bank's IDRs.
Fitch may also take negative rating action on NSB's IDRs if Fitch
sees evidence of lower state propensity to support, such as the
removal of preferential support extended to NSB, or a substantial
change in its policy role or deviation from mandated core
activities, indicating its reduced importance to the government.
Fitch believes such a scenario is unlikely to occur in the near
term.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
NSB's SRF is linked to the Sri Lankan Sovereign Rating of
B-/Negative.
*********
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 2020. All rights reserved. ISSN: 1520-9482.
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