Eurotas Infrastructure Limited 10 th Aug 2017

Transcription

1 Rating Rationale Eurotas Infrastructure Limited 10 th Aug 2017 Brickwork Ratings downgrades the rating for the Bank Loan Facilities of Rs Cr of Eurotas Infrastructure Limited. Particulars Facility Rated Amount (Rs. Crs) Tenure Rating * Fund Based Previous Present Previous Present Long Term BWR A- (SO) (Pronounced as A Minus (Structured Obligation)) Stable) BWR BB+(SO) (Pronounced as BWR Double B Plus (Structured Obligation)) Negative) Downgrade INR Three Hundred & thirty one crores and six Total lakhs only ^ Please refer to BWR website for definition of the ratings Long term rating downgraded The suffix (SO) to the Rating indicates the repayment mechanism with escrow of all cash flows from the project receivables being routed through a Trust and Retention Account (TRA) and maintenance of a debt service reserve account (DSRA) to meet the debt servicing requirements wherein a minimum of three months of principal and interest amount lies under the control of the Trustee. Rationale/Description of Key Rating Drivers/Rating sensitivities: The rating has been downgraded due to weak financial risk profile of the company including continuous loss since last two years with erosion of net worth to that extent and the company is not generating any revenue to service the debt repayment coupled with liquidity stress; continuous deferment of restarting the operation and current non-operational status of the plant. The Rating constraints are however; partially offset by, inter alia, validity of the long-term Cement Purchase Agreement ( CPA ) and Material Supply Agreement with ACC Limited th Aug 2017

2 Credit Weaknesses: 1. With the operational issues of RattanIndia Nashik Power Limited (RNPL) with respect to litigations with the PPA, leading to continuous deferment of restarting the operation with current non-operational status of the cement plant of EIL (as RNPL is required to supply water, power, fly ash and other major infrastructure for the cement manufacturing to EIL) including continuous loss IN EIL since last two years with erosion of its net worth to that extent. EIL is not generating any revenue to service the debt repayment coupled with liquidity stress. Credit Strengths: 1. Validity of the long-term Cement Purchase Agreement ( CPA ) and Material Supply Agreement with ACC Limited as on date. Rating Outlook: Negative BWR believes that the Negative outlook indicates likelihood of rating change over the medium term. The rating outlook may be revised to 'Stable/Positive' in case the revenues and profit show sustained improvement. Going forward, restarting of the plant and operation as projected, significant improvement in the debt protection metrics and liquidity would be the key rating sensitivities. About the Company Eurotas Infrastructure Limited (EIL) was incorporated in Feb 2011 and is an operating Company belonging to RattanIndia Group of Company, promoted by Mr. Rajiv Rattan. EIL is wholly held by Gregarious Construction Materials Ltd (GCML - erstwhile Indiabulls Construction Materials Ltd) which was incorporated in Oct Subsequently, GCML is 100% held by IIC Ltd (erstwhile Indiabulls Infrastructure Company Ltd). EIL was started for manufacturing of cement grinding unit and it had executed a long term rental agreement with ACC Ltd. to offload the entire cement produced with a total capacity of 3.30 MTPA (GU1 & GU2). The said Bank Loan Rating is exclusively for the GU1 (Grinding Unit 1) of capacity of 1.65 MTPA. It is located at Sinnar Industrial Area in Nashik district which is promoted by the Maharashtra Industrial Development Corporation (MIDC). It has also gone into a supply agreement of water, power, fly ash and other major infrastructure with Rattan India Nashik Power Limited (RNPL) (erstwhile Indiabulls Realtech Ltd.). Initially, the project s scheduled COD was 1 st January 2015 but it got delayed by a year and the revised COD had taken place on 30 th December 2015 (driven by cost overrun), due to operational issues faced by EIL during the said period th Aug 2017

3 The initial cost of project was Rs Cr which was funded by promoter s contribution of Rs Cr and debt of Rs. 290 Cr and the revised cost of project became Rs Cr which was funded through debt of Cr and promoter s contribution of Rs Cr. The cement plant of EIL being dependent on operations of 1350 MW Thermal Power Project at Nasik of RNPL (for providing fly ash, power, water and other infrastructure) which has not yet achieved its COD due to the litigation with respect to its PPA, the cement plant of EIL has become non-operational and the management is hopeful to restart its operation from Nov, 2017 onwards. However, the CPA between ACC Ltd. and EIL remained valid along with all existing agreements between different parties for the cement production of EIL. Company Financial Performance In FY16, it has achieved net sales of Rs Cr in FY16 with a net loss of Rs Cr. EIL s TNW has declined due to loss incurred in FY16 and stood at Rs Cr (FY15: Rs Cr). Subsequently, the gearing deteriorates further to 2.28X. The liquidity position and the debt protection metrics have worsened in FY16. As informed by the management, on a provisional basis; the company has not generated any revenue in its FY16-17 and the net loss incurred Rs Cr due to interest and finance cost and its TNW has further eroded to Rs Cr on account of the loss incurred during the said period resulting into deterioration into gearing ratio of 5.52X. Key Financial indicators: Particulars FY14-15 FY15-16 Net Sales/Revenues (Rs. Crores) EBIDTA (Rs. Crores) PAT (Rs. Crores) Tangible Networth (Rs. Crores) Total Debt : TNW (Times) Current Ratio (Times) th Aug 2017

4 Rating History for the last three years (including withdrawn/suspended ratings) Sl. No. Instrument/Facility Current Rating (Year 2017) Rating History Rating 2016 Amount BWR BB+ 1 Term Loan (SO) BWR A Type Rs Cr (SO) Long Term NA Negative) Stable) 2014 BWR A- (SO) (Outlook : Stable) Hyperlink/Reference to applicable Criteria General Criteria Approach to Financial Ratios nload/criteria_manufacturingcompani es.pdf Analytical Contacts Media B K Piparaiya Chief general Manager - Ratings analyst@brickworkratings.com media@brickworkratings.com Relationship Contact bd@brickworkratings.com Phone: For print and digital media The Rating Rationale is sent to you for the sole purpose of dissemination through your print, digital or electronic media. While it may be used by you acknowledging credit to BWR, please do not change the wordings in the rationale to avoid conveying a meaning different from what was intended by BWR. BWR alone has the sole right of sharing (both direct and indirect) its rationales for consideration or otherwise through any print or electronic or digital media. Note on complexity levels of the rated instrument: BWR complexity levels are meant for educating investors. The BWR complexity levels are available at Investors queries can be sent to info@brickworkratings.com th Aug 2017

5 About Brickwork Ratings Brickwork Ratings (BWR), a SEBI registered Credit Rating Agency, has also been accredited by RBI and empaneled by NSIC, offers Bank Loan, NCD, Commercial Paper, MSME ratings and grading services. NABARD has empaneled Brickwork for MFI and NGO grading. BWR is accredited by IREDA & the Ministry of New and Renewable Energy (MNRE), Government of India. Brickwork Ratings has Canara Bank, a Nationalized Bank, as its promoter and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations. BWR has rated debt instruments/bonds/bank loans, securitized paper of over 9,30,000 Cr. In addition, BWR has rated about 5000 MSMEs. Also, Fixed Deposits and Commercial Papers etc. worth over 19,700 Cr have been rated. Brickwork has a major presence in rating of nearly 100 cities. DISCLAIMER Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other reliable sources, which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented as is without any express or implied warranty of any kind. BWR does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by BWR should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses incurred by users from any use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at any time for any reasons th Aug 2017