Rating Rationale Sahyadri Agencies Ltd. 29 Nov 2018

Transcription

1 Rating Rationale Sahyadri Agencies Ltd. 29 Nov 2018 Brickwork Ratings assign rating for the Non-Convertible Debentures Issue of Crores and reaffirms for the Non-Convertible Debentures Issue of Crores of Sahyadri Agencies Ltd. Particulars Amount (Rs. Crs) Tenor Rating Assigned* Rs.150 crores Non-Convertible Debentures (INR One Hundred and Long Term BWR A (SO)/Stable Fifty Crores) *Please refer to BWR website for definition of the ratings Other outstanding ratings of the issuer with BWR are as per details below Instrume nt Amount Rs in Cr XIRR Issue Date Maturity ISIN Previous Rating Present Rating* NCD % 06/12/17 05 Dec 2019 INE811P07066 BWR A (SO) (Stable) BWR A (SO) (Stable) Reaffirmed *Ratings are valid for 1year for above respective issues from the date of Initial rating letter 1 29 Nov 2018

2 Rationale/Description of Key Rating Drivers/Rating sensitivities: BWR has essentially relied upon the draft term sheet outlining the structure of the deal, financial results of Jyothy Laboratories Limited (JLL) as of FY18 whose shares are pledged by the promoter Mr. M P Ramachandran, the pledgor and information & clarifications provided by the company. The rating assigned is primarily a function of total adherence of the issue to the term sheet shared with Brickwork and enforcement of security, if needed, within specified time-lines indicated in the term sheet. The rating factors, inter alia, the strength of underlying security in the form of pledge of equity shares of JLL, a listed company, business and financial strength of JLL, structure of the NCD issue and availability of sufficient free shares of JLL post this transaction, to take care of volatility in share price. However, the rating is constrained by unavailability of assured cash flows of the issuer at redemption, and dependency on the group support, refinance or alternatively liquidation of the securities before the redemption due date to meet the obligations arising from the proposed NCD issue. The given rating essentially captures performance of JLL, primarily since the NCD structure involves third party pledge of JLL equity shares provided as security. Stipulated security cover provides cushion to investors. T-15 clause requiring the company to deposit all amount payable under the facility in the designated bank account charged to the debenture trustee at least 15 days prior to maturity date addresses the liquidity aspects should there be a need to invoke the security. Performance of JLL and other promoter companies, and strict adherence to the structure are the key rating sensitivities Nov 2018

3 NCD Structure The company has raised this structured NCD of Rs.150 Cr with a tenor of 12 months 1 day to be used for general corporate purpose and refinancing existing debt. There will be no immediate coupon payment and the applicable redemption premium will be payable date or redemption whichever is earlier. The NCD s has an initial collateral cover of 2x, are secured by way of pledge of equity shares of Jyothy Laboratories Ltd (JLL) and personal guarantee of the promoter Mr. M P Ramachandran is provided. Top-up clause: In case the Security Cover drops below 1.75 times, then the top-up will be triggered and the Borrower shall be obliged to provide top-up in the form of pledge on additional Underlying Shares ( Share Top-up ) or cash deposited into the Designated Account ( Cash top-up ) (collectively Top Up ) within 2 Business days of any such dip in Security Cover such that the overall Security Cover is brought back 2 times. There are additional top up clause as mentioned in the below table: Particulars Security cover to be maintained Top up required Price falls > 35% 2.25 times When cover falls below 2 times Price falls > 50% 2.50 times When cover falls below 2.25 times T- Structure: The Issuer would be required to fund the cash redemption account with respect to payments of Redemption Proceeds at least 15 Days prior to call / put option date or maturity date whichever is earlier, failing which the trustee will sell the Shares. Its however agreed that the rating sensitive trigger / event will occur upon happening of the above events mentioned under EOD only if the issue is not able to deposit the required redemption amount within 15 days of occurrence of such respective event or trustee not able to realise the redemption amount from sales proceeds of shares within 15 days of occurrence of such respective event Nov 2018

4 About the Company Sahyadri Agencies Limited (SAL) is private limited company which was incorporated in 09th July SAL holds 8.28% of shares in JLL. The company generates its revenue by way of commission and interest / dividend income from Jyothy Laboratories Ltd. Background of Jyothy Laboratories Limited (JLL) Established in 1983, Jyothy Laboratories Ltd (JLL), promoted by Mr M P Ramachandran, is a mid-sized Indian origin fast moving consumer goods (FMCG) company having its headquarters located in Mumbai. Presently, JLL is involved in the manufacturing and marketing of products in Fabricare (Detergents/soaps for clothes), Household Insecticide (Repellent coils/liquid or spray), Utensil care and surface cleaning (liquids/soaps for utensils and floor cleaners), Personal care (soaps/face wash/toothpaste/deodorants/talc for human use) and others (incense sticks). The company has a well established position in the FMCG market with experienced management. JLL has a diversified product portfolio with strong brand recall and pan-india presence. The tangible net worth (TNW) of the company is Rs.337 cr in FY18 and Debt / TNW of 1.61x. The company has following subsidiaries. 1. Jyothy Fabricare Services Limited (JFSL) 2. Jyothy Kallol Bangladesh Limited 3. Snoways Laundrers and Drycleaners Pvt.Ltd 4. Four Seasons Dry Cleaning Co. Private Limited 5. JFSL-JLL(JV) - partnership firm 4 29 Nov 2018

5 Company Financial Performance Key Financial indicators of Issuer Sahyadri Agencies Limited Particulars (Amt in Rs Cr) Audited Audited Audited Total Operating Income OPBDIT PAT Tangible Net Worth Total debt: TNW Current Ratio Key Financial indicators of Jyothy Laboratories Limited - Consolidated Particulars (Amt in Rs Cr) HFY19 BSE Audited Audited Audited Published Net sales OPBDIT PAT Tangible Net Worth Total debt: TNW Current Ratio Rating History for the last three years 5 29 Nov 2018

6 S.No Instrument /Facility Current Rating (2018) Rating History Type (Long Term/ Short Term) Amount ( Crs) Rating NCD Long Term NCD Long Term BWR A (SO) / Stable NA NA NA BWR A (SO) / Stable NA NA Total Two Hundred and Twenty Five crores Only Status of non-cooperation with previous CRA (if applicable)-reason and comments: NA Any other information: NA Hyperlink/Reference to applicable Criteria General Criteria Approach to Financial Ratios For any other criteria obtain hyperlinks from website Analytical Contacts Bal Krishna Piparaiya CGM-Ratings analyst@brickworkratings.com Media 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 Nov 2018

7 About Brickwork Ratings Brickwork Ratings (BWR), a SEBI registered Credit Rating Agency, 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 leading public sector 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, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations. 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 Nov 2018