Brickwork Ratings upgrades the ratings for the Non-Convertible Debentures of Crores by JSW Projects Limited

Transcription

1 Rating Rationale JSW Projects Limited 14 May 2018 Brickwork Ratings upgrades the ratings for the Non-Convertible Debentures of Crores by JSW Projects Limited Particulars Instrument Issue Date Previous Amount ( Present Amount ( Coupon Maturity Date ISIN Particulars Previous Rating Review Rating* NCDs ( Mar-1 15-Mar-1 50 Series B Series B May Aug BWR A (SO) Upgraded to BWR AA- (SO) 20-Mar Jun [(Pronounced as BWR A (Structured Obligation)] [Pronounced as BWR Double A Minus (Structured Obligation)] NCDs ( Mar-1 Series B -200 Series B Oct (Outlook: Stable) (Outlook:Stable) 20-Mar-1 Series C -250 Series C Feb Total Crores (INR Eight Hundred and Fifty Crores Only) *P lease refer to BWR website for definition of the ratings Rationale/Description of Key Rating Drivers/Rating sensitivities: The initial issuer of the NCDs, Unity Advisory Services Pvt. Ltd. (UASPL) and its holding company Pratirup Advisory Services Pvt. Ltd (PASPL) got merged into JSW Projects Ltd. via NCLT order dt. 6th Dec 1, approving the scheme of amalgamation with effect from 31st Mar 1. Due to the merger, JSW Projects Limited (JPL) became the issuer of the NCDs May 2018

2 The rating upgrade has taken into account, the merger of initial issuer (UASPL) with a company (JPL) having better credit profile; integrated operation of JPL with the Vijayanagar unit of JSW Steel Limited, resulting in stability of revenue; JPL s improving capital structure, healthy profitability margins and adequate cash flow visibility to meet its debt servicing obligations. The rating with SO subscript continues to factor, the strength of promoters JSW Group, the underlying securities ( listed shares of JSW Steel Ltd and JSW Energy Ltd providing 1.2x cover and 0.80x cover respectively, pledged by the promoter group companies, with combined coverage of twice the outstanding principal and accrued interest amount of the NCDs), financial strength of the underlying companies; availability of additional shares as cushion for top-up cover to counter the price fluctuation as well as other terms of the issue. The rating is constrained by the fact that, NCDs are collateralized by pledged shares of JSW Steel Ltd. and JSW Energy Ltd., adverse downward share price movements of these companies have rating sensitivities. The cash-flow management of JSW Projects Limited is key rating sensitive factor, particularly during the year FY 20-21, when various tranches of the NCDs are maturing. Analytical Approach: BWR has essentially relied upon the draft terms of the issues, security coverage, underlying securities, financial results of JSW Projects Limited, JSW Steel Ltd. & JSW Energy Ltd. up to Q3 FY 1-18, publicly available information and other information/clarification provided by the management. Rating Outlook: Stable The Stable outlook indicates a low likelihood of rating change over the medium term. The key rating sensitivities are the performance of issuer JSW Projects Limited; performance of JSW Steel Ltd and JSW Energy Limited, whose shares have been pledged for the NCDs issue and maintenance of enough shares as cushion for top-up cover to counter the downward movement of price, as per the terms of the issue. About the NCDs Issue: The Rs. 200 Cr of NCDs was issued on 15 Mar 1, in two tranches of amounts Rs. 50 Cr and Rs. 150 Cr with redemption dates on 15th May 2020 and 15th Aug 2020 respectively. The Rs. 650 Cr of NCDs were issued on 20th Mar 1 in three tranches of amounts Rs. 200, Rs. 200 and Rs. 250 with redemption dates on 4th Jun 20, 5th Oct 20 and 4th Feb 21 respectively. The pledgers of the listed shares of JSW Steel Ltd and JSW Energy Ltd are promoter group companies, JSW Investment Pvt. Ltd, Sahyog Holdings Pvt. Ltd, JSW Holdings Ltd, JSW Techno Projects Management Ltd and Vividh Finvest Pvt. Ltd. There are provisions for top-up/top-down cover to counter the price fluctuation of the pledged shares. There are no put options for the NCDs, however call option can be exercised after 36 months from the date of allotment May 2018

3 About JSW Projects Limited: JSW Projects Limited (JPL) was floated by JSW Group to set up and operate 1.2 MTPA COREX gas based DRI (Direct Reduction of Iron) Plant, one Coke Dry Quenching (CDQ) plant comprising of four units with aggregate capacity of 3.42 MTPA and 6 megawatt captive power plant based on waste heat recovery from CDQ process. CDQ plants were operating at optimum level with capacity utilization of 93% during FY 1, while DRI plant had been operating at 66% capacity utilization. JPL operates these facilities on the basis of BOOT (Build Own Operate Transfer) agreement with JSW Steel Limited; Currently Sajjan Jindal Family Trust is the 100% shareholder of the company. Financial Performance of JSW Projects Ltd, JSW Steel Ltd and JSW Energy Ltd: JSW Projects Ltd: JSW Projects Limited (JPL) reported total income and net profit of Rs Cr and Rs Cr respectively in FY The corresponding figures for FY were Rs Cr and Rs Cr respectively. Total Secured Debt/Equity ratio of the company had deteriorated from 2.23 in FY 16 to 2.09 in FY 1, due to merger of two group companies Unity Advisory Services Pvt Ltd (UASPL) and its holding company Pratirup Advisory Services Pvt Ltd (PASPL) with JSW Projects Ltd, w.e.f. 31st Mar 1, resulting in increase of total debt from Rs. 1,40.11 Cr in FY 16 to Rs. 2, Cr excluding upfront fees Ind AS adjustment as it is a non-cash item in FY 1 and decline of TNW from Rs Cr in FY 16 to Rs Cr in FY 1. At the end of 9M FY 18, the TNW has increased to Rs Cr, due to profit accumulation and Total Debt has declined to Rs Cr due to loan repayments, resulting in improvement in capital structure at the end of Dec 1 compared to Mar 1. JSW Steel Ltd.: JSW Steel Ltd is the largest producer and exporter of steel in India. In FY 16-1, the company s consolidated total revenue from operations increased by 31.66% to Rs. 60,536 Cr from FY revenue of Rs. 45,9 Cr, on account of ramp up of operations in newly commissioned capacities and healthy growth in export volumes. It reported consolidated net profit of Rs. 3,46 Cr in FY 16-1 compared to net loss of Rs. 481 Cr in FY The consolidated net debt at the end of FY 16-1 was at Rs. 41,549 Cr with Net Debt/Equity ratio stood at In 9M FY 1-18, the company reported consolidated total revenue from operations of Rs. 50,686 Cr with y-o-y growth of 18.93% and consolidated PAT of Rs. 3,234 Cr with y-o-y growth of 31.52%. JSW Energy Ltd.: JSW Energy Limited s consolidated revenue declined from Rs. 10,060 Cr in FY to Rs. 8,480 Cr in FY 16-1 and consolidated profit also declined from Rs Cr in FY to Rs Cr in FY Fall in performance was on account of declining power tariffs due to 3 14 May 2018

4 excess supplies and partly due to rise in imported coal prices. In 9M FY 1-18, the company reported consolidated total revenue of Rs. 6, Cr. Key Financial Indicators of JSW Projects Limited Key Parameters Units FY FY 16-1 Result Type Audited Audited Operating Revenue Cr EBITDA Cr PAT Cr Tangible Net worth Cr Total Debt/Tangible Net worth Times Current Ratio Times Rating History for the last three years S.No Instrument /Facility Current Rating (2018) Rating History Type (Long Term/ Short Term) Amount ( Crs) Rating 28 Mar Fund Based 1 NCDs Long Term 2 NCDs Upgrade of rating to BWR AA-(SO) (Stable) Assignment of BWR A (SO) (Stable) to JSW Projects Limited Withdrawal of BWR A(SO) (Stable) for Unity Advisory Services Pvt. Ltd. Total Cr (Eight Hundred and Fifty Crores Only) Status of non-cooperation with previous CRA (if applicable) - NA 4 14 May 2018

5 Any other information 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 Media Relationship Contact 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. 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 10,00,000 Cr. In addition, BWR has rated over 6300 MSMEs. Also, Fixed Deposits and Commercial Papers etc. worth over 24,440 Cr have been rated May 2018

6 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 May 2018