Press Release. Rating 1. Rating Action. CARE A1+ (A One Plus) Reaffirmed

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1 Bahadur Chand Investments Pvt Ltd November 20, 2018 Ratings Amount Facilities Commercial Paper (CP) issue 3000 (enhanced from 2500) Total 3000 (Rupees Three Thousand Crore Only) Details of instruments/facilities in Annexure-1 Rating 1 CARE A1+ (A One Plus) Rating Action Reaffirmed Detailed Rationale & Key Rating Drivers The rating of Bahadur Chand Investments Private Ltd (BCIPL) factors in the status of BCIPL and its parent company Brijmohan Lal Om Prakash (BMOP) as the holding companies of Hero MotoCorp Limited (HMCL) and financial flexibility emanating from the significant market valuation from the holding of the two entities (33.99% in HMCL; Market Value of around Rs.19,000 crore) as against the combined overall debt of Rs.3,796 crore in the two entities as on Nov 1, The rating also continues to derive strength from the strong promoter group with long track record, importance as the holding entities of Hero MotoCorp Limited, the flagship entity of the group having strong credit profile and exhibited track record of dividend payment. The rating assigned also takes comfort from the comfortable capital structure on combined basis, limited incremental investment requirement from the holding entities in the group entities and consequently their borrowings are not expected to increase significantly from the current levels. Also, the company intends to maintain commercial paper borrowings at around current levels. The ratings are however constrained by the dependence on dividend income from HMCL and predominance of shortterm borrowings in the overall debt profile of the company. The above ratings also factor in the maintenance of total borrowings (existing and future contingent exposures (including but not limited to corporate guarantee, undertaking etc.) of BCIPL and BMOP within a specified limit and maintenance of adequate cover (i.e. ratio of market value of HMCL shares held by the two holding entities to their total borrowings). Going forward, maintenance of holding in HMCL, sustenance of revenue and profitability through regular dividend income from investments, ability to maintain its leverage levels while funding any incremental requirement of the group, reduce the share of short-term borrowings either by securing long term funding or monetization of its investments would remain crucial. Also, any substantial change in market value of investments in HMCL would be critical. Detailed description of the key rating drivers Key Rating Strengths Strong promoter group and long track record of operations Bahadur Chand Investments Pvt Ltd (BCIPL) is the holding company of the Hero Group. The company is promoted by M/s Brijmohan Lal Om Prakash (BMOP), a partnership holding entity belonging to the BM Munjal Group which has a track record of over 60 years with diversified presence across more than 6 industry verticals encompassing Automotive & Auto Components, Financial Services, Renewable Energy, Electronics & IT Enabled Services, Higher Education & Training and Real Estate. Financial flexibility owing to significant market value of investments in listed shares of HMCL as against combined borrowings of the two entities and financing flexibility expected to support liquidity profile BCIPL along with BMOP holds significant investments in the form of listed shares of Hero MotoCorp Limited which provides adequate financial flexibility. As against the Book Value of investment of BCIPL and BMOP (combined) in HMCL of Rs.7628 crore (78% of total investment as on Sept-18), the market value of the combined holding of BCIPL and BMOP in HMCL stood at Rs.18,946 crore as on November 1, As against this, the overall debt in the two entities combined as stood at Rs.3796 crore, thus indicating adequate coverage in terms of Market Value of Holding to outstanding debt of 5 times as on November 1, 2018 and consequent ability to raise further debt if required. Going forward, maintenance of holding in HMCL by the two holding entities while maintaining debt levels within specified limits would continue to be key rating factors. Given the short term commercial papers borrowings, the company will be dependent on rollover of short term borrowings, however, given strong financing flexibility arising from holding of HMCL equity stake and being part of Hero Moto Group. 1 Complete definition of the ratings assigned are available at and other CARE publications 1 CARE Ratings Limited

2 Major investments in Hero MotoCorp Limited (flagship entity of the group) having strong financial risk profile resulting in significant dividend income BCIPL holds 20% stake in Hero MotoCorp Ltd and together with BMOP, holds 33.99% stake in HMCL as on September HMCL is the flagship entity of the group, being a leading producer of motocycles in the world with steady cash flows and liquidity. During FY18, BCIPL along with BMOP earned dividend income of Rs.582 crore (99% of the dividend income earned in FY18 was contributed by HMCL). Given the comfortable financial and credit risk profile and strong position of HMCL in the 2-wheeler industry, HMCL has exhibited a track record of regular dividend distribution over the last 20 years. Apart from HMCL, BCIPL and BMOP also hold equity investments in other hero group companies i.e. Hero FinCorp Limited, Hero Future Energies Private Limited (merged into Clean Solar Power Hariyur), Rockman Industries Limited, Hero Electronix Private Ltd, BML Educorp Services Limited, Hero InvestCorp Private Limited, Munjal ACME Packaging Systems Pvt Ltd. The book value of the combined investments of BCIPL and BMOP stood at Rs.9847 crore as on Sept 30, 2018 (Book Value of Investments was Rs.7628 crore where as book value of other investments stood at Rs.2219 crore). Comfortable financial risk profile with low overall gearing The financial risk profile of the BCIPL and BMOP (Combined) is marked by steady dividend income and comfortable capital structure. The holding companies derive income either through dividend income or sale of investments given the predominance of investments (Equity and Compulsorily Convertible Preference Shares) in their asset base. Also, the capital structure of BCIPL and BMOP is comfortable on a combined basis. The combined overall gearing (including contingent liabilities) was comfortable at 0.59x as on March 31, 2018 (as against 0.57x as on Mar-17). BCIPL has outstanding borrowings of Rs.3796 crore as on Nov 1, 2018 of which was primarily in the form of Commercial Paper borrowings (60%), Non-Convertible Debentures including accrued interest (25%), and Rs.4 crore as Corporate Guarantee for a group entity. Key Rating Weaknesses High Proportion of Short term borrowings in the overall debt mix BCIPL had issued commercial paper to fund the realignment of business interest. Consequently, short term borrowings constituted 60% of the overall borrowing mix of the two holding entities combined as on November 1, The ability of BCIPL to reduce the share of short-term borrowings either by securing long term funding or through monetization of its investments would remain crucial. Concentration risk due to high dependence on HMCL for dividend income BCIPL and BMOP (Combined) had 78% of their investment in HMCL as on September 30, Consequently, the holding entities are predominantly dependent on the performance of HMCL and the auto industry for its cash flows (through dividend income). However, HMCL has managed to sustain its position in the industry through various economic cycles and declared dividend consistently over the years. Analytical approach: Combined financials of BCIPL and BMOP based on status as holding companies of HMCL (the flagship entity of the group) with common management Applicable Criteria CARE s Policy on Default Recognition Criteria for Short Term Instruments Rating Methodology: Factoring Linkages in Ratings Financial ratios Financial sector Sector specific methodologies - Non Banking Financial Companies About the Company Bahadur Chand Investments Private Limited (BCIPL) was originally incorporated as a Private Ltd Company on 19th September, The company was converted from NBFC-ND-SI (Non Deposit Systematically Important Non Banking Finance Company) to NBFC-ND-SI-CIC (Core Investment Company) vide Reserve Bank of India (RBI) order dated October 20, The company belongs to the BM Munjal Group and is one of the holding companies of Hero MotoCorp Limited along with its parent Brijmohan Lal Om Prakash (BMOP) (a partnership firm holding 99.62% stake in BCIPL as on March 31, 2018). As on September 30, 2018, BCIPL and Mr. Pawan Munjal, Ms. Renu Munjal and Mr. Suman Munjal on behalf of Brijmohan Lal Om Parkash Partnership Firm (BMOP) were respectively holding 20% and 13.99% stake of the total promoter holding of 34.64% in HMCL. BCIPL and BMOP also hold equity and preference stake in a large number of group companies viz. Hero FinCorp Limited, Hero Future Energies Private Limited (merged into Clean Solar Power Hariyur), Rockman Industries 2 CARE Ratings Limited

3 Limited, Hero Electronix Private Ltd, BML Educorp Services Limited, Hero InvestCorp Private Limited, Munjal ACME Packaging Systems Pvt Ltd, etc. BCIPL (Standalone) Brief Financials FY17 (A) FY18 (A) Total operating income PAT Interest coverage (times) Total Assets Net NPA (%) ROTA (%) A: Audited BCIPL + BMOP (Combined) Brief Financials FY17 (UA) FY18 (UA) Total operating income 8, PAT 8, Interest coverage (times) Total Assets 9,803 9,805 Net NPA (%) ROTA (%) UA: Unaudited (Combined by CARE Ratings) Status of non-cooperation with previous CRA: Not Applicable Any other information: Not Applicable Rating History for last three years: Please refer Annexure-2 Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. This classification is available at Investors/market intermediaries/regulators or others are welcome to write to care@careratings.com for any clarifications. Analyst Contact: Name: Puneet Maheshwari Tel: Mobile: p.maheshwari@careratings.com **For detailed Rationale Report and subscription information, please contact us at About CARE Ratings: CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading credit rating agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an External Credit Assessment Institution (ECAI) by the Reserve Bank of India (RBI). CARE Ratings is proud of its rightful place in the Indian capital market built around investor confidence. CARE Ratings provides the entire spectrum of credit rating that helps the corporates to raise capital for their various requirements and assists the investors to form an informed investment decision based on the credit risk and their own risk-return expectations. Our rating and grading service offerings leverage our domain and analytical expertise backed by the methodologies congruent with the international best practices. 3 CARE Ratings Limited

4 Disclaimer CARE s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. CARE has based its ratings/outlooks on information obtained from sources believed by it to be accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facilities/instruments. In case of partnership/proprietary concerns, the rating /outlook assigned by CARE is based on the capital deployed by the partners/proprietor and the financial strength of the firm at present. The rating/outlook may undergo change in case of withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial performance and other relevant factors. Annexure-1: Details of Instruments/Facilities Name of the Instrument Date of Issuance Coupon Rate Maturity Date Size of the Issue Rating assigned along with Rating Outlook Commercial Paper Days-1 Year 2500 CARE A1+ Annexure-2: Rating History of last three years Sr. No. Name of the Instrument/Bank Facilities Type Current Ratings Amount Outstanding Rating Rating history Commercial Paper ST CARE A1+ - 1)CARE A1+ (26-Oct-17) CARE Ratings Limited

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