Brickwork Ratings reaffirms ratings for the Non-Convertible Debentures/Bonds Issue of Crores of Dolvi Minerals & Metals Pvt. Ltd.

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1 Rating Rationale Dolvi Minerals & Metals Pvt. Ltd. 30 th March 2019 Brickwork Ratings reaffirms ratings for the Non-Convertible Debentures/Bonds Issue of Crores of Dolvi Minerals & Metals Pvt. Ltd. (DMML) Particulars Instrument Issue Date Previous ( Crores) Present ( Crores) Coupon Maturity Date ISIN Particulars Review Rating* NCD (Tranche I) NCD (Tranche II) 7th Oct th Oct Zero Zero 22nd Oct nd Oct 2019 INE392R08012** INE392R08020 ( A Minus (Structured Obligation)) (Outlook: Stable) Reaffirmed Total INR Seven Hundred Crores *Please refer to website for definition of the ratings **As per Company, NCDs of face value face value Rs. 10 lakh each were partially paid up to the extent of Rs.5 lakh each, aggregating to Rs. 350 Crore under the ISIN INE392R After payment of balance amount of Rs. 5 lakh per debenture, the debentures subsequently became fully paid up to Rs.10 lakh each aggregating to 700 Crore under a new ISIN- INE392R Consequently, the old ISIN INE392R08012 was thereby closed/substituted with the new ISIN. Rating: Reaffirmed Rationale/Description of Key Rating Drivers/Rating sensitivities: The rating with SO subscript primarily factors the support of JSW group and DMMPL's subsidiary DCPL's coke purchase agreement with JSW Steel. DMMPL has become wholly owned subsidiary of JSW Steel from October 2018 onward. It also factors the Put Option structure incorporated in the transaction through another group Company JSW Projects Ltd and the letter of comfort provided by JSW Investments Ltd. However, the rating is constrained by high dependence on the continued support from JSW Steel Ltd. in terms of purchase of entire coke from Dolvi Coke Projects Ltd. (DCPL) which is 100% owned by DMML and the tail risk embedded in the issue should the merger with JSW Steel does not go through. However, 1.5 MTPA project has started its commercial operation of Battery A (0.75 MTPA) w.e.f. 1 st November 1

2 2018 and Battery B (0.75 MTPA) is presently under trial run, which reduces the implementation risks. has essentially relied upon the terms of issue shared with us, financial results of DMML and JSW Steel for FY18, 9M FY19 and JSW Projects Ltd. for FY18 and information and clarifications provided by DMML. Description of Key Rating Drivers Credit Strengths: Promoter Support: DMML became wholly owned subsidiary of JSW Steel Ltd., post-acquisition of % of share capital of DMML in October JSW Investment Pvt. Ltd. has provided Letter of Comfort for the NCDs, and JSW Project Ltd. has provided Put option, which is owned by Sajjan Jindal Family Trust. JSW Projects has a 1.2 MTPA COREX gas based DRI plant MTPA of Coke Dry Quenching (CDQ) plant and 76 MW CPP at Vijayanagar. Project Completion Status: DMML through its wholly owned subsidiary DCPL, is setting up 1.5 MTPA recovery type coke oven plant located at Dolvi, District Raigad, Maharashtra, consisting of 2 coke oven batteries of capacity of 0.75 MTPA each. Commercial operation of Battery A (0.75 MTPA) has started w.e.f. 1 st November 2018 and Battery B (0.75 MTPA) is presently under trial run. The Cost of project was ~Rs.2000 Crs, of which Rs.1930 Crs has been incurred as of Dec 18. Off take arrangement with JSWSL: DMML also has an agreement with JSWSL towards purchase of entire coke from Dolvi Coke Projects Ltd. (DCPL) which is 100% owned by DMML. Credit Risks: Tail Risk: Redemption of entire NCDs including premium, is due in Oct 19, which poses a tail risk. However, the project is almost completed and DMML is a wholly owned subsidiary of JSWSL. Further, JSWSL has filed a scheme of amalgamation of DMML, DCPL, JSPCL, and JSW Salav with JSW Steel in Nov 18. Post-merger, the redemption is expected to be from JSWSL cashflows, which mitigates the tail risk. Terms of the Issue: DMML raised Rs.700 Crores by issue of NCDs with a tenor of 5 years and 15 days in two tranches of Rs.350 Crs each. The NCDs was secured by pledge 40% equity shares of DMML held by JSW Steel Ltd. The terms of issue require the issuer to fund the Debt Service Account 15 days before the due date and also provide that if the issuer fails to provide required funds accordingly, the investors, through the debenture trustee can exercise the put option on JSW Projects Ltd. (JPL). In addition, another group company JSW Investments Pvt. Ltd. also provided a Letter of Comfort for the NCD issue by DMML. The entire proceeds from the issue had been used by Dolvi Minerals and Metals Pvt. Ltd to purchase 100% stake in Dolvi Coke Projects Ltd., which is setting up a 1.5 MTPA recovery Coke oven plant at located at Dolvi, District Raigad, Maharashtra. 2

3 Analytical Approach For arriving at its ratings, has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale). Rating Outlook: Stable believes the Dolvi Minerals & Metals Pvt. Ltd. business risk profile will be maintained over the medium term. The Stable outlook indicates a low likelihood of rating change over the medium term. The rating outlook may be revised to 'Positive' in case the revenues and profit show sustained improvement. The rating outlook may be revised to 'Negative' if the revenues go down and profit margins show lower than expected figures. About the Company Dolvi Minerals & Metals Pvt Ltd (DMML), earlier promoted by Vinamra Consultancy Pvt. Ltd. was incorporated on August 22, 2014 with a paid-up capital of Rs.One Lac. Its share Capital increased to Rs.100 Crs in FY15. Further it increased to Rs.350 Crs in Oct 18. At present JSW Steel Ltd. holds ~100% in DMML. At present Mr. Anunay Kumar, Mrs. Saswati Goswami, and Mr. Gajraj Singh Rathore are the Directors of the Company. DMML is engaged in the business of acting as traders, whole-sellers and retailers in all forms of metallic and non-metallic minerals, which includes coal and lignite, coal products and iron and steel products etc. Company Financial Performance Incorporated in August 2014, DMML showed a consolidated revenue of Rs Crs in 9M FY19 as compared to Rs Crs in FY18 with a loss of Rs Crs in 9M FY19 (Rs Crs in FY18). It expects to generate a substantial portion of revenue from the dividend income from its investment in Dolvi Coke Projects Ltd. and from trading activities. Its consolidated total borrowings stood at Rs.1759 Crs as against consolidated Net-worth of Rs Crs as of Dec 18. Rating History for the last three years S.No Instrument /Facility Current Rating Rating History Type (Long Term/ Short Term) ( Crs) Rating Mar 2018 Feb 2017 Jan

4 1 NCD (Tranche I) Long Term - 2 NCD (Tranche II) Long Term ( A Minus (Structured Obligation)) (Outlook: Stable) Reaffirmed Total Seven Hundred Crores Only Status of non-cooperation with previous CRA (if applicable)-reason and comments: NA Key Financial Indicators Key Parameters Units Result Type Operating Revenue Cr EBITDA Cr PAT Cr Tangible Net worth Cr Total Debt Cr Current Ratio Times Hyperlink/Reference to applicable Criteria General Criteria Approach to Financial Ratios For any other criteria obtain hyperlinks from website Analytical Contacts Bala Krishna Piparaiya Senior Director-Ratings Media media@brickworkratings.com 4

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