Appollo Ispat Complex Ltd.

2016 Credit Rating Report (Surveillance) CRAB I CRAB Ratings on Corporate Credit Digest I 12 May 2017 Page 1 of 5

Particulars Ratings Remarks BDT 2,734.0 Million Long-term Outstanding BDT 190.0 Million Cash Credit Equivalent Limit BDT 1,365.0 Million Short-term Funded Limit BDT 2,480.0 Million Short-term Non-funded Limit Outlook Lr- Loan rating, ST- Short Term, (Refer Appendix 2 for Rating History) Due to revolving nature, CRAB considers Cash Credit in the long-term rating scale. Date of Rating: 12 May 2016 BBB2 BBB2 (Lr) BBB2 (Lr) Stable Details are at Appendix 1 Validity: Entity rating is valid till 11 May 2017; loan ratings are valid up to limit expiry date of respective credit facilities or 11 May 2017 whichever is earlier. Rating based on audited financial statements up to 2015, bank liability (31 December 2015) and other relevant quantitative and qualitative information up to the date of rating declaration. Methodology: CRAB s Corporate Rating Methodology (www.crab.com.bd) Analysts Mir Arif Billah mab@crab.com.bd Md. Abdur Rahman Evan evan@crabrating.com Table 1: FINANCIAL HIGHLIGHT 2015 2014 Sales 5,137.0 4,946.7 Net Profit 509.0 373.6 EBITDA 1,158.0 1,022.5 Total Asset 10,986.0 9,891.6 Cash Flow From Operation 597.3 171.9 Shareholders' Equity 5,866.0 5,211.0 Borrowed Funded Loan Limit 4,289.0 4,132.0 Borrowed Fund Limit 6,769.0 5,452.0 Inventory Conversion Period 266 Days 349 Days Receivable Collection Period 135 Days 76 Days Payable Deferral Period 2 Days 3 Days Cash Conversion Cycle 399 Days 423 Days Quick Ratio 0.7 X 0.5 X Gross Profit Margin 22.2% 20.1% EBITDA Margin 22.5% 20.7% Net Profit Margin 9.9% 7.6% Return on Capital Employed 6.3% 5.0% Fixed Asset Turnover 1.8 X 1.4 X Borrowed Fund to Equity 0.7 X 0.8 X Sales to Borrowed Fund (Limit) 2.4 X 1.9 X Debt Service Coverage Ratio 1.0 X 1.0 X Times Interest Earned Ratio 1.8 X 1.7 X Cash Flow From Operation to Sales 11.6% 3.5% Note: Amount in BDT Million RATIONALE the Company increased by 11.1% over past year. Total Shareholders Equity was BDT 7,007.0 million as of June 2015. Equity Debt position improved in recent year of the Company due to listing in capital market and timely repayment of long-term loan. Borrowed Fund to Equity improved to 0.7 X from 0.8 X. In addition, Sales to Borrowed Fund increased to 2.4 X. Credit Rating Agency of Bangladesh Ltd. has upgraded rating of to BBB2 (Pronounced Triple B Two) from BBB3. CRAB has also upgraded the rating of BDT 2,734.0 million long-term loan and BDT 190.0 million cash credit loan of the Company to BBB2 (Lr). CRAB has upgraded to rating in the shortterm of BDT 1,365.0 million funded and BDT 2,480.0 million non-funded loan. CRAB assigned Stable Outlook to the ratings of Appollo Ispat Complex Ltd., a public limited company, started its commercial operation in 1997. The Company is engaged in manufacturing and selling of Galvanized Corrugated Iron sheet through Galvanizing unit and manufacturing Cold Sheet from Hot Rolled coil. In 2013, the Company got listed in the capital market. The Company had BDT 10,986.0 million total assets comprised of 26.9% Inventory, 25.8% Property, Plant and Equipment and 17.5% Accounts Receivable. The Company had also invested BDT 101.0 million in Palash Spinning Ltd. and Phoenix Holdings Ltd. CRAB considers this is poor investment since the companies are not in operation for years. In 2015, total asset of Page 2 of 5

In 2015, total revenue of the Company was BDT 5,137.0 million, which was 3.8% lower compared to previous year. Cost of Goods Sold percent to Sales also slightly improved in 2015. Lengthy Cash Conversion Cycle put the Company weak liquidity position. Huge inventory piling and lingering collection period put the Company 399 Day Cash Conversion Cycle. Slightly improvement in operating performance also helped the Company improved cash flow position. In 2015, Cash Flow From Operation stood BDT 597.3 million, which was 2.5 times of 2014. For the first time in recent past, the Company saw positive Free Cash Flow in 2015 viz. BDT 327.3 million despite having BDT 270.0 million capital expenditure. Sales increases positively impacted on overall profitability ratios. COGS as percent of Sales decreased slightly. Moreover, operating cost efficiency helped the Company get higher EBIT Margin (20.7%). CRAB observed improved Fixed Asset Turnover ratio (1.8 X). CRAB observed improved leverage position and comfortable coverage position. Sales to Borrowed Fund increased to 2.4 X from 1.9 X. CRAB observed modest Coverage position of the Company. In 2015, Debt Service Coverage Ratio was marginally one, however, Times Interest Earned Ratio was in more comfortable zone viz. 1.8 X. Companies rated in this category have adequate capacity to meet financial commitments, but are more susceptible to adverse economic conditions or changing circumstances. Page 3 of 5

Appendix 1: Bank loan facilities of (31 December 2015) Sl. Bank Facility Term Category Fund Category Sanctioned Outstandi ng Expiry Date 1 IFIC Bank Term Loan Long-term Funded 800.0 654.0 21-Jan-18 2 IFIC Bank Term Loan Long-term Funded 68.0 68.0 31-Dec-16 3 IFIC Bank Term Loan Long-term Funded 101.0 101.0 31-Dec-16 4 Bank Asia Term Loan Long-term Funded 37.0 30.0 29-Dec-17 5 Bank Asia Term Loan Long-term Funded 219.0 189.0 29-Dec-18 6 Bank Asia Term Loan Long-term Funded 15.0 13.0 29-Dec-17 7 Bank Asia Term Loan Long-term Funded 151.0 115.0 16-Aug-17 8 Bank Asia Term Loan Long-term Funded 51.0 38.0 16-Aug-17 9 NCC Bank Term Loan Long-term Funded 370.0 234.0 31-Dec-16 10 Mercantile Bank Term Loan Long-term Funded 329.0 213.0 31-Dec-17 11 Social Islami Bank Term Loan Long-term Funded 266.0 135.0 9-Feb-18 12 Mutual Trust Bank Term Loan Long-term Funded 200.0 118.0 30-Jun-18 13 Mutual Trust Bank Term Loan Long-term Funded 45.0 21.0 30-Dec-16 14 Mutual Trust Bank Term Loan Long-term Funded 28.0 13.0 30-Dec-16 15 Mutual Trust Bank Term Loan Long-term Funded 85.0 61.0 30-Jun-16 16 Islamic Finance and Investment Term Loan Long-term Funded 150.0 147.0 10-Apr-20 17 Southeast Bank Term Loan Long-term Funded 200.0 152.0 31-Mar-16 18 19 Phoenix Finance and Investments Phoenix Finance and Investments Term Loan Long-term Funded 280.0 282.0 31-Dec-20 Term Loan Long-term Funded 50.0 50.0 30-Jun-21 20 Jamuna Bank Overdraft Short-term Funded 40.0 40.0 30-Apr-16 21 Jamuna Bank Time Loan Short-term Funded 60.0 60.0 30-Apr-16 22 Jamuna Bank Short-term Funded 150.0 150.0 30-Apr-16 23 IFIC Bank Overdraft Short-term Funded 150.0 150.0 30-Apr-16 24 IFIC Bank Short Term Loan Short-term Funded 100.0 100.0 30-Apr-16 25 IFIC Bank Demand Loan Short-term Funded 197.0 197.0 30-Apr-16 26 IFIC Bank Short-term Funded 130.0 173.0 30-Apr-16 27 GSP Finance Company Lease Finance Long-term Funded 100.0 100.0 22-Dec-16 28 Mutual Trust Bank 29 Southeast Bank Short-term Funded 128.0 40.0 27-Aug-16 Short-term Funded 600.0 58.0 31-Dec-16 30 IFIC Bank Letter of Credit Short-term Non-funded 1,000.0 800.0 31-Dec-16 31 Jamuna Bank Letter of Credit Short-term Non-funded 680.0 390.0 30-Apr-16 32 Mutual Trust Bank Letter of Credit Short-term Non-funded 200 120 27-Aug-16 33 Southeast Bank Letter of Credit Short-term Non-funded 600.0 0.0 31-Dec-16 Note: Amount in BDT Million www.crab.com.bd; www.crabrating.com Page 4 of 5

CRAB RATING SCALES AND S Long Term (Corporate) AAA Triple A AA1, AA2, AA3* Double A A1, A2, A3 Single A BBB1, BBB2, BBB3 Triple B BB1, BB2, BB3 Double B Companies rated in this cat egory have extremely strong ca pacity to meet financial commit ments. These companies are judged to be of the highest quality, with minimal credit risk. Companies rated in this category have very strong ca pacity to meet financial commit ments. These companies are judged t o be of very high quality, subject t o v ery low credit risk. Companies rated in t his cat egory have strong ca pacity to meet financial commit ment s, but are susceptible to the adverse eff ects of changes in circumstances and economic conditions. These compa nies are judged to be of high quality, subject to low cr edit risk. Companies rated in this category have a dequate capacity t o meet financial commit ments but more susceptible to adverse economic conditions or changing circumsta nces. These companies are subject to moderate credit risk. Such compa nies possess certain speculative characteristics. Companies rated in this category have ina dequat e ca pacity to meet financial commit ment s. Have ma jor ongoing uncertainties and exposure t o adverse business, financial, or economic conditions. These compa nies have speculative element s, subject to substantial credit risk. B1, B2, B3 Companies rated in this cat egory have weak capacity to meet financial commit ments. These companies have speculative elements, subject t o high credit risk. Single B CCC1, CCC2, Companies rated in this category have very weak capacity to meet fina ncial obligations. These companies have very weak standing and are subject to v ery high credit CCC3 risk. Triple C CC Companies rated in this cat egory have extremely w eak capacity to meet fina ncial obligations. These companies are highly speculative and are likely in, or very near, Double C default, with some prospect of recovery of principal and int erest. Companies rated in t his category are highly vulnerable to non-pay ment, have pay ment arrearages allow ed by t he ter ms of the documents, or subject of bankruptcy C petition, but have not experienced a pay ment default. Payments may have been suspended in a ccordance with the instrument's t er ms. These compa nies are typically in Single C default, with little prospect for recovery of principal or int erest. D D rating will also be used upon the filing of a ba nkruptcy petition or similar action if pay ments on a n obligation are jeopardiz ed. (Default) *Not e: CRAB a ppends numerical modifiers 1, 2, a nd 3 to each generic rating classification from AA through CCC. The modifier 1 indicates t hat the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicat es a ranking in the low er end of that generic rating cat egory. LONG-TERM RATING: LOANS/FACILITIES FROM BANKS/FIS (All loa ns/facilities with original mat urity exceeding one year) AAA (Lr) Loans/facilities rated AAA (Lr) are judged to off er the highest degree of safety, with regard to timely pay ment of fina ncial obligations. Any adverse changes in (Triple A) circumsta nces are unlikely to affect t he pay ments on t he loan facility. Highest Safety AA (Lr)* Loans/facilities rated AA (Lr) are judged t o off er a high degree of saf ety, with regard t o timely pay ment of financial obligations. They diff er only marginally in saf ety (Double A) from AAA (Lr) rated facilities. High Safety A (Lr) Loan/facilities rated A (Lr) are judged to off er an adequate degree of safety, wit h regard t o timely pay ment of financial obligations. How ever, changes in Adequate Safety circumsta nces can adv ersely affect such issues more t han t hose in t he higher rating cat egories. BBB (Lr) Loans/facilities rated B BB (Lr) are judged to offer moderate safety, wit h regard to timely pay ment of fina ncial obligations for the present ; how ever, changing (Triple B) circumsta nces are mor e likely to lead to a w eakened ca pacity to pay int erest and repay principal t han for issues in higher rating cat egories. Moderate Saf ety BB (Lr) Loans/facilities rated B B (Lr) are judged to carry inadequat e safety, with regard to timely pay ment of fina ncial obligations; they are less likely to default in the (Double B) immediate fut ure than instrument s in low er rating categories, but a n a dverse change in circumstances could lead to ina dequate capa city to make pay ment on Ina dequate financial obligations. Saf ety B (Lr) Loans/facilities rated B (Lr) are judged t o have high risk of default; while currently financial obligations are met, a dverse business or economic conditions would High Risk lead t o lack of ability or willingness t o pay int erest or principal. CCC (Lr) Loans/facilities rated CCC (Lr) are judged t o have factors present t hat make them very highly vulnerable to default ; timely pay ment of financial obligations is V ery High Risk possible only if favorable circumstances continue. CC (Lr) Extremely High Loans/facilities rated CC (Lr) are judged to be extremely vulnerable t o default ; timely pay ment of financial obligations is possible only through external support. Risk Loans/facilities rated C (Lr) are currently highly vulnerable to non-pay ment, having obligations with pay ment arrearages allow ed by t he t er ms of the documents, or C (Lr) obligations t hat are subject of a bankruptcy petition or similar action but have not experienced a pay ment defa ult. C is typically in default, with little prospect for Near to Default recovery of principal or int erest. C (Lr) are typically in default, with little prospect for recov ery of principal or int erest. D (Lr) Loans/facilities rated D (Lr) are in default or are expect ed to default on scheduled pay ment dat es. Defa ult *Not e: CRAB a ppends numerical modifiers 1, 2, a nd 3 to each generic rating classification from AA through CCC. The modifier 1 indicates t hat the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicat es a ranking in the low er end of that generic rating cat egory. SHORT-TERM CREDIT RATING: LOANS/FACILITIES OF BANKS/FIS (All loa ns/facilities with original mat urity within one year) ST-1 This rating indicat es t hat the degree of safety regarding timely pay ment on the loans/facilities is v ery strong. Highest Grade ST-2 This rating indicates that t he degree of safety regarding timely payment on t he loa ns/facilities is strong; how ever, the relative degree of saf ety is lower tha n that for High Grade issues rated higher. This rating indicat es that t he degree of safety regarding timely pay ment on the loans/facilities is adequate; how ever, the issues are more vulnerable t o t he adv erse Adequate effects of cha nging circumstances than issues rated in the two higher categories. Grade ST-4 This rating indicat es that the degree of safety regarding timely pay ment on the loans/facilities is marginal; and t he issues are quite vulnerable to t he adverse eff ects Marginal of cha nging circumstances. ST-5 This rating indicat es t hat the degree of saf ety regarding timely pay ment on t he loans/facilities is minimal, and it is likely to be adversely affect ed by short-ter m Inadequate adversity or less favorable conditions. Grade ST-6 This rating indicat es t hat the loans/facilities are expect ed t o be in default on maturity or is in default. Low est Grade Copyright 2016, CREDIT RATING AGENCY OF BANGLADESH LIMITED ("CRAB"). All rights reserved. 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