Press Release

PNP Maritime Services Pvt Ltd.

April 17, 2017

Ratings Amount Bank Facilities Ratings1 Remarks (Rs. crore) CARE AA(SO), Stable Long-term Bank 141.25 [Double A (Structured Obligation, Reaffirmed Facilities^ Outlook: Stable] Long-term Bank 77.21 CARE BBB+, Stable Reaffirmed Facilities [Triple B Plus, Outlook: Stable ] Total 218.46 (Rupees two hundred eighteen crore and forty six lakhs only) Details of instruments/facilities in Annexure-1 ^backed by an unconditional and irrevocable guarantee from Shapoorji Pallonji and Company Pvt. Ltd (SPCPL, rated ‘CARE AA+, Stable’) for maintaining revolving Debt service reserve account (DSRA) for an amount payable towards scheduled one quarter interest and one quarter principal for immediately succeeding quarter during the tenure of the facility Detailed Rationale & Key Rating Drivers The rating reaffirmation of the bank facilities of PNP Maritime Services Private Limited (PNP) principally derives comfort from the credit enhancement in the form of an unconditional and irrevocable guarantee from SPCPL for maintaining revolving DSRA for an amount payable towards scheduled one quarter interest and one quarter principal for immediately succeeding quarter during the tenure of the facility. The ratings remain sensitive to any variation in credit profile of SPCPL and PNP’s adherence to various covenants of the bank facility. The rating reaffirmation of the bank facilities of PNP continues to derive strength from 100% ownership of Dharamtar port (port) with PNP and increase in the financial flexibility with the acquisition of 50.0%plus 1 share equity stake in PNP by the strong and resourceful Shapoorji Pallonji group through SPCPL. The favourable location of port, operational history of the port for more than a decade, enhanced revenue visibility with the additional activities such as cargo handling to be undertaken by PNP and moderate debt service indicators are other credit positives. The above rating strengths are tempered by high working capital intensity of the operations, volatility in Profit-before- interest-lease-deprecation and tax (PBILDT) margin and susceptibility of the operations to the economic cycle.

Going forward, the impact on the operations and financials of PNP subsequent to change in the ownership of PNP constitutes the key rating sensitivity. Rating Rationale of the Credit Enhancement provider- SPCPL SPCPL, the holding-cum-operating company of the Shapoorji Pallonji Group (refers to companies ultimately held by Mr. Shapoor P. Mistry and Mr. Cyrus P. Mistry), is one of the leading construction companies of . SPCPL is equally held by Mr. Shapoor P. Mistry and Mr Cyrus P. Mistry through the group’s investment companies. The Shapoorji Pallonji Group is conglomerate with business interests in several sectors such as real estate, coal mining, power, ports, roads, biofuels & agriculture, shipping & logistics, consumer products, textiles etc. From FY11 onwards, Shapoorji Pallonji Group primarily focused on three divisions i.e. Construction, Real Estate and Infrastructure and especially businesses/projects where entry barriers are high. Construction division continues with focus on quality clients in the domestic and international markets. Besides, real estate will be very selective with the focus on affordable, premium housing in major cities. The Shapoorji Pallonji Group through its various companies has been executing prestigious projects across the globe having a huge order book. SPCPL has entered into infrastructure sector through development of a couple of road projects, and forayed into the EPC segment through the acquisition of Afcons Infrastructure Ltd (AIL), and into ports, FPSO segment, oil & gas segments through JVs and recently into solar (200 MW under execution) and water management projects. The Shapoorji Pallonji Group is the largest private shareholder of Tata Sons Ltd (TSL, holding company of the Tata group) with 18.37% stake, providing substantial financial flexibility to the various group companies and strengthening its credit profile. During FY16 (refers to the period April 1 to March 31), SPCPL reported PAT of Rs. 110 crore on the total income of Rs. 5,894 crore as against a PAT Rs.62 crore on the total operating income of Rs. 4,777 crore during FY15. For detailed rating rationale of SPCPL please refer to our website www.careratings.com

1 Complete definitions of the ratings assigned are available at www.careratings.com and in other CARE publications. 1 Credit Analysis & Research Limited

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Detailed description of the key rating drivers Key Rating Strengths Favourable location of port and major clearances in place for existing waterfront Dharamtar is a tri-modal minor port with rail, road, and sea connectivity in the state of . The port is in close proximity to , Nhava Sheva ports as well as state highways, National Highways and Mumbai-- railway line.The port has permission to handle all cargoes except hazardous cargo and has customs notified area admeasuring 64.51acres. PNP has railway siding with an approval of single rake which has capacity to handle 3500 metric tonne and around 4.5 rakes per day can be handled whereas truck can handle 16 metric tonne. Further the company has all the required clearances for the development of the adjacent land also purchased by the company for further expansion. Furthermore, as per the management, the earlier lease was for only 1 km waterfront. PNP obtained additional lease for 1 km waterfront for which environmental clearance has been received. The existing 1 km water front is capable of handling ~7 million tonnes (MMT) cargo per annum.

Revenue visibility and benefits in marketing with change in 50% ownership Due to seasonality of the operations on account of lean period during monsoon i.e. June to September, the operations are primarily carried out during the remaining part of the year. During FY16, PNP entered into annual contracts for around 3.7 MMT for coal from the institutional clients as against estimated 3.39 MMT for FY16. All major contracts are immediately renewed on expiry as major customers are always having cargo movement at the port. The above orders provide revenue visibility for the medium term. Further, all the contracts entered by the company have a minimum off-take clause. Besides, being a part of Shapoorji Pallonji Group, ability of PNP to fetch orders from larger players is likely to improve. Nonetheless, the estimated pick-up in the economic activity remains crucial. Improved Operating Margins and Debtors collection period

During FY13 and FY14, PBILDT margin was in the range of 24-26% due to port service income and catamaran service. However, in FY15, PBILDT margin of PNP declined to ~14.76% since there was substantial increase in the expenses especially fuel charges and internal transportation cost. However, in FY16 the operations of the project stabilised and the operation margin improved to ~36%. PNP provides extended credit periods only to major clients. The company has improved its collection period in FY16 mainly due to stringent payment terms entitling PNP to hold cargo amounting to equivalent of the outstanding dues of the customers. DSRA guaranteed structure for part of term loan facilities aggregating Rs. 141.25 crore Certain existing term and equipment financing loan facilities are backed by an unconditional and irrevocable guarantee from SPCPL for maintaining revolving Debt service reserve account (DSRA) for an amount payable towards scheduled one quarter interest and one quarter principal for the immediately succeeding quarter throughout the tenure of the facility. Key Rating Weaknesses

Working capital intensity nature of operations in the past The receivable days prior to FY16 were on higher side (~90-100 days) primarily due to stretched payment terms for one of the major client. PNP has since majorly entered into contract and received 50% of the contracts in advance and balance 50% within 15-20 days on the unloading of the cargo. The goods are released by PNP only on receipt of 100% amount from the client. PNP proposes to manage without extending any advance and availing credit period of 30 days. As a result, the reliance on limit is likely to be lower. Since the above plans are yet to fructify, ability to manage the working capital cycle remains crucial in the backdrop of increase in the scale of operations.

Analytical approach:

The credit assessment of PNP Maritime Services takes into account the financial performance of Dharamtar Port and also that of the Credit Enhancement Provider i.e. SPCPL.

i. For Standalone Rating – The credit risk assessment primarily encompasses the evaluation of standalone financials of PNP Maritime Services. ii. For Structure Obligation Rating - the Guarantor’s assessment is covered

Applicable Criteria

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I. Criteria on assigning Outlook to Credit Ratings II. CARE’s Policy on Default Recognition III. Criteria for Short Term Instruments IV. Rating Methodology: Factoring Linkages in Ratings V. Infrastructure Sector Ratings (ISR)

About the Company

PNP, incorporated in 1999, is promoted by Mr Jayant Patil. PNP has been authorized to develop a Minor Port in Dharamtar Creek by Maharashtra Maritime Board (MMB) under the Minor Port Development Scheme of the Government of Maharashtra, providing port-related facilities for the handling of bulk and containerised cargoes from vessels anchoring in Mumbai Harbour. MMB has granted a 30-year lease to PNP which commenced on October-1999 and shall end in 2029 which is extendable by additional 20 years. PNP pays wharfage charges to MMB. In 2005, PNP partnered with United Shippers Ltd. (USL) to establish Dharamtar Infrastructure Ltd. (DIL) for port development and managing logistics needs of the port. Since then, DIL commenced procuring land and developing for port usage and container business. In May 2015, USL sold its entire equity stake in DIL to PNP and DIL became wholly-owned subsidiary of PNP with effect from May 6, 2015. Subsequently, SPCPL, the holding-cum-operating company of SP group acquired 50.01% stake in PNP from the promoters. The SP group has presence in the development of infrastructure such as port through Afcons Infrastructure Ltd. and the acquisition of equity stake in PNP is to further increase its presence in the infrastructure space such as ports. Status of non-cooperation with previous CRA: NA

Any other information: NA

Rating History for last three years: Please refer Annexure-2

**For detailed Rationale Report and subscription information, please contact us at www.careratings.com

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. 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.

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Annexure-1: Details of Instruments/Facilities Name of the Date of Coupon Maturity Size of the Issue Rating assigned Instrument Issuance Rate Date (Rs. crore) along with Rating Outlook Fund-based - LT-Term Loan - - Sep 30, 141.25 CARE AA (SO); 2024 Stable Fund-based - LT-Cash Credit - - - 35.00 CARE BBB+; Stable Non-fund-based - LT-Bank - - - 15.00 CARE BBB+; Guarantees Stable Fund-based - LT-Term Loan - - Mar 31, 27.21 CARE BBB+; 2023 Stable

Annexure-2: Rating History of last three years Sl Name of the Current Ratings no. Instrument/Bank Type Amount Rating Date(s) & Date(s) & Date(s) & Facilities Outstanding Rating(s) Rating(s) assigned Rating(s) (Rs. crore) assigned in in 2015-2016 assigned in 2016-2017 2014-2015 1. Fund-based - LT-Term Loan LT 141.25 CARE AA - 1) CARE AA (SO) - (SO); Stable (08-Mar-16) 2) CARE AA (SO) (15-Jul-15)

2. Fund-based - LT-Cash Credit LT 35.00 CARE BBB+; - 1) CARE BBB+ - Stable (08-Mar-16) 2) CARE BBB+ (26-Oct-15)

3. Non-fund-based - LT-Bank LT 15.00 CARE BBB+; - 1)CARE BBB+ - Guarantees Stable (08-Mar-16)

4. Fund-based - LT-Term Loan LT 27.21 CARE BBB+; - 1)CARE BBB+ - Stable (08-Mar-16)

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