Press Release

Malwa Strips Private Limited March 30, 2017 Ratings Facilities Amount Ratings1 Rating Action (Rs. crore) Long-term Bank Facilities 6.00 CARE BB-; Stable Assigned (Double B Minus; Outlook: Stable) Short-term Bank Facilities 3.25 CARE A4 Assigned (A Four) Total 9.25 (Rupees Nine crore and twenty five Lakh only) Details of instruments/facilities in Anneuxre-1

Detailed Rationale & Key Rating Drivers The ratings assigned to the bank facilities of Malwa Strips Private Limited (MSPL) are primarily constrained on account of its fluctuating total operating income (TOI) and profitability margins during last three financial years ended FY16 (refers to the period April 1 to March 31) along with its moderate solvency position and stressed liquidity position. The ratings are further constrained on account of its presence in a highly competitive industry with high dependence on the prospects of power and infrastructure sector. The ratings, however, derives strength from the experienced and qualified promoters with long track record of operations in the industry, its ISO certified manufacturing facility along with long standing relationship with its clientele base. MSPL’s ability to increase its scale of operations while maintaining/improving profitability in light of volatile raw material prices along with improvement in the solvency position and efficient management of working capital shall be the key rating sensitivities.

Detailed description of the key rating drivers Key Rating Weakness Fluctuating TOI and profitability margins The scale of operations of the company has witnessed fluctuating trend in last four financial years ended FY16 (refers to the period April 1 to March 31). During FY15, TOI of the company increased by 30.90% over FY14 whereas in FY16, TOI has declined by 9% over FY15 owing to owing to fluctuation in raw material prices. Furthermore, profitability of the company has witnessed fluctuating trend in last four financial years ended FY16 owing to volatile raw material prices and other manufacturing expenses. During FY16, the PBILDT margin improved over FY15 owing to low raw material cost. In line with improvement in PBILDT margin, PAT margin has also improved over FY15, although lower in quantum as compared to increase in PBILDT margin owing to higher depreciation and interest expenses.

Moderate solvency position and stressed liquidity position The capital structure of MSPL stood moderately leveraged although improved as on March 31, 2016, primarily due to scheduled repayment of term loans and accretion of profits to reserves, which was offset extended by higher utilization of its working capital borrowings as on balance sheet date. Furthermore, the debt coverage indicators of the company stood moderate with total debt to GCA at 5.69 times as on March 31, 2016 and interest coverage ratio of 1.66 times in FY16. The liquidity position of the company is stressed owing to full utilization of its working capital bank borrowings during the last 12 months ended January, 2017. The current ratio stood moderate at 1.27 times as on March 31, 2016 whereas quick ratio stood below unity at 0.70 times as on March 31, 2016 mainly due to higher inventory. Furthermore, the operating cycle stood moderate at 66 days in FY16.

Presence in highly competitive industry with demand of the products linked to the outlook of power and infrastructure sector

1Complete definitions of the ratings assigned are available at www.careratings.com and in other CARE publications.

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MSPL supplies its products to the manufacturers of electrical equipments which finds it application in transmission & distribution of electricity. The demand of MSPL’s products is linked to investment in the power and infrastructure sector in . The risk would be partially mitigated through expand of its – clientele base. The revenue stream will be diversified through addition of the customers and increase in supplies to the sectors other than power sector including electrical equipments, automobiles.

Key Rating Strengths Experienced and qualified promoters with long track record of operations in the industry Mr Dilip Doshi, director, is a post graduate by qualification and has more than three decade of experience in the copper industry. He looks after overall affairs of the company and is supported by Mrs Payal Doshi. Furthermore, the directors are assisted by Mr V M Tripathi, who looks after production function of the company and by Mr Saboo who looks after marketing function of the company.

Certified manufacturing facilities and long standing relationship with clientele The manufacturing facility of MSPL is ISO 9001:2008 certified. The products manufactured by MSPL finds its application in various industries such as power and infrastructure industries. The major customers of MSPL include Indian Railways, Bharat Heavy Electricals Limited (BHEL) and Crompton Greaves Limited. Furthermore, the company is also doing job work for other companies.

Analytical Approach: Standalone

Applicable Criteria Criteria on assigning Outlook to Credit Ratings CARE’s Policy on Default Recognition Criteria for Short Term Instruments Rating Methodology-Manufacturing Companies Financial ratios – Non-Financial Sector

About the Company MSPL was incorporated in 1987 in Dewas (Madhya Pradesh) by Mr Dilip Doshi along with his family members. MSPL is engaged in the business of manufacturing of copper metal based products like copper bars, rods, strips, foils and other copper based products. The products of MSPL are mainly used in power and infrastructure sector. MSPL has its manufacturing facility situated at Dewas having an installed capacity of 120 Metric Tonnes Per Annum (MTPA) as on March 31, 2016. Major raw material used by MSPL is copper rods and copper strips. During FY16 (refers to the period April 1 to March 31), MSPL has reported a TOI of Rs.19.39 crore[FY15 (A):Rs.21.30 crore] with PAT of Rs.0.16 crore [FY15 (A):Rs.0.13].

Status of non-cooperation with previous CRA: Not Applicable

Any other information: Not Applicable

Rating History (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 www.careratings.com. Investors/market intermediaries/regulators or others are welcome to write to [email protected] for any clarifications.

Analyst Contact Name: Mr Abhishek Jain Tel: 0141-4020213/14 Mobile: +91 9251265875 Email: [email protected]

**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

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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.

Annexure 1: Details of Instruments/Facilities Name of the Date of Coupon Maturity Size of the Rating assigned Instrument Issuance Rate Date Issue along with Rating (Rs. crore) Outlook Fund-based - LT-Cash - - - 6.00 CARE BB-; Stable Credit Non-fund-based - ST- - - - 2.75 CARE A4 Bank Guarantees Non-fund-based - ST- - - - 0.50 CARE A4 Letter of credit Annexure 2: Rating History for last three years Sr. No. Name of the Current Ratings Rating history Instrument/Bank Type Amount Rating Date(s) & Date(s) & Date(s) & Date(s) & Facilities Outstanding Rating(s) Rating(s) Rating(s) Rating(s) (Rs. crore) assigned in assigned in assigned in assigned in 2016-2017 2015-2016 2014-2015 2013-2014 1. Fund-based - LT-Cash LT 6.00 CARE BB- - - - - Credit ; Stable 2. Non-fund-based - ST- ST 2.75 CARE A4 - - - - Bank Guarantees 3. Non-fund-based - ST- ST 0.50 CARE A4 - - - - Letter of credit

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