Rating Rationale 7 Aug 2020 JTPM Atsali Limited (JAL Or the Company)

Rating Rationale 7 Aug 2020 JTPM Atsali Limited (JAL or the company)

Brickwork Ratings reaffirms the rating for the Non-Convertible Debenture (NCD) issue of Rs. 209 Crores of JTPM Atsali Limited.

Particulars Previous Present Previous Rating Instrument Amount Amount ISIN* Present Rating# (Aug-2019) (Rs. Crs) (Rs. Crs) BWR BWR NCD 209.00 209.00 INE01F208016 BBB-/Stable BBB-/Stable Reaffirmed Total 209.00 209.00 INR Two Hundred Nine Crores Only

# *Details at Annexure I, please refer to BWR website www.brickworkratings.com/ for definition of the ratings

BWR has principally relied upon the audited financial results up to FY20, publicly available information and information/clarification provided by the company's management.

Rationale: The reaffirmation of the rating continues to factor in the partners of the consortium i.e. JSW Steel Ltd and AION Investment Private II Limited; experience of the consortium partners in acquiring and turning around distressed assets. The rating is however constrained by the fact the issuer has a weak financial risk profile as such there is probability of cash-flow stress at the final year of redemption to service the debt, however it is proposed that coupon payment obligations will be met through capital infusion or dividends from Monnet Ispat & Energy Limited (MIEL) and redemption will be through merger of the issuer with JSW Steel Ltd or refinancing of NCDs

BWR believes the JTPM Atsali Limited business risk profile will be maintained over the medium term. The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term.

Key Rating Drivers:

Credit Strengths:

The Partners of the Consortium: ● JSW Steel Limited (JSWSL) is part of the JSW group headed by Mr. Sajjan Jindal. The JSW group has presence across various sectors, such as steel, energy, ports, cement, etc. JSWSL is one of the leading steel producers in India with a steelmaking capacity of 18 mtpa. Its integrated steel

manufacturing units located across three states (i.e., Karnataka (12mtpa), Maharashtra (5mtpa) and Tamil Nadu (Salem – 1mtpa)) have facilities to produce a wide range of flat and long steel products. On a consolidated basis, JSW Steel Ltd has posted total operating income of Rs. 84,757 Crs in FY19 (A) with Ebitda of Rs. 19,509 Crs in FY19. For FY20, total operating income stood at Rs. 73,326 Crs with Ebitda of Rs. 12,728 Crs. D/E of the JSW Steel Limited stood at 1.46 times as of 31-3-2019 and 1.78 times as of 31-3-2020. ● AION Investment Private II Limited is wholly owned subsidiary of AION Capital Partners Limited (AION). AION, one of the largest India dedicated private-equity funds with c. $826 million of capital is a strategic partnership between Apollo Global Management LLC. (“Apollo”), one of the world’s largest alternative asset managers & ICICI. Apollo has significant experience in acquiring and turning around distressed companies and is amongst the largest investors in the metals and mining sector globally.

Experience in turning around distressed assets: ● JSW Steel Limited has successful track record of acquiring and turning around distressed companies in the steel sector in India. The notable examples are Ispat Industries, Southern Iron & Steel Co. Ltd. (SISCOL), Welspun Maxsteel and Vallabh Tinplate. ● Apollo has long-standing interest and successful history of investing in distressed companies having invested over USD 13 Billion across 250+ distressed companies globally.

Credit Concerns: Cash Flow Risk: The NCDs amount of Rs. 209.00 Cr to be fully redeemed in Aug-2048.The proceeds of the NCDs have been invested in the form of equity investment in Monnet Ispat & Energy Limited through Milloret Steel Limited. The issuer has a weak financial risk profile and has reported loss of Rs. 27.22 Crs in FY20 on a standalone basis which however is mainly on account of accrued premium on the debentures. As such there is probability of cash-flow stress at the final year of redemption. However it is proposed that coupon payment obligations will be met through capital infusion or dividends from Monnet Ispat & Energy Limited (MIEL) and redemption will be through merger of the issuer with JSW Steel Ltd or refinancing of NCDs Financial Risk Profile: The issuer has a limited financial flexibility characterized by negative tangible net worth of Rs. 42.02 Crs as of 31-3-2020 on a standalone basis and negative tangible net worth of Rs. 81.46 Crs as of 31-3-2020 on a consolidated basis. Liquidity Profile (Adequate): For the NCD issue of Rs. 209 Crs, the company has a coupon payment due on August 31, 2020 amounting to Rs. 0.02 Cr as against cash and cash equivalent of Rs. 0.10 Cr (Balance with bank in current account) as of 30-07-2020 and current investment amounting to Rs. 0.18 Cr (investment in mutual fund) as of 31-July-2020

Rating Sensitivities: Going forward, the ability of the company to manage any mismatch in cash flows would be the key rating sensitivities.

Positive Factors: ● In case the issuer increases its liquidity position significantly Negative Factors: ● If there is deterioration in the liquidity profile of the issuer ● Lower than envisaged performance and/or suspension of support for overall operations of MIEL

Analytical Approach: For arriving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).

About the Company JTPM Atsali Limited (JAL) is a special purpose vehicle created by the consortium of JSW Steel Limited & AION Investment Private II Limited for infusion of Rs. 209 Crs, which was further invested into another special purpose vehicle Milloret Steel Limited (MSL). As part of the resolution plan, after the capitalization of Milloret Steel Limited (MSL), it was to be merged with Monnet Ispat & Energy Limited (MIEL). The acquisition of majority of stake and control by the consortium has been completed and Milloret Steel Limited (MSL) has been merged with Monnet Ispat & Energy Limited (MIEL) in FY19.

$ Company Financial Performance (Standalone): Key Financial Parameters FY19 (Audited) FY20 (Audited) Total Operating Income (Rs. 1.61 1.25 Crs) PAT (Rs. Crs) -15.07 -27.22 Tangible Net worth (Rs. Crs) -14.84 -42.02 Total Debt (Rs. Crs) 209.53 209.56

$ Company Financial Performance (Consolidated): Key Financial Parameters FY19 (Audited) FY20 (Audited) Total Operating Income (Rs. 1.61 1.25 Crs) PAT (Rs. Crs) -29.22 -51.87 Tangible Net worth (Rs. Crs) -28.16 -81.46 Total Debt (Rs. Crs) 209.53 209.56 $ A s per BWR calculations Annexure I:

ISIN No. Issue Date Coupon Maturity Date 0.01% p.a. payable INE01F208016 29.08.2018 annual 29.08.2048

Rating History for the last three years (Including withdrawal and suspended): Sl. Instrument/Facility Current Rating (Year 2020) Rating History No. Type Amount (Long Rating Aug-2019 Aug-2018 2017 (Rs. Crs) Term/Short Term) BWR Non-Convertible BBB-/Sta BWR BWR 1 Long Term 209.00 N/A Debenture (NCD) ble BBB-/Sta BBB-/S Reaffirmed ble table

Total 209.00 (INR Two Hundred and Nine Crores Only)

N/A: Not Available

Status of non-cooperation with previous CRA (if applicable): Not Applicable

Any other information: NIL

COMPLEXITY LEVELS OF THE INSTRUMENTS

For more information, visit www.brickworkratings.com/download/ComplexityLevels.pdf

Hyperlink/Reference to applicable Criteria

● General Criteria ● Approach to Financial Ratios ● Trading Entities

Analytical Contacts Investor and Media Relations

Satish Jewani Senior Rating Analyst Liena Thakur [Board:+91 22 2831 1426 Ext: 603 ] Assistant Vice President - Corporate [Email Address: [email protected]] Communications +91 84339 94686 Bal Krishna Piparaiya [email protected] [Sr. Director– Ratings] [Board:+91 22 2831 1426] [Email Address:[email protected]]

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