SLR Metaliks Limited

February 16, 2018

Summary of Rated Instrument:

Rated Amount
Instrument Rating Action
(Rs. crore)
Term Loan 440.0 [ICRA]BBB(SO)@, placed on rating watch with negative implications

Material Event
The SO ratings factor in the credit enhancement in respect of the captioned bank loans by way of a guarantee provided
by Sociedade De Fomento Industrial Private Limited {SFI, rated [ICRA]BBB@ by ICRA} for repayment of the principal,
interest and other charges payable for the captioned debt programme. The ratings address the servicing of the loan to
happen as per the terms of the underlying loan and the guarantee arrangement and the ratings assume that the
guarantee will be duly invoked, as per the terms of the underlying loan and guarantee agreements, in case there is a
default in payment by SLRM. The rated instrument does not involve a structured payment mechanism.

The material event relates to the operations of the Guarantor SFI. The Supreme Court, in its order dated February 07,
2018, has quashed the second renewal of the mining leases granted by the State of Goa to iron ore miners in the state.
The Court has directed all mining lease holders who have been granted the second renewal to stop all mining operations
with effect from March 16, 2018, until fresh mining leases and fresh environmental clearances are granted. SFI is one of
the mining lease holders impacted by this verdict.

Impact of the Material Event

ICRA has taken note of the above event and has placed the rating of [ICRA]BBB (SO) (pronounced ICRA triple B Structured
Obligation) of SLRM on rating watch with negative implications as ICRA has placed the rating of [ICRA]BBB (pronounced
ICRA triple B) of SFI on rating watch with negative implications. The rating action takes into account the expected
adverse impact of the Supreme Court’s verdict on SFI’s operational and financial profile, given that iron ore mining is the
primary revenue generator for the company. ICRA will continue to closely monitor the developments and take
appropriate rating action, as and when more clarity emerges on the issue.

The previous detailed rating rationale is available on the following link: Click here

Key rating drivers:

Credit strengths
Corporate Guarantee from SFI – SFI has provided a corporate guarantee for repayment of the principal, interest and
other charges payable for the SLRM’s term loan rated by ICRA. The ratings address the servicing of the loan to happen as
per the terms of the underlying loan and the guarantee arrangement and the ratings assume that the guarantee will be
duly invoked, as per the terms of the underlying loan and guarantee agreements, in case there is a default in payment by
SLRM. The rated instrument does not involve a structured payment mechanism.

1
Experienced Promoters – SLRM, promoted by Mr. Rajkumar Goel and family members has setup a pig iron
manufacturing plant with capacity of 2.1 lakh TPA. Further the company has recently completed expansion of its project
and set up 3.0 lakh TPA steel melting shop and rolling mill within the existing pig iron complex at Bellary, Karnataka. The
promoters have been involved in the iron and steel industry for a long period.

Liquidity Support from SFI – apart from corporate guarantee, SFI has also invested significant in SLRM, bby way of
unsecured loans. SFI infused around Rs. 310 crore as unsecured loans to fund the promoters’ contribution for the
expansion project. In addition, SFI has granted unsecured loans to meet the liquidity requirements of the company.

Credit challenges
Cyclical Industry – Given the nature of the steel industry, SLRM remains exposed to inherent cyclicality and accordingly
its turnover and profitability has witnessed fluctuations in the past. The company expects to generate healthy revenue
and better profitability in its alloy steel bars division. However, given the initial stages of its operations in the same, the
performance of the division on sustainable basis remains to be seen.

Dependence on external funding support – Given its losses in the past and insufficient cash flow generation, SLRM had
relied on external funding support from SFI to meet its liquidity requirements and debt servicing obligations. Since the
company’s operations from the new project are yet to show sustained performance and hence any further cash flow
shortfall cannot be ruled out, which would necessitate external funding support.

2
ANALYST CONTACTS
Sabyasachi Majumdar Harsh Jagnani
+91 124 4545304 +91 124 4545394
sabyasachi@icraindia.com harshj@icraindia.com

Sachin Sachdeva
+91 124 4545307
sachin.sachdeva@icraindia.com

RELATIONSHIP CONTACT
Jayanta Chatterjee
+91 80 4332 6401
jayantac@icraindia.com

MEDIA AND PUBLIC RELATIONS CONTACT

Ms. Naznin Prodhani
Tel: +91 124 4545 860
naznin.prodhani@icraindia.com

Helpline for business queries:

+91-124-2866928 (open Monday to Friday, from 9:30 am to 6 pm)

info@icraindia.com

About ICRA Limited:

ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks and financial services
companies as an independent and professional investment Information and Credit Rating Agency.

Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited
Company, with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. The international Credit
Rating Agency Moody’s Investors Service is ICRA’s largest shareholder.

For more information, visit www.icra.in

3
ICRA Limited
Corporate Office
Building No. 8, 2nd Floor, Tower A; DLF Cyber City, Phase II; Gurgaon 122 002
Tel: +91 124 4545300
Email: info@icraindia.com
Website: www.icra.in

Registered Office
1105, Kailash Building, 11th Floor; 26 Kasturba Gandhi Marg; New Delhi 110001
Tel: +91 11 23357940-50

Branches

Mumbai + (91 22) 24331046/53/62/74/86/87

Chennai + (91 44) 2434 0043/9659/8080, 2433 0724/ 3293/3294,
Kolkata + (91 33) 2287 8839 /2287 6617/ 2283 1411/ 2280 0008,
Bangalore + (91 80) 2559 7401/4049
Ahmedabad+ (91 79) 2658 4924/5049/2008
Hyderabad + (91 40) 2373 5061/7251
Pune + (91 20) 6606 9999

© Copyright, 2018 ICRA Limited. All Rights Reserved.

Contents may be used freely with due acknowledgement to ICRA.

ICRA ratings should not be treated as recommendation to buy, sell or hold the rated debt instruments. ICRA ratings are subject to a process of
surveillance, which may lead to revision in ratings. An ICRA rating is a symbolic indicator of ICRA’s current opinion on the relative capability of the issuer
concerned to timely service debts and obligations, with reference to the instrument rated. Please visit our website www.icra.in or contact any ICRA
office for the latest information on ICRA ratings outstanding. All information contained herein has been obtained by ICRA from sources believed by it to
be accurate and reliable, including the rated issuer. ICRA however has not conducted any audit of the rated issuer or of the information provided by it.
While reasonable care has been taken to ensure that the information herein is true, such information is provided ‘as is’ without any warranty of any
kind, and ICRA in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such
information. Also, ICRA or any of its group companies may have provided services other than rating to the issuer rated. All information contained
herein must be construed solely as statements of opinion, and ICRA shall not be liable for any losses incurred by users from any use of this publication
or its contents