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Dolvi Minerals and Metals NCD 700Cr Reaffirmation Rationale 21jan2016
Dolvi Minerals and Metals NCD 700Cr Reaffirmation Rationale 21jan2016
Brickwork Ratings Reaffirms ‘BWR A-(SO)’ rating to Dolvi Minerals & Metals Pvt.
Ltd.’s long term Non-Convertible Debentures (NCD) issue of ` 700 Cr having tenor
up to 5 Years and 15 Days
Brickwork Ratings (BWR) has reaffirmed the Rating1 of ‘BWR A-(SO) (Pronounced BWR A
Minus (Structured Obligation)’ with Stable Outlook for Dolvi Minerals & Metals Pvt. Ltd.’s
(DMML) structured NCD issue of ` 700 Cr having a tenor of 5 years and 15 days.
Instruments with BWR A-(SO) rating are considered to have adequate degree of safety
regarding timely servicing of financial obligations. Such instruments carry low credit risk.
The rating primarily factors the support of JSW group and especially that of its flagship
Company JSW Steel Ltd. to the issue by DMML, letter of comfort provided by JSW Investments
Ltd., Put Option structure incorporated in the transaction through another group Company JSW
Projects Ltd. However, the rating is constrained by high dependence on the continued support
from JSW Steel Ltd. in terms of purchase of entire coke from Dolvi Coke Projects Ltd. (DCPL)
which is owned by DMML, weak financials of the other group Companies connected with the
issue and the tail risk embedded in the issue.
BWR has essentially relied upon the terms of issue shared with us, financial results of JSW Steel
Ltd. for H1 FY16, FY15 and JSW Projects Ltd. for FY15 and information and clarifications
provided by DMML.
Dolvi Minerals & Metals Pvt Ltd (DMML), earlier promoted by Vinamra Consultancy Pvt. Ltd.
was incorporated on August 22, 2014 with a paid up capital of Rs One Lac. Its share Capital
increased to ` 100 Crs in FY15, of which JSW Steel had invested ` 40 Crs. At present JSW Steel
Ltd. holds ~40%, and rest is with private investors. At present Mr. Anunay Kumar and Mrs.
Saswati Goswami are the Directors of the Company. DMML is engaged in the business of acting
as traders, whole-sellers and retailers in all forms of metallic and non-metallic minerals, which
includes coal and lignite, coal products and iron and steel products etc. Incorporated in August
2014, DMML showed a revenue of ` 59.92 Crs and a loss of ` 19.21 Crs in FY15. It expects to
generate a substantial portion of revenue from the dividend income from its investment in Dolvi
Coke Projects Ltd. and from trading activities.
DMML raised ` 700 Crores by issue of NCDs with a tenor of 5 years and 15 days in two tranches
of ` 350 Crs each. The NCDs would be secured by pledge 40% equity shares of DMML held by
JSW Steel Ltd. The terms of issue require the issuer to fund the Debt Service Account 15 days
before the due date and also provide that if the issuer fails to provide required funds
accordingly, the investors, through the debenture trustee can exercise the put option on JSW
Projects Ltd. (JPL).
1
Please refer to www.brickworkratings.com for definition of the Ratings
It started its business operations in the year 1994 in the name of Jindal Vijaynagar Steel Ltd
promoted by Jindal Iron and Steel Co. Ltd and Karnataka State Industrial Investment and
Development Corporation Ltd. through its steel plant with a capacity of 1.25 MTPA of hot rolled
coils at Toranagallu village in Karnataka. JSWSL has its facilities at Vijaynagar (Karnataka),
Dolvi (Maharashtra) and Salem (Tamil Nadu). JSW Steel Ltd. (JSWSL) is a group company of
JSW group headed by Mr. Sajjan Jindal.
JSW Steel Ltd.’s consolidated Operating income has increased from ` 51,220 Crs in FY14 to `
52972 Crs in FY15. PAT (after minority interest and share of associates) has increased from `
452 Crs in FY14 to ` 1797 Crs in FY15, as during FY14 it was low mainly due to exceptional item/
foreign exchange losses of ` 1713 Crs. EBIDTA has increased from ` 9165 Crs in FY14 to ` 9402
Crs in FY15. Crude steel production stood at 12.63 million tonnes in FY15, and Quantity of steel
sold stood at 12.03 million tonnes in FY15.
Outlook:
In most of the business areas in which the JSW Group operates, growth prospects are also
dependent on policy decisions at the national level and prevailing Industry trends. The rating
of the NCD issue of Rs 700 Crs by DMML is very significantly influenced by the support
provided by its promoter group Companies and especially by the strategic support of JSWSL
and track record of JSWSL in terms of performance and meeting debt obligations. Based on the
above, the outlook for the rating is assessed to be stable over the next twelve months. The key
rating sensitivities are the continuing support from JSW Steel Ltd. in terms of purchase of entire
coke form DCPL and other group companies to DMML, timely execution of DCPL’s Coke Oven
project, operating and financial performance of DMML, DCPL JSW Steel Ltd. and the ability of
JSWPL to meet the put option of the investors of the proposed NCD issue by DMML.
Disclaimer: Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other reliable sources,
which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion; however, it does not examine the precision or
completeness of the information obtained. And hence, the information in this report is presented “as is” without any express or implied warranty
of any kind. BWR does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by BWR
should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses
incurred by users from any use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at any time for any
reasons.