Monnet Ispat & Energy Limited (MIEL) discussion/proposal submitted by the prospective investors...

Monnet Ispat & Energy Limited (MIEL)

Investors Brief

January, 2017

1 Strictly Private & Confidential

Monnet Ispat & Energy Ltd - Brief Overview

Strictly Private & Confidential

~1.5 MMTPA* Integrated Steel Plant (ISP) at Raigarh based on blast

furnace / sponge iron route along with pellet and sinter facilities.

Coal-based sponge iron producer with total DRI capacity of 0.8 MMTPA at

Raipur (0.3 MMTPA) & Raigarh (0.5 MMTPA).

Captive Power capacity - 230 MW.

Interests in Coal & Iron Ore Mining & Coal Beneficiation business; Owned

Washery Capacity of 7.5 MMTPA.

Allocated Gare Palma IV/7 non-coking coal mine (Extractable coal of 56

MMT).

Iron & Steel & Captive power capacity at Raipur & Raigarh

*Million Metric Tonnes Per Annum 2

Presence/ Milestones

Strictly Private & Confidential 3

(Rs In Crores)

Historical Financial Position

Revenue reduced in FY16 by 43% over FY15 on account of lower aggregate utilization (30%) of facilities due to subdued global demand and dumping of steel in India.

Increase in Interest (~173%) & Depreciation (~100%) in FY15 due to capitalisation of ISP & washery; Interest expense has increased further (~43%) in FY16 due to additional term loan of Rs 800 Crs along with accrued interest on overdue, increase in interest on ECB facilities.

Exceptional item of Rs 253 crs in FY15 is royalty for coal extracted from Milupara captive mine to GoI.

Decrease in net worth due to losses incurred of ~796 Crs in FY15 & ~1684 Crs in FY16.

Description FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 H1

Net Sales 1897 1957 2268 3186 1823 722

EBIDTA 538 547 475 199 -343 -53

Interest & Financial Charges 87 119 239 653 940 540

Exceptional Items - - - 253 90 9

PAT 289 250 70 -796 -1684 -768

Net Worth 2360 2730 2840 2018 815

Long Term Loans (Secured + Unsecured)

2963 4333 5863 6339 6672

Net Block (including CWIP) 3819 5854 7271 7524 6838

EBIDTA Margin 28% 28% 21% 6% -18% -7%


Shareholding (As On March 31, 2016)


*Consortium lenders together hold 51.00% equity shares after including L&T Infrastructure (classified

under body corporate having ~0.90% holding). Lender wise equity share provided at Annexure -I

# Category Of Shareholder # Of shares Shareholding (%)

(A) Shareholding of Promoter and Promoter Group

1. Bodies Corporate I - Udhyam Merchandise Pvt Ltd 251,23,675 12.51%

II - Umra Securities Ltd 187,50,000 9.34%

III - Others 5,58,550 0.28%

2 Individuals / HUF/ Others 63,00,616 3.14%

Sub Total (A) 507,32,841 25.27%

(B) Public Shareholding

1. Institutions

I Foreign Institutional Investors 128,82,741 6.42%

II Mutual Funds / UTI 38,110 0.02%

III Financial Institutions 7,45,241 0.37%

IV Consortium Lenders* 1006,30,183 50.12%

2. Non-Institutions

I Bodies Corporate 234,57,139 11.68%

II Individuals 122,81,987 6.12%

Sub Total (B) 1500,35,401 74.73%

Total (A)+(B) 2007,68,242 100.00%

5

Stock Performance


Price History Data – NSE (January 2016 – January 2017)

Share Price Data (As on 3rd Jan’17) BSE NSE

Share Price 24.05 23.90

52 week High 38.90 35.10

52 week Low 19.25 19.25

6

Facilities at Raipur


Facility

Capacity (TPA) &

Configuration

Technology and

Make

Date of Start of Commercial

Production

Current Status/

Balance Economic Life

300,000 TPA

Sponge Iron

• 2 X 350 TPD & 2 X

100 TPD kiln.

Coal Based DRI

Make: Jindal Indigenous

Tech.

Kiln 1- 05.08.1994; Kiln 2- 25.12.2001

Kiln 3- 19.08.2003; Kiln 4- 01.01.2004

Operational ;

Avg balance life ~6 (+15

yrs*)

46,400 TPA

Ferro Alloys

• 2 X 7.5 MVA; 5

MVA; 9MVA.

• Mainly Si- Mn.

Open Top SAF

Make: Indigenous JSPL,

Sushma Associates

SAF 1-20.12.2000; SAF 2- 24.09.2003 SAF 3- 24.09.2003; SAF 4- 08.08.2004

Operational ;


yrs*)

233,200 TPA

Steel

Melting

Shop

• 2 X 8T, 2 X 12T & 1

X 18T IF.

• One Billet/ Bloom

Caster

Induction Furnace

Make: ABB IF and

Inductotherm

IF 4- 29.03.1995; IF 5- 30.08.2002 IF 1- 07.11.2003; IF 2- 07.11.2003

IF 3- 07.11.2003

Operational;


yrs*)

Caster Life: 20 Yrs

150,000 TPA

Rolling Mill

• Products - ISMB,

ISMC, ISA, RSJ.

Z – Type configuration Make: AS Precision

15.02.2007 Operational ;

Avg balance life ~18 yrs

60 MW

Power

• 37.5 MW; 15.0

MW; 7.5 MW

WHRB & AFBC

Make: Alstom, BHEL

and Triveni

20.12.2000 15.12.2003 01.02.2007

Operational ;


*Additional Economic Life of 15 years with maintenance capex

Facilities at Raigarh

8

Facility Technology / Configuration

And Make

Date of Start of Commercial

Production

Current Status/

Balance Economic Life

200,000 TPA

Pellet Plant

• Straight grate process

• Make: Jacobs Engg Inc/ Aker Solution, METSO, Outotec, Rotoauto, Enrich

March 2015

Operational


500,000 TPA

Sponge Iron

• 2 X 100 TPD & 4 X 350 TPD kiln

• Coal Based DRI

• Make: Jindal Indigenous Technology

Kiln 1- 28.03.2006; Kiln 2- 28.03.2006 Kiln 3- 29.03.2007; Kiln 4- 29.12.2008 Kiln 5- 28.03.2006; Kiln 6- 29.03.2006

Operational

Avg balance life ~13 (+15 *)

625,000 TPA

Blast Furnace

• Make: Sinosteel, China 01.10.2012

Operational

Avg balance life of ~24 yrs

1,610,000 TPA

Steel

Melting

Shop

• 2 X 100 TPA Electric Arc Furnaces

• 3 X 100 TPA Ladle Refining Furnace

• One Slab Caster + Billet Caster

• Make: Prowess, Danieli

SMS 1- Sept’13

SMS 2- Sept’13

Operational


Billet Caster Life: 24 Yrs

Slab Caster Life: 20 Yrs

Rolling Mill

• Plate Mill & Rebar Mill

• Make: ABB, NCO, Holtec, Danieli,

September 2013

Operational


170 MW Power • 2 X 45 MW + 1 X 80 MW

• Make: BHEL

2005 & 2009 Operational




Beneficiation Facilities

8 Strictly Private & Confidential


Washery Location Capacity Date of Commercial

Production Consultant

MIEL Owned

Angul (Talcher) 5.0 MMTPA December 2014 Engineers League

Incorporation

Raigarh 2.5 MMTPA December 2014 Bentech

Operational Performance

Raipur


• Steel facilities at Raipur operated at ~40% based on demand of structural product.

• Sponge Iron at Raigarh lower for FY16 due to deteriorating viability vis a vis cost of production.

• Raigarh ISP commissioned in FY14, Production currently in ramp-up stage based on industry demand.

• Utilizations lower owing weak demand & economics for industry.

Raigarh

95% 94% 92%

46%

31%

50% 47%

31%

51%

FY 2014 FY 2015 FY 2016

Sponge Iron Liquid Steel Billet Bloom

98%

69% 64%

9% 24%

9% 14%

38%

15%

FY 2014 FY 2015 FY 2016

Sponge Iron Liquid Steel Billet/ Bloom

10

Investments Allocation


Investment Asset/ Project Stake Present Status

Monnet Power &

Company Ltd

1050 MW coal

based power

plant

87.5%

(Rs 701 Cr*)

• Lenders have initiated change in management

proposal for MPCL and EoI have been

received from the interested bidders;

• Return on investment made by MIEL shall be

negligible. (Detailed as per Annexure IV)

Orissa Sponge Iron

and Steel Limited

Iron ore mine

with DRI plant

in Odisha

35.17%

(Rs 293 Cr*)

• Mineable reserve ~122 MMT (Avg Fe ~63-

64%).

• Critical clearances received for development

of mine. (Detailed as per Annexure III)

Monnet Global Ltd Stake in

Indonesian coal

mine

100%

(Rs 21 Cr*)

• MIEL to sell stake in MGL as per CAP

• Pending due to slow down in market

* Investment as per ABS dated 31.03.2016

11

Mines Allocated


Block Name Gare Palma IV/7 Coal Mine Hahaladdi Iron Ore Mine

Location Mand Raigarh Coalfield in Chhattisgarh Hahaladdi village, Bhanupratappur,

Chhattisgarh

Mine Type Open Cast Open Cast

Mining Area ~420 Ha (incl. 5.098 Ha of forest area) 78.90 Ha

Extractable Reserve 56.62 MMT (Phase I: 31.05 MMT in first

30 years); Phase II: 25.57 MMT)

12.05 MT (including 11.49 MT insitu ore

and 0.55 MT float ore)

Annual Extraction

Capacity

1.20 Million metric tonnes per annum 0.5 Million tonnes per annum

Associated

Infrastructure

200 TPH of Coal Handling Plant Capacity

& 0.96 MMTPA of coal washery

Newly allocated mine, infrastructure to

be developed.

Distance from Plant ~55 Kilometres ~45 Kilometres

Royalty Rs 2619 per tonne As per applicable laws

• In addition, Company also has investments in limestone mine.

• Five mines (under development) had been allotted to MIEL / its JV companies and cancelled later by the

Hon’ble supreme court of India. (Details as per Annexure VI)

12

Debt Obligations (As on March 2016)

Lender wise outstanding as on reference date provided at Annexure-II.

Rs In Crores


• SDR invoked by lenders on 22nd August 2015. Interest is not serviced by Company since invocation and part of

interest/debt obligations (Rs 350 crore ) converted into equity under SDR.

• EPBG invoked by Cargill on account of non-performance under APSA and converted EPBG into RTL.

• ECB of USD 53 Mn by ICICI Bank, converted into RTL facility & balance ECB by Axis Bank & ICICI Bank in various

stages of approval for conversion into RTL facilities.

Facilities Principal O/S Interest O/S Total

Rupee Loans for ISP 1661.5 56.5 1718.0

Additional 800 Cr Loan 683.5 70.2 753.7

Other Rupee Loans 732.3 42.3 774.7

Non-Convertible Debentures 920 67.6 987.6

Sub Total (A) 3997.4 236.6 4233.9

ECB Converted to RTL 355.8 - 355.8

Outstanding ECB 1386.7 55.9 1442.6

Export Performance Bank Guarantee 829.2 - 829.2

Sub Total (B) 2571.7 55.9 2627.6

Unsecured Loan 297.7 3.1 300.8

Fund Based WC Limits 1411.0 - 1411.0

Non- Fund Based WC Limits 504.5 - 504.6

Sub Total (C ) 2213.3 3.1 2216.4

Total (A+B+C) 8782.4 295.5 9077.9

13

Stake sale


• Lenders have acquired controlling stake (~51%) in MIEL through conversion of debt (~Rs. 350 Cr.) into

equity under SDR provisions of RBI.

• At least 26% shareholding of MIEL held by Lenders proposed to be divested

• Transaction proposed by way of bidding process. Debt on balance sheet of MIEL may be refinanced based

on discussion/proposal submitted by the prospective investors

Offer details

Name of the Company : Monnet Ispat & Energy Ltd.

Face Value : Rs. 10.00

Effective equity stake : At least 26%

Seller : Consortium of Lenders led by State Bank of Patiala (SBoP)

14

Offer Highlights


Company Specific Advantages

• Investment into operational ISP (expected to save ~5-7 years of project construction and stabilising time)

• Washery facilities of 7.5 MMTPA (Raigarh & Angul) for captive usage as well as sale on merchant basis.

• Strategic stake in iron ore mining capacity of OSIL(122 MT reserves); Mining lease to be executed by Jan-17.

• Allocated Gare Palma 1V/ 7 non-coking coal mine in Mand coalfields (Extractable reserves of 56.62 MMT).

• Well established distribution network coupled with a dedicated chain of dealers, throughout India.

Location Advantage

• Facilities located close to iron & coal bearing-areas (Improves access to raw material/ reduces logistics cost)

• Well connected road & infrastructure network for all facilities

Design Advantages

• Efficient system design ; Based on design capacity/ current input-mix plant has capacity to produce 1.50

MMTPA of finished steel + surplus 0.45 MMTPA of billets/ rounds and 0.35 MMTPA of pellets

Regulatory Support

• GOI has allowed & extended Minimum import price ( MIP)/ safeguard duty to support the Steel Industry

Proposed Investment

Investor to take at least 26% stake; funds so infused to be utilised towards:

(a) Improving the capital structure (b) Improving business profile of company (c) Ramping up production

Thank You

16

Annexure I – Pro-Rata equity allotted to Lenders

# Bank/Institution Equity Participation (Rs. Crore) % Share

1 State Bank of Patiala 46.13 6.72%

2 State Bank of India 24.12 3.51%

3 State Bank of Mysore 9.91 1.44%

4 State Bank of Hyderabad 10.57 1.54%

5 State Bank of Bikaner & Jaipur 20.37 2.97%

6 Punjab National Bank 17.86 2.60%

7 Indian Overseas Bank 17.40 2.53%

8 Oriental Bank of Commerce. 15.43 2.25%

9 Indian Bank 10.33 1.50%

10 Vijaya Bank 6.84 1.00%

11 Dena Bank 13.80 2.01%

12 UCO Bank 15.39 2.24%

13 United Bank of India 12.41 1.81%

14 Union Bank of India 14.86 2.16%

15 Corporation Bank 5.24 0.76%

16 Jammu & Kashmir Bank Ltd. 4.68 0.68%

17 Central Bank of India 3.74 0.54%

18 Allahabad Bank 1.17 0.17%

19 Syndicate Bank 6.22 0.91%

20 Bank of Maharashtra 9.32 1.36%

21 Andhra Bank 0.70 0.10%

22 ICICI Bank Ltd. 18.74 2.73%

23 Axis Bank 5.50 0.80%

24 Exim Bank 3.71 0.54%

25 IDBI Bank Ltd 31.60 4.60%

26 L&T Infrastructure Finance Company Limited 6.15 0.90%

27 IFCI Limited 11.69 1.70%

28 A P S R T C Employees Provident Fund Trust 6.30 0.92%

Total 350.18 51.00% 17

Annexure II – Lender–wise outstanding (As On Aug 22, 2015)

Rs In Crores

Bank/Financial Institution RTL NCD ECB WC - FB

Limit WC – NFB

Limit One

Time BG EPBG

Total Limits

State Bank of Patiala 80.11 10.00 - 490.00 185.00 123.46 98.00 986.57

State Bank of India 3.97 - - 312.00 120.00 80.00 - 515.97

State Bank of Mysore 20.54 - - 84.78 27.78 - 100.00 233.10

State Bank of Bikaner & Jaipur 222.75 - - 130.00 50.00 32.92 - 435.67

Punjab National Bank 200.22 - - 130.00 31.24 20.58 - 382.04

IDBI 107.00 45.00 199.50 153.00 71.33 - 100.00 675.83

State Bank of Travancore 4.37 - - - - - - 4.37

UCO Bank 329.17 - - - - - - 329.17

Syndicate Bank 18.24 25.00 89.78 - - - - 133.02

State Bank of Hyderabad 136.00 5.00 - - - - 85.00 226.00

Oriental bank of Commerce 245.07 15.00 - - - - 70.00 330.07

Dena Bank 324.67 - - - - - - 324.67

Corporation bank 112.00 - - - - - - 112.00

United Bank of India 265.47 - - - - - - 265.47

Indian overseas Bank 117.12 50.00 - - - - 205.00 372.12

Bank of India 105.00 25.00 47.88 - - - 75.00 252.88

Indian bank 114.02 - 41.90 - - - 65.00 220.92


Annexure II – Lender–wise break-up (As On Aug 22, 2015)

Rs I n Crores Bank/Financial Institution RTL NCD ECB

WC - FB Limit

WC – NFB Limit

One Time BG

EPBG Total

Limits

Vijaya bank 146.34 - - - - - - 146.34

Bank of Maharastra 189.40 10.00 - - - - - 199.40

Union Bank of India 216.16 - 101.75 - - - - 317.91

ICICI 55.00 - 345.80 - - - - 400.80

EXIM Bank 7.44 - 71.82 - - - - 79.26

Axis Bank 10.00 - 107.73 - - - - 117.73

LIC of India - 220.00 - - - - 220.00

Jammu & kashmir bank - 100.00 - - - - 100.00

Central Bank of India - 80.00 - - - - 80.00

Allahabad bank - 25.00 - - - - 25.00

Canara Bank - 25.00 199.50 - - - - 224.50

Andhra Bank - 15.00 - - - - 15.00

Bank of Baroda - 15.00 282.63 - - - - 297.63

APSRTC - 5.00 - - - - 5.00

IFCI - 250.00 - - - - 250.00

DBS - - 149.63 - - - - 149.63

Afrasia bank Ltd. - - 29.93 - - - - 29.93

SCB - - 106.40 - - - - 106.40

Deutsche 112.50 - - - - - - 112.50

L & T 131.53 131.53

Total 3410.07 920.00 1774.25 1299.78 485.35 256.96 798.00 8,944.41


Annexure III – Orissa Sponge Limited


MIEL has non current investment of `293 Crs for 35.17% stake in Orissa Sponge Iron and Steel Limited

(OSIL) which was incorporated in Orissa on April 9, 1979. It was promoted by Torsteel Research

Foundation in India (TRFI) and Investment Corporation of Orissa Limited (IPICOL).

The plant of OSIL is situated in Keonjhar Disctrict and is spread over 552.3 acres of land of which 70

acres is freehold and balance is on 90 years lease. OSIL has sponge iron manufacturing capacity of

250,000 TPA, billet making capacity of 100,000 TPA and captive power capacity of 36 MW. OSIL’s plant

is closed since FY14. OSISL has dues of around Rs 435 Crores towards FIs/Banks & Statutory dues.

OSIL was allocated Iron Ore mines at Malangtoli with reserves of 153 million tons. Mine Ensures ready

availability of iron ore for a period of ~15 years at low cost.

Status of mine:

• As per the new MMRDA act, terminal date for securing mining lease is January- 17.

• Mining Lease pending on account of Stage II Forest Clearance; Same shall be followed by (a)

Execution of ML (b) Permission from IBM for commencement of mining (c) Reserve / Cushion

Period.

• Mine can be operational in a period of 9-12 months from the date of grant of mining lease.

20

Annexure IV: Monnet Power Company Ltd

Background MIEL signed a MoU on 26th Sep 2006 with Government of Odisha for setting up the plant

Fuel Sources Aggregate coal required to operate at 85% PLF: 4.7 MTPA

Mandakini ‘A’ coal block allocated , in JV with Jindal India Thermal Power Ltd. (JITPL share 73%, MPCL share 27%). JV filed plea in Delhi HC against proposed capping of fixed charges by GoI; Matter is now sub-judice.

Off-take Executed 2 PPAs with PTC India aggregating to 665 MW (gross) & 600 MW (net) 350 MW on long term basis @ Rs. 3.17/kwh starting year tariff back-to-back arrangement with WBSEDCL* 200 MW on short term basis

GRIDCO: 12% of power (i.e., 126 MW) from the project @ variable cost

Water Requirement: 3,772 m3/hr, Source: Brahmani (~24 kms from the project site)

Power Evacuation

PGCIL to provide transmission capacity of 400 MW for evacuation of power to West Bengal

PGCIL setting up a pooling station at Angul to cater different IPPs – 31 km from project site; MPCL constructing dedicated 400 kV D/C transmission lines from 400 kV plant switchyard to 765 kV PGCIL Angul substation.

Present Status Account presently NPA, IDFC lead bank . Change in mangement process has been initiated by Lenders in MPCL and EoI for the same has been received from the interested bidders

MIEL stake in MPCL is proposed to be transferred to New Investor at notional value

Monnet Power Company Limited (MPCL)

Monnet Ispat & Energy Limited (MIEL) Blackstone FP Capital Partners (Mauritius) V Limited

1050 MW (2 X 525 MW) coal based thermal power plant in Odisha (Project)


12%

88%

21

Annexure V: Process Flow


Annexure VI – Investment in Mine


Particulars Expenditure on Fixed Assets

Investment in Shares

Other Current & Non Current Assets

Total

MIEL

Utkal - B2 40.79 - - 40.79

Rajgamar 13.96 - - 13.96

JVs

Mandakini - 39.30 3.00 42.30

Urthan North - 5.75 0.09 5.84

Morga – 3 - 0.98 5.56 6.54

54.75 46.03 8.65 109.43

23

As per ABS dated 31.03.2016

(Rs In Crores)

Monnet Ispat & Energy Limited (MIEL) discussion/proposal submitted by the prospective investors...

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