Page 1 of 4 CRAB I CRAB Ratings on Corporate Credit Digest I 10 October 2012

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Credit Rating Report (Surveillance) Ratanpur Steel Re-Rolling Mills Limited

Lr - Loan Rating; ST – Short Term. * Due to its revolving nature, CRAB views Cash Credit (CC) as long-term facility.

Date of Rating: 04 October 2012 Validity: The Entity rating is valid up to 31 December 2013 and the loan ratings are valid up to limit expiry date of respective credit facilities or 31 December 2013 whichever is earlier. Rating Based on: Audited financial statements up to 30 June 2012 and Management information up to December 2011, bank liability position as on 31 August 2012, and other relevant quantitative as well as qualitative information up to the date of rating declaration. Auditor: Huda Vasi and Co Methodology: CRAB’s Corporate Rating Methodology (www.crab.com.bd)

Particulars Ratings Remarks Ratanpur Steel Re-Rolling Mills Limited AA3 Entity BDT 111.97 million aggregate Long Term Outstanding (LTO) AA3(Lr) Please see

Appendix-1 for details

BDT 750.00 million aggregate CC(pl) and CC(H) limit* AA3(Lr) BDT 1,000.0 million aggregate Short term Funded and Non funded limit ST-2 Rating Out Look Stable

Analysts:

Munir Uddin Ahmed munir@crab.com.bd

Khandakar Shahed Royhan shahed@crabrating.com

Rationale: Credit Rating Agency of Bangladesh Limited (CRAB) has assigned ‘AA3’ (Pronounced Double A Three) rating in the Long Term to Ratanpur Steel Re-Rolling Mills Limited (hereinafter also referred to as RSRM or the Company) and AA3 (Lr) to BDT 111.97 million Long Term Outstanding (LTO) and BDT 750.0 million aggregate Cash Credit of the Company. CRAB has also assigned ST-2 rating to BDT 1,000.0 million aggregate Funded and Non-funded limit. CRAB has performed the present rating assignment based on audited financial statements up to June 2012 and other relevant information. The rating also takes into account business profile, past record and trend of operating performance, balance sheet strength and loan repayment history. In assessing, the Loan Ratings (Lr) CRAB also considers the security arrangements against each exposure along with the entity’s fundamentals. Ratanpur Steel Re-Rolling Mills Ltd (RSRM) was incorporated as a private limited company on 22 April 1986 and converted into public limited company on 26 June 2012. RSRM is engaged in manufacturing different graded (40, 60 and 75 grades) deformed rods in different sizes (5.5 mm to 32 mm) since 1986. Initially production capacity of RSRM was 50,000 MT/ per year, which was increased to 156,000 MT per year in 2011 and utilization of production capacity of the Company is in increasing trend. Rating reflects the growth in business, moderate scale of operations along with high competition intensity, its improved EBITDA margin and managing of price volatility at raw material procurement. The ratings also reflect the assessment of the moderate operation as well as experience of the Company’s promoters alongside.

RATING INDICATORS Rating Strengths Rating Concern

Business is profitable Experienced Management Long standing ties with

customer Borrowed fund/equity ratio

is declining. Backward linkage facilities

Low profit margin High COGS limits

profitability. Unstable energy

source

Ratanpur Steel Re-Rolling Mills Ltd.

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The capital structure has improved significantly. The equity of the company increased from BDT 322.7 million in FY 10-11 to BDT 1,422.6 million in FY 11-12 as BDT 943.9 million revaluation surplus of land included in equity and the company reinvested its profit. In FY 10-11 RSRM separated its Ship Breaking unit and another sister concern incorporated by the name of Ratanpur Ship Re-Cycling Industries Limited and took over all business transaction along with assets & liabilities regarding ship breaking unit of Ratanpur Steel Re-Rolling Mills Limited. Consequently borrowed fund of the company decreased from BDT 2,361.0 million in FY10-11 to BDT 1,294.6 million in FY 11-12. As a result borrowed fund/Equity ratio decreased from 7.3(x) in FY10-11 to 0.9(x) in the year FY 11-12. The rating also supported by the continuous demand prevailing in the construction sector, thus sustaining capacity utilization, but any constraint imposed to this sector may hamper Company’s growth. In FY 2011-12, the Company sold 91,392 MT MS Rod which was 62,000 MT and 23,230 MT in FY 10-11 and FY 09-10 respectively. The sales revenue increased during the observation period due to increase in product price and quantity of sales. The main reasons for increasing product price are increase in utility expenses (gas, electricity and water) and labor cost. Net profit after tax of the Company decreased from BDT 163.96 million in FY 10-11 to BDT 155.96 million in FY 11-12 as the company has paid deferred tax of BDT 85.0 million in FY 11-12. Net profit after tax is expected to increase during upcoming years as its utilization of capacity is in increasing trend. Moderate operating profitability coupled with debt repayment translated into improvement in RSRM’s borrowed fund/EBITDA from 6.5(x) in FY10-11 to 2.1(x) in FY11-12. Key Rating Drivers:

An increase in capacity utilization and/or introducing backward linkage facility and/or reduced Borrowed Fund to EBITDA (6.5x in FY10-11 to 2.1x in FY11-12) and/or increased Operating Profit Margin (7.7% in FY10-11 to 8.8% in FY11-12) and/or any positive changes in operation, could be a positive rating factor.

Unstable energy source, labor unrest and/or inefficiency working capital management, disparity between growth potentiality and exposure to debt led capital structure, could be a negative rating factor.

Ratanpur Steel Re-Rolling Mills Ltd.

Page 3 of 4 CRAB I CRAB Ratings on Corporate Credit Digest I 10 October 2012

CRAB RATING SCALES AND DEFINITIONS –Long Term (Corporate)

Long Term Rating Definition AAA

Triple A Companies rated in this category have extremely strong capacity to meet financial commitments. These companies are judged to be of the highest quality, with minimal credit risk.

AA1, AA2, AA3* Double A

Companies rated in this category have very strong capacity to meet financial commitments. These companies are judged to be of very high quality, subject to very low credit risk.

A1, A2, A3

Single A

Companies rated in this category have strong capacity to meet financial commitments, but are susceptible to the adverse effects of changes in circumstances and economic conditions. These companies are judged to be of high quality, subject to low credit risk.

BBB1, BBB2, BBB3

Triple B

Companies rated in this category have adequate capacity to meet financial commitments but more susceptible to adverse economic conditions or changing circumstances. These companies are subject to moderate credit risk. Such companies possess certain speculative characteristics.

BB1, BB2, BB3

Double B

Companies rated in this category have inadequate capacity to meet financial commitments. Have major ongoing uncertainties and exposure to adverse business, financial, or economic conditions. These companies have speculative elements, subject to substantial credit risk.

B1, B2, B3 Single B

Companies rated in this category have weak capacity to meet financial commitments. These companies have speculative elements, subject to high credit risk.

CCC1, CCC2, CCC3 Triple C

Companies rated in this category have very weak capacity to meet financial obligations. These companies have very weak standing and are subject to very high credit risk.

CC Double C

Companies rated in this category have extremely weak capacity to meet financial obligations. These companies are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.

C Single C

Companies rated in this category are highly vulnerable to non-payment, have payment arrearages allowed by the terms of the documents, or subject of bankruptcy petition, but have not experienced a payment default. Payments may have been suspended in accordance with the instrument's terms. These companies are typically in default, with little prospect for recovery of principal or interest.

D (Default)

D rating will also be used upon the filing of a bankruptcy petition or similar action if payments on an obligation are jeopardized.

*Note: CRAB appends numerical modifiers 1, 2, and 3 to each generic rating classification from AA through CCC. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.

Ratanpur Steel Re-Rolling Mills Ltd.

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LONG-TERM RATING: LOANS/FACILITIES FROM BANKS/FIS

(All loans/facilities with original maturity exceeding one year)

RATINGS DEFINITION AAA (Lr) (Triple A)

Highest Safety

Loans/facilities rated AAA (Lr) are judged to offer the highest degree of safety, with regard to timely payment of financial obligations. Any adverse changes in circumstances are unlikely to affect the payments on the loan facility.

AA (Lr)* (Double A) High Safety

Loans/facilities rated AA (Lr) are judged to offer a high degree of safety, with regard to timely payment of financial obligations. They differ only marginally in safety from AAA (Lr) rated facilities.

A (Lr) Adequate Safety

Loan/facilities rated A (Lr) are judged to offer an adequate degree of safety, with regard to timely payment of financial obligations. However, changes in circumstances can adversely affect such issues more than those in the higher rating categories.

BBB (Lr) (Triple B)

Moderate Safety

Loans/facilities rated BBB (Lr) are judged to offer moderate safety, with regard to timely payment of financial obligations for the present; however, changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal than for issues in higher rating categories.

BB (Lr) (Double B) Inadequate

Safety

Loans/facilities rated BB (Lr) are judged to carry inadequate safety, with regard to timely payment of financial obligations; they are less likely to default in the immediate future than instruments in lower rating categories, but an adverse change in circumstances could lead to inadequate capacity to make payment on financial obligations.

B (Lr) High Risk

Loans/facilities rated B (Lr) are judged to have high risk of default; while currently financial obligations are met, adverse business or economic conditions would lead to lack of ability or willingness to pay interest or principal.

CCC (Lr) Very High Risk

Loans/facilities rated CCC (Lr) are judged to have factors present that make them very highly vulnerable to default; timely payment of financial obligations is possible only if favorable circumstances continue.

CC (Lr) Extremely High Risk

Loans/facilities rated CC (Lr) are judged to be extremely vulnerable to default; timely payment of financial obligations is possible only through external support.

C (Lr) Near to Default

Loans/facilities rated C (Lr) are currently highly vulnerable to non-payment, having obligations with payment arrearages allowed by the terms of the documents, or obligations that are subject of a bankruptcy petition or similar action but have not experienced a payment default. C is typically in default, with little prospect for recovery of principal or interest. C (Lr) are typically in default, with little prospect for recovery of principal or interest.

D (Lr) Default Loans/facilities rated D (Lr) are in default or are expected to default on scheduled payment dates.

*Note: CRAB appends numerical modifiers 1, 2, and 3 to each generic rating classification from AA through CCC. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in

the lower end of that generic rating category. SHORT-TERM CREDIT RATING: LOANS/FACILITIES OF BANKS/FIS

(All loans/facilities with original maturity within one year)

DEFINITION

ST-1 Highest Grade

This rating indicates that the degree of safety regarding timely pay ment on the loans/facilities is v ery strong.

ST-2 High Grade

This rating indicates that the degree of safety regarding timely pay ment on the loans/facilities is strong; however, the relative degree of safety is lower than that for issues rated higher.

ST-3 Adequate Grade

This rating indicates that the degree of safety regarding timely pay ment on the loans/facilities is adequate; however, the issues are more vulnerable to the adverse effects of changing circumstances than issues rated in the two higher categories.

ST-4 Marginal

This rating indicates that the degree of safety regarding timely payment on the loans/facilities is marginal; and the issues are quite vulnerable to the adverse effects of changing circumstances.

ST-5 Inadequate Grade

This rating indicates that the degree of safety regarding timely pay ment on the loans/facilities is minimal, and it is likely to be adversely affected by short-ter m adversity or less favorable conditions.

ST-6 Lowest Grade

This rating indicates that the loans/facilities are expected to be in default on maturity or is in default.

© Copyright 2012, CREDIT RATING AGENCY OF BANGLADESH LIMITED ("CRAB"). All rights reserved. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT CRAB’S PRIOR WRITTEN CONSENT. All information contained herein is obtained by CRAB from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, such infor mation is provided “as is” without warranty of any kind and CRAB, in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any such information. Under no circumstances shall CRAB have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of CRAB or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if CRAB is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such infor mation. The credit ratings and financial reporting analysis observations, if any, constituting part of the infor mation contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY CRAB IN ANY FORM OR MANNER WHATSOEVER. Each rating or other opinion must be weighed solely as one factor in any investment decision made by or on behalf of any user of the information contained herein, and each such user must accordingly make its own study and evaluation of each security and of each issuer and guarantor of, and each provider of credit support for, each security that it may consider purchasing, holding or selling.