CRISIL COMPANY REPORT | 1

Monnet Ispat Ltd

GICS Industry: Metals & Mining l Sub Industry: Steel l Website: www.monnetgroup.com

NSE Ticker: MONNETISPA

Bloomberg Ticker: MISP: IN

Face value / Share: 10.0

Div. Yield (%): 0.99

CMP (as on 15 Apr 2011—Rs/share): 528.1

52-week range up to 15 Apr 2011 (Rs) (H/L): 750.00/354.30

Market Cap as on 15 Apr 2011 (Rs mn): 32,838

Enterprise Value as on 15 Apr 2011 (Rs mn): 47,862

Div. Yield (%): 0.0

Shares outstanding (mn): 62.2

Free Float (%): 51.0

Average daily volumes (12 months): 89,827

Beta (2 year): 0.9

Key Stock Indicators

Monnet Ispat Ltd (MIL) is the flagship company of the Monnet Group. MIL is promoted by Mr.

Sandeep Jajodia. MIL is the largest coal based sponge iron producer in India and an integrated steel

player. The company has manufacturing units for sponge iron, steel melting & rolling mill, ferro

alloys plant, power generation units, mining & mineral beneficiation of coal, iron ore and other

minerals. MIL has manufacturing facilities in Raipur & Raigarh in Chhattisgarh. Its registered office

is located at Raipur and corporate office is located at New Delhi.

KEY HIGHLIGHTS

MIL’s joint venture and acquisitions

In March 2011, MIL through its wholly owned subsidiary Monnet Global Limited (MGL), acquired

Indonesian coal company, PT Sarwa Sembada Karya Bumi and on part exploration the reserves of

65 million tonne on thermal coal have been established. The acquisition will give MGL, access to

one of the largest thermal coal mine spreading over an area of 25,000 hectares. MIL through MGL

will use this produce for its planned coast based power project and plans to use coal for captive

needs and is planning to sell the surplus power in the open market which will be a long term source

of revenue for the company. National Mineral Development Corporation (NMDC) and MIL have

also entered into 51:49 joint-venture to acquire and develop coal blocks in India. The company is

planning to source coal for its future requirements from the proposed joint venture.

Expansion and modernisation

The MIL is expanding its steel manufacturing capacity at Raipur. The company is setting up a steel

melt shop for manufacturing structural steel. The capacity of the continuous mill is 500,000 tonnes

per annum (TPA). This mill has been set up for manufacturing various sizes of structural sections

covering wide range of structural grades to cater to the needs of the construction and engineering

sectors. Further capacity additions are underway at Raigarh works where a greenfield steel plant

will be set up for manufacturing 1.5 million tonnes per annum (TPA) of long and flat steel products

at an investment of Rs. 40 billion. MIL is also planning to set up and operate power plants. The

company presently generates 150 MW of power from its Raipur and Raigarh Plant for captive

consumption & sale. MIL is planning to enhance the power generation capacity at Raigarh from 90

MW to 180 MW. The new 90 MW plant is slated for commencing power generation in FY11. MIL is

also setting up a 1,050 MW power plant in Angul, Orissa. MIL is executing this project through its

wholly owned subsidiary, Monnet Power Company Limited. The plant will be commissioned in

FY12.

KEY RISKS • Volatility in the raw material prices of Coal and Iron Ore

• Foreign exchange fluctuations

• Intense competition from new/small players locally/globally

YTD 1-m 3-m 12-m

MONNETISPA 25 3 -5 19

NIFTY 10 7 3 10

Returns (%)

Note:

1) YTD returns are since Apr 01, 2010 to Apr 15, 2011.

2) 1-m, 3-m and 12-m returns are up to Apr 15, 2011

Mar-08 Mar-09 Mar-10

Revenue (Rs mn) 11,592.4 15,742.7 15,337.0

EBITDA margins (%) 21.9 24.1 29.4

PAT (Rs mn) 1,661.9 2,005.2 2,612.9

PAT margins(%) 14.3 12.7 17.0

Gearing (x) 1.0 1.2 1.1

EPS (Rs/share) 34.6 41.8 48.0

PE (x) 14.1 3.7 11.0

P/BV (x) 2.1 0.6 1.8

RoCE (%) 13.2 12.3 13.0

RoE (%) 19.9 17.5 18.4

EV/EBITDA (x) 12.2 4.9 9.7 n.m. : Not meaningful

Promoter

49%

FII

34%

DII

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Indexed price chart

Shareholding (As on February 12, 2011)

Key Financial Indicators

Stock Performances vis-à-vis market

CRISIL COMPANY REPORT | 2

Monnet Ispat Ltd

BACKGROUND

Incorporated in February 1990, MIL was formerly known as Monnet Ispat Limited (MIL). The company was promoted jointly by Sandeep Jajodia and Jindal Strips. In March

2006 the name of the company has been changed from Monnet Ispat Limited to its current name. MIL got listed on BSE in January 2001. MIL is primarily engaged in

manufacturing sponge, steel and ferro alloys. It has manufacturing units for sponge iron, steel melting and rolling mill, ferro-allow plant, power generation units, mining

and mineral beneficiation of coal, iron ore and other minerals. The company operates in three segments viz. iron and steel, power and others. Iron & steel contributed

~73%, Power ~25% and other ~2% to the total revenues during FY10. The company has a combined capacity of 800,000 tonnes of sponge iron, 300,000 tonnes of steel,

58,400 tonnes of ferro alloys and 150 megawatts of power. In FY10, the company produced 710,044 tonnes of sponge iron, 115,325 tonnes of MS/SS products, 90,714

tonnes of structural steel and 1,000,119 tonnes of coal. The company’s subsidiaries include Monnet Global Ltd, Monnet Overseas Ltd, Monnet Daniel Coal Washeries Pvt.

Ltd, Monnet Power Company Ltd, Monnet Cement Ltd and Rameshwaram Steel & Power Pvt Ltd. In December 2010, Mounteverest Trading & Investment Limited (MTIL)

got merged into MIL.

COMPETITIVE POSITION

Peer Comparison

Monnet Ispat &

Energy Ltd

Jai Balaji

Industries

Limited J S W Steel Ltd.

Jindal Steel &

Power Ltd.

Mar-10 Mar-10 Mar-10 Mar-10

Revenue (Rs mn) 15,337.0 19,298.0 189,460.2 111,131.2

EBITDA margins (%) 29.4 13.2 21.6 53.6

PAT (Rs mn) 2,612.9 245.6 15,532.9 36,345.6

PAT margins(%) 17.0 1.3 8.2 32.7

Gearing (x) 1.1 1.7 2.1 0.8

EPS (Rs/sha re) 48.0 3.9 84.9 21.0

PE (x) 11.0 44.1 10.9 31.6

P/BV (x) 1.8 1.2 1.3 7.6

RoCE (%) 13.0 7.3 11.8 25.2

RoE (%) 18.4 3.5 19.9 35.3

EV/EBITDA (x) 9.7 10.5 9.0 11.8 n.m: Not meaningful

FINANCIAL PROFILE

Top-line fell by 2.6% due to discontinuing the ferro alloys division in FY10

MIL showed decline in top-line by ~2.6% in FY10 over FY09’s top-line of Rs 15.7 bn.

This decline was mainly on account of discontinuing the operations of its ferro alloys

division since the cost of production has gone higher than the market price. Export

sales of the company have also declined by ~9% on y-o-y basis from Rs. 511.7 mn in

FY09 to Rs 466.4 mn in FY10.

Operating margins of the company grew by ~530 basis points during the year and

stood at 29.4% in FY10 as compared to 24.1% in FY09. The growth was on account of

decrease in material cost and marketing cost as a percentage of sales over FY09.

The company reported a net profit of Rs 2.6 bn in FY10 as against a PAT of Rs 2.0 bn

in FY09. The growth of ~30.3% was on account of higher operating profits coupled

with an increase in income from profit on sale of investments of ~Rs 141.6 mn as

compared to a loss on sale of investments of ~Rs 157 mn in FY09.

Units Mar-08 Mar-09 Mar-10

Revenue Rs mi l l ion 11,592.4 15,742.7 15,337.0

EBITDA margins Per cent 21.9 24.1 29.4

PAT Rs mi l l ion 1,661.9 2,005.2 2,612.9

PAT margi ns Per cent 14.3 12.7 17.0

Revenue growth Per cent 82.1 35.8 -2.6

EBITDA growth Per cent 44.0 49.6 18.6

PAT growth Per cent 23.3 20.7 30.3

Gearing Times 1.0 1.2 1.1

RoCE Per cent 13.2 12.3 13.0

RoE Per cent 19.9 17.5 18.4

Key Financial Indicators

INDUSTRY PROFILE Sponge iron

In India, mini-steel plants that produce long products are the primary consumers of merchant sponge iron. The sponge iron industry is highly fragmented with numerous

unorganised small players and only a few large organised players. The low cost involved in setting up a sponge iron unit makes it easier to put up smaller units, leading to

fierce competition. India is the largest sponge iron player in the world, producing 22.99 million tonnes in 2009-10. India uses more sponge iron, mainly on account of ample

availability of iron ore and non-coking coal and also due to less availability of scrap. In developed countries, scrap is more popular than sponge iron for steel production

considering it consumes less power and the yield is also higher. Between April-December 2009, sponge iron demand in India grew by 6 per cent (y-o-y) to 17 million tonnes

(20 million tonnes in 2008-09) following improvement in demand for long products (which grew by 8-9 per cent).

Steel Alloy

In the last few years, applications of alloy steel have been increasing in consumer products such as consumer durables and automobiles. Use of alloy steels has enabled the

industry to make light-weight machinery, thus making them energy efficient. The automobile industry is the largest consumer of alloy steel. In 2009-10, India’s consumption

of alloy steel increased by 9.6 per cent over 2008-09. The automobile and auto components sectors consume around 70 per cent of the alloy steel produced in India. In the

auto component sector, around 60 per cent of the total demand is derived from automobile original equipment manufacturers (OEM). In 2009-10, production of cars, utility

vehicles and two wheelers is estimated to have grown by 25 per cent and that of commercial vehicles is estimated to have grown by around 36 per cent. Additionally,

production of the auto components is also estimated to have grown by 10-11 per cent y-o-y in 2009-10.

CRISIL COMPANY REPORT | 3

Monnet Ispat Ltd

ANNUAL RESULTS

Income Statement Balance sheet

(Rs million ) Mar-08 Mar-09 Mar-10 (Rs million ) Mar-08 Mar-09 Mar-10

Net Sales 11,583.4 15,695.7 15,319.9 Equity share capital 480.0 479.6 544.8

Operating Income 11,592.4 15,742.7 15,337.0 Reserves and surplus 10,504.5 11,481.3 15,856.4

Tangible net worth 10,984.5 11,961.0 16,401.2

EBITDA 2,539.2 3,799.4 4,505.4 Deferred tax liablity:|asset| 908.5 1,096.4 1,161.2

EBITDA Margin 21.9 24.1 29.4 Long-term debt 9,145.6 10,718.1 11,420.5

Short-term-debt 2,113.8 3,101.8 5,807.5

Depreciation 444.9 686.6 772.9 Total debt 11,259.4 13,819.9 17,228.0

Interest 425.3 565.7 793.6 Current l iabilities 1,473.5 1,833.3 2,066.6

Other Income 538.9 90.2 306.6 Total provisions 292.9 292.6 334.5

Total liabilities 24,918.8 29,003.2 37,191.5

PBT 2,199.9 2,520.8 3,225.5 Gross block 12,355.2 14,841.5 15,635.7

PAT 1,661.9 2,005.2 2,612.9 Net fixed assets 14,000.1 16,371.6 24,739.6

Investments 1,009.8 1,057.1 1,846.6

PAT Margin 14.3 12.7 17.0 Current assets 9,908.9 11,574.5 10,605.2

Receivables 1,050.9 1,120.0 1,468.0

No. of shares (Mn No.) 48.0 48.0 54.5 Inventories 2,217.1 2,003.0 2,403.6

Cash 3,740.5 2,497.8 2,204.2

Earnings per share (EPS) 34.6 41.8 48.0 Total assets 24,918.8 29,003.2 37,191.4

Cash flow Ratio

(Rs million ) Mar-08 Mar-09 Mar-10 Mar-08 Mar-09 Mar-10

Pre-tax profit 2,207.9 2,637.3 3,245.5 Revenue growth (%) 82.1 35.8 -2.6

Total tax paid -257.6 -327.7 -547.9 EBITDA growth(%) 44.0 49.6 18.6

Depreciation 444.9 686.6 772.9 PAT growth(%) 23.3 20.7 30.3

Change in working capital -1,965.2 -2,548.9 950.9

EBITDA margins(%) 21.9 24.1 29.4

Cash flow from operating activities 430.0 447.3 4,421.4 Tax rate (%) 11.7 12.7 17.0

Capital Expenditure -3,623.5 -3,249.2 -9,145.9 PAT margins (%) 14.3 12.7 17.0

Investments and others -624.2 -47.3 -789.5

Dividend payout (%) 14.6 12.0 10.9

Dividend per share (Rs) 5.1 5.0 5.2

Cash flow from investing activities -4,247.7 -3,296.5 -9,935.4 BV (Rs) 228.0 247.1 301.1

Equity raised/(repaid) 3,591.7 233.7 895.6 Return on Equity (%) 19.9 17.5 18.4

Debt raised/(repaid) 1,074.4 2,560.5 3,408.1 Return on capital employed (%) 13.2 12.3 13.0

Dividend (incl. tax) -284.4 -280.5 -334.5

Others (incl extraordinaries) 249.7 -907.3 1,251.2 Gearing (x) 1.0 1.2 1.1

Interest coverage (x) 6.0 6.7 5.7

Debt/EBITDA (x) 4.4 3.6 3.8

Cash flow from financing activities 4,631.4 1,606.4 5,220.4

Change in cash position 813.7 -1,242.8 -293.6 Asset turnover (x) 1.1 1.2 1.0

Opening cash 2,926.8 3,740.5 2,497.8 Current ratio (x) 2.7 2.3 1.5

Closing cash 3,740.5 2,497.8 2,204.2 Gross current assets (days) 312 268 251

n.m : Not meaningful;

QUARTERLY RESULTS

(Rs million) Dec-10 % of

Revenue

Dec-09 % of

Revenue

Sep-10 % of

Revenue

Dec-10 % of

Revenue

Dec-09 % of

RevenueNo of Months 3 3 3 9 9

Revenue 3,536.3 100.0 3,773.2 100.0 3,681.4 100.0 11,441.7 100.0 10,626.4 100.0

EBITDA 1,174.1 33.2 1,176.6 31.2 1,121.9 30.5 3,528.9 30.8 3,369.6 31.7

Interest 53.7 1.5 160.3 4.2 119.3 3.2 316.8 2.8 490.4 4.6

Depreciation 188.8 5.3 181.4 4.8 184.0 5.0 554.4 4.8 534.5 5.0

PBT 931.6 26.3 834.9 22.1 818.6 22.2 2,657.7 23.2 2,344.7 22.1

PAT 701.8 19.8 680.1 18.0 656.0 17.8 2,084.9 18.2 1,934.6 18.2

Profit and loss account

CRISIL COMPANY REPORT | 4

Monnet Ispat Ltd

FOCUS CHARTS & TABLES

Jun 2010 Sep 2010 Dec 2010 Feb 2011

Promoter 44.3 44.3 51.1 49.8

FII 32.1 31.6 31.7 33.9

DII 6.9 7.1 4.8 4.6

Others 16.7 17.0 12.4 11.8

Shareholding Pattern (Per cent)

Director Name Designation

Mohinder Singh Gujra l (Mr.) Chairman

Sandeep Ja jodia (Mr.) Executive Vice Cha irman & Mana ging

Director

C.P. Bai d(Mr.) Dy. Managing Di rector

K.K. Khanna(Mr.) Executive Di rector

G.C. Mrig(Mr.) Non Executive Di rectors

Ajay Relan(Mr.) Non Executive Di rectors

P.L. Nene(Mr.) Non Executive Di rectors

J.P. Lath(Mr.) Non Executive Di rectors

V.N. Kedia(Mr.) Non Executive Di rectors

Board of Directors

Additional Disclosure

This report has been sponsored by NSE - Investor Protection Fund Trust (NSEIPFT).

Disclaimer

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contact 'Client Servicing' at +91-22-33423561, or via e-mail: clientservicing@crisil.com.

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