Ador Welding Ltd. — Capital/Financing Update 2019

Mar 27, 2019

ADDR WELDING LIMITED WELDING

Mumbai—400 023. Mumbai-400 051.

Fort, Bandra (East),

Phiroze Jeejeebhoy Towers, Exchange Plaza, C — 1, Block G, 01St Floor, Dalal Street, Bandra—Kurla Complex,

Comggnv Scrip Code: 517041 Companv Scrip Code: ADORWELD

Dear Sirs,

Sub: Revision in Credit Ratiflg

Pursuant to Regulation 30 read with Schedule III Part A Para A of SEBI {Listing Obligations and Disclosure Requirements) Regulations 2015', please find enclosed herewith letters dated ' 22rld March, 2019 & 27th March, 2019 received from "CARE", Credit Rating Agency, indicating revision in the credit rating with respect to bank facilities, as availed by our Company.

The revision is with respect to the long term bank facilities. The revised rating is CARE AA whereas the original rating was CARE AA; however the outlook, under both the ratings, denotes stability. Further, please note that the rating of short term bank facilities is reaffirmed at CARE A+.

We hereby request you to take a note of the above revision and acknowledge its receipt.

Yours Sincereiy, For ADOR WELDING LIMITED

6i? , iii GIRISH A. PATKAR

CHIEF FINANCIAL OFFICER

Encl: as above

AWL/SEC/SE/2018-19 27th March, 2019

BSE LTD. NATIONAL STOCK EXCHANGE OF INDIA LTD.

REGD. 8. CORPORATE OFFICE Adar House, 6, K. Dubash Marg, Fort. Mumbai - 400 001-16 India. GPO. Box No. 1546 Phone : (022) 2234 252516623 9300 Fax :(022) 2287 3983 Email: cma@-adorians.com Website :www.adorweiding.oom Corporate identity No: L70100MH1951PL000864? GED

. Confidential ' '

Credit rating for bank facilities

C&fig Ratings ERfiE'ifil'BWffiéfiflWsue	25 ¢§TlNc ,, 6% *bfllen'o zéfafi'io lyd¢°
Mr. Patkar Girish Chief Officer Financial Ador Welding Limited
House" Marg, '— 400	001
			March 22,
Sir,	. Confidential Credit for rating	bank facilities	' '
review of a 9MFY19 for	developments including recent Committee (UA), our Rating	and financial operational the following has reviewed	performance of ratings:
Facilities	Amount	Rating"	Action Rating
Long-term bank facilities	(Rs. crore) 87 50 _ '	CARE AA-; Stable Minus; (Double A Outlook: Stable)	Revised from CARE Stable A; Outlook: (Double Stable)
Short-term - facilities bank	79 00 ' y '	CARE A1+ Plus) (A One	Reaffirmed
Total	166.50 (Rupees hundred One sixty six crore and fifty lakhs only)
Annexure 2 Refer	1 of rated for details facilities.
The 3 rationale	will be the for rating	you communicated to	A write-up separately.
on release)	above is proposed to the rating	be the press issued to	of draft a shortly,
is enclosed	Annexure-Z. your perusal as for	We you request	the peruse' to
document	comments and your if any. offer	We doing this as are	matter courtesy of a
clients and our	view ensure that With to a	no inaccuracies factual	have inadvertently
in. Kindly	possible.- In any as as revert early	if we do not case,	2019_ your AA; (press which annexed crept' March from you by hear 25,
we 2019	you on will proceed the that basis undertake the right to a	comments no any have of surveillance/review	to offer. from time the rating
CARE reserves 4' based time,	on warranting circumstances	such subject review,	to one such at least
4th Floor,.Ador 6, K. Dubash Fort, Mumbai Dear On company review/surveillance	every year.

• ³ The rationale for the rating will be communicated to you separately. A write-up (press release) on the above rating is proposed to be issued to the press shortly, ^a draft of which is enclosed for your perusal as Annexure-Z. We request you to peruse' the annexed document and offer your comments if any. We are doing this as ^a matter of courtesy to our clients and With ^a view to ensure that no factual inaccuracies have inadvertently crept' in. Kindly revert as early as possible.- In any case, if we do not hear from you by March 25, 2019 we will proceed on the basis that you have no any comments to offer.
• 4' CARE reserves the right to undertake ^a surveillance/review of the rating from time to time, based on circumstances warranting such review, subject to at least one such review/surveillance every year.

* Complete definitions of the ratings assigned are available at www.careratings.com and in other CARE publications.

CARE Ratings Limited (Formerly known as Credit Analysis & Research Limited)

• 5 CARE reserves the right to revise/reaffirm/withdraw the rating assigned as also revise the outlook, as a result of periodic review/surveillance, based on any event or information which in the opinion of CARE warrants such an action. In the event of failure on the part of the entity to furnish such information, material or clarifications as may be required by CARE so as to enable it to carry out continuous monitoring, of the rating'of the bank facilities, CARE shall carry out the review on the basis of best available information throughout the life time of such bank facilities. In such cases the credit rating symbol shall be accompanied by "ISSUER NOT COOPERATING". CARE shall also be entitled to publicize/disseminate all the afore-mentioned rating actions in any manner considered appropriate by it, without reference to you.
• 6 CARE ratings do not take into account the sovereign risk, if any, attached to the foreign currency loans, and the ratings are applicable only to the rupee equivalent of these loans. W
• 7 Users of this rating may kindly refer our website www.Careratings.com for latest update on the outstanding rating. ⁷
• 8 CARE ratings are not, recommendations to sanction, renew, disburse or' recall the concerned bank facilities.

If you need any clarification, you are welcome to approach us in this regard. Thanking you, .

Yours faithfull Y, ^A ' ' ^I \ ' _ [Anubhav Sharma] Hitesh M Avachat] Manager ' _ Senior Manager anubhav.sharma@careratings.com hites .avachat@careratings.com

Encl.: As above '

' '

Disclaimer

CARE's ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the ' concerned bank facilities or to buy, sellor hold any security. CARE has based its ratings/outlooks on information obtained from sources believed by it to be accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facilities/instruments. ' .

In case of partnership/proprietary concerns, the rating/outlook assigned by CARE is based on the capital deployed by the partners/proprietor and the financial strength of the firm at present. The rating/outlook may undergo change in case of withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial performance . and other relevant factors. ^I '

Page 2 of 8

CARE Ratings Limited (Formerly known as Credit Analysis 8: Research Limited)

Annexure 1

, ⁷ Details of Rated Facilities

1. Long-term hank facilities

1. A. Fund based limits

	Annexure 1
	Details of Rated Facilities , 7
1.	hank Long-term facilities
1. A. Fund	based limits
S. No.	Name of-Lender	(Rs. crore) CC/WCDL*
1. 2.	HDFC Bank IDFC Bank	62.50 25.00
*-CC=Cash	Total Capital Demand Credit WCDL=-Working Loan	87.50
Total long term	facilities (1.A) = Rs. 87.50 crore
	instruments
2. Short-term 2.A. Fund
	based limits	(Rs. crore)
5.1%.	Name of Lender	5m"
1. '	Bank Mahindra Kotak Total	15.00 15.00
	* \$IFF=SaIes Invoice Financing Facility	'
2.8. Non	Fund based limits '
.- S.No.	Name'of Lender	(Rs. crore) LC/BG *
1.	HDFC Bank IDFC Bank	43.00 20.00
2.

Total long term facilities (1.A) = Rs. 87.50 crore

2. Short-term instruments

2.A. Fund based limits

		(Rs. crore)
5.1%.	Name of Lender	5m"
1.	Bank Mahindra Kotak	15.00
'	Total	15.00

2.8. Non Fund based limits '

		Annexure	1
	, 7	Details of Rated	Facilities
1. 1. A. Fund	hank Long-term facilities based limits
				(Rs. crore)
S. No.	Name of-Lender			CC/WCDL* 62.50
1. 2.	HDFC Bank IDFC Bank			25.00 87.50
*-CC=Cash	Total Credit WCDL=-Working	Capital Demand Loan
	Total long term facilities (1.A) = Rs. 87.50	crore
2. Short-term	instruments
2.A. Fund	based limits
				(Rs. crore)
5.1%.	Name of Lender			5m" 15.00
1.	Bank Mahindra Kotak			15.00
'	Total * \$IFF=SaIes Invoice Financing Facility			'
	Fund based limits '
2.8. Non				(Rs. crore)
.- S.No.	Name'of Lender			LC/BG * 43.00
1. 2.	HDFC Bank IDFC Bank			20.00
3.	of Baroda Bank Total			1.00 64.00

*-LC=Letter of Credit 86: Bank Guarantee

Total short term instruments (2.A.+2.B.) = Rs. 79.00 crore

Page 3 of 8

CARE Ratings Limited (Formerly known as Credit Analysis & Research Limited)

Annexure 2

Press Release

^~ Ador Wielding Limited

March, 2019

	Annexure	2
	Release Press
	~ Ador Wielding 2019 March,	Limited
Ratings	Amount
Facilities	(Rs. crore)	Rating' CARE AA-; Stable	Rating Action CARE from Revised AA;
. bank Long-term faCIlItleS	8750	A Double Minus; (Outlook: Stable)	Stable ' (Double A; Outlook: Stable)
Short-term bank facilities	79.00	A" CARE (A One Plus)	Reaff'rmed
Total	166.50 (Rs. One hundred sixty six
	crore and fifty lakhs only)

Details of instruments/facilities in Annexure—l '

Detailed Rationale

The revision in long-term rating of bank facilities of Adar Welding Limited (AWL) is on account of delay in reduction on dependence Ievel,on working capital borrowings within the stipulated time period; as envisaged by CARE. '

The ratings continue to derive strength from well established & experienced promoter group, diversified product portfolio supported by comprehensive sales and distribution network, established market position in . the wielding industry catering to reputed client base, favourable financial risk_ profile and debt coverage ^I indicators. . ^V

The rating strengths, however, continue to be offset by volatility associated with raw material prices and prevalent competition in wielding industry.

Ability of the company to efficiently manage its working capital requirements and any large debtfunded capital expenditure/acquisition impacting overall financial risk profile of the company would be the key rating sensitivities.

Detailed description of the key rating drivers

Key Rating Strengths

Well established and experienced promoter group

'Complete definitions of the ratings assigned are available at www.careratings.com and in othe CARE publications. '

Page 4 of 8

CARE Ratings Limited (Formerly known as Credit Analysis 6: Research Limited)

AWL promoted by] B Advani & Co. has over six decades of experienée in welding consumables business. J B Advani Group was established'in the year 1908 as a small trading company and had set up AWL in the year 1951. Currently, the group consists of companies having operations in engineering products and services, cosmetic products and green energy solutions. The day-to —day operations of the company are overlooked by a team of qualified and experienced professional headed by Mr.S.M.Bhat. '

Well- established brand offering diversified» product portfolio supported by comprehensive sales & distribution network ' ' .

AWL is engaged in the manufacturing of welding consumables & equipment and also has a project engineering division. It offers a wide variety (over 200 types) of electrodes, fluxes, flux—cored wires and specially customized electrodes. The company has further augmented its distribution network to "300 distributors, spread across India. Further, the company has a marketing office in Sharjah through which it caters to countries in the Gulf region.

Established market position in wielding industry catering to reputed client base

AWL caters to ' various industries including oil & gas, steel, ship-building, defense, power, automobile, chemicals & fertilizers, general fabrication and engineering industries. The company has also diversified into project engineering whereby it provides customized solutions for multi-disciplinary projects and contracts to various industries such as petrochemicals, oil & gas, fertilizers, pharmaceuticals, metals, etc.

Favourable financial risk profile and debt protection metrics

The company's overall financial risk profile and debt protection metrics continues to be favourable. In FY18 the company reported moderation in its Project Engineering BusineSs (PEB) segment performance. Due to delay in realisations from international order, the company continues to report loss at PBIT levels in'9MFY19. .

g. Total Debt of the company increased significantly to Rs. 81.20 crore as on March 31, 2018 from Rs. 35.47 crore as on March 31, 2017 on account of working-capital requirement towards execution orders in the PEB segment. As a result the interest and finance expenses increased to Rs. 6.20 crore in FY18_from Rs. 2.06 crore in FY17. Interest coverage ratio of the company moderated to 7.11 times in FY18 from 18.84 times in FY17. Total debt to GCA of the company increased to 2.77 times as on March 31, 2018 from 1.20 times as on March 31, 201-7. ' '

Key Rating Weaknesses

Delay in reduction of debt at consolidated level within stipulated time period

. CARE at time of last. review envisaged that as on December 31', 2018, AWL was to reduce its dependence level on working capital borr'owings. However, due to delay in realisation of receivables from an international-order, the company continued to exhibit dependence on working bank borrowings. As ^a result,' the company relinquished its debt free profile and reported higher level of fund based bank limit utilisations. Exposure of operational performance to volatility'associated with raw material prices _ '

AWL major raw material component is steel. The company procures it domestically. The inventory levelsof the raw material are budgeted as per production requirement. Any increase in raw material is paSS-on to Page 5 of 8

CARE Ratings Limited (Formerly known as Credit Analysis & Research Limited)

4'" Floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway, Sion (E), Mumbai - 400 022. Tel.: +91-22— 6754 3456 ⁰ Fax: +91-22- 022 6754 3457 ^o www.careratings.com ^o CIN-L6719OMH1993PLC071691 end users. However, any time lag in pass-on of cost escalation would impact the operational performance of the company.

Prevalent competition in wielding industry from domestic and international players

The welding industry comprises welding equipment, consumables and welding services. Demand for welding consumables is likely to rise during the forecast period due to increasing investments in the oil & gas industry. The Indian welding industry comprises various large, medium, and small-scale companies. Some international players in the Indian welding consumables industry include ESAB, Lincoln Electric and Voestalpine ^{A G} (Bohler Welding Group India Pvt Ltd.) and domestic players include AWL, 0&H Sécheron, Honavar Electrodes, and ^D & ^H Welding Electrodes Ltd. Along with these players, the Indian welding consumables industry comprises ^a large number of small, unorganized players. The key market players have developed their own distribution networks, as distribution is ^a critical success factor in this industry. Entry of Chinese manufacturers, with their low cost and sophisticated technology, has also resulted in increasing competitive pressures. I I '

Analytical approach: Standalone

Applicable Criteria

CARE's criteria on assiqnina Outlook to Credit Ratinqs CARE's policy on Default Recoqnition CARE's methodoloqy for Short-term Instruments Financial ratios - Non-Financial Sector CARE's methodology for manufacturing comganies '

About the Company _

AWL (formerly known as Advani Oerlikon Limited), incorporated on October 22, ¹⁹⁵¹ by 1.8. Advani & ⁷ company Private Limited (IBPL) and the Oerlikon-Buhrle Group, Switzerland. 'During FY03, IBPL acquired shareholding of Oerlikon Group in AWL and became majority shareholder in the company.

The company is engaged in the manufacturing of welding consumables & equipments and also has ^a project engineering division. AWL offers ^a complete welding package which includes ^a wide variety (over ²⁰⁰ types) of electrodes, fluxes, flux—cored wires and specially customized electrodes. Projectengineering division of AWL is currently engaged in providing customized solutions for multi-disci'plinary projects and contracts related to refineries, oil & gas, petrochemicals, fertilizers, steel plants, pharmaceuticals, water and other chemical complexes and process industries. ^{I I}

	'FY17 7	" FY18
income Total	446.34	471.23
v - PBILDT	38.82	' 44.07
PAT	18.12	18.56
, times eari Overall	- 0.15	0.33
I e times Interest	18.84	7.11

A: Audited

StatUs of non-cooperation with previous CRA: Not Applicable I Page 6 of 8

CARE Ratings Limited (Formerly known as Credit Analysis 8: Research Limited)

4'" Floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway, Sion (E), Mumbai - 400 022. Tel.: +91-22- 6754 3456 0, Fax: +91-22- 022 6754 3457 ^o www.careratings.com - CIN-L67190MH1993PLC071691

Any other information: Not Applicable

Rating History for last three years: Please refer Annexure-Z

Analyst Contact:

"For detailed Rationale Report and subscription information, please contact us at www.careratings.com

About CARE Ratings:

CARE Ratings commenced operations in April ¹⁹⁹³ and over two decades, it has established itself as one of the leading credit rating agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an EXternal Credit Assessment Institution (ECAI) by the Reserve Bank of India (RBI). CARE Ratings is proud of its rightful place in the Indian capital market built around investor confidence. CARE Ratings provides the entire spectrum of credit rating that helps the corporates to raise capital for their various requirements and assists the investors to form an informed investment decision based on the credit risk and their own risk-return expectations. Our rating and grading service offerings leverage our domain and analytical expertise backed by the methodologies congruent with the international best practices.

Disclaimer .

Annexure-l: Details of Instruments/Facilities

Any information: Not other	Applicable
Rating History for last three years: Please refer Annexure-Z
Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. This classification is available at www.careratings.com. Investors/market intermediaries/regulators_or others are welcome
to write to care@careratings.com for any clarifications. - Analyst Contact:				'
Hitesh M Name: Avachat Tel: 022-67543510
Email: hitesh.avachat@careratings.com
"For detailed Rationale Report and subscription information, please contact us at www.careratings.com About CARE Ratings:
credit rating agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an EXternal Credit Assessment Institution (ECAI) by the Reserve Bank of India (RBI). CARE Ratings is proud of its rightful place in the Indian capital market built around investor confidence. CARE Ratings provides the entire spectrum of credit rating that helps the corporates to raise capital for their various requirements and assists the investors to form an		CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading
informed investment decision based on the credit risk and their own risk-return expectations. Our rating and grading service offerings leverage our domain and analytical expertise backed by the methodologies congruent with the international best practices.
		Disclaimer
CARE'S ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. CARE from sources believed by it to be accurate and reliable. CARE completeness of any information and is not responsible for-any errors or omissions or for the results obtained from the use of such information. Most on the amount	entities whose and type of bank facilities/instruments. .	bank facilities/instruments are rated by CARE
In case of partnership/proprietary concerns, the rating /outlook assigned by CARE partners/proprietor and the financial strength of the firm ' withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial performance and other relevant factors.			at present. The rating/outlook may
Annexure-l: Details of Instruments/Facilities
Name of the ' Instrument	I Date of Issuance	Coupon Rate	Maturity Date	Size of the Issue	Rating assigned Outlook
' - - Fund-based - LT-Cash	-	-	-- '	(Rs. crore) 87.50	CARE AA—; Stable
Credit Non—fund-based - ST— BG/LC	-	-	'-	79.00	CARE A1+ '
Annexure-Z: Rating History of last three years
Name of the Sr.		Current Ratings		Rating history	has based its ratings/outlooks on information obtained does not, however, guarantee the accuracy, adequacy or have paid a credit rating fee, based is based on the capital deployed by the undergo change in case of along with Rating
Instrument/Bank No. Facilities	Type	Rating Amount Outstanding (Rs. crore)	Date(s) & Rating(s) 2018-2019	Date(s) & Rating(s) 2017-2018	Date(s) & Date(s) & ,Rating(s) Rating(s) assigned in assigned in assigned in assigned in 2015-2016 2016-2017

Annexure-Z: Rating History of last three years

Sr.	Name of the		Current Ratings			Rating history
No.	Instrument/Bank Facilities	Type	Amount Outstanding (Rs. crore)	Rating	Date(s) & Rating(s) 2018-2019	Date(s) & Rating(s) assigned in assigned in assigned in assigned in 2017-2018	Date(s) & Rating(s) 2016-2017	Date(s) & ,Rating(s) 2015-2016
	1. Fund-based - LT-Cash	LT	87.50	CARE	1)CARE AA;	-	1)CARE AA; 1)CARE AA

CARE Ratings Limited (Formerly known as Credit Analysis & Research Limited)

4m Floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway, Sion (E), Mumbai - 400 022. Tel.: +91-22- 6754 3456 0 Fax: +91-22— 022 6754 3457 ^o www.careratings.com ^o CIN-L67190MH1993PLC071691

Sr. , No.	Name of the Instrument/Bank Facilities	Type '	Current Ratings Amount Outstanding	Rating	Date(s) & Rating(s)	Rating history Date(s) & Rating(s)	Date(s) & Ratingis)	Date(s) & Rating(s)
	I Credit		(Rs.crore)	AA-;	2018-2019 Stable	2017-2018	assigned in assignedinr assigned in assigned in 2016-2017 Stable (26-Dec-16)	2015—2016 (10—Aug—15)
				Stable	(05-Oct—18) 2)CARE AA; Stable (31-Aug-18) 3)CARE AA;		' -
	2. Non-fund-based - ST-	ST	79.00	CARE	Stable (06-Apr-18) 1)CARE A1+			1)CARE A1+ 1)CARE A1+
	BG/LC			A1+	(05-Oct-18) 2)CARE A1+; Stable (31—Aug-18) 3)CARE A1+			(26-Dec-16) (10-Aug-15)
					(06-Apr-18)
				Page 8	of 8

6, K. Dubash Marg, Fort, Mumbai - 400 001

March 27, 2019

Confidential

Dear Sir,

Credit rating for bank facilities

Please refer to our rating letter no. CARE/HO/RL/2018—19/516 dated March 22, 2019, press release dated March 22, 2019 and your representation e-mail dated March 27, 2019 on the above subject. 2. Our Rating Committee has carefully reconsidered the representation made by you tegarding the revision in rating assigned to the above mentioned bank facilities. It has, however, not been found possible to upgrade the rating for the facilities and the rating stands at 'CARE AA-_; Stable/CARE A1+' (Double A Minus; Outlook: Stable/A One Plus) for Iong—term facilities. In this connection, we assure you that the facts mentioned in your letter under I reference were considered while deciding the rating. Manager Senior Manager

If you need any clarification, you are welcome to approach us in this regard.

Thanking you,

Yours faithfully,

W

[Anubhav anubhav.sharma@careratings.com

Sharma] [Hitesh M Avachat] hitesh.avachat@careratings.com

Disclaimer

CARE's ratings are opinions on credit quaiity and are not recommendations to sanction, renew, disburse or recall the concerned hank facilities or to buy, sell or hold any security. CARE has based its ratings on information obtained from sources believed by it to be accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeneSS of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE have paid ^a credit rating fee, based on the amount and type of bank facilities/instruments. In case of partnership/pmprietary concerns, the rating assigned by CARE is based on the capital deployed by the partners/proprietor and the financial strength of the firm at present. The rating may undergo change in case of withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial performance and other relevant factors.

Page 1 of 1

CARE Ratings Limited (Formerly known as Credit Analysis 6: Research Limited)

4'" Floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway, Sion (E), Mumbai - ⁴⁰⁰ 022.