Edelweiss DISRUPTIVE India Conference 2016 INNOVATIONSbudget.edelweissfin.com › report ›...

Post Conference Notes - Day 1February 2016

February 15-17, 2016 St. Regis Hotel, Mumbai

Edelweiss Research Team+91 22 2286 [email protected]

Edelweiss Securities Limited

February 1 -1 , 2015 7 6 St. Regis Hotel, Mumbai

Edelweiss Research Team+91 22 2286 [email protected]

Edelweiss Securities Limited

February 1 -1 , 2015 7 6 St. Regis Hotel, Mumbai

EdelweissIndia Conference 2016

DISRUPTIVEINNOVATIONS

Profile of Participating Companies

Edelweiss Securities LimitedEdelweiss Securities Limited1 Edelweiss Securities Limited

PrefaceWe present key takeaways from Day 1 of the Mumbai leg of Edelweiss India Conference 2016 - Disruptive Innovations. The annualevent will witness the biggest-ever participation with more than 170 companies on board, covering upwards of 50% of the BSE 500market cap and facilitating over 2,000 one-on-one meetings between investors and corporates. The conference endeavours toprovide investors an ideal platform to interact with companies across sectors, besides giving a meaningful outlook on India’sgrowth trajectory and investment opportunities. The event will bring together over 170 corporates, 500 investors, industry experts,politicians and senior bureaucrats over 3 days (February 15-17).

The conference is being held during perplexing times, both in India and globally. We believe technology is advancing so rapidly andin so many directions that it has become challenging to encompass the next big thing in the long term. Hence, it is important to takecognizance of Disruptive Innovations at the earliest. The non-linear growth in human capital along with technology has resulted indisruptions at break-neck speed. Given that 60-90% of value is derived from terminal value, it is important that investors evaluaterisks to their existing businesses, which may be disrupted. We do not know how these things will pan out yet, but our attempt is tocreate an enabling and thought-provoking environment for deliberation, which hopefully will help us in better decision making.

Speaking about disruption, the focus of Day 1 of the conference was energy and financial services. In the energy space, there wereuseful insights from Sun Edisson and Mr. Zachary Shahn on renewable energy. The Bank Bazaar story and the subsequent bankingpanel discussion highlighted how technology is changing the banking landscape. The panel agreed that domain and technologyexpertise will have to move forward in a collaborative manner.

Apart from disruption, Day 1 also had Mr. Piyush Goyal, Union Power Minister, and Mr. Suresh Prabhu, Railway Minister, highlightingkey measures and the roadmap ahead in their respective sectors. The power minister highlighted that over the past 2 years, coalproduction has improved, PLF of gas-based plants has increased, distribution capex has improved and UDAY scheme will helpresolve legacy SEB debt issues. Going ahead, renewable sector will be key focus area and it alone will attract USD1bn investmentover the next 5 years. Mr. Suresh Prabhu mentioned that railways’ focus will remain on strengthening the rail network rather thanannouncing new projects. The aim is to leverage technology and analyse data and set up alternative revenue streams that willimprove railways’ finances.

Our interactions with companies also indicated change in consumer expectations due to technology explosion. Within the consumer

sector, our interactions suggest that overall demand remains subdued as there is some pressure in rural areas. While benign rawmaterial prices have boosted margins, companies are awaiting implementation of OROP and 7th Pay Commission for somemeaningful pick up in volumes. Meanwhile, real estate companies conceded that some concerns remain; however, the recent fall ininterest rates has helped boost volumes in some segments. Players are hopeful that further interest rate cuts and policy reformswill help waning of risk perception for the sector. Banking companies indicated that dismal environment is unavoidable, given thebleak situation in all commodity businesses like steel, cement, paper etc. Overall, India Inc., believes that the Indian economy willgrow in the coming quarters, but anaemic global growth will pose some challenges.

Overall, though CY15 was a challenging year owing to global uncertainties, investor mood towards India was slightly better. Wehope this conference will provide investors an ideal platform to interact across a spectrum of companies besides giving aninsightful perspective on the likely trajectory of India’s growth and investment opportunities therein.

Team Edelweiss

Edelweiss Securities LimitedEdelweiss Research is also available on www.edelresearch.com,Bloomberg EDEL <GO>, Thomson First Call, Reuters and Factset.



CONTENTS

Aditya Birla Fashion & Retail ...................................................................................................................................................................... 4

APL Apollo Tubes ....................................................................................................................................................................................................... 6

Ashiana Housing ....................................................................................................................................................................................................... 8

Aurobindo Pharma .................................................................................................................................................................................................. 10

Axis Bank .................................................................................................................................................................................................................. 12

Bharat Forge ............................................................................................................................................................................................................. 14

Blue Dart ................................................................................................................................................................................................................... 16

Claris Lifesciences .................................................................................................................................................................................................. 18

Cox and Kings ........................................................................................................................................................................................................... 20

D B Corp ..................................................................................................................................................................................................................... 22

eClerx Services ......................................................................................................................................................................................................... 24

Essel Propack ........................................................................................................................................................................................................... 26

Federal Bank ............................................................................................................................................................................................................ 28

Geometric ................................................................................................................................................................................................................. 30

Glenmark Pharmaceuticals ................................................................................................................................................................................... 32

Grasim Industries ................................................................................................................................................................................................... 34

HDFC Bank ................................................................................................................................................................................................................ 36

HDFC Standard Life Insurance Company ............................................................................................................................................................ 38

Hero Motocorp ......................................................................................................................................................................................................... 40

Hindalco Industries ............................................................................................................................................................................................... 42

Hindustan Unilever ................................................................................................................................................................................................ 44

ICICI Bank .................................................................................................................................................................................................................. 46

ICICI Prudential Life Insurance Company ........................................................................................................................................................... 48

IDBI Bank .................................................................................................................................................................................................................. 50

IDFC ............................................................................................................................................................................................................................ 52

Indiabulls Housing Finance ................................................................................................................................................................................. 54

Indo Count Industries ............................................................................................................................................................................................ 56

Indusind Bank ......................................................................................................................................................................................................... 58

Info Edge India ........................................................................................................................................................................................................ 60

J Kumar Infraprojects .............................................................................................................................................................................................. 62

Just Dial .................................................................................................................................................................................................................... 64

KEC International .................................................................................................................................................................................................... 66

Larsen & Toubro ....................................................................................................................................................................................................... 68

LIC Housing Finance ............................................................................................................................................................................................... 70

M & M Financial Services ...................................................................................................................................................................................... 72

Manappuram Finance ............................................................................................................................................................................................ 74

Marico ........................................................................................................................................................................................................................ 76

Motherson Sumi Systems ...................................................................................................................................................................................... 78



NBCC ........................................................................................................................................................................................................................... 80

ONGC .......................................................................................................................................................................................................................... 82

Praj Industries ......................................................................................................................................................................................................... 84

Prism Cement ........................................................................................................................................................................................................... 86

Reliance Capital ...................................................................................................................................................................................................... 88

Reliance Industries ................................................................................................................................................................................................ 90

Renew Power Ventures .......................................................................................................................................................................................... 92

Sharda Cropchem .................................................................................................................................................................................................... 94

Shriram City Union Finance ................................................................................................................................................................................... 96

Shriram Transport Finance .................................................................................................................................................................................... 98

Solar Industries India .......................................................................................................................................................................................... 100

SRF ............................................................................................................................................................................................................................ 102

Sun Pharmaceuticals Industries ........................................................................................................................................................................ 104

Tata Consultancy Services ................................................................................................................................................................................... 106

Triveni Turbine ....................................................................................................................................................................................................... 108

Ultratech Cement .................................................................................................................................................................................................. 110

Vakrangee ............................................................................................................................................................................................................... 112

Viacom 18 ............................................................................................................................................................................................................... 114

V I P Industries ...................................................................................................................................................................................................... 116

Welspun India ....................................................................................................................................................................................................... 118

Wonderla Holidays ............................................................................................................................................................................................... 120

Yes Bank .................................................................................................................................................................................................................. 122

Zee Entertainment Enterprises .......................................................................................................................................................................... 124

Since the number of companis coverage is huge it is impossible to include all the price charts in one note. However, is a client request for a particularprice chart we can provide the same.


Key takeawaysOrganised retail market in India is ~USD40bn and expected to increase to~USD93bn. Apparel holds the largest share of the overall apparel market with~27% share of the total pie.

Overall consumer sentiments continue to remain subdued for discretionary andlifestyle categories.

Drivers of growth—strong brands, distribution opportunity, omni-channel givenits big network of stores, large white space and strong talent.

Pantaloon growth plan: FY14-Manage the transition, FY15–Lay the foundation,FY16–Begin the journey of growth and FY17–Build scale.

Size of kids’ market around INR100-120bn. There are hardly any organised playersin the market. Kids’ margins are slightly lower compared to others.

Luxury market is small in size. Most of the luxury brands in India are franchiseestores where margins can be low. But. over the long term, it is a big market.

Key risksIncreased competition from e-commerce.

Delay in store roll outs.

Macro economic slowdown.

Increase in prices of raw materials like cotton.

ADITYA BIRLA FASHION & RETAILIndia Equity Research l RETAIL

A new dawn

Company Profile

Abneesh Roy+91 22 6620 [email protected]

Pooja Lath+91 22 6620 [email protected]

Tanmay Sharma+91 22 4040 [email protected]

EDELWEISS RATINGS

Absolute Rating NOT RATED

MARKET DATA (R : BNPA.BO, B: ABFRL IN)

CMP : INR 147Target Price : NA52-week range (INR) : 263/ 107Share in issue (mn) : 92.8M cap (INR bn/USD mn) : 13 / 193Avg. Daily Vol. BSE/NSE (‘000) : 340.7

Share Holding Pattern (%)

Current Q2FY16 Q1FY16

Promoters * 73.8 73.8 73.8MF's, FI's & BK’s 8.6 1.7 1.4FII's 2.1 7.9 8.6Others 15.5 16.6 16.3* Promoters pledged shares : Nil (% of share in issue)

Relative Performance (%)

Sensex Stock Stock over Sensex

1 month 0.7 (3.6) 4.33 months (12.2) (6.3) (6.0)12 months 35.4 (14.5) 49.9

February 15, 2016



N A


APL APOLLO TUBESIndia Equity Research l Miscellaneous

Lead player

Company Profile

Shradha Sheth+91 22 6623 [email protected]

EDELWEISS RATINGS


MARKET DATA (R : APLA.BO, B: APAT IN)

CMP : INR 673Target Price : NA52-week range (INR) : 839 / 336Share in issue (mn) : 23.4M cap (INR bn/USD mn) : 16 / 232Avg. Daily Vol. BSE/NSE (‘000) : 50.3






1 month (13.6) (3.6) (10.0)3 months 33.2 (6.3) 39.412 months 88.5 (14.5) 103.0

Financials

Year to March FY12 FY13 FY14 FY15

Revenues (INR mn) 13,923 20,083 24,970 30,138Rev. growth (%) 53.8 44.2 24.3 20.7EBITDA (INR mn) 1,144 1,595 1,646 1,832Net profit (INR mn) 495 694 592 638EPS (INR) 23.2 31.1 25.3 27.2EPS growth (%) 9.0 33.8 (18.7) 7.7Diluted P/E (x) 29.0 21.6 26.6 24.7EV/EBITDA (x) 15.1 12.0 12.4 10.9ROE (%) 19.1 21.5 15.4 14.6 February 15, 2016

Key takeawaysOut of the total steel pipes and tubes market of 7mn tonne, the organised sectorcomprises 50% of the total market. APL Apollo has total capacity of 1.05mn tonnes,which it expects to increase to 1.75mn tonne by FY17 end.

The company manufactures 400 types of products. Key products are: MS black, whichcontributes 25% of total revenue and fetches EBITDA margin of 5%; hollow sectionscontribute 35% with 8% EBITDA margin; galvanized coating contribute 16% with EBITDAmargin of 8%; and pre- galvanized tubes contribute 24% with EBITDA margin of 14%.

Currently, the company has engaged with 20,000 fabricators pan India. It is exploringthe markets of Himachal Pradesh and Gujarat.

APL Apollo has very large market share in Kerala. The company supplies galvanisedpipes for making rooftops there.

It is bringing in the HSU technology for pipe manufacturing in India which will augmentits current capacity and technology framework. The HSU mill concept helps in forminguniversal hollow shapes directly from steel. It is expected to be useful to the companyin many ways including reduction in production time increased automation, andsavings with respect to material costs.

The company currently utilises 85-90% of total capacity.

It sees huge opportunity in exports. With the development of various solar powerprojects, green houses in Andhra Pradesh and in Gujarat the fencing and metroprojects the company expects further boost in the revenue, going forward.

Key risksSlowdown in industrial capex cycle will negatively impact demand for steel pipes.

Volatility of raw material prices like HR coil will hit margins.



Valuation parametersYear to March FY12 FY13 FY14 FY15

Diluted EPS (INR) 23.2 31.1 25.3 27.2Y-o-Y growth (%) 9.0 33.8 (18.7) 7.7CEPS 27.3 36.7 32.3 36.6Diluted P/E (x) 29.0 21.6 26.6 24.7Price/BV (x) 5.0 4.4 3.8 3.4EV/Sales (x) 1.2 1.0 0.8 0.7EV/EBITDA (X) 15.1 12.0 12.4 10.9

Growth metrics (%)Year to March FY12 FY13 FY14 FY15

Revenues 53.8 44.2 24.3 20.7EBITDA 28.2 39.5 3.2 11.3PBT 16.2 45.0 (15.6) 9.5Net profit 14.4 40.2 (14.7) 7.7EPS 9.0 33.8 (18.7) 7.7

Common size metrics as % of net revenuesYear to March FY12 FY13 FY14 FY15

Operating expenses 91.8 92.1 93.4 93.9Depreciation and Amortization 0.6 0.6 0.7 0.7Interest expenditure 2.4 2.1 2.4 2.2EBITDA margins 8.2 7.9 6.6 6.1Net profit margins 3.6 3.5 2.4 2.1

Balance sheet (INR mn)

As on 31st March FY12 FY13 FY14 FY15

Equity capital 213 223 234 234Reserves & surplus 2,675 3,357 3,900 4,371Shareholders funds 2,887 3,581 4,135 4,606Share Warrants 83 40 0 0Long Term Borrowings 719 842 1,372 1,417Short Term Borrowings 2,242 3,403 3,403 2,926Borrowings 2,961 4,246 4,774 4,342Sources of funds 5,931 7,867 8,909 8,948Gross block 2,497 3,615 4,745 6,672Depreciation 266 386 545 761Net block 2,230 3,229 4,200 5,911Capital work in progress 456 151 279 239Total fixed assets 2,686 3,380 4,479 6,150Investments 1 12 176 191Inventories 1,525 2,882 2,885 3,196Sundry debtors 1,734 2,194 2,494 1,795Cash and equivalents 51 142 101 192Loans and Advances 930 1,242 1,131 1,153Other current assets 109 65 120 109Total current assets 4,348 6,525 6,731 6,444Sundry creditors and others 617 1,314 1,654 2,693Provisions 203 337 301 400Total CL & provisions 820 1,650 1,955 3,093Net current assets 3,528 4,875 4,776 3,352Net deferred tax (283) (400) (521) (745)Uses of funds 5,931 7,867 8,909 8,948Adjusted BV per share (INR) 136 153 176 197

Financial Statements

Income statement (INR mn)


Income from operations 13,923 20,083 24,970 30,138Direct costs 11,662 16,888 22,115 26,816Employee costs 171 245 293 349Other expenses 946 1,355 916 1,141Total operating expenses 12,779 18,488 23,324 28,306EBITDA 1,144 1,595 1,646 1,832Depreciation & amortisation 86 125 164 220EBIT 1,058 1,470 1,481 1,612Interest expenses 336 429 609 665Other income 8 17 20 30Profit before tax 729 1,058 892 977Provision for tax 234 364 300 339Core profit 495 694 592 638Extraordinary items (4) (8) (3) (1)Profit after tax 491 686 590 638PAT after minority interest 491 686 590 638Adjusted net profit 495 694 592 638EPS (INR) basic 23 31 25 27Diluted equity shares (mn) 21 22 23 23Dividend payout (%) 8.6 16.1 19.8 22.0Tax rate (%) 32.1 34.4 33.6 34.7

Cash flow statement (INR mn)Year to March FY12 FY13 FY14 FY15

Net profit 495 694 592 638 Depreciation 86 125 164 220 Others 407 558 662 953Gross cash flow 988 1,377 1,419 1,811Less:Changes in WC 615 1,121 92 (1,382)Operating cash flow 373 256 1,327 3,193Less: Capex (768) (827) (1,263) (1,907)Free cash flow (395) (571) 64 1,286

RatiosYear to March FY12 FY13 FY14 FY15

ROAE (%) (on adjusted profits) 19.1 21.5 15.4 14.6ROACE (%) 19.8 21.3 17.7 18.1Inventory days 47 48 48 41Debtors days 36 36 34 26Payable days 16 21 24 30Cash conversion cycle 66 62 57 38Current ratio 5.3 4.0 3.4 2.1Debt/EBITDA 0.4 0.4 0.4 0.4Interest coverage 3.1 3.4 2.4 2.4Fixed assets t/o (x) 6.9 7.4 6.7 6.0Debt/equity 1.0 1.2 1.2 0.9


ASHIANA HOUSINGIndia Equity Research l Real Estate

Mid-income housing developer

Company Profile

Harshal Pandya+91 22 6620 [email protected]

EDELWEISS RATINGS


MARKET DATA (R : AHFN.BO, B: ASFI IN)







1 month (14.0) (3.6) (10.4)3 months (16.3) (6.3) (10.1)12 months (35.9) (14.5) (21.4)

Financials


Revenues (INR mn) 2,433 1,487 1,107 1,427Rev. growth (%) 62.0 (38.9) (25.6) 29.0EBITDA (INR mn) 840 349 197 373Net profit (INR mn) 696 331 219 465Share outstanding (mn) 19 19 93 102EPS (INR) 37.4 17.8 2.4 4.9EPS growth (%) 59 (52) (87) 110Diluted P/E (x) 0.7 2.1 23.9 34.6ROE (%) 29.0 12.4 7.8 9.0 February 15, 2016

Key takeawaysAshiana has recently begun work on its residential projects in Sohna (Anmol) andChennai (Shubham). It plans to launch its Kolkata project (Maitri) in H1FY17.

Ashiana is geographically well-diversified and is not looking at entering new marketsin the immediate future. It, however, continues to look for value accretive land buyingopportunities in the markets it operates.

It has seen 10-15% price reduction in new launches in existing markets. It, however,continues to command a premium over competitors. While sales have softened, itcontinues to hold prices in ongoing projects. The company has observed somesoftening of land prices in key markets.

Ashiana is planning to scale up new sales from current 2msf/annum to 4msf/annumover the next 4 years.

To raise debt of INR1.0-1.5bn in the near future to be deployed as working capital forcompleting ongoing projects. This is necessitated due to sale rate in certain projectslagging construction completion, leading to risk of unsold inventory in completedprojects.

Given its history of delivering projects as per schedule, Ashiana expects little impactof the proposed Real Estate Bill.

It remains focused on constructing mid-income housing project in tier 2/3 cities andindustrial townships.

Key risksDemand slowdown in Tier 2/3 and other smaller cities.

Cost increases could hurt margins.




ROAE (%) (on adjusted profits) 29.0 12.4 7.8 9.0ROACE (%) 31.3 11.6 6.3 6.5Current ratio 481.5 332.8 199.5 184.6Interest coverage 2,935.6 1,152.0 1,076.8 1,963.7Net Debt/equity (31.0) (14.8) (24.1) (46.4)


Diluted EPS (INR) 37.4 17.8 2.4 4.9Y-o-Y growth (%) 59.0 (52.3) (86.8) 109.8CEPS 38.7 19.2 2.7 5.3Diluted P/E (x) 0.7 2.1 23.9 34.6Price/BV (x) 0.2 0.3 1.9 3.4


Revenues 62.0% -38.9% -25.6% 29.0%EBITDA 54.0% -58.5% -43.4% 88.9%PBT 51.0% -50.2% -35.8% 81.8%Net profit 59.0% -52.3% -34.0% 112.6%EPS 59.0% -52.3% -86.8% 109.8%


Operating expenses 65.5% 76.5% 82.2% 73.9%Depreciation & Amortization 1.0% 1.7% 2.8% 5.6%Interest expenditure 1.2% 2.0% 1.7% 1.3%EBITDA margins 34.5% 23.5% 17.8% 26.1%Net profit margins 28.6% 22.3% 19.8% 32.6%



Equity capital 186 186 186 205Reserves & surplus 2,212 2,481 2,627 4,940Shareholders funds 2,398 2,667 2,814 5,144Deferred Tax Liabilities (net) 31 37 34 23Borrowings 255 299 298 554Sources of funds 2,685 3,003 3,146 5,721Gross block 529 574 709 965Depreciation 89 115 139 251Net block 440 459 570 713Capital work in progress 0 1 0 0Total fixed assets 440 460 570 713Investments 381 165 (233) 26Inventories 1,240 1,992 3,780 6,243Sundry debtors 55 141 96 136Cash and equivalents 435 576 572 635Other current assets 744 786 1,342 4,074Total current assets 2,474 3,496 5,790 11,088Sundry creditors and others 514 1,050 2,901 6,005Provisions 96 67 80 100Total CL & provisions 610 1,118 2,981 6,105Net current assets 1,864 2,378 2,808 4,983Uses of funds 2,685 3,003 3,146 5,721Adjusted BV per share (INR) 129 143 30 50




Income from operations 2,433 1,487 1,107 1,427Direct costs 1,275 852 539 642Employee costs 150 144 186 226Other expenses 168 141 184 186Total operating expenses 1,593 1,137 909 1,054EBITDA 840 349 197 373Depreciation and amortisation 24 26 30 80EBIT 816 323 167 293Interest expenses 29 30 18 19Other income 57 128 121 217Profit before tax 844 420 270 491Provision for tax 149 89 40 26Core profit 696 331 230 465Extraordinary items 0 0 11 0Profit after tax 696 331 219 465PAT after minority interest 696 331 219 465Adjusted net profit 696 331 219 465EPS (INR) basic 37.4 17.8 2.4 4.9Diluted equity shares (mn) 19 19 93 102Tax rate (%) 17.6 21.2 15.0 5.2


Net profit 696 331 219 465 Depreciation 24 24 30 80 Deferred tax (1) 6 (2) (2) Others (102) (174) (253) (629)Gross cash flow 616 187 (6) (85)Less:Changes in WC 602 406 225 (46)Operating cash flow 14 (219) (231) (39)Less: Capex 52 46 146 255Free cash flow (38) (265) (377) (295)


Key takeawaysUnit VII form 483

Whenever an out of specification (OOS) observation happens, investigation intolaboratory begins; these could be human or lab error. Aurobindo (ARBP) concludedthat it was a human error and this is the field related observation in form 483. Thecompany has received 3 approvals from the unit post the form 483. There are 88approvals pending from this unit.

Injectables

ARBP expects 5 more approvals in US this fiscal. No new filings have been made inthe current year. The company is planning to file onco, penems and hormones bynext year.

Abilify

Pricing is still holding on in the product. The company has 12-15% share.

EU business

ARBP intends to eventually supply from dedicated Vizag unit and is targetingsingle digit EBITDA margin in 2 years’ time.

Investment conclusionWe expect ARBP’s US generic business to remain the primary engine for growth.We expect ARBP to continue to deliver new approvals and ramp up some of itsniche initiatives, viz., injectables, peptides, hormones and microspheres, andmaintain growth momentum barring systemic slowdown of the US generic industry.However, the non-US business (~45% revenue) which includes Actavis’ EU businesswill grow in single digit and is a drag for the overall company growth.

Key risksSlower-than-expected turnaround of the acquired EU business.

Slowdown in ANDA approvals and USFDA related regulatory risks are part of thegenerics business.

Escalation of form 483 at Unit VII.

AUROBINDO PHARMAIndia Equity Research l Pharmaceuticals

Impressive US generics business

Company Profile

EDELWEISS 4D RATINGS

Absolute Rating HOLD

Rating Relative to Sector Performer

Risk Rating Relative to Sector Medium

Sector Relative to Market Underweight

MARKET DATA (R : ARBN.BO, B: ARBP IN)

CMP : INR 654Target Price : INR 77052-week range (INR) : 891 / 490Share in issue (mn) : 584.0M cap (INR bn/USD mn) : 433 / 6,380Avg. Daily Vol. BSE/NSE (‘000) : 2,465.9



Promoters * 53.9 53.9 53.9MF's, FI's & BK’s 6.5 6.1 6.3FII's 28.8 28.9 29.5Others 10.9 11.1 10.3* Promoters pledged shares : 11.1 (% of share in issue)

PRICE Performance (%)

Stock Nifty EW Pharma Index

1 month (13.1) (6.4) (6.3)3 month (9.5) (7.4) (11.5)12 month 21.2 (15.3) 1.7

February 15, 2016

Deepak Malik+91 22 6620 [email protected]

Rahul Solanki+91 22 6623 [email protected]

Financials

Year to March FY14 FY15 FY16E FY17E

Net Revenues (INR mn) 80,998 121,205 141,404 156,562Rev. growth (%) 38.3 49.6 16.7 10.7EBITDA (INR mn) 21,328 25,636 33,455 37,786Adjusted Profit (INR mn) 13,328 16,223 21,958 25,420No. of Shares outstanding (mn) 583 584 584 584Adjusted Diluted EPS (INR) 22.9 27.8 37.6 43.5EPS growth (%) 57.9 21.6 35.4 15.8Diluted P/E (x) 31.9 26.2 19.4 16.7EV/EBITDA (x) 21.5 17.9 13.5 11.5ROAE (%) 41.6 36.1 36.5 32.5



Growth metrics (%)Year to March FY14 FY15 FY16E FY17E

Net Revenues 38.3 49.6 16.7 10.7EBITDA 139.9 20.2 30.5 12.9PBT 309.6 41.5 35.1 15.8Adjusted Profit 216.1 21.7 35.4 15.8EPS 58.0 21.4 35.4 15.8

Cash flow statement (INR mn)Year to March FY14 FY15 FY16E FY17E

Reported Profit 11,728 15,758 21,958 25,420Add: Depreciation 3,125 3,326 3,758 3,946Interest (Net of Tax) 823 611 689 710Others (22,745) (29,540) (27,643) (9,662)Less: Changes in WC (10,961) (14,464) (13,477) (4,476)Operating cash flow 3,893 4,619 12,240 24,890Less: Capex 4,865 14,265 5,143 3,996Free cash flow (972) (9,646) 7,097 20,895

Valuation parametersYear to March FY14 FY15 FY16E FY17E

Adjusted Diluted EPS (INR) 22.9 27.8 37.6 43.5Y-o-Y growth (%) 58.0 21.4 35.4 15.8Adjusted Cash EPS (INR) 28.2 33.5 44.0 50.3Diluted P/E (x) 31.9 26.2 19.4 16.7Price to Book Ratio (P/B) (x) 11.3 8.2 6.2 4.8Enterprise Value / Sales (x) 5.7 3.8 3.2 2.8Enterprise Value / EBITDA (x) 21.5 17.9 13.5 11.5Dividend Yield (%) 0.2 0.6 0.4 0.5

Common size metrics as % of net revenuesYear to March FY14 FY15 FY16E FY17E

Operating expenses 73.7 78.8 76.3 75.9Materials costs 44.5 45.4 46.6 46.6R&D costs 3.1 2.9 5.0 6.0Staff costs 10.3 10.7 10.9 10.9S G & A expenses 0.0 0.0 0.0 0.0Depreciation 3.9 2.7 2.7 2.5Interest Expense 1.3 0.7 0.6 0.6EBITDA margins 26.3 21.2 23.7 24.1Net profit margins 16.4 13.3 15.5 16.2


As on 31st March FY14 FY15 FY16E FY17E

Share capital 292 292 292 292Reserves & Surplus 37,210 51,267 67,975 87,546Shareholders' funds 37,502 51,559 68,267 87,838Minority interest 257 258 258 258Long term borrowings 23,546 25,021 18,121 11,221Short term borrowings 12,794 13,615 13,615 13,615Total Borrowings 36,339 38,636 31,736 24,836Deferred tax liability (net) 2,054 2,058 2,058 2,058Sources of funds 76,151 92,511 102,319 114,990Gross Block 41,830 54,995 60,125 64,125Net Block 27,217 37,056 38,441 38,490Capital work in progress 3,097 4,196 4,196 4,196Total Fixed assets 30,314 41,253 42,637 42,686Non current investments 198 1 1 1Cash and cash equivalents 1,786 4,888 6,171 15,825Inventories 23,675 36,113 41,530 47,759Sundry debtors 26,366 35,392 40,700 46,806Loans & advances 12,559 11,451 7,514 8,764Total cur. assets (ex cash) 62,600 82,956 89,744 103,329Trade payable 13,512 20,511 17,760 25,619Ot. Cur. Liab. & Sh. Term Prov. 5,235 16,076 18,475 21,232Total current liab. & prov. 18,747 36,587 36,235 46,851Net current assets (ex cash) 43,854 46,369 53,510 56,478Uses of funds 76,151 92,511 102,319 114,990Book Value per share (INR) 64 88 117 150




Income from operations 80,998 121,205 141,404 156,562Gross Revenues 82,592 122,725 144,283 159,705Less: Excise 1,594 1,520 2,880 3,142Net revenues 80,998 121,205 141,404 156,562Total operating expenses 59,670 95,569 107,949 118,776Materials cost 36,060 55,056 65,891 72,973Employee cost 8,319 13,023 15,421 17,079R&D cost 2,551 3,500 7,025 9,334Other expenses 12,740 23,990 19,612 19,390Depreciation 3,125 3,326 3,758 3,946EBITDA 21,328 25,636 33,455 37,786Operating Profit 21,328 25,636 33,455 37,786EBIT 18,203 22,310 29,696 33,840Less: Interest Expense 1,079 843 919 947Add: Other income 232 808 500 1,000Add: Exceptional items (2,031) (596) 0 0Profit before tax 15,325.1 21,679 29,277 33,893Less: Provision for Tax 3,635 5,966 7,319 8,473Less: Minority Interest (37.8) (45.1) 0.0 0.0Reported Profit 11,728 15,758 21,958 25,420Less: Excep. Items (Net of Tax) (1,599) (465) - -Adjusted Profit 13,328 16,223 21,958 25,420No. of Shares outstanding 582.5 584.0 584.0 584.0Adjusted Basic EPS 22.9 27.8 37.6 43.5No. of Dil. shares outstanding 583.2 584.0 584.0 584.0Adjusted Diluted EPS 22.9 27.8 37.6 43.5Adjusted Cash EPS 28.2 33.5 44.0 50.3Dividend per share (DPS) 1.5 4.5 2.9 3.4Dividend Payout Ratio (%) 7.5 16.7 7.8 7.9

RatiosYear to March FY14 FY15 FY16E FY17E

ROAE (%) 41.6 36.1 36.5 32.5ROACE (%) 27.5 28.1 31.7 32.7Inventory days 217.2 198.2 215 223Debtors days 95.4 93.0 98 102Payble days 117.2 112.8 106 108Cash Conversion Cycle 195.4 178.4 207.3 216.8Current Ratio 3.4 2.4 2.6 2.5Gross Debt/EBITDA 1.7 1.5 1 1Gross Debt/Equity 1.0 0.7 0.5 0.3Adjusted Debt/Equity 1.0 0.7 0.5 0.3Net Debt/Equity 0.9 0.7 0.4 0.1Interest Coverage Ratio 16.9 26.5 32.3 35.8


Key takeawaysSector-wise stress test analysis was done by RBI providing Axis Bank with a list ofaccounts wherein the bank was asked to make provisions over Q3/Q4FY16.However, as a prudent measure, the bank has fully recognized the necessaryimpairment and the resultant provisioning impact of the asset reclassification asper RBI’s assessment in the current quarter itself.

Credit cost for 9mFY16 was 128bps (including utilisation of floating provisions)and 102bps during the quarter. For full year, Axis Bank maintained guidance of125bps (including utilisation of floating provisions and 90bps excludingutilisation of floating provisions).

The bank’s exposure to the highly leveraged group stands at 8%. Of these: a) largestexposure forms around 1.5%; b) ~70% of funded exposure increase in FY14 hasbeen to A plus and above category; and c) no sector has contributed to excess of20% of net increase with top 4 sectors in terms of increase have been cement,petroleum, power and other metals.

Bank’s credit growth target of 20% for full year FY16.

Moderation in cost of term deposits has helped funding cost; expects NIMs to bewell above the target level of 3.5%.

Currently, in dialogue with Max India regarding arrangement; the agreement isvalid till September 2016.

Investment conclusionThe stock has corrected given uncertainty around asset quality (particularly postRBI list); however, given transparent disclosures/guidance we expect uncertaintyto fade and with progress on vital variables—share of retail assets/liabilitiesbeing on track—we expect it to re-rate. Further, the bank’s well capitalised position(Tier I: ~10.8%) and strengthened liability franchise lend comfort. Axis Bank hasregistered healthy loan growth given tough macroeconomic landscape on abalanced portfolio skewed towards corporate advances and retail. Retail advancescontributed 40% to total loan portfolio. Rapidly growing franchise and new productofferings will further drive growth in retail fee income.

Key risksDeterioration of macro environment can result in higher slippages.

AXIS BANKIndia Equity Research l Banking and Financial Services

Regaining ground

Company Profile


Absolute Rating BUY

Rating Relative to Sector Outperformer


Sector Relative to Market Overweight

MARKET DATA (R : AXBK.BO, B: AXSB IN)

CMP : INR 418Target Price : INR 57052-week range (INR) : 655 / 366Share in issue (mn) : 2,378.9M cap (INR bn/USD mn) : 993 / 14578Avg. Daily Vol. BSE/NSE (‘000) : 8,884.3





Stock Nifty EW BFSI Index

1 month (13.1) (6.4) (12.3)3 month (18.3) (7.4) (13.7)12 month (36.7) (15.3) (25.1)

Financials


Net revenue 193,569 225,892 263,407 307,544Net profit 62,177 73,578 86,206 95,059Diluted EPS (INR) 26.5 31.0 36.4 40.1Adj. BV (INR) 159.6 184.6 212.5 244.8Price/ Adj book (x) 2.6 2.3 2.0 1.7Diluted P/E (x) 15.8 13.5 11.5 10.4ROE (%) 17.4 17.8 17.8 17.0 February 15, 2016

Nilesh Parikh+91-22- 4063 [email protected]

Kunal Shah+91-22- 4040 [email protected]

Prakhar Agarwal+91 22 6620 [email protected]



ROA decomposition (%)Year to March FY14 FY15 FY16E FY17E

Net interest income/Assets 3.4 3.5 3.3 3.4Fees/Assets 2.0 1.8 1.7 1.6Investment profits/Assets 0.1 0.2 0.3 0.2Net revenues/Assets 5.5 5.5 5.3 5.2Operating expense/Assets (2.2) (2.2) (2.0) (1.9)Provisions/Assets (0.6) (0.6) (0.7) (0.9)Taxes/Assets (0.9) (0.9) (0.9) (0.8)Total costs/Assets (3.7) (3.7) (3.6) (3.6)ROA 1.8 1.8 1.7 1.6Equity/Assets 10.1 10.1 9.7 9.4ROAE 17.4 17.8 17.8 17.0


Diluted EPS (INR) 26.5 31.0 36.4 40.1EPS growth (%) 19.6 17.3 17.2 10.3Book value per share (INR) 162.7 188.5 219.0 251.6Adjusted BV/share (INR) 159.6 184.6 212.5 244.8Diluted P/E (x) 15.8 13.5 11.5 10.4Price/ BV (x) 2.6 2.2 1.9 1.7Price/ ABV (x) 2.6 2.3 2.0 1.7Dividend yield (%) 1.0 1.2 1.4 1.8




Interest income 306,412 354,786 431,204 510,490Interest expenses 186,895 212,545 265,181 309,190Net interest income 119,516 142,241 166,023 201,301Non interest income 74,052 83,650 97,384 106,244- Fee & forex income 69,114 71,052 80,950 92,576- Misc. income 1,805 2,685 2,934 3,668- Investment profits 3,134 9,913 13,500 10,000Net revenues 193,569 225,892 263,407 307,544Operating expense 79,008 92,037 100,113 111,530 - Employee exp 26,014 31,150 34,384 39,992 - Other opex 52,994 60,888 65,729 71,538Preprovision profit 114,561 133,854 163,294 196,014Provisions 21,075 23,286 33,466 53,276- Loan loss provisions 12,960 17,886 29,966 51,276PBT 93,486 110,568 129,828 142,739Taxes 31,310 36,990 43,622 47,680PAT 62,177 73,578 86,206 95,059Diluted EPS 26.5 31.0 36.4 40.1DPS 4.0 4.6 5.4 7.0Payout ratio (%) 17.7 17.8 16.3 19.1


NII growth 23.6 19.0 16.7 21.2Fees growth 21.5 2.8 13.9 14.4Opex growth 14.3 16.5 8.8 11.4PPOP growth 27.8 11.2 20.9 24.2PPP growth 23.1 16.8 22.0 20.0Provisions growth 20.4 10.5 43.7 59.2PAT growth 20.0 18.3 17.2 10.3

Oprating ratios (%)Year to March FY14 FY15 FY16E FY17E

Yield on advances 10.3 10.1 10.0 9.8Yield on investments 7.3 7.4 7.3 7.2Yield on assets 8.7 8.6 8.7 8.6Net interest margins 3.4 3.5 3.3 3.4Cost of funds 5.7 5.6 5.8 5.6Cost of deposits 5.8 5.7 5.7 5.6Cost of borrowings 7.3 7.7 7.0 6.8Spread 3.0 3.1 2.9 3.0Cost-income 40.8 40.7 38.0 36.3Tax rate 33.5 33.5 33.6 33.4



LiabilitiesEquity capital 4,698 4,741 4,741 4,741Reserves 377,506 442,024 514,509 591,724Net worth 382,205 446,765 519,250 596,465Sub bonds/pref cap 104,056 0 5,000 10,000Deposits 2,809,446 3,224,419 3,939,255 4,825,170Borrowings 398,853 797,583 917,146 987,801Other liabilities 137,889 150,557 182,174 218,608Total 3,832,449 4,619,324 5,562,825 6,638,044AssetsLoans 2,300,668 2,810,830 3,401,105 4,081,326InvestmentsGilts 696,004 822,292 1,189,818 1,424,178Others 439,480 501,136 573,445 656,599Cash & equi 282,387 360,990 254,959 310,127Fixed assets 24,102 25,143 23,791 22,165Other assets 89,808 98,932 119,708 143,649Total 3,832,449 4,619,324 5,562,825 6,638,044Balance sheet ratios (%)Credit growth 13.7 20.7 20.5 19.6Deposit growth 11.2 14.8 22.2 22.5EA growth 12.3 20.9 20.6 19.4SLR ratio 21.7 20.4 24.5 24.5C-D ratio 90.7 95.3 94.0 91.7Low-cost deposits 45.0 44.8 44.0 44.0Gross NPA ratio 1.2 1.3 1.7 1.9Net NPA ratio 0.4 0.5 0.7 0.6Provision coverage 67.4 68.0 65.5 72.1Incremental slippage 1.1 1.1 2.3 1.5Net NPA / Equity 2.7 2.9 4.3 3.9Capital adequacy 16.1 15.1 12.5 12.0 - Tier 1 12.6 12.1 11.7 11.3Book value 162.7 188.5 219.0 251.6


Key takeawaysHigher CV sales were offset by weak industrial sales in Q3FY16. In domesticindustrial market, tractors and standby power market declined, while internationalindustrial business suffered weakness in oil & gas.

In aerospace, Bharat Forge shipped 1st set of titanium components to Boeing forits 737 series aircraft. Management expects USD50m revenue by FY18E fromaerospace. Boeing and Rolls Royce are moving away from existing suppliers, whichaugurs well for Bharat Forge given cost advantage and capability.

Management expects to improve profitability in overseas subsidiaries over thenext 1-2 years as BF Aluminiumtechnik ramps up for new PV components.

Standalone capex at INR10bn for over 3 years.

Management expects huge potential in railway business given >20% cost advantageversus imports. However, given lot of uncertainty from government, setting atimeline is difficult.

Investment conclusionA well-diversified, de-risked business model: The promoters have been focusing onde-risking BHFC’s business model. Their strategy has been to diversify the autoand non-auto segments through acquisitions/JVs across geographies. Gearing upfor demand revival in key markets – US, Europe and India: With improving macroeconomic outlook in both US and Europe, demand for class 8 truck in the US islikely to improve. Change in emission norms to help with pre-buying in the USmarket. Similarly, European market has bottomed out and it gives early signs ofrevival in passenger vehicles. In India, growth in CVs is likely to return with highershare of multi-axle vehicles. Non auto to scale up further: BHFC is looking atincreasing the share of non-auto to 50-60% over the next few years. The non-autobusiness have better margin given higher machining proportion. The company ispositive on energy, transportation (including railways and aerospace) constructionand defence sectors to scale up its non-auto business.

Key risksTepid outlook for Class 8 trucks.

Slower ramp up in non-auto business.

BHARAT FORGEIndia Equity Research l Engineering and Capital Goods

Scaling the global pitch

Company Profile


Absolute Rating BUY


Risk Rating Relative to Sector Low


MARKET DATA (R : BFRG.BO, B: BHFC IN)

CMP : INR 786Target Price : INR 1,10052-week range (INR) : 1,362 / 720Share in issue (mn) : 232.8M cap (INR bn/USD mn) : 183 / 2,685Avg. Daily Vol. BSE/NSE (‘000) : 1,098.5





Stock Nifty EW Capital Goods Index


Financials


Revenues (INR mn) 67,158 76,247 77,168 89,332Rev. growth (%) 30.0 13.5 1.2 15.8EBITDA (INR mn) 10,302 14,408 14,664 17,460Adjsuted profit (INR mn) 4,214 7,238 7,347 9,383EPS (INR) 18.1 31.1 31.6 40.3EPS growth (%) 57.2 71.8 1.5 27.7Diluted P/E (x) 43.4 25.3 24.9 19.5ROE (%) 16.3 23.5 20.1 22.1 February 15, 2016

Amit Mahawar+91 22 4040 [email protected]

Swarnim Maheshwari+91 22 4040 [email protected]




Reported Profit 5,251 7,666 7,612 9,560Depreciation 3,571 3,624 3,980 4,216Interest (Net of Tax) 1,206 923 962 883Others (4,494) (3,159) (10,068) (8,428)Less:Changes in WC (1,629) (1,240) (4,569) (3,624)Operating cash flow 7,164 10,293 7,055 9,854Less: Capex 203 7,089 3,550 3,550Free cash flow 6,961 3,204 3,505 6,304


Revenues 30.0 13.5 4.2 14.1EBITDA 30.1 39.9 4.3 17.6PBT 61.5 53.3 (1.8) 24.8Adjusted Profit 57.2 71.8 5.2 25.6EPS 57.2 71.8 5.2 25.6




Income from operations 67,158 76,247 79,438 90,648Direct costs 24,609 28,836 42,090 47,448Employee costs 7,888 9,051 8,060 9,088Other expenses 24,360 23,952 14,260 16,447Total operating expenses 56,857 61,840 64,410 72,983EBITDA 10,302 14,408 15,027 17,665Depreciation & amortisation 3,571 3,624 3,980 4,216EBIT 6,730 10,784 11,048 13,449Interest expenses 1,692 1,356 1,374 1,261Other income 1,247 1,368 1,342 1,559Add: Exceptional items 1,037 428 - -Profit before tax 7,322 11,223 11,016 13,747Provision for tax 2,100 3,587 3,305 4,124Less: Minority interests (28) (30) 77 96Add: Share in profits of assoc. (0) 0 (22) 33Reported Profit 5,251 7,666 7,612 9,560Less: Exceptional Items 1,037 428 - -Adjusted profit 4,214 7,238 7,612 9,560Basic sh. outstanding (mn) 233 233 233 233Adjusted Basic EPS 18.1 31.1 32.7 41.1No. of Dil. shares outst. (mn) 233 233 233 233Adjusted Diluted EPS 18.1 31.1 32.7 41.1Adjusted Cash EPS 33.4 46.7 49.8 59.2Dividend per share (DPS) 4.5 7.5 8.0 10.0Dividend Payout Ratio (%) 24.9 24.1 24.5 24.4


ROAE (%) (on adj. profits) 16.3 23.5 20.7 22.3ROACE (%) 16.9 23.1 20.6 23.2Inventory days 161 131 112 127Debtors days 45 41 45 47Cash conversion cycle (days) 206 172 157 174Current ratio (x) 1.7 2.3 2.2 2.3Gross Debt/EBITDA (x) 1.9 1.6 1.5 1.2Interest coverage (x) 4.0 8.0 8.0 10.7Fixed assets t/o (x) 2.5 3.0 3.0 3.6Gross Debt/equity (x) 0.7 0.7 0.6 0.4Adjusted debt/Equity (x) 0.7 0.7 0.6 0.4


Direct cost 36.6 37.8 53.0 52.3Employee expenses 11.7 11.9 10.1 10.0S G &A expenses 36.3 31.4 18.0 18.1Operating expenses 84.7 81.1 81.1 80.5Depreciation & amortization 5.3 4.8 5.0 4.7Interest expenditure 2.5 1.8 1.7 1.4EBITDA margins 15.3 18.9 18.9 19.5EBIT margins 10.0 14.1 13.9 14.8Net Profit margins 6.2 9.5 9.7 10.7



Equity capital 466 466 466 466Reserves & surplus 26,367 33,976 39,409 46,246Shareholders funds 26,832 34,442 39,875 46,711Minority interest 170 (20) (20) (20)Long term borrowings 15,212 19,815 18,315 16,815Short term borrowings 4,862 3,830 3,830 3,830Total Borrowings 20,074 23,645 22,145 20,645Net deferred tax 1,645 1,638 1,638 1,638Long Term Liab. & Provisions 1,338 1,792 1,792 1,792Sources of funds 50,059 61,497 65,430 70,766.3Gross Block 53,282 55,906 59,406 62,906Net Block 25,194 25,668 25,247 24,596Capital work in progress 5,827 8,586 8,586 8,586Intangible Assets 146 619 610 596Total Fixed Assets 31,167 34,873 34,443 33,777Non current investments 291 389 389 389Inventories 10,386 10,339 15,568 17,549Sundry debtors 8,660 8,535 10,882 12,418Cash and cash equivalents 11,949 11,386 11,180 13,559Loans and advances 6,348 5,066 5,572 6,129Other current assets 6,545 11,752 13,514 16,217Total current assets (ex cash)31,939 35,691 45,536 52,313Trade payable 10,554 11,016 15,683 17,679Ot. Cur. Liab. & Sh. Term Prov. 14,732 9,826 10,435 11,593Total CL & provisions 25,286 20,842 26,118 29,272Net current assets (ex cash) 6,653 14,849 19,418 23,041Uses of funds 50,058.8 61,496.7 65,429.8 70,766.3Adjusted BV per share (INR) 115 148 171 201


Diluted EPS (INR) 18.1 31.1 31.6 40.3Y-o-Y growth (%) 57.2 71.8 1.5 27.7CEPS (INR) 33.4 46.7 48.7 58.4Diluted P/E (x) 43.4 25.3 24.9 19.5Price/BV (x) 6.8 5.3 4.6 4.0EV/Sales (x) 2.8 2.6 2.5 2.1EV/EBITDA (X) 18.6 13.5 13.2 10.9Dividend yield (%) 0.6 1.0 1.0 1.3


Key takeawaysThe B2B segment has been muted in light of the manufacturing downturn.

However, B2C (e-commerce) has been performing much better. It has grown 35%YoY till 9mFY16.

Blue Dart had divested 60% in Blue Dart Aviation (BDA) in 2005 due to FDI issues.Now with FDI in aviation permitted, Blue Dart has gone ahead and raised its staketo 74%. It plans to take this to 100% soon.

It has 5 planes currently which are running at a 84-85% utilization. The maximumpossible utilization is 90%.

Blue Dart will be adding a 6th plane this year.

The company has opened a E Fulfillment Center (EFC) at Gurgaon and will beadding one at Bengaluru soon.

Normal capex has been INR400-500mn per annum. With the addition of EFC, thiscould increase to INR600-700mn.

Key risksIntensifying competition in eCommerce delivery.

Increasing digitization could impact B2B growth.

BLUE DARTIndia Equity Research l Miscellaneous

Play on burgeoning e-commerce industry

Company Profile

Nihal Jham+91 22 6623 [email protected]

EDELWEISS RATINGS


MARKET DATA (R : BLDT.BO, B: BDE IN)

CMP : INR 5,832Target Price : NA52-week range (INR) : 7,900 / 5,501Share in issue (mn) : 23.7M cap (INR bn/USD mn) : 138 / 2,031Avg. Daily Vol. BSE/NSE (‘000) : 8.2






1 month (8.3) (3.6) (4.7)3 months (17.8) (6.3) (11.6)12 months (10.4) (14.5) 4.1

Financials

Year to March CY11 FY13* FY14* FY15

Net revenues (INR mn) 14,954 21,717 19,383 22,722Revenue growth (%) 30.0 16.2 11.6 17.2EBITDA (INR mn) 1,799 2,688 1,741 2,242Adjusted Profit (INR mn) 1,242 1,933 1,226 1,293Diluted EPS (INR) 52 81 52 54Diluted P/E (x) 111.6 89.6 113.0 107.1EV/EBITDA (x) 76.5 63.3 79.0 62.5ROAE (%) 20.5 23.4 18.8 27.2

*Annualized February 15, 2016



Growth metrics (%)Year to March CY11 FY13 FY14 FY15

Revenues 30.0 16.2 11.6 17.2EBITDA 16.2 19.6 (19.0) 28.8PBT 27.8 21.9 (15.9) 5.2Adjusted profit 31.1 24.5 (20.7) 5.5EPS 31.2 24.5 (20.7) 5.5

Common size metrics as % of net revenuesYear to March CY11 FY13 FY14 FY15

Operating expenses 67.0 65.0 68.5 66.8Staff costs 12.9 13.8 13.8 14.2S G & A expenses 8.1 8.8 8.8 9.2Depreciation 1.5 1.6 1.4 1.9Interest Expense 0.0 0.0 0.0 0.5EBITDA margins 12.0 12.4 9.0 9.9Net Profit margins 8.3 8.9 6.3 5.7


Reported profit 1,242 1,933 1,226 1,293Add: Depreciation 218 347 273 436Interest (Net of Tax) 0 0 0 73Add: Others (262) (288) (392) (155)Less:Changes in WC 128 167 (94) 113Opertaing cash flow 1,070 1,825 1,201 1,535Less: Capex 702 322 342 442Free cash flow 368 1,503 859 1,093



Year to March CY11 FY13 FY14 FY15

Net revenues 14,954 21,717 19,383 22,722Operating expenses 10,015 14,107 13,278 15,180Employee expenses 1,923 3,002 2,666 3,216Other expenses 1,217 1,920 1,698 2,083Total Expenditure 13,155 19,029 17,642 20,479EBITDA 1,799 2,688 1,741 2,242Depreciation & amortisation 218 347 273 436EBIT 1,581 2,341 1,468 1,806Less: Interest Expense 0 0 0 112Add: Other income 217 400 377 246Profit Before Tax 1,798 2,741 1,845 1,941Less: Provision for Tax 570 834 635 669Add: Share of profit from assoc. 14 26 16 22Reported Profit 1,242 1,933 1,226 1,293Adjusted Profit 1,242 1,933 1,226 1,293No. of Shares outstanding (mn) 23.8 23.8 23.8 23.8Adjusted Basic EPS 52.3 81.3 51.6 54.4No. of Dil.shares outst. (mn) 23.8 23.8 23.8 23.8Adjusted Diluted EPS 52.3 81.3 51.6 54.4Adjusted Cash EPS 61.5 94.5 64.2 69.7Dividend per share (DPS) 2.0 71.0 50.0 20.0Dividend Payout Ratio (%) 4.4 102.0 113.2 43.0


As on 31st March CY11 FY13 FY14 FY15

Share capital 238 238 238 238Reserves & Surplus 6,400 6,362 6,192 2,835Shareholders' funds 6,637 6,599 6,430 3,073Long term borrowings 0 0 0 3,322Long Term Liabilities & Prov. 87 97 94 148Deferred tax liability 182 148 175 102Sources of funds 6,906 6,844 6,698 6,645Gross Block 3,952 3,967 4,237 4,722Net Block 1,927 1,828 1,880 1,928CWIP (incl. intangible) 19 49 11 10Intangible assets 415 453 474 472Total net fixed assets 2,361 2,329 2,365 2,410Non-current Investments 202 228 243 265Cash and cash equivalents 938 2,417 1,064 1,663Inventories 26 24 27 40Sundry debtors 1,890 2,272 2,667 2,910Loans & advances 3,012 3,233 3,030 2,540Other Current Assets 11 6 5 54Total Current Assets (ex cash) 4,939 5,534 5,730 5,543Trade payable 538 729 1,073 1,280Ot. Cur. Liab. & Short Term Prov. 995 2,935 1,631 1,956Total Current Liab. & Prov. 1,534 3,664 2,704 3,237Net Current Assets (ex cash) 3,406 1,870 3,026 2,307Uses of funds 6,906 6,844 6,698 6,645Book value per share 279 278 271 129

RatiosYear to March CY11 FY13 FY14 FY15

ROAE (%) 20.5 23.4 18.8 27.2ROCE (%) 29.8 33.1 28.3 32.0Inventory Days 1 1 1 1Debtors Days 42 44 47 45Payable Days 24 18 22 25Cash Conversion Cycle 18 26 25 21Current Ratio 3.8 2.2 2.5 2.2Gross Debt/EBITDA 0.0 0.0 0.0 1.5Gross Debt/Equity 0.0 0.0 0.0 1.1Adjusted Debt/Equity 0.0 0.0 0.0 1.1Net Debt/Equity (0.1) (0.4) (0.2) 0.5Interest Coverage Ratio NM NM NM 16.1

Valuation parametersYear to March CY11 FY13 FY14 FY15

Diluted EPS (INR) 52.3 81.3 51.6 54.4Y-o-Y growth (%) 31.2 24.5 (20.7) 5.5CEPS (INR) 61.5 94.5 64.2 69.7Diluted P/E (x) 111.6 89.6 113.0 107.1P/BV (x) 20.9 21.0 21.6 45.1EV/Sales (x) 9.2 7.8 7.1 6.2EV/EBITDA (x) 76.5 63.3 79.0 62.5Dividend yield(%) 0.0 1.2 0.9 0.3

*Annualized


Key takeawaysClaris has been on recovery path post resolution of the USFDA import alert (2012)and filed some niche products like Propofol and Iron Sucrose. Management hasguided for revenue growth of 30% (riding on a slew of filings/launches in the US/EU and capacity expansion) and EBITDA margin to stabilise at ~32-35% over next2 years, as the US starts delivering. If products like Propofol (settled for Oct’16launch) and Iron Sucrose (expects approval by CY16 end) also get approval, thisguidance could well get beaten. Management is fairly confident of being able toresolve the outstanding Form 483 (issued May 2015), as it has received site transferapprovals for 3 products post this issue.

The company expects to clock FY16/17/18 revenues of INR 6bn/7.5bn/ 10bn.

It has started expensing out R&D from last quarter. EBIDTA margin fell this yeardue to expensed R&D and higher fixed costs as compared to previous year. Theseexpenses are in line with the budgets for future growth.

On Otsuka joint venture (JV intangibles) write-off, the JV stopped selling in a numberof EMs and has changed its 3 year business plan. As a policy, parent companydecided to write down intangibles, and Claris had to take proportionate write-down in Q3FY16. Since goodwill was getting amortised over 5 years before this,this development will boost profitability going forward. The lock in on thecompany’s put option has 2 more years before activation.

Gross debt is ~INR4.4bn (INR 1.6bn is working capital debt), while cash is ~INR2.2bn.

Key risksAny escalation of Form 483.

Hospira’s market share gain in important injectables.

CLARIS LIFESCIENCEIndia Equity Research l Pharmaceuticals

Rare pure injectables play

Company Profile



EDELWEISS RATINGS


MARKET DATA (R : CLAI.BO, B: CLAR IN)








Financials


Revenues (INR mn) 7,674 6,678 6,418 7,966Rev. growth (%) 3.6 (13.0) (3.9) 24.1EBITDA (INR mn) 2,648 1,694 1,319 1,523Net profit (INR mn) 1,039 844 1,390 1,463Diluted P/E (x) 20.0 29.5 19.2 17.5EV/EBITDA (x) 9.3 13.1 15.3 12.5ROE (%) 9.4 5.5 6.8 7.4 February 15, 2016




PBIT 1,905 1,040 918 1,032Depreciation 743 654 401 490Change in working capital (952) (3,583) 907 922Operating cash flow 1,696 (1,889) 2,226 2,445Interest (651) (522) (378) (483)Non-operating income 103 406 725 863Tax paid (319) (221) (341) (396)Free cash flow 830 (2,226) 2,232 2,429


ROAE (%) (on adjusted profits) 9.4 5.5 6.8 7.4ROACE (%) 13.1 8.8 9.8 10.6Inventory days 76.3 76.1 75 75Debtors days 122.1 121.7 120 120Current ratio 4.9 4.7 4.3 4.8Debt/EBITDA 1.6 2.5 3 3Interest coverage 4.1 3.2 3.5 3.2assets t/o (x) 0.7 0.6 0.6 0.7Debt/equity 0.4 0.4 0.4 0.4


Diluted P/E (x) 20.0 29.5 19.2 17.5Price/BV (x) 1.8 1.5 1.4 1.2EV/EBITDA (X) 9.3 13.1 15.3 12.5


Revenues 3.6 (13.0) (3.9) 24.1EBITDA 7.8 (36.0) (22.1) 15.4




Total revenues 7,674 6,678 6,418 7,966Raw material (2,505) (2,471) (2,882) (3,546)Employee cost (524) (510) (631) (926)Others (1,997) (2,003) (1,585) (1,971)Total expenses (5,026) (4,984) (5,099) (6,443)EBITDA 2,648 1,694 1,319 1,523Depreciation (743) (654) (401) (490)Other income 103 406 725 863Interest (651) (522) (378) (483)PBT 1,358 924 1,265 1,413Taxes (319) (221) (341) (396)Recurring PAT 1,039 703 924 1,017Extraordinary items 0 151 518 518Minority Interest 0 (10) (51) (72)PAT 1,039 844 1,390 1,463


Depreciation & Amortization 9.7 9.8 6.3 6.2Interest expenditure 8.5 7.8 5.9 6.1EBITDA margins 34.5 25.4 20.6 19.1Net profit margins 13.5 12.6 21.7 18.4



Equity capital 638 638 546 546Total reserves 10,850 13,405 12,593 13,794Total shareholders' funds 11,489 14,043 13,138 14,340Total debt 4,993 2,323 4,118 4,118Total Liabilities 16,482 16,366 17,256 18,458Net fixed assets 8,706 5,715 8,504 8,515Capital work-in-progress 1,743 1,733 1,733 1,733Investments 0 2,095 2,044 2,044Inventories 1,843 450 905 950Debtors 2,282 1,565 1,709 1,794Cash & bank balance 1,177 7,034 3,927 5,048Loans and Advances 4,242 2,400 2,374 2,493Other current assets 17 116 145 152Total current assets 6,676 9,619 7,966 9,289Creditors 1,071 1,083 1,571 1,650Provisions 294 968 272 272Total cur. liab. & provisions 1,366 2,051 1,843 1,922Net current assets 1,952 4,473 3,010 4,146Total net assets 16,482 16,366 17,256 18,458


Key takeawaysTotal of 2.8mn packages sold in India. ~30% of the market is organized. CNK is theleader in the organized market with ~30% market share.

In Leisure International, the Cox & Kings brand business contributes 50% to revenueand 90% to EBITDA. Selling Explore and buying LateRooms is part of the company’sstrategy to realign its portfolio within leisure international to revive growth.

The company is planning plans to reduce debt by INR4bn annually.

CNK stated that instead of adding 700 beds it will be adding 535 beds in FY16 dueto certain permission issues. As a result, FY17 capex plan is expected to be higherthan FY16 due to postponement of bed addition in Education to FY17.

Majority of the room expansion in Meininger will be in FY18.

The company expects growth in Leisure India to be around 15%, in line withprevious trend.

Investment conclusionDiversified business mix and revenue distribution: Well diversified business mixacross India leisure, International leisure and Education segment. Geographicallyrevenue is distributed with income from India, the UK, the Netherlands and others.Leisure Boom: Potential for high growth in leisure business, both domestic andoutbound as economic growth picks up. Potential re-rating of stock: Potential re-rating of stock with reduction in leverage may lead to higher valuations.

Key risksWorking capital and debt repayment delays.

COX & KINGSIndia Equity Research l Hotels

Turning a new page in international leisure

Company Profile

EDELWEISS RATINGS

Absolute Rating BUY

Investment Characteristics Growth

MARKET DATA (R : COKI.BO, B: COXK IN)

CMP : INR 163Target Price : INR 39352-week range (INR) : 343 / 150Share in issue (mn) : 169.3M cap (INR bn/USD mn) : 28 / 404Avg. Daily Vol. BSE/NSE (‘000) : 397.1





BSE Midcap Stock Stock OverIndex Index


Financials


Net revenues (INR mn) 23,076 25,691 23,904 25,757EBITDA (INR mn) 11,106 10,115 9,193 9,991Adjusted profit (INR mn) 4,166 2,112 3,509 4,631Diluted EPS (INR) 30.5 12.5 20.7 26.2Diluted P/E (x) 5.3 13.0 7.8 6.2EV/EBITDA (x) 6.5 5.8 5.1 4.5ROAE (%) 21.6 7.0 11.6 12.2 February 15, 2016





Adjusted Diluted EPS (INR) 30.5 12.5 20.7 26.2Y-o-Y growth (%) 67.7 (59.1) 66.1 26.6Adjusted Cash EPS (INR) 42.3 23.0 27.1 32.8Diluted P/E (x) 5.3 13.0 7.8 6.2P/BV (x) 1.3 1.1 0.9 0.8EV/Sales (x) 3.1 2.3 2.0 1.7EV/EBITDA (x) 6.5 5.8 5.1 4.5Dividend yield(%) 0.6 0.6 0.6 0.6


Reported Profit 3,832 918 3,402 4,631Add: Depreciation 1,711 1,983 1,132 1,230Interest (Net of Tax) 2,369 1,255 1,726 1,455Others 360 3,607 1,068 628Less: Changes in WC 180 2,781 (8,816) 1,703Operating cash flow 8,093 4,981 16,142 6,241Less: Capex 2,841 1,544 2,000 2,000Free cash flow 5,252 3,436 14,142 4,241


Staff costs 37.9 35.6 34.6 34.3S G & A expenses 14.0 25.1 27.0 26.9EBITDA margins 48.1 39.4 38.5 38.8EBIT margins 40.7 31.7 33.7 34.0Net profit margin 20.8 8.1 17.4 19.5


Revenues 27.6 11.3 (7.0) 7.8EBITDA 54.7 (8.9) (9.1) 8.7Adjusted Profit 44.2 (49.3) 66.1 32.0EPS 67.7 (59.1) 66.1 26.6




Net revenues 23,076 25,691 23,904 25,757Employee expenses 8,748 9,140 8,268 8,835Other expenses 3,222 6,436 6,442 6,931EBITDA 11,106 10,115 9,193 9,991Depreciation & amortisation 1,711 1,983 1,132 1,230EBIT 9,395 8,132 8,062 8,761Less: Interest Expense 3,236 3,244 2,421 2,021Add: Other income 431 535 210 248Add: Exceptional items (456) (3,087) (150) -Profit before tax 6,133 2,336 5,701 6,988Current tax 1,686 1,764 1,697 2,027Deferred tax (103) (204) (59) (70)Other tax 60 (128) - -Less: Provision for Tax 1,643 1,433 1,638 1,957Less: Minority Interest 643 (31) 641 379Add: Share of profit from assoc. (15) (18) (20) (21)Reported Profit 3,832 918 3,402 4,631Less: Excep. Items (Net of Tax) (334) (1,194) (107) -Adjusted Profit 4,166 2,112 3,509 4,631Equity shares outstanding (mn) 137 169 169 177Adjusted Basic EPS 30.5 12.5 20.7 26.2Diluted shares (mn) 136.5 169.3 169.3 176.6Adjusted Diluted EPS 30.5 12.5 20.7 26.2CEPS 42.3 23.0 27.1 32.8Dividend per share 1.0 1.0 1.0 1.0Dividend payout (%) 4.2 22.3 6.0 4.6


ROAE (%) 21.6 7.0 11.6 12.2ROCE (%) 13.4 11.3 11.5 12.2Inventory (days) 3 3 4 4Debtors (days) 161 165 185 187Payables (days) 154 110 98 94Cash conversion cycle (days) 10.1 57.6 90.5 96.3Current ratio 1.7 2.0 3.1 3.1Gross Debt/EBITDA 5.0 3.7 3.7 3.1Gross Debt/Equity 2.2 1.1 0.9 0.7Adjusted Debt/Equity 2.4 1.3 1.1 0.8Net Debt/Equity 1.6 0.7 0.3 0.2Interest coverage (x) 2.9 2.5 3.3 4.3



Share capital 683 847 847 883Reserves & Surplus 16,867 25,184 28,942 35,008Shareholders' funds 17,549 26,030 29,789 35,891Minority interest 8,205 7,541 8,182 8,561Long term borrowings 47,395 33,065 30,000 28,000Short term borrowings 8,442 4,740 4,412 2,867Total Borrowings 55,836 37,805 34,412 30,867Long Term Liab. & Provisions 699 255 196 126Deferred Tax Liability (net) 245 172 14,711 15,766Sources of funds 82,534 71,803 87,289 91,211Gross Block 30,031 19,783 21,683 23,583Net Block 22,882 16,931 17,826 18,626Capital work in progress 2,188 1,724 1,814 1,903Intangible Assets 41,584 34,287 34,170 34,052Total Fixed Assets 66,654 52,942 53,810 54,580Non-Current Investments 321 324 500 500Cash and cash equivalents 14,067 14,337 23,056 23,450Inventories 199 236 265 285Sundry debtors 11,356 11,805 12,377 14,005Loans & advances 12,193 10,238 13,305 15,655Other Current Assets 17 17 24 26Total Current Assets (ex cash) 23,764 22,296 25,970 29,970Trade payable 5,428 3,966 3,929 4,234Ot. Cur. Liab. & Sh. Term Prov. 16,845 14,129 12,117 13,055Total Current Liab. & Prov. 22,272 18,095 16,047 17,289Net current assets (ex-cash) 1,492 4,201 9,923 12,681Uses of funds 82,534 71,803 87,289 91,211Book value per share 129 154 176 203


Key takeawaysJanuary ad growth: In past 21 days, strong single digit print ad growth was clockedby the company.

Circulation growth: Circulation growth was 18% YoY in Q3FY16, primarily drivenby higher yield in mature markets. Circulation revenue jumped 16% YoY in Q3FY16excluding Bihar, Jharkhand and Maharashtra. It was driven by 15% YoY rise in netrealisation.

Radio revenue: Radio business posted robust growth led by festive season andhigher government & corporate spending. Yield rise also helped bolster radiorevenue.

Top spending categories: Automobile is at top, followed by lifestyle. Real estateand education only problematic categories. Other categories doing well.

Ecommerce: Posted 2-3x growth; however, size is not big.

Digital revenue: Digital revenue slowed slightly as ecommerce spending was highin the base.

FM radio new licence: The current station will roll out by 5-6 months. For next setof stations, DB Corp (DBCL) has yet to get notifications from the ministry. Thecompany can be ready in 30 days after the government provides the infrastructure.

Investment conclusionWhile DBCL remains one of the best plays in the Indian print space, it is rampingup in the digital domain too. The company is growing its footprint in Maharashtra,Bihar and Jharkhand with an eye on higher circulation revenues, even as itsdominance in Madhya Pradesh, Chhattisgarh and Rajasthan will bolster adrevenues. It leverages its extensive network of sub-editions to tap local ads. SinceDBCL’s ad revenues are heavily dependent on interest rate-sensitive sectors likeBFSI, auto, real estate and consumer durables, any interest rate cut by the RBI willaid ad growth.

Key risksSlow GDP growth may hamper ad growth. Any escalation in newsprint pricescould impact profitability. Further depreciation in INR will increase forex losses.

DB CORPIndia Equity Research l Media

Leader surging ahead

Company Profile

February 15, 2016


Absolute Rating BUY




MARKET DATA (R : DBCL.BO, B: DBCL IN)






Stock Nifty EW Media Index

1 month (2.8) (6.4) 4.83 month (1.1) (7.4) 4.312 month (17.1) (15.3) 63.1

February 15, 2016

Financials


Revenues (INR mn) 18,598 20,096 20,540 22,655Rev. growth (%) 16.8 8.1 2.2 10.3EBITDA (INR mn) 5,003 5,622 5,598 6,940Adjusted Profit (INR mn) 3,066 3,163 3,079 3,893No. of Shares outstanding (mn) 183 184 184 184Adjusted Diluted EPS (INR) 16.7 17.2 16.8 21.2EPS growth (%) 40.5 3.0 (2.7) 26.4Diluted P/E (x) 18.7 18.1 18.6 14.7EV/EBITDA (x) 11.5 10.1 10.2 8.1ROAE (%) 28.2 26.0 22.7 25.6


Rajiv Berlia+91 22 6623 [email protected]




ROAE (%) 28.2 26.0 22.7 25.6ROACE (%) 36.9 36.8 32.6 37.1Inventory days 87 88 88 88Debtors days 62 63 63 63Payable days 60 60 60 60Cash Conversion Cycle 90 91 91 91Current Ratio 2.4 2.8 2.9 3.3Gross Debt/EBITDA 0.3 0.2 0.2 0.2Gross Debt/Equity 0.1 0.1 0.1 0.1Adjusted Debt/Equity 0.1 0.1 0.1 0.1Interest Coverage Ratio 57.9 62.7 60.6 76.8


Revenues 16.8 8.1 2.2 10.3EBITDA 32.2 12.4 (0.4) 24.0PBT 36.5 8.8 (3.0) 26.4Adjusted Profit 40.6 3.2 (2.7) 26.4EPS 40.5 3.0 (2.7) 26.4


Reported Profit 3,066 3,163 3,079 3,893Add: Depreciation 642 881 953 1,054Interest (Net of Tax) 51 49 49 49 Others 107 255 (178) (199)Less: Changes in WC 1,387 95 342 853Operating cash flow 2,480 4,253 3,561 3,944Less: Capex 734 585 2,500 750Free cash flow 1,746 3,668 1,061 3,194


Adjusted Diluted EPS (INR) 16.7 17.2 16.8 21.2Y-o-Y growth (%) 40.5 3.0 (2.7) 26.4Adjusted Cash EPS (INR) 20.2 22.0 22.0 26.9Diluted P/E (x) 18.7 18.1 18.6 14.7Price to Book Ratio (P/B) (x) 5.0 4.5 4.0 3.6Enterprise Value / Sales (x) 3.1 2.8 2.8 2.5Enterprise Value / EBITDA (x) 11.5 10.1 10.2 8.1Dividend Yield (%) 2.3 2.5 2.4 3.1




Net revenues 18,598 20,096 20,540 22,655COGS 6,323 6,479 6,007 6,450Employee expenses 3,025 3,457 3,903 4,078SG&A expenses 4,246 4,537 5,032 5,188Total operating expenses 13,595 14,474 14,942 15,716EBITDA 5,003 5,622 5,598 6,940Depreciation & amortization 642 881 953 1,054EBIT 4,360 4,741 4,645 5,886Less: Interest Expense 75 76 77 77Add: Other income 239 257 205 227Profit before tax 4,524 4,923 4,774 6,036Less: Provision for Tax 1,457 1,759 1,695 2,143Reported Profit 3,066 3,163 3,079 3,893Adjusted Profit 3,066 3,163 3,079 3,893No. of Shares outstanding (mn) 183 184 184 184Adjusted Basic EPS 16.7 17.2 16.8 21.2No. of Dil. shares outst. (mn) 183 184 184 184Adjusted Diluted EPS 16.7 17.2 16.8 21.2Adjusted Cash EPS 20.2 22.0 22.0 26.9Dividend per share (DPS) 7.2 7.8 7.5 9.5Dividend Payout Ratio (%) 50.8 54.0 54.0 54.0


COGS 34.0 32.2 29.2 28.5Employee expenses 16.3 17.2 19.0 18.0S G &A expenses 22.8 22.6 24.5 22.9Total operating expenses 73.1 72.0 72.7 69.4Depreciation and Amortization 3.5 4.4 4.6 4.7Interest expenditure 0.4 0.4 0.4 0.3EBITDA margin 26.9 28.0 27.3 30.6EBIT margin 23.4 23.6 22.6 26.0Net profit margins 16.5 15.7 15.0 17.2



Share capital 1,835 1,836 1,836 1,836Reserves & surplus 9,633 11,045 12,462 14,253Shareholders funds 11,467 12,882 14,298 16,089Minority interest - - - -Long term borrowings 727 505 505 505Short term borrowings 818 772 772 772Total Borrowings 1,544 1,277 1,277 1,277Long Term Liab. & Provisions 346 377 377 377Deferred Tax Liability (net) 885 832 832 832Sources of funds 14,243 15,368 16,785 18,576Gross Block 11,156 11,668 12,168 12,668Net Block 8,249 7,926 7,610 7,236Intangible assets 254 233 2,095 2,165Capital work in progress 22 45 45 45Total Fixed Assets 8,526 8,203 9,750 9,446Non current investments 724 686 686 686Cash and cash equivalents 1,133 1,780 1,307 2,549Inventories 1,732 1,402 1,505 1,605Sundry debtors 3,280 3,450 3,433 4,388Loans & advances 2,236 3,477 3,477 3,477Other Current Assets 64 48 48 48Total current assets (ex cash) 7,313 8,377 8,463 9,518Trade payable 1,114 1,215 959 1,161Other current liab. & prov. 2,338 2,463 2,463 2,463Total current liab. & prov. 3,452 3,677 3,422 3,624Net current assets (ex cash) 3,861 4,700 5,042 5,894Uses of funds 14,243 15,368 16,785 18,576Book value per share 63 70 78 88


Key takeawaysGetting business from banks has been challenging due to macro environment.Banks are willing to sell business in the form of captive etc. eClerx is not lookingto acquire such business due to cash drain and integration challenges. Will belooking to acquire skill sets in the digital space.

Roughly, a third of the current revenue will be coming from acquisitions.

Margins for eClerx have been maintained due to operations in the niche andgrowing area.

Looking to get more closer-to-customer engagements for driving digital growth.This growth can from consulting and more onshore engagements, but theseengagements will be margin dilutive.

In a typical year, headline increase is ~10% but the overall impact is ~5-7%. Expectsalary increase to be slower this year due to benign environment.

Investment conclusionWe continue to like eClerx’s execution capability, track record in scaling up relevantacquisitions like Agilyst, CLX and management’s conservative guidance. Thedifferentiated business model (involves high human interface which acts as abarrier), high RoEs (38%) and high payout (~50%) are highly appreciable. However,current valuation of 13.3 FY18E EPS factors in these positives. Maintain ‘HOLD/SP’with target price of INR1,497 (14x FY17E EPS).

Key risksSupply side pressures could affect client servicing and margins.

Volatility in exchange rates could impact the company’s financials meaningfully.

Process automation and adverse regulations could impact the existing business.

Ram down in one of the top clients in SMS segment.

eCLERX SERVICESIndia Equity Research l IT

Unique KPO play

Company Profile

February 15, 2016






MARKET DATA (R : ECLE.BO, B: ECLX IN)

CMP : INR 1,331Target Price : INR 1,49752-week range (INR) : 1,640 / 924Share in issue (mn) : 40.7M cap (INR bn/USD mn) : 54 / 795Avg. Daily Vol. BSE/NSE (‘000) : 56.9





Stock Nifty EW IT Index

1 month (5.6) (6.4) 1.73 month (0.8) (7.4) (0.7)12 month 40.8 (15.3) (0.5)

February 15, 2016

Sandip Agarwal+91 22 6623 [email protected]

Pranav Kshatriya+91 22 4040 [email protected]

Financials


Revenues (INR mn) 8,410 9,421 13,128 15,243Rev. growth (%) 27.3 12.0 39.3 16.1EBITDA (INR mn) 3,536 3,156 4,609 5,544Net profit (INR mn) 2,557 2,297 3,433 4,128Share outstanding (mn) 29 40 40 40EPS (INR) 84.8 55.6 83.1 99.9EPS growth (%) 46.8 (34.5) 49.5 20.3Diluted P/E (x) 15.7 23.9 16.0 13.3EV/EBITDA (x) 10.1 15.7 10.0 8.0ROE (%) 49.8 35.2 38.3 35.3




ROAE (%) 49.8 35.2 38.3 35.3ROACE (%) 64.6 45.7 50.8 47.7Debtors Days 36 44 36 34Payable Days 25 29 30 35Cash Conversion Cycle 11 15 6 (1)Current Ratio 3.1 3.2 4.4 4.3


Reported Profit 2,557 2,297 3,433 4,128Add: Depreciation 330 500 508 531Others (501) (118) (82) (270)Less: Changes in WC 436 247 84 104Operating cash flow 1,950 2,432 3,775 4,285Less: Capex 452 618 559 525Free Cash Flow 1,497 1,814 3,217 3,760




Net revenue 8,410 9,421 13,128 15,243Cost of revenues 3,580 4,539 6,405 7,032Gross profit 4,830 4,883 6,724 8,212Total SG&A expenses 1,294 1,727 2,114 2,668EBITDA 3,536 3,156 4,609 5,544Depreciation 330 500 508 531EBIT 3,206 2,656 4,101 5,013Add: Other income 110 324 457 572Profit Before Tax 3,316 2,979 4,558 5,585Less: Provision for Tax 759 683 1,121 1,452Reported Profit 2,557 2,297 3,433 4,128Adjusted Profit 2,557 2,297 3,433 4,128Shares o /s (mn) 29 40 40 40Adjusted Basic EPS 86.9 56.9 85 102.2Diluted shares o/s (mn) 30 41 41 41Adjusted Diluted EPS 84.8 55.6 83.1 99.9Adjusted Cash EPS 98.1 69.3 97.6 115.4Dividend per share (DPS) 35.3 25.8 39.3 47Dividend Payout Ratio(%) 48.6 56.1 55.3 55.1


Cost of revenues 42.6 48.2 48.8 46.1Gross margin 57.4 51.8 51.2 53.9SG&A expenses 15.4 18.3 16.1 17.5EBITDA margins 42 33.5 35.1 36.4EBIT margins 38.1 28.2 31.2 32.9Net Profit margins 30.4 24.4 26.2 27.1


Diluted EPS (INR) 84.8 55.6 83.1 99.9Y-o-Y growth (%) 46.8 -34.5 49.5 20.3CEPS 98.1 69.3 97.6 115.4Diluted P/E (x) 15.7 23.9 16.0 13.3Price/BV (x) 6.8 7.7 5.1 4.4EV/Sales (x) 4.2 5.2 3.5 2,9EV/EBITDA (X) 10.1 15.7 10.0 8.0


Revenues 27.3 12 39.3 16.1EBITDA 37.7 (10.7) 46.1 20.3PBT 54.1 (10.1) 53 22.5Adjusted Profit 46.8 (10.2) 49.5 20.3EPS 46.8 (34.5) 49.5 20.3



Share capital 310 312 412 412Reserves & Surplus 5,580 6,839 10,381 12,236Shareholders' funds 5,890 7,151 10,793 12,648Def. Tax Liability (net) (18) (52) (52) (52)Sources of funds 5,871 7,099 10,741 12,597Gross Block 2,600 3,224 3,674 4,199Net Block 753 695 1,494 1,488Capital work in progress 12 11 120 120Intangible Assets 795 975 118 118Total Fixed Assets 1,559 1,682 1,732 1,726Cash and Equivalents 3,560 4,419 7,927 9,684Sundry Debtors 996 1,261 1,331 1,503Loans & Advances 752 802 943 1,355Other Current Assets 1,008 1,359 1,495 1,644Current Assets (ex cash) 2,757 3,422 3,768 4,503Trade payable 259 453 611 750Other Current Liab 1,746 1,970 2,075 2,566Total Current Liab 2,005 2,424 2,686 3,317Net Curr Assets-ex cash 751 998 1,082 1,186Uses of funds 5,871 7,099 10,741 12,597BVPS (INR) 195.4 173.1 261.3 306.2


Key takeawaysWhile Essel Propack tried to penetrate the plastic tube market, it realized itsstrength lies in laminated barriers. Hence, it has been focusing on convertingcustomers to using laminated tubes.

There is not much of a pricing difference between plastic and laminated tubes fora customer. Key benefit of laminated tubes is mainly its barrier property.

The focus is not on converting non-oral customers to laminated tubes. Non oralhas different ethos compared to oral. As one is making customized products insmall batch sizes, one has to design new products as per customer requirements.

Margin improvement to be driven by: a) Economies of scale, b) Efficiencyimprovement, c) Reduction of debt & rating improvement and d) Limited rawmaterial volatility.

Margins in India and China have been tracking well as they are mature. The companywants to push margins in Europe and Americas to the levels in India and China.

It is looking for 15% growth in revenue and 20% growth in PAT in FY17.

The company has a policy of paying out 20-25% of its consolidated PAT as dividend.

Investment conclusionEPL has enhanced its laminated tubes market share from ~28% in CY02 to ~34%currently, a feat it accomplished owing to sizeable investments in innovation.R&D and innovations have been the company’s unequivocal hallmarks, enablingit to pioneer the paradigm shift in packaging. Also, focus on non-oral care andturnaround in its subsidiaries will drive significant improvement in return rations.

Key risksSustained rise in crude prices, pace of adoption/conversion to laminatedpackaging in non-oral segments.

ESSEL PROPACKIndia Equity Research l Logistics

Packaging innovation

Company Profile

EDELWEISS RATINGS

Absolute Rating BUY


MARKET DATA (R : ESSL.BO, B: ESEL IN)


Share Holding Pattern (%)Current Q2FY16 Q1FY16


PRICE Performance (%)BSE Midcap Stock Stock Over

Index Index


February 15, 2016


Financials


Net revenue (INR mn) 21,266 23,230 21,907 23,727Revenue growth (%) 16.1 9.2 -5.7 8.3EBITDA (INR mn) 3,541 3,908 4,286 4,962Adj. profit (INR mn) 1,083 1,368 1,768 2,272Diluted EPS (INR) 6.9 8.7 11.3 14.5Diluted P/E (x) 21.1 16.7 12.9 10.1EV/EBITDA (x) 9.0 8.0 7.0 5.8ROAE (%) 13.5 18.8 20.8 22.5




Revenues 16.1 9.2 (5.7) 8.3EBITDA 13.1 10.3 9.7 15.8PBT 33.8 22.2 29.0 22.1Adjusted Profit 39.1 26.2 29.3 28.5EPS 39.1 26.3 29.2 28.5


Reported Profit 1,078 1,406 1,845 2,272Add: Depreciation 1,258 1,318 1,282 1,382Interest (Net of Tax) 539 558 457 389Others (304) (147) 332 151Operating cash flow 2,571 3,135 3,916 4,194Less:Changes In WC 262 327 (331) (206)Less: Capex 1,801 2,186 1,768 1,764Free Cash Flow 507 622 2,479 2,636


Diluted EPS (INR) 6.9 8.7 11.3 14.5Y-o-Y Growth (%) 39.1 26.3 29.2 28.5CEPS (INR) 15.5 17.7 19.2 23.1Diluted P/E (x) 21.1 16.7 12.9 10.1P/BV (x) 3.2 2.9 2.5 2.1EV/Sales (x) 1.5 1.4 1.4 1.2EV/EBITDA (x) 9.0 8.0 7.0 5.8Dividend Yield(%) 0.9 1.1 1.9 2.4




Net Revenues 21,266 23,230 21,907 23,727Raw Material Costs 10,395 11,362 9,694 10,258Gross Profit 10,871 11,867 12,214 13,469Employee Expenses 3,360 3,628 3,919 4,212Other Expenses 3,969 4,331 4,009 4,295EBITDA 3,541 3,908 4,286 4,962Depreciation & Amortisation 1,258 1,318 1,282 1,382EBIT 2,284 2,590 3,004 3,580Less: Interest Expense 814 794 649 548Add: Other income 224 210 193 214Add: Exceptional items (8) 55 110 0Profit Before Tax 1,686 2,061 2,659 3,246Less: Provision for Tax 569 611 784 941Less: Minority Interest 39 47 29 33Add: Share of Profits from Assoc. (0) 3 0 0Reported Profit 1,078 1,406 1,845 2,272Less: Excep. Items (Net of Tax) (5) 39 78 0Adjusted Profit 1,083 1,368 1,768 2,272Equity Shares Outstand. (mn) 157.1 157.0 157.1 157.1Adjusted Basic EPS (INR) 6.9 8.7 11.3 14.5No. of Dil. shares outs. (mn) 157.1 157.0 157.1 157.1Adjusted Diluted EPS 6.9 8.7 11.3 14.5Adjusted Cash EPS 15.5 17.7 19.2 23.1Dividend per share (DPS) 1.3 1.6 2.7 3.6Dividend Payout Ratio (%) 26.3 26.3 23.4 24.6


Operating expenses 83.3 83.2 80.4 79.1Materials costs 48.9 48.9 44.2 43.2Staff costs 15.8 15.6 17.9 17.8S G & A expenses 18.7 18.6 18.3 18.1Depreciation 5.9 5.7 5.9 5.8Interest Expense 3.8 3.4 3.0 2.3EBITDA Margins 16.7 16.8 19.6 20.9Net Profit Margin 5.3 6.1 8.2 9.7



Share Capital 314 314 314 314Reserves & Surplus 6,744 7,515 8,929 10,643Shareholders' Funds 7,059 7,830 9,243 10,957Minority Interest 76 81 110 142Long Term Borrowings 6,449 6,434 5,500 4,500Short Term Borrowings 3,795 3,184 2,652 2,583Total Borrowings 10,244 9,619 8,152 7,083Long Term Liabilities & Prov. 115 144 165 165Deferred Tax Liability (net) 44 137 111 78Sources of funds 17,537 17,811 17,780 18,426Gross Block 24,020 25,133 26,845 28,609Net Block 8,801 8,704 9,133 9,516Capital work in progress 331 843 900 900Intangible Assets 205 213 214 214Total Fixed Assets 9,337 9,760 10,247 10,630Non Current Investments 454 458 463 463Cash and Cash Equivalents 1,416 1,164 953 1,421Inventories 2,249 2,318 2,125 2,108Sundry Debtors 3,675 3,758 3,601 3,770Loans & Advances 2,761 2,783 2,750 2,750Other Current Assets 1,035 860 832 878Total Current assets (ex-cash) 9,719 9,718 9,308 9,506Trade Payable 1,830 1,611 1,461 1,546Ot. Cur. Liab. and Provisions 1,559 1,678 1,729 2,047Total Current Liab. & Prov. 3,389 3,289 3,190 3,593Net Current Assets (ex-cash) 6,330 6,429 6,119 5,913Uses of Funds 17,537 17,811 17,780 18,426Book value per share 45 50 59 70


ROE (%) 13.5 18.8 20.8 22.5Pre-tax ROCE (%) 13.7 16.0 18.3 21.3Inventory Days 62 61 68 61Debtors Days 57 58 61 57Payble Days 52 55 58 53Cash Conversion Cycle 67 64 72 64Current Ratio 3.3 3.3 3.2 3.0Gross Debt/EBITDA 2.9 2.5 1.9 1.4Gross Debt/Equity 1.4 1.2 0.9 0.6Adjusted Debt/Equity 1.5 1.3 1.0 0.7Net Debt/Equity 1.2 1.1 0.8 0.5Interest Coverage Ratio 2.8 3.3 4.6 6.5


Key takeawaysFederal Bank (FB) recognized the stress emerging from its corporate segment inQ3FY16. Slippages should normalize henceforth as recovery in SME accounts ismore predictable.

Credit growth is evident in SME and mid corporate. Focus areas for FB are: (i) fullfledged corporate strategy and RM strategy; (ii) presence in GIFT city; (ii) fullfledged digital banking and digitization. A sectoral shift in advances is evidentand the bank is incrementally lending to sectors where it is comfortable.

No 5:25 refinancing during the quarter. There is one restructured account (INR1bn)performance of which needs to be monitored as it may show some pain.

The bank is confident of maintaining NIMs in the 3.10-3.15% range for FY17.

Not expecting major hit on remittances due to Middle East (till date, remittancesare normal).

No plans of raising capital in FY17.

Investment conclusionSME and retail loans, which constitute a bulk of the bank’s loan book, are likely tocontinue to lead its growth in future. The loan book is expected to grow at ~15%CAGR over FY15-18E through network expansion and increased penetration.Improving productivity, following improved revenue traction, will lower its cost-income ratio in turn improving return ratios.

Key risksThe bank’s high dependence on the NRI segment (37% of its deposits come from thesegment) exposes it to regulatory risks.

Lower CASA comparatively in this current scenario will be a negative for the bank.

FEDERAL BANKIndia Equity Research l Banking and Financial Services

In transition mode

Company Profile

February 15, 2016


Absolute Rating BUY




MARKET DATA (R : FED.BO, B: FB IN)








Financials











Diluted EPS (INR) 4.9 5.9 4.0 6.0EPS growth (%) 0.1 19.7 (32.2) 51.2Book value per share (INR) 40.6 45.1 47.6 51.7Adjusted BV/share (INR) 39.3 43.6 43.9 47.8Diluted P/E (x) 9.0 7.5 11.1 7.4Price/ BV (x) 1.1 1.0 0.9 0.9Price/ ABV (x) 1.1 1.0 1.0 0.9Dividend yield (%) 4.4 4.4 5.8 7.1




Interest income 69,461 74,195 76,731 86,559Interest expenses 47,175 50,391 52,128 56,445Net interest income 22,286 23,804 24,602 30,114Non interest income 6,939 8,783 7,778 9,195- Fee & forex income 4,589 4,974 5,371 6,177- Misc. income 774 1,251 1,306 1,468- Investment profits 1,575 2,559 1,100 1,550Net revenues 29,225 32,587 32,380 39,309Operating expense 14,421 16,309 18,386 20,668 - Employee exp 7,715 8,920 10,288 11,751 - Other opex 6,705 7,390 8,098 8,917Preprovision profit 14,804 16,278 13,994 18,640Provisions 2,684 1,067 3,649 3,232- Loan loss provisions 2,282 2,043 3,459 3,042- Investment depreciation 1,116 (806) 90 90- Other provisions (714) (170) 100 100PBT 12,120 15,210 10,345 15,408Taxes 3,731 5,153 3,517 5,085PAT 8,389 10,058 6,827 10,323Reported PAT 8,389 10,058 6,827 10,323EPS (INR) 4.9 5.9 4.0 6.0DPS (INR) 2.0 2.0 2.6 3.2Payout ratio (%) 23.7 22.6 37.9 30.9


NII growth 12.9 6.8 3.4 22.4Fees growth 19.5 8.4 8.0 15.0Opex growth 22.3 13.1 12.7 12.4PPOP growth 5.5 3.7 (6.0) 32.5PPP growth 1.4 10.0 (14.0) 33.2Provisions growth 1.0 (60.2) 241.9 (11.4)PAT growth 0.1 19.9 (32.1) 51.2





LiabilitiesEquity capital 1,711 1,713 3,429 3,429Reserves 67,745 75,618 78,139 85,274Net worth 69,456 77,331 81,568 88,703Deposits 597,313 708,250 784,144 889,444Borrowings 56,880 23,083 39,761 59,761Other liabilities 26,006 22,685 30,506 41,419Total 749,655 831,349 935,978 1,079,326AssetsLoans 434,361 512,850 571,828 663,320InvestmentsGilts 158,231 168,761 189,498 213,571Others 82,948 75,331 89,984 107,606Cash & equi 45,294 47,800 55,557 63,449Fixed assets 4,200 4,616 5,272 5,334Other assets 24,622 21,990 23,840 26,047Total 749,655 831,349 935,978 1,079,326Balance sheet ratios (%)Credit growth (0.5) 16.6 11.7 16.2Deposit growth 3.7 18.6 10.7 13.4EA growth 4.5 11.6 12.7 15.6SLR ratio 24.2 23.1 23.0 22.5C-D ratio 75.5 74.1 74.7 76.5Low-cost deposits 31.2 30.8 32.8 33.3Gross NPA ratio 2.4 2.0 3.2 3.2Net NPA ratio 0.7 0.7 1.6 1.4Provision coverage 70.4 64.7 50.9 55.1Incremental slippage 1.2 1.8 2.4 1.7Net NPA / Equity 4.6 4.8 11.1 10.8Capital adequacy 15.2 14.5 13.8 12.9 - Tier 1 14.6 13.9 13.1 12.4Book value 41 45 48 52


Key takeawaysRevenue growth to remain tepid impacted by weakness in industrial, whileautomotive and aerospace segments continue to grow.

Margin levers are limited and management expects constant currency (CC) marginsto remain near last quarter levels of 14.8%. Operating leverage can only aidmargins.

3D PLM is on cost plus basis and hence revenue is hedged 2 years forward. Revenuegrowth will optically appear to decline on account of Euro depreciation.

Aerospace demand strong due to re-engineering of old designs - converting 2dimensional designs to 3 dimensional formats and increased automation.

Management continues to invest in sales and focus is on 40-45 key clients only.

Key risksRevenue growth continues to be the biggest concern area with 10 quarters CQGR0.35%. Slower than anticipated pick up remains key risk area.

Revenue growth as aerospace and automotive spends are increasingly towardsconsulting and problem solving compared to resource augmentation. Inability tosource right talent can impact revenue growth and also result in losing walletshare in key clients.

GEOMETRICIndia Equity Research l IT

Engineering solutions: The growth driver

Company Profile

EDELWEISS RATINGS


MARKET DATA (R : GEOM.BO, B: GEO IN)



Current Q2FY16 Q1FY16Promoters * 38.0 38.0 38.1MF's, FI's & BK’s 0.3 0.3 0.2FII's 3.1 3.1 4.7Others 58.6 58.6 57.0* Promoters pledged shares : Nil (% of share in issue)



1 month (17.7) (3.6) (14.1)3 months 6.4 (6.3) 12.612 months 21.4 (14.5) 35.9

February 15, 2016



Financials


Revenues (INR mn) 8,079 10,204 10,955 11,053Rev. growth (%) 30.2 26.3 7.4 0.9EBITDA (INR mn) 1,147 1,951 2,072 1,318Net profit (INR mn) 658 687 462 498Share outstanding (mn) 63 63 63 63EPS (INR) 9.44 10.96 7.38 8.80EPS growth (%) 2.5 16.1 (32.7) 19.3Diluted P/E (x) 0.0 0.0 0.0 0.0EV/EBITDA (x) 3.1 2.8 2.8 7.1ROE (%) 29.3 30.6 15.5 14.8




Diluted EPS (INR) 9.4 11.0 7.4 8.8Y-o-Y growth (%) 2.5 16.1 (32.7) 19.3CEPS 13.7 16.1 12.9 14.3Diluted P/E (x) 16.0 13.8 20.5 17.2Price/BV (x) 5.1 3.6 2.8 2.3EV/Sales (x) 2.4 1.7 1.6 1.2EV/EBITDA (X) 3.1 2.8 2.8 7.1


Revenues 30.2 26.3 7.4 0.9EBITDA 61.1 70.1 6.2 (36.4)PBT 44.5 22.5 (18.1) 8.5Net profit 2.9 16.1 (32.7) 19.3EPS 2.5 16.1 (32.7) 19.3


Operating expenses 85.8 80.9 81.1 88.1Depreciation and Amortization 3.3 3.1 3.2 3.1Interest expenditure (0.3) (0.3) (0.3) (0.3)EBITDA margins 14.2 19.1 18.9 11.9Net profit margins 7.3 6.7 4.2 5.0



Equity capital 125 126 127 129Reserves & surplus 1,740 2,500 3,225 3,949Shareholders funds 1,866 2,626 3,352 4,078Secured loans 658 472 428 542Deferred revenues 541 717 770 945Sources of funds 3,065 3,815 4,549 5,564Net block 877 980 901 1,257Capital work in progress 14 18 191 22Total fixed assets 891 998 1,092 1,279Investments 734 839 1,029 1,307Sundry debtors 1,445 1,478 1,308 1,551Cash and equivalents 562 332 805 540Other current assets 1,638 1,283 2,002 2,447Total current assets 4,378 3,932 5,143 5,845Sundry creditors and others 1,852 1,446 1,890 1,718Provisions 199 801 504 676Total CL & provisions 2,050 2,247 2,394 2,394Net current assets 2,328 1,685 2,749 3,450Net deferred tax 154 (1,132) (708) (835)Uses of funds 3,219 2,683 3,841 4,729Adjusted BV per share (INR) 30 42 53 65




Income from operations 8,079 10,204 10,955 11,053Employee costs 5,390 6,382 6,670 7,487Other expenses 1,542 1,871 2,213 2,248Total operating expenses 6,932 8,252 8,883 9,735EBITDA 1,147 1,951 2,072 1,318Depreciation and amortisation 270 320 345 344EBIT 877 1,632 1,727 974Interest expenses (25) (36) (35) (33)Other income 163 (352) (674) 165Profit before tax 1,015 1,244 1,018 1,105Provision for tax 212 377 387 392Core profit 803 867 631 713Extraordinary items (70) 0 0 54Profit after tax 733 867 631 767Less: Minority interests (142) (180) (169) (216)PAT after minority interest 592 687 462 552Adjusted net profit 592 687 462 552EPS (INR) basic 9.4 11.0 7.4 8.8Diluted equity shares (mn) 63 63 63 63Dividend payout (%) 17.8 18.1 28.5 29.5Tax rate (%) 20.9 30.3 38.0 35.5


Net profit 1,015 1,244 1,018 1,105 Depreciation 270 320 345 344 Others (288) (349) (357) (400)Gross cash flow 997 1,215 1,007 1,049Less:Changes in WC 225 489 38 (1,264)Operating cash flow 1,222 1,704 1,045 (214)Less: Capex (557) (80) (179) (233)Free cash flow 665 1,624 866 (447)


ROAE (%) (on adjusted profits) 29.3 30.6 15.5 14.8ROACE (%) 33.4 35.4 25.5 22.1Inventory days 0.0 0.0 0.0 0.0Debtors days 65.3 52.9 43.6 51.2Payable days 4.5 3.2 5.9 3.8Cash conversion cycle 60.7 49.7 37.7 47.5Current ratio 1.8 1.6 1.8 2.2Debt/EBITDA 0.6 0.2 0.2 0.4Interest coverage 41.9 36.0 30.3 34.2Fixed assets t/o (x) 1.9 1.9 1.8 1.6Debt/equity (0.2) (0.2) (0.3) (0.2)


Key takeawaysGlenmark (GNP) expects an approval rate of 4 ANDAs/ quarter going forward, witha number of high value launches expected in FY17 (Zetia, Nitroglycerin – had a TADin January 2017, derma, injectables, among others). An eventual Ortho TricyclenLo launch may not amount to much now due to high competition.

US: “Golden period is over”

Customer consolidation (“double digit erosion/ year”) and compliance woes havechanged the face of the business. Many new players are coming into the market,leading to intense competition. While it still remains attractive, RoCE of the businesswill dip going forward as filing will have to be done from multiple facilities, andcompanies will need to spend more on R&D and compliance whilst maintainingfacilities in US too. Companies will need to move higher in the value chain tomaintain growth. To do that, they will need to do branded/ specialty business.

Currency woes

Venezuela: The company has outstanding USD40mn receivables and USD5mn worthof inventory in subsidiary. It may now be unviable to do business and the companywill soon decide the course of action for field force (90 people) in the country.

Russia: The business has plummeted to USD35mn from a peak of ~USD100mn.

Brazil: The business has dipped to USD35mn from a peak of ~USD65mn.

Advair: The company has started filing generic Seretide across some EU marketsand expects launches in ~18-20 months. It may be difficult for Indian pharmapeers to enter US market before 2019/2020.

Investment conclusionGNP is poised to benefit from its complex generic pipeline over the next 2 years. Itwill launch Zetia (USD1.5bn) in Dec 2016 as an FTF. It will also launch limitedcompetition products like Zyvox (USD500mn), Renvela/ Renagel (USD1,400mn)and Welchol (USD800mn) during FY17/FY18.

Key risksSlowdown in ANDA approvals and USFDA related regulatory risks.

GLENMARK PHARMACEUTICALSIndia Equity Research l Pharmaceuticals

Currency woes continue

Company Profile






MARKET DATA (R : GLEN.BO, B: GNP IN)

CMP : INR 711Target Price : INR 92052-week range (INR) : 1,261 / 671Share in issue (mn) : 282.2M cap (INR bn/USD mn) : 201 / 2,943Avg. Daily Vol. BSE/NSE (‘000) : 1,102.3







February 15, 2016



Financials


Net Revenues (INR mn) 60,069 66,448 72,718 89,121Rev. growth (%) 19.8 10.6 9.4 22.6EBITDA (INR mn) 13,101 14,466 15,343 23,884Adjusted Profit (INR mn) 7,195 7,944 8,207 15,447No. of Shares outstanding (mn) 270 282 282 282Adjusted Diluted EPS (INR) 26.6 28.2 29.1 54.7EPS growth (%) 16.6 5.8 3.3 88.2Diluted P/E (x) 27.5 26.0 25.2 13.4EV/EBITDA (x) 17.1 16.4 15.3 9.6ROAE (%) 25.0 26.5 24.4 35.1




Net Revenues 19.8 10.6 9.1 21.1EBITDA 29.2 10.4 5.8 53.8PBT (5.0) (14.7) 97.3 75.7Adjusted Profit 16.6 10.4 3.3 88.2EPS 16.5 6.1 3.3 88.2


Reported Profit 5,423 4,753 8,207 15,447Add: Depreciation 2,168 2,600 2,352 2,587Interest (Net of Tax) 1,477 1,521 1,001 726Others (7,396) (9,519) (2,426) (6,145)Less: Changes in WC (2,960) (3,999) (712) (2,710)Operating cash flow 4,631 3,354 9,846 15,324Less: Capex 4,102 5,215 4,707 4,049Free cash flow 528 (1,862) 5,140 11,275






Income from operations 60,069 66,448 72,718 89,121Net revenues 60,069 66,448 72,718 89,121Total operating expenses 46,969 51,981 57,374 65,237Materials cost 18,730 19,344 23,997 26,202Employee cost 10,261 12,024 11,780 13,368R&D cost 5,410 6,760 7,054 8,467Other expenses 12,567 13,853 14,544 17,200Depreciation 2,168 2,600 2,352 2,587EBITDA 13,101 14,466 15,343 23,884Operating Profit 13,101 14,466 15,343 23,884EBIT 10,933 11,866 12,992 21,298Less: Interest Expense 1,886 1,902 1,430 967Add: Other income 194 69 163 265Add: Exceptional items (2,272) (4,091) 0 0Profit before tax 6,968.8 5,943 11,724 20,595Less: Provision for Tax 1,513 1,190 3,517 5,149Less: Minority Interest 33.3 (0.7) 0.0 0.0Reported Profit 5,423 4,753 8,207 15,447Less: Excep. Items (Net of Tax) (1,772) (3,191) - -Adjusted Profit 7,195 7,944 8,207 15,447No. of Shares outstanding 271 282 282 282Adjusted Basic EPS 26.5 28.2 29.1 54.7No. of Diluted shares outst. 270.3 282.1 282.1 282.1Adjusted Diluted EPS 26.6 28.2 29.1 54.7Adjusted Cash EPS 34.5 37.4 37.4 63.9Dividend per share (DPS) 2.3 2.0 3.5 6.6Dividend Payout Ratio (%) 11.7 11.9 12.0 12.0





Share capital 271 271 282 282Reserves & Surplus 29,562 29,732 36,954 50,547Shareholders' funds 29,833 30,003 37,236 50,829Minority interest 133 (2) (2) (2)Long term borrowings 8,383 12,256 12,256 12,256Short term borrowings 24,287 25,744 21,244 18,744Total Borrowings 32,670 37,999 33,499 30,999Deferred tax liability (net) (1,520) (2,750) (2,750) (2,750)Sources of funds 61,116 65,251 67,984 79,077Gross Block 22,181 27,397 30,669 33,140Net Block 15,609 18,225 20,580 22,042Capital work in progress 500 500 500 500Intangible assets 14,849 14,559 15,287 16,816Total Fixed assets 30,958 33,284 36,367 39,358Non current investments 181 171 171 171Cash and cash equivalents 8,007 7,681 5,423 8,842Inventories 21,563 25,118 27,629 31,774Sundry debtors 12,707 12,382 13,579 15,552Loans & advances 9,329 12,690 13,959 16,053Total current assets (ex cash)43,599 50,190 55,167 63,379Trade payable 17,540 20,457 23,525 27,054Ot. Cur. Liab. & Sh. Term Prov. 4,090 5,620 5,620 5,620Total current liab. & prov. 21,630 26,077 29,145 32,674Net current assets (ex cash) 21,969 24,114 26,022 30,705Uses of funds 61,116 65,251 67,984 79,077Book Value per share (INR) 110 106 132 180


ROAE (%) 25.0 26.5 24.4 35.1ROACE (%) 18.9 18.3 19.0 28.3Inventory days 369.9 440.4 402 420Debtors days 61.9 68.9 65 61Payble days 311.6 358.5 335 358Cash Conversion Cycle 120.2 150.8 132.2 122.9Current Ratio 2.4 2.2 2.1 2.2Gross Debt/EBITDA 2.5 2.6 2 1Gross Debt/Equity 1.1 1.3 0.9 0.6Adjusted Debt/Equity 1.1 1.3 0.9 0.6Net Debt/Equity 0.8 1.0 0.8 0.4Interest Coverage Ratio 5.8 6.2 9.1 21.7


Key takeawaysThe Grasim management was positive on long-term outlook of both VSF and cementbusinesses. In VSF, the positive view was owing to:

Sustainable growth in global VSF demand, outperforming demand for othercompeting fibres like polyester and cotton, in line with historic trend.

Grasim being among low cost producers globally given captive raw materials -pulp & caustic soda, captive power and self managed water supply resources.

Beneficiary of expected high growth in textile consumption in India versus globalconsumption.

In the near term, however, prices and margins will be influenced by developmentsin China and downstream industry and also competing fiber prices trend. It isfocusing on expanding domestic market through product development activitiesand focus on increasing share of specialty products.

In cement, the positive view emanates from:

Expected demand revival given government’s focus on improving infrastructure inIndia. Capacity addition pace slowing down, leading to improvement in utilisation.

Challenges for setting up a new plant like tougher land acquisition process,increased gestation period and availability of new limestone mines only throughauctions.

Costs respite with softening of energy prices in global markets.

Investment conclusionWe remain positive on both the lead sectors of Grasim. In cement, the companywill benefit from expected demand revival (estimated to grow at ~8% YoY), slowcapacity additions, low cost inflation and imminent industry consolidation.

Key risksLower-than-estimated demand and price hikes will impact estimates.

Significant increase in operating costs will impact estimates.

GRASIM INDUSTRIESIndia Equity Research l Cement

VSF volumes on a high

Company Profile


Absolute Rating BUY




MARKET DATA (R : GRAS.BO, B: GRASIM IN)

CMP : INR 3,460Target Price : INR 4,83252-week range (INR) : 4,023 / 3,304Share in issue (mn) : 91.9M cap (INR bn/USD mn) : 318 / 4,665Avg. Daily Vol. BSE/NSE (‘000) : 63.6





Stock Nifty EW Cement Index


Financials


Revenues (INR mn) 293,240 328,473 358,488 394,530Rev. growth (%) 5.1 12.0 9.1 10.1EBITDA (INR mn) 49,144 51,445 63,659 81,236Adjusted Profit 20,715 17,533 23,630 31,480Shares outstanding (mn) 91.8 91.9 93.3 93.3Diluted EPS (INR) 225.6 190.8 253.2 337.3EPS growth (%) (19.1) (15.4) 32.7 33.2Diluted P/E (x) 15.2 18.0 13.6 10.2EV/EBITDA (x) 8.7 9.2 7.4 5.4ROAE (%) 10.9 8.7 9.9 12.3 February 15, 2016

Navin Sahadeo+91 22 6623 [email protected]




ROAE (%) 10.0 7.8 9.7 11.6ROCE (%) 25.8 23.5 26.8 34.0Inventory (days) 60 60 61 59Debtors (days) 29 29 28 27Payable (days) 46 46 47 47Cash conversion cycle 43 42 41 39Current ratio 2.2 1.9 2.1 2.6Gross Debt/EBITDA 2.0 2.3 1.9 1.5Gross Debt/Equity 0.3 0.4 0.3 0.3Adjusted Debt/Equity 0.4 0.5 0.5 0.4Interest cover (x) 7.7 5.4 5.6 7.3


Revenues 5.1 12.0 9.1 10.1EBITDA (17.0) 4.7 23.7 27.6PBT (30.7) (3.7) 23.2 42.8Adjusted Profit (19.0) (15.4) 34.8 33.2EPS (19.1) (15.4) 32.7 33.2


Operating expenses 83.2 84.3 82.2 79.4Depreciation and amortisation 5.0 4.8 5.3 5.3Interest expenditure 1.5 2.0 2.2 2.1EBITDA margins 16.8 15.7 17.8 20.6Net profit margins 10.1 7.9 9.0 11.4


Reported Profit 20,715 17,533 23,630 31,480 Depreciation 14,575 15,632 19,008 20,870Interest (Net of Tax) 3557 4710 5779 5929 Others 1,457 10,051 9,380 14,348Less:Changes in WC 4,738 1,965 1,500 1,500Operating cash flow 35566 45961 56297 71127Less: Capex 36,294 66,521 39,396 22,000Free cash flow (727) (20,560) 16,901 49,127



Share capital 1,364 1,510 1,525 1,525Reserves & surplus 214,779 229,887 256,215 285,238Shareholders funds 216,143 231,398 257,740 286,763Minority interest 69,358 76,818 85,510 99,012Total Borrowings 96,990 119,692 119,692 119,692Deferred Tax Liability (net) 28,030 34,291 40,291 40,291Sources of funds 410,522 462,198 503,233 545,758Gross Block 233,249 300,209 327,973 341,964Net Block 218,674 284,577 308,964 321,094Intangible assets 676 923 923 923CWIP (incl. intangible) 50,080 35,066 31,066 20,066Goodwill 32,770 32,834 33,570 33,570Total Fixed Assets 302,200 353,399 374,523 375,653Non current investments 26,733 38,577 38,577 38,577Cash and cash equivalents 53,342 38,780 57,192 97,087Inventories 42,565 47,885 49,885 51,885Sundry debtors 25,092 26,474 27,974 29,474Loans and advances 26,782 34,780 34,780 34,780Other current assets 634 641 641 641Total cur. assets (ex cash) 95,072 109,779 113,279 116,779Trade payable 32,459 37,195 39,195 41,195Ot. cur. liab. & provisions 34,366 41,143 41,143 41,143Total current liab. & prov. 66,825 78,338 80,338 82,338Net current assets (ex cash) 28,247 31,441 32,941 34,441Application of funds 410,522 462,198 503,233 545,758Book value per share (BV) 2,353 2,519 2,762 3,073




Income from operations 293,240 328,473 358,488 394,530Total operating expenses 244,096 277,029 294,829 313,294EBITDA 49,144 51,445 63,659 81,236Depreciation & amortisation 14,575 15,632 19,008 20,870EBIT 34,570 35,812 44,650 60,366Less: Interest Expense 4,473 6,674 7,983 8,291Add: Other income 5,766 5,390 5,888 8,710Profit before tax 35,862 34,528 42,556 60,784Less: Provision for Tax 7,348 10,159 11,750 17,319Less: Minority interest 8,828 8,379 8,692 13,502Add: Share of associates PAT 1,029 1,542 1,516 1,516Reported Profit 20,715 17,533 23,630 31,480Adjusted Profit 20,715 17,533 23,630 31,480No. of Dil. shares outst. (mn) 92 92 93 93Adjusted Diluted EPS 225.6 190.8 253.2 337.3Adjusted Cash EPS 384.3 361.0 456.8 560.9Dividend per share (INR) 23 23 23 23Dividend payout (%) 17.1 19.3 10.2 7.8


Adjusted Diluted EPS (INR) 225.6 190.8 253.2 337.3Y-o-Y growth (%) (19.1) (15.4) 32.7 33.2Adjusted Cash EPS 384 361 457 561Diluted P/E (x) 15.2 18.0 13.6 10.2Price to Book Ratio (P/B) (x) 1.5 1.4 1.2 1.1EV/tonne (USD/tonne) 0.0 0.0 0.0 0.0EV/Sales (x) 1.5 1.4 1.3 1.1EV/EBITDA (x) 8.7 9.2 7.4 5.4Dividend yield (%) 0.7 0.7 0.7 0.7


Key takeawaysSlippages were driven by agriculture, business banking and credit card portfolio(more to do with change in classification norms for RBI). On the other hand,wholesale book held on well.

The bank does not have anything under 5:25 refinancing or SDR.

HDFC Bank is not targeting certain market share, but is looking to have decentgrowth with decent margins which are within the banks credit appetite. The bankremains optimistic on the retail business given its underlying strength and sometraction shown by a few of the business lines within the retail segment.

Growth in corporate advances was largely driven by working capital loans. Growthin overseas advances continues to be slow—currently, 7.5% of book is international.

The bank is now buying ~70% of what it is originating versus earlier practice of50% buy out.

HDFC Bank highlighted that NIMs have broadly been in the 4.0-4.3% range andthere is no indication that NIMs will move out of the above range in either direction.

Investment conclusionBest-in-class liability franchise, expansion of rural/semi-urban branches andimprovement in productivity owing to digital focus will ensure that the bankmaintains above-industry earnings growth and in turn sustain superior returnratios. The quarter was most critical in terms of asset quality performance (givenRBI asset classification directive). But, the bank was able to maintain pristineasset quality. The best-in-class liability franchise, marginal stress baggage (no5:25 refinancing, no SDR) and growth ammunition place it in a sweet spot tocapitalise on emerging opportunities.

Key risksHigher-than-expected decline in CASA ratio and change in macro environmentmay impact cost of funds and consequently margins.

Higher than expected delinquencies due to the loan mix and also vulnerable tosystem-wide deterioration in the quality of retail assets is the key risk.

Valuations de-rating of the stock due to structural changes within the bank (likechange in management etc).

HDFC BANKIndia Equity Research l Banking and Financial Services

In ivy league

Company Profile


Absolute Rating BUY




MARKET DATA (R : HDBK.BO, B: HDFCB IN)

CMP : INR 974Target Price : INR 1,36052-week range (INR) : 1,127 / 944Share in issue (mn) : 2,525.1M cap (INR bn/USD mn) : 2,460/ 36,107Avg. Daily Vol. BSE/NSE (‘000) : 1,627.4







Financials


Net revenue 264,023 313,920 381,640 451,932Net profit 84,784 102,159 122,994 148,688Dil. EPS (INR) 35.3 40.8 49.1 59.3Adj. BV (INR) 178.8 244.9 283.5 330.7Price/ Adj book (x) 5.4 4.0 3.4 2.9Diluted P/E (x) 27.6 23.9 19.9 16.4ROE (%) 21.3 19.4 18.4 19.1

* Adj. for subs. February 15, 2016









Diluted EPS 35.3 40.8 49.1 59.3EPS growth (%) 25.0 15.3 20.4 20.9Book value per share (INR) 181 247 286.9 334.6Adjusted BV/share (INR) 179 245 283.5 330.7Diluted P/E (x) 27.6 23.9 19.9 16.4Price/ BV (x) 5.4 3.9 3.4 2.9Price/ ABV (x) 5.4 4.0 3.4 2.9Dividend yield (%) 0.7 0.8 0.9 1.1

* Adj. for subs.


NII growth 16.9 21.2 22.3 20.6Fees growth 11.5 6.7 22.0 15.0Opex growth 7.2 16.2 20.6 15.3PPOP growth 26.1 18.3 22.7 21.5Provisions growth (5.3) 30.7 29.3 20.6PAT growth 26.0 20.5 20.4 20.9




Interest income 411,355 484,699 594,612 722,959Interest expenses 226,529 260,742 320,738 392,783Net Interest income 184,826 223,957 273,874 330,176Non interest income 79,196 89,963 107,766 121,756- Fee & forex income 71,360 76,122 92,868 106,798- Misc. income 6,764 8,471 8,898 8,957- Investment profits 1,072 5,371 6,000 6,000Net revenues 264,023 313,920 381,640 451,932Operating expense 120,422 139,875 168,718 194,598 - Employee exp 41,790 47,510 56,027 63,457 - Other opex 78,632 92,366 112,691 131,141Preprovision profit 143,601 174,045 212,922 257,333Provisions 15,880 20,758 26,850 32,389- Loan loss provisions 16,326 17,236 26,350 31,889- Other provisions (404) 3,560 500 500PBT 127,721 153,287 186,072 224,945Taxes 42,937 51,128 63,079 76,256PAT 84,784 102,159 122,994 148,688Reported PAT 84,784 102,159 122,994 148,688EPS (INR) 35.3 40.8 49.1 59.3DPS (INR) 6.9 8.0 9.6 11.6Payout ratio (%) 22.7 23.6 19.6 19.6





Equity capital 4,798 5,013 5,013 5,013Reserves 429,988 615,081 714,013 833,626Net worth 434,786 620,094 719,026 838,639Sub bonds/pref cap 160,439 156,299 176,299 196,299Deposits 3,673,375 4,507,956 5,465,904 6,770,888Borrowings 233,951 295,837 328,337 360,837Other liabilities 413,444 324,845 377,089 439,867Total 4,915,995 5,905,031 7,066,655 8,606,529AssetsLoans 3,030,003 3,654,950 4,605,238 5,710,495InvestmentsGilts 946,400 1,203,903 1,332,675 1,640,297Others 263,111 460,697 465,798 472,007Cash & equi 395,836 363,315 403,766 484,684Fixed assets 29,399 31,217 31,367 30,615Other assets 251,246 190,949 227,811 268,431Total 4,915,995 5,905,031 7,066,655 8,606,529Balance sheet ratios (%)Credit growth 26.7 19.9 26.0 24.0Deposit growth 24.0 22.7 21.3 23.9EA growth 21.6 22.5 21.1 21.0SLR ratio 24.2 25.1 23.0 23.0C-D ratio 83.9 82.2 85.3 85.2Low-cost deposits 44.8 44.0 41.6 42.1Gross NPA ratio 1.0 0.9 1.0 1.0Net NPA ratio 0.3 0.2 0.3 0.2Provision coverage 72.6 73.9 73.8 74.8Incremental slippage 1.9 1.6 1.6 1.6Net NPA / Equity 1.9 1.4 1.7 1.6Capital adequacy 16.1 16.8 15.7 15.2 - Tier 1 11.8 13.7 12.6 12.1Book value (INR) 181.2 247.4 286.9 334.6


Key takeawaysLife insurance: (i) Expects industry to grow in mid-to high teens in FY16; (ii) financialsaving rate is likely to pick up and benefit the insurance space.

Surrenders for 9mFY16 includes INR4.1bn of payout due to auto termination ofpolicies, in line with September 2010 regulations.

Average policy terms (across policies) now stands at 14.5 years with averagecustomer age of 37.6 years.

The company has strong focus on online segments. It has leadership in onlinesegment, with 4% contribution to individual new business APE.

Operating expenses increased to >11.7% (higher that previous years) followingongoing investments in development of new distribution channels, technologyand product innovation.

Product mix to rebalance further with target of ULIP (45-50%), participatory (30-35%) and non-par (20%).

Of par products, 80-85% are debt; of non-par 100% are debt.

Individual NBMs (pre-cost overruns) improved to 22.5% aided by higher share ofprotection business. Post cost margin stood at 17.5%.

Key risksUpon introduction of DTC, corporate tax rate likely to be increased from 12.5%currently to 30.0%.

Any further regulatory hurdles may impact the industry as a whole.

HDFC STANDARD LIFE INSURANCEIndia Equity Research l Banking and Financial Services

Scale player

Company Profile

EDELWEISS RATINGS

Absolute Rating NOT LISTED

February 15, 2016

Financials


APE 26,267 28,746 32,043 35,506APE growth (%) (31.1) 9.4 11.5 10.8Surplus 5,854 7,315 8,252 6,985PAT 5,558 6,222 7,401 8,200






N A


Key takeawaysDemand outlook

• In FY17, 2W industry is likely to log mid single digit growth. H1 will be challenging,but growth could pick up in H2 given normal monsoon. Expects growth in scootersto outpace motorcycles given their rural bias. Scooter industry growth could be~10%, a moderation compared to previous growth rate of >20%.

Gained market share in scooters to 20% from 14% following 2 recent launches –Maestro Edge and Duet. Scooter capacity stands at 100K units per month. Duet isyet to be dispatched in the North and East regions and to be available pan-India byQ4FY16. The company believes that the 2W long-term growth story remains intactwith the household penetration level at ~40%.

Margins: The company believes 14-15% could be sustainable level for margin overnext 3 years. Higher level of R&D spend and increasing share of scooters (margindilutive) could impact margin, but cost savings and higher spare sales to support.

Market share/competitive intensity: Despite aggressive pricing by competition,HMCL has retained its market share. In 125cc motorcycle it gained market share.

Wide distribution network, impressive brand portfolio and lower costs ofownership will ensure that HMCL is able to play the margin versus market sharegame fairly well.

Investment conclusionHMCL is yet to demonstrate its strength in the powerful/premium motorcyclesegment. Also, its dominance in executive segment is under threat on risingcompetitive intensity from Honda (plans of expanding into rural areas and launchmore products in 110cc space) and new launches from TVS and Bajaj. Though lackof pricing discipline could weigh on margins, lower commodity prices and benefitsfrom LEAP costs savings plan could support margins in the near term.

Key risksLower than anticipated competitive intensity

A benign competitive environment and better than anticipated success of newlaunches can pose upside risk to our estimates.

HERO MOTOCORPIndia Equity Research l Automobiles

Competition pangs

Company Profile

February 15, 2016



Rating Relative to Sector Underperformer

Risk Rating Relative to Sector High


MARKET DATA (R : HROM.BO, B: HMCL IN)

CMP : 2,516Target Price : INR 2,58552-week range (INR) : 2,869 / 2,252Share in issue (mn) : 199.7M cap (INR bn/USD mn) : 502 / 7,373Avg. Daily Vol. BSE/NSE (‘000) : 563.7





Stock Nifty EW Auto Index


February 15, 2016

Chirag Shah+91 22 6623 [email protected]

Karthik Subramaniam+91 22 6620 [email protected]

Financials


Revenues (INR mn) 252,755 275,853 281,650 306,384Rev. growth (%) 6.3 9.1 2.1 8.8EBITDA (INR mn) 35,401 35,422 44,033 48,638Adjusted Profit (INR mn) 21,091 22,037 31,370 34,876No. of Shares outstanding (mn) 200 200 200 200Adjusted Diluted EPS (INR) 105.6 110.4 157.1 174.6EPS growth (%) (0.4) 4.5 42.4 11.2Diluted P/E (x) 23.8 22.8 16.0 14.4EV/EBITDA (x) 13.0 13.2 10.4 9.1ROACE (%) 39.8 36.3 44.5 43.0




ROE (%) 39.8 36.3 43.9 43.6ROCE (%) 54.3 54.6 61.1 60.8Inventory days 13 14 16 14Debtors days 11 15 18 16Payble days 42 47 55 50Cash Conversion Cycle (17) (19) (22) (21)Current Ratio 1.5 1.7 1.5 1.4Net Debt/Equity (0.8) (0.5) (0.6) (0.7)Interest Coverage Ratio 205.8 254.3 347.9 386.5


Reported Profit 21,091 22,037 30,768 34,515Add: Depreciation 11,074 7,220 4,394 5,001Interest (Net of Tax) 87 78 80 80Others (789) (21,791) 21,716 18,371Less: Changes in WC 1,828 (14,957) 12,972 11,761Operating cash flow 29,634 22,500 43,986 46,207Less: Capex 9,105 9,136 16,500 13,500Free cash flow 20,529 13,364 27,486 32,707


Operating expenses 86.0 87.2 84.4 84.4Materials costs 72.1 71.6 68.1 68.1Staff costs 3.7 4.3 4.6 4.8S G & A expenses 9.3 10.3 10.8 10.6Depreciation 4.4 2.6 1.6 1.6EBITDA margins 14.0 12.8 15.6 15.6Net profit margins 8.3 8.0 11.1 11.2


Adjusted Diluted EPS (INR) 105.6 110.4 157.1 174.6Y-o-Y growth (%) (0.4) 4.5 42.4 11.2Adjusted Cash EPS (INR) 161.1 146.5 179.1 199.7Diluted P/E (x) 23.8 22.8 16.0 14.4Price to Book Ratio (P/B) (x) 9.0 7.7 6.7 5.8Enterprise Value / Sales (x) 1.8 1.7 1.6 1.4Enterprise Value / EBITDA (x) 13.0 13.2 10.4 9.1Dividend Yield (%) 2.6 2.4 3.6 4.0


Revenues 6.3 9.1 0.1 11.3EBITDA 7.8 0.1 21.3 11.4PBT 13.4 9.8 35.8 12.2Adjusted Profit (0.4) 4.5 39.6 12.2EPS (0.4) 4.5 39.6 12.2



Share capital 399 399 399 399Shareholders' funds 55,999 65,413 74,852 83,298Deferred tax liability (net) (815) (422) (735) (735)Sources of funds 55,183 64,991 74,117 82,563Gross Block 69,089 81,140 97,640 111,140Net Block 22,433 29,127 40,920 49,418Capital work in progress 10,040 7,126 7,126 7,126Total Fixed assets 32,473 36,252 48,045 56,544Cash and cash equivalents 42,063 33,134 43,439 55,147Inventories 6,696 8,155 8,064 8,076Sundry debtors 9,206 13,896 12,903 13,459Loans & advances 8,778 11,845 11,774 11,463Other Current Assets 699 1,200 1,200 1,200Total current assets (ex cash)25,378 35,096 33,941 34,198Trade payable 22,906 28,419 28,755 29,146Ot. Cur. Liab. & Sh. Term Prov. 21,824 11,072 22,553 34,180Total current liab. & prov. 44,730 39,490 51,308 63,325Net current assets (ex cash) (19,352) (4,395) (17,367) (29,128)Uses of funds 55,183 64,991 74,117 82,563Book Value per share 280 328 375 417




Total volume (nos) 6,245,518 6,627,028 6,547,948 7,203,363% Growth 2.6 6.1 (1.2) 10.0Income from operations 252,755 275,853 276,216 307,338Materials costs 182,299 197,539 188,091 209,312Manufacturing expenses 2,364 2,654 2,716 3,016Staff costs 9,300 11,729 12,721 14,605S G & A expenses 23,391 28,509 29,709 32,537Total operating expenses 217,354 240,431 233,237 259,469EBITDA 35,401 35,422 42,979 47,869Depreciation & amortisation11,074 7,220 4,394 5,001 EBIT 24,327 28,203 38,585 42,868Less: Interest Expense 118 111 111 111Add: Other income 4,464 4,927 4,260 5,181Add: Exceptional items 0 (1,550) 0 0Profit before tax 28,672 31,469 42,734 47,938Less: Provision for Tax 7,582 9,432 11,966 13,423Reported Profit 21,091 22,037 30,768 34,515Adjusted Profit 21,091 22,037 30,768 34,515No. of Shares outstanding 200 200 200 200Adjusted Basic EPS 105.6 110.4 154.1 172.8No. of Dil. shares outstanding 200 200 200 200Adjusted Diluted EPS 105.6 110.4 154.1 172.8Adjusted Cash EPS 161.1 146.5 176.1 197.9Dividend per share (DPS) 65.0 60.0 90.0 110.0Dividend Payout Ratio (%) 72.0 64.5 69.3 75.5


Key takeawaysCapacities at greenfield smelters: Mahaan and Aditya (360KTPA each) are rampingup. In Q3FY16, production at Mahaan and Aditya was at 90KT (rated capacity) and65KT, respectively. In next 2 quarters, production at Aditya will be ramped up tothe rated capacity as well.

Utkal alumina plant is among the lowest cost producers in the world, placed in thelast decile of the cost curve compiled by CRU.

On the price front, aluminium has been resilient at USD1,500/t on LME. Further, LMEpremium has also gone up by USD20/t during the previous quarter to USD120/t.

Market outlook for Novelis robust with demand outlook in North America andEurope, focus on rolled products and declining impact of metal price lag.

Hindalco is focusing on conserving cash with focus on consolidation for the nextcouple of years. Hence, capex is likely to remain low. Further, debt repayment isalso limited to INR80bn over the next few years.

Investment conclusionWe have a neutral outlook on aluminium due to bleak global scenario. Hindalco’sstandalone business is robust with competitive cost of producing aluminium(USD1,900/t currently) and value-added aluminium products, which constituteover 50% of its volume mix. The company manufactures special grade aluminathat commands a premium of up to ~USD 250/tonne over the regular variety. Weexpect EBITDA growth in Novelis led by ramp up of greenfield capacity, improvedproduct mix and increased usage of scrap aluminium. The metal price lag impactis also expected to subside at the current level of aluminium prices.

Key risksAluminium LME prices sustaining below USD1,600/t with no increase in premiums.

Higher- than- expected increase in input costs.

Lower-than- expected margin expansion at Novelis.

HINDALCO INDUSTRIESIndia Equity Research l Metals & Mining

Robust operations

Company Profile

February 15, 2016






MARKET DATA (R : HALC.BO, B: HNDL IN)

CMP : INR 67Target Price : INR 7552-week range (INR) : 161 / 58Share in issue (mn) : 2,065.0M cap (INR bn/USD mn) : 138 / 2,026Avg. Daily Vol. BSE/NSE (‘000) : 8,410.9







February 15, 2016


Financials


Revenues (INR mn) 876,955 1,042,811 989,210 1,091,033Rev. growth (%) 9.4 18.9 (5.1) 10.3EBITDA (INR mn) 82,863 89,446 78,170 103,279Net profit (INR mn) 24,926 13,323 (3,763) 6,385Share outstanding (mn) 2,063 2,063 2,063 2,063EPS (INR) 12.1 6.5 (1.8) 3.1EPS growth (%) (23.6) (46.5) (128.2) (269.7)Diluted P/E (x) 5.5 10.3 (36.5) 21.5EV/EBITDA (x) 8.3 8.0 9.0 7.0ROE (%) 6.3 1.8 (1.4) 1.2




Reported Profit 21,750 8,542 (3,763) 11,154Add: Depreciation 35,528 35,906 44,330 46,619Interest (Net of Tax) 21,671 10,298 35,066 40,162Others 5,545 25,530 13,380 15,469Less: Changes in W. C. (21,998) (7,588) 14,418 62,252Operating cash flow 106,492 87,863 74,595 51,153Less: Capex 146,526 73,550 44,350 10,000Free cash flow (40,034) 14,313 30,245 41,153




Net revenue 876,955 1,042,811 989,210 1,091,033Accretion to stock (4,444) (12,379) 0 0Raw material costs 523,500 656,913 554,100 595,716Purchase of goods 523 366 366 366Employee expenses 73,198 79,912 80,591 81,019Power and freight 61,505 83,786 132,617 153,818SGA and other expenses 139,811 144,767 143,366 150,149Total operating expenses 794,092 953,365 911,040 981,068Other Expenses 57,584 71,772 132,983 154,184EBITDA 82,863 89,446 78,170 109,966Dep. & amortisation 35,528 35,906 44,330 46,619EBIT 47,335 53,540 33,840 63,347Less: Interest Expense 27,016 41,784 50,097 57,372Add: Other income 10,172 11,047 6,028 4,978Add: Excep. items gain/(loss) (3,960) (19,401)Profit before tax 26,531 3,402 (10,229) 10,953Less: Provision for Tax 5,249 2,564 (3,069) 3,286Less: Minority Interest 200 (5,957) (1,650) (1,740)Add: Share of profit from assoc. 668 1,747 1,747 1,747Reported Profit 21,750 8,542 (3,763) 11,154Less: Excep. Items (Net of Tax) (3,176) (4,781) - -Adjusted Profit 24,926 13,323 (3,763) 11,154No. of Shares outst. (mn) 2,063 2,063 2,063 2,063Adjusted Basic EPS 12.1 6.5 (1.8) 5.4No. of Dil. shares outs.(mn) 2,063 2,063 2,063 2,063Adjusted Diluted EPS 12.1 6.5 (1.8) 5.4Adjusted Cash EPS 29.3 23.9 19.7 28.0Dividend per share (INR) 1.5 1.5 1.5 1.5Dividend payout (%) 16.7 42.4 (96.3) 32.5Tax rate (%) 19.8 75.4 30.0 30.0


Operating expenses 90.6 91.4 92.1 89.9Depreciation 4.1 3.4 4.5 4.3Interest expenditure 3.1 4.0 5.1 5.3EBITDA margins 9.4 8.6 7.9 10.1Net profit margins 2.9 0.7 (0.5) 0.9


Diluted EPS (INR) 12.1 6.5 (1.8) 3.1Y-o-Y growth (%) (23.6) (46.5) (128.2) (269.7)CEPS 29.3 23.9 19.7 25.7Diluted P/E (x) 5.5 10.3 (36.5) 21.5Price/BV (x) 0.3 0.4 0.4 0.4EV/Sales (x) 0.8 0.7 0.7 0.7EV/EBITDA (X) 8.3 8.0 9.0 7.0


Revenues 9.4 18.9 (5.1) 10.3EBITDA 5.7 7.9 (12.6) 40.7PBT (32.1) (87.2) NA NAAdjusted Profit (17.6) (46.5) NA NAEPS (23.6) (46.5) NA NA



Share capital 2,065 2,065 2,065 2,065Reserves & Surplus 403,984 381,220 373,833 381,363Shareholders' funds 406,048 383,285 375,897 383,428Minority Interest 17,805 9,561 7,911 6,171Long term borrowings 539,441 553,862 592,338 517,834Short term borrowings 107,511 130,188 130,188 130,188Total Borrowings 646,952 684,050 722,526 648,022Long Term Liab. & Prov. 69,720 73,773 73,773 73,773Deferred Tax Liability (net) 31,889 39,481 39,481 39,481Sources of funds 1,172,414 1,190,151 1,219,589 1,150,876Gross Block 656,817 796,817 896,817 996,817Net Block 432,654 566,725 592,419 645,800Capital work in progress 228,823 162,373 106,723 16,723Intangible Assets 180,750 131,602 131,602 131,602Total Fixed Assets 842,227 860,700 830,744 794,125Non current investments 70,509 74,484 74,484 74,484Cash and cash equivalents 117,121 119,289 164,266 69,920Inventories 166,943 184,511 179,829 211,875Sundry Debtors 92,348 91,864 92,427 110,834Loans & Advances 69,945 75,730 75,730 75,730Other Current Assets 20,864 24,810 24,810 24,810Total Cur. Assets (ex cash) 350,099 376,915 372,795 423,249Trade payable 129,970 155,005 136,467 124,669Ot. Cur. Liab. & Sh. Term Prov. 77,573 86,233 86,233 86,233Total Current Liab. & Prov. 207,543 241,238 222,699 210,902Net Cur. Assets (ex cash) 142,556 135,678 150,096 212,347Uses of funds 1,172,414 1,190,151 1,219,589 1,150,876Book value per share (BV) (INR) 197 186 182 186


ROAE (%) 6.3 1.8 (1.4) 2.4ROCE (%) 5.7 6.0 3.7 6.4Inventory Days 109 99 120 120Debtors Days 38 32 34 34Payble Days 79 81 96 80Cash Conversion Cycle 67 51 58 74Current ratio 2.3 2.1 2.4 2.3Gross Debt/EBITDA 7.8 7.6 9.2 5.9Gross Debt/Equity 1.5 1.7 1.9 1.7Adjusted Debt/Equity 1.5 1.7 1.9 1.7Net Debt/Equity 1.3 1.4 1.5 1.5Interest Coverage Ratio 1.8 1.3 0.7 1.1


Key takeawaysVolume off take in 2016 is looking better than in 2015 (for industry).

Price decline was seen in S&D; has been partly passed on to consumers to guardmarket share. In rest of the portfolio, price growth is there though lower than inpast. HUL is in a position to hike prices when needed.

Board approval for transfer of INR21.9bn to P&L from general reserves; modusoperandi of transfer (special dividend, buyback) not decided.

Wheel logged strong performance after many quarters.

Bru attained value market leadership for the first time in more than 10 years (wasalways volume leader).

HUL has relaunched Pepsodent with an entirely new mix (the team working on thisis the same which is credited with Wheel turnaround).

HUL is betting big on naturals segment—variants in existing brands, Indulekhaacquisition and relaunch of Ayush.

HUL evaluated ROIs on various channels (e-commerce, general trade, distributors)and aligned it with strategic objectives for desired results.

Investment conclusionHUL has displayed its ability to grow ahead of market, which, combined withimproved outlook for S&D and personal care, and strong growth in processedfoods and beverages, boosts our positive outlook on the company. Commodityprice correction will aid gross margin expansion, though we expect partial benefitto be passed on to customers through promotional offers/select price cuts. Weexpect higher investment in A&P to support brand equity and counter pick up incompetitive intensity. Anticipated recovery in urban demand and commoditycorrection to aid EBITDA margin expansion.

Key risksDepreciation in INR impacts price of imported raw materials. Ad spends likely tospike due to increased competition from regional players. Maintaining marketshare will also be a challenge for HUL. The price war in HUL’s popular segmentswith new entrants entering the fray could hit the company hard.

HINDUSTAN UNILEVERIndia Equity Research l Consumer Goods

Primed for growth

Company Profile






MARKET DATA (R : HLL.BO, B: HUVR IN)

CMP : INR 805Target Price : INR 87752-week range (INR) : 979 / 765Share in issue (mn) : 2,163.9M cap (INR bn/USD mn) : 1,742 /25,568Avg. Daily Vol. BSE/NSE (‘000) : 1,508.3





Stock Nifty EW Consumer Goods Index


Financials


Revenues (INR mn) 285,394 311,997 327,914 360,110Rev. growth (%) 8.4 9.3 5.1 9.8EBITDA (INR mn) 47,457 54,137 59,731 67,703Adjusted Profit (INR mn) 37,100 36,839 42,119 47,564Adjusted Diluted EPS (INR) 17.2 17.0 19.5 22.0EPS growth (%) 15.1 (0.8) 14.3 12.9Diluted P/E (x) 47.4 47.7 41.8 37.0EV/EBITDA (x) 36.0 31.5 28.4 25.0ROAE (%) 115.4 97.2 98.9 100.5 February 15, 2016







ROAE (%) 115.4 97.2 98.9 100.5ROCE (%) 154.1 147.1 144.0 146.5Inventory Days 69 65 65 65Debtors Days 13 12 12 12Payble Days 137 128 128 128Cash Conversion Cycle (55) (51) (52) (52)Current Ratio 1.1 1.2 1.2 1.2Net Debt/Equity (1.4) (1.3) (1.3) (1.3)Interest Coverage Ratio 109.4 287.6 11,279.5 6,410.0


Adjusted Diluted EPS (INR) 17.2 17.0 19.5 22.0Y-o-Y growth (%) 15.1 (0.8) 14.3 12.9Adjusted Cash EPS (INR) 18.5 18.5 21.0 23.6Diluted P/E (x) 47.4 47.7 41.8 37.0Price to Book Ratio (P/B) (x) 49.7 43.7 39.5 35.6Enterprise Value / Sales (x) 6.0 5.5 5.2 4.7Enterprise Value / EBITDA (x) 36.0 31.5 28.4 25.0Dividend Yield (%) 1.6 1.8 1.8 2.0


Revenues 8.4 9.3 5.1 9.8EBITDA 12.8 14.1 10.3 13.3Profit Before Tax 11.6 13.3 10.1 12.9Adjusted profit 15.1 (0.7) 14.3 12.9EPS 15.1 (0.8) 14.3 12.9




Net revenues 285,394 311,997 327,914 360,110Other operating income 6,943 7,725 8,343 9,010Total operating income 292,337 319,722 336,256 369,120Cost of materials 148,700 161,761 160,517 175,177Gross profit 143,637 157,961 175,739 193,942Employee costs 15,727 17,239 17,485 18,825Advertisement costs 36,747 39,436 48,085 52,046Others 43,707 47,149 50,438 55,368EBITDA 47,457 54,137 59,731 67,703Depreciation 2,955 3,224 3,333 3,603EBIT 44,501 50,913 56,398 64,100Interest Expense 407 177 5 10Other income 5,701 5,667 5,715 6,041Profit before tax 49,796 56,403 62,107 70,131Provision for tax 12,594 19,440 19,874 22,442Minority interest 102 124 114 125Exceptional Items (Net of Tax) 2,356 6,792 65 0Reported Profit 39,456 43,631 42,184 47,564Exceptional Items (Net of Tax) 2,356 6,792 65 0Adjusted Profit 37,100 36,839 42,119 47,564No. of Shares outstanding 2,163 2,163 2,163 2,163Adjusted Basic EPS 17.2 17.0 19.5 22.0No. of Dil. sh. outstanding 2,163 2,164 2,164 2,164Adjusted Diluted EPS 17.2 17.0 19.5 22.0Adjusted Cash EPS 18.5 18.5 21.0 23.6Dividend per share (DPS) 13.0 15.0 14.6 16.5Dividend Payout Ratio (%) 83.0 89.0 89.7 89.7


Cost of materials 52.1 51.8 49.0 48.6Employee costs 5.5 5.5 5.3 5.2Advertising costs 12.9 12.6 14.7 14.5Other expenditure 15.3 15.1 15.4 15.4Depreciation 1.0 1.0 1.0 1.0Interest Expense 0.1 0.1 0.0 0.0EBITDA margin 16.6 17.4 18.2 18.8EBIT margin 15.6 16.3 17.2 17.8Net profit margin 13.0 11.8 12.9 13.2


Reported Profit 39,456 43,631 42,184 47,564Add: Depreciation 2,955 3,224 3,333 3,603Interest (Net of Tax) 304 116 3 7Others (6,823) (13,524) 51 128Less: Changes in WC (2,290) 2,209 (638) (1,495)Operating cash flow 38,182 31,238 46,209 52,798Less: Capex 5,800 3,329 1,987 4,500Free Cash Flow 32,382 27,909 44,222 48,298



Share capital 2,163 2,164 2,164 2,164Reserves 33,210 38,053 42,400 47,301Shareholders' funds 35,373 40,216 44,563 49,464Minority Interest 223 248 362 487Long term borrowings 84 70 70 70Short term borrowings 371 360 360 360Total Borrowings 456 430 430 430Long term liab. & prov. 12,692 11,718 11,718 11,718Deferred tax liability (net) (1,796) (1,994) (1,994) (1,994)Sources of funds 46,948 50,619 55,079 60,106Gross Block 49,977 53,306 57,806 62,306Net Block 26,409 27,178 28,345 29,241Capital work in progress 3,649 5,163 2,650 2,650Intangible Assets 1,130 1,032 1,032 1,032Total Fixed Assets 31,188 33,373 32,027 32,923Non current investments 3,802 3,239 3,239 3,239Cash and cash equivalents 49,740 53,907 60,352 65,976Inventories 29,398 28,488 28,585 31,196Sundry Debtors 10,168 10,112 10,594 11,630Loans & Advances 10,513 12,340 12,340 12,340Other Current Assets 934 851 851 851Total Current Assets (ex cash)51,013 51,791 52,371 56,017Trade payable 58,249 55,073 56,291 61,432Other current liab. & prov. 30,546 36,618 36,618 36,618Total Current Liab. & Prov. 88,795 91,692 92,909 98,050Net Current Assets (ex cash)(37,782) (39,900) (40,538) (42,033)Uses of funds 46,948 50,619 55,079 60,106Book Value per share (INR) 16.4 18.6 20.6 22.9


Key takeawaysLarge part of slippages during Q3FY16 were driven by one large steel account, ~ 2/3rd of incremental slippages due to RBI directive, predominantly driven by theabove mentioned steel account.

ICICI Bank highlighted that asset quality could see similar stress in Q4FY16 withsimilar rise in NPLs. A large part of the rise will prominently be because of alreadyrestructured accounts (forming ~50% of incremental slippages). 5:25 pipeline ofINR7bn, SDR pipeline of INR12bn.

Confident of retail book growing at 25% for FY16 and overall loan growth will beahead of systemic growth. The bank continues to grow Personal Loan and CreditCard book with focus on cross-sell opportunities.

Going into Q4FY16, management expects some pressure on NIMs following higherinterest income reversal.

Investment conclusionAsset quality has been the focus area for banks (especially corporate lenders)over past few months (post RBI’s directive to clean banks’ balance sheets). Q3FY16was critical to shape up for the future and the outcome suggests things are unlikelyto stabilise in near-to-medium term. Incorporating higher credit cost we lower ourFY17E EPS by > 18%, leading to > 4% cut in adjusted BV. We maintain our ‘BUY’recommendation given: a) >40% of current price reflects stable value of subsidiaries(recent deals lend comfort on realisability); b) despite factoring in higher creditcost, the bank will still generate above-average RoA of 1.6-1.6% and RoE of 13-14%- attractive for core business trading at ~0.8x FY18E P/ABV; and c) other operatingparameters - CASA, retail assets, healthy capital adequacy – are consistentlyimproving.

Key risksWith banks getting aggressive on retail side maintaining retail traction may turnout to be a challenge.

Deterioration of macro environment can result in higher restructuring and slowdown business growth.

ICICI BANKIndia Equity Research l Banking and Financial Services

Navigating through challenging times

Company Profile

February 15, 2016


Absolute Rating BUY




MARKET DATA (R : ICBK.BO, B: ICICIBC IN)

CMP : INR 203Target Price : INR 28652-week range (INR) : 365 / 190Share in issue (mn) : 5,812.2M cap (INR bn/USD mn) : 1,182 /17,352Avg. Daily Vol. BSE/NSE (‘000) : 14,363.9







Financials



*Adjusted for subsidiary valuation

February 15, 2016







Diluted EPS (INR) 17.0 19.3 21.4 20.4EPS growth (%) 17.7 13.5 11.2 (4.7)Book value per share (INR) 126.8 138.7 153.6 168.7Adjusted BV/share (INR) 102.0 110.9 119.9 135.7Diluted P/E (x) 12.0 10.6 9.5 10.0Price/ BV (x) 1.6 1.5 1.3 1.2Price/ ABV (x) 2.0 1.8 1.7 1.5Dividend yield (%) 3.3 3.3 4.0 3.3




Interest income 441,782 490,911 554,004 636,143Interest expenses 277,026 300,515 340,683 389,521Net interest income 164,756 190,396 213,321 246,622Non interest income 104,279 121,761 126,883 141,470- Fee & forex income 81,339 90,220 98,339 114,343- Misc. income 17,402 15,970 15,544 17,127- Investment profits 5,538 15,572 13,000 10,000Net revenues 269,034 312,157 340,204 388,092Operating expense 103,089 114,958 126,403 143,609 - Employee exp 42,201 47,499 51,634 57,649 - Other opex 60,888 67,460 74,769 85,959Preprovision profit 165,946 197,199 213,801 244,483Provisions 26,314 39,050 38,055 41,130- Loan loss provisions 22,523 31,413 38,055 41,130- Investment depreciation 711 2,979 0 0- Other provisions 3,080 4,658 0 0PBT 139,632 158,149 175,746 203,353Taxes 41,527 46,396 50,088 57,956PAT 98,105 111,754 125,658 145,397Reported PAT 98,105 111,754 125,658 145,397Diluted EPS (INR) 17.0 19.3 21.7 25.1DPS (INR) 4.6 4.6 5.6 5.6Payout ratio (%) 29.4 28.4 30.0 26.0


NII growth 18.8 15.6 12.0 15.6Fees growth 19.7 10.9 9.0 16.3Opex growth 14.4 11.5 10.0 13.6PPOP growth 27.3 13.2 10.6 16.8PPP growth 25.7 18.8 8.4 14.4Provisions growth 45.4 48.4 (2.5) 8.1PAT growth 17.8 13.9 12.4 15.7

Operating ratios (%)Year to March FY14 FY15 FY16E FY17E




LiabilitiesEquity capital 11,550 11,597 11,597 11,597Reserves 720,583 792,697 880,617 988,277Net worth 732,133 804,294 892,214 999,873Sub bonds/pref cap 571,447 596,345 629,545 662,745Deposits 3,319,137 3,615,627 4,095,381 4,846,579Borrowings 976,144 1,127,829 1,276,613 1,436,932Other liabilities 369,963 343,747 398,747 470,521Total 5,968,823 6,487,842 7,292,500 8,416,651AssetsLoans 3,387,027 3,875,221 4,470,256 5,249,902InvestmentsGilts 958,917 1,073,933 1,235,559 1,445,208Others 811,302 791,868 803,123 814,677Cash & equi 415,296 423,046 415,873 482,014Fixed assets 46,781 47,255 46,928 46,351Other assets 349,501 276,519 320,762 378,499Total 5,968,823 6,487,842 7,292,500 8,416,651Balance sheet ratios (%)Credit growth 14.0 13.8 15.1 17.1Deposit growth 13.4 8.9 13.3 18.3EA growth 10.8 10.6 12.3 15.4SLR ratio 22.3 22.6 23.0 23.0C-D ratio 109.5 113.6 115.1 113.5Low-cost deposits 42.9 45.5 45.0 45.0Gross NPA ratio 2.9 3.7 3.9 3.7Net NPA ratio 1.0 1.6 1.7 1.6Provision coverage 68.6 58.6 57.2 57.9Incremental slippage 1.4 2.2 1.8 1.7Net NPA / Equity 4.5 7.8 8.6 8.4Capital adequacy 17.7 17.0 16.5 16.0 - Tier 1 12.8 12.8 12.3 11.8Book value (INR) 127 139 154 172




Key takeawaysMarket dynamics: 1) life insurance space has been through a lot of regulatoryupheavals, large part of it seems to have settled now; 2) with environment turningfavourable, expects growth to spur in the life insurance space.

Growth metrics: 1) registered healthy growth in 9mFY16, leading to market sharegains driven by environment change, customer centric products and improvedprocesses.

Management expects to outpace industry growth going forward. Large part ofgrowth was driven by ULIP products (taking current proportion to > 84%).Management will continue to focus on ULIPs.

Distribution channel: 1) does not expect banks to opt for the bank broking modelgiven the inherent risk attached to selling of products; 2) bancassurance channelcontributed ~62% of individual weighted received premium for 9mFY16; 3) in agencychannel, lot of churn has happened over time; going forward, it envisages a lot ofpotential in this channel.

Management is focusing on digital platform to expand distribution capacity andimprove productivity.

Surrenders have been falling consistently, now forming 0.6% of AUMs (versus1.3% in FY13).

NBMs (post cost over runs) for FY15 at 5.7%; for H1FY16 stood at 6.6%. Managementexpects this to touch double digit by FY18 following higher protection mix, improvingpersistency and improving cost ratios.

Key risksUpon introduction of DTC, corporate tax rate likely to be increased from 12.5%currently to 30.0%.

Any further regulatory hurdles may impact the industry as a whole.

ICICI PRUDENTIAL LIFE INSURANCEIndia Equity Research l Banking and Financial Services

First among unequals

Company Profile

EDELWEISS RATINGS

Absolute Rating NOT LISTED

February 15, 2016

Financials


APE 37,200 42,500 33,300 47,440APE growth (%) (37.1) 14.2 (21.6) 42.5Surplus 13,300 14,500 12,600 11,620PAT 13,800 15,000 15,700 16,340






N A


Key takeawaysRBI has given dispensation for 2 quarters in terms of asset quality review. Hence,some part of the pain will flow through in the next quarter. With this exercise,capital adequacy for the space will dip significantly. However, IDBI Bank has somecapital.

The government is trying to lower stake in banks across the board. IDBI will be thefirst beneficiary as it comes under different regulation. However, there has beenno formal communication in this regard.

Aim is to shore up retail book from current 33% to 36-37% over the next 2 yearsand bring down corporate book.

Some pressure will continue on fee-based income, but will try and compensate itby divesting non-core assets and by exploring some synergies in group business(especially reviving IDBI Capital which has been dormant for some time now).

RoA will remain subdued for next fiscal and improvement is envisaged startingFY18.

NIMs will slightly come down from current 2% plus levels, but expected to be in1.85-1.95% range. The dip will be due to fact that cost of funds may rise givenlower ratings.

Key risksMacro economic risk is the biggest risk given its size and exposures.

Increasing geographic penetration by new private sector banks can lead to fasterthan expected decline in market share.

IDBI BANKIndia Equity Research l Banking and Financial Services

Charting through turbulent times

Company Profile

EDELWEISS RATINGS


MARKET DATA (R : IDBI.BO, B: IDBI IN)

CMP : INR 54Target Price : NA52-week range (INR) : 95 / 47Share in issue (mn) : 1,900.1M cap (INR bn/USD mn) : 102 / 1499Avg. Daily Vol. BSE/NSE (‘000) : 6,828.4


Current Q2FY16 Q1FY16Promoters * 80.2 76.5 76.5MF's, FI's & BK’s 9.0 10.9 10.9FII's 2.6 3.0 2.9Others 8.2 9.6 9.7* Promoters pledged shares : 1.3 (% of share in issue)

February 15, 2016

Financials


Net revenue 66,157 85,926 90,002 97,555Net profit 20,325 18,823 11,220 8,734Diluted EPS (INR) 15.4 13.6 6.8 5.3BV (INR) 137.2 145.9 136.5 141.6Price/ Adj book (x) 0.4 0.4 0.4 0.4Diluted P/E (x) 3.5 4.0 7.9 10.2ROE (%) 13.4 10.2 5.4 3.9






ROA decomposition (%)Year to March FY12 FY13 FY14 FY15

PBIDT/Sales(%) 82.0 76.3 73.4 72.4 Sales/Net Assets 0.3 0.3 0.3 0.3 PBDIT/Net Assets 0.2 0.2 0.2 0.2 PAT/PBIDT(%) 9.7 8.7 5.2 3.8 Net Assets/Net Worth 4.9 5.2 4.9 5.5 ROE(%) 13.4 10.2 5.4 3.9


Diluted EPS 15.4 13.6 6.8 5.3EPS growth (%) (4.8) (11.9) (49.8) (22.4)Book value per share 137 146 136 142Diluted P/E 3.5 4.0 7.9 10.2Price/ BV 0.4 0.4 0.4 0.4



LiabilitiesEquity capital 12,784 13,328 16,039 16,040Reserves 181,487 199,025 220,349 227,130Net worth 194,271 212,353 236,389 243,169Equity application money 9 8 5 2Deposits 2,104,926 2,271,165 2,357,736 2,598,360Borrowings 534,776 658,089 601,463 618,330Other liabilities 69,646 86,561 98,484 105,405Total 2,903,627 3,228,175 3,294,077 3,565,265AssetsLoans 1,805,723 1,963,065 1,976,860 2,083,769Investments 831,754 988,009 1,037,735 1,209,632Cash & equi 180,577 179,245 168,179 145,258Fixed assets 30,188 29,253 29,832 30,605Other assets 55,386 68,603 81,470 96,002Total 2,903,627 3,228,175 3,294,077 3,565,266




Interest income 233,699 250,643 265,975 281,540Interest expenses 188,664 196,912 205,760 224,061Net interest income 45,035 53,731 60,215 57,479Non interest income 21,122 32,195 29,788 40,076Net revenues 66,157 85,926 90,002 97,555Operating expense 21,015 29,451 30,914 38,153 - Employee exp 11,604 15,385 14,916 19,264 - Other opex 9,410 14,066 15,998 18,889Preprovision profit 45,142 56,475 59,089 59,402Provisions 18,845 30,257 41,677 46,529PBT 26,297 26,218 17,411 12,873Taxes 5,981 7,397 6,197 4,140PAT 20,316 18,821 11,214 8,734Extraordinaries (9) (2) (6) 0Reported PAT 20,325 18,823 11,220 8,734EPS 15.4 13.6 6.8 5.3DPS 3.5 3.5 1.0 0.8

Growth ratios (%)Year to March FY12 FY13 FY14 FY15

NII growth 5.5 19.3 12.1 (4.5)Fees growth (1.4) 52.4 (7.5) 34.5Opex growth 15.0 40.1 5.0 23.4PPOP growth (1.5) 25.1 4.6 0.5Provisions growth (18.2) 60.6 37.7 11.6PAT growth 23.0 (7.4) (40.4) (22.2)

Operating ratios (%)Year to March FY12 FY13 FY14 FY15



Key takeawaysWithin commercial and wholesale banking (CWB), IDFC Bank has over 200customers on asset side and over 100 clients on liabilities side. Within Bharatbanking, the bank has over 3,330 customers on assets side and over 2,500customers on liabilities side.

Asset quality has remained stable and management is confident that the book iswell provided for and does not anticipate any increase in credit costs. There couldbe some slippages from restructured book. However, since everything is providedfor, there should not be any P&L impact.

The bank is currently unsure about the reference date for calculating PSL. AssumingANBC is calculated on base of Dec 2015, PSL would be INR150bn of which INR15-20bn will be organic generation.

The bank has not received any letter from the RBI with regards to any accounts andneither expects to receive any letter going forward.

Management is looking at growth rate of 15-20% driven by MSME and mid-corporatesegment. Within rural segment the strategy is to start with agri, followed byenterprise loans vehicle loans and then gold loans.

Rate of interest on savings bank account is 4%.

Expects to open 60 branches till FY16 (40 branches rural).

Investment conclusionIDFC Bank will offer room for FII holding to go up to 49% in the bank on day 1,which can rise to 74% after 5 years. Erstwhile IDFC was engaged in financinginfrastructure projects in sectors like energy, telecommunication, transportation,commercial and industrial projects. Post transfer to bank, we expect it to havesimilar sector exposure. On funding side, dependency will primarily remain onwholesale side, with SA generation taking longer. With no legacy of existing model,IDFC is expected to leverage on technology and concentrate on liability buildingon the retail side. Asset quality deterioration was sharper and disappointing overlast few quarters. On asset quality side, the bank reported GNPA of 3.09% andNNPA of 0.98% in Q3FY16. Restructured assets formed 3.7% of loans.

Key risksOn funding side, the bank will have to build CASA and branches which could be achallenge in current scenario, especially considering small finance banks arealso poised to start their operations in next 18-24 months.

Deterioration of macro environment can result in higher restructuring and slowdown business growth.

IDFC BANKIndia Equity Research l Banking and Financial Services

Room to grow

Company Profile

February 15, 2016


Absolute Rating BUY




MARKET DATA (R : IDFC.BO, B: IDFCBK IN)

CMP : INR 54Target Price : INR 6052-week range (INR) : 73 / 43Share in issue (mn) : 3,392.6M cap (INR bn/USD mn) : 183 / 2,689Avg. Daily Vol. BSE/NSE (‘000) : 4,925.4


Current Q2FY16

Promoters * 53.0 53.0MF's, FI's & BK’s 15.6 15.6FII's 22.5 22.5Others 9.0 9.0* Promoters pledged shares : Nil (% of share in issue)




February 15, 2016








Year to March H2FY16E FY17E FY18E FY19E FY20E

Interest Earned 38,710 84,605 89,447 96,536 107,878Interest Expended 30,109 66,129 69,009 73,002 80,106Net Interest Income 8,602 18,475 20,438 23,534 27,772Non Interest Income 3,871 7,386 8,305 9,365 10,643Net revenues 12,473 25,862 28,743 32,900 38,415Operating expense 4,445 9,780 11,043 12,388 13,628Staff cost 2,593 5,705 6,561 7,413 8,155Other opex 1,852 4,075 4,482 4,975 5,473Operating Profit 8,027 16,082 17,700 20,512 24,787Provisions 301 2,046 2,383 2,746 3,158PBT 7,727 14,036 15,316 17,766 21,629Taxes 2,630 3,775 4,141 4,650 5,252Net Profit 5,097 10,261 11,175 13,116 16,377EPS (INR) 1.5 3.0 3.3 3.9 4.8


Year to March H2FY16E FY17E FY18E FY19E FY20E

Capital 33,851 33,851 33,851 33,851 33,851Reserves and Surplus 104,254 114,515 125,690 138,806 155,183Networth 138,105 148,366 159,541 172,657 189,034Borrowings 694,565 739,349 781,719 846,307 918,376Deposit 17,283 19,875 22,857 26,285 30,228Other Liabilities 44,050 50,658 55,723 61,296 67,425Total 894,003 958,248 1,019,840 1,106,545 1,205,063Application of FundsCash and equivalent 67,336 58,280 39,079 35,616 34,944Investments 306,743 329,468 319,298 309,280 324,880Advances 448,076 526,938 623,292 723,711 825,032Other Assets incl FA 61,847 43,562 38,172 37,939 20,207Total 894,003 958,248 1,019,840 1,106,545 1,205,063Book value per share 40.8 43.8 47.1 51.0 55.8EPS 1.5 3.0 3.3 3.9 4.8P/BV (x) 1.3 1.2 1.1 1.0 1.0Diluted P/E (x) 35.5 17.6 16.2 13.8 11.0

Valuation parametersYear to March H2FY16E FY17E FY18E FY19E FY20E

Book value per share 40.8 43.8 47.1 51.0 55.8EPS 1.5 3.0 3.3 3.9 4.8P/BV (x) 1.3 1.2 1.1 1.1 1.0Diluted P/E (x) 35.9 17.8 16.4 13.9 11.2


Key takeawaysManagement maintained its guidance of 20-25% growth across key financialparameters. It is hopeful of closing FY16 at higher end of the range.

Management highlighted that Affordable Housing is turning around and showingsigns of traction (Mumbai residential sales up 28% YoY, more tilted towardsaffordable housing finance segment).

On liability side, the company targets to have mix of borrowings at 60:40 fromnon-bank: bank. Management highlighted they will not be looking at increasingthe ZCBs as a means of funding.

Single party exposure of debt AUMs is broadly in the range of 1-1.5%, which ismuch below the single party caps.

Full year credit cost guidance at 60-65bps for FY16 and 55-60bps in FY17.

Deccan Chronicle recovery should happen in 4th quarter. There was recovery inone of the infra loans given 5-7 years ago, which should reflect in this quarter.

No capital raising for next 3-4 years.

Guidance

Loan composition (FY18) – 60% housing, 20% LAP, 20% corporate mortgage, AUM(FY18) – INR950bn, RoA (FY18) – 3.6%, credit cost should be 30bps over 3-4 years.

The company has decided to cap single developer loan to 2% of AUM.

Investment conclusionIHFL emerged much stronger after down-sizing riskier assets post FY09. The companyis undergoing structural metamorphosis with steady 20% plus asset growth, creditrating upgrades and active sell-downs supporting its best-in-class NIMs. We believean optimal product strategy with stringent risk mitigants to manage NPLs, stablefranchise, high liquidity and low gearing will help sustain superior return ratios(RoA/RoE of 3.5%/25% - post capital raising).

Key risksAny slowdown in real estate sector will adversely hit growth and earnings. It willalso impact default rates and recoverability in the event of default.

INDIABULLS HOUSING FINANCEIndia Equity Research l Banking and Financial Services

Consistent player

Company Profile

February 15, 2016


Absolute Rating BUY




MARKET DATA (R : INBF.BO, B: IHFL IN)

CMP : INR 636Target Price : INR 89552-week range (INR) : 820 / 518Share in issue (mn) : 420.6M cap (INR bn/USD mn) : 268 / 3,928Avg. Daily Vol. BSE/NSE (‘000) : 1,901.8






1 month (5.7) (6.4) (12.3)3 month (3.9) (7.4) (13.7)12 month 16.6 (15.3) (25.1)

February 15, 2016




Financials


Net revenue 25,232 33,139 40,128 49,098Net profit 15,093 19,779 23,102 27,864Diluted EPS (INR) 45.8 55.6 54.7 65.9Adj. BV (INR) 160.6 178.9 266.5 288.4Price/ Adj book (x) 4.0 3.6 2.4 2.2Diluted P/E (x) 13.9 11.4 11.6 9.7ROE (%) 29.0 33.1 25.8 23.4




Net interest income/Assets 4.7 4.5 4.7 4.7Other Income/Assets 1.9 2.6 2.0 1.8Net revenues/Assets 6.6 7.1 6.7 6.6Operating expense/Assets 0.9 1.0 1.0 0.9Provisions/Assets 0.7 0.6 0.6 0.5Taxes/Assets 1.0 1.2 1.3 1.4Total costs/Assets 2.7 2.9 2.8 2.8ROA 4.0 4.3 3.9 3.7Equity/Assets 13.6 12.9 15.0 15.9ROAE 29.0 33.1 25.8 23.4


Diluted EPS (INR) 45.8 55.6 54.7 65.9EPS growth (%) 20.2 21.4 (1.7) 20.6Book value per share (INR) 163.7 182.6 270.3 293.2Adjusted BV per share (INR) 160.6 178.9 266.5 288.4Diluted P/E (x) 13.9 11.4 11.6 9.7Price/ BV (x) 3.9 3.5 2.4 2.2Price/ Adj. BV (x) 4.0 3.6 2.4 2.2Dividend yield (%) 4.4 3.9 4.1 5.0


Operating income growth 10.2 17.2 35.4 24.7Net revenues growth 20.0 31.3 21.1 22.4Opex growth (6.6) 38.1 20.3 17.2PPP growth 25.8 30.2 21.2 23.2Provisions growth 121.6 9.0 17.9 17.2PAT growth 23.0 31.0 16.8 20.6


Yield on advances 15.2 14.8 14.5 14.0Cost of funds 9.7 9.5 9.1 8.9Spread 5.4 5.3 5.4 5.1Net interest margins 4.7 4.5 4.7 4.7Cost-income 13.9 14.6 14.6 13.9Tax rate 20.6 21.9 25.0 27.0




Interest income 50,159 59,332 74,538 91,433Interest charges 32,323 38,435 46,244 56,141Net interest income 17,837 20,897 28,294 35,292Fee & other income 2,082 3,145 3,763 4,296Other Income 5,313 9,096 8,070 9,510Net revenues 25,232 33,139 40,128 49,098Operating expense 3,514 4,854 5,842 6,847 - Employee exp 2,206 2,793 3,583 4,342 - Depreciation /amortisation 77 180 195 154 - Other opex 1,232 1,881 2,064 2,351Preprovision profit 21,718 28,284 34,286 42,250Provisions 2,710 2,953 3,482 4,080PBT 19,008 25,332 30,803 38,170Taxes 3,908 5,549 7,701 10,306PAT 15,100 19,782 23,102 27,864Reported PAT 15,093 19,779 23,102 27,864Basic number of shares (mn) 334 356 423 423Basic EPS (INR) 46.3 57.2 54.7 65.9Diluted number of shares (mn)329.5 355.6 422.7 422.7Diluted EPS (INR) 45.8 55.6 54.7 65.9DPS (INR) 29.3 25.6 27.3 33.0Payout ratio (%) 64.0 46.0 50.0 50.0



Share capital 668 711 845 845Reserves and surplus 54,004 64,211 113,396 123,073Shareholders' fund 54,672 64,922 114,241 123,919Long term borrowings 199,044 288,721 350,407 441,028Short term borrowings 145,851 169,231 205,388 258,504Total Borrowings 344,895 457,953 555,795 699,532Long term liab. & provisions 3,621 4,720 1,425 1,649Deferred tax liability (net) (1,794) 24 1,564 3,473Sources of funds 401,394 527,618 673,026 828,572Gorss block 1,051 1,320 1,470 1,620Net block 456 507 462 458Intangible Assets 4 9 8 8Total fixed assets 460 516 471 466Non current investments 6,021 7,493 13,865 13,476Cash and cash equivalents 71,890 84,266 50,328 70,479Loans & advances 350,610 450,654 580,009 721,610Current assets (ex-cash) 3,362 4,992 55,475 53,923Other assets 7,704 3,505Trade payable 23 32 41 51Ot. cur. liab. & sh. term prov. 27,570 23,776 27,082 31,332Total current liab. & prov. 27,593 23,808 27,122 31,383Net current assets (ex cash) (24,231) (18,816) 28,353 22,541Uses of funds 412,455 527,618 673,026 828,572Book value per share (INR) 164 183 270 293Earning assets 400,934 527,102 671,130 826,457Disbursements 140,540 203,038 248,489 291,871Total borrowing 405,762 524,625 638,382 807,179Balance sheet ratios (%)EA growth 10.8 31.5 27.3 23.1Disbursement growth (8.2) 44.5 22.4 17.5Gross NPA ratio 0.8 0.8 0.8 0.9Net NPA ratio 0.4 0.4 0.3 0.3Gross NPAs 3,417 4,428 5,665 7,232Net NPAs 1,473 1,878 2,266 2,893Provision coverage 56.6 57.6 60.0 60.0


Key takeawaysThere is ~18% pricing difference between India and China in cotton bed sheets.This is attributed to cotton (12%) and labour (6%).

Current capacity stands at 68mn mts. The company plans to utilise 50% of theincremental capacity by FY16; balance will be used by FY17.

Cumulatively, it clocked volumes of 42mn mts till 9mFY16.

The company will be increasing its capacity further from 68mn mts to 90mn mts.The expansion will be 2/3rd funded by debt and 1/3rd by internal accrual. This entirecapacity will be eligible for TUFS loan.

The company is looking at revenue growth of ~20% in the coming years.

Key risksIncrease in prices of cotton of cotton yarn and fabric.

Not being totally vertically integrated could create supply issues.

INDO COUNT INDUSTRIESIndia Equity Research l Miscellaneous

Spinning the growth yarn

Company Profile

EDELWEISS RATINGS


MARKET DATA (R : ICNT.BO, B: ICNT IN)



Current Q2FY16 Q1FY16Promoters * 59.0 59.0 59.0MF's, FI's & BK’s 1.5 1.5 1.8FII's 8.5 8.5 7.0Others 31.1 31.1 32.3* Promoters pledged shares : 10.1 (% of share in issue)



1 month 14.0 (3.6) 17.63 months 33.3 (6.3) 39.612 months 160.4 (14.5) 174.9

February 15, 2016

Financials


Revenues (INR mn) 7,797 11,868 14,676 17,169Revenue growth (%) 10.1 52.2 23.7 17.0EBITDA (INR mn) 356 897 1,588 2,488Adj. profit (INR mn) 70 422 1,100 1,638Diluted EPS (INR) 1.8 11.1 29.0 39.0Diluted P/E (x) 531.5 88.3 33.8 25.1EV/EBITDA (x) 114.3 45.9 26.0 17.9ROAE (%) 3.8 22.5 45.1 45.8





Diluted EPS (INR) 1.8 11.1 29.0 39.0Y-o-Y Growth (%) -51.1 502.2 160.8 34.8CEPS (INR) 6.7 16.0 34.1 42.8Diluted P/E (x) 531.5 88.3 33.8 25.1P/BV (x) 20.8 19.0 12.8 9.7EV/Sales (x) 5.2 3.5 2.8 2.6EV/EBITDA (x) 114.3 45.9 26.0 17.9


Revenues 10.1 52.2 23.7 17.0EBITDA (24.7) 152.1 77.0 56.6PBT (117.8) (1,259.9) 231.6 72.9Adjusted Profit (47.6) 502.2 160.8 49.0EPS (51.1) 502.2 160.8 34.8



Share Capital 380 380 380 420Reserves & Surplus 1,409 1,576 2,537 3,819Shareholders' Funds 1,789 1,956 2,917 4,239Minority Interest 11 13 55 57Long Term Borrowings 1,755 1,359 972 672Short Term Borrowings 1,784 2,728 3,344 3,135Total Borrowings 3,539 4,087 4,317 3,806Long Term Liab. & Provisions 34 20 7 22Deferred Tax Liability (net) (264) (213) (131) 370Sources of funds 5,108 5,864 7,163 8,494Gross Block 6,057 6,301 6,422 7,065Net Block 3,651 3,596 3,464 3,884Capital work in progress 49 18 3 146Total Fixed Assets 3,700 3,613 3,467 4,030Non Current Investments 1 0 0 0Cash and Cash Equivalents 71 86 313 508Inventories 1,480 2,458 3,457 3,830Sundry Debtors 586 879 1,087 1,270Loans & Advances 542 612 1,136 2,028Other Current Assets 185 532 518 752Total Cur. assets (ex-cash) 2,793 4,481 6,197 7,881Trade Payable 1,120 1,876 1,998 1,888Other Current Liab. & Prov. 337 441 816 2,036Total Current Liab. & Prov. 1,457 2,317 2,815 3,925Net Current Assets (ex-cash) 1,336 2,164 3,383 3,957Uses of Funds 5,108 5,864 7,163 8,494Book value per share 47 52 77 101




Net Revenues 7,797 11,868 14,676 17,169Raw Material Costs 5,382 7,366 8,903 9,466Gross Profit 2,415 4,502 5,773 7,703Employee Expenses 397 512 580 698Other Expenses 1,662 3,093 3,605 4,518EBITDA 356 897 1,588 2,488Depreciation & Amortisation 186 185 196 160EBIT 170 712 1,393 2,328Less: Interest Expense 352 498 499 650Add: Other income 274 303 303 649Add: Exceptional items (123) (157) 0 (257)Profit Before Tax (31) 361 1,196 2,069Less: Provision for Tax (8) 66 93 611Less: Minority Interest 1 (2) (4) (2)Reported Profit (22) 293 1,100 1,457Less: Excep. Items (Net of Tax) (92) (128) 0 (181)Adjusted Profit 70 422 1,100 1,638Equity Shares Outstand. (mn) 38.0 38.0 38.0 42.0Adjusted Basic EPS (INR) 1.8 11.1 29.0 39.0No. of Dil. shares outst. (mn) 38.0 38.0 38.0 42.0Adjusted Diluted EPS 1.8 11.1 29.0 39.0Adjusted Cash EPS 6.7 16.0 34.1 42.8


Operating expenses 95.4 92.4 89.2 85.5Materials costs 69.0 62.1 60.7 55.1Staff costs 5.1 4.3 4.0 4.1S G & A expenses 21.3 26.1 24.6 26.3Depreciation 2.4 1.6 1.3 0.9Interest Expense 4.5 4.2 3.4 3.8EBITDA Margins 4.6 7.6 10.8 14.5Net Profit Margin 0.9 3.6 7.5 9.5


Reported Profit (22) 293 1,100 1,457Add: Depreciation 186 185 196 160Interest (Net of Tax) 262 407 460 458Others (74) 74 (318) 445Less:Changes In WC (99) 772 1,096 158Operating cash flow 451 187 342 2,362Less: Capex 96 215 193 862Free Cash Flow 354 (28) 149 1,500


ROE (%) 3.8 22.5 45.1 45.8Pre-tax ROCE (%) 8.1 17.9 25.5 39.0Inventory Days 73 69 86 95Debtors Days 27 23 24 25Payble Days 50 50 54 48Cash Conversion Cycle 50 41 57 72Current Ratio 2.0 2.0 2.3 2.1Gross Debt/EBITDA 9.9 4.6 2.7 1.5Gross Debt/Equity 2.0 2.1 1.5 0.9Adjusted Debt/Equity 2.2 2.5 1.7 1.0Net Debt/Equity 1.9 2.0 1.4 0.8Interest Coverage Ratio 0.5 1.4 2.8 3.6


Key takeawaysIn terms of industry outlook, management is seeing strong growth in MH&CVs, butLCV sales are still weak and there is no particular trend.

Management believes the retail segment is incrementally getting better. IndusIndBank’s (IIB) total retail clients stand at ~3mn, with most of it being secured.

IRR on PL is 12-16%, IRR on credit card is ~26% with RoA of 2%.

Foreign currency accounts for 20% of the corporate book. The change in RBI’sguidance on higher standard asset provisions is towards lending to overseascorporates wherein IIB does not have material exposure.

IIB highlighted there are no large cases where it is in discussion with the RBI withrespect to bucket classifications. In conjunction with this, the bank doesn’t seeany major slippages in FY16. It expects to contain credit costs to 60bps (includingthe shortfall on account of sale to ARCs) for FY16.

With opening of the bancassurance channel, IIB may evaluate further tie-ups ingeneral and life insurance space. Third party fees will likely grow (TATA AIA lifeinsurance seeing traction).

Target of 1,200 branches by FY17 remains intact. C/I will likely remain in currentrange and may show fluctuations within narrow band of 1-2% percentage points.

Possibility of tie-up with payment banks exists.

Investment conclusionSince management change, market has consistently rewarded IIB for its deliveryon improvement in profitability metrics – RoA and RoE. The bank has a successfultrack record of growth and has raised capital at every stage at richer valuations tofund its expansion. Over the years, it has garnered support from strategic investorsto prop up its ambitious growth plans. Given improving retail liabilities, highRoAs and well-capitalized position (Tier 1 at 15.6% - post capital raising) weexpect execution risk to be minimal. Improving liability franchise and aboveaverage earnings growth at strong return ratios will ensure that IIB will sustainpremium valuations.

Key risksIIB plans to achieve the desired CASA growth by expanding its branch network.

INDUSIND BANKIndia Equity Research l Banking and Financial Services

Going strong

Company Profile

February 15, 2016


Absolute Rating BUY




MARKET DATA (R : INBK.BO, B: IIB IN)

CMP : INR 822Target Price : INR 1,15052-week range (INR) : 988 / 784Share in issue (mn) : 593.6M cap (INR bn/USD mn) : 488 / 7,166Avg. Daily Vol. BSE/NSE (‘000) : 1,207.6







February 15, 2016




Financials






NII growth 29.5 18.3 32.1 23.2Fees growth 40.1 27.0 30.4 26.4Opex growth 24.4 24.7 27.8 22.6PPOP growth 43.8 17.2 34.7 26.1Provisions growth 77.6 (16.8) 66.4 16.1PAT growth 32.7 27.4 27.2 27.3





LiabilitiesEquity capital 5,256 5,295 5,945 5,945Reserves 85,173 101,151 169,991 193,864Net worth 90,430 106,445 175,936 199,810Sub bonds/pref cap 0 0 500 1,000Deposits 605,023 741,344 912,518 1,129,992Borrowings 147,620 206,181 221,132 274,109Other liabilities 28,825 39,964 60,498 54,624Total 871,897 1,093,934 1,370,584 1,659,535AssetsLoans 551,018 687,882 880,489 1,100,611Gilts 153,800 179,061 243,735 294,861Others 61,830 69,532 84,195 100,977Cash & equi 67,695 107,791 94,262 95,823Fixed assets 10,165 11,576 11,481 11,306Other assets 27,390 38,091 56,422 55,957Total 871,897 1,093,934 1,370,584 1,659,535Balance sheet ratios (%)Credit growth 25.3 24.6 27.9 24.9Deposit growth 11.8 22.5 23.1 23.8EA growth 17.8 25.2 24.7 22.2SLR ratio 20.4 18.9 21.5 21.0C-D ratio 93.4 95.0 98.7 99.6Low-cost deposits 32.5 34.1 35.5 36.4Gross NPA ratio 1.1 0.8 1.0 1.1Net NPA ratio 0.3 0.3 0.3 0.3Provision coverage 70.4 62.6 68.3 70.3Incremental slippage 1.4 1.6 1.4 1.4Net NPA / Equity 2.0 2.0 1.5 1.8Capital adequacy 14.9 13.6 13.1 12.6 - Tier 1 12.7 11.2 10.5 9.8Book value 172.0 201.0 295.9 336.1




EPS 26.8 33.9 38.4 48.9EPS growth (%) 32.0 26.5 13.3 27.3Book value per share 172.0 201.0 295.9 336.1Adjusted book value/share 169.6 198.3 292.8 331.9Price/Earnings 34.1 27.0 23.8 18.7Price/ BV 4.8 4.1 2.8 2.4Price/ ABV 5.4 4.6 3.1 2.8Dividend yield (%) 0.4 0.4 0.7 0.8




Interest income 82,535 96,920 115,743 136,370Interest expenses 53,628 62,717 70,550 80,672Net interest income 28,907 34,203 45,193 55,698Non interest income 18,905 24,039 30,615 38,460- Fee & forex income 17,869 22,688 29,588 37,394- Misc. income 516 192 227 266- Investment profits 520 1,158 800 800Net revenues 47,812 58,242 75,808 94,158Operating expense 21,853 27,259 34,845 42,727 - Employee exp 8,093 9,805 12,833 15,661 - Other opex 13,760 17,455 22,013 27,066Preprovision profit 25,960 30,982 40,962 51,432Provisions 4,681 3,895 6,481 7,522- Loan loss provisions 3,801 4,429 6,481 7,522- Investment depreciation 876 (664) 0 0- Other provisions 5 130 0 0PBT 21,278 27,087 34,481 43,909Taxes 7,198 9,150 11,665 14,854PAT 14,080 17,937 22,817 29,056Reported PAT 14,080 17,937 22,817 29,056EPS 26.8 33.9 38.4 48.9DPS 4.0 4.0 6.0 7.5Payout ratio (%) 15.3 14.2 18.2 17.8


Key takeawaysInfo Edge’s growth pillars are: 1) Revenue growth acceleration in Naukri; 2) gain intraffic share in 99 acres; and 3) value from Zomato.

Core business recruitment growth correlation with GDP continues to remain high.Management expects growth acceleration only if GDP revives.

99 acres’ competitive intensity has reduced and hence management has reducedadvertising spends. Strategy is to remain reactive to competition.

Jeevansathi continues to remain third in traffic share and management will notmake any significant investments in the business.

Zomato to breakeven in 5-6 countries in CY16 and could drive significant value inthe coming year.

Other investee companies should report losses and could result in impairmentsin coming quarters.

Investment conclusionIEL’s strategy of: 1) sustaining leadership in recruitment business; 2) nurturingreal estate business; and 3) investing in business to create long-term competitiveadvantage, diversifies the risk of investing in internet sector where the winnertakes it all.

Key risksHigher gestation period in other segment: The number of players in real estatebusiness and other online businesses has increased in the past few years. Giventhe intensity of competition and potential of these markets, one expects to seephase of investments for all players until few establish clear leadership. Thisphase can lengthen gestation period for turning profitable, depending on privateequity funding to competitor.

INFO EDGEIndia Equity Research l IT

Effective 3 pronged strategy

Company Profile

February 15, 2016


Absolute Rating BUY




MARKET DATA (R : INED.BO, B: INFOE IN)







1 month (12.7) (6.4) 1.73 month 1.3 (7.4) (0.7)12 month (5.1) (15.3) (0.5)

February 15, 2016



Financials


Net revenue 5,051.4 6,113.4 7,200.9 8,901.4Rev. growth (%) 15.8 21.0 17.8 23.6EBITDA 1,660.5 1,819.9 1,689.5 2,750.5Adjusted Profit 1,311.0 1,647.3 1,587.9 2,462.1Basic shares outstanding (mn) 109.2 121.8 121.8 121.8Adjusted diluted EPS (INR) 12.0 13.5 13.0 20.2EPS Growth (%) (0.3) 12.7 (3.6) 55.1Diluted P/E (x) 61.1 54.3 56.3 36.3EV/EBITDA (x) 44.7 43.0 46.7 27.9ROAE (%) 18.3 12.5 8.4 12.0




ROAE (%) 18.3 12.5 8.4 12ROACE (%) 26.9 18.2 12.3 17.1Debtors Days 7 10 9 5Payable Days 98 114 129 125Cash Conversion Cycle (91) (104) (120) (119)Current Ratio 3.2 3.9 3.5 3.7


Reported Profit 1,285 1,939 1,588 2,462Add: Depreciation 174 173 196 187Interest (Net of Tax) (743) (798) (23) -Others (1,523) (1,749) (813) (954)Less: Changes in WC (1,615) (946) (428) (358)Operating cash flow 808 510 1,376 2,053Less: Capex 185 4,414 677 299Free Cash Flow 623 (3,904) 698 1,754




Net revenue 5,051 6,113 7,201 8,901Cost of revenues 2,128 2,717 3,329 4,023Gross profit 2,923 3,397 3,872 4,878Total SG&A expenses 1,263 1,577 2,182 2,127S&M expenses 662 842 1,328 1,237G&A expenses 600 735 855 890EBITDA 1,660 1,820 1,690 2,751Depreciation 174 173 196 187EBIT 1,487 1,647 1,493 2,563Add: Other income 440 766 837 954Less: Interest Expense 25 30 1 -Profit Before Tax 1,902 2,675 2,329 3,517Less: Provision for Tax 591 736 741 1,055Reported Profit 1,285 1,939 1,588 2,462Exceptional Items (26) 292 - -Adjusted Profit 1,311 1,647 1,588 2,462Shares o /s (mn) 109 120 120 120Adjusted Basic EPS 12 13.7 13.2 20.5Diluted shares o/s (mn) 109 122 122 122Adjusted Diluted EPS 12 13.5 13 20.2Adjusted Cash EPS 13.6 15.2 14.9 22.1Dividend per share (DPS) 2 2.3 3 3Dividend Payout Ratio(%) 19.8 17.4 26.4 17.0


Adj. Diluted EPS (INR) 12.0 13.5 13.0 20.2Y-o-Y growth (%) (0.3) 12.7 (3.6) 55.1Adjusted Cash EPS (INR) 13.6 15.2 14.9 22.1Diluted P/E (x) 61.1 54.3 56.3 36.3P/B (x) 11.9 6.3 5.8 5.1EV / Sales (x) 14.7 12.8 11.0 8.6EV / EBITDA (x) 44.7 43.0 46.7 27.9Dividend Yield (%) 0.3 0.3 0.4 0.4


Revenues 15.8 21.0 17.8 23.6EBITDA 12.0 9.6 (7.2) 62.8PBT 3.2 40.6 (12.9) 51.0Adjusted Profit (0.3) 25.7 (3.6) 55.1EPS (0.3) 12.7 (3.6) 55.1



Share capital 1,092 1,202 1,202 1,202Reserves & Surplus 5,628 12,949 14,118 16,162Shareholders' funds 6,720 14,151 15,319 17,363Minority Interest 1,392 4,188 4,188 4,188Long term borrowings 10 3 - -Total Borrowings 10 3 - -Def. Tax Liability (net) (64) (64) (64) (64)Sources of funds 8,059 18,279 19,444 21,488Gross Block 1,553 5,346 5,646 6,046Net Block 884 989 1,092 1,305Capital work in progress 103 123 500 400Intangible Assets 602 4,767 4,767 4,767Total Fixed Assets 1,588 5,878 6,359 6,472Non current investments 1,085 1,130 3,000 3,000Cash and Equivalents 7,367 14,198 13,440 15,729Sundry Debtors 92 237 118 146Loans & Advances 319 486 375 375Other Current Assets 85 176 176 176Current Assets (ex cash) 496 899 669 697Trade payable 589 1,110 1,242 1,511Other Current Liab 1,889 2,717 2,782 2,899Total Current Liab 2,478 3,827 4,024 4,410Net Curr Assets-ex cash (1,981) (2,927) (3,355) (3,713)Uses of funds 8,059 18,279 19,444 21,488BVPS (INR) 61.5 116.2 125.8 142.6


Cost of revenues 42.1 44.4 46.2 45.2Gross margin 57.9 55.6 53.8 54.8G&A expenses 11.9 12 11.9 10S&M expenses 13.1 13.8 18.4 13.9SG&A expenses 25 25.8 30.3 23.9EBITDA margins 32.9 29.8 23.5 30.9EBIT margins 29.4 26.9 20.7 28.8Net Profit margins 26.0 26.9 22.1 27.7


Key takeawaysMumbai metro: JKIL has emerged the lowest bidder in 2 packages of MumbaiMetro Line 3 worth ~INR52bn. The company expects the project to be awarded byMarch 2016 and execution to begin in Q1FY17, though it will gather pace only inH2FY17. Apart from this, the company is also bidding for Line 2 and Line 7 projectsworth ~INR26bn.

Ahmedabad metro: Work on the ~INR2.8bn contract won by JKIL in FY15 isprogressing smoothly; apart from this, the company is also bidding for additionalprojects in Ahmedabad Metro.

Geographical concentration: With the Mumbai region expected to witness largescale ordering for projects like Trans Harbour link (INR170bn), coastal road project(INR120bn), Navi Mumbai airport, flyover projects in Mumbai (~INR30bn), etc.,JKIL is focusing on winning orders in Maharashtra. Apart from these, the companyis also bidding for multi specialty hospitals (in buildings space) and NHAI EPCprojects in Maharashtra, Gujarat and Rajasthan

The regional concentration with ~80% of order book from Maharashtra region hasled to superior monitoring and better project execution, aided by fastermobilisation aiding margins.

Investment conclusionA strong balance sheet, healthy order inflow prospects and niche presence inurban infra space render JKIL our preferred pick in the EPC space. We expect asharp surge in top-line growth beginning FY18E on back of Mumbai Metro orderwin and upcoming large opportunities in urban infra space. We expect JKIL to post43% EPS CAGR over FY16 18.

Key risksDelay in formal award of Mumbai Metro project can impact top-line growth inFY17.

Majority of JKIL’s orders are from the transportation segment. This exposes it toconcentration risks arising from exposure to a particular segment.

J KUMAR INFRAPROJECTSIndia Equity Research l Infrastructure - Construction

Primed for growth

Company Profile

EDELWEISS RATINGS

Absolute Rating BUY


MARKET DATA (R : JKIP.BO, B: JKIL IN)







1 month (8.5) (1.6) 6.83 month (6.3) (2.6) 3.712 month (3.6) 52.4 56.0

February 15, 2016

Parvez Akhtar Qazi+91 22 4063 [email protected]

Rita Tahilramani+91 22 6623 [email protected]

Financials


Revenue (INR mn) 11,868 13,432 14,407 20,749Rev. growth (%) 18.6 13.2 7.3 44.0EBITDA (INR mn) 2,058 2,506 2,659 3,829Adjusted profit (INR mn) 841 944 1,096 1,579Shares outstanding (mn) 56 64 76 76Basic EPS (INR) 15.1 14.6 14.5 20.9EPS growth (%) 11.0 (3.1) (1.1) 44.1P/E (x) 19.0 19.6 19.8 13.8EV/ EBITDA (x) 9.9 8.8 9.0 6.8ROAE (%) 15.6 13.8 10.6 11.8ROACE (%) 19.4 17.7 15.6 18.9




Revenues 18.6 13.2 17.5 36.4EBITDA 23.0 21.7 17.5 36.4PBT 11.7 12.3 29.4 56.0Adjusted profit 11.0 12.3 26.2 56.0EPS 11.0 (3.1) 7.5 56.0


Adjusted Diluted EPS (INR) 15.1 14.6 14.5 20.9Y-o-Y growth (%) 11.0 (3.1) (1.1) 44.1Adjusted Cash EPS (INR) 21.7 23.0 21.2 28.5Diluted P/E (x) 19.0 19.6 19.8 13.8Price to Book Ratio (P/B) (x) 2.8 2.3 1.7 1.5Enterprise Value / Sales (x) 1.7 1.6 1.7 1.3Enterprise Value / EBITDA (x) 9.9 8.8 9.0 6.8Dividend Yield (%) 0.7 0.7 1.2 1.2




Income from operations 11,868 13,432 15,782 21,522Direct costs 8,374 9,334 10,967 14,957Employee costs 773 741 870 1,187Other expenses 663 851 1,000 1,364Total operating expenses 9,810 10,926 12,838 17,507EBITDA 2,058 2,506 2,944 4,015Depreciation & amortisation 348 474 511 640EBIT 1,711 2,032 2,433 3,374Less: Interest Expense 576 768 780 712Add: Other income 108 130 152 153Profit Before Tax 1,242 1,395 1,804 2,815Less: Provision for Tax 402 451 614 957Reported Profit 841 944 1,191 1,858Adjusted Profit 841 944 1,191 1,858No. of Shares outstanding (mn) 55.6 64.5 75.7 75.7Adjusted Basic EPS 15.1 14.6 15.7 24.6No. of Dil. shares outst. (mn) 55.6 64.5 75.7 75.7Adjusted Diluted EPS 15.1 14.6 15.7 24.6Adjusted Cash EPS 21.7 23.0 22.5 33.0Dividend per share (DPS) 1.9 2.0 3.5 3.5Dividend Payout Ratio (%) 14.5 16.4 26.0 16.7


ROAE (%) 15.6 13.8 11.5 13.6ROCE (%) 19.4 17.7 19.0 22.1Inventory Days 209 217 199 185Debtors Days 38 45 51 47Payable Days 196 166 133 141Cash Conversion Cycle 52 96 117 91Current Ratio 2.2 3.2 3.0 2.5Gross Debt/EBITDA 2.7 2.1 0.5 0.8Gross Debt/Equity 1.0 0.7 0.1 0.2Adjusted Debt/Equity 1.0 0.7 0.1 0.2Net Debt/Equity 0.8 0.5 0.0 0.1Interest Coverage Ratio 3.0 2.6 3.1 4.7


Operating expenses 82.7 81.3 81.3 81.3EBIDTA margins 17.3 18.7 18.7 18.7Depreciation and amortization 2.9 3.5 3.2 3.0Adjusted profit margins 7.1 7.0 7.5 8.6


Reported Profit 841 944 1,191 1,858Add: Depreciation 348 474 511 640Interest (Net of Tax) 390 519 515 470Others (371) (457) (515) (470)Less: Changes in WC 1,924 1,531 1,200 1,364Operating cash flow (717) (52) 502 1,135Less: Capex 2,232 410 760 2,510Free Cash Flow (2,948) (461) (258) (1,375)



Share capital 278 322 378 378Reserves & Surplus 5,475 7,569 12,487 14,035Shareholders' funds 5,753 7,891 12,865 14,413Long term borrowings 1,350 533 533 533Short term borrowings 4,221 4,621 818 2,818Total Borrowings 5,571 5,154 1,352 3,352Long Term Liabilities & Prov. 6 14 15 17Deferred Tax Liability (net) 71 131 131 131Sources of funds 11401 13,190 14,363 17,913Gross Block 4,523 6,040 6,790 9,290Net Block 3,255 4,301 4,540 6,399Capital work in progress 1,752 633 643 653Total Fixed Assets 5,007 4,933 5,182 7,052Non current investments 23 11 11 11Cash and cash equivalents 1,213 1,548 1,270 1,586Inventories 5,658 5,431 6,516 8,629Sundry Debtors 1,320 2,008 2,421 3,148Loans & Advances 1,420 797 947 1,226Other Current Assets 1,890 2,193 2,689 3,603Total Current Assets (ex cash) 10,288 10,429 12,573 16,606Trade payable 1,817 1,355 1,949 3,967Ot. Cur. Liab. & Sh. Term Prov. 3,312 2,377 2,724 3,375Total Current Liab. & Prov. 5,130 3,732 4,674 7,342Net Current Assets (ex cash) 5,158 6,697 7,899 9,264Uses of funds 11,401 13,190 14,363 17,913Book value per share (BV) 103 122 170 190


Key takeawaysThe hiring of sales personnel is on track and it expects the ~2,000 new hires todrive revenue growth. The necessity of hiring is due to 18-20% mortality rate of thebusiness and some due to churn. Persistency rate is ~56% and it has beenhistorically in that range.

Tour operators is the largest vertical followed by doctors, security, hotels/spa etc.

Just Dial (JD) does not believe that vertical based approach is the right model asthe scalability of each vertical is a big problem. There is already happening in thisspace and expects deals and discounts to go as the companies continue to bleed.

JD will be launching is new product ‘JD Omni’ on 25th February. This product will bea billing and inventory management software for customers which will enablesmall and medium businesses to migrate to the internet ecosystem. It would helpSMEs create a webpage and app on the go. It will be offered as a hosted CRMsolution for SME.

‘JD Omni’ is necessary to create stickiness in the business and will also beintegrated in the Just Dial app. It will help businesses increase customerconvenience, which is one of the key USP of vertical specific apps currently.

Investment conclusionWe had downgraded JD on poor revenue traction in last two quarters. We willwatch out for 3 things before we turn positive on the stock 1) Launch of masscommunication and JD Omni in the current quarter as committed 2) traction inrevenue growth in next 2 quarters and 3)feedback on launch of JD Omni. Wemaintain HOLD rating with price target of INR 567 (20x FY18E EPS).

Key risksCustomer acceptance of JD Omni product.

Increasing competition in the internet space.

Concentration of revenue from in large cities.

JUST DIALIndia Equity Research l IT

In investment mode

Company Profile

February 15, 2016






MARKET DATA (R : JUST.BO, B: JUST IN)

CMP : INR 465Target Price : INR 56752-week range (INR) : 1,469 / 377Share in issue (mn) : 70.5M cap (INR bn/USD mn) : 33 / 481Avg. Daily Vol. BSE/NSE (‘000) : 933.3






1 month (38.2) (5.1) (1.8)3 month (33.3) (7.3) (4.1)12 month (62,6) (15.8) (7.9)

February 15, 2016



Financials


Revenues (INR mn) 8,410 9,421 13,128 15,243Rev. growth (%) 27.3 12 39.3 16.1EBITDA (INR mn) 3,536 3,156 4,609 5,544Net profit (INR mn) 2,557 2,297 3,433 4,128Share outstanding (mn) 29 40 40 40EPS (INR) 84.8 55.6 83.1 99.9EPS growth (%) 46.8 -34.5 49.5 20.3Diluted P/E (x) 15.70 24.00 16.00 13.30EV/EBITDA (x) 10.1 15.7 10 8ROE (%) 49.8 35.2 38.3 35.3




ROAE (%) 25.1 23.5 18.1 13.0ROACE (%) 34.3 32.2 24.7 17.5Payable Days 311 267 255 222Cash Conversion Cycle (310) (267) (255) (222)Current Ratio 3.1 3.1 3.1 3.3


Reported Profit 1,205.9 1,389.0 1,266.9 1,032.2Add: Depreciation 172.9 241.0 299.2 354.9Others (388.4) - - (0.0)Less: Changes in WC (340.0) (238.3) (268.8) 114.4Operating cash flow 1,330.4 1,868.3 1,834.9 1,272.7Less: Capex 208.3 600.0 600.0 600.0Free Cash Flow 1,122.1 1,268.3 1,234.9 672.7




Net revenue 4,613 5,898 6,846 8,159Cost of revenues 2,286 3,088 3,715 4,569Gross profit 2,327 2,810 3,131 3,590Total SG&A expenses 905 1,152 1,657 2,440EBITDA 1,422 1,657 1,474 1,150Depreciation 172.9 241 299 355EBIT 1,249 1,416 1,174 795Add: Other income 400 489 557 600Profit Before Tax 1,648 1,905 1,731 1,395Less: Provision for Tax 442.5 516.4 464 363Reported Profit 1,206 1,389 1,267 1,032Adjusted Profit 1,206 1,389 1,267 1,032Shares o /s (mn) 70 70 70 70Adjusted Basic EPS 17.2 19.7 18.0 14.6Diluted shares o/s (mn) 70.4 71.0 70.9 70.9Adjusted Diluted EPS 17.1 19.6 17.9 14.6Adjusted Cash EPS 19.7 23.1 22.2 19.7


Adj. Diluted EPS (INR) 17.1 19.6 17.9 14.6Y-o-Y growth (%) 72.0 14.2 (8.6) (18.5)Adjusted Cash EPS (INR) 19.7 23.1 22.2 19.7Diluted P/E (x) 27.2 23.8 26.1 32.0P/B (x) 6.1 5.1 4.4 3.9EV / Sales (x) 5.6 4.3 3.5 2.9EV / EBITDA (x) 18.3 15.2 16.4 20.6


Revenues 27.2 27.9 16.1 19.2EBITDA 41.2 16.6 (11.1) (21.9)PBT 64.9 15.6 (9.1) (19.4)Adjusted Profit 76.2 15.2 (8.8) (18.5)EPS 72.0 14.2 (8.6) (18.5)



Share capital 702 702 702 702Reserves & Surplus 4,643 5,788 6,833 7,684Shareholders' funds 5,344 6,490 7,534 8,385Def. Tax Liability (net) 18 18 18 18Sources of funds 5,363 6,508 7,552 8,404Gross Block 1,126 1,726 2,326 2,926Net Block 528 887 1,188 1,433Total Fixed Assets 528 887 1,188 1,433Cash and Equivalents 6,627 7,651 8,664 9,155Loans & Advances 460 552 662 795Other Current Assets 35 39 43 47Current Assets (ex cash) 495 591 705 842Trade payable 2,103 2,418 2,781 2,781Other Current Liab 184 203 223 245Total Current Liab 2,287 2,621 3,004 3,026Net Curr Assets-ex cash (1,792) (2,030) (2,299) (2,185)Uses of funds 5,363 6,508 7,552 8,404BVPS (INR) 76 92 107 119


Cost of revenues 49.6 52.4 54.3 56.0Gross margin 50.4 47.6 45.7 44.0SG&A expenses 19.6 19.5 24.2 29.9EBITDA margins 30.8 28.1 21.5 14.1EBIT margins 27.1 24.0 17.2 9.7Net Profit margins 26.1 23.6 18.5 12.7


Key takeawaysUpdate on SAE: Order traction witnessed some improvement. Positive PBT andEBITDA for SAE during Q3FY16. Turnaround in SAE is from Mexico while Brazilcontinues to be stable.

ME constitutes ~15% of total order book. At this juncture, there are no delays orslackening in KEC’s ME exposure. The company has not seen slackening of orderingin SAARC, MEA regions. In fact, basic infra T&D spending is on the rise. However,management has seen that the time taken for conversion of L1 to order hasincreased.

KEC has started EPC business in Brazil. Also, the company has strong order book inBrazil and a lot of business is coming in from Indonesia.

As per management, solar and T&D business looks promising. Management believesthat substation business should clock 10% growth.

The company has decided not to venture in resource management and focus willbe on treatment.

Investment conclusionStrong 40% EPS growth over the next 2 years with the company moving back to its7.5-8.5% margin profile.

KEC, over the past 2 years, has increased its offerings from TLT EPC contractor tonow a substation player also, thus improving its addressable market opportunity.

With strong impetus on T&D spend by select states and PGCIL the bid pipeline forKEC remains robust at INR150bn over the next 2-3 quarters.

Moving up the scale, KEC is targeting higher ticket projects in railway EPC spacewhich could help it improve margins even beyond our modeled estimates.

Key risksDelay in execution of current order book poses a risk to our revenue and OPMassumptions.

Major slowdown in T&D spending in key markets like India, Middle East & Africanmarkets.

KEC INTERNATIONALIndia Equity Research l Engineering and Capital Goods

Scaling up

Company Profile

February 15, 2016


Absolute Rating BUY




MARKET DATA (R : KECL.BO, B: KECI IN)

CMP : INR 109Target Price : INR 17552-week range (INR) : 164 / 71Share in issue (mn) : 257.1M cap (INR bn/USD mn) : 28 / 411Avg. Daily Vol. BSE/NSE (‘000) : 1,232.2







February 15, 2016



Financials (Consolidated)


Revenue (INR mn) 79,018.3 84,678.0 87,484.6 102,900.1Rev. growth (%) 13.2 7.2 3.3 17.6EBITDA (INR mn) 4,932.6 5,118.0 6,713.1 8,405.4Adjusted profit (INR mn) 849.2 1,609.8 1,802.8 2,785.7EPS (INR) 3.3 6.3 7.0 10.8EPS growth (%) 30.3 89.6 12.0 54.5Diluted P/E (x) 33.0 17.4 15.5 10.1ROAE (%) 7.3 12.8 12.8 17.4




Reported Profit 425 1,390 1,798 2,908Add: Depreciation 705 881 925 983Interest (Net of Tax) 1,133 1,905 1,734 1,930Others 1,601 559 1,162 1,047Less:Changes in WC 3,957 3,206 2,529 2,791Opertaing cash flow (93) 1,529 3,090 4,077Less: Capex 1,441 -1,165 866 866Free cash flow (1,534) 2,694 2,224 3,211


ROAE (%) 7.3 12.8 12.8 18.1ROACE (%) 15.6 17.8 17.0 19.9Inventory (days) 28 28 27 24Debtors (days) 155 165 165 157Payable (days) 174 185 189 176Cash conversion cycle 8 8 3 5Current ratio 1.4 1.5 1.6 1.5Gross Debt/EBITDA 3.7 4.0 3.1 2.6Interest cover (x) 1.6 1.4 2.0 2.5Debt/Equity (x) 1.5 1.5 1.4 1.3Adjusted debt/Equity 1.5 1.5 1.4 1.3


Revenues 13.2 7.2 3.3 17.6EBITDA 29.3 3.8 31.2 24.0Adjusted Profit 30.3 89.6 11.7 61.7EPS 30.3 89.6 11.7 61.7


Operating expenses 93.8 94.0 92.3 91.9Material cost 75.4 76.2 73.8 73.4Employee cost 7.2 6.9 7.3 7.3Other manufacturing expenses 11.2 10.8 11.1 11.1Depreciation and amortisation 0.9 1.0 1.1 1.0Interest expenditure 3.3 3.6 3.3 2.9EBITDA margins 6.2 6.0 7.7 8.1Net profit margins 1.1 1.9 2.1 2.8


Diluted EPS (INR) 3.3 6.3 7.0 10.8Y-o-Y growth (%) 30.3 89.6 12.0 54.5CEPS (INR) 6.0 9.7 10.5 14.6Diluted P/E (x) 33.0 17.4 15.5 10.1Price/BV(x) 2.4 2.1 1.9 1.6EV/Sales (x) 0.6 0.5 0.6 0.5EV/EBITDA (x) 9.1 9.1 7.6 6.1Dividend yield (%) 0.9 0.8 0.9 1.1

Financial Statements (Consolidated)



Income from operations 79,018 84,678 87,485 102,900Materials costs 59,594 64,527 64,606 75,562Employee cost 5,661 5,865 6,414 7,551Other manufacturing expenses8,831 9,168 9,751 11,465Total operating expenses 74,086 79,560 80,772 94,578EBITDA 4,933 5,118 6,713 8,322Depreciation and amortisation 705 881 925 983EBIT 4,227 4,237 5,788 7,339Interest expense 2,633 3,089 2,896 2,977Other income 138 1,462 111 122Add: Exceptional items (182) 0 0 0Profit before tax 1,551 2,611 3,003 4,485Provision for tax 883 1,001 1,205 1,577Reported Profit 668 1,610 1,798 2,908Less: Exceptional Items (182) - - -Adjusted Profit 849 1,610 1,798 2,908Equity shares outstanding (mn) 257 257 257 257EPS (INR) basic 2.6 6.3 7.0 11.3Diluted shares (mn) 257 257 257 257Adjusted Diluted EPS 3.3 6.3 7.0 11.3Adjusted Cash EPS 6.0 9.7 10.6 15.1DPS 1.0 0.9 1.0 1.2Dividend payout (%) 45.2 17.3 17.1 12.7



Equity capital 514 514 514 514Reserves & surplus 11,402 12,784 14,274 16,812Shareholders funds 11,916 13,298 14,788 17,326Long term borrowings 6,126 7,370 7,870 8,870Short term borrowings 12,069 13,081 13,081 13,081Total Borrowings 18,195 20,451 20,951 21,951Long Term Liabilities & Prov. 201 211 211 211Deferred Tax (Net) 514 527 527 527Sources of funds 30,825 34,488 36,478 40,016Gross Block 11,224 10,561 11,361 12,161Net Block 8,273 7,310 7,314 7,263CWIP 180 164 179 194Intangible Assets 5,247 5,280 5,201 5,120Total Fixed Assets 13,700 12,754 12,695 12,578Inventories 5,052 4,764 4,664 5,390Sundry debtors 38,078 38,529 40,474 47,893Cash and cash equivalents 1,440 2,063 1,583 2,447Loans and advances 7,106 9,507 9,982 10,981Other current assets 8,520 9,655 10,138 10,898Total current assets (ex cash)58,757 62,455 65,258 75,162Trade payable 32,130 33,248 33,560 39,251Other Curr. Liab. & ST Prov. 10,942 9,536 9,497 10,920Total current liab. & prov. 43,072 42,784 43,057 50,171Net current assets (ex cash) 15,685 19,671 22,201 24,991Uses of funds 30,825 34,488 36,478 40,016Book value per share (BV) (INR) 46.4 51.7 57.5 67.4


Key takeawaysManagement believes that hydrocarbon margin is at 4% and infra should alsogenerate 4-5% margin in the Middle East.

L&T remains bullish on domestic order pipeline and expects INR2lakh worth ofcontracts in next 2 years (mostly domestic) dominated by urban infra.

The company expects domestic margin to be stable. However, adverse marginimpact for 9 months period on account of higher Middle East growth and earlystage in domestic projects.

L&T is trying to control working capital from further deterioration in external realestate projects by demobilizing from project site wherever customers are notpaying.

Hyderabad Metro: Cost of project remains unchanged as of now pending clearanceof revised cost submitted by L&T. Of the total INR170bn project (cum IDC) L&T hasspent 60% till date.

Investment conclusionDiversified business dominance imparts unique flexibility: L&T has a dominantposition and market share in most operating verticals, be it oil & gas, processprojects, roads, bridges, or industrial structures. New segments: Potent growthcatalysts: L&T will have to garner INR100-150bn new orders annually over FY16-17E to cover lost ground owing to tepid Middle East market and weak F&B segment.We believe, the much needed succour will come from defence, transportation andpower T&D sectors in the domestic market. Strong OB and domestic execution pickup to drive earnings from FY17 (+30% core earnings). Diversified presence acrosskey verticals has helped L&T sustain healthy order book traction over past threeyears of investment slowdown. Though this elongates its execution cycle, it alsoimparts good revenue visibility over the next few years. L&T could see a substantialscale up in execution as these factors reverse going ahead.

Key risksPerceived risk of a slowdown in Middle East capex due to sharp drop in global oilprices can severely impact L&T’s order intake and revenue accruals.

Further delay in recovery of the domestic investment cycle.

Continued deterioration in working capital requirement.

LARSEN & TOUBROIndia Equity Research l Engineering and Capital Goods

Diversified play

Company Profile

February 15, 2016


Absolute Rating BUY




MARKET DATA (R : LART.BO, B: LT IN)

CMP : INR 1,149Target Price : INR 1,75052-week range (INR) : 1,892 / 1,016Share in issue (mn) : 931.2M cap (INR bn/USD mn) : 1,070 /15,707Avg. Daily Vol. BSE/NSE (‘000) : 2,226.7







February 15, 2016



Financials


Revenues (INR mn) 851,284 920,046 1,025,381 1,184,795Rev. growth (%) 14.3 8.1 11.4 15.5EBITDA (INR mn) 107,298 113,356 122,646 143,131Adjsuted profit (INR mn) 45,469 44,171 45,605 57,620EPS (INR) 48.9 47.5 49.1 62.0EPS growth (%) (5.2) (2.8) 3.2 26.3Diluted P/E (x) 23.5 24.2 23.4 18.5ROE (%) 11.7 10.6 10.5 11.8




Reported Profit 49,021 47,648 45,605 57,620 Depreciation 14,458 26,225 29,195 31,704Interest (Net of Tax) 20,358 19,487 20,811 23,221 Others (65,969) (91,049) (96,140) (118,316)Less:Changes in WC 87,502 8,999 36,629 (3,000)Operating cash flow (69,633) (6,688) (37,159) (2,771)Less: Capex 66,787 67,714 21,501 21,503Free cash flow (136,420) (74,402) (58,660) (24,274)


EBITDA margins 12.6 12.3 12.0 12.1EBIT margins 10.9 9.5 9.1 9.4Net Profit margins 5.3 5.0 4.9 5.2




Income from operations 851,284 920,046 1,025,381 1,184,795Direct costs 626,087 672,937 749,414 877,150Employee costs 71,351 79,222 93,420 100,890Other expenses 46,549 54,531 59,901 63,624Total operating expenses 743,986 806,690 902,735 1,041,664EBITDA 107,298 113,356 122,646 143,131Dep. & amortisation 14,458 26,225 29,195 31,704EBIT 92,840 87,131 93,451 111,427Interest expenses 31,380 28,507 31,061 34,148Other income 9,819 10,072 11,275 11,868Add: Exceptional items 3,553 3,477 - -Profit before tax 74,831 72,172 73,665 89,147Provision for tax 26,284 22,836 24,309 28,527Less: Minority interests (381) 1,710 4,343 3,637Add: Share in profits of assoc. 93 21 593 638Reported Profit 49,021 47,648 45,605 57,620Less: Exceptional Items 3,553 3,477 - -Adjusted profit 45,469 44,171 45,605 57,620Basic sh. outstanding (mn) 924 930 930 930Adjusted Basic EPS 49.2 47.5 49.1 62.0No. of Dil. shares outst. (mn) 930 930 930 930Adjusted Diluted EPS 48.9 47.5 49.1 62.0Adjusted Cash EPS 65.1 71.3 80.5 96.1Dividend per share (DPS) 12.2 13.9 13.6 14.3Dividend Payout Ratio (%) 26.9 31.6 34.7 28.8


Revenues 14.3 8.1 11.4 15.5EBITDA 8.8 5.6 8.2 16.7PBT (1.9) (3.6) 2.1 21.0Adjusted Profit (5.2) (2.9) 3.2 26.3EPS (5.2) (2.8) 3.2 26.3



Equity capital 1,854 1,859 1,859 1,859Reserves & surplus 375,262 407,232 440,187 484,525Shareholders funds 377,116 409,091 442,046 486,384Minority interest 31,792 49,986 54,329 57,967Long term borrowings 674,542 652,780 702,780 742,780Short term borrowings 136,787 252,934 302,934 352,934Total Borrowings 811,329 905,714 1,005,714 1,095,714Deffered payment liability 34,819 30,322 30,322 30,322Net deferred tax 3,375 (1,846) (1,846) (1,846)Long Term Liab. & Prov. 14,742 18,466 18,466 18,466Sources of funds 1,273,172 1,411,733 1,549,031 1,687,007Gross Block 285,006 320,006 340,006 360,007Net Block 207,378 221,578 217,777 212,578Capital work in progress 142,810 169,846 170,846 171,846Intangible Assets 115,275 111,194 106,300 100,299Total Fixed Assets 465,463 502,618 494,924 484,722Non current investments 14,328 16,468 16,468 16,468Inventories 55,275 65,182 69,808 84,110Sundry debtors 263,846 300,894 329,073 373,968Cash and cash equivalents 107,727 138,208 135,838 154,133Loans and advances 535,555 665,340 787,240 932,405Other current assets 254,547 245,890 255,725 265,954Total cur. assets (ex cash) 1,109,221 1,277,305 1,441,847 1,656,437Trade payable 395,541 487,616 527,396 611,472Ot. Cur. Liab. & Sh. Te. Prov. 28,027 35,251 12,650 13,282Total CL & provisions 423,568 522,867 540,046 624,755Net cur. assets (ex cash) 685,653 754,438 901,801 1,031,682Uses of funds 1,273,172 1,411,733 1,549,031 1,687,007Adjusted BV per share (INR) 408 440 476 523


ROAE (%) (on adj. profits) 11.7 10.6 10.5 11.8ROACE (%) 9.3 7.5 7.3 7.8Inventory days 31 33 33 32Debtors days 106 112 112 108Payable days 116 124 128 125Cash conversion cycle (days) 21 21 17 15Current ratio (x) 2.9 2.7 2.9 2.9Gross Debt/EBITDA (x) 7.6 8.0 8.2 7.7Interest coverage (x) 3.0 3.1 3.0 3.3Fixed assets t/o (x) 2.7 2.8 3.1 3.7Gross Debt/equity (x) 2.0 2.0 2.0 2.0Adjusted debt/Equity (x) 2.0 2.0 2.0 2.0


Diluted EPS (INR) 48.9 47.5 49.1 62.0Y-o-Y growth (%) (5.2) (2.8) 3.2 26.3CEPS (INR) 65.1 71.3 80.5 96.1Diluted P/E (x) 23.5 24.2 23.4 18.5Price/BV (x) 2.8 2.6 2.4 2.2EV/Sales (x) 2.1 2.0 1.9 1.7EV/EBITDA (X) 16.8 16.6 16.2 14.4Dividend yield (%) 1.1 1.2 1.2 1.2


Key takeawaysManagement’s strategy is to retain clients, though not at the cost of squeeze inmargins. It believes that clients will not shift to competition owing to marginaldifference in yields.

Management is confident of achieving disbursement growth of 15% for FY16.LICHF’s market share has increased from 5% to 10% over couple of years.

Top 7 cities contribute 80 branches while balance 154 branches cover 130-145locations. In terms of loan book, top 7 cities contribute ~50%.

Proportion of LAP increased from 5.6% in Q2FY16 to 6.4% in Q3FY16. LTV has beenstable at ~25% with average ticket size of incremental LAP borrowing at INR1.5mn.

Outstanding stress on account of developer loans (LRD account) is yet not resolved.

Announced PLR cut by 30bps during the quarter. Spread in LAP is 200bps higherthan core mortgage loan and spread in developer loan is 200bps higher than LAP.

Of overall debt market borrowings, ~18% flows from MFs (ie INR140bn). Evenbefore SEBI imposed restrictions on MFs to cap their investment in debt papers ofNBFCs and HFCs, overall investment of MFs in LICHF’s debt paper was 17-18%.

Investment conclusionLICHF, being a leading housing financier, will be key beneficiary of our optimisticstance on mortgage finance sector given emerging opportunities and government’sthrust on ‘affordable housing’ and ‘housing for all’ initiatives. We expect thecompany’s growth momentum to sustain given increased focus on LAP and gainingtraction in developer loan sanctions. Relative to other non-banking financecompanies, stability in LICHF’s earnings will be high as regulatory arbitrage isalready low (follows 90-day NPL recognition) and growth/asset quality prospectsare better.

Key risksDisbursements are losing traction in individual loans.

NIMs may come under pressure if unable to pass on the pressure of increasedfunding costs.

There could be further stress in corporate developer segment in tough macroenvironment.

LIC HOUSING FINANCEIndia Equity Research l Banking and Financial Services

Leading the pack

Company Profile


Absolute Rating BUY




MARKET DATA (R : LICH.BO, B: LICHF IN)








Financials







Edelweiss Securities LimitedEdelweiss Securities Limited7 1 Edelweiss Securities Limited


Net interest income/assets 2.3 2.3 2.6 2.5Non interest income/assets 0.3 0.2 0.2 0.2Net revenues/assets 2.6 2.6 2.8 2.7Operating expense/assets 0.4 0.4 0.4 0.4Provisions/assets 0.0 0.0 0.1 0.1Taxes/assets 0.6 0.7 0.8 0.7Total costs/assets 1.0 1.1 1.3 1.2ROA 1.6 1.4 1.5 1.5Equity/assets 8.5 7.9 7.5 7.6ROAE 18.8 18.1 19.8 19.3


Diluted EPS (INR) 26.1 27.5 33.3 37.9EPS growth (%) 28.7 5.2 21.1 14.1Book value per share 149.2 154.8 181.1 211.0Adjusted BV per share (INR) 144.3 151.6 177.0 206.2RoE (%) 18.8 18.1 19.8 19.3Diluted P/E (x) 16.4 15.6 12.9 11.3Price/ BV (x) 2.9 2.8 2.4 2.0Price/ Adj. BV (x) 3.0 2.8 2.4 2.1Dividend yield (%) 1.0 1.1 1.4 1.6


Net interest income 23.9 18.3 28.0 13.7Net revenues growth 24.6 15.2 24.7 13.7Opex growth 11.2 21.1 20.2 16.1PPP growth 27.2 14.2 25.5 13.3Provisions growth (72.8) (66.3) 1,577.5 (2.0)PAT growth 28.7 5.2 21.1 14.1


Yield on assets 11.1 10.9 10.8 10.6Yield on advances 9.9 9.9 9.9 9.9Cost of funds 9.5 9.3 9.0 8.7Spread 2.3 2.3 2.6 2.5Net interest margins 2.3 2.3 2.6 2.5Cost-income 14.5 15.2 14.7 15.0Tax rate 27.8 34.1 33.5 33.5




Interest income 90,903 105,761 122,085 137,367Interest expended 71,744 83,103 93,089 104,410Net interest income 19,158 22,658 28,996 32,957Non interest income 2,108 2,063 1,876 2,181- Fee & forex income 1,081 1,227 956 1,167- Misc. income 1,027 836 920 1,013Income from operations 21,266 24,721 30,872 35,137Other income 336 163 150 150Net revenues 21,602 24,884 31,022 35,287Operating expenses 3,132 3,792 4,558 5,292 - Employee exp 1,038 1,293 1,420 1,637 - Depreciation /amortisation 76 94 131 138 - Other opex 2,018 2,405 3,007 3,518Preprovision profit 18,470 21,092 26,464 29,995Provisions 215 72 1,214 1,190PBT 18,255 21,019 25,249 28,805Taxes 5,083 7,158 8,459 9,650PAT 13,172 13,862 16,791 19,155Reported PAT 13,172 13,862 16,791 19,155Basic number of shares (mn) 505 505 505 505Basic EPS (INR) 26.1 27.5 33.3 37.9Diluted number of shares (mn) 505 505 505 505Diluted EPS (INR) 26.1 27.5 33.3 37.9DPS (INR) 4.5 5.0 6.0 6.8Dividend pay out (%) 20.2 21.8 21.1 21.1

Sanctions and disbursementsYear to March FY14 FY15 FY16E FY17E

Sanctions (INR mn) 267,083 336,962 379,217 432,307Disbursements (INR mn) 252,712 303,266 341,295 389,076Disburse. to sanction ratio (%) 95 90 90 90Disbursements growth (%) 3.7 20.0 12.5 14.0Sanctions growth (%) 0.9 26.2 12.5 14.0



Share capital 1,010 1,010 1,010 1,010Reserves and surplus 74,319 77,174 90,429 105,551Shareholders' fund 75,329 78,184 91,439 106,561Long term borrowings 677,123 805,186 884,868 1,026,097Short term borrowings 143,233 160,133 221,217 256,524Total Borrowings 820,356 965,319 1,106,086 1,282,621Long term liab. & provisions 7,954 10,194 15,066 15,288Deferred tax liability (net) -2566 6690 6182 5603Sources of funds 901,073 1,060,387 1,218,773 1,410,073Gross Block 1181 1307 1582.698 1657.698Net Block 715 737 731 673Intangible assets 41 59 59 54Total fixed assets 756 797 790 727Non current investments 1,991 2,371 399 449Cash and cash equivalents 9,516 29,331 35609 40919Loans & advances 913,409 1,083,607 1,232,020 1,417,813Other assets 1,757 1,193 1344 1457Current assets (ex cash) 7,065 8,152 8875 9859Trade payable 256.0 274.6 254 258Other current liab. & prov. 33,165 64,789 60010 60893Total current liab. & prov. 33,421 65064 60264 61151Net current assets (ex cash)-26355.8 -56911.6 -51389.2 -51292.2Uses of funds 901,073 1,060,387 1,218,773 1,410,073Book value per share 149 155 181 211


Key takeawaysThe progress is not bad across India. 4-5 states are registering good positive trend(Rajasthan, AP, Telangana, Bihar, Gujarat and some parts of UP). On the otherhand, a few geographies are showing stress like Maharashtra, Karnataka, TamilNadu, MP and Kerala (to some extent WB and Assam too); these states contribute60-70% of NPLs and are also slow from the business perspective.

NPLs are on the higher side as customer has ability to pay current dues, butearnings are not high enough to clear past dues. During this time of stress, giventhe company’s relationship and understanding of the customer, MMFSL has stillnot resorted to re-possession of vehicles. However, now with coverage standing atcomfortable level (sufficient for principal protection), the company may resort torepossessing.

Cautiously aiming to move towards 120dpd recognition norm by FY16, but thetransition also depends on market conditions. GNPLs at 90dpd will be around25%.

The company provides for bad debts as follows: (i) 50% provisioning for accounton 11 month plus due; and (iii) 100% provisioning for accounts on 23 months plusdue.

Not chasing market share at this stage, but targets to maintain market share at alltimes.

AUM for Mahindra Housing Finance is INR30bn, of which 90% is towards ruraland 10% is urban / semi-urban.

Investment conclusionUnpleasant GNPA surprises in the recent past have resulted in volatile earnings.Though we repose faith in MMFS’ sound business model (strong brand, businessrelationships, geographical depth and product diversification), uncertainoperating performance and weak rural cash flows keep us guarded. Going forward,improvement will be contingent on rural cash flows; consequently, uncertainty onasset quality and limited levers for asset growth recovery may keep valuationsunder check.

Key risksMMFSL’s business model is directly linked to demand for underlying auto segmentshence earnings will be subject to the seasonality and cyclicality of the same.

MAHINDRA & MAHINDRA FINANCIAL SERVICES

India Equity Research l Banking and Financial Services

Rural play

Company Profile

February 15, 2016






MARKET DATA (R : MMFS.BO, B: MMFS IN)








Financials









Diluted EPS (INR) 15.6 14.6 9.7 17.3EPS growth (%) (4.9) (6.3) (33.5) 77.4Book value per share (INR) 90.5 100.6 106.3 118.5Adjusted BV per share (INR) 82.5 89.6 83.6 93.9Diluted P/E (x) 13.2 14.1 21.2 12.0Price/ BV (x) 2.3 2.1 1.9 1.7Price/ Adj. BV (x) 2.5 2.3 2.5 2.2Dividend yield (%) 1.4 1.5 0.9 1.6




Interest income 48,969 54,989 57,816 64,624Interest charges 21,880 24,967 27,290 30,081Net interest income 27,088 30,022 30,527 34,543Fee & other income 561 858 560 560Net revenues 27,650 30,880 31,087 35,104Operating expense 9,134 10,068 11,221 13,064 - Employee exp 2,973 4,591 5,493 6,465 - Depreciation /amortisation 243 415 377 455 - Other opex 5,918 5,062 5,351 6,144Preprovision profit 18,515 20,811 19,866 22,040Provisions 5,058 8,275 11,521 7,233PBT 13,458 12,536 8,345 14,807Taxes 4,585 4,219 2,812 4,990PAT 8,872 8,318 5,533 9,817Reported PAT 8,872 8,318 5,533 9,817Basic number of shares (mn) 563.2 563.8 568.8 568.8Basic EPS (INR) 15.8 14.8 9.7 17.3Diluted number of shares (mn)568.8 568.8 568.8 568.8Diluted EPS (INR) 15.6 14.6 9.7 17.3DPS (INR) 3.8 4.0 2.4 4.3Payout ratio (%) 28.4 32.7 29.3 29.3


Operating income growth 21.8 10.8 1.7 13.2Net revenues growth 21.5 11.7 0.7 12.9Opex growth 23.1 10.2 11.4 16.4PPP growth 20.7 12.4 (4.5) 10.9Provisions growth 78.5 63.6 39.2 (37.2)PAT growth 3.9 (6.2) (33.5) 77.4




Net interest income/Assets 10.5 10.0 9.3 9.4Other Income/Assets 0.2 0.3 0.2 0.2Net revenues/Assets 10.7 10.3 9.4 9.6Operating expense/Assets (3.5) (3.4) (3.4) (3.6)Provisions/Assets (2.0) (2.8) (3.5) (2.0)Taxes/Assets (1.8) (1.4) (0.9) (1.4)Total costs/Assets (7.3) (7.5) (7.8) (6.9)ROA 3.4 2.8 1.7 2.7Equity/Assets 18.5 17.9 17.8 17.5ROAE 18.6 15.5 9.4 15.4



Share capital 1,127 1,128 1,128 1,128Reserve and surplus 49,815 55,566 59,322 66,268Shareholder fund 50,942 56,694 60,451 67,396Long term borrowings 169,032 147,871 214,578 241,696Short term borrowings 70,275 114,762 91,962 103,584Total Borrowings 239,306 262,633 306,540 345,280Long term liab. & provisions 5,944 6,304 8,537 9,616Deferred tax liability (net) (3,151) (4,153) (4,806) (5,967)Sources of funds 293,042 321,479 370,721 416,326Gross block 1,989 2,311 2,898 3,498Net block 1,144 1,051 1,073 1,212Capital work in progress 2 3 5 5Intangible assets 49 47 48 54Total fixed assets 1,195 1,101 1,126 1,271Non current investments 5,263 7,599 4,838 5,018Cash and cash equivalents 8,962 5,731 6,189 7,526Loans & advances 296,170 329,298 370,476 418,055Other assets 1,359 2,320 17,107 17,631Current assets (ex cash) 558 540 5,132 5,289Trade payable 4,379 4,779 6,499 7,321Ot. cur. liabilities & prov. 16,086 20,331 27,648 31,144Total current liab. & prov. 20,464 25,110 34,147 38,464Net cur. assets (ex cash) (19,907) (24,570) (29,015) (33,175)Uses of funds 293,042 321,479 370,721 416,326Book value per share (INR) 90 101 106 118


Key takeawaysGrowth has come led by new businesses and new gold lending business model.Manappuram Finance (MFL) has made a strategic shift to short tenure gold loans,which has helped reduce auctions and improve profitability. Gold loans shouldgrow at 10% CAGR over next 2 years.

With many banks exiting the gold loans business and revamp of gold loan portfolioby the company, management is confident of increasing its market share.

Overall cost of funds reduced owing to better negotiation with banks and withbanks resorting to CPs. Around 20bps reduction in cost of funds can be attributedto reduction in base rates. Going forward, proportion of debentures may lowerwhereas proportion of CPs and banks would go up.

Yields have gone up owing to lower auctions since majority of loans is for 3months.

The company will move to 120 and 90dpd as per the RBI stated timelines only.

Management is confident that asset quality within different business segmentswill be maintained with sufficient collateral, manageable LTVs and strong team.

MFL is adequately capitalised and its subsidiaries would easily get capital as andwhen required from parent company. Subsidiaries would be able to leverage onbanking relationship of MFL to keep cost of funds under tab.

Investment conclusionMFL’s earnings have been volatile due to regulatory whip, auction and accountingpolicy change. With writing off of stressed pool during aggressive growth phaseand conservative policy of recognising income, NPL management should be better.Also, the RBI has reposed importance on organised way of monetising idle gold,indicating long-term sustainability of business model. Key monitorable for thestock will be emergence of stability in key business metrics namely, margins,growth and asset quality performance. MFL is also focused on diversifying itsbusiness model with MFI, CV and housing loans estimated to constitute more than25% in 3 years.

Key risksWe believe competitive intensity in gold loan financing is bound to rise in next fewyears, posing a risk to NIMs enjoyed by specialised gold loan financiers.

MANNAPURAM FINANCEIndia Equity Research l Banking and Financial Services

Gathering pace

Company Profile

February 15, 2016


Absolute Rating BUY




MARKET DATA (R : MNFL.BO, B: MGFL IN)







1 month (4.6) (6.4) (12.3)3 month 17.4 (7.4) (13.7)12 month (16.8) (15.3) (25.1)

Financials









Diluted EPS (INR) 2.7 3.2 3.1 3.6EPS growth (%) 8.4 19.8 -4.3 17.9Book value per share (INR) 29.6 31.2 33.4 36.0Adjusted BV per share (INR) 28.9 30.5 32.5 34.9Diluted P/E (x) 11.8 9.9 10.3 8.8Price/ BV (x) 1.1 1.0 1.0 0.9Price/ Adj. BV (x) 1.1 1.0 1.0 0.9Dividend yield (%) 6.2 6.2 2.6 3.1




Interest income 20,530 19,534 21,287 24,294Interest charges 10,266 8,727 9,178 10,379Net interest income 10,264 10,807 12,110 13,915Fee & other income 588 276 339 360Net revenues 10,852 11,083 12,448 14,275Operating expense 6,953 6,684 7,857 8,849 - Employee exp 3,235 3,109 3,821 4,325 - Depreciation /amort. 639 539 607 687 - Other opex 3,078 3,036 3,428 3,836Preprovision profit 3,899 4,399 4,592 5,427Provisions 469 275 693 756PBT 3,431 4,124 3,899 4,671Taxes 1,170 1,417 1,306 1,565PAT 2,260 2,707 2,593 3,106Reported PAT 2,260 2,707 2,593 3,106Basic number of shares (mn) 841 841 841 841Basic EPS (INR) 3 3 3 4Diluted number of shares (mn) 841 841 841 841Diluted EPS (INR) 3 3 3 4DPS (INR) 2 1 1 1Payout ratio (%) 67 35 25 25


Operating income growth 0.2 5.3 12.0 14.9Net revenues growth 0.7 2.1 12.3 14.7Opex growth 1.0 (3.9) 17.5 12.6PPP growth 0.2 12.8 4.4 18.2Provisions growth (43.4) (41.3) 151.9 9.1PAT growth 8.4 19.8 (4.2) 19.8




Net interest income/Assets 9.2 10.2 10.6 10.6Non-interest income/Assets 0.5 0.3 0.3 0.3Net revenues/Assets 9.7 10.5 10.9 10.9Operating expense/Assets (6.2) (6.3) (6.9) (6.8)Provisions/Assets (0.4) (0.3) (0.6) (0.6)Taxes/Assets (1.1) (1.3) (1.1) (1.2)Total costs/Assets (7.7) (7.9) (8.6) (8.5)ROA 2.0 2.6 2.3 2.4Equity/Assets 22.1 24.4 24.0 22.5ROAE 9.2 10.5 9.5 10.6



Share capital 1,682 1,682 1,682 1,682Reserves and surplus 23,235 24,829 26,661 28,854Shareholder fund 24,918 26,512 28,343 30,537Long term borrowings 14,546 12,588 14,014 16,969Short term borrowings 63,408 71,331 79,412 96,156Total borrowings 77,954 83,919 93,426 113,125Long term liabilities & prov. 2,726 1,495 1,566 1,743Deferred tax liability (net) (289) (296) (200) (240)Sources of funds 105,309 111,630 123,135 145,165Gross block 3,811 4,276 4,801 5,371Net block 1,911 1,668 1,590 1,479Capital work in progress 45 39 38 35Intangible assets 62 54 52 48Total fixed assets 2,019 1,761 1,679 1,562Non current investments 214 190 228 267Cash and cash equivalents 16,239 10,431 11,567 13,646Loans & advances 81,609 92,693 103,399 122,476Other assets 1,913 - - -Total current assets (ex cash) 6,102 8,049 7,829 8,957Trade payable 363 195 204 227Other current liab. & prov. 2,423 1,300 1,362 1,516Total current liab. & prov. 2,786 1,495 1,566 1,743Net current assets (ex cash) 3,316 6,554 6,263 7,214Uses of funds 105,309 111,630 123,135 145,165Book value per share (INR) 30 32 34 36


Key takeawaysMarico has taken a weighted average price correction of 6% across SKUs in January2016 to remain competitive as commodity prices softened further (8% QoQ); expectsto deliver volume growth of 5-7% in the near term.

The company is looking at sustainable 13-15% volume growth in VAHO goingforward. A new INR5 spout pack of Nihar Shanti amla is being prototyped in ruralareas in the North. The company may look into some promotions / price cuts inrecruiter packs.

Marico is confident of achieving double digit volume growth in Saffola goingforward.

Saffola oats will breakeven once it achieves the INR2bn mark (likely by FY18).

Marico will relaunch deo brand in February with Ranveer Singh as brandambassador.

International business delivered double digit volume growth after 14 quarters.Middle East posted 41% YoY cc growth; management expects this business to beprofitable in FY16.

Marico made strategic investment in Bellezimo. To roll out its hair care formats insalons channel.

Investment conclusionWe like Marico’s sharpened focus on new growth drivers like skin care, foodcategories and youth brands (focusing more on high-margin businesses of gels,hair gain products and serum rather than deos), which have been growing at a fastclip. Renewed focus to drive volume growth in business and sustain market sharegains remain key positives. We are enthused by Marico’s new initiatives in theVAHO segment (new INR5 spout pack of Nihar Shanti amla, Nihar Naturals SarsonKesh Tel extended to the Hindi-speaking states of North and East). Internationalbusiness is showing early signs of revival barring Bangladesh where it is lookingto focus on non-coconut oil portfolio.

Key risksVolatility in copra prices puts margin under pressure. Appreciation of INR againstEgyptian pound, Bangladeshi taka and other international currencies.

MARICOIndia Equity Research l Consumer Goods

Enriched spurt

Company Profile

February 15, 2016


Absolute Rating BUY




MARKET DATA (R : MRCO.BO, B: MRCO IN)






Stock Nifty EW Consumer Goods Index

1 month (1.9) (6.4) (5.0)3 month 15.4 (7.4) (5.0)12 month 23.6 (15.3) (7.2)

February 15, 2016




Financials


Revenues (INR mn) 46,865 57,330 61,886 69,607Rev. growth (%) 2.0 22.3 7.9 12.5EBITDA (INR mn) 7,480 8,701 10,830 12,668Adjusted Profit (INR mn) 4,854 5,735 7,342 8,656Adjusted Diluted EPS (INR) 3.8 4.5 5.7 6.7EPS growth (%) 33.8 18.1 27.3 17.9Diluted P/E (x) 60.3 51.0 40.1 34.0EV/EBITDA (x) 39.4 33.8 26.7 22.4ROAE (%) 29.5 36.2 35.4 32.5




ROAE (%) 29.5 36.2 35.4 32.5ROCE (%) 29.4 38.9 42.6 41.1Dabtor days 16 13 13 13Inventory Days 126 105 112 112Payable days 75 62 63 63Cash conversion cycle (days) 68 55 62 62Current ratio 2.3 2.4 3.0 3.5Gross Debt/EBITDA 0.9 0.5 0.3 0.3Gross Debt/Equity 0.5 0.2 0.2 0.1Adjusted debt/equity 0.5 0.2 0.2 0.1Interest coverage (x) 19.5 34.2 61.6 74.1


Revenues 2.0 22.3 7.9 12.5EBITDA 19.5 16.3 24.5 17.0PBT 33.9 18.3 28.4 17.9Adjusted Profit 33.8 18.1 28.0 17.9EPS 33.8 18.1 27.3 17.9




Net revenues 46,865 57,330 61,886 69,607Cost of materials 23,992 31,190 31,995 35,708Gross profit 22,874 26,139 29,891 33,898Employee costs 2,847 3,251 3,589 4,037Advertisement & sales costs 5,612 6,498 7,736 8,701Others 6,935 7,689 7,736 8,492EBITDA 7,480 8,701 10,830 12,668Depreciation 769 843 900 907EBIT 6,711 7,857 9,930 11,761Less: Interest Expense 345 229 161 159Add: Other income 579 589 782 839Profit Before Tax 6,946 8,217 10,551 12,441Less: Provision for Tax 1,905 2,368 3,060 3,608Less: Minority Interest 187 114 150 177Reported Profit 4,854 5,735 7,342 8,656Adjusted Profit 4,854 5,735 7,342 8,656No. of Shares outstanding (mn)1,290 1,290 1,290 1,290Adjusted Basic EPS 3.8 4.4 5.7 6.7No. of Dil. sh. outstanding (mn)1,282 1,282 1,290 1,290Adjusted Diluted EPS 3.8 4.5 5.7 6.7Adjusted Cash EPS 4.4 5.1 6.4 7.4Dividend per share (DPS) 2.0 1.3 1.4 1.7Dividend Payout Ratio (%) 55.1 30.4 27.0 27.0Tax rate 27.4 28.8 29.0 29.0


EBITDA (including other income) 7,538 8,913 11,612 13,507Tax (1,811) (2,097) (3,060) (3,608)Gross cash flow 5,727 6,817 8,552 9,899Less: Changes in WC 878 (169) (428) (773)Operating cash flow 6,605 6,648 8,124 9,126Less: Capex 7,374 (206) (1,050) (1,000)Free cash flow 13,979 6,442 7,075 8,126





Share capital 645 645 1,290 1,290Reserves & Surplus 12,961 17,603 22,317 28,636Shareholders' funds 13,606 18,248 23,607 29,926Minority interest 358 137 286 463Long term borrowings 2,515 1,687 1,490 1,293Short term borrowings 4,283 2,592 2,289 1,986Total Borrowings 6,798 4,279 3,779 3,279Long Term Liab. & Provisions 33 87 87 87Deferred tax liability 96 79 79 79Sources of funds 20,892 22,829 27,838 33,834Gross Block 9,634 9,841 10,841 11,841Net block 5,949 5,567 5,667 5,760Capital work in progress 44 30 80 80Intangible Assets 2,927 5,193 5,193 5,193Total Fixed Assets 8,920 10,790 10,940 11,032Non current investments 499 458 458 458Cash and cash equivalents 6,671 4,430 8,861 13,991Inventories 7,962 9,947 9,818 10,957Sundry debtors 2,232 1,768 2,204 2,479Loans and advances 1,474 2,298 2,298 2,298Other current assets 1,892 1,564 1,564 1,564Total current assets (ex cash) 13,560 15,576 15,883 17,297Trade payable 5,025 5,643 5,522 6,163Other current liab. & prov. 3,733 2,781 2,781 2,781Total current liab. & prov. 8,758 8,424 8,303 8,944Net current assets (ex cash) 4,802 7,152 7,580 8,353Uses of funds 20,892 22,829 27,838 33,834Book Value per share (INR) 10.6 14.2 18.3 23.2


Cost of materials 51.2 54.4 51.7 51.3Employee costs 6.1 5.7 5.8 5.8Advertising & sales costs 12.0 11.3 12.5 12.5Other general expenditure 14.8 13.4 12.5 12.2Depreciation 1.6 1.5 1.5 1.3Net interest expenditure 0.7 0.4 0.3 0.2EBITDA margin 16.0 15.2 17.5 18.2EBIT margin 14.3 13.7 16.0 16.9Net profit margin 10.8 10.2 12.1 12.7Tax rate 27.4 28.8 29.0 29.0


Key takeawaysIndia business

Motherson Sumi Systems (MSS) has not lost market share in wiring harnessbusiness. Its strategy is to focus on cash generation rather than market share.

Margin

Total 17 plants have been under various stages of construction. Of these, 7 plantsare now at handover stage. As and when production ramps up, SMRP BV’s marginswill improve.

Capacity addition (new plant in Mexico) and related overheads impacted Q3 SMPmargins. As and when share of new business increases, margin and hence RoCEwill improve. This happened in SMR as well. The timing difference could be higheras it depends on products as well as customer ramp up plans. Also, investment inSMP in new plants is far higher than SMR.

India business margin in Q3 was affected by the provision for bonus for 21 monthsas per the new act (INR120mn) and also by costs associated with Chennai floodsas the company’s plants were shut down.

Demand

Reiterated 2020 top line guidance of USD18bn and cited that volume growth willbe led by US, Europe, China and India (in that order). There are no further delays inany projects across customers and geographies. Won a new order from Daimlerworth INR2bn and new green field plants are being set up in US and Hungary.

Investment conclusionHistorically, MSS’ revenue and profit have catapulted ~5x every five years drivenby rising content per vehicle, diversified geography & clients and acquisitions.Our analysis of successful global leaders—Bosch, Johnson Control, Magna—indicates acquisitions have been integral to growth; MSS is treading the samepath. We believe India business remains a vital cog

Key risksMSS has too many subsidiaries/JVs, which complicates the ownership structures.

MOTHERSON SUMI SYSTEMSIndia Equity Research l Automobiles

Awaiting demand push

Company Profile

February 15, 2016






MARKET DATA (R : MOSS.BO, B: MSS IN)






Stock Nifty EW Auto Index

1 month (13.2) (6.4) (10.4)3 month 5.1 (7.4) (7.9)12 month (13.5) (15.3) (16.6)

February 15, 2016

Chirag Shah+91 22 6623 [email protected]

Karthik Subramaniam+91 22 6620 [email protected]

Financials


Revenues (INR mn) 304,279 345,852 384,543 442,882Rev. growth (%) 20.2 13.7 11.2 15.2EBITDA (INR mn) 25,852 27,674 34,271 42,311Adjusted Profit (INR mn) 8,943 10,829 13,134 15,747No. of Shares outstanding (mn) 1,323 1,323 1,323 1,323Adjusted Diluted EPS (INR) 6.8 8.2 9.9 11.9EPS growth (%) 68.0 21.1 21.3 19.9Diluted P/E (x) 35.6 29.4 24.2 20.2EV/EBITDA (x)* 21.2 20.4 16.6 13.6ROAE (%) 38.1 37.4 35.8 34.8

* Adjusted for concern share in SMRP - Samvardhana Motherson Automotive Systems group




EPS (INR) 6.8 8.2 9.9 11.9Y-o-Y growth (%) 68.0 21.1 21.3 19.9CEPS (INR) 12.9 15.1 17.5 20.3Diluted adjusted P/E (x) 35.6 29.4 24.2 20.2Price/BV (x) 10.7 9.6 7.8 6.2EV/Sales (x) 2.0 1.8 1.7 1.4EV/EBITDA (x) 21.2 20.4 16.6 13.6Dividend yield (%) 1.0 1.2 1.4 1.5




Reported Profit 7,651 11,919 13,902 18,227Add: Depreciation 8,172 9,206 10,003 11,045Interest (Net of Tax) 2,023 2,259 1,777 1,576Others 6,701 (2,137) 5,965 8,299Less: Changes in WC (2,403) (12,650) 6,934 3,097Operating cash flow 26,950 33,897 24,713 36,050Less: Capex 14,120 19,443 13,860 13,940Free cash flow 12,830 14,454 10,853 22,110




Income from operations 304,279 345,852 392,484 459,571Materials costs 193,614 216,314 246,615 287,768Staff costs 51,064 63,653 62,797 71,693S G & A expenses 33,749 38,211 46,675 52,623Total operating expenses 278,427 318,178 356,088 412,084EBITDA 25,852 27,674 36,396 47,487Depre.and amortisation 8,172 9,206 10,003 11,045EBIT 17,681 18,468 26,393 36,442Less: Interest Expense 2,944 3,178 2,538 2,284Add: Other income 3,106 4,643 3,439 3,260Add: Exceptional items (1,880) 1,534 - -Profit before tax 15,962 21,466 27,294 37,418Less: Provision for Tax 4,994 5,256 8,188 11,600Less: Minority Interest 3,316 4,295 5,203 7,591Add: Share of profit from assoc. (2) 4 - -Reported Profit 7,651 11,919 13,902 18,227Less: Excep. Items (Net of Tax) (1,292) 1,090 - -Adjusted Profit 8,943 10,829 13,902 18,227No. of Shares outstanding 1,323 1,323 1,323 1,323Adjusted Basic EPS 6.8 8.2 10.5 13.8No. of Dil. shares outstanding 1,323 1,323 1,323 1,323Adjusted Diluted EPS 6.8 8.2 10.5 13.8 Adjusted Cash EPS 12.9 15.1 18.1 22.1Dividend per share (DPS) 2.5 3.0 3.7 4.1Dividend Payout Ratio (%) 50.6 53.6 40.8 35.0


Operating expenses 91.5 92.0 90.7 89.7Materials costs 63.6 62.5 62.8 62.6Staff costs 16.8 18.4 16.0 15.6S G & A expenses 11.1 11.0 11.9 11.5Depreciation 2.7 2.7 2.5 2.4Interest expenditure 1.0 0.9 0.6 0.5EBITDA margins 8.5 8.0 9.3 10.3Net profit margins 4.0 4.4 4.9 5.6



Share capital 882 882 882 882Reserves & Surplus 28,711 32,356 40,590 52,447Shareholders' funds 29,593 33,238 41,472 53,328Minority interest 7,896 10,143 15,346 22,937Long term borrowings 38,286 43,061 38,061 38,061Short term borrowings 10,111 8,245 4,245 0Total Borrowings 48,397 51,306 42,306 38,061Deferred tax liability (net) 497 (452) (452) (452)Sources of funds 86,383 94,235 98,672 113,875Gross Block 126,336 126,440 140,300 154,240Net Block 56,485 57,755 61,612 64,507Capital work in progress 6,471 9,558 9,558 9,558Intangible assets 2,704 3,534 3,534 3,534Total Fixed assets 65,660 70,847 74,704 77,599Cash and cash equivalents 9,810 19,569 13,214 22,426Inventories 32,822 37,500 37,635 45,328Sundry debtors 32,384 30,144 38,711 45,328Loans & advances 9,728 13,130 10,753 12,591Other Current Assets 2,035 2,610 2,151 2,518Total cur. assets (ex cash) 76,969 83,384 89,250 105,764Trade payable 59,314 71,817 70,970 83,101Ot. Cur. Liab. & Sh. Term Prov. 6,742 7,748 7,527 8,814Total current liab. & prov. 66,057 79,565 78,497 91,914Net current assets (ex cash) 10,912 3,819 10,753 13,850Uses of funds 86,383 94,235 98,672 113,875BV 22 25 31 40


ROE (%) 38.1 37.4 38.1 38.8ROCE (%) 25.8 25.6 30.8 37.2Inventory days 55 59 56 53Debtors days 37 33 32 33Payble days 99 111 106 98Cash Conversion Cycle (7) (18) (18) (12)Current Ratio 1.3 1.3 1.3 1.4Gross Debt/EBITDA 1.9 1.9 1.2 0.8Gross Debt/Equity 1.3 1.2 0.7 0.5Adjusted Debt/Equity 1.3 1.2 0.7 0.5Net Debt/Equity 1.0 0.7 0.5 0.2Interest Coverage Ratio 6.0 5.8 10.4 16.0


Key takeawaysCompany strategy: NBCC is focusing on large-sized redevelopment projects whichhave better margins than its traditional work areas. The scheduled completiondate of the INR43bn Kidwai Nagar project is December 2019; the project is currentlyrunning ahead of schedule.

Competition: CPWD is the only other large PSU player capable of competing withNBCC as far as undertaking jobs from other government departments is concerned.However, it does not have any experience in real estate development; also being agovernment department and not a company, it cannot undertake marketing workwhich is a key component of redevelopment projects.

Guidance: The company expects to post a steady 25-30% revenue CAGR over thenext couple of years with expansion in margins due to operating leverage.

Redevelopment project: Approval for redevelopment of 4 government colonies inDelhi (~ INR200bn) is expected by September 2016 while that for development ofGhitorni project is expected by December 2016. Work on the Pragati Maidanredevelopment project will start in Q3FY17. Average execution time period forredevelopment project is 4-4.5 years. NBCC has tied up with Odisha governmentfor development of 5,000 flats (low cost housing). Work on the same is expected tobegin in a year. Ministry of Railways has nominated NBCC for redevelopment of 3railway stations in Lucknow, Delhi & Odisha. Funds will be generated from leasingof shops, developing budget hotels, shopping malls etc.

Investment conclusionSurging order book due to large opportunities in the redevelopment space areimproving NBCC’s revenue visibility. Likely improvement in margin trajectorydriven by increasing share of redevelopment projects, healthy order book, robustreturn ratios (24% RoEs) and cash-rich balance sheet make NBCC a worthwhile betin our view.

Key risksAverage size of projects being handled by the company is increasing and projectsalso involve higher level of complexity than what the company has encounteredso far. Completion of such projects within the stipulated time and costs will beparamount to maintain profitability.

NBCCIndia Equity Research l Infrastructure - Construction

Play on redevelopment opportunities

Company Profile

EDELWEISS RATINGS

Absolute Rating BUY


MARKET DATA (R : NATO.BO, B: NBCC IN)

CMP : INR 868Target Price : INR 1,27652-week range (INR) : 1214 / 702Share in issue (mn) : 120.0M cap (INR bn/USD mn) : 104 / 1529Avg. Daily Vol. BSE/NSE (‘000) : 579.1






1 month (4.9) (10.7) (5.8)3 month (7.5) (11.3) (3.8)12 month (15.6) 16.6 32.2

Financials


Revenue (INR mn) 40,397 46,621 59,630 76,349EBITDA (INR mn) 2,240 2,870 3,671 4,777Adjusted profit (INR mn) 2,472 2,773 3,353 4,420Shares outstanding (mn) 120 120 120 120Basic EPS (INR) 20.6 23.1 27.9 36.8P/E (x) 42.1 37.5 31.0 23.5ROAE (%) 23.8 22.6 22.5 23.5 February 15, 2016

Parvez Akhtar Qazi+91 22 4063 [email protected]

Rita Tahilramani+91 22 6623 [email protected]




Operating expenses 94.5 93.8 93.7 93.6EBITDA margins 5.5 6.2 6.3 6.4Depreciation 0.0 0.1 0.0 0.0Adjusted profit margins 6.1 5.9 5.8 6.1



Share capital 1,200 1,200 1,200 1,200Reserves & Surplus 10,073 12,041 15,527 20,167Shareholders' funds 11,273 13,241 16,727 21,367Long Term Liabilities & Prov. 532 450 450 450Deferred Tax Liability (net) (233) (195) (195) (195)Sources of funds 11,572 13,496 16,981 21,622Gross Block 354 415 480 553Net Block 225 262 302 347Total Fixed Assets 225 262 302 347Non current investments 242 262 262 262Cash and cash equivalents 12,853 11,943 14,358 19,682Inventories 9,967 11,457 15,602 19,044Sundry Debtors 13,164 17,041 23,226 27,495Loans & Advances 5,122 6,123 7,662 9,887Other Current Assets 102 161 102 102Total Curr. Assets (ex cash) 28,355 34,782 46,591 56,528Trade payable 9,420 15,140 20,373 25,934Other Curr. Liab. & ST Prov. 20,684 18,613 24,157 29,262Total Current Liab. & Prov. 30103 33753 44531 55196Net Current Assets (ex cash) (1,748) 1,029 2,061 1,332Uses of funds 11,572 13,496 16,981 21,622Book value per share (BV) 93.9 110.3 139.4 178.1




Income from operations 40,397 46,621 59,630 76,349Direct costs 35,790 41,237 52,684 67,379Employee costs 1,821 1,951 2,496 3,196Other expenses 546 563 720 921Total operating expenses 38,157 43,751 55,899 71,496EBITDA 2,240 2,870 3,731 4,853Depr. & amortisation 13 23 26 27EBIT 2,227 2,847 3,705 4,826Less: Interest Expense 224 402 325 307Add: Other income 1,333 1,466 1,468 1,936Profit before tax 3,335 3,910 4,847 6,454Less: Provision for Tax 864 1,137 1,362 1,814Reported Profit 2,471 2,773 3,485 4,641Adjusted profit 2,472 2,773 3,485 4,641No. of Sh. outstanding (mn) 120.0 120.0 120.0 120.0Adjusted Basic EPS 20.6 23.1 29.0 38.7Dil. Sh. outstanding (mn) 120 120 120 120Adjusted Diluted EPS 20.6 23.1 29.0 38.7Adjusted Cash EPS 19.6 23.6 29.3 38.9Dividend per share (DPS) 5.0 5.5 6.7 7.7Dividend Payout Ratio (%) 24.3 23.8 23.0 20.0


ROAE (%) 23.8 22.6 23.3 24.4Pre-tax ROCE (%) 34.3 35.2 34.5 35.5Inventory Days 83 95 93 91Debtors Days 101 118 118 116Payable Days 90 109 109 111Cash Conversion Cycle 94 104 102 96Current Ratio 0.9 1.0 1.0 1.0Net debt/ Equity (1.1) (0.9) (0.9) (0.9)Interest coverage ratio (x) 9.9 7.1 11.4 15.7


Reported profit 2,471 2,773 3,485 4,641Add: Depreciation 13 23 26 27Interest (Net of Tax) 166 285 234 221Add: Others (871) (1,080) (1,196) (1,335)Less: Changes in W. C. 5,549 2,859 1,032 (729)Operating cash flow (3,770) (857) 1,517 4,283Less: Capex (25) 61 65 73Free cash flow (3,744) (918) 1,452 4,211


Revenues 25.0 15.4 27.9 28.0EBITDA 15.5 28.1 30.0 30.1Adjusted profit 19.1 12.2 25.7 33.2EPS 18.3 12.2 25.7 33.2


Diluted EPS (INR) 20.6 23.1 27.9 36.8Y-o-Y growth (%) 18.3 12.2 20.9 31.8CEPS (INR) 19.6 23.6 28.2 37.1Diluted P/E (x) 42.1 37.5 31.0 23.5Price/BV(x) 9.2 7.9 6.3 4.9EV/Sales (x) 2.3 2.0 1.5 1.1EV/EBITDA (x) 40.7 32.1 24.5 17.9Dividend yield 0.6 0.6 0.7 0.8


Key takeawaysCess rationalisation: ONGC expects 10% ad-valorem cess to be introduced in theupcoming budget, a significant reduction from the current fixed rate of INR4,500/tonne (~30% implied rate), which will be a huge relief in the current low priceenvironment.

5% custom duty on crude: To offset the revenue loss, the company expects thegovernment will reinstate 5% customs duty. As India meets 80% of its oilrequirements through imports, this will neutralise the impact of cess reduction.

Higher development activity: Despite higher drilling activity, expects lower capexfor FY17 at INR290bn (INR320bn in FY16), primarily benefitted from reduction inservice costs. Expects capex to be funded through internal accruals.

Expect 15-20% reduction in gas price from April’16 (currently at USD4.2/mmbtu atNCV).

Key projects status

KG DWN 98/2: Expects remunerative gas price for the deep-water block to beannounced by end of March’16. Project break-even at USD6-7/mmbtu.

Mozambique: Expect FID to be signed by Dec’16 and the project will be based onthe term-sheets signed by Anadarko for LNG trains.

Investment conclusionGas price premium: Clarity on domestic gas price premium for deepwater/difficultfields will boost capital expenditure. In addition, eventual oil recovery will boostearnings recovery. Improved upstream policy making: Marginal field policy andthe more recent draft upstream policy will be long term positives for the sectorencouraging upstream investments.

Key risksLower than expected crude prices will impact the company’s crude realisationsand earnings. Additionally, net realisations also depend on upstream subsidysharing.

ONGCIndia Equity Research l Oil, Gas and Services

Value play

Company Profile

February 15, 2016


Absolute Rating BUY




MARKET DATA (R : ONGC.BO, B: ONGC IN)








February 15, 2016

Jal Irani+91 22 6620 [email protected]

Yusufi Kapadia+91 22 4065 [email protected]

Financials


Revenues (INR mn) 1,745 1,609 1,323 1,369Rev. growth (%) 7.4 (7.8) (17.8) 3.5EBITDA (INR mn) 580 536 520 549Net profit (INR mn) 263 186 186 214Share outstanding (mn) 8,555 8,555 8,556 8,556EPS (INR) 30.7 21.8 21.8 25.0EPS growth (%) 8.4 (29.0) 0.0 14.6Diluted P/E (x) 6.5 9.2 9.2 8.0EV/EBITDA (x) 3.0 3.2 3.3 3.1ROE (%) 16.0 10.1 9.6 10.5




Reported Profit 265 183 221 255Add: Depreciation 251 290 293 307Interest (Net of Tax) 4 18 20 20Others (85) (92) (44) (47)Less: Changes in WC (98) 60 119 28Operating cash flow 533 340 371 507Less: Capex 616 354 564 465Free cash flow (83) (14) (193) 42




Net revenues 1,745 1,609 1,430 1,582Statutory levies 262 255 227 245Other expenditure 893 807 603 662Provisions & Write-offs 11 11 11 11EBITDAX 580 536 589 664Recouped cost 251 290 293 307EBIT 329 246 296 356Interest expenses 6 29 29 30Other income 69 60 52 40Profit before tax 394 274 318 366Provision for tax 128 97 104 119Profit after tax 265 183 221 255Less: Minority interests 2 (6) (6) (7)PAT after minority interest 263 186 223 255Adjusted net profit 263 186 223 255EPS (INR) basic 30.7 22 26 30Diluted equity shares (mn) 8,555 8,555 8,556 8,556Dividend payout (%) 36.1 50.9 47.8 45.5Tax rate (%) 32.4 35.4 32.5 32.4


Operating expenses 66.8 66.7 58.8 58.0Staff costs 14.5 14.9 8.4 8.4S G & A expenses 49.7 48.7 41.3 41.0Depreciation 14.4 18.0 20.5 19.4Interest Expense 0.4 1.8 2.0 1.9EBITDA margins 33.2 33.3 41.2 42.0Net Profit margins 15.1 11.2 15.2 15.7


Diluted EPS (INR) 30.7 21.8 21.8 25.0Y-o-Y growth (%) 8.4 (29.0) 0.0 14.6CEPS 55.2 43.7 42.1 44.2Diluted P/E (x) 6.5 9.2 9.2 8.0Price/BV (x) 1.0 0.9 0.9 0.9EV/Sales (x) 1.0 1.1 1.3 1.3EV/EBITDA (X) 3.0 3.2 3.3 3.1


Revenues 7.4 (7.8) (11.1) 10.7EBITDA 5.6 (7.6) 9.9 12.7PBT 7.3 (30.6) 16.3 15.1Net profit 9.5 (30.8) 20.6 15.4EPS 8.4 (29.0) 19.7 14.3



Share capital 43 43 43 43Reserves & Surplus 1,679 1,762 1,868 2,002Shareholders' funds 1,722 1,805 1,911 2,044Minority Interest 29 25 18 11Long term borrowings 317 476 491 523Short term borrowings 174 64 59 46Total Borrowings 491 539 550 569Long Term Liab. & Provisions 323 346 346 346Deferred Tax Liability (net) 179 182 182 167Sources of funds 2,743 2,897 3,008 3,138Gross Block 1,404 1,707 1,919 2,012Net Block 462 687 861 916Capital work in progress 720 634 611 738Intangible Assets 1,097 1,113 1,233 1,208Total Fixed Assets 2,280 2,433 2,704 2,862Non current investments 149 155 102 102Cash and cash equivalents 245 161 103 50Inventories 148 106 128 141Sundry Debtors 160 188 184 203Loans & Advances 68 100 132 164Other Current Assets 192 228 159 161Total Current Assets (ex cash) 568 622 603 669Trade payable 307 304 129 143Ot. Cur. Liab. & Short Term Prov. 192 171 377 403Total Current Liab. & Provisions 499 474 505 545Net Current Assets (ex cash) 69 148 98 124Uses of funds 2,743 2,897 3,008 3,138Book Value per share (INR) 201 211 223 239


ROAE (%) (on adjusted profits) 19.9 13.3 14.3 15.5ROACE (%) 16.0 10.1 11.5 12.4Inventory days 28.4 28.3 29 30Debtors days 32.9 39.5 47 45Payable days 51.6 69.3 55 31Cash conversion cycle 9.7 (1.4) 20.9 43.1Current ratio 1.6 1.7 1.4 1.3Debt/EBITDA 0.3 0.3 0 0Interest coverage 52.7 8.6 10.1 11.8Fixed assets t/o (x) 1.3 1.0 0.7 0.8Debt/equity 0.5 0.3 0.3 0.3


Key takeawaysManagement foresees 13-14% growth in beverages segment over the next 2-3 years.

Management believes there is good reason for the government to go to 10% blending.Currently, 4.2% blending has been achieved against targeted 5%.

Under the waste water segment the company has the ability to select the bestmembrane and integration of technologies such as chemical, biological, filtrationand thermal. The total market size as per management is around 30,000mn.

In the emerging business, management expects effluent treatment plant businessto ramp up significantly given government’s focus on stricter pollution norms.

Management is confident that the next gen cellulose, which is manufactured usingagricultural residue, will be taken to commercial scale.

Praj currently has a revenue mix of 70:30 for ethanol and emerging businesses;target is to achieve 50:50 revenue mix by FY17.

Investment conclusionDiversification to high growth segments imparts scalability

Praj has diversified its revenue base over the past four-five years with core businesscontribution moving from 100% to 72% currently; emerging businesses—criticalprocess equipment, waste water, Neela—contribute the balance. The companyaims to further improve overall revenue mix to 50:50 by FY18E led by stable growthin conventional and high growth (25% CAGR) in emerging businesses.

Core business steady; brewery business gaining traction

Led by global references and ethanol blending mandates in key export regions likeUS, Brazil, Columbia, Peru, Thailand, Malaysia etc, Praj has sustained a steadyposition in the global ethanol market. Its brewery business recently bagged twolarge projects overseas and expects to sustain the increased momentum.

Key risksSlowdown in industrial capex.

Letdown of the 2G plant.

PRAJ INDUSTRIESIndia Equity Research l Engineering and Capital Goods

Strong fundamentals

Company Profile

EDELWEISS RATINGS

Absolute Rating BUY


MARKET DATA (R : PRAJ.BO, B: PRJ IN)







1 month (8.5) (0.1) 8.43 month (6.3) 7.0 13.212 month (3.6) 45.0 48.6

Financials


Revenues (INR mn) 9,858 10,118 10,444 12,819Rev. growth (%) 2.6 2.6 3.2 22.7EBITDA (INR mn) 785 927 1,154 1,389Adjusted profit (INR mn) 547 762 726 876EPS (INR) 3.0 4.1 4.2 3.1EPS growth (%) (53.2) 33.1 4.4 (27.1)Diluted P/E (x) 27.5 19.7 20.7 17.2ROAE (%) 9.4 12.6 11.4 12.9 February 15, 2016






Revenues 2.6 2.6 3.2 22.7EBITDA (7.6) 18.1 24.6 20.4Adjusted Profit (27.1) 39.4 (4.8) 20.7EPS (27.1) 39.4 (4.8) 20.7


Diluted EPS (INR) 3.1 4.3 4.1 4.9Y-o-Y growth (%) (27.1) 39.4 (4.8) 20.7CEPS (INR) 4.4 6.0 6.3 7.2Diluted P/E (x) 27.5 19.7 20.7 17.2Price/BV(x) 2.6 2.4 2.3 2.1EV/Sales (x) 1.4 1.3 1.2 1.0EV/EBITDA (x) 17.9 13.9 10.9 9.0Dividend yield (%) 2.6 1.9 2.1 2.3


Reported Profit 547 762 726 876Add: Depreciation 238 378 385 409Interest (Net of Tax) 11 22 16 24Add: Others (128) 67 8 6Less:Changes in working cap. 701 (270) 213 475Opertaing cash flow (34) 1,500 923 840Less: Capex 381 (43) 260 260Free cash flow (415) 1,543 663 580


ROAE (%) 9.4 12.6 11.4 12.9ROACE (%) 12.9 13.9 15.3 17.2Inventory (days) 101 79 70 63Debtors (days) 118 108 101 95Payable (days) 162 136 128 115Cash conversion cycle 57 52 44 43Current ratio 1.5 1.6 1.7 1.8Gross Debt/EBITDA 0.3 0.2 0.2 0.3Interest cover (x) 38.0 22.2 34.5 30.4




Income from operations 9,858 10,118 10,444 12,819Materials costs 4,791 5,060 5,065 6,313Employee cost 1,240 1,331 1,345 1,651Other manuf. expenses 3,043 2,801 2,880 3,466Total operating expenses 9,074 9,192 9,290 11,430EBITDA 785 927 1,154 1,389Depreciation and amortisation 238 378 385 409EBIT 547 548 769 981Interest expense 14 25 22 32Other income 238 340 267 276Profit before tax 770 864 1,014 1,224Provision for tax 204 82 264 318Minority interest 19 20 25 30Reported Profit 547 762 726 876Less: Exceptional Items 0 0 0 0Adjusted Profit 547 762 726 876Equity shares outstanding (mn) 177 177 177 177EPS (INR) basic 3.1 4.3 4.1 4.9Diluted shares (mn) 177 177 177 177EPS (INR) fully diluted 3.1 4.3 4.1 4.9CEPS (INR) 4 6 6 7DPS 2.2 1.6 1.8 2.0Dividend payout (%) 84.0 44.0 50.8 46.3


Operating expenses 92.0 90.8 88.9 89.2Material cost 48.6 50.0 48.5 49.2Employee cost 12.6 13.2 12.9 12.9Other manufacturing exp. 30.9 27.7 27.6 27.0Depreciation and amortisation 2.4 3.7 3.7 3.2Interest expenditure 0.1 0.2 0.2 0.3EBITDA margins 8.0 9.2 11.1 10.8Net profit margins 5.7 7.7 7.2 7.1



Equity capital 355 355 355 355Reserves & surplus 5,470 5,867 6,223 6,694Shareholders funds 5,825 6,222 6,578 7,048Minority Interest 214 148 173 203Long term borrowings 2 2 2 2Short term borrowings 212 171 271 371Total Borrowings 213 173 273 373Deferred tax (Net) 75 (12) (12) (12)Long Term Liab. & Provisions 96.31 120.6 120.6 120.6Sources of funds 6,424 6,651 7,132 7,732Gross Block 3,803 3,847 4,097 4,347Net Block 2,664 2,393 2,258 2,099Capital work in progress 16 14 24 34Intangible Assets 560 626 626 626Total Fixed Assets 3,239 3,033 2,908 2,759Non current investments 50 100 110 120Inventories 1,222 976 971 1,211Sundry debtors 3,203 2,805 2,995 3,677Cash and cash equivalents 1,433 2,479 2,862 3,126Loans and advances 2,493 1,447 1,664 1,864Other current assets 1,099 1,295 1,360 1,428Total current assets (ex cash) 8,017 6,524 6,991 8,179Trade payable 1,998 1,772 1,776 2,214Ot. Cur. Liab. & Sh. Term Prov. 4,317 3,712 3,963 4,238Total current liab. & prov. 6,315 5,484 5,739 6,452Net current assets (ex cash) 1,701 1,039 1,252 1,727Uses of funds 6,424 6,651 7,132 7,732Book value per share (BV) (INR) 33 35 37 40


Key takeawaysPrism Cement, being a diversified building materials provider (with presence incement, Ready Mix Concrete (RMC) and tiles business), expects to benefit from theimproving economic outlook and the government’s focus on infrastructure growthin the country.

In cement, it expects to benefit from:

Presence in a cluster - Satna (MP, Central India) which has historically witnesseda growth of 1.5x the national average.

No new capacities in progress in the cluster and imminent industry consolidation.

Low average lead distance of 399km, ~64% exposure to railway for transport, 81%sales through a wide trade network of ~3,800 dealers.

In RMC, it expects to benefit from:

Expected industry growth of >20% p.a. led by growth of cement consumption inIndia and rampant conversion from site-mix to ready-mix for construction. While~10% of total cement used for concrete in India is sold through RMC channel, indeveloped countries, the ratio is as high as 50-70%.

Prism RMC is the 2nd largest player in India with national footprint—81 plants in35 cities / towns and benefits of backward integration at select plants. While itssales in RMC clocked ~39% CAGR over FY03-12, past 3 years have been flattish dueto subdued economy.

In the tiles space, the company will benefit from:

Its wide range of products like tiles, sanitary ware, bath fittings, modular kitchens,construction chemicals.

Strong brand equity and large, national trade network of ~10,000 retail points.

Overall, the company is well positioned to capture benefits of expected demandrevival in cement and also rise in overall construction activity in India.

Key risksDemand disappointment due to lower than expected recovery.

PRISM CEMENTIndia Equity Research l Cement

Integrated building material player

Company Profile


EDELWEISS RATINGS


MARKET DATA (R : PRIS.BO, B: PRSC IN)








February 15, 2016

Financials


Revenue 45,962 48,206 50,266 56,544Revenue Growth (%) 33.3 4.9 4.3 12.5EBITDA 3,180.6 3,181.4 1,955.3 3,506.7Net Profit (169) (605) (850) 48Shares Outstanding (crs.) 503.4 503.4 503.4 503.4Diluted EPS (INR) (0.4) (1.2) (1.7) 0.1EPS Growth (%) NA NA NA NADiluted P/E (x) NA NA NA NAEV/EBITDA (x) 16.1 17.5 28.8 16.5RoE (%) (0.6) (2.0) (2.6) 0.1




Materials costs 40.0 38.9 39.3 39.8Depreciation 3.5 3.7 4.0 2.9EBITDA margins 6.9 6.6 3.9 6.2EBIT margins 3.4 2.9 (0.1) 3.3Net profit margins (0.4) (1.3) (1.7) 0.1



Equity capital 5,034 5,034 5,034 5,034Reserves & surplus 7,072 6,453 5,555 5,510Borrowings 16,862 21,307 22,228 23,834Deferred Tax Liabilities (Net) 1,238 929 451 185Minority Interest 513 533 545 571Sources of funds 30,720 34,255 33,812 35,133Net Fixed Assets 23,041 24,393 25,373 24,846Investments 3,545 3,462 2,259 2,176Inventories 5,157 5,870 5,744 7,135Sundry debtors 3,285 4,763 5,313 5,829Cash & Bank Balances 926 989 1,107 1,296Other Current assets 87 731 782 893Loans and advances 4,382 5,450 5,512 6,324Total current assets 13,838 17,803 18,458 21,478Sundry creditors and others 8,867 10,789 11,546 12,475Provisions 838 614 732 891Total current liab. & prov. 9,704 11,402 12,278 13,367Net current assets 4,133 6,400 6,180 8,111Uses of funds 30,720 34,255 33,812 35,133


Diluted EPS (Rs.) (0.4) (1.2) (1.7) 0.1YoY growth (%) NA NA NA NADiluted PE (x) NA NA NA NAPrice/BV (x) 2.9 3.1 3.3 3.3EV/Sales (x) 1.1 1.2 1.1 1.0EV/EBITDA (x) 16.1 17.5 28.8 16.5Dividend yield (%) 0.7 0.8 0.0 0.0


Net profit (169) (605) (850) 48Add : Depreciation 1,622 1,799 2,004 1,649Others 1,494 1,634 834 2,744Gross cash flow 2,948 2,827 1,988 4,441Less: Changes in WC (281) (228) (1,422) (2,463)Operating cash flow 2,667 2,599 566 1,978Less: Capex 3,018 3,109 2,905 1,080Free cash flow (351) (510) (2,339) 898




Net revenue 45,962 48,206 50,266 56,544Materials costs 18,404 18,733 19,732 22,519Gross profit 27,558 29,472 30,533 34,026Power & Fuel Cost 8,581 8,889 9,514 9,354Freight Cost 5,232 5,926 6,393 7,259Other Cost 10,564 11,476 12,671 13,907EBITDA 3,181 3,181 1,955 3,507Depreciation & Amortization 1,622 1,799 2,004 1,649EBIT 1,558 1,383 (48) 1,858Other income 136 159 1,588 968Extraordinary Items 62 50 30 (48)EBIT incl. other income 1,633 1,492 1,510 2,874Interest expenses 1,914 2,339 2,803 2,948Profit before tax (281) (847) (1,292) (74)Provision for tax (112) (242) (442) (122)Net profit (169) (605) (850) 48Minority Interest 16 20 12 22Adj Net Profit (184) (625) (862) 26Basic shares outstanding (mn) 503 503 503 503EPS (INR.) (0.37) (1.24) (1.71) 0.05Dividend per share (INR.) 0.5 0.6 0.0 0.0Dividend payout (%) (136.5) (46.8) N/A 0.4


ROAE (%) (1.2) (5.5) (20.4) (4.6)ROACE (%) 5.9 4.8 4.6 8.6Inventory day 37 42 42 42Debtors days 24 30 37 36Payable days 61 74 81 78Cash conversion cycle (days) 0 (2) (2) 0Current ratio 1.4 1.6 1.5 1.6Debt/Equity 1.4 1.9 2.1 2.3


Revenues 33.3 4.9 4.3 12.5EBITDA NA 0.0 (38.5) 79.3PBT NA NA NA NANet profit NA NA NA NA


Key takeawaysLife insurance: (i) Individual WRP decreased primarily due to: (a) decline in ULIPsales due to focus on traditional business; and (b) exit from third party distributionpartnerships due to poor-quality business. Persistency of 57% in Q3FY16 (versus53% in Q3FY15) owing to focus on agency and propriety channel which has higherpersistency. Management expects this to further improve going forward.

Commercial finance: Key growth drivers will be SME and housing segments. Focusof housing segment is on affordable housing (beyond the metros). 100% of thebook continues to be secured. Within home loan book, 80% loans offered to non-salaried segment.

General insurance: Motor business contributed 63% of overall business mix. Thefocus is now tilting towards non-motor business. There was impact of INR129mn(gross claims of INR860mn) on account of Chennai floods (industry estimatesgross claims of INR45bn).

Other highlights: Management expects cash infusion from foreign partner toconclude in near future, which will be used to run-down the CP book.

The company plans to sell non-core assets and various real estate properties topare debt. On combined basis, there will be marginal gains in investment book,after considering non realised gains.

Exploring strategic alliance with AMCs in US and Europe, on the same lines as wasdone with Samsung, Korea.

Investment conclusionRCap’s earnings have been volatile over past few quarters due to stake sale andconsolidation of group entities. After being in consolidation phase, the company’score businesses, viz., AMC and commercial financing, have stabilised a tad orimproved. Stake sale and monetisation will not only boost RoE, but also helpdeleverage balance sheet. Taking cognizance of its inherent value in life insuranceand asset management businesses, coupled with scale up in consumer financing,we are positive on the stock.

Key risksExecution failure is the key business risk.

RELIANCE CAPITALIndia Equity Research l Banking and Financial Services

Financial powerhouse

Company Profile

February 15, 2016


Absolute Rating BUY




MARKET DATA (R : RLCP.BO, B: RCAPT IN)








February 15, 2016




Financials

Businesses Method Value Value per(INR mn) Share (INR)

Asset management % of AUMs 42,152 172Life Insurance* Appraisal value 65,786 268Retail broking business PE 148 1Consumer finance business PB 32,988 134General Insurance Eco. profit multiple 11,147 45Excess NW/Investments Market value 19,450 79Total 171,670 699Fair Value (post holding company discount) 137,336 594

* for 74% stake in life insurance & 51% stake in asset management businesses



Valuation metricsYear to March FY14 FY15 FY16E FY17E

Diluted EPS (INR) 30.4 40.7 55.3 42.7EPS growth (%) (8.7) 33.8 35.8 (22.8)Book value per share (INR) 527.2 559.2 605.7 639.6Diluted P/E (x)* 11.2 8.4 6.2 8.0Price/ BV (x)* 0.6 0.6 0.6 0.5Dividend yield (%) 2.0 2.0 2.0 2.0

* for 74% stake in life insurance & 51% stake in asset managementbusinesses




Interest income 22,077 23,682 26,028 28,719Interest expended 22,305 23,864 25,981 27,704Net interest income (228) (181) 47 1,015Non interest income 53,028 62,970 73,461 74,378- Misc. income 16,202 21,790 25,525 20,172- Investment advisory fee 7,519 9,157 10,707 12,136- Gen. ins. premium earned 25,729 28,710 33,467 38,041- Reliance Money 3,577 3,314 3,762 4,030Net revenues 52,800 62,789 73,509 75,393Operating expenses 43,398 47,868 53,756 59,749 - Employee exp 5,932 6,682 6,954 7,506 - Depreciation /amortisation 830 826 824 822 - Other opex 36,636 40,360 45,978 51,420Preprovision profit 9,402 14,921 19,752 15,644Provisions 871 1,222 1,966 1,747PBT 8,531 13,699 17,786 13,897Taxes 1,689 3,627 4,493 3,957PAT 6,842 10,071 13,293 9,940Share of assoc. /min. int. (640) 60 (300) (550)PAT after minority interest 7,482 10,011 13,593 10,490Basic number of shares (mn) 246 246 246 246Basic EPS (INR) 30.4 40.7 55.3 42.7Diluted number of shares (mn) 246 246 246 246Diluted EPS (INR) 30.4 40.7 55.3 42.7DPS (INR) 7.5 7.5 7.5 7.5Dividend pay out (%) 28.8 21.4 15.8 20.5


Net revenues growth (0.8) 18.9 17.1 2.6Opex growth 5.0 10.3 12.3 11.1PPP growth (20.8) 58.7 32.4 (20.8)Provisions growth (74.9) 40.4 60.9 (11.1)PAT growth (8.7) 33.8 35.8 (22.8)



Share capital 2,462 2,462 2,462 2,462Revenue and surplus 127,184 135,039 146,477 154,811Shareholder fund 129,645 137,501 148,939 157,273Preference share capitalMinority interest 2,903 4,203 5,403 6,603Long term borrowings 114,910 126,010 136,510 153,010Short term borrowings 76,606 84,006 91,006 102,006Loan funds 191,516 210,016 227,516 255,016Deferred tax liability/asset 201 201 201 201Sources of funds 324,266 351,921 382,059 419,093Total net fixed assets 764 730 701 676Non current investments 142,983 149,182 156,205 164,165Current investments 15,887 16,576 17,356 18,241Cash and cash equivalents 8,569 16,995 22,749 29,886Loans & advances 174,461 193,681 214,384 237,305Other assets 133 133 133 133Total current assets (ex cash)26,025 26,007 30,116 38,126Other current liab. & prov. 44,557 51,382 59,585 69,439Total current liab. & prov. 44,557 51,382 59,585 69,439Net current assets (ex cash) (18,532) (25,375) (29,469) (31,313)Application of funds 324,266 351,921 382,059 419,093


Key takeawaysCess rationalisation: ONGC expects 10% ad-valorem cess to be introduced in theupcoming budget, a significant reduction from the current fixed rate of INR4,500/tonne (~30% implied rate), which will be a huge relief in the current low priceenvironment.

5% custom duty on crude: To offset the revenue loss, the company expects thegovernment will reinstate 5% customs duty. As India meets 80% of its oilrequirements through imports, this will neutralise the impact of cess reduction.

Higher development activity: Despite higher drilling activity, expects lower capexfor FY17 at INR290bn (INR320bn in FY16), primarily benefitted from reduction inservice costs. Expects capex to be funded through internal accruals.

Expect 15-20% reduction in gas price from April’16 (currently at USD4.2/mmbtu atNCV).

Key projects status

KG DWN 98/2: Expects remunerative gas price for the deep-water block to beannounced by end of March’16. Project break-even at USD6-7/mmbtu.

Mozambique: Expect FID to be signed by Dec’16 and the project will be based onthe term-sheets signed by Anadarko for LNG trains.

Investment conclusionGas price premium: Clarity on domestic gas price premium for deepwater/difficultfields will boost capital expenditure. In addition, eventual oil recovery will boostearnings recovery. Improved upstream policy making: Marginal field policy andthe more recent draft upstream policy will be long term positives for the sectorencouraging upstream investments. Smart overseas acquisitions: We believe OVL’srecent stake acquisition in Rosneft’s producing Vankor field appears to be anintuitively smart acquisition. It requires limited capex outlay and will givesignificant boost to OVL’s production prospects.

Key risksLower than expected crude prices will impact the company’s crude realisationsand earnings.

RELIANCE INDUSTRIESIndia Equity Research l Oil, Gas and Services

Growth at reasonable price

Company Profile

February 15, 2016


Absolute Rating BUY




MARKET DATA (R : RELI.BO, B: RIL IN)

CMP : INR 945Target Price : INR 1,27052-week range (INR) : 1089 / 796Share in issue (mn) : 3,239.2M cap (INR bn/USD mn) : 3060 / 44913Avg. Daily Vol. BSE/NSE (‘000) : 4,132.3





Stock Nifty EW O & G Index


February 15, 2016


Yusufi Kapadi+91 22 4063 [email protected]

Financials


Revenues (INR mn) 4,344,600 3,754,350 2,630,455 3,086,567Rev. growth (%) 9.4 (13.6) (29.9) 17.3EBITDA (INR mn) 347,990 373,640 463,372 536,543Net profit (INR mn) 224,930 235,660 266,009 279,219Share outstanding (mn) 2,894 2,894 2,894 2,894EPS (INR) 77.7 81.4 91.9 96.5EPS growth (%) 9.3 4.8 12.9 5.0Diluted P/E (x) 12.2 11.6 10.6 10.1EV/EBITDA (x) 9.8 10.0 8.8 7.6ROE (%) 11.8 11.2 11.5 11.0






Net revenues 4,344,600 3,754,350 2,630,455 3,086,567Raw material costs 3,630,220 2,940,460 1,743,494 1,907,487Gross profit 714,380 813,890 886,961 1,179,079Employee expenses 55,720 62,620 51,545 177,333Other expenses 310,670 377,630 372,044 465,203EBITDA 347,990 373,640 463,372 536,543Dep. & amortisation 112,010 115,470 117,106 170,423EBIT 235,980 258,170 346,266 366,120Interest expense 38,360 33,160 48,063 70,004Other income 90,010 84,950 68,725 65,235Profit before tax 287,630 309,960 422,157 361,351Less: Provision for Tax 62,150 74,740 110,819 80,810Less: Minority Interest 550 740 1,146 1,323Add: Share of pr. from associates 0 1,180 0 0Reported Profit 224,930 235,660 310,191 279,219Exceptional Items 0 0 44,183 0PAT after minority interest 224,930 235,660 310,191 279,219Adjusted net profit 224,930 235,660 266,009 279,219EPS (INR) basic 77.7 81 92 96Diluted equity shares (mn) 2,894 2,894 2,894 2,894Dividend payout (%) 14.3 14.3 14.3 19.8Tax rate (%) 21.6 24.1 26.3 22.4


Revenues 9.4 (13.6) (29.9) 17.3EBITDA 5.3 7.4 24.0 15.8PBT 9.7 7.8 36.2 (14.4)Net profit 7.7 4.8 12.9 5.0EPS 9.3 4.8 12.9 5.0


Reported profit 224,930 235,660 310,191 279,219Add: Depreciation 112,010 115,470 117,106 170,423Interest (Net of tax) 30,071 25,164 35,446 54,349Others (44,701) (294,334) (54,528) (47,334)Less:Changes in WC (110,300) (263,700) (58,724) (25,028)Operating cash flow 432,610 345,660 466,939 481,685Less: Capex 600,870 633,640 325,642 309,187Free cash flow (168,260) (287,980) 141,297 172,499


Diluted EPS (INR) 77.7 81.4 91.9 96.5Y-o-Y growth (%) 9.3 4.8 12.9 5.0CEPS 117.4 125.4 132.5 155.7Diluted P/E (x) 12.2 11.6 10.6 10.1Price/BV (x) 1.4 1.3 1.2 1.1EV/Sales (x) 0.8 1.0 1.6 1.3EV/EBITDA (X) 9.8 10.0 8.8 7.6


Operating expenses 8.4 11.7 16.1 20.8Materials costs 83.6 78.3 66.3 61.8Staff costs 1.3 1.7 2.0 5.7S G & A expenses 7.2 10.1 14.1 15.1Depreciation 2.6 3.1 4.5 5.5Interest Expense 0.9 0.9 1.8 2.3EBITDA margins 8.0 10.0 17.6 17.4Net Profit margins 5.2 6.3 10.2 9.1



Share capital 29,570 29,600 29,600 29,600Reserves & Surplus 1,957,300 2,155,390 2,380,209 2,603,931Shareholders' funds 1,986,870 2,184,990 2,409,809 2,633,531Minority Interest 9,590 30,380 31,526 32,849Long term borrowings 1,010,190 1,207,800 1,286,706 1,322,627Short term borrowings 377,290 400,700 459,987 509,987Total Borrowings 1,387,480 1,608,500 1,746,693 1,832,613Long Term Liab. & Prov. 10,970 106,450 106,450 106,450Deferred Tax Liability (net) 119,250 129,740 130,174 131,098Sources of funds 3,514,160 4,060,060 4,424,653 4,736,542Gross Block 1,856,740 1,951,560 2,585,500 3,195,834Net Block 972,560 991,980 1,528,801 2,011,854Capital work in progress 914,940 1,664,620 1,166,804 796,804Intangible Assets 441,610 572,600 738,604 763,597Total Fixed Assets 2,329,110 3,229,200 3,434,209 3,572,255Non current investments 448,630 449,750 530,751 530,751Cash and cash equivalents 724,420 635,590 513,124 576,858Inventories 559,970 532,480 407,655 421,727Sundry Debtors 94,110 53,150 94,146 108,086Loans & Advances 99,650 111,710 59,098 38,447Other Current Assets 32,540 32,980 33,254 33,541Total Cur. Assets (ex cash) 786,270 730,320 594,154 421,841Trade payable 608,600 594,070 296,248 325,047Ot. Cur. Liab. & Sh. Te. Prov. 165,670 390,730 351,336 40,117Total Current Liab. & Prov. 774,270 984,800 647,585 365,164Net Current Assets (ex cash) 12,000 (254,480) (53,431) 56,677Uses of funds 3,514,160 4,060,060 4,424,653 4,736,542Book value per share 686.6 755.0 832.7 910.0


ROAE (%) (on adjusted profits) 11.8 11.2 11.5 11.0ROACE (%) 10.4 9.5 10.4 9.9Inventory days 53.8 66.9 96 77Debtors days 8.0 7.2 10 12Payable days 55.6 74.6 93 59Cash conversion cycle 6.3 (0.5) 13.4 30.0Current ratio 2.0 1.4 1.7 2.7Debt/EBITDA 4.0 4.3 4 3Interest coverage 6.2 7.8 7.2 5.2Fixed assets t/o (x) 3.2 2.5 1.4 1.2Debt/equity 0.8 0.7 0.7 0.7


Key takeawaysForesees greater potential in solar projects: ReNew foresees great potential insolar given increased government focus and support and modular nature of solar.Solar is more predictable than wind which makes wind projects more challenging.Given the recent low bids in the solar space, it will progressively assessopportunities going ahead. The company has not yet bid under the India SolarMission.

Unique challenges in wind projects: Management stated that wind projects haveunique challenges in execution of wind projects. Sporadic nature and executionrisks remain key challenges. There is also a higher dependency on stateinfrastructure for wind projects compared to solar.

Adequate capital base: ReNew completed a fresh round of funding of USD265mnled by Abu Dhabi Investment Authority. It is targeting to reach a combined installedcapacity of 1GW from wind and solar projects in the next 3 months and has apipeline of 900MW.

Key risksNon remunerative PPA’s and inordinate project execution delays with lack of clarityon resolution.

Competition versus conventional sources like coal.

Profitability impact given slew of aggressive bids which could impact investmentsin the sector.

Slow development of supporting infrastructure like transmission and distributionfacilities for evacuating power from renewable projects.

RENEW POWER VENTURESIndia Equity Research l Cement

Clean energy pioneer

Company Profile


Yusufi Kapadi+91 22 4063 [email protected]

February 15, 2016



N A


Key takeawaysSharda Cropchem (SCC) has guided for 10-15% YoY constant currency revenuegrowth in FY17, citing challenging market conditions, currency headwinds andlow commodity prices.

Total number of registrations stood at 1,626 as on Dec 2015. SCC had a pipeline of786 registrations as on Dec 2015. The company added 83 new registrations inQ3FY16.

Europe registered strong volume and revenue growth of 58% and 96%, respectively.

Investment conclusionSCC pursues a differentiated asset-light business model underpinned by focus onproduct registrations. Robust 47.2% CAGR (FY10-15) in registration in stringentregulation geographies coupled with strong sourcing capabilities reinforce itsexecution credentials. Moreover, SCC is on cusp of exponential surge riding multipletriggers—rising wallet share in existing products and new launches furtherbolstered by expansion of in-house sales team. We estimate revenue and PATCAGR of 17.9 and 22%% over FY16-18 (FY10-15 CAGR of 24.7% and 37.4%),respectively, with ex-cash RoE/RoCE of >25% riding these multiple levers. Weperceive re-rating potential in light of strong product registration-led growth, netcash balance sheet and return ratios.

Key risksWeather: Crop protection industry faces the risks of seasonal weather factors.

GM crops: The usage of crop protection products is significantly less for GM crops

Adverse currency movement: SCC deals in multiple currencies across geographies.Ergo, any sharp movement could impact the company’s earnings adversely.

Regulatory risk: SCC operates in a highly regulated sector; if it fails to comply withregulations prescribed by authorities, the company’s financials could be adverselyaffected.

Dependence on Chinese suppliers: SCC is predominantly dependent on Chinesevendors for its sourcing. Issues like adverse movement in Chinese currency, risinglabour costs and heightened costs of environmental compliance could significantlyimpact the competitiveness of Chinese manufacturers.

SHARDA CROPCHEMIndia Equity Research l Miscellaneous

Expanding global footprint

Company Profile

EDELWEISS RATINGS

Absolute Rating BUY


MARKET DATA (R : NA, B: SHCR IN)







1 month (8.5) (6.9) 1.53 month (6.3) (13.7) (7.4)12 month (3.6) (14.5) (10.9)

February 15, 2016

Manish Mahawar+91 22 6623 [email protected]

Damodaran Kutty+91 22 6623 [email protected]

Financials


Revenues (INR mn) 7,904 10,611 10,654 12,617Revenue growth (%) 2 34 0 18EBITDA (INR mn) 1,543 1,895 2,067 2,498Adjusted Profit (INR mn) 928.9 1,416.4 1,301.1 1,622.3Adjusted Diluted EPS (INR) 10.3 15.7 14.4 18.0EPS growth (%) 22.0 52.5 (8.1) 24.7Diluted P/E (x) 22.0 14.4 15.7 12.6EV/EBITDA (x) 12.2 10.1 8.7 7.1ROAE (%) 18.2 23.4 18.4 19.6




Revenues 1.6 34.2 0.4 18.4EBITDA 10.2 22.8 9.1 20.9PBT 25.2 41.4 (4.2) 21.2Net profit 22.0 52.5 (8.1) 24.7EPS 22.0 52.5 (8.1) 24.7



Share capital 902 902 902 902Reserves & surplus 4,655 5,643 6,714 8,011Shareholder equity 5,557 6,545 7,617 8,913Short term borrowings 399 381 - -Total Borrowings 399 381 - -Long Term Liab.& Provisions 2 5 5 5Deferred Tax Liability (net) 102 215 215 215Sources of funds 6,061 7,147 7,837 9,134Gross fixed assets 2,473 2,938 3,688 4,438Accumulated depreciation 1,854 2,073 2,401 2,796Intangible assets 621 868 1,290 1,645Tangible assets 19 15 15 15Capital work in progress 1,335 1,488 1,500 1,500Total Fixed Assets 1,975 2,371 2,805 3,160Non current investments 53 90 90 90Cash and cash equivalents 1,909 1,561 2,496 2,576Inventories 808 1,396 1,052 1,358Sundry debtors 4,002 4,544 4,378 5,531Loans and advances 291 491 491 491Other Current Assets 104 12 12 12Total current assets (ex cash) 5,205 6,443 5,933 7,392Trade payable 2,049 2,281 2,294 2,717Other Current Liab. & ST Prov. 1,032 1,038 1,193 1,367Total current liabilities & prov. 3,081 3,319 3,487 4,084Net Current Assets (ex cash) 2,124 3,124 2,446 3,308Uses of funds 6,061 7,147 7,837 9,134Book value per share (INR) 62 73 84 99


Adjusted Diluted EPS (INR) 10.3 15.7 14.4 18.0Y-o-Y growth (%) 22.0 52.5 (8.1) 24.7Adjusted Cash EPS (INR) 13.9 19.5 18.1 22.4Diluted P/E (x) 22.0 14.4 15.7 12.6Price to Book Ratio (P/B) (x) 3.7 3.1 2.7 2.3Enterprise Value / Sales (x) 2.4 1.8 1.7 1.4Enterprise Value / EBITDA (x) 12.2 10.1 8.7 7.1Dividend Yield (%) 0.9 1.1 1.1 1.3


Reported Profit 1,111 1,230 1,343 1,622Add: Depreciation 289 233 328 395Interest (Net of Tax) 10 6 8 8Others 33 (285) (8) (7)Gross cash flow 1,443 1,184 1,671 2,017Less: Changes in WC (120) 723 (678) 862Operating cash flow 1,563 461 2,350 1,156Less: Capex 855 801 762 750Free cash flow 708 (340) 1,587 406


Gross profit margin 35.0 33.1 34.5 34.5EBITDA margin 19.5 17.9 19.4 19.8ROCE (%) 25.0 30.3 25.7 27.4ROAE (%) 18.2 23.4 18.4 19.6ROA (%) 15.3 19.8 16.6 17.8Current ratio 2.3 2.4 2.4 2.4Quick ratio 1.4 1.5 1.4 1.5Cash ratio 0.6 0.5 0.7 0.6Receivable turnover (x) 2.0 2.5 2.4 2.5Inventory turnover (x) 5.9 6.4 5.7 6.9Payables turnover (x) 1.8 2.2 2.1 2.2Debtors Days 180 147 153 143Inventory Days 62 57 64 53Payable Days 207 164 178 167Cash Conversion Cycle 35 39 39 29




Net revenues 7,904 10,611 10,654 12,617Raw material costs 5,140 7,101 6,979 8,264Gross profit 2,763 3,510 3,676 4,353Employee expenses 181 246 266 278Other expenses 1,039 1,369 1,342 1,577Operating expenses 1,221 1,615 1,609 1,855Total expenditure 6,361 8,716 8,587 10,119EBITDA 1,543 1,895 2,067 2,498Depreciation & amortisation 289 233 328 395EBIT 1,253 1,662 1,739 2,103Less: Interest Expense 14 8 10 10Add: Other income 132 287 130 160Profit Before Tax 1,372 1,941 1,859 2,253Less: Provision for Tax 443 524 558 631Add: Except. items (net of tax) 182 (187) 42 -Reported Profit 1,111 1,230 1,343 1,622Less: Except. Items (Net of Tax) 182 (187) 42 -Adjusted Profit 929 1,416 1,301 1,622No. of Shares outstanding (mn) 90.2 90.2 90.2 90.2Adjusted Basic EPS 10.3 15.7 14.4 18.0No. of Dil. sh. outstanding (mn) 90.2 90.2 90.2 90.2Adjusted Diluted EPS 10.3 15.7 14.4 18.0Adjusted Cash EPS 13.9 19.5 18.1 22.4Dividend per share (DPS) 2.0 2.5 2.5 3.0Dividend Payout Ratio (%) 19.0 22.1 20.2 20.1


Gross margin 35.0 33.1 34.5 34.5Operating expenses 15.4 15.2 15.1 14.7EBITDA margins 19.5 17.9 19.4 19.8EBIT margin 15.9 15.7 16.3 16.7Interest 0.2 0.1 0.1 0.1Net profit margin 11.8 13.3 12.2 12.9


Key takeawaysGrowth for FY16 should be upwards of 15% and for FY17 it should be ~15%,contingent on macro-economic recovery. Growth will be led by SME & 2W portfolio.

Management sees good traction in tier 2 & 3 cities and so is not in a hurry to moveto metros. More than 80% of AUM is coming from Tamil Nadu, Maharashtra andAP.

Management believes with gold loan market stabilizing, going forward gold loanportfolio should see some upward trajectory.

The company has been recognizing GNPA on 180dpd basis. It will shift to recognizeGNPA on 150dpd from Q4FY16. GNPLs on 150dpd will be >5%, 120dpd will be >7%and 90dpd will be >9%. Traditionally, loan loss has been <2% and will not changehenceforth.

Lending rate within segments has remained unchanged for past 1 quarter. Thecompany is not seeing any yield pressure within different segments.

Target cost-income ratio: 35-40% over next 2 to 3 years, but interest income reversaldue to early recognition of GNPA will tend to keep it higher.

Existing dividend policy to be retained unless board approves a new policy.

Housing finance subsidiary has gained access to NHB refinance during the quarter.

Investment conclusionSCUF follows a unique and sound business model with presence in high-yielding,high-growth, small-ticket retail finance segment (consumer durable finance, autoloans, personal loans, business finance, and retail gold loans), and RoAs of 3.5-4.0% plus. The concept of chit fund-based lending is gradually losing its sheenand SCUF aims to fill this space by lending to these customers, thereby retainingdecades old relationships.

Key risksSCUF operates in the small-ticket retail finance segment in semi-urban and ruralareas and may face stiff competition from banks, other financial institutions, andmultinational players, which have access to cheap funds. Our earnings estimatesmay not fructify if the company is unable to maintain its spreads at expectedlevels of 10-11% due to inability to maintain yields at 22-24%, amidst stiffcompetition.

SHRIRAM CITY UNION FINANCEIndia Equity Research l Banking and Financial Services

In sync with times

Company Profile

February 15, 2016


Absolute Rating BUY




MARKET DATA (R : SHCU.BO, B: SCUF IN)

CMP : INR 1,477Target Price : INR 2,19452-week range (INR) : 2095 / 1336Share in issue (mn) : 65.9M cap (INR bn/USD mn) : 97 / 1430Avg. Daily Vol. BSE/NSE (‘000) : 27.5







Financials









Diluted EPS (INR) 89.5 86.0 92.1 119.7EPS growth (%) 7.9 (3.9) 7.0 30.0Book value per share (INR) 488.9 622.3 694.7 791.6Adjusted BV per share (INR) 479.9 610.9 654.4 700.9Diluted P/E (x) 16.5 17.2 16.0 12.3Price/ BV (x) 3.0 2.4 2.1 1.9Price/ Adj. BV (x) 3.1 2.4 2.3 2.1Dividend yield (%) 0.7 1.0 1.1 1.3




Income from operations 30,887 33,910 38,332 46,383Interest charges 13,507 13,432 14,418 17,644Oper. inc. (net of int. exp.) 17,380 20,478 23,915 28,739Other income 1,499 1,407 1,039 1,120Net revenues 18,879 21,885 24,953 29,859Operating expense 7,239 8,936 10,089 11,591 - Employee exp 2,708 4,116 4,825 5,551 - Depreciation /amortisation 296 427 387 400 - Other opex 4,235 4,394 4,877 5,639Preprovision profit 11,641 12,949 14,865 18,268Provisions 3,842 4,538 5,726 6,390PBT 7,799 8,411 9,139 11,878Taxes 2,587 2,830 3,061 3,979PAT 5,211 5,581 6,077 7,899Reported PAT 5,211 5,581 6,077 7,899Basic number of shares (mn) 58.1 65.9 65.9 65.9Basic EPS (INR) 89.8 86.2 92.1 119.7Diluted number of shares (mn) 58.2 65.9 65.9 65.9Diluted EPS (INR) 89.5 86.0 92.1 119.7DPS (INR) 10.3 15.6 16.5 19.5Payout ratio (%) 13.7 22.1 21.0 19.0


Operating income growth 8.9 17.8 16.8 20.2Net revenues growth 12.9 15.9 14.0 19.7Opex growth 16.2 23.4 12.9 14.9PPP growth 10.9 11.2 14.8 22.9PAT growth 15.9 7.1 8.9 30.0


Yield on assets 20.8 21.7 21.1 21.1Cost of funds 10.9 11.0 10.4 10.2Spread 9.9 10.7 10.8 10.8Net interest margins 11.7 13.1 13.2 13.0Cost-income 38.3 40.8 40.4 38.8Tax rate 33.2 33.6 33.5 33.5


Oper. inc. (net of int exp)/Assets 11.7 13.1 13.2 13.0Other income/Assets 1.0 0.9 0.6 0.5Net revenues/Assets 12.7 14.0 13.8 13.6Operating expense/Assets (4.9) (5.7) (5.6) (5.3)Provisions/Assets (2.6) (2.9) (3.2) (2.9)Taxes/Assets (1.7) (1.8) (1.7) (1.8)Total costs/Assets (9.2) (10.4) (10.4) (10.0)ROA 3.5 3.6 3.4 3.6Equity/Assets 17.3 22.4 23.9 22.2ROAE 20.2 15.9 14.0 16.1



Share capital 593 659 659 659Reserves and surplus 28,390 40,352 45,125 51,513Shareholders' fund 28,983 41,011 45,784 52,172Long term borrowings 89,304 77,329 107,841 133,351Short term borrowings 31,188 46,693 46,217 57,150Total borrowings 120,491 124,021 154,058 190,501Long term liab. & provisions 4,291 4,399 4,789 5,481Deferred tax liability (net) (180) (310) (250) (250)Sources of funds 153,585 169,122 204,382 247,904Gross block 1,928 2,112 2,187 2,262Net block 913 755 681 603Total fixed assets 1,014 823 743 658Non current investments 1,685 2,538 5,822 5,122Cash and cash equivalents 29,320 15,093 13,094 13,422Loans & advances 127,954 158,143 192,791 235,548Other assets 1,837 2,132 2,239 2,351Current assets (ex cash) 1,842 1,342 869 3,594Other current liab. & prov. 10,066 10,949 11,175 12,790Total current liab. & prov. 10,066 10,949 11,175 12,790Net current assets (ex cash) (8,224) (9,607) (10,306) (9,196)Uses of funds 153,585 169,122 204,382 247,904Book value per share (INR) 489 622 695 792


Key takeawaysShriram Transport Finance (SHTF) is confident of attaining 15% AUM growth forFY16. Going into FY17, the company is confident of achieving 12-15% AUM growth.

Within the tractor segment, used tractor financing has been the main focus areawhere the company has been gaining market share, reflected in growth as well.

Will be moving to 150dpd recognition by FY16 based on which GNPLs may inch upby another 100-150bps. Decision on provision coverage to be taken by board ofdirectors in their forthcoming meeting. Interest income reversal on GNPL inch upcould be INR450-500mn. Hence, NIMs could be impacted by 10-15bps.

With respect to CE business: Merger progress is on expected lines (will likelyconclude by March). Expect lower GNPLs as customers are coming back to settlethe accounts or update the status with them. CE portfolio is at INR22.5bn andexpect this to run down to INR18-20bn by March 2016 (further lower to INR5-6bnby H1FY17).

SHTF has already provided for INR2.8bn on its CE book. Maximum loss that thecompany expects could be INR3.5bn; hence, incremental P&L impact could be~INR700mn.

Investment conclusionWhile growth trends are improving (management is confident of tracking > 15%growth in FY16/FY17), however, given prevalent tough operating environment, highercredit cost (moving to 150dpd norm) and concerns on equipment finance unit, weexpect RoE to be capped (<15%).

Key risksCV utilisation and freight rates, which depend on the economic cycle, ultimatelyinfluence vehicle sales and also SHTF’s asset quality.

High dependency on financed asset: The borrower’s (SFOs and FTUs) ability toearn and his ability to repay rests solely on the asset (pre-owned/new CV) financed.

Growing presence and expanding reach of NBFCs and commercial banks is a causefor concern.

SHRIRAM TRANSPORT FINANCEIndia Equity Research l Banking and Financial Services

Macro headwinds

Company Profile

February 15, 2016






MARKET DATA (R : SRTR.BO, B: SHTF IN)

CMP : INR 813Target Price : INR 1,01052-week range (INR) : 1,286 / 736Share in issue (mn) : 226.9M cap (INR bn/USD mn) : 185 / 2,709Avg. Daily Vol. BSE/NSE (‘000) : 711.2







Financials











Interest income 73,084 81,460 99,764 117,709Interest charges 39,325 43,900 53,084 62,164Net interest income 33,759 37,561 46,681 55,544Fee & other income 4,651 3,837 4,062 4,556Net revenues 38,410 41,398 50,743 60,100Operating expense 9,789 11,232 12,674 14,439 - Employee exp 4,089 4,296 4,811 5,389 - Depreciation /amortisation 291 405 483 563 - Other opex 5,409 6,531 7,380 8,487Preprovision profit 28,621 30,165 38,069 45,661Provisions 10,340 11,742 17,755 20,700PBT 18,280 18,424 20,314 24,961Taxes 5,638 6,046 6,866 8,412PAT 12,642 12,378 13,448 16,549Reported PAT - Standalone 12,642 12,378 13,448 16,549Reported PAT - Consolidated 13,593 10,285 12,866 17,706Basic number of shares (mn) 226.9 226.9 226.9 226.9Basic EPS (INR) 55.7 54.6 59.3 72.9Diluted number of shares (mn)226.9 226.9 226.9 226.9Diluted EPS (INR) 55.7 54.6 59.3 72.9DPS (INR) 7.0 10.0 10.9 13.4Payout ratio (%) 12.6 18.3 18.3 18.3


NII growth (2.4) 11.3 24.3 19.0Net revenues growth 4.1 7.8 22.6 18.4Opex growth 19.2 14.7 12.8 13.9PPP growth (0.2) 5.4 26.2 19.9Provisions growth 21.5 13.6 51.2 16.6PAT growth (7.1) (2.1) 8.6 23.1


Yield on advances (On AUM) 14.2 14.5 15.5 15.5Yield on advances (On Book) 17.2 17.3 17.2 17.0Yield on advances (Off Book) 8.4 5.6 5.3 4.9Cost of funds (On Book) 11.1 10.6 10.5 10.3Spread (On Book) 6.1 6.7 6.7 6.7Net interest margins (On AUM) 6.6 6.7 7.2 7.3Cost-income 25.5 27.1 25.0 24.0Tax rate 30.8 32.8 33.8 33.7



LiabilitiesShare capital 2,269 2,269 2,269 2,269Reserves and surplus 80,463 90,111 101,094 114,609Shareholders' fund 82,732 92,380 103,363 116,879Long term borrowings 227,121 315,708 396,246 467,310Short term borrowings 132,125 127,054 159,466 188,066Total borrowings 359,246 442,762 555,712 655,376Long term liab. & provisions 22,587 25,578 30,676 39,147Deferred tax liability (net) (2,512) (2,565) (3,250) (3,250)Sources of funds 462,054 558,155 686,501 808,151Gross block 1,908 2,216 2,416 2,616Net block 990 995 1,192 1,389Intangible assets 16 13 15 18Total fixed assets 1,007 1,007 1,207 1,407Non current investments 6,878 11,143 10,785 11,434Cash and cash equivalents 91,234 69,363 93,854 114,335Loans and advances 388,882 507,638 611,330 720,122Other assets 944 931Current assets (ex-cash) 800 624 - -Trade payables 4,459 11,597 10,929 13,947Ot. cur. liab. & sh. term prov. 23,232 20,955 19,748 25,200Total current liab. & prov. 27,691 32,552 30,676 39,147Net current assets (ex-cash) (26,891) (31,927) (30,676) (39,147)Uses of funds 462,054 558,155 686,501 808,151Book Value per share (INR) 365 407 456 515Earning assets 590,873 628,391 740,631 866,081Disbursements 289,850 336,690 398,641 462,424AUM 531,021 591,082 698,552 820,013Total borrowing 538,555 557,513 642,933 755,267


Net interest income/Assets 5.9 6.2 6.8 6.9Other Income/Assets 0.8 0.6 0.6 0.6Net revenues/Assets 6.7 6.8 7.4 7.5Operating expense/Assets 1.7 1.8 1.9 1.8Provisions/Assets 1.8 1.9 2.6 2.6Taxes/Assets 1.0 1.0 1.0 1.0Total costs/Assets 4.5 4.8 5.4 5.4ROA 2.2 2.0 2.0 2.1Equity/Assets 13.5 14.4 14.3 13.7ROAE 16.3 14.1 13.7 15.0


Diluted EPS (INR) 55.7 54.6 59.3 72.9EPS growth (%) (5.2) (2.1) 8.6 23.1Consolidated EPS (INR) 59.9 45.3 56.7 78.0Book value per share (INR) 364.6 407.2 455.6 515.2ABV (INR) 355.3 395.5 416.8 452.3Diluted P/E (x) 14.6 14.9 13.7 11.2Price/ BV (x) 2.2 2.0 1.8 1.6Price/ ABV (x) 2.3 2.1 2.0 1.8


Key takewaysCurrently, Solar Industries (SOIL) has an order to supply 600 propellants for Akash,which will boost its revenues in ensuing quarters.

The domestic explosives market volume is ~9lakh tonnes at present, which isexpected to increase to 21lakh tonnes by 2020. With the huge demand in domesticexplosive, SOIL expects its volume to increase 3x present volume. It currentlymeets 28% of Coal India’s (CIL) requirement and has total market share of 25%.

The company’s EBITDA margin has improved from 16% to 18% in recent years.Going forward, management targets to achieve sustainable margin of 20-21%.

In the recent quarter, SOIL faced pricing pressure from CIL. Prices fell up to 14%due to the 9-10% decline in price of ammonium nitrate (a key raw material).However, the company was able to maintain its margins as only 30% of its businessfaced pricing pressure.

Going forward, SOIL expects to incur capex of ~INR1bn each year with INR750mnfor domestic growth and remaining for its overseas subsidiary.

Most of the raw materials required by SOIL are developed in house. This backwardintegration provides it inherent advantage over competition.

Going forward, the company expects to log revenue CAGR of 25% over xxxx followingincrease in domestic as well as export business.

Investment conclusionSOIL is market leader in the domestic industrial explosives segment, the largestIndian exporter and poised to sustain its fast-paced growth drawing from itsleadership position and high entry barriers in explosive industry. The companyposted robust 22.6% domestic revenue CAGR to become market leader by enhancingmarket share from ~6% in FY06 to 24% in FY15. Moreover, with SOIL expandinggeographically via exports as well as scaling up overseas manufacturingoperations, surge in profitability is imminent. Its proposed defence project providesgrowth visibility even beyond next 2-3 years. SOIL is entering defence segment tosupply propellants and HMX to government defence entities, for which it hasreceived manufacturing approval.

Key risksSlow down in mining and infrastructure sectors.

SOLAR INDUSTRIESIndia Equity Research l Miscellaneous

On high growth trajectory; defence orders key

Company Profile

EDELWEISS RATINGS



MARKET DATA (R : SLIN.BO, B: SOIL IN)

CMP : INR 3,136Target Price : INR 3,41852-week range (INR) : 4,324 / 2,979Share in issue (mn) : 18.1M cap (INR bn/USD mn) : 57 / 833Avg. Daily Vol. BSE/NSE (‘000) : 11.2






1 month (8.5) (10.7) (2.2)3 month (6.3) (4.2) 2.112 month (3.6) 4.7 8.3

Financials


Revenues (INR mn) 11,330 13,520 15,676 19,238EBITDA (INR mn) 2,030 2,541 3,032 3,799Adjusted Profit (INR mn) 2,030 2,541 3,032 3,799Adjusted Diluted EPS (INR) 70.9 87.0 92.5 119.1Diluted P/E (x) 44.2 36.0 33.9 26.3EV/EBITDA (x) 29.8 23.7 20.0 15.9ROAE (%) 21.2 21.9 20.4 22.1 February 15, 2016

Manish Mahawar+91 22 6623 [email protected]




Reported Profit 1,184 1,475 1,674 2,156Add: Depreciation 219 315 335 402Add: Interest 0 120 124 124Add: Others 14 437 117 119Gross cash flow 1,417 2,346 2,250 2,801Less: Changes in WC (247) 40 576 1,094Operating cash flow 1,663 2,305 1,675 1,708Less: Capex 1,593 1,195 1,300 589Free cash flow 70 1,110 375 1,118




Gross margin 47.9 43.1 42.6 42.8Operating expenses 29.9 24.3 23.3 23.1EBITDA margins 17.9 18.8 19.3 19.7Depreciation & amortisation 1.9 2.3 2.1 2.1EBIT margin 16.0 16.5 17.2 17.7Net profit margin 12.3 12.3 11.6 12.1






Net revenues 11,330 13,520 15,676 19,238Raw material costs 5,908 7,687 8,991 10,995Gross profit 5,421 5,832 6,685 8,243Employee expenses 673 798 784 923Other expenses 2,719 2,494 2,869 3,521Operating expenses 3,392 3,292 3,653 4,444Total expenditure 9,300 10,979 12,644 15,439EBITDA 2,030 2,541 3,032 3,799Depreciation & amortisation 219 315 335 402EBIT 1,811 2,226 2,697 3,397Interest expense 179 179 185 185Other income 112 79 95 114Profit before tax 1,744 2,127 2,607 3,325Provision for tax 349 463 782 998Less: Minority Interest 111 89 151 172Add: Excep. items (net of tax) (100) (100) 0 0Reported Profit 1,183.8 1,475 1,674 2,156Less: Excep. Items (Net of Tax)(100.0) (100.0) 0.0 0.0Adjusted Profit 1,283.8 1,574.7 1,674.3 2,155.6Core profit 1,394.8 1,664.0 1,824.9 2,327.6Profit after tax 1,294.8 1,564.0 1,824.9 2,327.6Profit after minority int. 1,183.8 1,474.7 1,674.3 2,155.6No. of Shares outstanding (mn) 18.1 18.1 18.1 18.1Adjusted Basic EPS 70.9 87.0 92.5 119.1No. of Dil. shares outst. (mn) 18.1 18.1 18.1 18.1Adjusted Diluted EPS 70.9 87.0 92.5 119.1Adjusted Cash EPS 83.0 111.0 111.0 141.3Dividend per share (DPS) 11.9 17.1 20.0 25.0Dividend Payout Ratio (%) 20.6 24.4 25.3 24.6



Share capital 181 181 181 181Revenue and surplus 6,435 7,578 8,829 10,455Shareholder fund 6,616 7,759 9,010 10,636Minority interest 381 471 622 794Long term borrowings 1,524 1,559 1,559 1,559Short term borrowings 3,312 2,147 2,147 2,147Total Borrowings 4,836 3,707 3,707 3,707Long Term Liab. & Provisions 15 11 13 14Deferred Tax Liability (net) 270 444 444 444Sources of funds 12,117 12,392 13,795 15,594Gross block 5,754 7,139 8,439 9,439Net block 4,838 5,849 6,814 7,411Capital work in progress 810 611 611 200Intangible assets 71 0 0 0Total Fixed Assets 5,719 6,459 7,424 7,611Non current investments 105 77 77 77Cash and cash equivalents 1,477 669 529 1,046Inventories 1,528 1,649 1,847 2,410Sundry debtors 1,853 1,913 2,368 3,134Loans & advances 1,424 1,558 1,558 1,558Other assets 1,417 1,566 1,566 1,566Total current assets (ex cash) 6,223 6,686 7,340 8,668Trade payable 385 626 616 753Ot. cur. liab. and provisions 1,022 873 961 1,057Total current liab. & prov. 1,407 1,500 1,576 1,810Net current assets (ex cash) 4,816 5,187 5,764 6,859Uses of funds 12,117 12,392 13,795 15,594Book value per share (INR) 366 429 498 588


ROCE (%) 17.7 19.4 22.1 24.7ROAE (%) 21.2 21.9 20.4 22.1ROA (%) 11.6 12.8 12.8 14.7Current ratio 5.5 4.9 5.0 5.4Quick ratio 4.4 3.8 3.8 4.0Cash ratio 1.0 0.4 0.3 0.6Receivable turnover (x) 6.6 7.2 7.3 7.0Inventory turnover (x) 4.1 4.8 5.1 5.2Payables turnover (x) 19.2 15.2 14.5 16.1Receivables (days) 55.0 50.8 50 52Inventory (days) 89.2 75.4 71 71Payables (days) 19.0 24.0 25 23Cash conversion cycle (days) 125.2 102.3 95.6 100.1Gross Debt/Equity 0.7 0.5 0.4 0.3Gross Debt/EBITDA 2.4 1.5 1.2 1.0


Key takeawaysSRF’s expertise in specialty chemicals comes out of experience in fluorochemical.It has been making refrigerant gases for more than 30 years.

Agrochemical Active Ingredients are not as complicated in following protocols asAPIs.

SRF supplies to the top 3 agrochemical manufacturers in the world.

In Q3FY16, R22 exports got impacted due to quotas which came in 2016.

Seen a rebound in specialty chemical business despite softness in agrochemicals.

Softness in the agrochemical business is expected to continue.

Once the company realized agro chemical business is not coming through, itundertook opportunistic and certain difficult contracts.

Endeavour is to set up 2-3 dedicated plants in specialty chemicals every year.

In March 2015, share of pharma was 17%, with the rest coming from agrochemical.In Sep, the mix improved to 24:76. The company’s goal is to take pharma’s share to25% by March 2017; mix in this quarter was 21%.

Investment conclusionCar/refrigerator sales to spur fluorochems; R&D to drive specialty: Capacityutilisation in SRF’s fluorochemicals business is anticipated to surge riding spurtin sales of refrigerators & cars and import substitution. Moreover, R&Dinvestments, cornerstone of SRF’s commendable success in high entry barriersspecialty chemicals, have yielded handsome dividends—filed 54 process patentsand commercialised more than 40 products—leading to 66% revenue CAGR overFY09-15. Technical textiles: Cash cow; Packaging: consumption growth play: SRFhas been channelising technical textiles’ ~INR2.2bn/year FCF to financeincremental capex in other divisions.

Key risksEarly phase out of the molecule and pace of launch of new molecules.

SRFIndia Equity Research l Miscellaneous

The specialist

Company Profile

EDELWEISS RATINGS

Absolute Rating BUY


MARKET DATA (R : SRFL.BO, B: SRF IN)







1 month (8.5) (9.0) (0.5)3 month (6.3) (13.4) (7.1)12 month (3.6) 19.2 22.8

February 15, 2016


Financials


Net revenues (INR mn) 40,181 45,398 45,908 51,185 Revenue growth (%) 6.2 13.0 1.1 11.5 EBITDA (INR mn) 5,053 7,175 9,229 10,965 Adj. profit (INR mn) 1,625 3,028 3,842 5,005 Adj. diluted EPS (INR) 28.3 52.7 66.9 87.2 Diluted P/E (x) 40.3 21.6 17.0 13.1 EV/EBITDA (x) 17.0 12.2 9.5 7.9 ROAE (%) 8.1 13.9 15.7 17.9




Reported Profit 1,625 3,028 4,307 5,143Add: Depreciation 2,247 2,450 2,714 2,922Interest (Net of Tax) 751 1,043 1,002 960Others 44 (87) (156) 53Less:Changes in WC 1,199 1,011 934 952Operating cash flow 3,467 5,423 6,933 8,125Less: Capex 7,995 5,118 5,367 6,171Free cash flow (4,528) 305 1,566 1,954


Revenues 6.2 13.0 4.5 10.6EBITDA (17.7) 42.0 37.5 13.5PBT (40.2) 92.1 50.0 19.9Adjusted Profit (35.8) 86.4 42.2 19.4EPS (35.8) 86.4 42.2 19.4



Share capital 584 584 584 584Reserves & Surplus 20,082 22,379 25,879 30,014Total shareholders funds 20,667 22,963 26,464 30,599Long term Borrowings 17,126 17,882 16,819 15,543Short term Borrowings 4,627 6,467 6,541 6,798Total Borrowings 21,753 24,349 23,360 22,342Long Term Liabilities & Prov. 172 667 712 787Deferred Tax Liability (net) 2,752 3,386 4,232 5,245Sources of funds 45,343 51,365 54,767 58,972Gross Block 60,605 65,358 70,567 76,738Net Block 35,230 38,158 40,652 43,902Capital work in progress 1,121 1,041 1,200 1,200Intangible Assets 278 1,065 1,065 1,065Total Fixed Assets 36,629 40,265 42,918 46,167Non current investments 101 1 1 1Cash & bank balances 1,089 2,015 1,786 1,714Inventories 7,464 7,635 7,827 8,497Sundry Debtors 6,915 6,107 6,642 7,345Loans & Advances 2,325 2,679 3,175 3,511Other Current Assets 164 131 146 161Total Cur. Assets (Ex Cash) 16,868 16,551 17,790 19,514Trade payable 7,886 5,814 6,001 6,514Other Current Liab. & ST Prov. 1,458 1,652 1,726 1,909Total Current Liab. & Prov. 9,344 7,466 7,727 8,423Net Current Assets (ex cash) 7,524 9,085 10,063 11,091Uses of funds 45,343 51,365 54,767 58,972Book value per share (BV) (INR) 360 400 461 533


Adjusted Diluted EPS (INR) 28.3 52.7 66.9 87.2Y-o-Y growth (%) (35.8) 86.4 26.9 30.3Adjusted Cash EPS (INR) 71.7 106.8 127.4 155.3Diluted P/E (x) 40.3 21.6 17.0 13.1Price/BV (x) 3.2 2.9 2.5 2.2EV/Sales (x) 2.1 1.9 1.9 1.7EV/EBITDA (x) 17.0 12.2 9.5 7.9Dividend yield (%) 0.9 0.9 1.1 1.3




Net Revenues 40,181 45,398 47,444 52,462Raw Material Costs 23,972 25,420 26,089 28,323Employee costs 3,110 3,561 4,078 4,669Other expenses 8,045 9,243 7,415 8,280Total expenses 35,128 38,224 37,582 41,272EBITDA 5,053 7,175 9,862 11,190Depreciation & amortization 2,247 2,450 2,714 2,922EBIT 2,805 4,724 7,148 8,268Less: Interest Expense 961 1,376 1,394 1,341Add: Other income 235 646 236 254Profit Before Tax 2,080 3,994 5,990 7,181Less: Provision for Tax 455 966 1,683 2,038Reported Profit 1,625 3,028 4,307 5,143Adjusted Profit 1,625 3,028 4,307 5,143No. of Shares outstanding (mn) 57.4 57.4 57.4 57.4Adjusted Basic EPS 28.3 52.7 75.0 89.6No. of dil. shares outst. (mn) 57.4 57.4 57.4 57.4Adjusted Diluted EPS 28.3 52.7 75.0 89.6Adjusted Cash EPS 71.7 106.8 137.0 158.1Dividend per share 10.0 10.0 12.0 15.0Dividend Payout Ratio (%) 41.4 22.5 18.7 19.6


Materials costs 59.7 56.0 55.0 54.0Staff costs 7.7 7.8 8.6 8.9S G & A expenses 20.0 20.4 15.6 15.8Depreciation 5.6 5.4 5.7 5.6Interest Expense 2.4 3.0 2.9 2.6EBITDA margins 12.6 15.8 20.8 21.3Net Profit margins 4.0 6.7 9.1 9.8


ROAE (%) 8.1 13.9 17.4 18.0ROACE (%) 7.7 12.0 15.2 16.6Inventory Days 100 108 108 105Debtors Days 55 52 49 49Payble Days 99 98 83 81Cash conversion cycle (days) 55 62 75 73Current Ratio 1.9 2.5 2.5 2.5Gross Debt/EBITDA 4.3 3.4 2.4 2.0Gross Debt/Equity 1.1 1.1 0.9 0.7Adjusted Debt/Equity 1.2 1.2 1.0 0.8Net Debt/Equity 1.0 1.0 0.8 0.7Interest Coverage Ratio 2.9 3.4 5.1 6.2


Key takeawaysHalol

As discussed during Q3FY16 call, Sun Pharma (SUNP) will send FDA an invitationto re-inspect sometime during Q1FY17. It will be FDA’s discretion on when it willre-inspect eventually.

Ranbaxy synergies

While building specialty front-end teams in US will raise costs, synergy benefitswill inch up gradually from here until FY18 when the company expects ~USD300mnsynergies.

Gleevec

The launch is still in early days, but there are no disappointments as yet. Publicly,the company has stated a target of ~30% market share. While it does not havelabel for Paediatric/ GIST indications, these form a small part of the patient pool.

Keveyis

While the product is much better than current gold standard of treatment, responsewill only be gradual as physicians will not tamper with medication of patientswho seem stable on current medicine. Building patient registry of new patientswill take some time.

Intrexon JV

One IND will be filed in H2CY16. Clinical trial will follow.

India market

Removal of bonus units will have somewhat of a lingering impact for 4-5 quarters.

Investment conclusionSUNP’s capital allocation strategy is ahead of peers as evident from its currentinvestments in specialty and complex businesses. We estimate these businessesto contribute ~70% to its US operations by FY20, with further upside possible viadeals/partnerships (SPARC, Intrexon). Ranbaxy’s acquisition has given SUNP entryinto emerging markets, which will become another growth driver FY17 onwards.

Key risksPotential price correction in select derma products of Taro franchise could resultin loss of Taro’s business.

SUN PHARMACEUTICALSIndia Equity Research l Pharmaceuticals

Be ready for Sun shine

Company Profile

February 15, 2016


Absolute Rating BUY




MARKET DATA (R : SUN.BO, B: SUNP IN)

CMP : INR 849Target Price : INR 92052-week range (INR) : 1,200 / 706Share in issue (mn) : 2,406.7M cap (INR bn/USD mn) : 2,043/29,989Avg. Daily Vol. BSE/NSE (‘000) : 5,241.9






1 month 2.4 (6.4) (6.3)3 month (3.5) (7.4) (11.5)12 month (10.1) (15.3) 1.7

February 15, 2016



Financials


Net Revenues (INR mn) 160,044 272,865 286,836 358,307EBITDA (INR mn) 69,998 78,667 80,446 120,000Adjusted Profit (INR mn) 54,099 47,444 53,970 84,968No. of Shares outstanding (mn) 2,071 2,071 2,406 2,406Adjusted Diluted EPS (INR) 26.1 22.9 22.4 35.3Diluted P/E (x) 32.0 36.5 37.5 23.8EV/EBITDA (x) 24.3 22.0 23.8 15.3ROAE (%) 33.2 23.3 19.5 23.6




ROAE (%) 33.2 23.3 19.5 23.6ROACE (%) 35.9 24.4 20.2 26.7Inventory days 374.3 238.1 297 287Debtors days 56.0 50.2 64 54Payble days 176.3 121.4 167 164Cash Conversion Cycle 254.0 166.9 193.3 177.4Current Ratio 2.9 2.8 3.3 3.4Gross Debt/EBITDA 0.4 1.0 1 0Gross Debt/Equity 0.1 0.3 0.2 0.1Adjusted Debt/Equity 0.1 0.3 0.2 0.1Net Debt/Equity (0.2) (0.1) -0.4 -0.5Interest Coverage Ratio 149.1 11.5 19.2 37.0Growth metrics (%)


Net Revenues 42.4 70.5 5.1 24.9EBITDA 43.0 12.4 2.3 49.2PBT 6.2 39.8 17.6 56.4Adjusted Profit 55.8 (12.3) 13.8 57.4Adjusted EPS 55.8 (12.3) (2.1) 57.4


Reported Profit 31,415 45,394 53,970 84,968Add: Depreciation 4,092 11,947 10,000 10,500Interest (Net of Tax) 374 4,963 3,074 2,368Others (1,638) (81,589) 11,562 (37,756)Less: Changes in WC (632) (38,313) 7,318 (17,694)Operating cash flow 34,875 19,028 71,289 77,774Less: Capex 11,563 43,844 31,229 8,000Free cash flow 23,312 (24,816) 40,060 69,774



Share capital 2,071 2,071 1,036 1,036Reserves & Surplus 183,178 254,161 336,191 411,285Shareholders' funds 185,250 256,232 337,226 412,321Minority interest 19,212 28,661 25,390 25,390Long term borrowings 24,403 62,279 52,279 42,279Short term borrowings 578 15,548 5,548 5,548Total Borrowings 24,982 77,827 57,827 47,827Deferred tax liability (net) (9,110) (17,516) (5,198) (5,198)Sources of funds 220,333 345,203 415,245 480,340Gross Block 86,505 130,369 176,358 184,358Net Block 49,827 69,752 105,741 103,241Capital work in progress 8,415 20,386 5,626 5,626Intangible assets 18,346 37,010 26,515 11,330Total Fixed assets 76,588 127,148 137,882 120,197Non current investments 27,860 27,163 29,453 29,453Cash and cash equivalents 75,902 109,980 192,533 261,502Inventories 31,230 56,680 55,181 68,943Sundry debtors 22,004 53,123 47,298 59,094Loans & advances 48,257 77,620 63,064 78,792Total curr. assets (ex cash) 101,491 187,423 165,542 206,828Trade payable 13,283 31,538 31,532 39,396Other Curr. Liab. & ST Prov. 48,226 74,974 78,634 98,245Total current liab. & prov. 61,509 106,512 110,166 137,641Net current assets (ex cash) 39,983 80,911 55,376 69,187Uses of funds 220,333 345,203 415,245 480,340Book Value per share (INR) 89.4 123.7 140.1 171.3




Adjusted Diluted EPS (INR) 26.1 22.9 22.4 35.3Y-o-Y growth (%) 55.8 (12.3) (2.1) 57.4Adjusted Cash EPS (INR) 28.1 28.7 26.6 39.7Diluted P/E (x) 32.0 36.5 37.5 23.8Price to Book Ratio (P/B) (x) 9.3 6.8 6.0 4.9Enterprise Value / Sales (x) 10.6 6.3 6.7 5.1Enterprise Value / EBITDA (x) 24.3 22.0 23.8 15.3Dividend Yield (%) 0.3 0.2 0.3 0.4




Income from operations 160,804 274,334 287,728 359,487Gross Revenues 160,044 272,865 286,836 358,307Net revenues 160,044 272,865 286,836 358,307Other operating income 760 1,469 892 1,181Total operating expenses 90,806 195,667 207,282 239,488Materials cost 27,793 67,392 68,823 78,804Employee cost 20,744 44,299 48,728 53,601R&D cost 10,420 19,550 23,018 30,556Other expenses 31,848 64,427 66,713 76,526Depreciation 4,092 11,947 10,000 10,500EBITDA 69,998 78,667 80,446 120,000Operating Profit 69,998 78,667 80,446 120,000EBIT 65,906 66,720 70,446 109,500Less: Interest Expense 442 5,790 3,660 2,960Add: Other income 5,522 5,477 8,536 11,295Add: Exceptional items (25,174) (2,378) 0 0Profit before tax 45,812 64,029 75,322 117,835Less: Provision for Tax 7,022 9,147 12,051 23,567Less: Minority Interest 7,375 9,488 9,300 9,300Reported Profit 31,414.7 45,394 53,970 84,968Less: Exc. Items (Net of Tax) (22,684) (2,050) 0 0Adjusted Profit 54,098.7 47,443.8 53,970.3 84,967.9No. of Sh. outstanding 2,071.200 2,071.2 2,406.4 2,406.4Adjusted Basic EPS 26.119 22.9 22.4 35.3No. of Dil. sh. outstanding 2,071.200 2,071.2 2,406.4 2,406.4Adjusted Diluted EPS 26.119 22.9 22.4 35.3Adjusted Cash EPS 28.095 28.7 26.6 39.7Dividend per share (DPS) 2.499 1.5 2.2 3.5Dividend Payout Ratio (%) 16.474 6.8 10.0 10.0


Key takeawaysDemand environment stable: Management commentary alludes to stable demandenvironment. Confidence in demand is based on stable client budgets till date.

Growth concerns hyped: Constant currency (cc) revenue growth in CY15 was 13.2%,lower than revenue growth of 15% in CY14. However, growth during the year wasimpacted by: 1) slowdown in Diligenta; and 2) weakness in Japan, LATAM andIndia. The portfolio whose growth was impacted is not a core portfolio. Corevertical BFSI in cc terms grew 15% and management commentary indicates growthwill remain strong in CY16.

Investment conclusionTCS revenue growth disappointment in the past 6 quarters impact by weakness indifferent segments of their portfolio. We believe its high base (despite it breakingdown entire business into 23 different businesses) coupled with current transitionin IT business model (aggressive adoption of digital technology and automation)render even “lower double digit” growth tough, given significant portion of non-digital business (~87%). We maintain ‘HOLD’ with TP of INR2, 410 (16x FY18E EPS).The stock is trading at 18.5x and 16.5x FY17E and FY18E EPS, respectively.

Key risksDiligenta continues to remain weak: Management expects diligent to bottom outin 4Q as FY15 revenues included one large deal. Hence in FY16m base reset willabate decline at least optically. However, business improvement will depend onsuccessful expansion of the insurance product in US geography. Slower thananticipated expansion could hamper growth.

TATA CONSULTANCY SERVICESIndia Equity Research l IT

Growth slowing down

Company Profile

February 15, 2016






MARKET DATA (R : TCS.BO, B: TCS IN)

CMP : INR 2,270Target Price : INR 2,41052-week range (INR) : 2810 / 2167Share in issue (mn) : 1,970.4M cap (INR bn/USD mn) : 4472 / 65639Avg. Daily Vol. BSE/NSE (‘000) : 1,211.3






1 month (0.8) (6.4) 1.73 month (4.7) (7.4) (0.7)12 month (4.6) (15.3) (0.5)

February 15, 2016



Financials


Revenues (INR mn) 818,094 946,432 1,073,877 1,226,413Rev. growth (%) 30 16 14 14EBITDA (INR mn) 251,323 246,610 304,646 344,822Net profit (INR mn) 191,087 196,432 239,603 270,006Share outstanding (mn) 1,957 1,957 1,965 1,965EPS (INR) 97.6 100.4 122.0 137.4EPS growth (%) 37.1 2.8 21.5 12.7Diluted P/E (x) 23.2 22.5 18.5 16.5EV/EBITDA (x) 17.4 17.6 13.9 11.9ROE (%) 39.6 34.7 37.5 34.1




ROAE (%) (on adjusted profits) 39.6 34.7 37.5 34.1ROACE (%) 51.7 45.1 49 45.4Inventory days 88 90 86 84Debtors days 94 95 128 143Payable days (6) (6) (41) (59)Cash conversion cycle 3.6 3.2 2.5 2.9



Share capital 1,959 1,959 1,970 1,970Reserves & Surplus 551,393 572,808 694,847 887,987Shareholders' funds 553,352 574,767 696,817 889,957Minority Interest 6,905 9,136 2,833 2,833Long term borrowings 2,969 3,577 1,781 1,781Total Borrowings 2,969 3,577 1,781 1,781Def. Tax Liability (net) (48,191) (61,606) (64,356) (64,356)Sources of funds 515,034 525,874 637,074 830,215Net Block 105,415 117,909 118,491 152,396Intangible Assets 39,797 37,115 37,574 37,574Total Fixed Assets 145,212 155,023 156,065 189,970Non current investments 55,143 30,438 94,234 134,234Cash and Equivalents 190,437 224,854 348,695 456,441Sundry Debtors 222,360 242,670 265,311 297,573Loans & Advances 16,907 21,739 16,333 16,333Other Current Assets 5,320 9,064 8,317 8,317Current Assets (ex cash) 244,586 273,473 289,961 322,224Trade payable 120,344 157,915 251,881 272,653Total Current Liab 120,344 157,915 251,881 272,653Net Curr Assets-ex cash 124,243 115,558 38,080 49,570Uses of funds 515,034 525,874 637,074 830,215BVPS (INR) 283 294 355 453


Adj. Diluted EPS (INR) 97.6 100.4 122 137.4Y-o-Y growth (%) 37.1 2.8 21.5 12.7Adjusted Cash EPS (INR) 104.4 109.9 131.4 147.4Diluted P/E (x) 23.2 22.5 18.5 16.5P/B (x) 8.0 7.7 6.4 4.99EV / Sales (x) 5.3 4.6 3.9 3.4EV / EBITDA (x) 17.4 17.6 13.9 11.9Dividend Yield (%) 1.4 3.3 0.9 1.4




Net revenue 818,094 946,432 1,073,877 1,226,413Cost of revenues 422,064 532,274 586,323 669,109Gross profit 396,030 414,158 487,554 557,304Total SG&A expenses 144,707 167,548 182,909 212,482EBITDA 251,323 246,610 304,646 344,822Depreciation 13,243 18,698 18,554 19,623EBIT 238,080 227,912 286,092 325,199Add: Other income 15,809 31,396 29,462 36,712Profit Before Tax 253,889 259,308 315,554 361,912Less: Provision for Tax 60,712 60,828 74,621 90,478Less: Minority Interest 2,090 2,048 1,330 1,428Reported Profit 191,087 196,432 239,603 270,006Adjusted Profit 191,087 196,432 239,603 270,006Shares o /s (mn) 1,957 1,957 1,965 1,965Adjusted Basic EPS 97.6 100.4 122 137.4Diluted shares o/s (mn) 1,957 1,957 1,965 1,965Adjusted Diluted EPS 97.6 100.4 122 137.4Adjusted Cash EPS 104.4 109.9 131.4 147.4Dividend per share (DPS) 32 79 21.9 33.4Dividend Payout Ratio(%) 38.3 92.1 21 28.5


Cost of revenues 51.6 56.2 54.6 54.6Gross margin 48.4 43.8 45.4 45.4S&M expenses 17.7 17.7 17.0 17.3SG&A expenses 17.7 17.7 17.0 17.3EBITDA margins 30.7 26.1 28.4 28.1EBIT margins 29.1 24.1 26.6 26.5Net Profit margins 23.6 21.0 22.4 22.1


Revenues 29.9 15.7 13.5 14.2EBITDA 39.0 (1.9) 23.5 13.2PBT 40.1 2.1 21.7 14.7Adjusted Profit 37.1 2.8 22.0 12.7EPS 37.1 2.8 21.5 12.7


Reported Profit 191,087 196,432 239,603 270,006Add: Depreciation 13,243 18,698 18,554 19,623Others (19,068) (11,760) 12,281 (35,284)Less: Changes in WC 26,045 (8,685) (77,478) 11,490Operating cash flow 159,217 212,055 347,916 242,854Less: Capex 30,680 28,804 19,294 53,527Free Cash Flow 128,536 183,251 328,622 189,327


Key takeawaysIn the domestic market, green shoots were seen from sugar industry and otherprocess industries. Revival in cement and steel will take time. Renewable space(water to energy, biomass) has also seen growth.

Management does not see any major changes in the domestic turbine market interms of order booking.

Potential markets for the company are South America and Africa.

Management does not see China as a major threat in small turbine businessunless contracts are funded from Chinese banks.

In the international market, waste–to-energy segment has seen strong growth inEurope and traction is expected to continue over the next 6 months.

On refurbishment of turbines, management said there is no competition from anybig OEM as there are execution delays and it is expensive. Also, the company iswitnessing success in Europe because of better delivery cycle and costcompetitiveness.

Investment conclusionSound positioning in domestic market; captive market to revive: With 40 years ofexperience in the manufacture and sale of turbines, TTL commands more than 60%of market share in the 0-30MW steam turbines segment in India. Penetration inexports market to be next big growth driver: The overall international market inthe sub-30MW range is pegged at ~INR140bn. TTL’s market share was ~1% in FY14.While the enquiry book from the international market steadily growing, orderinflow is also following suit. GE-Triveni to swell product range; sizeable businessto come from FY16: With TTL’s entry into 30-100MW range turbines, we expectbig-ticket orders to lend fillip to sluggish sales growth (6% CAGR during past fiveyears). TTL, on standalone basis, too would benefit as it will be manufacturing theproducts for the JV.

Key risksIndustrial capex slowdown may lead to decline in order inflow.

Rising competition may contract TTL’s market share and hence margin.

TRIVENI TURBINEIndia Equity Research l Engineering & Capital Goods

On a firm footing

Company Profile

EDELWEISS RATINGS

Absolute Rating BUY


MARKET DATA (R : TRVT.BO, B: TRIV IN)








February 15, 2016



Financials


Net revenues (INR mn) 5,154 6,508 8,331 10,422EBITDA (INR mn) 1,036 1,225 1,702 2,284Margins (%) 20.1 18.8 20.4 21.9Reported profit (INR mn) 656 959 1,165 1,523Diluted shares (mn) 330 330 330 330EPS (INR) 2.0 2.9 3.5 4.6P/E (x) 47.8 32.7 26.9 20.6ROAE (%) 40.0 47.6 44.2 43.2




Reported profit 656 959 1,165 1,523Depreciation 135 158 193 209Interest 8 12 11 12Others 31 (93) (28) 51Less:Changes in WC 456 330 419 504Operating cash flow 375 706 921 1,290Less: Capex 532 111 260 260Free cash flow (158) 596 661 1,030


ROAE (%) (on adjusted profits) 40 48 44 43ROACE (%) 59 63 58 60Debtors days 81 73 74 74Inventory days 115 117 115 117Fixed assets t/o (x) 4.5 4.8 5.2 6.5Interest coverage 76 61 97 124Payable days 161 128 112 112Cash conversion cycle 35 63 77 79Current ratio 1.3 1.3 1.5 1.7


Revenues (22.3) 26.3 28.0 25.1EBITDA (35.6) 18.3 38.9 34.2PBT (35.0) 36.7 20.4 38.5adjusted profit (35.9) 46.2 21.5 30.7EPS (35.9) 46.2 21.5 30.7



Equity capital 329 329 329 329Reserves & surplus 1,418 1,956 2,642 3,714Shareholders funds 1,747 2,285 2,971 4,043Long term borrowings 119 123 144 165Short term borrowings 69 7 7 7Total Borrowings 188 129 150 171Minority Interest 41 68 100 146Deferred tax liability/asset 96 77 77 77Long term liabiities & Provisions 42 45 45 45Sources of funds 2,114 2,604 3,344 4,482Gross Block 1,895 2,246 2,718 2,938Net block 1,020 1,482 1,505 1,520Intangible assets 92 93 96 93CWIP (incl. intangible) 193 61 101 141Total fixed assets 1,305 1,636 1,703 1,754Inventories 1,116 1,349 1,753 2,209Sundry debtors 1,126 1,483 1,878 2,350Cash & equiv. (inc. cur. invst.) 92 337 590 1,173Othe current assets 570 306 336 387Loans and advances 748 666 688 728Total current assets (ex cash) 3,560 3,803 4,656 5,673Sundry creditors and others 1,357 1,325 1,686 2,124Other current liab. & prov. 1,486 1,847 1,919 1,995Total current liab. & prov. 2,843 3,172 3,605 4,119Net current assets 717 632 1,051 1,555Uses of funds 2,114 2,604 3,344 4,482Adjusted BV per share (INR) 5.29 6.93 9.01 12.26




Income from operations 5,154 6,508 8,331 10,422Direct costs 2,838 3,829 4,922 6,201Employee costs 579 622 695 766Other expenses 701 832 1,012 1,170Total operating expenses 4,118 5,282 6,629 8,138EBITDA 1,036 1,225 1,702 2,284Depreciation & amortisation 135 158 193 209EBIT 900 1,068 1,509 2,075Interest expenses 12 18 15 17Other income 108 341 148 215Exceptinal items 0 (28) 0 0Profit before tax 997 1,363 1,641 2,273Provision for tax 329 431 509 705Minority Interest (12) 27 33 45Reported profit 656 959 1,165 1,523Exceptinal itemsAdjusted profit 656 959 1,165 1,523Basic shares outstanding (mn) 330 330 330 330EPS (INR) basic 2.0 2.9 3.5 4.6Diluted equity shares (mn) 329.9 329.9 329.9 329.9EPS (INR) fully diluted 2.0 2.9 3.5 4.6CEPS (INR) 2.4 3.4 4.1 5.2Dividend per share 0.8 0.9 1.1 1.2


Direct cost 55.1 58.8 59.1 59.5Employee expenses 11.2 9.6 8.3 7.4S G &A expenses 13.6 12.8 12.1 11.2Operating expenses 79.9 81.2 79.6 78.1Depreciation & Amortization 2.6 2.4 2.3 2.0Interest expenditure 0.2 0.3 0.2 0.2EBITDA margins 20.1 18.8 20.4 21.9EBIT margins 17.5 16.4 18.1 19.9Net profit margins (adjusted) 12.5 15.1 14.4 15.1


EPS (INR) fully diluted 2.0 2.9 3.5 4.6Y-o-Y growth (%) (35.9) 46.2 21.5 30.7CEPS 2.4 3.4 4.1 5.2Diluted P/E (x) 47.8 32.7 26.9 20.6Price/BV (x) 18.0 13.7 10.6 7.8EV/Sales (x) 6.1 4.8 3.7 2.9EV/EBITDA (X) 30.4 25.5 18.2 13.4Dividend yield (%) 0.8 0.9 1.2 1.3


Key takeawaysUltraTech Cement’s management was optimistic on industry outlook factoring:

Expected revival in industry demand, in line with the average historical multipleof GDP growth (~1.2x). Expects infrastructure segment to spearhead recovery ledby various government initiatives like Houses for All by 2022, focus on concreteroads, new freight corridors, plan to build 110mn new toilets under the SwachhBharat Mission, new metro rail projects in tier II cities, electrification of 20kvillages, Smart Cities and higher allocation towards infrastructure projects.

Improvement in industry capacity utilisation as from FY16-18 demand is expectedto outpace supply. Expects surplus capacity to reduce from 145mtpa in FY16 to~120mtpa by FY18.

Challenges in adding new greenfield capacities due to tough land acquisitionprocess, increased gestation period and availability of new limestone mines onlythrough auctions.

UTCL has demonstrated sustained cost leadership with increasing usage of lowcost pet coke and new waste heat recovery plants. It has also demonstratedsustained market leadership with its premium national brand ULTRATECH andstrong nationwide distribution network.

Investment conclusionWe remain positive on the sector as: 1) low capacity addition will propel industryutilisation to 81% in FY18 (>85% in North); 2) low fuel prices will keep a check oncost inflation; and 3) imminent industry consolidation will help improve the pricingenvironment. Being the largest domestic player, UTCL will be a key beneficiary ofthe sector uptrend. Strong balance sheet with DE ratio of 0.4x offers scope forfurther expansion/acquisitions.

Key risksLower-than-estimated demand and price hikes will impact estimates.

Significant increase in operating costs will impact estimates.

ULTRATECH CEMENTIndia Equity Research l Cement

Best play in the sector

Company Profile

February 15, 2016


Absolute Rating BUY




MARKET DATA (R : ULTC.BO, B: UTCEM IN)






Stock Nifty EW Cement Index


February 15, 2016


Financials


Revenues (INR mn) 202,798 229,362 240,299 269,098Rev. growth (%) 0.5% 13.1% 4.8% 12.0%EBITDA (INR mn) 38,179 41,950 46,349 62,844Adjusted Profit 21,445 20,147 21,895 34,009No. of Diluted shares outstanding (mn) 274 274 274 274Adjusted Diluted EPS 78.2 73.4 79.8 123.9EPS growth (%) (19.1) -6.1 8.7 55.3Diluted P/E (x) 35.4 37.7 34.7 22.3EV/EBITDA (x) 20.2 19.2 17.2 12.3ROAE (%) 13.3 11.2 11.0 15.2




Revenues 0.5 13.1 4.8 12.0EBITDA (18.3) 9.9 10.5 35.6Adjusted Profit (19.1) (6.0) 8.7 55.3EPS (19.1) (6.1) 8.7 55.3


Net profit 21,445 20,147 21,895 34,009Add: Depreciation 10,523 11,331 12,703 13,957Interest (Net of Tax) 2,466 3,821 3,840 4,211Others (2,703) 5,439 (2,947) (4,211)Less:Changes in WC (685) (91) (1,618) 2,843Operating cash flow 32,416 40,829 37,109 45,123Less: Capex 22,284 25,929 25,000 20,000Free cash flow 10,132 14,901 12,109 25,123




Total vol. - Cement + Clinker (mn tonnes) 42.6 46.1 48.2 52.0Income from operations 202,798 229,362 240,299 269,098Total operating expenses 164,619 187,411 193,949 206,255Material costs 33,273 35,601 39,071 42,982Employee cost 10,146 12,183 13,619 14,845Factory & admin. expenses 34,038 38,195 39,993 42,793EBITDA 38,179 41,950 46,349 62,844Depreciation & amortisation 10,523 11,331 12,703 13,957EBIT 27,656 30,619 33,646 48,887Less: Interest Expense 3,192 5,475 5,445 5,931Add: Other income 3,290 3,718 2,847 4,945Profit before tax 27,755 28,863 31,047 47,900Less: Provision for Tax 6,310 8,715 9,152 13,891Reported Profit 21,445 20,147 21,895 34,009Adjusted Profit 21,445 20,147 21,895 34,009No. of Shares outstanding (mn) 274 274 274 274No. of Dil. shares outst. (mn) 274 274 274 274Adjusted Diluted EPS 78.2 73.4 79.8 123.9Dividend per share (INR) 9.0 9.0 9.0 9.0Dividend payout (%) 13.5 14.3 13.2 8.5


ROAE (%) 13.3 11.2 11.0 15.2ROCE (%) 14.4 14.1 13.4 18.1Inventory (days) 72 68 69 66Debtors (days) 21 20 18 16Payable (days) 70 69 69 66Cash conversion cycle 22 19 17 16Current ratio 1.8 1.4 1.6 2.0Gross Debt/EBITDA 1.4 1.8 1.6 1.2Gross Debt/Equity 0.3 0.4 0.4 0.3Adjusted debt/Equity 0.3 0.4 0.4 0.3Interest cover (x) 8.7 5.6 6.2 8.2


Operating expenses 81.2 81.7 80.7 76.6Depreciation and amortisation 5.2 4.9 5.3 5.2Interest expenditure 1.6 2.4 2.3 2.2EBITDA margins 18.8 18.3 19.3 23.4Net profit margins 10.6 8.8 9.1 12.6



Share capital 2,742 2,744 2,744 2,744Reserves & surplus 168,233 185,833 205,731 236,850Shareholders funds 170,975 188,577 208,475 239,594Long term borrowings 44,959 46,151 46,151 46,151Short term borrowings 7,057 28,004 28,004 28,004Total Borrowings 52,016 74,155 74,155 74,155Deferred Tax Liability (net) 22,958 27,920 27,920 27,920Sources of funds 245,950 290,652 310,551 341,669Gross Block 250,767 312,871 342,871 372,871Net Block 157,809 208,787 226,336 242,379Capital work in progress 27,779 26,845 21,796 11,796Intangible assets 909 688 484 484Total Fixed Assets 186,497 236,319 248,616 254,659Non current investments 16,623 26,858 26,858 26,858Cash and cash equivalents 40,068 27,369 36,589 58,822Inventories 23,684 27,514 25,218 28,602Sundry debtors 12,810 12,032 11,330 12,589Loans and advances 17,705 21,898 21,898 21,898Other current assets 153 160 160 160Total cur. assets (ex cash) 54,351 61,604 58,606 63,248Trade payables 24,242 27,390 26,010 27,810Other cur. liab. & provisions 27,348 34,108 34,108 34,108Total current liab. & prov. 51,591 61,497 60,118 61,917Net current assets (ex cash) 2,761 106 (1,512) 1,331Application of funds 245,950 290,652 310,551 341,669Book value per share (BV) 623 687 760 873


Adjusted Diluted EPS (INR) 78.2 73.4 79.8 123.9Y-o-Y growth (%) (19.1) (6.1) 8.7 55.3Adjusted Cash EPS 117 115 126 175Diluted P/E (x) 35.4 37.7 34.7 22.3Price/BV(x) 4.4 4.0 3.6 3.2EV/tonne (USD/tonne) 237 219 190 173EV/Sales (x) 3.8 3.5 3.3 2.9EV/EBITDA (x) 20.2 19.2 17.2 12.3EV/EBITDA (x)+1 yr forward 18.4 17.4 12.7 10.0Dividend yield (%) 0.3 0.3 0.3 0.3


Key takeawaysOn Vakrangee Kendras:

The company is well on track to achieve its roadmap of setting up Kendras and hasalready set up 18,067 Vakrangee Kendras. Vakrangee has already exceeded 9mFY16target of setting up Vakrangee Kendras in rural areas. PMJDY and other governmentbacked financial inclusion schemes have helped the company set up and expandits Kendras.

Amazon’s offerings have already been rolled out from over 460 branches (all 64Mumbai Kendras are enabled to offer Amazon service, >350 Kendras in Rajasthanoffer Amazon services). Contribution from sale of Amazon products is minimal asof now since roll out of this business started only from Oct-Nov from most of theKendras.

Sustainable EBITDA margin in Vakrangee Kendra business is ~17%. Erstwhilefranchisees with different revenue sharing model have also been renegotiated to80:20 revenue share model.

On trend basis, outstanding debt and debtors have been tapering off. Life cycle ofdebtors in Vakrangee Kendras is ~60 days and payables are at ~30 days.

Vakrangee plans to incorporate a logistic supply company which will enable it toroll out Amazon outlets pan-India. This company will cater to logistic needs ofAmazon.

On e-governance:

As and when e-governance projects are completed, the company is not re-biddingfor new projects. E.g., Maharashtra registration project got over in November, butthe government has not re-bid for the project.

Key risksDelay in roll out of Vakrangee Kendras may not fetch Vakrangee the growth that isexpected.

The company is banking on tie ups with various e-com players so as to offer abouquet of services from its Kendras. However, any delay in tie-ups may hamperthe growth prospects of the company.

VAKRANGEEIndia Equity Research l Banking and Financial Services

In a sweet spot

Company Profile

EDELWEISS RATINGS


MARKET DATA (R : VKAR.BO, B: VKI IN)

CMP : INR 203Target Price : NA52-week range (INR) : 212 / 86Share in issue (mn) : 529.2M cap (INR bn/USD mn) : 107 / 1577Avg. Daily Vol. BSE/NSE (‘000) : 2,255.8






1 month 17.2 (3.6) 20.83 months 72.9 (6.3) 79.212 months 68.1 (14.5) 82.6

February 15, 2016

Financials


Net revenues 13,521 15,558 19,654 27,754EBITDA 2,380 3,838 5,549 7,178Adjusted profit 675 1,093 1,990 3,206Diluted EPS (INR) 1.3 2.2 3.9 6.0Diluted P/E (x) 152.7 93.2 52.0 33.6ROAE (%) NA 23.5 32.7 38.1







Revenues NA 15.1 26.3 41.2EBITDA NA 61.3 44.6 29.4PBT NA 49.1 106.1 59.5Adjusted Profit NA 61.9 82.1 61.1EPS NA 63.9 79.3 54.5


Gross margin 19.4 27.2 30.4 27.3Operating expenses 1.8 2.5 2.2 1.4EBITDA margins 17.6 24.7 28.2 25.9EBIT margin 11.1 14.6 19.1 19.9Interest 4.1 5.5 4.0 2.7Net profit margin 5.0 7.0 10.1 11.6


Adjusted Diluted EPS (INR) 1.3 2.2 3.9 6.0Y-o-Y growth (%) NA 63.9 79.3 54.5Diluted P/E (x) 156.2 95.3 53.1 34.4Book Value per share (INR) 8.3 10.3 16.0 24.5Price to Book Ratio (P/B) (x) 24.5 19.8 12.7 8.3




Net revenues 13,521 15,558 19,654 27,754Raw material costs 10,897 11,324 13,677 20,184Gross profit 2,625 4,234 5,977 7,569Employee expenses 122 250 262 196Other expenses 123 146 166 196Operating expenses 245 396 428 391Total expenditure 11,142 11,720 14,105 20,576EBITDA 2,380 3,838 5,549 7,178Depreciation & amortisation 874 1,569 1,803 1,643EBIT 1,506 2,269 3,746 5,535Interest expense 553 858 779 749Other income 42 74 92 96Profit before tax 995 1,485 3,060 4,881Provision for tax 320 392 1,070 1,675Reported Profit 675 1,093 1,990 3,206Adjusted Profit 675 1,093 1,990 3,206Equity shares outstanding (mn) 500 501 503 503EPS (INR) Adjusted basic 1.4 2.2 4.0 6.4Diluted shares (mn) 508 501 509 531EPS (INR) Adjusted diluted 1.3 2.2 3.9 6.0DPS 0.2 0.2 0.3 0.3Dividend payout (%) 17.2 10.8 7.4 4.7


EBITDA margin 17.6 24.7 28.2 25.9Pre-tax (ROCE) (%) NA 27.1 34.6 38.7ROAE (%) NA 23.5 32.7 38.1ROA (%) NA 11.5 16.7 21.2Current ratio 2.4 2.8 3.3 4.8Quick ratio 2.4 2.8 3.0 4.5Cash ratio 0.1 0.1 0.1 0.1Cash conversion cycle (days) NA 86.3 98.1 114.4



Share capital 250 502 503 503Reserves & surplus 3,891 4,653 6,525 9,312Shareholder equity 4,141 5,155 7,028 9,815Money recd against warrants - - 1,022 2,500Long term borrowings 1,560 1,457 862 374Short term borrowings 2,170 2,805 3,888 3,626Loan funds 3,730 4,262 4,750 4,000Deferred tax liability/asset 732 827 709 423Long Term Liabs and provisions 70 78 33 16Sources of funds 8,672 10,322 13,542 16,754Gross fixed assets 7,118 7,998 10,446 10,472Accumulated depreciation 2,247 3,814 6,096 7,753Net block 4,871 4,184 4,350 2,719CWIP (incl. intangible) 1 - 481 101Total net fixed assets 4,872 4,184 4,831 2,820Non current investments 584 117 38 28Cash and cash equivalents 260 312 292 368Inventories 36 199 1,306 1,335Sundry Debtors 4,452 6,614 7,920 12,216Loans & Advances 648 594 917 469Other Assets 102 1,572 1,976 3,138Total Current Assets (ex cash) 5,238 8,978 12,119 17,159Trade payable 1,189 1,748 2,520 2,108Other CL & Short term provs. 1,093 1,521 1,218 1,512Total CL & Provisions 2,282 3,269 3,738 3,620Net Current Assets (ex cash) 2,957 5,710 8,382 13,538Uses of funds 8,672 10,322 13,542 16,754Book Value per share (INR) 8 10 16 24


Key takeawaysBARC ratings: On a weekly basis, BARC rating helps Viacom18 to quickly react tochange in viewership. However, it does not impact ad rates on weekly basis.

Rishtey: The company believes FTA channels will do well after BARC ratings inrural markets. Rishtey is doing well in rural markets. Further, there is hugemonetisation potential for Rishtey than Zee Anmol as it caters to different sets ofpeople. Zee Anmol has the potential to increase its revenue by 2x over next 2 years.Profitability will be higher for FTA channels as incremental costs will be marginal.The company will re-use content from its main channel, Colors.

Pay TV market: If FTA picks up in a huge way, the company fears it may impact theTV eco system.

Content differentiation in urban/rural markets: Broadly, viewership is similar inthese markets for Hindi GECs. It has been strengthened by good ratings of Viacom18channels in rural markets.

ARPU from digitisation: ARPU from digitisation will take time. The digitisationprocess will be completed in 7 years, though the government is trying to completedigitisation in 4 years. The government’s mandate is to digitise the country firstthen to monetise.

Netflix: It is not a threat to broadcasters. Netflix will face issues such as pricingand local content. It worked in other markets which were English speaking markets.Netflix has approached Viacom18 for content, while the latter has denied thesame.

Sports: The company is not planning to launch a sports channel as of now.

Key risksDelay in monetisation benefit from digitisation.

Rise in new investments may exert pressure on margins longer than expected.

Slowdown in ad spends due to lower than expected GDP growth.

VIACOM 18India Equity Research l Retail

Media master

Company Profile

February 15, 2016





N A


Key takeawaysPrice cuts from Chinese suppliers: With expenses in Remnibi having come downwith CNY depreciating against USD for Chinese suppliers, VIP’s costs have fallenwith price renegotiation (price cuts) from Chinese suppliers in soft luggage imports.

Backpacks growing more than 30%: Backpack sales have already exceeded INR1bnin 9mFY16 and are growing strong at more than 30%. Replacement cycle muchbetter than luggage at less than one year. Also, gained share from Fast Track andAmerican Tourister. Expected to be at INR1.25-1.5bn for the full year.

CSD expected to continue growing well with new product ranges and strengtheningpromoters for the channel.

Modern trade channel (hyper market) continues to register strong growth and wasthe fastest growing channel led by introduction of a variety of backpacks, duffelsand casual bags. Hypermarket segment growth was primarily on account of goodacceptance of Skybags, competitive pricing of Aristocrat and good salesmanagement.

Investment conclusionVIP, the largest player in organised luggage industry in India commanding ~45%market share, is expected to log 14.6% CAGR in sales and 17.6% EBITDA CAGR overFY15-18E. The discretionary consumption has picked up recently in the luggagespace with VIP recouping share across segments.

Key risksStiff competition

Size of the unorganised market is ~INR 30 bn, whereas the organised market is~INR 20 bn. Increase in competition from the organized (Samsonite and Safari) aswell as unorganised sector can affect VIP’s earnings growth

Increase in raw material prices

Major raw materials consumed in manufacture of hard luggage are polypropyleneand aluminum. Any substantial rise in their prices will adversely impact thecompany’s margins and, hence, profitability.

VIP INDUSTRIESIndia Equity Research l Miscellaneous

Beneficiary of uptick in consumption cycle

Company Profile

EDELWEISS RATINGS

Absolute Rating BUY


MARKET DATA (R : VIPL.BO, B: VIP IN)







1 month (8.5) (6.9) 1.63 month (6.3) 1.0 7.312 month (3.6) (8.3) (4.7)

Financials


Revenues (INR mn) 9,725 10,477 12,206 13,769Rev. growth (%) 16 8 17 13EBITDA (INR mn) 806 775 1,014 1,147Adjusted Profit (INR mn) 463.9 435.2 617.6 715.3Adjusted Diluted EPS (INR) 3.3 3.1 4.4 5.1EPS growth (%) 47.1 (6.2) 41.9 15.8Diluted P/E (x) 28.8 30.7 21.6 18.7EV/EBITDA (x) 16.6 17.6 13.1 11.5ROAE (%) 17.0 14.7 19.1 19.8 February 15, 2016

Shradha Sheth+91 22 6623 [email protected]

Damodaran Kutty+91 22 6623 [email protected]




Reported Profit 576 466 618 715Add: Depreciation 171 175 141 147Add:Interest 14 9 12 7Add: Others (443) (974) (131) (552)Gross cash flow 319 (324) 639 317Less: Changes in working cap. 136 488 67 276Operating cash flow 454 164 706 593Less: Capex 15 (149) 129 150Free cash flow 440 313 577 443


Gross profit margin 45.4 45.3 44.9 44.7EBITDA margin 8.3 7.4 8.3 8.3ROACE (%) 22.0 19.5 26.0 27.5ROAE (%) 17.0 14.7 19.1 19.8ROA (%) 15.3 13.5 17.8 19.0Current ratio 2.5 2.7 2.9 3.0Quick ratio 1.3 1.2 1.6 1.6Cash ratio 0.1 0.0 0.1 0.2Receivable turnover (x) 9.8 10.2 10.2 10.3Inventory turnover (x) 3.3 2.8 3.1 3.6Payables turnover (x) 6.2 5.3 6.3 7.5Receivables (days) 37 36 36 35Inventory (days) 110 128 116 102Payables (days) 59 70 58 49Cash conversion cycle (days) 89 95 93 89Total debt / Capital employed (%) 51.3 55.0 44.4 42.9Interest coverage (x) 30.0 46.8 49.9 102.9


Revenues 16.1 7.7 16.5 12.8EBITDA 17.7 (3.9) 30.8 13.1PBT 75.8 (17.9) 34.7 15.8Adjusted profit 47.1 (6.2) 41.9 15.8EPS 47.1 (6.2) 41.9 15.8


Cost of goods sold 54.6 54.7 55.1 55.3Operating expenses 37.1 37.9 36.6 36.4EBITDA margins 8.3 7.4 8.3 8.3Depreciation & amortisation 1.8 1.7 1.2 1.1Interest 0.2 0.1 0.1 0.1Net profit margin 4.8 4.2 5.1 5.2



As on 31st March FY14 FY15 FY16E FY17EShare capital 283 283 283 283Revenue and surplus 2,588 2,775 3,112 3,546Shareholder fund 2,870 3,058 3,394 3,828Short term borrowings 161 310 150 120Loan funds 161 310 150 120Long term provisions & liab 39 45 48 52Deferred tax liability/asset (14) (31) (31) (31)Sources of funds 3,056 3,382 3,562 3,969Gross block 2,918 2,766 2,866 3,016Tangible assets 838 699 658 661CWIP (incl. intangible) 7 11 40 40Intangible assets 11 15 15 15Total net fixed assets 856 724 712 715Cash and cash equivalents 111 75 196 321Inventories 1,756 2,269 2,008 2,252Sundry debtors 952 1,111 1,271 1,396Loans & advances 543 483 508 534Other assets 260 301 331 364Total current assets (ex cash) 3,511 4,164 4,117 4,546Trade payable 991 1,190 958 1,084Other current liab. & prov. 431 391 506 528Total current liab. & prov. 1,422 1,581 1,464 1,613Net current assets (ex cash) 2,089 2,583 2,653 2,933Uses of funds 3,056 3,382 3,562 3,969Book value per share (INR) 20 22 24 27






Net revenues 9,725 10,477 12,206 13,769Raw material costs 5,308 5,728 6,725 7,610Gross profit 4,417 4,749 5,481 6,159Employee expenses 933 1,097 1,233 1,391Other expenses 2,678 2,878 3,234 3,621Operating expenses 3,611 3,975 4,467 5,012Total expenditure 8,919 9,702 11,192 12,622EBITDA 806 775 1,014 1,147Depreciation & amortisation 171 175 141 147EBIT 636 600 873 1,000Interest expense 21 13 17 10Other income 26 25 27 32Exceptional Items 158 43 0 0Profit before tax 798 655 882 1,022Provision for tax 221 189 265 307Reported Profit 576 466 618 715Exceptional Items(Net of tax) 113 31 0 0Adjusted Profit 464 435 618 715Equity sh. outstanding (mn) 141.3 141.3 141.3 141.3EPS (INR) basic 3.3 3.1 4.4 5.1Diluted shares (mn) 141.3 141.3 141.3 141.3EPS (INR) diluted 3.3 3.1 4.4 5.1CEPS 4.3 4.3 5.4 6.1DPS 1.7 1.7 1.7 1.7Dividend payout (%) 48.8 60.3 45.5 39.3


Key takeawaysTotal textile business is USD800bn, of which home textile is a USD45bn market.US is the largest market with 1/3rd share, EU also holds 1/3rd share, but is highlyfragmented. 1/3rd is RoW with Japan being the largest with 5% share.

India, China and Pakistan account for 85% of the supply.

India has a competitive advantage in cotton-based home textiles due to: a)availability of cheaper, domestically produced cotton; b) lower labour costscompared to China; and c) better safety.

Welspun negotiates pricing at the beginning of the programme and revision isallowed only for currency and raw material.

Currently, branded segment accounts for 11% of revenue.

Hygro Cotton has helped the company drive strong growth, especially in the lastquarter. It is planning to follow an ingredient branding strategy like the IT industry.Private players have agreed to put the Hygro label on their products.

On back of increase in its share of innovative products, Welspun has revised upEBITDA margin guidance from 20-22% to 23-24%.

The company is guiding for revenue growth to be in the 13-17% range.

Balance capex of INR7bn will be done over the next 9 months: INR3bn will be spentin Q4FY16 and INR4bn in FY17.

Investment conclusionWelspun supplies to 14 of the top 30 global retailers and commands a lion’sshare of home textiles exported out of India. The company is undertaking a majorcapex programme to enhance its cost base, lending it pricing power andopportunities to increase market share globally. High capacity utilisation andincreased backward integration will drive expansion in EBITDA margin.

Key risksRaw material price increase. Leveraged balance sheet.

WELSPUN INDIAIndia Equity Research l Textiles

Spinning the growth weave

Company Profile

EDELWEISS RATINGS

Absolute Rating BUY


MARKET DATA (R : WLSP.BO, B: WLSI IN)

CMP : INR 858Target Price : INR 1,12852-week range (INR) : 963 / 319Share in issue (mn) : 100.5M cap (INR bn/USD mn) : 86 / 1265Avg. Daily Vol. BSE/NSE (‘000) : 257.8






1 month (8.5) (5.3) 3.23 month (6.3) 18.0 24.312 month (3.6) 121.3 124.9

February 15, 2016


Financials


Net revenue (INR mn) 43,730 53,025 58,457 67,038Revenue growth (%) 19.9 21.3 10.2 14.7EBITDA (INR mn) 9,211 12,742 15,322 18,063Adjusted Profit (INR mn) 921 5,398 6,776 8,325Adjusted Diluted EPS (INR) 9.2 53.7 67.5 82.9EPS growth (%) (59.6) 485.6 25.5 22.9Diluted P/E (x) 93.5 16.0 12.7 10.4EV/EBITDA (x) 12.3 8.8 7.3 6.0ROAE (%) 7.8 41.7 39.8 36.6




Revenues 19.9 21.3 10.2 14.7EBITDA 54.9 38.3 20.3 17.9PBT (65.2) 626.3 33.6 22.6Adjusted Profit (59.5) 486.3 25.5 22.9EPS (59.6) 485.6 25.5 22.9


Adjusted Diluted EPS (INR) 9.2 53.7 67.5 82.9Y-o-Y growth (%) (59.6) 485.6 25.5 22.9CEPS (INR) 63.0 89.3 109.6 131.1Diluted P/E (x) 93.5 16.0 12.7 10.4P/BV (x) 7.8 6.0 4.4 3.4EV/Sales (x) 2.6 2.1 1.9 1.6EV/EBITDA (x) 12.3 8.8 7.3 6.0Dividend yield(%) 0.3 1.2 1.6 2.0


Reported Profit 921 5,398 6,776 8,325Add: Depreciation 6,863 3,329 3,905 4,443Interest (Net of Tax) 1,576 2,044 1,551 1,529Add: Others (4,672) 871 133 155Less:Changes in WC (3,974) 2,399 (58) 2,097Operating cash flow 5,510 9,243 12,423 12,355Less: Capex 7,186 5,795 7,815 5,543Free cash flow (1,676) 3,449 4,608 6,812




Net revenues 43,730 53,025 58,457 67,038Raw material costs 22,673 25,443 26,034 29,870Gross profit 21,057 27,582 32,422 37,167Employee expenses 3,400 4,460 5,318 5,991Other expenses 8,446 10,380 11,782 13,113EBITDA 9,211 12,742 15,322 18,063Depreciation & amortisation 6,863 3,329 3,905 4,443EBIT 2,348 9,412 11,418 13,620Less: Interest expense 2,352 2,829 2,268 2,233Add: Other income 1,042 949 910 949Profit before tax 1,037 7,533 10,060 12,336Total tax 199 2,090 3,179 3,886Less: Minority Interest (82) 45 105 125Reported PAT 921 5,398 6,776 8,325Adjusted Profit 921 5,398 6,776 8,325No. of Shares outstanding (mn) 100 100 100 100Adjusted Basic EPS 9.2 53.7 67.5 82.9No. of Dil. shares outst. (mn) 100.3 100.5 100.5 100.5Adjusted Diluted EPS 9.2 53.7 67.5 82.9Adjusted Cash EPS 63.0 89.3 109.6 131.1Dividend per share (DPS) 3.0 10.5 14.1 17.3Dividend Payout Ratio (%) 38.3 23.5 25.0 25.0



Share capital 1,003 1,005 1,005 1,005Reserves & surplus 10,093 13,314 18,396 24,640Shareholders' funds 11,096 14,318 19,401 25,645Minority Interest 316 378 483 608Long term borrowings 16,795 15,946 16,250 15,701Short term borrowings 13,498 14,905 15,574 14,606Total Borrowings 30,293 30,851 31,824 30,307Long Term Liab. & Provisions 1,553 1,020 1,162 1,326Deferred Tax Liability (net) 434 641 967 1,368Sources of funds 43,693 47,208 53,838 59,253Gross Block 34,049 42,980 51,712 57,234Net Block 18,395 24,442 29,271 30,352CWIP (incl. intangible) 5,324 1,564 647 668Intangible assets 1,890 1,828 1,836 1,844Total Fixed Assets 25,609 27,834 31,754 32,865Non current investments 473 15 50 50Cash and cash equivalents 2,974 4,657 7,247 9,292Inventories 10,094 11,006 11,455 13,143Sundry debtors 4,117 4,467 4,969 5,698Loans & advances 5,376 7,474 7,599 8,715Other Current Assets 3,041 1,500 1,461 1,676Total Current Assets (ex cash)22,628 24,447 25,485 29,232Trade payable 6,144 6,910 7,333 8,326Ot. cur. liab. and provisions 1,846 2,835 3,366 3,860Total current liab. & prov. 7,990 9,745 10,699 12,186Net current assets (ex-cash) 14,638 14,702 14,786 17,046Uses of funds 43,693 47,208 53,838 59,253Book value per share 111 143 193 255


ROAE (%) 7.8 41.7 39.8 36.6ROCE (%) 9.4 23.8 25.4 26.9Inventory (days) 121 122 125 120Debtors Days 29 30 29 29Payables (days) 89 94 100 96Cash conversion cycle (days) 60 58 54 53Current Ratio 3.2 3.0 3.1 3.2Gross Debt/EBITDA 3.3 2.4 2.1 1.7Gross Debt/Equity 2.7 2.1 1.6 1.2Adjusted Debt/Equity 2.7 2.1 1.6 1.2Net Debt/Equity 2.4 1.8 1.2 0.8Interest Coverage Ratio 1.0 3.3 5.0 6.1


Operating expenses 78.9 76.0 73.8 73.1Materials costs 51.8 48.0 44.5 44.6Staff costs 7.8 8.4 9.1 8.9S G & A expenses 19.3 19.6 20.2 19.6Depreciation 15.7 6.3 6.7 6.6Interest Expense 5.4 5.3 3.9 3.3EBITDA margins 21.1 24.0 26.2 26.9Net Profit margins 1.9 10.3 11.8 12.6


Key takeawaysCurrently, non ticket revenue is 22% of total revenue. In 2-3 years’ time, non ticketrevenue will be close to 30% contributions driven by food and merchandise.

The company is building a big roller coaster at the Bengaluru park which will beoperational from Q1FY17.

Wonderla is on track to start its new park at Hyderabad in April 2016. Overallcapex at this park is estimated to be ~INR1.8-2.0bn.

Capex in FY16 will be close to INR1500-1600mn. In FY17, capex will be INR1,000mn(INR700mn in Chennai park and INR250mn capex for existing park). In FY18, similarcapex will be required.

Construction of the Chennai park is expected to start in Q2FY17 (depending onland acquisition). Total capex at the park will be close to INR3bn. The project willbe funded by 50% loan and 50% equity.

Management is hiring professionals for the next leg of growth. Hired a new CEO,Head of marketing and Head of HR.

Investment conclusionWonderla, India’s largest amusement park chain, is in a sweet spot with theamusement park industry set to swing upwards spurred by the favourable macroeconomic tail winds and increased penetration. The company, armed with anexperienced management (~15 years’ experience in amusement parks industry),in-house manufacturing capability, strong & clean balance sheet and robustexpansion plan, is well poised to soar. Wonderla’s blended gross realisation percustomer will jump riding improvement in proportion of non-ticketing revenue,improvement in average ticket price (ATP) and also introduction of differentiatedand premium offerings.

Key risksService tax levy, accidents/natural calamities can impact footfalls, Slowdown inconsumer discretionary spending and seasonal nature of business.

WONDERLA HOLIDAYSIndia Equity Research l Retail

Set for the joy ride

Company Profile

February 15, 2016


Absolute Rating BUY




MARKET DATA (R : NA, B: WONH IN)






Stock Nifty EW Retail Index


February 15, 2016




Financials (Consolidated)


Revenues (INR mn) 1,536 1,819 2,090 3,035Rev. growth (%) 12.8 18.4 14.9 45.2EBITDA (INR mn) 704 806 948 1,330Adjusted Profit (INR mn) 399 506 631 695Shares outstanding (mn) 42 57 57 57Adjusted Diluted EPS (INR) 9.5 9.0 11.2 12.3EPS growth (%) 18.8 (5.7) 24.7 10.2Diluted P/E (x) 36.3 38.5 34.1 31.0EV/EBITDA (x) 20.6 21.8 21.7 15.9ROAE (%) 29.6 20.0 16.6 16.1




Revenues 12.8 18.4 14.9 45.2EBITDA 15.1 14.5 17.6 40.4PBT 15.7 26.0 29.2 8.5Adjusted Profit 18.8 26.9 24.7 10.2EPS 18.8 (5.7) 24.7 10.2


Reported Profit 399 506 631 695Add: Depreciation 132 162 141 326 Others 188 169 325 369Less: Changes in WC 19 23 (27) (18)Operating cash flow 700 814 1,125 1,409Less: Capex 277 339 1,642 1,451Free cash flow 424 475 (518) (42)


ROAE (%) 29.6 20.0 16.6 16.1ROCE (%) 38.1 27.8 24.0 21.9Debtors days 1.0 0.9 5.9 7.9Inventory days 72 56 57 64Payable days 9 3 3 3Cash conversion cycle (days) 64 53 60 69Current ratio 1.3 7.2 3.8 3.4Gross Debt/EBITDA 0.3 0.1 0.3 0.6Gross Debt/Equity 0.1 0.0 0.1 0.2Adjusted Debt/Equity 0.1 0.0 0.1 0.2Interest coverage (x) 35.1 38.5 56.0 23.9




Net revenues 1,536 1,819 2,090 3,035Park operating expenses 258 320 356 574Other operating expenses 157 244 284 312Personnel expenses 253 271 313 482Advertisement expenses 116 119 120 230Marketing expenses 49 60 70 107Total operating expenses 833 1,013 1,142 1,705EBITDA 704 806 948 1,330Depreciation & amortization 132 162 141 326EBIT 572 644 807 1,004Less: Interest Expense 16 17 14 42Add: Other income 24 102 150 61Profit before tax 579 729 942 1,023Less: Provision for Tax 180 223 311 327Reported Profit 399 506 631 695Adjusted Profit 399 506 631 695No. of Shares outstanding (mn) 42 57 57 57Adjusted Basic EPS 9.5 9.0 11 12No. of Dil. shares outst. (mn) 42 57 57 57Adjusted Diluted EPS 9.5 9.0 11 12Adjusted Cash EPS 12.6 11.8 14 18Dividend per share (DPS) 1.5 1.5 1 2Dividend payout (%) 15.8 16.7 13 16



Share capital 420 565 565 565Reserves & surplus 1,079 2,999 3,499 4,029Shareholders funds 1,499 3,564 4,064 4,594Long term borrowings 203 110 250 800Total Borrowings 203 110 250 800Deferred tax liability/asset 33 (11) (11) (11)Sources of funds 1,736 3,664 4,303 5,383Gross Block 2,553 2,695 3,015 5,967Net Block 1,455 1,394 1,572 4,198Capital work in progress 201 398 1,720 220Total Fixed Assets 1,655 1,791 3,292 4,418Current investments - 1,943 1,000 500Cash and cash equivalents 200 2,026 1,191 1,164Inventories 33 41 48 61Sundry debtors 3 5 63 69Loans & advances 72 98 72 76Other Current Assets 38 5 2 2Total current assets (ex cash) 147 149 185 208Trade payable 126 132 206 211Ot. Cur. Liab. & Sh. Term Prov. 141 169 159 196Total current lia.& provisions 267 302 365 407Net current assets (ex cash) (120) (153) (180) (199)Uses of funds 1,736 3,664 4,303 5,383Book value per share 36 63 72 81


Adjusted Diluted EPS (INR) 9.5 9.0 11.2 12.3Y-o-Y growth (%) 18.8 (5.7) 24.7 10.2Adjusted Cash EPS (INR) 12.6 11.8 13.7 18.1Diluted P/E (x) 36.3 38.5 34.1 31.0Price to Book Ratio (P/B) (x) 9.7 5.5 5.3 4.7Enterprise Value / Sales (x) 9.4 9.7 9.9 7.0Enterprise Value / EBITDA (x) 20.6 21.8 21.7 15.9Dividend yield (%) 0.4 0.4 0.4 0.6


Park operating expenses 16.8 17.6 17.0 18.9Cost of goods sold 10.2 13.4 13.6 10.3Personnel expenses 16.5 14.9 15.0 15.9Advertisement expenses 7.6 6.5 5.7 7.6Marketing expenses 3.2 3.3 3.3 3.5Total operating expenses 54.2 55.7 54.6 56.2Depreciation & amortization 8.6 8.9 6.8 10.7Interest expenditure 1.1 0.9 0.7 1.4EBITDA margin 45.8 44.3 45.4 43.8EBIT margin 37.2 35.4 38.6 33.1Net profit margins 26.0 27.8 30.2 22.9


Key takeawaysDuring the quarter, Yes Bank has taken 75% of the accounts that were asked by RBIand balance will flow through in next quarter (the reason for not providing duringthe quarter was that the bank is hopeful of some recovery in balance accounts).

No restructuring, no ARC sale, no SDR and no 5:25 refinancing during the quarter.

Yes Bank is tightening its credit cost guidance to <50bps (factoring in expecteddevelopment during Q4, after considering RBI directive).

There is no firm list of guided numbers for FY17 but broadly for FY17 banks expects:a) to track mid-20s growth in both loan and deposits; b) 3-4 percentage points ofimprovement in CASA; c) 2-3 percentage points shift in the loan mix towards branchbanking; d) based on above 2 NIMs will have an upward bias.

Within retail banking space, focus has been on 3 domains: a) building retailassets; b) building business banking; and c) credit cards.

The bank targets CASA to touch 40% by FY20. Margin to improve 10-15bps everyyear.

Expects contribution from retail/SME business to form 45% of retail mix by FY20.

No immediate requirement of capital; however, if the environment is conducive,Yes Bank may consider fund raising in the current calendar year.

Investment conclusionYes Bank is one of the few private sector banks with product depth, sustainablecompetitive edge, and strong growth. Given the underlying credit demand andsmall asset book, loan book is expected to grow at more than 25% over FY16-18E.Bank has over a period demonstrated its ability to navigate challenging times(interest risk - July 13 + economic moderation) with limited impact on their earningsprofile and continue to deliver best in class return ratios with ROEs of ~ 22%. Webelieve as benefits of building granularity in business model (retails - fees, liability)kicks in coupled with gradual improvement in macro environment- (absence ofasset quality baggage), we expect bank well placed to capitalize on the opportunityand regain lost ground.

Key risksLower CASA can be a negative for the bank at this point of time when most banksare banking on their franchise network.

YES BANKIndia Equity Research l Banking and Financial Services

Resilient player

Company Profile

February 15, 2016


Absolute Rating BUY




MARKET DATA (R : YESB.BO, B: YES IN)

CMP : INR 752Target Price : INR 1,17652-week range (INR) : 910 / 590Share in issue (mn) : 419.5M cap (INR bn/USD mn) : 315 / 4628Avg. Daily Vol. BSE/NSE (‘000) : 3,775.9






1 month 4.3 (6.4) (12.3)3 month (1.0) (7.4) (13.7)12 month (8.2) (15.3) (25.1)

Financials









Diluted EPS (INR) 44.9 48.0 60.2 74.6EPS growth (%) 23.6 7.0 25.5 23.8Book value per share (INR) 197.5 279.6 327.1 386.1Adjusted BV/share (INR) 197.0 278.1 323.4 380.1Diluted P/E (x) 16.8 15.7 12.5 10.1Price/ BV (x) 3.8 2.7 2.3 1.9Price/ ABV (x) 3.8 2.7 2.3 2.0Dividend yield (%) 1.1 1.2 1.4 1.8




Interest income 99,814 115,720 142,910 174,590Interest expenses 72,651 80,842 97,630 118,204Net interest income 27,163 34,878 45,280 56,387Non interest income 17,217 20,466 26,006 32,958- Fee & forex income 14,594 19,095 23,745 29,880- Misc. income 961 (49) 62 78- Investment profits 1,662 1,421 2,200 3,000Net revenues 44,379 55,344 71,287 89,344Operating expense 17,499 22,847 29,992 37,563 - Employee exp 7,844 9,797 13,213 16,640 - Other opex 9,655 13,050 16,779 20,922Preprovision profit 26,881 32,497 41,294 51,782Provisions 3,617 3,395 4,018 5,617- Loan loss provisions 2,637 3,740 3,918 5,367- Investment depreciation 860 (584) 100 250- Other provisions 120 239 0 0PBT 23,264 29,103 37,277 46,165Taxes 7,086 9,049 12,115 15,004PAT 16,178 20,054 25,162 31,161Reported PAT 16,178 20,054 25,162 31,161EPS 44.9 48.0 60.2 74.6DPS 8.0 9.0 11.0 13.5Payout ratio (%) 20.6 21.6 21.1 20.9


NII growth 22.4 28.4 29.8 24.5Fees growth 27.7 30.8 24.4 25.8Opex growth 31.1 30.6 31.3 25.2PPOP growth 26.9 23.2 25.8 24.8PPP growth 25.5 20.9 27.1 25.4Provisions growth 67.5 (6.1) 18.3 39.8PAT growth 24.3 24.0 25.5 23.8





LiabilitiesEquity capital 3,606 4,177 4,177 4,177Reserves 67,611 112,623 132,479 157,130Net worth 71,217 116,800 136,657 161,307Sub bonds/pref cap 67,714 67,922 68,922 69,922Deposits 741,920 911,759 1,073,803 1,335,843Borrowings 145,429 194,282 250,315 325,969Other liabilities 63,878 70,942 85,762 106,551Total 1,090,158 1,361,704 1,615,458 1,999,592AssetsLoans 556,330 755,498 921,708 1,152,135InvestmentsGilts 224,290 300,012 341,622 424,593Others 185,214 166,040 191,268 225,692Cash & equi 58,917 75,572 85,256 105,579Fixed assets 2,935 3,190 2,919 2,549Other assets 62,473 61,392 72,687 89,044Total 1,090,158 1,361,704 1,615,458 1,999,592Balance sheet ratios (%)Credit growth 15.0 28.9 20.5 23.6Deposit growth 10.8 22.9 17.8 24.4EA growth 9.0 26.6 18.7 23.9SLR ratio 25.3 27.1 25.8 25.6C-D ratio 88.9 93.3 95.4 94.8Low-cost deposits 22.0 23.1 25.5 26.5Gross NPA ratio 0.3 0.4 0.7 1.1Net NPA ratio 0.0 0.1 0.2 0.3Provision coverage 85.1 72.0 68.2 71.2Incremental slippage 0.8 0.7 1.1 1.1Net NPA / Equity 0.4 0.8 1.6 2.2Capital adequacy 14.4 15.6 14.9 14.5 - Tier 1 9.8 11.5 10.8 10.4Book value (INR) 197.5 279.6 327.1 386.1




Key takeawaysAd revenue: Posted 26.8% YoY growth in Q3FY16. Excluding &TV, LTL ad growth wasahead of TV ad industry growth rate of ~15% YoY.

TV ad industry: In Q3FY16 TV, ad industry growth was 14-15% YoY. TV ad industryseems optimistic given visibility the company has over the next 2-3 quarters.

Sector-wise ad industry: FMCG is growing at healthy pace. Further, FMCGcontribution remains intact (100bps point change QoQ). Internet & ecommerceare growing are high pace. Telecom & auto have not fired in a big way as yet.

OTT investments: At current juncture, ZEE is one of the few OTT players who havedone well given the subscription model. The company will keep evaluatingstrategies. OTT players will face stiff competition from each other. However, in thebroadcaster business, not a large threat due to infrastructure constraints in theshort term.

Sports business: With digitisation progression in Phase III, subscriptionmonetisation will improve in 3-4 years. This will change dynamics of sportsbusiness.

Phase III digitisation: The government has maintained the deadline. Stay ordershave come from various states High Courts. Switch-off of analogue signals willhappen over a period of time.

International strategy: ZEE will offer content to various audiences in Thailand, theMiddle East and Africa, which will help its international business.

Investment conclusionGDP recovery, improvement in its market share in regional and movies genres andnew launches will aid ad revenue growth. Higher penetration of DTH and digitisationaugur well for faster growth in subscription revenue over long term. We believeZEE is well poised to benefit from this favourable environment.

Key risksDelay in monetisation benefits from digitisation. Rise in new investments maypressurise margins longer than expected.

ZEE ENTERTAINMENT ENTERPRISES

India Equity Research l Media

Vibrant bouquet

Company Profile

February 15, 2016


Absolute Rating BUY




MARKET DATA (R : ZEE.BO, B: Z IN)






Stock Nifty EW Media Index


February 15, 2016

Financials


Revenues (INR mn) 44,217 48,837 57,955 66,064Rev. growth (%) 19.5 10.4 18.7 14.0EBITDA (INR mn) 12,043 12,537 14,663 17,903Adjusted Profit (INR mn) 8,921 9,775 10,623 12,923Adjusted Diluted EPS (INR) 9.3 8.7 9.6 11.9EPS growth (%) 23.2 (6.7) 10.2 25.1Diluted P/E (x) 39.9 42.7 38.8 31.0EV/EBITDA (x) 30.3 28.7 24.5 19.8ROACE (%) 30.7 27.4 27.0 29.3






ROE (%) 26.8 31.1 27.5 28.3ROCE (%) 30.7 27.4 27.0 29.3Inventory days 181 201 200 200Debtors days 83 78 80 80Payable days 55 58 60 60Cash Conversion Cycle 209 222 220 220Current Ratio 3.7 4.1 4.3 4.6Gross Debt/EBITDA 1.7 1.6 1.4 1.1Gross Debt/Equity 0.7 0.6 0.5 0.4Adjusted Debt/Equity 1.4 1.1 0.9 0.8Interest Coverage Ratio 73.1 115.6 139.1 162.5


Revenues 19.5 10.4 18.7 14.0EBITDA 26.2 4.1 17.0 22.1PBT 25.4 6.4 10.0 24.4Adjusted Profit 24.0 9.6 8.7 21.6EPS 23.2 (6.7) 10.2 25.1


Reported Profit 8,921 9,775 10,399 12,923Add: Depreciation 501 673 750 837Interest (Net of Tax) 107 71 68 70Others (796) (1,474) (68) (70)Less: Changes in WC 4,904 2,236 3,980 3,110Operating cash flow 3,829 6,809 7,169 10,650Less: Capex 2,168 636 1,424 1,400Free cash flow 1,661 6,173 5,745 9,250




Direct cost 46.8 43.8 46.1 45.7Employee expenses 8.8 9.2 9.1 8.5S G &A expenses 17.2 21.3 19.5 18.7Operating expenses 72.8 74.3 74.7 72.9Depreciation and Amortization 1.1 1.4 1.3 1.3Interest expenditure 0.4 0.2 0.2 0.2EBITDA margin 27.2 25.7 25.3 27.1EBIT margin 26.1 24.3 24.0 25.8Net profit margins 20.1 19.9 18.2 19.5



Share capital 960 960 960 960Reserves & surplus 26,247 34,346 40,584 48,682Shareholders funds 27,207 35,306 41,544 49,642Minority interest 61 4 (46) (101)Long term borrowings 20,187 20,204 20,204 20,204Short term borrowings 12 10 10 10Total Borrowings 20,199 20,214 20,214 20,214Long Term Liab. & Provisions 659 768 768 768Deferred tax liability (net) (298) (531) (531) (531)Sources of funds 47,828 55,761 61,949 69,992Gross Block 5,613 5,853 6,553 7,353Net Block 3,025 3,213 3,237 3,278Capital work in progress 997 878 850 850Intangible assets 7,708 8,163 8,841 9,363Total fixed assets 11,730 12,254 12,928 13,491Non current investments 2,941 1,464 1,464 1,464Cash and cash equivalents 10,993 15,656 17,190 21,560Inventories 11,736 11,878 14,640 16,543Sundry debtors 10,281 10,692 12,703 14,480Loans & advances 11,095 15,877 15,877 15,877Other Current Investments 1,243 1,706 1,706 1,706Total current assets (ex cash) 34,355 40,153 44,925 48,606Trade payable 5,050 4,204 4,996 5,567Ot. cur. liab. & provisions 7,141 9,562 9,562 9,562Total current liab. & prov. 12,191 13,766 14,558 15,129Net current assets (ex cash) 22,164 26,387 30,367 33,477Uses of funds 47,828 55,761 61,949 69,992Book value per share 28 37 43 52




Net revenues 44,217 48,837 57,955 66,064Direct cost 20,688 21,393 26,717 30,191Employee expenses 3,895 4,498 5,274 5,615S G &A expenses 7,591 10,408 11,301 12,354Total operating expenses 32,174 36,300 43,293 48,161EBITDA 12,043 12,537 14,663 17,903Depreciation & amortization 501 673 750 837EBIT 11,542 11,864 13,913 17,066Less: Interest expense 158 103 100 105Add: Other Income 1,807 2,278 1,962 2,245Add: Exceptional Items - - (331) -Profit before tax 13,191 14,039 15,445 19,206Less: Provision for Tax 4,291 4,284 5,095 6,338Less: Minority Interest (19) (57) (50) (55)Add: Share of pr. from associates 2 (37) - -Reported Profit 8,921 9,775 10,399 12,923Less: Excep. Items (Net of Tax) - - (224) -Adjusted Profit 8,921 9,775 10,623 12,923Dividend on Preference shares - 1,453 1,452 1,452No. of Shares outstanding 960 960 960 960Adjusted Basic EPS 9.3 8.7 9.6 11.9No. of Dil. shares outstanding 960 960 960 960Adjusted Diluted EPS 9.3 8.7 9.6 11.9Adjusted Cash EPS 9.8 10.9 11.8 14.3Dividend per share (DPS) 2.0 2.3 2.4 3.0Dividend Payout Ratio (%) 25.2 26.6 26.5 26.5

RATING & INTERPRETATION

ABSOLUTE RATING

RELATIVE RETURNS RATING

RELATIVE RISK RATING

Ratings Expected absolute returns over 12 months

Buy More than 15%

Hold Between 15% and - 5%

Reduce Less than -5%

Ratings Criteria

Sector Outperformer (SO) Stock return > 1.25 x Sector return

Sector Performer (SP) Stock return > 0.75 x Sector return

Stock return < 1.25 x Sector return

Sector Underperformer (SU) Stock return < 0.75 x Sector return

Sector return is market cap weighted average return for the coverage universe within the sector

Ratings Criteria

Low (L) Bottom 1/3rd percentile in the sector

Medium (M) Middle 1/3rd percentile in the sector

High (H) Top 1/3rd percentile in the sector

Risk ratings are based on Edelweiss risk model

SECTOR RATING

Ratings Criteria

Overweight (OW) Sector return > 1.25 x Nifty return

Equalweight (EW) Sector return > 0.75 x Nifty return

Sector return < 1.25 x Nifty return

Underweight (UW) Sector return < 0.75 x Nifty return


Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina,Mumbai – 400 098, Board: (91-22) 4009 4400.

Email: [email protected]


Distribution of Ratings / Market Cap

Edelweiss Research Coverage Universe

Buy Hold Reduce Total

Rating Distribution* 145 54 15 214

* 1 stocks under review

> 50bn Between 10bn and 50 bn < 10bn

Market Cap (INR) 147 61 6


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